Technical Guide on Accounting for Expenditure on Corporate Social Responsibility Activities
1. Section 135 of the Companies Act, 2013 (the Act), requires the Board of Directors of every company having a net worth of Rupees 500 crore or more, or turnover of Rupees 1,000 crore or more or a net profit of Rupees 5 crore or more, during the immediate preceding financial year, to constitute a Corporate Social Responsibility Committee of the Board.
2. The Corporate Social Responsibility Committee has to formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company in areas or subject as specified in Schedule VII of the Act.
3. The Board has to ensure that the company spends in every financial year at least 2% of the average net profits of the company made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, on Corporate Social Responsibility (CSR) in pursuance of its policy in this regard.
4. The objective of this Technical Guide (TG) is to provide guidance on recognition, measurement, accounting, presentation and disclosure of expenditure on activities relating to corporate social responsibility.
5. What constitutes CSR activities is specified in Schedule VII to the Act.
Reference is also invited to the circular issued by the Ministry of Corporate Affairs (MCA) No. 21/2014, Notification dated October 24, 2014 and clarification by MCA on COVID activities and contribution to PM cares fund. Accordingly the Technical Guide does not deal with identification of activities that constitute CSR activities but only provides guidance on accounting for expenditure on CSR activities in cash and in kind in line with the requirements of the Generally Accepted Accounting Principles including the applicable Accounting Standards.
6. This TG does not apply to other charitable activities of the company, which are not part of discharge of the mandatory corporate social responsibility requirements of the company under section 135 of the Companies Act, 2013
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The Institute of Chartered Accountants of India is the national professional accounting body of India. It was established on 1 July 1949 as a statutory body under the Chartered Accountants Act, 1949 enacted by the Parliament to regulate the profession of Chartered Accountancy in India.
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