Exemption from Applicability of Cash Flow Statements

Provided that the financial statement, with respect to One Person Company, small company, and dormant company, may not include the cash flow statement i.e. there is an exemption given to OPC, small company and dormant Company for preparing the Cash flow statement for purpose of inclusion in the financial statement.

Rest companies (Other than small) are mandatory to prepare Cash Flow Statements

Applicability of Cash Flow Statement: –

According to Section 2(40) of the Companies Act, 2013, The Financial statements of a company include a Cash Flow Statement. Cash Flow Statement is governed by The Companies (Accounting Standards) Rules, 2006 (AS 3) and The Companies (Indian Accounting Standards) Rules, 2015 (Ind AS 7), as applicable.

The CARO, 2016 would not be applicable to the following companies: –

• A Banking Company as per section 5(c) of The Banking Regulation Act, 1949.
• An Insurance Company as per The Insurance Act, 1938.
• A Company licensed to operate under Section 8 (Company with charitable purpose).
• One Person Company
• Small Company
• A Private Company not being a subsidiary or holding company of a Public company

> Having Paid-up capital and reserves and surplus upto one crore rupees.

> Having borrowings upto one crore rupees.

> Which does not have a total revenue as disclosed in Scheduled III to the Companies Act (including revenue from discontinuing operations) exceeding ten crore rupees during the financial year.

According to order number S.O. 849(E) of MCA dated 25th March 2020 read along with order number S.O. 4588(E) of MCA dates 17th December 2020, The Companies (Auditor’s Report) Order, 2020 would be applicable from 1st April 2021.