# Section 134 — Financial Statement & Board's Report

## Part A — Authentication & Signing

### 1. Financial Statements (incl. Consolidated FS)

Must be approved by the Board of Directors before they are signed on behalf of the Board.
Signed by:
Chairperson of the company (if authorised by the Board), OR
Two directors, of whom one shall be Managing Director (MD), AND
CEO (if a director), CFO and Company Secretary (CS) — wherever they are appointed.

### 2. Board's Report

Approved by the Board.
Signed by:
Chairperson of the company (if authorised by the Board), OR
At least 2 directors, one of whom shall be MD, OR
The director where there is only one director.

> Mnemonic — Signing FS: "Chair OR 2 dir (1=MD) + CEO + CFO + CS"

## Part B — Director's Responsibility Statement (DRS)

The Board's Report must include a DRS stating the following six points:

### (i) Applicable AS followed

In preparation of annual accounts, applicable accounting standards have been followed and there is no material departure.

### (ii) Selection & application of Accounting Policies (AP)

Directors have selected such accounting policies and applied them consistently and made judgements & estimates that are reasonable and prudent, so as to give a true and fair view of state of affairs and profit/loss.

### (iii) Proper care for maintenance of records

Directors have taken proper and sufficient care for:

Maintenance of adequate accounting records, in accordance with the Act;
Safeguarding the assets of the company;
Preventing and detecting fraud and other irregularities.

### (iv) Going concern basis

Directors have prepared the annual accounts on a going concern basis.

### (v) Internal Financial Controls (IFC) — Applicable only to Listed Companies

Directors have laid down IFC that are adequate and were operating effectively.

### (vi) Compliance with all applicable laws

Directors have devised proper systems to ensure compliance with provisions of all applicable laws and that such systems were adequate and operating effectively.

## Memory Hook for DRS — "AS, AP, CARE, GC, CONTROL, LAW"

#	Acronym	Point
1	AS	Applicable AS followed, no material departure
2	AP	Consistent AP + prudent judgement
3	CARE	Records, safeguarding assets, fraud prevention
4	GC	Going Concern basis
5	CONTROL	IFC adequate (listed cos only)
6	LAW	Compliance system for all laws

## Part C — Other Contents of Board's Report

Additional disclosures include extract of annual return, number of board meetings, declaration of independent directors, particulars of loans/guarantees/investments, related party transactions, dividend, transfer to reserves, material changes after FY end, conservation of energy, CSR initiatives, risk management policy, etc.

Worked example

### Example 1

Example 1 (Signing FS): ABC Ltd's MD is on leave. Can FS be signed by CFO and CS alone?

Answer: No. FS must be signed by Chairperson (if authorised) OR 2 directors of whom one must be MD. CFO + CS sign in addition but cannot replace director signatures.

### Example 2

Example 2 (DRS in Private Co.): Is point (e) — IFC — required in DRS of a private company?

Answer: No. IFC point applies only to listed companies. Other 5 points apply to all companies.

### Example 3

Example 3 (One director company): OPC has only one director. Who signs Board's Report?

Answer: The sole director signs the Board's Report (proviso to Section 134).

⚠️ Common exam mistakes

Forgetting that one of the 2 signing directors of FS must be MD (if a MD exists).
Including IFC statement in DRS of an unlisted/private company — IFC point is listed companies only.
Omitting CEO from FS signing — CEO signs only if he is a director; CFO & CS sign wherever appointed (irrespective of being a director).
Confusing 'true and fair view' as the responsibility line — DRS uses 'prudent and reasonable judgement' to give true & fair view (point (ii), not a separate point).
Stating only 5 points in DRS — there are 6 points; (e) IFC is the listed-co specific one.
Saying Board Report is signed by all directors — it can be signed by Chairperson (if authorised) or 2 directors including MD, not necessarily all.

Bare-Act text Section 134(1), 134(3) & 134(5) · Companies Act, 2013 · click to expand

Section 134(1) — The financial statement, including consolidated financial statement, if any, shall be approved by the Board of Directors before they are signed on behalf of the Board by the Chairperson of the company where he is authorised by the Board or by two directors out of which one shall be the Managing Director, and the Chief Executive Officer (if he is a director), the Chief Financial Officer and the Company Secretary of the company, wherever they are appointed. Section 134(3)(c) read with 134(5) — There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include a Director's Responsibility Statement, indicating — (a) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (b) that the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs and profit or loss of the company; (c) that proper and sufficient care had been taken for the maintenance of adequate accounting records, for safeguarding the assets and for preventing and detecting fraud and other irregularities; (d) that the annual accounts had been prepared on a going concern basis; (e) that in the case of a listed company, directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; (f) that the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

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Financial Statement & Board's Report — Authentication, Signing & Director's Responsibility Statement (Section 134)

Worked example

⚠️ Common exam mistakes