28 august 2000

icai to tighten disclosure norms
new delhi: as companies make a bid to raise funds from the public, the institute of chartered accountants of india (icai) has made it mandatory for companies to follow accounting standard 18, that calls for companies to give full details of transactions between companies having common ownership or directors with substantial interest in their annual reports. the requirements of the statement apply to the financial statements of each company and also to the consolidated financial statements presented by a holding company.

the accounting standard will come into effect from april 1, 2001.under this standard, companies will also be required to disclose names of other companies which have common ownership or directors having substantial interest.

it is expected that this move will bring about greater transparency in the company’s balance sheet, which will bring to light the common directorship of a director with substantial interest in two or more companies and any financial transaction between these companies. the move is aimed to curb any undue benefits derived by a company because of a common ownership or directorship with substantial interest. an individual or a company is considered to have a substantial interest in another company if that company or individual owns 20 per cent or more interest in the voting power.

the move aims at bringing to light the transactions with directors or other key management personnel of a company and giving details like their remuneration and borrowings.

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