revised schedule vi 30.04 - baroda branch of wirc of...

REVISED SCHEDULE VI REVISED SCHEDULE VI

CA. Pareen Shah C . a een Shah Partner

Contractor, Nayak & Kishnadwala

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APPLICABILITYAPPLICABILITY

A li bl f FY i ftApplicable for FY commencing on or after

1.4.2011.

Specific exemption for Banking Co’s, Insurance

Co’s and Co's engaged in generation and supply

of electricity.

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Main Principles

Eliminated the concept of schedule and such

information will now be provided in the notes to

accounts.

The terms used therein will carry the meaning as definedy g

by the applicable Accounting Standards.

In case of any conflict Act/AS would prevail over RS-VI

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Main Principles ...pNomenclature of Profit & Loss changed to Statement ofProfit and Loss

Only vertical format prescribed – for both BalanceSheet and Statement of Profit and LossSheet and Statement of Profit and Loss.

Requirements mentioned therein for disclosure on the face ofh fi i l i h i ithe financial statements or in the notes are minimum

requirements.

Line items, sub-line items and sub-totals can be presented asan addition or substitution on the face of the financialstatements when such presentation is relevant forstatements when such presentation is relevant forunderstanding of the company’s financial position.

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Main Principles …p

Disclosures no longer required in Revised Schedule VI:

Details of managerial remuneration and computation thereof;Details of managerial remuneration and computation thereof;

Information relating to licensed capacity, installed capacity

and actual production;and actual production;

Details of investments purchased/sold during the year;

Maximum amounts due on account of loans and advancesMaximum amounts due on account of loans and advances

from directors or officers of the company;

Commission brokerage and non trade discountsCommission, brokerage and non-trade discounts

Part IV (as contained in old Schedule VI)

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Main Principle …Main Principle …Rounding off: OptionalIf opted for, to use the same consistently in FS

Revised Schedule VITurnover < Rs. 100 Crores - R/off to the nearest Hundreds, thousands,Turnover < Rs. 100 Crores R/off to the nearest Hundreds, thousands,lakhs or millions or decimal thereof.

Turnover >Rs. 100 Crores - R/off to the nearest lakhs, millions ord i l th fcrores, or decimal thereof

SOME ISSUESCNK

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SOME ISSUES• Are any other disclosures required in financial statement other than

h ib d d i d h d l VIthose prescribed under revised schedule VI :‐

1 Disclosures as per notified Accounting Standards (i.e. as per AS Rules,2006)

2 Disclosures as per Companies Act, 1956Buyback of shares (as per sec 77)

3 Disclosures as per other StatutesMSMED Act

4 Disclosures as per ICAI pronouncements4 Disclosures as per ICAI pronouncementsICAI Announcement for derivatives, share based payments

5 Disclosures as per Clause 32 of listing agreementL t i t tLoans to associates, etc.

SOME ISSUESCNK

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SOME ISSUES• According to the MCA circular, presentation of financialg , pstatements for the limited purpose of IPO / FPO duringthe financial year 2011–12 may be made in the pre‐Revised Schedule VI format.

• As explained in the Circular dated 5 September 2011, theone‐time exemption is available only if the IPO / FPO getsp y / gclosed before 31 March 2012. For any IPO/ FPO, whichwill get closed after 31 March 2012, the company willprepare its restated financial information in accordancep pwith Revised Schedule VI, irrespective of the period forwhich the information is being included in the offerdocument.

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• Reclassification of liability of previous year to match the current years classification

• Current / non ‐current classification of assets / liabilitiesis determined on a particular date, viz., the balancesheet date. Thus, the company should have determinedthe current / non‐current classification of previous yearbalances based on the position existing as at the end ofthe previous year. If there is any change in the position at

f ffthe end of current year resulting in differentclassification of assets / liabilities in the current year, itwill not impact the classification made in the previous

I h d h ill iyear. In other words, the company will continue toclassify the loan as non ‐current liability in the figures ofthe previous period.

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• Will Revised schedule VI impact the presentation ofcash flow statements. i.eI i d f h di lIs it mandatory for the company to discloseinflow from the current and noncurrentcomponent of loan separately?

• AS 3 Cash Flow Statements does not mandate suchpresentation. Nor is such presentation required in

i d h d l id hRevised Schedule VI or Guidance Note on theRevised Schedule VI. Hence, it is not mandatory fora company to present separate movement / inflows

d tfl f t d tand outflows from current and noncurrentcomponents of various line items separately.

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Definitions• As per the Framework for preparation and

Presentation of Financial Statements:Presentation of Financial Statements:

• Asset – It is a resource controlled by the enterprise as a resultof past events from which future economic benefits areof past events from which future economic benefits areexpected to flow to the enterprise

• Liability – It is a present obligation of the enterprise arisingf h l f hi h i d lfrom past events, the settlement of which is expected to resultin an outflow from the enterprise of resources embodyingeconomic benefits

• Equity – It is the residual interest in the assets of theenterprise after deducting all liabilities

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Balance Sheet …Current v/s Non Current

A liability is classified as Current if it satisfies any of the following criteria:(a) it is expected to be settled in the company’s normal operating cycle;(b) it is held primarily for the purpose of being traded;( ) d b l d h h f h d(c) it is due to be settled within 12 months after the reporting date; or(d) the company does not have an unconditional right to defer settlement of

the liability for at least 12 months after the reporting date. Terms of a liabilit that co ld at the option of the co nterpart res lt in its liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities shall be classified as non-currentAll other liabilities shall be classified as non-current.

