Corporate Financial

Reporting
Module 2
 Module 2: Orientation To Annual
Report And Financial
Statements
• Annual Report – Contents of Annual Report and Purpose of each item;
• Financial Statements - Meaning, Purpose and Format of Income
Statement, Balance Sheet and Notes to Accounts, IND AS per
Schedule III of Companies Act, 2013;
• Environmental Reporting and Corporate Social Reporting
 Annual Report –
Purpose & Contents
Hands-on experience of studying and examining Tata’s IHCL annual reports
Annual report
• An annual report is a comprehensive
report on a company's activities
throughout the preceding year.
• Annual reports are intended to give
shareholders and other interested
people information about the
company's activities and financial
performance.
 Annual report
• An annual report is a comprehensive
report on a company's activities
throughout the preceding year.
• Annual reports are intended to give
shareholders and other interested
people information about the
company's activities and financial
performance.
• [Link]
CL_Integrated_Annual_Report_2023-
[Link]
 Purpose
• Provide an entity’s corporate and financial information
• Provides the financial position of the entity (Liquidity position, solvency
position – stock vs flow concept)
• Provides information about sales revenue generated for the reporting
period and the performance of the company
• Provides entity’s equity information along with changes of equity for the
period as result of performance. Also informs users how much the
shareholders injected funds into entity
• Provides information about the cash flow and the cash position
Contents of Annual report
• Part A – Corporate Information
• Part B – Notice of AGM and Director’s report
• Part C – Annexures of Directors Report
• Part D – Secretarial Report/ Statement/Certificates
• Part E – Financial Report/ Statement
• Part F – Annexures of Notice

• [Link]
• [Link]
 Part A: Introduction and Company
Information

1. Cover Page: Company name, CIN (Corporate Identity

Number),logo, registered office address, reporting period
and contact details.
2. Board of directors' names, roles, and responsibilities.
3. Key managerial personnel and company secretary
details.
 Part B: Notice of AGM and Director’s
Report
5. Notice of AGM: Date, time, and venue of the AGM;
agenda items, resolutions proposed, and procedures for
participation.
[Link] statement
7. Voting Procedure
8. Director's Report: Message from the board
highlighting key achievements, future outlook, and
corporate governance practices.
 Part C: Annexures of Director’s Report
• Certificate of Non-Disqualification Of Directors
• Performance Evaluation Criteria of Independent Directors
• Management Discussion and Analysis Report (MDAR):
Analysis of financial performance, operations, risks,
opportunities, and market trends.
• Related Party Transaction Details
• Particulars of KMP/Employees Remuneration
• Auditor's Report
• Business Responsibility Report
 Part D: Secretarial
Report/Statement/Certificates
Secretarial Report:
• Compliance report by the company secretary covering
governance, regulatory compliance, and filings.
• Compliance with listing regulations, SEBI guidelines, and
other statutory requirements.
• Secretarial Audit Report Form No. MR-3, Secretarial
Compliance Report
Secretarial Certificates
• Certificates confirming compliance with various legal and
regulatory provisions.
• Certificate on Corporate Governance
 Part E: Financial Report/Statement
• Standalone/consolidated financial statements including
the Balance Sheet, Profit and Loss Account, Cash Flow
Statement, and Statement of Changes in Equity.
• Notes to financial statements providing explanations,
disclosures, and accounting policies.
• Summary of financial performance including revenue, profit, margins,
and key financial ratios.
 Part F: Annexures of Notice
• Additional information and disclosures related to agenda items for the
AGM, voting process (NSDL e-voting), attending through VC, details of
directors seeking re-appointment at the AGM
• Proxy forms, nomination forms, cancellation/variation of nomination
forms etc.
[Link]
[Link]/files/IHCL_Integ
rated_Annual_Report_
[Link]
[Link]
[Link]/sites/g/files
/gfwrlq316/files/2024-
05/tata-consumer-ar-2
[Link]
Financial Statements
Hands-on experience of studying and examining financial reports
 Financial Statements
• Financial statements are formal records of the financial activities of a
business.
• They provide a summary of the financial performance and the financial
position of an entity.
• These include:
1. Income Statement (Profit and Loss Statement)
2. Balance Sheet (Statement of Financial Position)
3. Cash Flow Statement
4. Statement of Changes in Equity
5. Notes to the Accounts/Financial Statements
 Financial Statements
• Schedule III of the Companies Act, 2013 provides the framework for the
presentation of financial statements for companies in India.
• It lays out the format and content requirements for Balance Sheet,
Statement of Profit and Loss, and Notes to Accounts.
• The objective is to standardize financial reporting and enhance
transparency and comparability of financial statements across different
entities.
Financial Statements: Structure
of Schedule III
[Link] Instructions for Preparation of Financial Statements
[Link] I - Form of Balance Sheet
[Link] II - Form of Statement of Profit and Loss
[Link] Instructions for the Preparation of Consolidated Financial
Statements (CFS)

