Year-end considerations for 2023: what organizations need to know

This publication provides an overview of the changes in accounting standards and interpretations as well as regulatory changes that are relevant from year-end closure for 2023 and beyond. 

As we revisit the Financial Year 2022-23 (FY 2023), a number of challenges are likely to shape the future landscape such as sharp deterioration of macroeconomic environment with geopolitical risks, high inflation, monetary measures by central banks, slowing economic growth and the potential for a full-blown recession in many countries. The war between Russia and Ukraine has already catalyzed enormous disruption for businesses and economies around the globe. Regulatory changes are a reflection of these challenges and uncertainties. In seeking to address and mitigate the risks of this new environment, regulators may create an additional layer of complexity for industry from the perspective of its inclusion in year-end financial statements and reporting.

A recent EY publication, “Year-end considerations: updates of standards, interpretations and regulatory considerations affecting financial statements”, aims to help companies make sense of the regulatory landscape that is relevant for 2023 and beyond. The publication consists of three sections:

Section 1: provides an overview of the key accounting changes as of 31 March 2023 and certain key amendments that are applicable for financial statements for the year-ended 31 March 2023 and beyond. 

Section 2: provides a glance at the regulatory and other changes that have been issued during this year, which have a consequential impact on accounting, disclosures, and compliance with regulations. 

Key amendments by the Ministry of Corporate Affairs including:

Use of an accounting software which records the audit trail

MCA has amended the Companies (Accounts) Rules, 2014 relating to the manner of maintaining books of account in electronic mode. As per the amendment, every company which uses accounting software for maintaining its books of account, should use only such accounting software which has a feature of recording the audit trail of each transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled. 

Companies need to gear up to upgrade their accounting system to comply with audit trail requirements w.e.f. 1 April 2023. The date of applicability of audit trail requirements for the management succeeds the date from applicable to the auditor (i.e., effective from 1 April 2022). In the absence of current year compliance requirement for the Companies, Statutory Auditor would not be able to report under 11 (g) of Audit Rules.  

Corporate Social Responsibilities (CSR)

Key amendments to Companies (Corporate Social Responsibility Policy) Rules, 2014 include proviso to Rule 3(1), Rule 4(1) to be substituted, Clause (C) of rule 8(3), annexure II and clarification on spending of CSR funds for “Har Ghar Tiranga” campaign.