An operating cycle is the time between the acquisition f f i d h i li i i h of assets for processing and their realization in cash or

cash equivalents

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Balance Sheet..Current vs. Non CurrentAn asset shall be classified as current when it satisfies any of the following criteria:(a) It is expected to be realized in or is intended for sale or (a) It is expected to be realized in, or is intended for sale or

consumption in the company’s normal operating cycle;(b) It is held primarily for the purpose of being traded ;( ) It i t d t b li d ithi 12 th ft th (c) It is expected to be realized within 12 months after the

reporting date; or(d) It is cash or cash equivalent unless it is restricted from

being exchanged or used to settle a liability for at least 12 being exchanged or used to settle a liability for at least 12 months after reporting period date.

All other assets shall be classified as non-current.

An operating cycle is the time between the acquisition of assets for processing and their realization in cash or of assets for processing and their realization in cash or cash equivalents

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Balance Sheet …Current Assets …Can X Ltd, engaged in diversified operations, have diff i l f i i li f different operating cycles for its various lines of business?

There is no bar in the RS VI forThere is no bar in the RS VI fora Company to have multipleOperating Cycles. Thus, X Ltd canhave different Operating cycles for itshave different Operating cycles for itsvarious lines of business. In such acase, it should Classify the assetsand liabilities of the Respectiveand liabilities of the Respectivebusiness into current and noncurrent, depending on the length

f th ti B i lof the respective Business cycles.

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• Whether operating cycle shall be disclosed innotes:notes:

• Yes. As a matter of best practice, a company mayp , p y ydisclose the same, especially if the same is morethan 12 months. This disclosure will be

i l l h l f l h f fi i lparticularly helpful to the users of financialstatements, where determination of theoperating cycle involves significant judgmentoperating cycle involves significant judgmentand it is more than 12 months.

h h i l h ld b id d i

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• Whether Operating cycle should be considered customer wiseor business wise

• The company to identify its operating cycle for each of itsbusinesses and not based on each of its customers Hence thebusinesses and not based on each of its customers. Hence, theoperating cycle must be defined in terms of each business.

• Whether lead time period for procurement of materialshall be included in the operating cycle?

• Operating cycle of a business should comprise thel d l f ( )normal time required to complete its processes of (i)

Acquiring raw material, (ii) Processing the same intofinished goods, (iii) Making the sale, and (iv) Realisingthe sale proceeds in cash Hence in the given case thethe sale proceeds in cash. Hence, in the given case, thenormal lead -time to acquire raw material should beincluded in determining the operating cycle.

Whether any adjustment required in determining operating cycle CNK

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• Whether any adjustment required in determining operating cycle for credit period allowed by suppliers.

• In accordance with the Revised Schedule VI, operating cycle isp g ythe time between the acquisition of assets for processing andtheir realisation in cash or cash equivalents.

This suggests that the operating cycle should comprise theThis suggests that the operating cycle should comprise thenormal time spent on various activities, starting from purchaseof raw material till realisation of cash and there is no need toreduce the credit period allowed by supplier from the same.

Further, though the company has not paid for the raw materialduring the first six months, it might have started incurringexpenses on other items such as labour and overhead costs.p

Hence, the credit period allowed by the supplier need not bereduced when determining the operating cycle.

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Format of Revised Schedule VIPart I – Balance SheetPart I Balance Sheet

Name of the Company........

Balance Sheet as at............ (Rupees in..........)Balance Sheet as at............ (Rupees in..........)

Particulars Note No

Figures as at end of current reporting period

Figures as at end of previous reporting periodreporting period period

I EQUITY AND LIABILITIES

(1) Shareholder’s funds(2) Share application money

pending allotment(3) Non-Current Liabilities(4) Current LiabilitiesII ASSETS

(1) Non Current Assets(1) Non-Current Assets(2) Current Assets

TOTAL

Balance Sheet – Liability Side19

S y S

Shareholders Non Current Current Shareholders Funds

Non CurrentLiabilities

Current Liabilities

Share Capital Long term Short term Share Capital Long term borrowings

Short term borrowings

Reserves and surplus Deferred tax Trade Payablesliabilities

Money received i h

Other Long term li bili i

Other current li bili iagainst share

warrantsliabilities liabilities

Long-term Short term Long term provisions

Short term provisions

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Balance Sheet Share CapitalBalance Sheet Share Capital

EQUITY AND LIABILITIES

( ) Sh h ld ’ F d Di l f(1) Shareholder’s Funds – Disclosure for:

a) Share Capitalb) Reserves and surplusc) Money Received against share warrants

Disclosures are required for each class of share capital (different

classes of preference shares to be treated separately).

