Companies need to disclose cryptocurrency dealings under revised rules: Govt
Companies will now be required to disclose their dealings in cryptocurrencies, with the government putting in place stricter disclosure requirements to enhance transparency.
The Ministry of Corporate Affairs (MCA) has amended various rules under the companies law pertaining to audit, auditors, and accounts.
Besides, by making changes to Schedule III of the Companies Act, 2013, there are increased disclosure requirements, including details about their dealings in cryptocurrencies, if any.
The changes were notified by the ministry, which is implementing the companies law on Wednesday. These will be effective from April 1.
According to a senior official, if companies are indulging in trading of cryptocurrencies, then there should be transparency about the magnitude and how much money is being made through such trading activities.
He said there have been complaints in the past about some companies luring investors with promise of high returns by investing in cryptocurrencies and there were also instances of people losing money.
The official also said the latest changes in rules are complimentary ones to CARO — Companies (Auditor's Report) Order. CARO will be applicable from the next financial year.
These are also aimed at enhancing transparency, he added.
Schedule III pertains to general instructions for preparation of balance sheet and statement of profit and loss of a company.
Prateek Agarwal, Partner at Nangia & Co LLP, said amendments to Schedule III will give more insights to various stakeholders/ users of financial statements about specific items and will also make the financial information/ benchmarks comparable between different companies.
"Further, some of the requirements are more detailed mandatory disclosures in the financial statements of the existing financial statement captions," he said.
In another change, companies that use accounting software for maintaining their books must use software that allows them to record audit trail of each and every transaction and also ensure that the audit trail cannot be disabled. This will be applicable from the financial year starting April 1.
"We believe that accounting software requirement is a welcome step towards transparency although it might have significant impact for some smaller businesses in case the existing accounting software does not support the requirements," Agarwal said.
The ministry has also amended the rules pertaining to companies' audit and auditors.
These are aimed at broadening the scope of reporting by auditors in their audit reports.
According to Agarwal, the changes in the auditor report will further increase the responsibility of the auditors as these are significant additional requirements to be reported and that too for the processes that the companies are required to follow the entire year.
Global Cryptocurrency ExchangeFounder and CEO Monark Modi said in light of the recent speculation around banning, allowing crypto currencies to be a part of accounting practices will definitely put investors at ease as they no longer have to be worried regarding taxation.
Bringing regulation that provides safety to investors, factors taxation and fosters crypto currency as an alternate investment class will be the right step ahead, he added.