• Division I - Schedule III: Applicable to Non-Ind AS companies (SMEs)

• Division II - Schedule III: Applicable to Ind AS companies (companies
with a net worth of ₹250 crore or more).
• Division-III: Applicable to NBFCs to whom Ind AS are applicable.
 General Instructions for Preparation of
Financial Statements
1. An entity shall classify an asset as current when
(a) it expects to realise the asset, or intends to sell or consume it, in its normal operating
cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the reporting period; or
(d) the asset is cash or a cash equivalent unless the asset is restricted from being
exchanged or used to settle a liability for at least twelve months after the reporting
period.
An entity shall classify all other assets as non-current.
2. The operating cycle of an entity is the time between the acquisition of assets for
processing and their realisation in cash or cash equivalents, When the entity's normal
operating cycle is not clearly identifiable, it is assumed to be twelve months.
 General Instructions for Preparation of
Financial Statements
3. An entity shall classify a liability as current when:
(a) it expects to settle the liability in its normal operating cycle;
(b) it holds the liability primarily for the purpose of trading;
(c) the liability is due to be settled within twelve months after the reporting period; or
(d) it does not have an unconditional right to defer settlement of the liability for at least
twelve months after the reporting period. Terms of a liability that could, at the option of
the counterparty, result in it settlement by the issue of equity instruments do not affect its
classification.
An entity shall classify all other liabilities as non-current.
4. A receivable shall be classified as a 'trade receivable' if it is in respect of the amount due
on account of goods sold or services rendered in the normal course of business.
5. A payable shall be classified as a 'trade payable' if it is in respect of the amount due on
account of goods purchased or services received in the normal course of business.
 General Instructions for Preparation of
Financial Statements
• [Link]
Law/schedule_iii_general_instructions.html
• [Link]
Format of Financial
Statements
 General Instructions for the Preparation of
Consolidated Financial Statements (CFS)
• Consolidated financial statements must be prepared in accordance with the
applicable accounting standards (Indian Accounting Standards - Ind AS or
Indian GAAP).
• The CFS should include the financial statements of the parent company and
its subsidiaries.
 Information in Consolidated Financial
Statements (CFS)
(i) Profit or loss attributable to 'non-controlling interest’ and to ‘owners of
the parent' in the statement of P&L shall be presented as allocation for the
period.
(ii) Further, 'total comprehensive income for the period attributable to 'non-
controlling interest' and to 'owners of the parent shall be presented in the
statement of P&L as allocation for the period.
(iii) The aforesaid disclosures for 'total comprehensive income shall also be
made in the statement of changes in equity.
(iv) In addition to the disclosure requirements in the Ind AS, the aforesaid
disclosures shall also be made in respect of 'other comprehensive Income ’.
 Information in Consolidated Financial
Statements (CFS)
Non-Controlling Interests (NCI) is the portion of equity ownership in a subsidiary
that is not owned by the parent company or the parent’s shareholders.
• Equity Ownership: NCI refers to shareholders who hold a minority stake in the
subsidiary.
• Profit Allocation: In the consolidated statement of profit and loss, a portion of
the subsidiary's net income is allocated to NCI.
• Equity Presentation: In the consolidated balance sheet, NCI is presented within
equity but separately from the equity attributable to the owners of the parent.
• Disclosure: Detailed disclosures about NCI, including their share of profits and
losses, and movements in their equity are required in the notes to the
consolidated financial statements.
 Information in Consolidated Financial
Statements (CFS)
Owners of the Parent refer to the shareholders who own equity shares in the parent
company. These owners have a controlling interest in the group of companies, including
all the subsidiaries.
• Controlling Interest: The parent company holds a controlling interest in its subsidiaries,
usually through owning more than 50% of the voting shares.
• Profit Allocation: In the consolidated statement of profit and loss, the net income
attributable to the owners of the parent is separately identified.
• Equity Presentation: In the consolidated balance sheet, the equity attributable to the
owners of the parent includes share capital, reserves, and retained earnings of the
parent company and its share of post-acquisition profits and reserves of subsidiaries.
• Control: Owners of the parent have the ability to direct the financial and operating
 Information in Consolidated Financial
Statements (CFS)
Example to Illustrate NCI and Owners of the Parent
• Consider a parent company, ParentCo, which owns 80% of SubsidiaryCo. The
remaining 20% of SubsidiaryCo is owned by other shareholders who are the non-
controlling interests.
• Consolidated Financial Statements: When preparing the CFS, ParentCo will
consolidate 100% of SubsidiaryCo's assets, liabilities, income, and expenses.
However, 20% of SubsidiaryCo's net income and net assets will be allocated to NCI.
• Equity Presentation: The consolidated balance sheet will show the equity