Disclosure required for:

( ) th b d t f h th i d(a) the number and amount of shares authorized.(b) the number of shares issued, subscribed and fully paid, and

subscribed but not fully paid.( ) P l h(c) Par value per share

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Balance Sheet Share Capital…p

d) reconciliation of the number of shares outstanding at theb i i d h d f i i dbeginning and at the end of reporting period.

e) the rights, preferences and restrictions attaching to eachg , p gclass of shares including restrictions on distribution.

f) shares in respect of each class in the company held by itsf) shares in respect of each class in the company held by itsholding company or its ultimate holding companyincluding shares held by or by subsidiaries or associates ofth h ldi th lti t h ldi ithe holding company or the ultimate holding company inaggregate terms as per AS 18, AS 21.

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Balance Sheet …Share Capital …(g) Shares in the company held by each shareholder

h ldi h % h if i h bholding more than 5% shares specifying the numberof shares held.

Though not specified whether disclosure is required forg p qeach class of shares or not, to disclose shareholding foreach class of shares within Equity/Preference Shares.Percentage should be computed separately for eachPercentage should be computed separately for eachclass of shares outstanding within Equity andPreference Shares.Th h h ldi h ll b t dThe shareholding shall be as at year-end.

(h) Shares reserved for issue under options and contracts /commitments for the sale of shares/disinvestment,including terms and amounts.

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Balance Sheet …Share CapitalShare Capital …

(i) For 5 years immediately preceding the date as athi h h BS i dwhich the BS is prepared:

Aggregate number and class of shares allotted as fullypaid up pursuant to contract(s) without payment beingp p p p y greceived in cash.Aggregate number & class of shares allotted as fully paidbonus sharesbonus shares.

j) Terms of any securities convertible into equity/preferenceshares issued along with the earliest date of conversion ind di d t ti f th f th t h d tdescending order starting from the farthest such date.

k) Calls unpaid (showing aggregate value of calls unpaid bydirectors and officers)

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Some issues• Classification of investment in Preference shares

convertible into equity shares within 12 MONTHSconvertible into equity shares within 12 MONTHS.

• In accordance with the Revised Schedule VI, aninvestment realisable within 12 months from theinvestment realisable within 12 months from thereporting date is classified as a current asset. Suchrealization should be in the form of cash or cashequivalents rather than through conversion of oneequivalents, rather than through conversion of oneasset into another non-current asset. Hence, thecompany must classify such an investment as a non-current asset unless it expects to sell the preferencecurrent asset, unless it expects to sell the preferenceshares or the equity shares on conversion and realisecash within 12 months.

• Disclosure related to calls unpaidCNK

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• Disclosure related to calls unpaid

• As per Revised Schedule VI of para 6.A.b ofG l I t ti d t il f h b ib dGeneral Instructions, details of shares subscribedand fully paid up and details of shares subscribed,but not fully paid up, should be shown separately.Th h b ib d b t t f ll id h ldThe shares subscribed but not fully paid up shouldindicate the amount not paid up. Further, as perGeneral Instructions 6.A.k, calls unpaid (showing

t l f ll id b di t daggregate value of calls unpaid by directors andofficials) should be given by way of note undershare capital. In view of this, the gross amountsh ld b di d i th it l ti fi t dshould be discussed in the capital portion first and

then the calls unpaid should be reflected as adeduction.

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Balance Sheet …Reserves and Surplus

2) Reserves and Surplus to be classified as:) p

(a) Capital Reserves

(b) Capital Redemption Reserve

(c) Securities Premium Reserve

(d) Debenture Redemption Reserve

( ) R l i R(e) Revaluation Reserve

(f) Share Options Outstanding A/c

(g) Other Reserves (specify the nature and purpose of each(g) Other Reserves – (specify the nature and purpose of eachreserve and the amount in respect thereof) E.g. – TonnageTax Reserve, Statutory Reserve (for NBFCs), etc.

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Balance Sheet Reserves and Surplus …p

Surplus i.e. balance in Statement of Profit & Lossdisclosing allocations and appropriations such asdisclosing allocations and appropriations such asdividend, bonus shares and transfer to/from reserves etc.(Additions and deductions since last balance sheet to beshown under each of the specified heads Statement ofshown under each of the specified heads. Statement ofProfit & Loss will no longer reflect any appropriations)

(a) Debit balance of statement of profit and loss to beshown as a negative figure under the head ‘Surplus'.

(b) B l f R&S ft dj ti ti b l f(b) Balance of R&S after adjusting negative balance ofsurplus, if any, to be shown under ‘R&S’ even if resultingfigure is in negative.

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Balance Sheet …

2) Share Application money pending allotment.

Share Application money pending allotment is to bedisclosed as a separate line-item on the face of BalanceSheet between “Shareholders’ Funds” and “Non currentSheet between Shareholders Funds and Non-currentLiabilities”.

Share application money to the extent not refundableshall be shown under this line item.

Share application money to the extent Refundable shallbe shown under the head ‘Other current liabilities’be shown under the head Other current liabilities .

