Corporate Accounting

CORPORATE FINANCIAL
REPORTING AND
SEGMENT REPORTING

BY
Priyanka 23504/79 Chesta 23504/28
B.Com hons
Simmone 23504/109 Devanshi 23504/31
Section : A
Semester : 2 Riddhi 23504/88 Lalitama 23504/58
Sharanya 23504/103
 MEANING
Corporate financial reporting provides essential information to investors and lenders, enabling informed
financial decisions. It is crucial for guiding decisions about loans and investments by offering clear and
useful data.

TYPES OF CSR
OBJECTIVE
1. Help management make better INCOME STATEMENT BALANCE SHEET
A financial statement detailing assets,
decisions for owners. Shows financial performance liabilities, and shareholder equity at a
2. Inform investors, creditors, and users Sumarries sales & expense for p/l specific time, crucial for assessing
Includes EPS for shareholders financial
for smarter choices. refrence structure and shareholder
3. Show company performance for comprehensive for overall investments,
investment assessment. performance aiding decision- making by
stakeholders.
4. Provide info on resources &
STATEMEMT OF CHANGE
transaction CASH FLOW STATEMENT
5. Cover cash management, debt
It tracks cash movement through IN EQUITY
different activities, but it's not It tracks stock price, dividends, and
handling and liquidity events. widely distributed, gains/losses
making it challenging for outsiders over time. It's mainly for external
6. Fulfill owners' guardianship
to parties and doesn't have much impact
obligations. understand a company's financial on internal financial decisions.
status.
 Annual Report And Its Elements
MEANING :
It is the key source of information about a company, covering past, present,
and future performance, financial statements, governance, and CSR initiatives. It enables evaluation
of past activities and future outlook, mandatory for shareholders and vital for investors

Main Components of an Annual Report:

• Chairman's Letter • Director's Report
• Ten-year Financial Summary • Corporate Information
• List of Directors and Officers • Shareholders' Information and Corporate Governance
• Management Discussion and Analysis • Financial Statements & Schedules

Financial Statements and Schedules:

➢Statement of Profit and Loss: Summarizes revenue, costs, and expenses.

NOTE ➢Balance Sheet: Lists assets and liabilities.

➢Statement of Cash Flow: Tracks cash movement by operating, investing,
and financing activities.
 CONTENTS OF REPORT OF BOD

• If any, web address where

• Conservation efforts,
annual report has been
technology absorption placed.
and foreign exchange • Board's meeting held
details. during the year.

A report from the • Statement of Director's Responsibility

• Material changes and
board of directors • Details of any fraud reported by the
commitments impacting
must be included • auditor other those which are reportable
the company's financial
with the financial • to the Central Govt.
position.
statements
presented to a • Company's policy on director
• State of the company's company in a appointment and remuneration.
affairs and proposed general meeting. • Explanations on qualifications or
reserves. The report must remarks by auditors/CS in
• Dividend amount include the practice.
recommended. following
information: • Loans, guarantees or
• Contracts or
investments made by the
arrangements with
company.
related parties.
 PURPOSE

XBRL MEANING :As per the Companies Rule 2015, a standardised

language for communication in electronic form to
It is used for multiple purposes :
• Accounting
eXtensible Business express,report or file financial information
• Internal Reporting
Reporting Language by the co. Act, 2013.
• External Reporting
USERS
Before Co. Act 2013 :
• Companies
• MCA for the first time made it •
ADVANTAGES
Non-Profit organization
mandatory to file their b/s • Accountants analysis
and P/L in XBRL format. • Automated Data Processing
• Investors
• This requirement applied for • Makes reports Accurate and Efficient
• 2010-11
• TAX and Gov. Authorities
• Review the data & identify the problem
• The specific classes required
• to file in XBRL were: • Increased data Integrity & uniformity
CHARACTERISTICS
a. Companies listed in India • Standardized Definitions • Reduces cost & saves time.
and • Testable Business Rule
their subsidiaries
• Multilingual Support
b. paid up capital of 5 crore
• Strong Software Support
(₹50 million) or above Required to follow XBRL
c. Companies with a turnover
XBRL in INDIA According to Sec. 137 of co. Act 2013 with the
of
100 crore (₹1 billion) or above In India, XBRL reporting is mandated Registrar:
(excluding power and banking by MCA, RBI, and the SEBI for various filings, (i) listed with any Stock Exchange(s) in India
companies, etc. including annual reports, cost audit reports, and their Indian subsidiaries
and mutual fund filings. (ii) having a paid up capital of rupees 5 crore or
After Co. Act 2013 :
XBRL India is the Indian Jurisdiction of XBRL above
The Companies Rules, 2015 (iii) having a turnover of rupees 100 crore or
International and is responsible for
were issued, superseding above
promoting and developing XBRL standards in India.
the previous rules. (iv) All companies which were hitherto covered
MCA mandated the submission of XBRL in 2011.
under
 SUSTAINABILITY REPORT
MEANING
A sustainability report is a document companies published to share their environment, social,
and governance performance. It complements traditional financial report by disclosing non-
financial information like environmental practices, social initiatives,and governance structures.
The transparency helps stakeholder access companie's sustainability efforts and their long term
impact on value creation.

