Message from Ministry of Corporate Affairs :
“Over the years, the ICAI has made a name for itself in the development of accounting discipline. It has been catering to the needs of modern day accountancy requirements by generating qualified CAs to meet the present as well as the future needs of the industry.
The Institute has intensified its focus on global best practices and has raised the bench mark of accountancy profession in India. It has thus come a long way since its establishment”.
EAC Opinion
Accounting for unspent expenditure towards Corporate Social Responsibility
Facts:
A company being a Government of India enterprise, is engaged in the business of transmission of power from the generating units in central sector to various State Electricity Boards.
The company has stated that the Guidelines on Corporate Society Responsibility (CSR) for Central Public Sector Enterprises (CPSEs), issued by the Department of Public Enterprises (DPE) on 9th April, 2010, provides that each CPSE has to mandatorily create CSR budget through a board resolution as a percentage of net profit of the previous financial year. The above guidelines also provide that the amount allocated for CSR activities should be transferred to a CSR fund which will accumulate – as in the case of non-lapsable pool for the North East.
In accordance with the above guidelines, in the financial year (F.Y.) 2011-12, 1% of profit after tax (PAT) of the previous year was earmarked to CSR activities after approval of the Board of Directors.
The company has also stated that upto the F.Y. 2010- 11, actual expenditure incurred on CSR activities was charged to the statement of profit and loss and the difference between 1% of PAT of previous year and actual expenditure (hereinafter called as ‘unspent expenditure’) was appropriated through the statement of profit and loss to CSR reserve.
During the F.Y. 2011-12, it was considered that unspent expenditure is not in the nature of reserve to be created by appropriation of profit but is an obligation to be incurred. As such, it is in the nature of provision rather than reserve fund. Accordingly, provision was made for the unspent expenditure for the year as well as unspent expenditure as at the beginning of the year.
Query:
On the basis of the above, the company has sought the opinion of the Committee on the following issues:
(i) Whether the unspent expenditure should be charged to the profit and loss account and provision be created for the same, or (ii) the unspent expenditure be appropriated through the profit and loss account to CSR reserve, or (iii) to adopt any other accounting treatment.
Opinion:
The Committee noted the definitions of ‘provision’. ‘liability’ ‘obligating event’ ‘present obligation’ and paragraphs 14, 16, 17 and 18 of AS 29, notified under the Companies (Accounting Standards) Rules, 2006 as well as DPE Guidelines and is of the view that as per the DPE Guidelines, there is a mandate for creation of a budget/fund and not to spend on CSR activities as a percentage of profits, which would only form a basis for evaluation of the performance of an enterprise. However, there is no mandate on the amount of expenditure, which has to be necessarily incurred by an enterprise during a period of its operation. Thus, there is a mandate only on the creation of a budget or fund rather than an obligation to incur expenditure during a period. Since as per DPE Guidelines, there is no such obligation on the enterprise, provision should not be recognised. Accordingly, the Committee is of the view that the requirement in the DPE Guidelines for creation of a CSR budget can be met through creation of a reserve as an appropriation of profits rather than creating a provision as per AS 29.
[Pl. Refer Page nos. 139 to141 C. A. Journal – July, 2013]
ICAI News:
(Note: Page Numbers given below are from C.A. Journal of July, 2013)
i) Member as a senior citizen – Age reduced to 60 (P.182)
The Council of the ICAI has decided to reduce the age from 65 years to 60 years for treating a member as senior citizen for the purpose of payment of annual membership fee and certificate of practice fee.
ii) New Branches of ICAI (P. 167 to 168)
The following five branches of ICAI have been established. With this addition, there are 138 Branches of ICAI in India now.
a) Sikar (Rajasthan) – CIRC
b) Sirsa (Rajasthan) – NIRC
c) Rewari (Haryana) – NIRC
d) Nanded (Maharashtra) – WIRC
e) Dhule (Maharashtra) – WIRC
iii) Branches of WIRC Students Association (P. 169)
The following branches have been set up
a) Latur (b) Ahmedabad (c) Sangli and (d) Goa
iv) The following Institutions have recognised Chartered Accountancy Qualification for registration to PhD Programme (P. 169 to 171)
a) Arinahilingam Institute for Home Science and Higher Education for Women, Coimbatore – deemed university
b) Indian Institute of Technology, Madras
c) Dr. D.Y. Patil Vidyapeeth University, Pune
d) Central University of Jharkhand, Ranchi.
v) The following Campus Placement Programme for newly qualified C.As. has been or organised by ICAI during the month of August and September, 2013 (P. 180)