attributable to the owners of ParentCo and a separate line item for NCI.
• Profit Allocation: In the consolidated statement of profit and loss, the total net
income will be divided into amounts attributable to the owners of ParentCo and NCI.
 Information in Consolidated Financial
Statements (CFS)
Other Comprehensive Income (OCI) refers to revenues, expenses, gains, and
losses that are excluded from net income on the income statement.
• Instead, these items are recorded directly in equity through the comprehensive
income statement.
• OCI provides a broader perspective on a company's total financial performance
than net income alone.
• Presentation: OCI is reported in the statement of comprehensive income and
also accumulated in a separate component of equity within the balance sheet,
typically under “Accumulated Other Comprehensive Income”.
OCI
 Information in Consolidated Financial
Statements (CFS)
Components of OCI:
• Unrealized Gains/Losses on Investments: Changes in the fair value of available-for-sale
financial assets or other investments that are not immediately recognized in profit or loss.
• Foreign Currency Translation Adjustments: Gains or losses resulting from translating
foreign subsidiaries' financial statements from their functional currencies to the reporting
currency.
• Cash Flow Hedges: Effective portions of gains or losses on hedging instruments that are
designated and qualify as cash flow hedges.
• Revaluation Surplus: Increases in the carrying amount of property, plant, and equipment
when a company adopts a revaluation model.
• Actuarial Gains and Losses on Defined Benefit Plans: Changes in the revaluation of the
OCI
 Information in Consolidated Financial
Statements (CFS)
• Total Comprehensive Income (TCI) is the sum of net income and other
comprehensive income for a period.
• TCI provides a more complete picture of a company’s financial health by
including all changes in equity during a period except those resulting from
investments by owners and distributions to owners.
• Formula:
Total Comprehensive Income=Net Income+ Other Comprehensive Income (OCI)
OCI
 General Instructions for the Preparation of
Consolidated Financial Statements (CFS)
• All subsidiaries, associates and joint venture (whether Indian or Foreign) will
be covered under consolidated financial statement.
• An entity shall disclose the list of subsidiaries or associates or joint venture
which have been consolidated in the consolidated financial statement along
with the reason of not consolidating.
Case: Financial Statements of IHCL
 Environmental
Reporting and
Corporate Social
Reporting
Hands-on experience of studying and examining sustainable practices of companies
 Environmental Reporting
• Environmental reporting refers to the process through which companies
disclose information regarding their environmental performance, impacts,
and strategies.
• This includes data on energy consumption, emissions, waste management,
resource usage, and efforts to mitigate environmental harm.
• The primary purpose of environmental reporting is to provide transparency
and accountability regarding a company's environmental impact.
• It aims to inform stakeholders, including investors, customers, regulators,
and the public, about the company's environmental practices and
sustainability efforts.
 Key Elements of Environmental
Reporting
1. Environmental Impact Assessments: Data on emissions, waste, water
usage, and resource consumption.
2. Sustainability Initiatives: Information on efforts to reduce environmental
impact, such as recycling programs, energy-efficient technologies, and
carbon offsetting.
3. Compliance: Details on adherence to environmental laws and
regulations.
4. Goals and Targets: Long-term environmental goals, such as achieving net-
zero emissions or reducing plastic usage
 Sustainability Reporting
• Sustainability reporting is the disclosure and communication of
environmental, social, and governance (ESG) goals—as well as a company’s
progress towards them.
• The benefits of sustainability reporting include improved corporate
reputation, building consumer confidence, increased innovation, and even
improvement of risk management.
 Key Elements of Sustainability
Reporting
[Link] Impact:
• Emissions: Data on greenhouse gas emissions, air quality, and carbon footprint.
• Resource Usage: Information on energy consumption, water usage, and raw material sourcing.
• Waste Management: Details on waste generation, recycling efforts, and waste reduction initiatives.
[Link] Impact:
• Labor Practices: Information on employee welfare, diversity and inclusion, labor rights, and
workplace safety.
• Community Engagement: Data on community development programs, charitable contributions, and
volunteer efforts.
• Product Responsibility: Information on product safety, quality, and sustainability of supply chains.
[Link]:
• Corporate Governance: Details on board structure, executive compensation, and shareholder rights.
• Ethical Practices: Data on anti-corruption measures, compliance programs, and ethical business
conduct.
• Risk Management: Information on how sustainability risks are identified, assessed, and managed.
 ESG Reporting
• An ESG report is a report published by a company or organization about
environmental, social and governance (ESG) impacts.
• It enables the company to be more transparent about the risks and
opportunities it faces.
Some sustainable practices of companies:
[Link]
[Link]
 • IKEA, a Swedish
furniture giant has
proactively switched
its entire lighting
range to energy-
efficient LEDs.

