Financial Statements: Section 129

In one line

Section 129 requires the financial statements to give a true and fair view, to comply with the accounting standards notified under section 133, and to take the form prescribed by Schedule III, and requires the Board to lay them before the annual general meeting.

What a financial statement is

The definition is not in section 129; it is in section 2(40), and you should open the answer with it. A financial statement includes the balance sheet, the profit and loss account, the cash flow statement, the statement of changes in equity if applicable, and any explanatory note annexed to or forming part of them. A One Person Company, a small company and a dormant company may omit the cash flow statement.

And section 129 has its own Explanation to the same effect: any reference in the section to the financial statement includes any notes annexed to or forming part of it. So a requirement laid on the statement is laid on the notes.

Sub-section (1): the three requirements

The financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133, and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III.

The first proviso adds that the items in the financial statements shall be in accordance with the accounting standards. So the standards govern not only the totals but the composition of every line.

Sub-section (1): who is outside it

The second proviso takes four classes out of the form requirement, because their own statutes prescribe a form.

1. an insurance company;
2. a banking company;
3. a company engaged in the generation or supply of electricity; and
4. any other class of company for which a form of financial statement has been specified in or under the Act governing that class.

The third proviso protects them further. The statements of such a company shall not be treated as failing to give a true and fair view merely because they do not disclose matters not required to be disclosed by:

Why this matters to a B.Com student: a bank's balance sheet looks nothing like Schedule III, and the reason is here, in the second and third provisos to section 129(1). It is a clean two-mark point.