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Balance Sheet Share Application …Balance Sheet Share Application …

Disclosure requirements:

Number of shares proposed to be issuedNumber of shares proposed to be issued

The amount of premium, if any

The period before which shares are to be allottedp

Whether the company has sufficient authorized share capital tocover the share capital amount on allotment

Interest accrued on amount due for refundInterest accrued on amount due for refund

The period for which the share application money has beenpending beyond the period for allotment as mentioned in theshare application form along with the reasons thereof for suchshare application money being pending is to be disclosed.

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Balance Sheet …Non Current Liabilities …

Non Current Liabilities:Long-term Borrowings are classified as :(a) Bonds / debentures(b) Term Loans: from banks and from other parties(b) Term Loans: from banks and from other parties(c) Deferred payment liabilities(d) Deposits(e) Loans and advances from related parties(f) Long-term maturities of finance lease obligations(g) Othe loa s a d ad a ces (s ecif at e)(g) Other loans and advances (specify nature).

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Disclosures

• Borrowings are further sub classified as • Borrowings are further sub-classified as secured / unsecured.

• Nature of security and Terms of repayment y p yto be specified separately in each case.

• Where loans have been guaranteed by directors or

h f h l d others, the aggregate amount of such loans under each head shall be disclosed.

• Period and amount of continuing default as on the • Period and amount of continuing default as on the Balance Sheet date in repayment of loan/interest to be specified separately in each case.

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Some Issues• Classification of liability as secured or unsecured

if Third party security is provided.

• If the deed properly conveys a security, it can be suitably disclosed in the terms of the loan suitably disclosed in the terms of the loan. However, the loan itself is disclosed under unsecured loan because the assets of the company are not provided as a security for the loan.

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• Classification of long term loans in case of breach of major debt co enantmajor debt covenant.

• As per the Guidance Note on the Revised ScheduleAs per the Guidance Note on the Revised ScheduleVI, a breach is considered to impact the non-currentnature of the loan only if the loan has beenirrevocably recalled. Hence, in the Indian context,long-term loans, which have a minor or majorbreach in terms will be considered as current only ifbreach in terms, will be considered as current only ifthe loans have been irrevocably recalled beforeauthorization of the financial statements for issue.

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• Classification of loan in case of NPA assetsd l d b b k d i f ll fdeclared by bank and in case of rollover ofrestructuring of loan

• The situation in case of a loan being classified asa non-performing asset will also be the same asa non performing asset will also be the same asthe case of a performing asset. The essentialingredient to impair the long-term nature of theloan would be irrevocable recall of the loan bythe lender.

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• A company has taken a three-year loan specifically for abusiness whose operating cycle is four years. Hence, itneeds to classify the three -year loan as current liabilityneeds to classify the three -year loan as current liability.This gives rise to the following issues:

(a) Should the loan be classified in the balance sheet underthe head “long term borrowing” “short term borrowing”the head long-term borrowing , short-term borrowingor “current maturities of long-term debt”?

(b) Does the company need to make all the disclosuresi d f l t b i f thi l l ?required for long-term borrowings for this loan also?

• Any borrowing whose repayment falls within theoperating cycle will be only a current liability. Hence, itwill be included under short-term borrowings.Disclosures will also be required accordingly.

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• Whether to disclose continuing default onrepayment on term loan if made good as on balancerepayment on term loan if made good as on balancesheet date or after balance sheet date.

• Revised Schedule VI requires disclosure of default inthe repayment of loan and interest existing on thebalance sheet date We believe that a company needsbalance sheet date. We believe that a company needsto make this disclosure even if the default has beenmade good after the reporting date. However, it mayg p g ychoose to also disclose the fact that default has beenmade good after the reporting date.

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Balance Sheet …Non Current Liabilities …(ii) Other Long term liabilities are classified as:( ) g

(a) Trade payables

(b) Others

(iii) Long-term provisions are classified as:

(a) Provision for employee benefits

(b) O h ( if )(b) Others (specify nature)

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Balance Sheet …Non Current Liabilities …What can be included in Trade Payables?

ViewViewTrade Payables will include only those payables related togoods / services related to operations of the company.

Contractual obligations like salaries/wages payable, Contributionto provident fund, purchase of fixed assets, contractuallyreimbursable expenses interest accrued on trade payables etcreimbursable expenses, interest accrued on trade payables, etc.Such payables should be classified as “other currentliabilities’ and each such item should be disclosed nature-wisewise.

Acceptances should be disclosed as part of trade payables interms of the Re ised Schedule VIterms of the Revised Schedule VI.

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Balance Sheet Current Liabilities …(a) Short term borrowings are to be classified as:

i. Loans repayable on demand: from banks, from other parties

ii. Loans and advances from related parties

iii. Deposits

iv Other loans and advances (specify nature)iv. Other loans and advances (specify nature).

All Other Disclosures as discussed for long termgborrowings except related to default.

