To enhance disclosure norms and present investors with quality information on solvency of firms, the finance ministry and the Securities and Exchange Board of India (Sebi) are considering a proposal to make it mandatory for companies to declare their balance sheets every quarter. At present, companies are required to share their balance sheets with investors and the capital markets regulator Sebi only once a year.

What has prompted the government and the regulator to move quickly on this aspect is the current economic slowdown and its impact on the profitability of companies. “Investors must get to know about the solvency of the firms too and not just the profit and loss (P&L) account,” a finance ministry official told The Indian Express. At present, companies share only their P&L statements every quarter

“With a number of large firms going bust across the globe, investors need to know about the liquidity and solvency of the companies they invest in to make a sound choice,” the official said. The P&L account does not reflect the debt liability of the company, which a balance sheet does. A decision on the same may be taken over the next few weeks after Sebi concurs with the proposal, he added.

Account receivables and payables are reflected in the balance sheet, which reflect any default of payments by customers. On the payables side, it will reflect whether the company has enough liquidity to pay back suppliers. Moreover, many companies show their foreign exchange losses only in the balance sheet, which makes such a disclosure even more essential to adjudge the health of the company.

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