• They have also

announced
their plans to invest
$220 million in
reforestation, green
energy, and forest
protection projects
in an effort to
become “climate-
positive.”

• Along with all this,

the company is also
[Link] committed to using
[Link]
[Link]

[Link]
ea-cups-share-pilot-phase/

[Link]
[Link]
reenwashing/
[Link]
relations/esg-initiatives
[Link]
[Link]
 Business Responsibility and
Sustainability Reporting (BRSR)
• India has introduced new environment, social, and governance (ESG)
reporting requirements for the top 1,000 listed companies in the country
by market capitalization.
• SEBI stipulates that the disclosure must be made through a new format,
namely the Business Responsibility and Sustainability Report (BRSR).
• The purpose of BRSR is to integrate sustainability into corporate
governance and reporting, and to enhance the accountability of businesses
regarding their ESG impacts.
 BRSR
• BRSR reporting was voluntary for FY 2021-22 but made mandatory from FY
2022-23.
[Link]
-sustainability-reporting-by-listed-entities_50096.html
 Objective / Purpose
• The BRSR is aimed at securing transparent and standardized disclosures by
companies on their ESG parameters and sustainability-related risks.
• This approach is expected to help companies better demonstrate their
sustainability objectives, position, and performance to the market, resulting
in long-term value creation and increasing the ability of investors to make
informed ESG-related decisions.
 BRSR
• Earlier, Business Responsibility Reporting (BRR) guidelines were framed by
the Ministry of Corporate Affairs (MCA) in 2009.
• BRR served as a platform upon which a ESG reporting framework having
much broader scope could be developed and it served as the launchpad for
BRSR.
• SEBI introduced requirement of ESG reporting in India in 2012. Their
version of ESG reporting was termed the Business Responsibility Report
(BRR) and it was mandated by SEBI that the top 100 listed companies in
India by market capitalization needed to file a BRR.
• By 2021, BRR evolved into BRSR, making it a comprehensive ESG reporting
framework.
[Link]
[Link]
[Link]
/files/IHCL_Integrated_Annu
al_Report_2023-[Link]
 [Link]