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Balance Sheet Current LiabilitiesBalance Sheet …Current Liabilities …(b) Other current liabilities are classified as:

i C t t iti f l t d bti. Current maturities of long term debt

ii. Current maturities of finance lease obligation

iii Interest accrued and due / but not due on borrowingsiii. Interest accrued and due / but not due on borrowings

iv. Income received in advance

v. Unpaid dividendp

vi. Application Money Refundable (as explained earlier)

vii. Unpaid matured deposits / debentures and interestaccrued thereon.

viii. Other payables (to specify nature) – will includeamounts in the nature of statutory dues such asamounts in the nature of statutory dues such asWithholding taxes, Service Tax, VAT, Excise Duty etc.

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Balance Sheet …C i bili iCurrent Liabilities …The portion of long term debts / lease obligations, which is duef t ithi t l th f th ti d t ifor payments within twelve months of the reporting date isrequired to be classified under “Other Current liabilities” whilethe balance amount should be classified under Long-termB iBorrowings.

(c) Short term provision to be classified as:(a) Provision for employees(b) Others (Specify nature) – it will include provisions such

as Provision for Dividend, Provision for Taxation,as Provision for Dividend, Provision for Taxation,Warranty Provision, etc.

These amounts should be disclosed separately specifyingnature thereofnature thereof.

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Balance Sheet -Non Current Liabilities …

Whether the following are current or non Current?a) Deposits received from customersb) Deposits received against leased/rented propertyc) Provision for retirement benefitsc) Provision for retirement benefits

GratuityLeave Encashment

d) Retention amounts payable to supplierse) Provision for Taxationf) A dit Fees ??f) Audit Fees ??

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Balance Sheet …Assets(1) Non Current Assets (2) Current Assets( )

(a) Fixed Assets (a) Current Investments

(b) Non Current Investments (b) Inventories

(c) Deferred Tax Assets (Net) (c) Trade Receivables(c) Deferred Tax Assets (Net) (c) Trade Receivables

(d) Long term loans and Advances (d) Cash and Cash Equivalents

(e) Other Non current assets (e) Short term loans and Advances

(f) Other Current Assets

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Non Current Assets

Fixed Assets: Tangible

(a) Land

(b) B ildi (b) Buildings

(c) Plant and Equipment

(d) Furniture and Fixture(d) Furniture and Fixture

(e) Vehicles

(f) Office Equipment( ) q p

(g) Others (Specify nature)

Assets under lease to be separately specified under h l feach class of asset.

Balance Sheet … CNK

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Balance Sheet …Fixed Assets …• Non Current Assets:Non Current Assets:• Fixed Assets: Intangible

(a) Goodwill(b) Brands/trademarks(b) Brands/trademarks(c) Computer software(d) Mastheads and publishing titles(e) Mining rights(e) Mining rights(f) Copyrights and patents and other intellectual property

rights, services and operating rights.(g) Recipes, formulae, models, designs and prototypes(g) Recipes, formulae, models, designs and prototypes(h) Licenses and franchise(i) Others (specify nature)

B l Sh t CNK

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Balance Sheet …Fixed Assets …

Capital Work in Progress

As per the Revised Schedule VI capital advancesAs per the Revised Schedule VI, capital advancesshould be included under long-term loans &advances and hence, cannot be included under,capital work-in-progress.

Intangible Assets under Development

This is a new head under Revised Schedule VI

Balance Sheet CNK

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• Other disclosures regarding Tangible andIntangible Assets are:A Reconciliation of the gross and net carrying amountsA Reconciliation of the gross and net carrying amountsof each class of assets at the beginning and end of thereporting period showing:

AdditiAdditionsDisposalsAcquisitions through business combinationsq gother adjustments andthe related depreciation and impairment losses /reversals to be disclosed separately.reversals to be disclosed separately.

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Particulars Opening Additions Disposals ThroughBusiness

Combinations

Other Adjustments

***

Gross

*** to include capitalisation of exchange differences (as per AS 11), borrowing costs for each class of assets

OpeningDepreciation

On Business Combinations

For the

Total Closing Closing (LY)

borrowing costs – for each class of assets

Depreciation Combinations the year

(LY)

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Some issues• Revised Schedule VI requires:q• “Except in the case of the first financial

statements laid before the company (after itsincorporation) the corresponding amountsincorporation) the corresponding amounts(comparatives) for the immediatelypreceding reporting period for all items

h i h fi i l i l dishown in the financial statements includingnotes shall also be given.”

• Thus, previous years figures for each class of Fixed, p y gAsset has to be given as against the current practiceof just mentioning the previous years total of fixedassetsassets.

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Balance Sheet …Investments Disclosures applicable to both Non Current as well as Current InvestmentsCurrent Investments

To be classified as Trade Investments / Other I t t d f th l ifi d Investments and further classified as:(a) Investment property(b) Investments in Equity Instruments(c) Investments in preference shares(d) Investments in Government or trust securities(e) Investments in debentures or bonds(e) Investments in debentures or bonds(f) Investments in Mutual Funds(g) Investments in partnership firms(h) Oth t i t t ( if t )(h) Other non-current investments (specify nature)

Balance Sheet CNK

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Balance Sheet …Investments …

Under each classification details are to be given of names ofthe body corporate (indicating separately whether suchbodies are:bodies are:

a) Subsidiaries

b) Associates)

c) Joint ventures

d) Controlled special purpose entities

in whom investments are made, nature and extent ofinvestment so made in each such body corporate (showingseparately investments which are partly paid)separately investments which are partly paid)

Balance Sheet CNK

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Balance Sheet …Investments …

Di l f I t t i P t hi fi illDisclosures for Investment in Partnership firms willnot include Investment in Limited LiabilityPartnerships.

