Overview with Schedule III

Transcription

1 Overview with Schedule III LUNAWAT & CO. Chartered Accountants 11 th December 2014 CA. PRAMOD JAIN FCA, FCS, FCMA, LL.B, MIMA, DISA

2 THE STRUCTURE Parts 29 Chapters 658 Sections 470 Sections 15 Schedules 7 Schedules 67 Definitions 95 Definitions Nil Rules 400+ Rules 33 New Definitions; 11 removed Phrase as may be prescribed appears 346 times in 2013 Act

3 GENERAL It applies to the whole of India and is also applicable to certain companies or bodies corporate governed by Special Acts Substantial part of the Companies Act, 2013 in form of rules, prescribed separately. 98 Sections made applicable w.e.f.. 12 th September Sections and Rules made applicable w.e.f.. 1 st April 2014, Restructuring, NCLT & NFRA pending

4 Public Private Company

5 NEW PROVISIONS OPC Small Co. Dormant Co NCLT & NCALT CSR NFRA Registered Valuers Fraud

6 STRESS CREATORS Huge Penalties Rampant Prosecution Provisions Fraud 19 Provisions Imprisonment 61 Provisions Class Actions Penalties for late filings Even Board Resolutions to be filed Bringing in monies made tough Loans to be given only on interest

7 STRESS CREATORS Detailed Annual Returns Detailed Directors Reports SA compliance made mandatory for auditors Director duties conflict of interest Hosting on Website made mandatory 17 provisions including: Closure of members Register GM notice Director Resignation

8 OPPORTUNITIES Women Directors Independent Directors Resident Directors Registered Valuers OPC & Dormant Cos NCLT & NCALT Cash Flow Statement Consolidated Financial Statements

9 OPPORTUNITIES Internal Audit Fixed Asset Registers to ascertain actual life of each asset Internal Financial Control Systems Secretarial Records and compliance audits Fast Track Merger Conversion into LLP

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11 BOOKS Permits the maintenance of books of a/cs & other books & papers in electronic mode Shall remain accessible in India Retained completely in the format in which they were originally generated, sent or received Back up to kept in server located in India To intimate to ROC along with FS Name of the service provider; IP address of service provider; Location of the service provider (wherever applicable); Where the books maintained on cloud, such address as provided by the service provider.

12 BOOKS Books on accrual basis and according to the double entry system of accounting To be maintained at R.O. books, papers & FS Branches summarized periodical returns Summarised returns of books of a/c kept and maintained outside India to be sent to R.O at quarterly intervals Preserve books for 8 years Investigation sep Non- compliance MD, WTD in charge of finance, CFO or other person in charge by Board- Imprisonment upto I yr or Fine 50 k to 500 k

13 FINANCIAL STATEMENTS Financial Year 31/3 Financial Statement defined - Includes notes on B/s, Profit & Loss statement, Cash Flow Cash Flow for all except OPC, SC, DC. Shall give true and fair view. Shall comply with Accounting Standards Shall be in form of Schedule III. To be laid before AGM

14 FINANCIAL STATEMENTS Has to be AS compliant: FS to disclose deviation from AS Reason for deviation Financial effect arising of deviation Non- compliance MD, WTD incharge of finance CFO Any other person charged by Board If no one all directors Imprisonment upto I yr or F 50 k to 500 k or both

15 CONSOLIDATED FINANCIAL STATEMENTS One or more subsidiaries CFS Intermediary Subs. not required. No exemption if Foreign Co. Subsidiary shall include associate co. & Joint Venture exemption if no subsidiary till Statement to be filed in AOC-1 of CFS not FS In case not required to prepare CFS under AS just comply with Schedule III - Para 11 of AS 21 Control intended is temporary held for subsequent disposal Operates under severe long-term restrictions which significantly impair its ability to transfer funds to holding

16 CONSOLIDATED FINANCIAL STATEMENTS Provisions under Companies Act 2013 applicable for: Preparation Adoption Audit Appointment in AGM?? Appointment for 5 Years?? 20 limit??

