950817

CLA clarifies

accounting

year provision

ISLAMABAD: The Corporate Law Authority has issued a clarification after an amendment in the Income Tax Ordinance, 1979 whereby the companies will have to adopt the financial year as their accounting year.

According to a press release, the clarification has become necessary to avoid any conflict of that amendment with the relevant provisions of the Companies Ordinance, 1984.

The Companies Ordinance, 1984, does not prescribe any particular accounting year for the companies. It, however, requires that annual accounts are compiled for a period not exceeding 12 months except in cases where special permission has been granted in this behalf by the Registrar of Comapnies and such accounts duly audited are laid in the general meeting of the company within a prescribed period.

The other requirement relating to accounts is that every listed company has to within two months of the closing of the first half of its year of accounts, prepare and transmit to the members and the stock exchange concerned, half yearly accounts, whether audited or otherwise.

As a result of the requirement of amended Income Tax Ordinance, the first changed account year of the companies has ended on June 30, 1995. A question has been raised as to whether companies which have already closed their accounts on December 31, 1994, will have to compile the accounts for a period of 18 months i.e. from January 1, 1995 to June 30, 1996 or they should close the accounts for six months i.e. from January 1, 1995 to June 30, 1995 and then compile the accounts for the subsequent period of 12 months separately i.e., from July 1, 1995 to June 30, 1996, for the purpose of the Companies Ordinance, 1984. It may be clarified that under the Companies Ordinance it is upto the companies to adopt either of the course subject to the condition that if they choose to compile accounts for 18 months they will have to seek special permission of the Registrar of Companies and will have to hold the annual general meeting during the calendar year of 1996 within the period prescribed under the Companies Ordinance, 1984. In case, companies propose to compile the accounts for the period of six months ended June 30, 1995 separately, they may do so without any special permission but a general meeting will have to be convened for approval of the said accounts before the expiry of the year,1995.

The other issue relates to listed companies which are required to circulate the half yearly accounts. In the context of the change of the accounting year the rationale of the circulation of the half yearly accounts for the period ended June 30, 1995 within the period of two months thereafter has been questioned on e grounds that such an exercise may cause confusion in the minds of shareholders in view of the fact that the audited version of the said half yearly accounts would be available for circulation within two or three months thereafter. Corporate Law Authority has appreciated the view point of the companies and having regard to the practical difficulties which the listed companies may have to face, it has been decided that the listed companies may circulate the aforesaid half yearly accounts duly audited amongst their members even after the expiry of the two months period as prescribed under the Companies Ordinance, 1984 provided audited half year accounts for the period ended June 30, 1995 are circulated to the members not later than December 1, 1995.

The companies for which special income year has been prescribed by the CBR or those proposing to close their accounts for more than 12 months i.e. from January 1, 1995 to June 30, 1996 are at liberty either to circulate the half yearly accounts in question in an unaudited form within the period prescribed under Section 245 or they may circulate the audited accounts for the period 1.1.1995 to 30.6.1995 even after the expiry of prescribed period of two months, but not later than December 1, 1995.-APP