[Link]
 [Link]

[Link]
 Corporate Social Reporting
• Corporate Social Responsibility (CSR) is corporate initiative to assess and take
responsibility for the company's effects on the environment and its impact on
social welfare.
• It can be conceptualized as the corporations’ obligation to take necessary action to
reduce the negative externalities and enhance the positive externalities
associated with their business.
• The concept of CSR has evolved and it now includes within its scope triple bottom
line approach (achieving a balance of economic, environmental and social
imperatives), corporate ethics, improving and developing skills for sustainability,
etc.
 Key Elements of CSR
[Link] Impact: Information on community programs, philanthropy, and
efforts to improve social well-being.
[Link] Practices: Data on business ethics, anti-corruption measures,
and responsible sourcing.
[Link] Practices: Details on employee welfare, diversity and inclusion,
and labor rights.
[Link] Stewardship: Similar to environmental reporting but
within the broader context of CSR.
 Statutory Provisions for CSR
 The applicability of CSR reporting in India is primarily guided by the
Companies Act, 2013 (Section 135, Schedule VII) and the Companies
(Corporate Social Responsibility Policy) Rules, 2014, issued by the
Ministry of Corporate Affairs (MCA).

 These regulations mandate certain companies to undertake CSR activities

and disclose their CSR initiatives through reporting.
 CSR Reporting
CSR means and includes but is not limited to:
(1) Projects or programs relating to activities specified in Schedule VII to the
Companies Act, 2013
(2) Projects or programs relating to activities undertaken by the Board of Directors
of a company, in pursuance of recommendations of the CSR Committee of the
Board, as per declared CSR Policy of the company (along with the conditions that
such policy will cover subjects specified in Schedule VII of the Act)
 Statutory Provisions for CSR
As per section 135 of the Companies Act, 2013:
Every company having either
➢ net worth of Rs. 500 crore or more, or
➢ turnover of Rs. 1,000 crore or more or
➢ a net profit of Rs.5 crore or more
during any financial year shall constitute a CSR Committee of the Board
consisting of three or more directors (including at least one independent
director).
 Role of CSR Committee
The CSR Committee shall—
(a) formulate and recommend to Board-
◦ a CSR Policy indicating the activities to be undertaken by the company as
specified in Schedule VII;
◦ the amount of expenditure to be incurred on the above activities
(b) monitor the CSR Policy of the company from time to time.
 Role of Board
Board shall disclose:
(a) The composition of CSR Committee in its annual report
(b) Approve the recommended CSR Policy for the company
(c) Disclose the contents of such Policy in its report and place it on the company's
website
(d) Ensure that the activities included in CSR Policy of the company are duly executed by
the company
(e) Ensure that the company spends, in every financial year, at least 2% of the average
net profits of the company made during the three immediately preceding financial years
by giving preference to the local area and areas around it where it operates in India.
(f) In case the company fails to spend such amount, the Board shall specify the reasons
for not spending the amount.
 Role of Board
• The CSR report should be a part of the annual report.
• CSR report should provide information about the company's CSR policy, the
projects or programs undertaken, the amount spent on each activity, and the
manner of implementation.
• It should also include the reasons for any unspent CSR funds, if applicable.
• CSR report may also include an impact assessment of the company's CSR
initiatives, evaluating the outcomes and benefits of the undertaken activities.

