csr accounting.pptx

About Corporate Social Responsibility Accounting

1. Corporate social responsibility accounting

2. Definition “ A company’s obligation to all of its stakeholders across all of its activities with the aim of achieving sustainable development in the economic , social and environment dimensions.”

3. Which company need to constitute a csr committee ? If a company satisfied any of the following condition during any financial year shall constitute a CSR committee of the board consisting of three or more directors, out of which at least one director shall be an independent director. The conditions are as follows: Net worth of Rs.500crore or more; Turnover of Rs.1000crore or more; Net profit of Rs.5crore or more.

4. Minimum amount of expenditure on corporate social responsibility The board shall 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, in pursuance of its corporate social responsibility policy

5. Activities permitted under corporate social responsibility Eradicating extreme hunger and poverty Promotion of education Promoting gender equality and empowering women Reducing child mortality Ensuring environmental sustainability Employment enhancing vocational skills, social business projects, Contribution to the prime minister’s national relief fund etc ,..

6. General Recognition & Measurement criteria The CSR Activities are carried out by companies in any of the following three ways: -By making contribution to funds specified in Schedule VII of the Companies Act 2013; -Through a registered society/ trust/ section 8 company (erstwhile section 25); -On their own account

7. Treatment of csr expenses option a and b= statement of profit and loss account option c= revenue or capital expenditure Revenue - statement of profit and loss Capital- control Control transferred - statement of profit and loss Control not transferred - check future economic benefit - statement of profit and loss but not as business profit. CSR Expenses are measured at aggregate of amount actually spent/paid and amount for which contractual liability has been incurred (benefits received but payment not made as on date).

8. treatment of unspent csr No provision is required to be made for unspent amount of CSR and only a disclosure is required to be made. However, provision needs to be made when a liability has been incurred by entering into contract for CSR spend. The amount of provision will be equal to the amount representing the extent to which CSR activity was completed during the year.

9. treatment of Excess CSR Amount If the company spends amount on CSR in excess of the 2% of average profits of past 3 years then it is free to do so as 2% is minimum amount and there is no maximum limit prescribed in law. However, no set-off will be allowed in subsequent years for excess amount spend in previous years and accordingly no asset should be recognized in books for such amount

10. Measurement of CSR spend made in kind This includes activities such as free distribution of goods produced by the entity. These should be measured in accordance with the AS-2/ Ind AS 2 at cost or net realisable value, whichever is lower. Treatment of Surplus arising out of CSR Activities Any surplus arising out of CSR Projects shall not form part of business profits of a company. It is an income of the company which has to be recognised in Statement of Profit & Loss. So, corresponding to income a liability will also be recognised for CSR expense which will be expensed off in future period.

11. Presentation and disclosure requirements As per General Instructions for Preparation of Financial Statements in accordance with Schedule III of the Companies Act 2013, the amount of CSR expenditure should be disclosed by way of note to the Statement of Profit & Loss . For better financial reporting practices create a separate line item for CSR Expenditure in Statement of Profit & Loss. A disclosure would be made in Board’s Report .

12. Following disclosure are required in notes to account of CSR expenditure: 1. Gross Amount required to be spent. 2. Amount approved by the Board. 3. Amount spent during the year on Construction/ acquisition of asset Other purposes 4. Details of Related Party Transactions (Trust/ society/ section 8 company which is controlled by company for making CSR spend).

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