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October 2022

How Well Rounded are Rules about Rounding off Numbers in Financials Statements?

By Raman Jokhakar, Chartered Accountant
Reading Time 8 mins
Financial Statements (FS) indicate a company’s financial performance and position. In case of Public Interest Entities (PIE), FS serves numerous people/bodies like shareholders, analysts, regulators, etc.

The idea behind any reporting, is to enable the reader to gather information in a way she can comprehend with ease. Comprehension by reader is the ultimate test that a preparer should measure up his reporting, so that it is of value. IASB has also stated that understandability is an important feature that preparers of financial statements must strive for.

This short article walks you through the rule regarding ‘rounding off’ of figures in the financial statements under the Companies Act, 2013 as required by Schedule III – the absurdities, excesses and anomalies.

PRESENT LAW

Schedule III lays out the manner of presentation of financial statements and other information to ensure they give a true and fair view. In relation to rounding off of numbers, Schedule III mandates:

(i) Depending upon the Total Income of the company, the figures appearing in the Financial Statements shall be rounded off as given below:-

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