Tata Consumer Case

 CSR Activities – Important
points
- The CSR activities undertaken by the company shall exclude activities undertaken in pursuance
of its normal course of business.

- A company may collaborate with other companies for undertaking projects or programs or
CSR activities in such a manner that the CSR committees of respective companies are in a
position to report separately on such projects or programs in accordance with these rules.

- The CSR projects or programs or activities undertaken in India only shall amount to CSR
expenditure.

- The CSR projects or programs or activities that benefit only the employees of the company and
their Families shall not be considered as CSR activities in accordance with Section 135 of the Act.

[Link]
 CSR Activities – Important
points
- Companies may build CSR capacities of their own personnel as well as those of their
implementing agencies through institutions with established track records of at least three
financial years but such expenditure, including expenditure on administrative overheads,
shall not exceed five percent of total CSR expenditure of the company in one financial year.
- Contribution of any amount directly or indirectly to any political party, shall not be
considered as CSR activity.
- The surplus arising out of the CSR projects or programs or activities shall not form part of
the business profit of a company.
 Permissible activities
 eradicating hunger, poverty and malnutrition, promoting health care including preventive
health care and sanitation (including contribution to the Swach Bharat Kosh set-up by the
Central Government for the promotion of sanitation) and making available safe drinking
water.
 promoting education, including special education and employment enhancing vocation
skills especially among children, women, elderly and the differently abled and livelihood
enhancement projects.
 promoting gender equality, empowering women, setting up homes and hostels for women
and orphans; setting up old age homes, day care centres and such other facilities for senior
citizens and measures for reducing inequalities faced by socially and economically
backward groups;
 Permissible activities
 ensuring environmental sustainability, ecological balance, protection of flora and fauna,
animal welfare, agroforestry, conservation of natural resources and maintaining quality of
soil, air and water (including contribution to the Clean Ganga Fund set-up by the Central
Government for rejuvenation of river Ganga);
 protection of national heritage, art and culture including restoration of buildings and sites
of historical importance and works of art; setting up public libraries; promotion and
development of traditional arts and handicrafts;
 measures for the benefit of armed forces veteran, war widows and their dependents;

 training to promote rural sports, nationally recognized sports, paralympic sports and
Olympic sports;
 Permissible activities
 contribution to the Prime Minister's National Relief Fund or PM CARES Fund or any other fund set
up by the Central Government for socio-economic development and relief and welfare of the
Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and
 Contribution to incubators or R&D projects in the field of science, technology, engineering and
medicine, funded by Central Government or State Government or Public Sector Undertaking or any
agency of the Central Government or State Government;
 Contributions to public funded Universities; Indian Institute of Technology (IITs); National
Laboratories and autonomous bodies established under Department of Atomic Energy (DAE);
Department of Biotechnology (DBT); Department of Science and Technology (DST); Department of
Pharmaceuticals; Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy
(AYUSH); Ministry of Electronics and Information Technology and other bodies, namely Defense
Research and Development Organisation (DRDO); Indian Council of Agricultural Research (ICAR);
Indian Council of Medical Research (ICMR) and Council of Scientific and Industrial Research (CSIR),
engaged in conducting research in science, technology, engineering and medicine aimed at
promoting Sustainable Development Goals (SDGs)
Permissible activities
 rural development projects.
 slum area development. (For the purposes of this item, the term ‘slum area’ shall mean
any area declared as such by the Central Government or any State Government or any
other competent authority under any law for the time being in force.)
 disaster management, including relief, rehabilitation and reconstruction activities.

[Link]
Infosys CSR Initiatives
[Link]
[Link]
q316/files/2023-05/Impact_Assessment_Report_C
SR_2021-[Link]
Mindmap