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.
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.
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.
The financial year for all the schemes should end on 31 March each year and comparatives are required for the financial statements.
The reporting currency is India Rupee (INR).
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.
The regulations detail the contents of abridged revenue accounts and balance sheets for the schemes.
Financial statements are required for umbrella schemes including all sub funds. The fund can additionally produce financial statements for each sub fund.
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.
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.
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.
Whenever there is no guidance Generally Accepted Accounting Principles (GAAP) in India must be used for preparation 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|
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:|
|The financial statements distinguish between income and capital||Yes||Yes|
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:
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