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18 USEFUL LIVES 1. Buildings 2. Bridges, Culverts, bunders, etc. 3. Roads 4. Plant & Machinery 5. Furniture & Fixture 6. Motor Vehicles 7. Ships 8. Aircrafts & Helicopters 9. Railway sidings, Locomotives, Rolling Stocks, Tramways

19 USEFUL LIVES 10. Ropeway Structures 11. Office Equipment 12. Computers and Data Processing Units 13. Laboratory Equipment 14. Electrical Installations and Equipment 15. Hydraulic Works, Pipelines & Sluices 12 Industry Specific Rates Double shift increase by 50%, triple shift 100% - reduction in useful life 100% on assets below 5K not required

20 DEPRECIATION The useful live of asset is period over which an asset is expected to be available for use or the no of production unit expected to be obtained No rate for Intangible assets (except toll) AS Useful lives changed Eg: Factory Building from 58 Yrs to 30 Yrs: General FF 15 to 10 Plant & Mach. General 20 to 15 Motor Car - 10 to 8 Laptop, computer - 6 app to 3

21 WHAT TO DO?? On commencement would be depreciated over remaining useful life Where remaining useful live - nil trf to Surplus Three amendments to Schedule II: 1. If If co. adopts different useful life - to be disclosed in FS and provide justification duly supported by technical advice. 2. Component accounting is voluntary w.e.f & mandatory w.e.f If If asset's useful life as on is Nil, Co. has now an option to transfer the balance after retaining residual value to Surplus. Earlier it was mandatory.

22 SCHEDULE III

23 STRUCTURE OF SCHEDULE III 1. General Instructions 2. Part I 1. Form of Balance Sheet 2. General Instructions for preparation of Balance Sheet 3. Part II 1. Form of Statement of Profit and loss 2. General Instructions for preparation of Statement of Profit and Loss 3. General Instructions for preparation of Consolidated Financial Statements

24 GENERAL INSTRUCTIONS Disclosure requirements of AS shall prevail over Schedule III. Companies Act disclosures also required. Disclosures are in addition to and not in substitution of the disclosure requirements of AS. Each item on face of B/S & Statement of P & L is to be cross referenced to related information in notes to a/c Notes to accounts to contain information in addition to that presented in the financial statement including narrative descriptions Corresponding amounts for immediately preceding reporting period to be given, except for first year of incorporation.

25 GENERAL INSTRUCTIONS Balance to be maintained between providing excessive details that may not assist users and not providing important information. Terms used shall be as per AS Rounding off based on turnover. Less than Rs. 100 Crores - To the nearest hundreds, thousands, lacs or millions or decimal thereof Rs. 100 Crores or more - To the nearest lacs or millions or crores or decimal thereof

26 BASICS CURRENT VS. NON-CURRENT Current / Non- Current. Current Asset - satisfies any of following criteria; it is: In the company s normal operating cycle it is; Intended for sale; or Intended to be consumed; or Expected to be realized. Held primarily for the purpose of being traded; or Expected to be realized within 12 months after the reporting date; or Cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after reporting date.

27 BASICS OPERATING CYCLE Operating cycle is the time between the acquisition of assets for processing and their realization in Cash or cash equivalent. In other words Operating cycle is a period beginning from acquisition of raw material and ending on realization. Hence, an operating cycle would be = Average holding period of Raw Material + Average Production Period + Average Holding period of Finished Goods + Average Collection Period

28 BASICS - CURRENT LIABILITY A liability would be a current liability if it satisfies any of the following criteria; if it is : Expected to be settled in the company s normal operating cycle; or Held primarily for the purpose of being traded; or Due to be settled within 12 months after reporting date; or The company does not have an unconditional right to defer settlement of liability for at least 12 months after reporting date. Terms of a liability that could, at option of counterparty, result in its settlement by issue of equity do not affect its classification.

