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Introduction of Form CSR-2 for CSR reporting, mining, and analyzing CSR data
On 11 February 2022, the Central Government notified amendments to Companies (Accounts) Rules, 2014. The amended rules apply to companies that are required to undertake Corporate Social Responsibility (CSR) activities as prescribed under Section 135 of the Companies Act, 2013 (Act). Central Government’s intent behind this amendment is to closely monitor any irregularities, discrepancies, and mismanagement in CSR contributions. The amendment focuses on new disclosures that capture crucial metrics of CSR contributions in granular detail to support this intent.
An itemized summary of the amendments announced and applicable under the Companies (Accounts) Rules, 2014 from 11 February 2022 is as under:
- Introduction of new sub-rule 1B in Rule 12 in Companies (Accounts) Rules, 2014
- Additional disclosure by introducing a new form – Form No. CSR-2: Report on Corporate Social Responsibility (CSR)
Introduction of new sub-rule 1A in Rule 12 in Companies (Accounts) Rules, 2014
Under the new sub-rule, companies required to undertake CSR activities will now be required to undertake the following compliance filings:
| Reporting Period |
Prescribed Compliance Filing |
| 2020-21 |
Separately furnish a report on CSR in form CSR-2 to the Registrar of Companies on or before 31 March 2021 |
| 2021-22 and ahead |
File a report on CSR in form CSR-2 in addendum to:
Form AOC-4/ AOC-4 XBRL/ AOC-4 NBFC (Ind AS) as applicable |
Overview of Form CSR-2
CSR information to be reported in Form CSR-2 can be summarized as under:
- Net worth, Turnover and Net Profit and criteria that triggered CSR applicability
- Average Net Profit of the Company as per Section 135(5) of the Act, 2% of average Net Profit of the Company as per Section 135(5), Total CSR Obligation
- Total amount spent for the financial year, Unspent amount/Excess, any amount to be transferred to Unspent CSR account as per Section 135(6), any amount to be transferred to a fund specified in Schedule VII of the Act.
- Composition of CSR committee if any and number of meetings conducted during the year
- CSR Policy and projects approved by the Board
- Amount available for set-off up to immediately succeeding three financial years
- Avenue of CSR spending: Ongoing projects and/or other than ongoing projects
- Amount spent in Administrative overheads and Impact assessment
- Details of any capital assets acquired or created through CSR spends in the financial year
- Reasons for failure to spend, if any.
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Our Comments
- Form CSR-2 is intended to serve as a holistic data CSR accumulator for the Central Government. Ministry of Corporate Affairs plans to use data analytics and artificial intelligence to identify discrepancies in CSR performance by companies and Form CSR-2 can act as the platform on which these analytics can be performed1.
- CSR compliances in India have matured over time. As CSR reporting shifts from a “comply or explain approach” to being more conscientious and governance oriented. Form CSR-2 is a balanced blend of quantitative financial information and qualitative CSR project and spend oriented details. This echoes how CSR compliance in India has matured over time as CSR reporting shifts from a “comply or explain approach” to being more conscientious and governance oriented.
- Reporting entities will have to bear an incremental input to their compliance matrix. However, if applied in the spirit as intended by the Central Government, this compliance can be a dashboard of CSR information that a company can provide to all its stakeholders.
- Landmark amendments are expected to follow in the CSR sphere as India is gearing to implement ESG reporting (Environment, Sustenance and Governance). ESG reports in India may be expected to be a rung higher owing to a CSR reporting environment that grows more robust with the introduction of compliances like Form CSR-2.
Refer to our master publication on CSR compliance and reporting on https://www.suditkparekh.com/pdf/Amendments_to_CSR_activities_for_the_year_2020-21.pdf
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1. Economic Times 15 February 2022
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