Investments carried other than at cost should be separatelystated specifying the basis for valuation thereof.The following shall also be disclosed:The following shall also be disclosed:(a) Aggregate amount of quoted investments and market

value thereof;(b) Aggregate amount of unquoted investments;( ) gg g q ;(c) Aggregate provision for diminution in value of

investments

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Some issuesCl ifi ti f t d t• Classification of current and non currentInvestment as per RS-VI and AS-13?

• Accordingly, as per AS 13 , the assessment ofwhether an investment is “Long term” has to bewhether an investment is Long term has to bemade with respect to the date of investmentwhereas , as per Revised Schedule VI,” Non –current” investment has to be determined withrespect to the Balance Sheet date.


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Loans and AdvancesDisclosure of Long-term loans and advances asgfollows:(a) Capital Advances(b) Security deposits(b) Security deposits(c) Loans and advances to related parties (giving details

thereof)(d) Other loans and advances (specify nature)• Above should be further sub-classified as:

Secured considered goodSecured, considered goodUnsecured, considered goodDoubtful


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Balance Sheet …Loans and Advances

Allowance for bad and doubtful loans andadvances to be disclosed under the relevant headsseparatelyseparately.

Loans and advances due by directors or otherofficers of the company or any of them either severallyor jointly with any other persons or amounts due byfirms or private companies respectively in which anydirector is a partner or a director or a member should bedirector is a partner or a director or a member should beseparately stated.


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Other Non Current Assets

Oth t t h ll b l ifi d dOther non-current assets shall be classified as under:

(i) Long Term trade Receivables (including tradereceivables on deferred credit terms)

(ii) Others (specify nature)

• Above should be further sub-classified as:

Secured considered goodSecured, considered good

Unsecured, considered good

Doubtful

Other disclosures same as Long Term Loans andAdvancesAdvances


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Balance Sheet …Current Assets

( ) C A(2) Current Assetsa) Current Investments – disclosure requirements similar

to non-current investments.b) Inventoriesc) Trade Receivablesd) Cash and cash equivalentsd) Cash and cash equivalentse) Short term loans and advances – disclosure

requirements similar to long term loans andadvances

f) Other current assets – this is an all-inclusive headingwhich incorporates current assets that do not fit into anyother asset categories.g

Balance Sheet …

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Inventories

Inventories to be classified as:

(a) Raw materials

(b) Work-in-progress

(c) Finished goods(c) Finished goods

(d) Stock-in-trade (in respect of goods acquired for trading)

(e) Stores and spares

(f) Loose tools

(g) Others (specify nature)

• Goods in transit shall be disclosed under the relevant sub-head ofinventories.

Mode of Valuation shall be stated for each itemMode of Valuation shall be stated for each item


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Trade Receivables

Trade Receivables to be classified as:

Aggregate amount of Trade Receivables outstanding for aperiod exceeding 6 months from the date theyare due for payment should be separately statedare due for payment should be separately stated.

Above should be further sub-classified as:Above should be further sub classified as:

Secured, considered good

Unsecured, considered goodg

Doubtful

Remaining disclosures same as Long Term Loans andAdAdvances


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Cash and Cash EquivalentsCash and cash equivalents disclosed as:q

(a) Balances with Banks

(b) Cheques, drafts on hand

(c) Cash on hand

(d) Others (specify nature)

E k d b l ith b k ( id Earmarked balances with banks (e.g.: unpaid dividend) shall be separately stated.

Balances with banks to the extent held as margin Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments shall be disclosed separately.

R i i i i if i f h d Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated.


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Cash and Cash Equivalents

B k d i i h h h i h ll Bank deposits with more than 12 months maturity shall be disclosed separately.

• Revised Schedule VI omits the following disclosures: 1) Classification of balances with banks as balances 1) Classification of balances with banks as balances

with:(a)Scheduled banks and(b)With others

2) Classification as balances as on current account, call amount and deposit account.amount and deposit account.

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Some issues• Classification of cash and cash equivalent as• Classification of cash and cash equivalent as

per AS-3 and RS-VI?

The conflict sho ld be resol ed b changing the• The conflict should be resolved by changing thecaption “Cash and Cash equivalent” to “Cash andbank balances”, which may have two sub-headings,viz “Cash and cash equivalents” and “Other bankviz., Cash and cash equivalents and Other bankbalances”. The former should include only the itemsthat constitute cash and cash equivalents defined inaccordance with AS 3 (and not the Revised Scheduleaccordance with AS 3 (and not the Revised ScheduleVI), while the remaining line-items may be includedunder the latter heading.


