Sebi revises listing rules for more transparency

Reduces time for disclosing results; solvency position to be disclosed every 6 months.

The Securities and the Exchange Board of India (Sebi) has reduced the period within which companies can announce their annual financial numbers. The regulator has also made it mandatory for all listed entities to disclose their asset-liability and solvency positions every six months.

Also, in order to implement peer review among accountants, only auditors who have been through the peer review process will be allowed to audit listed entities. Schemes of amalgamation, mergers and reconstruction will now be required to be accompanied by an auditor’s certificate.

In a circular today, Sebi said the amendments were an attempt to bring more transparency and efficiency in governance of all listed entities. Also, appointment of chief financial officers would have to be approved by the audit committee of the company after proper assessment of candidates' qualifications, experience and background.

“It has been decided that listed entities shall disclose, on standalone or consolidated basis, their quarterly (audited or un-audited with limited review) financial results within 45 days of the end of every quarter,” said Sebi.

Also, for entities which submit annual audited results in lieu of last quarter’s unaudited financial results with limited review, audited annual results on standalone as well as consolidated basis shall be disclosed within 60 days from the end of the financial year. At present, companies get a maximum of 90 days to announce their annual numbers.

The regulator has also dealt with the sensitive issue of companies’ solvency position. The issue has assumed importance after the recent global financial crisis. Companies will now have to disclose their asset-liability position within 45 days from the end of the half-year, as a note to their half-yearly financial results. At present, shareholders have access to statements of assets and liabilities of listed entities and their solvency position only on an annual basis.

The regulator has also rules that limited review/statutory audit reports can be given by only auditors who have “subjected themselves to the peer review process of ICAI and who hold a valid certificate issued by the ‘Peer Review Board’ of the said institute”. Incidentally, after the Satyam scam, Institute of Chartered Accountants of India (ICAI) had specified a peer review mechanism to ensure that the quality of services by its members is maintained. Chartered accountancy firms (proprietary as well as partnership) and members of the institute practising individually are required to undergo the process.

On a different note, the regulator has made it mandatory for companies to submit an auditors’ certificate while submitting the scheme of amalgamation, mergers and reconstruction to prove that the accounting treatment in such schemes is in compliance with all applicable accounting standards. Further, to familiarise companies with international accounting norms, listed entities with subsidiaries have been given an option to submit their consolidated financial results in accordance with International Financial Reporting Standards (IFRS), which will be implemented from April 1, 2011.

“Where the figures for the current period are according to IFRS and the figures for the corresponding previous period are according to the notified accounting standards, a reconciliation shall be provided in respect of significant differences between the figures as disclosed as per IFRS and what they would have been if the notified accounting standards were adopted,” said Sebi.