Jash Nikunj Doshi, SVKM’s Pravin Gandhi College of Law
ABSTRACT
The emphasis of this study is on the significance of possessing fundamental knowledge of financial statements for lawyers practicing in India. It highlights the need for publicly listed companies to comply with Generally Accepted Accounting Principles (GAAP) or Indian Accounting Standards (Ind-AS) when publishing financial statements such as income statement, balance sheet, cash flow statement, and auditor's reports on either a quarterly or annual basis. The study emphasizes the significance of having a comprehensive understanding of financial statements, which allows lawyers to assess a company's compliance with accounting principles, undertake due diligence for mergers and acquisitions, and make informed decisions on the economic viability of transactions. The paper also stresses the importance of being knowledgeable about the compliance requirements specified in the SEBI Listing Regulations 2015, which include quarterly, semi-annual, and yearly compliances. The reporting of the profit and loss account, which can be presented in either a single-step or multi-step format, and the balance sheet, which provides an understanding of a company's assets, liabilities, and equity, as well as the cash flow statement, which reveals the movement of cash within the business, are also discussed.
The paper also discusses the importance of footnotes to financial statements, which provide additional disclosures and context for the financial information presented in an annual report. The management's discussion and analysis (MD&A) section, which is a crucial part of a company's annual report and provides an in-depth overview of the company's operations and future prospects, is also discussed. The auditor's report, which is an independent evaluation of the financial statements, is also included in the discussion. The auditor's role is to obtain reasonable assurance about the accuracy of the financial statements and report their findings. It is important for lawyers in India to have a good understanding of financial statements because it allows them to check if a company is following accounting rules, look into the details before making a decision, and judge if a business deal is financially sound.