IMPORTANCE DISADVANTAGE
S
1. Integrating sustainability report into
financial report enhances transparency. 1. Gathering reliable data on sustainability
2. It helps improves relation with investors metrics maybe challenging particularly
by addressing their increasing interest in for companies with decentralized
ESG performance. operations or incomplete Data Collection
3. Customers increasingly prepare business system.
that try your eyes sustainability leading 2. It can be expensive especially for smaller
to improved customer loyalty and brand businesses with limited resources.
advocacy. 3. Sustainability reporting required
4. Reporting can align with Global significant time and resources to collect,
sustainability target set by United analyse and report data, diverting
Nations, contributing to board broader attention and resources from other
societal goals strategic priorities
 TRIPLE BOTTOM LINE REPORTING
The triple bottom line reporting refers to an accounting framework that takes into account not only financial
performance but also social and environmental impacts. It incorporates three dimensions of performance:
people, planet and profits. It is a way to access the overall sustainability and responsibility of a company beyond
just financial gains.

Problems
3P's
One of the challenges.
•Profit: Focusing on simvolved in 3 in in gauging a
financial success and company's TRI. is that it is
difficult to measure. Profim are
economic viability. Benefits numerical and so easy to
•People: Prioritizing
measure, but it can be difficult
social well-being,
to measure the value of, for
inclusivity, and fair •Enhanced brand image and
example, reducing greenhouse
treatment. perception emissions or preventing an oil
•Planet: Promoting •Higher employee retention rate spill except in terms of the
environmental impact to profßt. Some may
•Improved employee satisfaction
sustainability and interpret a company having a
•Long term sustainability limited impact on the
minimizing negative
impacts on the Earth. •Risk reduction environment as a succes, while
others might want to see a
company actively improving
the environment.
 CSR REPORTING
CSR reporting, also known as corporate transparency reporting, is when companies share information about social and
environment impact alongside financials. It's like a report card for the community and the environment. These reports
are important because they show companies care about more than money and can boost their public image by
highlighting good deeds.

NEED FOR CSR

CSR reports are a vital tool for organizations to share their mission, efforts, and outcomes with stakeholders. These
stakeholders include employees, decision-makers, shareholders, customers, the local community and society. When a
company excels in CSR, its report becomes strategic for marketing and PR event. With no strict guidelines,
companies can showcase achievements and integrate social responsibility into their brand identity. Releasing CSR
reports annually fosters accountability within the organization.

CSR COMMITTEE (AMENDMENTS)

The CSR Committee of India, established under the Co.’s Act, 2013, ensure that eligible
companies allocate funds for CSR activities. These aim to benefit society and the
environment. The CSR Committee formulates and implements CSR policies, approves CSR
projects and monitors compliance with legal requirements.

As per Section 135(1) provides that every company having a fincial thresholds must
form CSR Commitee. These includes :
• Networth of 500 crores or more,
• Or
• Turnover of over 1000 crore or more,
• Or
• Net profit of 5 crores or more
 AMENDMENTS
 During the immediately preceding financial year, shall constitute CSR Committee of the BoD consisting of 3 or
more directors, including at least one independent director. However, If not required to appoint an independent
director under sec. 149(4), the CSR Committee must have at least two directors.
 Rule 5 of the Co.’s Amendment Rules, 2014,allowing Co. to have a CSR Committee, without an independent
director, if it is not required underSec. 149(4). A private company having only two directors must constitute its
CSR Committee accordingly.
 Futhermore, Rule 3(1) of the Co.’s Rules, 2014, mandates CSR compliance for holding company and subsidiaries
regardless of eligibility and vice versa.
 Rule 3(2) of the Co.’s Rules, 2014, states that company fails to meet the criteria given in Section 135 (1), for 3
consecutive financial years, it shall not be required to constitute a CSR Committee till the time it meets the said
criteria,
 if CSR spending does not exceed 50 lakhs annually, the CSR Committee requirement is waived.
 Section 135(2) provides that the Board's Report must disclose the composition of the CSR Committee.

