India - Accounting

India - Accounting

International funds and fund management survey

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1.1 Accounting

In India, the regulator for governing mutual fund is the Securities and Exchange Board of India (SEBI). As part of its regulations, it governs maintenance of books of account and preparation of financial statements.

1.2 Requirement to produce financial statements

Requirement to maintain the books and records in the local jurisdiction

Every asset management company is required to keep and maintain proper books of accounts, records, and documents for each scheme and to intimate the regulator of the place where such books of accounts, records, and documents are maintained.

Production of financial statements by collective investment funds

Collective investment funds are required to produce financial statements. The regulator, that is, SEBI, requires the schemes to prepare financial statements every year.

The financial statements are to be prepared by the investment manager and signed by the trustees as well as the directors of the asset management company.

Choice of year/period-end for collective investment funds

The financial year for all the schemes should end on 31 March each year and comparatives are required for the financial statements.

Restrictions on the currency under which financial statements must be prepared

The reporting currency is India Rupee (INR).

Accounting publications specific to the funds industry (as issued by accounting bodies or the regulators)

The regulations issued by regulator cover accounting aspects of the schemes such as form and content of the balance sheet, revenue account, accounting policies, etc.

Use of short form accounts

The regulations detail the contents of abridged revenue accounts and balance sheets for the schemes.

Umbrella schemes

Financial statements are required for umbrella schemes including all sub funds. The fund can additionally produce financial statements for each sub fund.

Classes of shares

In India, funds are formed as trusts. The financial statements incorporate all classes of units and financial statements are required to be produced for each class of share.

1.3 Requirement to audit financial statements

Annual financial statements are required to be audited every financial year.

Interim financial statements are not required to be audited.

Every mutual fund shall need to have the annual accounts audited by an auditor who is not in any way associated with the audit of the asset management company.

1.4 Publication of financial statements

The abridged scheme wise annual reports are required to be mailed to all unitholders withinfour months from the date of closure of each financial year. However, a full set of financial statements shall be available at the head office of the mutual fund and shall be made available to the unit holders on payment of nominal fees as may be specified by the mutual fund.

Annual accounts are required to be filed with the regulator within four months from the date of closure of each financial year.

The unaudited half yearly accounts are also to be published within one month from the close of each half-year. Unaudited half-yearly accounts are to be filed within two months from the close of each half year.

Abridged annual accounts can be sent to the investors in lieu of the full set of financial statements.

The format of abridged accounts is prescribed by SEBI regulations.

1.5 Accounting standards

Whenever there is no guidance Generally Accepted Accounting Principles (GAAP) in India must be used for preparation of financial statements.

1.6 Contents of financial statements

Requirement for inclusion in annual financial statements:

  Required by law Required by GAAP (India)
A statement which includes all income less expenses plus realized and unrealized gains and losses Unrealized gains are shown below the line and unrealized losses are shown as a above the line adjustment in the revenue account No
Statements of net assets and liabilities Yes No
Cash flow statement No Yes - in case the turnover exceeds the specified limits
Statement of accounting policies Yes Yes
3 year net asset value table Yes No

1.7 Accounting treatments and disclosures:

The following items must be included in the annual financial statements:

  Required by law Required by GAAP (India)
Futures are shown on the balance sheet based on the margin outstanding and the margin paid to date No Yes - only margin paid to date is shown on the balance sheet
Organization costs are written off immediately Organizational costs are not charged to the scheme. The same is borne by AMC Yes
Methods used in financial statement presentation to measure listed investments are:    
Cost Yes Yes
Market value:    
close Yes Yes
The financial statements distinguish between income and capital Yes Yes

1.8 Appendix

Reference material

The following details relevant laws and regulations for collective investment funds and fund management companies and provides web addresses (in certain instances) for where this material can be located:

Securities and Exchange Board of India Mutual Fund Regulations 1996.

Accounting pronouncements


Stock exchange

  • Listing agreement.

Taxation authority

  • Income tax authority, service tax authority.
US industries banking three people hallway


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