29 ORGANIZING THE BALANCE SHEET Preparing Balance Sheet and Profit and Loss Account in Horizontal Format has been done away. Now only the Vertical Format is allowed. No need to prepare schedules to form part of the financial statements. Only notes are to be given. In place of Schedule Numbers, we shall have to give Note Numbers. Old terms of Sources of Funds and Application of Funds are replaced by Equity & Liabilities and Assets, respectively

30 Particulars I. EQUITY AND LIABILITIES (1) Shareholders Funds (2) Share Application Money Pending Allotment (3) Non-Current Liabilities (4) Current Liabilities BALANCE SHEET AS AT Note No. Figures as at the end of the current reporting period Figures as at the end of the previous reporting period II. ASSETS TOTAL (1) Non-Current Assets (2) Current Assets TOTAL

31 FORM OF BALANCE SHEET (PART 1) Particulars I. EQUITY AND LIABILITIES (1) Shareholders Funds (a) Share capital (b) Reserve and Surplus (c) Money received against share warrants Note No. 1 2 Figures as at the end of the CRP Figures as at the end of the PRP (2) Share application money pending allotment (3) Non-current Liabilities (a) Long term borrowings (b) Deferred tax liabilities (net) (c) Other long term liabilities (d) Long term provisions (4) Current Liabilities (a) Short term borrowings (b) Trade payables (c) Other current liabilities (d) Short term provisions TOTAL

32 SHARE CAPITAL: DETAILS REQUIRED No. and amount of authorized shares. No. of shares issued. No. of shares subscribed and fully paid up & subscribed but not fully paid up. Par value of shares Reconciliation of no of shares outstanding at beginning and at end of reporting period. Rights, preference & restrictions attaching to each class of shares including restrictions on distribution of dividends & repayment of capital. Shares in respect of each class held by its holding co. or its ultimate holding co. including shares held by or by subsidiaries or associates of holding co or ultimate holding co. in aggregate.

33 SHARE CAPITAL: DETAILS REQUIRED Shares held by each shareholder >5% shares with no of shares held. Shares reserved for issue under options and contracts / commitments for the sale of shares / disinvestment, including the terms and amounts. For 5 yrs immediately preceding date as at balance sheet is prepared: Aggregate no & class of shares allotted as fully paid up pursuant to contract(s) without payment received in cash Aggregate no & class of shares allotted as fully paid up by way of bonus Aggregate no of shares bought back Terms of any securities convertible into equity / preference shares issued along with earliest date of conversion in descending order starting from farthest such date. Calls unpaid. Aggregate value by directors and officers - separately Forfeited shares (amount originally paid up)

34 SHARE CAPITAL:??? Preference shares to be classified as equity or liability? There is no change in current period, but in previous period only. Is the reconciliation still to be given? Shareholding of > 5% shares is to be disclosed of person who held these throughout the year or who held these on any particular date? Is source of bonus shares required to be disclosed? Is debt payable by co adjusted against subscription, amount to shares allotted without cash? Is conversion of loans into shares in event of default in repayment amount to shares allotted without cash?

35 SHARE CAPITAL: RECONCILIATION Particulars No. of shares at the beginning (+) Shares issued on conversion (+) Shares issued on exercise of employee stock option (+) Bonus shares issued (-) Buy back of shares Current Period No. of Shares xxx xxx xxx xxx xxx Amount xxxx xxxx xxxx xxxx xxxx Previous Period No. of Shares xxx xxx xxx xxx xxx Amount xxxx xxxx xxxx xxxx xxxx No. of shares at the end xxx xxxx xxx xxxx

36 SHARE CAPITAL: 5% SHAREHOLDING Names of Shareholders Mr. A Ms. B X Pvt. Ltd Y Ltd. Z LLP Others (holding less than 5% each) Current Period Previous Period No. of Shares % No. of Share % xxx 06% xxx 10% xxx 45% xxx 25% Nil Nil xxx 14% xxx 13% Nil Nil xxx 16% Nil Nil xxx 20% xxx 51% No. of shares at the end xxx 100% xxx 100%

37 SHARE CAPITAL: HOLDING / SUBS Shareholders Holding / Subsidiary / Associate wise Holding Company Subsidiary of Holding Company Associate of Holding Company Ultimate Holding Company Subsidiary of Ultimate Holding Company Associate of Ultimate Holding Company Equity Shares Current Period xxx xxx xxx xxx xxx Xxx Previous Period xxx xxx xxx xxx xxx Xxx Preference Shares Current Period xxx xxx xxx xxx xxx Xxx Previous Period xxx xxx xxx xxx xxx Xxx

38 RESERVES AND SURPLUS - CLASSIFICATION Capital Reserve Capital Redemption Reserve Securities Premium Reserve Debenture Redemption Reserve Revaluation Reserve Share Options Outstanding A/c Other Reserves (nature and purpose to be specified) Surplus i.e. balance in Statement of Profit and Loss disclosing allocations and appropriations for dividends, bonus, transfer to reserves, etc.