CSR EXPENDITURE
 According to Sec. 135(5) of the Co.’s Act, as changed by the Co.’s (Amendment) Act, 2020, a companies must
spend at least 2% of its average net profits from the last 3 financial years on CSR activities annually. For the
companies less than 3 years of operation, the average is based on available years, excluding specific amounts
set by law and is figured out following section 198 rules. Emphasis should be on assisting local communities.
Failure to meet the spending requirement mandates an explanation in Co.’s report. Unspent moneymust be
transferred to a special fund within 6 months after the financial year ends, unless it's for an ongoing project.
Excess spending can be carried forward to cover CSR obligations.
 As per Section 135(6), any remaining funds from ongoing CSR projects must be moved to a special bank
account called the Unspent CSR A/C within 30 days after the financial year ends. This money must be used for
CSR activities.
 Failure to meet CSR spending obligations incurs penalties.The penalty is twice the shortfall or 1 crore,
whichever is less. Company officers responsible for non-compliance may face penalties, up to 2 lakhs or
1/10th for the shortfall, whichever is less.
 JOURNAL ENTRIES
CSR EXPENDITURE
ENTRIES

Case-1: When CSR spending made Case-2: When CSR spending made
in cash in kind

CSR Expenditure Account Dr. CSR Expenditure Account Dr.

To Bank Account To Purchases/Cost of Goods
Consumed Account

Case-3: When amount of CSR not fully Case-4: When amount of CSR not fully
spent [unspent CSR- Section 135(5)] spent but there is an ongoing project in
this regard [ongoing project - Section
CSR Expenditure Account Dr. 135(6)]
To Bank/Purchases/Cost of Goods
CSR Expenditure Account Dr.
Consumed (as the case may be) To Bank/Purchases/Cost of Goods
To CSR Fund Account (unspent amount) Consumed (as the case may be)
To CSR to be spent on ongoing Project
A/C

Case-5: Excess spending on CSR

CSR Expenditure Account Dr.
CSR Pre-Spent Account Dr.
To Bank/Purchases/Cost of goods
consumed (as the case may be)
 SEGMENT REPORTING
Segment reporting offers a comprehensive view of a company's performance and risks across operations and locations. AS 17
ensures transparency. Compliance enhances understanding and aids detailed analysis for complex, diversified firms.

Companies operate in diverse product lines and regions The organization begins with internal financial
with varying profitability, growth, and risks. The reporting to identify segment-linked items.
standard guides disclosing financial data about
Segment revenue, expense, assets, and
products/services and regions, aiding users in
understanding performance, analyzing risks and returns, liabilities are presumed directly attributable or
and making informed judgments about the enterprise. reasonably allocable from internal reporting.

AS - 17 is crucial for financial statements with mandatory Primary reporting format (business or geographic) based on
compliance. Segment information is based on consolidated risks and returns.
statements. Reportable segments:
• Business segment: Distinct part with unique products/services • Revenue/internal transactions ≥ 10% of total segment
and risks. revenue.
• Geographical segment: Serving specific geographic areas. • Segment result ≥ 10% of combined result.
• Reportable segment: Identified per AS 17. • Segment assets ≥ 10% of total assets. For each segment,
• Segment revenue includes directly attributable and disclose:
reasonably allocated revenue, excluding extraordinary items. Revenue, result, assets/liabilities.
• Segment expenses include directly attributable and • Future asset acquisition costs.
reasonably allocated operating expenses, excluding • Depreciation, amortization, significant non-cash expenses.
extraordinary items.Segment result is revenue minus Secondary reporting if business segments are primary:
expenses. • Revenue by geographic area.
• Segment assets/liabilities are directly or reasonably allocated • Total assets by geographic location.
• Asset acquisition costs by location
to the segment.
 EXAMPLES

• Tata Steel - Sustainability Report

• Nestle - Annual Report • https://www.tatasteeleurope.co
• https://www.nestle.com/sites/defaul m/sites/default/files/Tata%20Ste
t/files/2024-03/nestle-finance-inter el%20sustainability%20report%
national-ltd-fullyear-financial-report 20202223.pdf
-2023-en.pdf
REAL LIFE
COMPANY’S
EXAMPLES
• RIL - CSR report • CFA - Segment Reporting
• https://www.ril.com/sites/defaul • https://www.cfainstitute.org/-/me
t/files/2023-08/CSR202223.pdf dia/documents/survey/segment-d
isclosures-survey-report.pdf
THANK YOU