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Short Term Loans and Advances

Sh l d dShort-term loans and advances:i. Short-term loans and advances shall be classified as:

a) Loans and advances to related parties (giving detailsa) Loans and advances to related parties (giving detailsthereof);

b) Others (specify nature)ii Ab h ld b f th b l ifi dii. Above should be further sub-classified as:

Secured, considered goodUnsecured, considered goodUnsecured, considered goodDoubtful

Remaining disclosures same as Long Term Loansd Adand Advances

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Balance Sheet …Short Term Loans and Advances …

Oth C t A t (S if t )• Other Current Assets (Specify nature)

This is an all-inclusive heading, which incorporatescurrent assets that do not fit into any other assetycategories e.g. Unbilled Revenue, Unamortised Premiumon Forward Contracts, etc.

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Balance Sheet …N C t / C t A tNon Current v/s Current AssetsWhether the following are current or non Current?a) Raw Materials held for 18 monthsb) Unsold Finished Goods since 24 monthsc) Obsolete RM expired FG (since 36 months)c) Obsolete RM, expired FG (since 36 months)d) Debtors o/s since 18 monthse) Doubtful debtorsf) Taxes paid in advanceg) Fixed assets held for sale.h) FD ith at it of o e tha 12 o thsh) FD with maturity of more than 12 months.

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Part II – Statement of Profit & LossName of the Company..........

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p yProfit and Loss statement for the year ended........(Rupees in..........)

Particulars Note CY PYNo

I Revenue from operations

II Other Income

III TOTAL REVENUE (I+II)

IV Expenses

V Profit before exceptional and extraordinary items and tax (III-IV)

VI Exceptional items

VII Profit before extraordinary items and tax (V VI)(V-VI)

VIII Extraordinary Items

IX Profit before tax (VII-VIII)

Part II – Statement of Profit & LossN f th C

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Name of the Company..........Profit and Loss statement for the year ended..........(Rupees in..........)

Particulars Note CY PYParticulars Note No

CY PY

IX Profit before tax (VII-VIII)

X Tax Expense:

(1) Current tax

(2) Deferred tax

XI Profit (Loss) for the period from continuing operations (VII-VIII)p ( )

XII Profit/(Loss) from discontinuing operations

XIII Tax expense of discontinuing operations

XIV Profit/(Loss) from discontinuing operations (after tax) (XII-XIII)

XV Profit (Loss) for the period (XI+XIV)

XVI Earnings per Equity Share:

(1) Basic(1) Basic

(2) Diluted

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Statement of Profit and Loss …

A Company other than a finance company shalldisclose separately in the notes revenue from:

a) Sale of Productsa) Sale of Products

b) Sale of Services

c) Other Operating Revenuesc) Other Operating Revenues

d) Less : Excise Duty

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Statement of Profit and Loss …Other Operating Revenue

The term “other operating revenue” is not definedThe term “other operating revenue” is not defined.

It would include Revenue arising from a company’soperating activities, i.e., either its principal or ancillaryrevenue-generating activities, but which is not revenuearising from the sale of products or rendering of services.arising from the sale of products or rendering of services.

Whether a particular income constitutes “otheroperating revenue” or “other income” is to beoperating revenue” or “other income” is to bedecided based on the facts of each case and detailedunderstanding of the company’s activities.

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70Statement of Profit and Loss …Other IncomeOther Income

Other Income shall be classified as:

a) Interest Income (in case of a company other than a finance company);

b) Dividend Income;b) Dividend Income;

c) Net gain / loss on sale of investments;

d) Other non-operating income (net of expenses directly ) p g ( f p yattributable to such income).

A Finance company shall include revenue from

a) Interest and

b) O h Fi i l ib) Other Financial services

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Some issues• Treatment of interest from Customers on amounts overdue.

• The Revised Schedule VI provides that in the ‘Statement of Profit• The Revised Schedule VI provides that in the Statement of Profitand Loss’, the head “Other Income” includes interest incomeunder which “Interest from customers on amounts overdue” isspecifically included. However, under AS 17(segment reporting –refer to “FAQ’ published on AS 17), the same is treated asQ p 7),Operating Income and not as Other Income.

• In case of a manufacturing company, normally, interest income isIn case of a manufacturing company, normally, interest income isnot material and business is not done with an aim of earninginterest. Practically, it is generally difficult to enforce the interestclause even though it is normally contained in all cases. Based onmateriality and provisions in AS 17, the interest income on overduemateriality and provisions in AS 17, the interest income on overdueoutstanding is not an operating income. However, if a company, onthe facts of its own case, determines that it would be appropriate totreat is as an operating income, it would have to disclose it as anaccounting policy, if material.accounting policy, if material.

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• Will arrear depreciation require separate disclosure?

• Where material, arrears of depreciation, if any, provide needs disclosure in terms of Para 19 of AS 6. In case it is not provided, it requires a di l th l b i h t b disclosure, as the accrual basis has not been complied with.

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• Whether following should be treated as Other Operating Income or Other Income?

