Sebi revises disclosure norms for exceptional items

The market regulator, Securities and Exchange Board of India (Sebi), is contemplating a proposal on the treatment of exceptional items in the way companies present their accounts.

Exceptional items are usually one-off gains or losses outside the usual scope of business. The regulator is looking to bring in greater visibility and more consistency to disclosures, it said in a discussion paper on a revision in Clause-41 of the Equity Listing Agreement that provides the framework for preparation, authentication and submission of financial results by listed companies.

Exceptional items are highly judgmental and it was observed that many companies follow divergent and inconsistent practices. The exceptional items shall be disclosed as a line item in the main table instead of in the 'Notes' to enhance visibility. More, the definition of exceptional items has also been modified to bring more clarity in disclosures, said the paper.

Other suggestions that it is looking to bring into practice include putting all results in 'Rs crore' till two decimal points, disclosure of book value and cash flow on a six-month basis and greater transparency in reporting of foreign subsidiaries and discontinued operations.

The Sebi Committee on Disclosures and Accounting Standards reviewed the current practices and made recommendations on the same.

It has suggested a similar format for reporting for finance companies and banks as well as disclosure of half-yearly consolidated financial statements when there is a variation of 20 per cent or more in the revenue, total assets, total liabilities, or profits and loss in the consolidated financial results of 20 per cent or more vis-à-vis the corresponding amounts in the standalone financial results according to the last annual audited financial statements.

Also, the consolidated results are to include the audited results of foreign subsidiaries which with Indian subsidiaries or joint ventures would constitute not less than 80 per cent of the consolidated turnover, net worth, or profit and loss.

The option of publishing consolidated results only in International Financial Reporting Standards (IFRS) will be discontinued and listed companies will be required to file consolidated financial results in line with Indian Generally Accepted Accounting Principles.

Listed companies will have the option to submit consolidated financial results in line with IFRS notified by the relevant body.

If there are any changes in the accounting policies during the year, the impact of the same on the prior quarters of the year, included in the current quarter results, shall be disclosed separately by way of a note to the financial results of the current quarter, without restating the previously-published figures.

The move is also to bring clarity to non-manufacturing companies which are required to make disclosures in line with that of manufacturing companies, said the Sebi discussion paper.

SMS tipsters
Sebi on Tuesday took action against entities involved in circulating market tips and stock advisories through SMSs.

It barred Imtiyaz Hanif Khanda and Vali Mamad Habib Ghaniwala from access to the capital markets. Sebi's preliminary investigation revealed they were giving investment advice through their proprietary concerns, Right Trade, Sai Traders, Bull Trader and Laxmi Traders, without being registered with Sebi.