• Job work income• Income from sale of scrap

E t i ti d D t d b k• Export incentives and Duty drawbacks• Interest income• Dividend Income• Lease rent• Profit on sale of fixed asset• Insurance claim• Sundry balance written back• Discount received• Excess depreciation written back• Excess depreciation written back• Sale of wind operated power generated

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Statement of Profit and Loss …Oth I Di id dOther Income … Dividend

Dividend Income

Separate disclosure for Dividends from subsidiarycompanies.

old Schedule VI specifically required parent companies toold Schedule VI specifically required parent companies torecognise dividend declared by subsidiary companieseven if declared after the Balance Sheet date if they related toh i d d b h fi i lthe same period covered by the financial statements.

According to Revised Schedule VI dividend income fromsubsidiary companies should be recognized in accordancesubsidiary companies should be recognized in accordancewith AS-9, i.e. only when they have a right to receive thesame on or before the Balance Sheet date.

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Statement of Profit and Loss …Oth I Di id d Other Income … Dividend …

In the first year of application of Revised Schedule VI,di id d i i d i th i di t l didividend income recognised in the immediately preceding yearbased on the requirements of old Schedule VI and should not bederecognized for the comparatives presented.

To recognize dividend based on the right to receive wouldconstitute a change in accounting policy which should beapplied prospectively.applied prospectively.

Necessary disclosures as per AS-5 should be made in thenotes to accounts.

For other non-operating income, income should bedisclosed under this head net off expenses directlyattributable to such income. However, the expenses so, pnetted off should be separately disclosed.

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Statement of Profit and Loss …Expenses

Following expenses are to be disclosed on the face of theStatement of Profit and Loss:

Cost of materials consumedCost of materials consumed

Purchase of Stock-in-Trade

Changes in inventories of finished goods, work in progress andg g , p gstock in trade

Employee benefits expense

Finance Costs

Depreciation and amortization expense

Other expensesOther expenses

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Statement of Profit and Loss …Finance CostFinance costs is to be bifurcated under the following:

a) Interest expense

b) Other borrowing costs

c) Applicable net gain/loss on foreign currencytransactions and translation

Interest expense

Finance charges on finance leases are should be classified asginterest expense.

Bifurcation for interest paid on fixed period loans and otherb i d t b iborrowings need not be given.

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Statement of Profit and Loss …Fi C t Finance Cost …Other Borrowing costs include:

Commitment chargesCommitment chargesloan processing chargesguarantee chargesl f ilit ti hloan facilitation chargesdiscounts/premium on borrowings, other ancillary costsincurred in connection with borrowings, oramortization of such costs, etc

Applicable net gain/loss on foreign currencytransactions and translation

Exchange differences arising from foreign currency borrowingsto the extent that they are regarded as an adjustment tointerest costs para [4(e) of AS 16]interest costs para [4(e) of AS 16]

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Statement of Profit and Loss …hOther Expenses …

F ll i it l ifi d ‘Oth E ’Following items are classified as ‘Other Expenses’:

Consumption of stores and spare parts;

Power and fuel;Power and fuel;

Rent;

Repairs to buildings;p g ;

Repairs to machinery;

Insurance;

Rates and taxes, excluding taxes on income;

Miscellaneous expenses

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Requirements for Statement of Profit and Loss

• Disclosure for items ofincome or expenditurewhich exceeds 1% ofwhich exceeds 1% ofrevenue fromoperations or Rs100 000 hi h i

Revised Schedule 100,000 whichever is

higher.Schedule

VI

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REVISED SCHEDULE VI- Additional Information …To be disclosed by way of Notes to Statement of Profity yand Loss:

Contingent liabilities and other commitments.g

Prior period items

Payments to the auditor.ay e ts to t e aud to

Value of imports calculated on C.I.F basis.

Expenditure in foreign currency.Expenditure in foreign currency.

Total value of all imported and indigenous materialsconsumed and the percentage of each to the totalconsumed and the percentage of each to the totalconsumption.

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82Statement of Profit and Loss …Additional Information Additional Information …

Nature of company Disclosures requiredNature of company Disclosures requiredManufacturing companies Raw materials under broad heads

Goods purchased under broad heads

Trading companies Purchases of goods traded under broadheads

Companies rendering or Gross income derived from servicesp gsupplying services rendered under broad heads

Company that falls in morethan one category

It will be sufficient compliance with therequirements, if purchases, sales andthan one category requirements, if purchases, sales andconsumption of raw material and the grossincome from services rendered are shownunder broad heads.

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83Statement of Profit and Loss …Additional Information Additional Information …

Broad heads shall be decided taking into account the concept ofmateriality and presentation of true and fair viewmateriality and presentation of true and fair view

No need to give quantitative details for any of the items.

10 percent of total value of sales/services purchases of trading goods10 percent of total value of sales/services, purchases of trading goods

and consumption of raw material is considered as an acceptable

threshold for determination of broad headsthreshold for determination of broad heads.

Concept of materiality and presentation of true and fair view of FS should

be taken into considerationbe taken into consideration.

QUESTIONS?

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revised schedule vi 30.04 - baroda branch of wirc of...

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