39 RESERVES AND SURPLUS -??? How to disclose a reserve which represents any earmarked investments? If after the debit balance in Statement of Profit and Loss, the net result of Reserve and Surplus is negative, how to disclose the same? Schedule III uses - Securities Premium Reserve However Companies Act - Securities Premium A/c. Which nomenclature to be used? How are reserves created under other statutes like Tonnage Tax Reserve, etc. to be disclosed?

40 RESERVES AND SURPLUS - FORMAT Particulars Current Period Previous Period Amount Amount Amount Amount Securities Premium Account As per last Balance Sheet Add: on issue of shares Less: on buy back of Equity Shares General Reserve As per last Balance Sheet Add: Transfer from Surplus Surplus As per last Balance Sheet Add: Net Profit after tax transferred from Statement of Profit and Loss Amount available for appropriation Less: Appropriations Proposed Dividend Transfer to General Reserve Tax on Dividend Total xxxxx xxxxx

41 SHARE APPLICATION MONEY Amount not exceeding the issued capital and to the extent not refundable. S. Situation Disclosure No. 1 Share Application Money to be refunded Other Current liabilities 2 Share Application Money not exceeding issued On the face of the B/S capital and not refundable between Shareholder s Funds and Non-Current Liabilities 3 Share Application Money exceeding Other Current liabilities authorized capital and approval of increase in authorized capital is pending 4 Share Application Money exceeding issued Other Current liabilities capital 5 Share Application Money in a public issue where minimum subscription requirement is not met Other Current liabilities

42 SHARE APPLICATION MONEY - DISCLOSURE Terms & conditions & No. of shares proposed to be issued. Amount of premium, if any. Period before which the allotment shall be made. Whether company has sufficient authorized share capital to allot shares. Period for which the share application money has been pending beyond the period for allotment as mentioned in the share application document. Reason for which such share application money is pending for allotment, if so pending.

43 LIABILITIES (3) Non-current liabilities (a) Long term borrowings (b) Deferred tax liabilities (net) (c) Other long term liabilities (d) Long term provisions (4) Current liabilities (a) Short term borrowings (b) Trade payables (c) Other current liabilities (d) Short term provisions

44 CURRENT AND NON-CURRENT LIABILITIES Criteria to be met to classify as current liability: Expected to be settled in the co s normal operating cycle, Due to be settled within twelve months after the reporting date, Held primarily for the purpose of being traded or There is no unconditional right to defer settlement for at least 12 months after the reporting date. All other liabilities are classified as non-current liabilities. Trade payables: amount due on account of goods purchased or services received in the normal course of business.

45 CURRENT AND NON-CURRENT LIABILITIES The nature of each and every liability will have to be analyzed before deciding it s classification. The liabilities are to be classified as: Current liabilities. Non current liabilities. For instance current maturities of a long term borrowing will have to be classified under Other Current Liabilities

46 LONG TERM BORROWINGS- CLASSIFICATION Bonds/debentures Term loans From banks From other parties Deferred Payment liabilities Deposits Loans and advances from related parties Long term maturities of finance lease obligations Other loans and advances

47 LONG TERM BORROWINGS - DISCLOSURES Secured, unsecured nature of security to be stated and guaranteed by directors to be shown separately. Term of repayment of term loans to be given Period of maturity with respect to B/S date Number of installments due Amount of installments due Applicable rate of interest Other significant relevant terms, if any Period & amount of default in payment of principal and interest as on the B/S date.

48 LONG TERM BORROWINGS -??? If a person other than the company itself has given a security, would such loan be classified as secured? Loans and advances from related parties are to be disclosed. Who are related parties? A liability is to be settled by issue of equity instruments, at the option of counterparty, does this impact its classification? If there is default during the year and at the end of the year it is made good. Does there is still a requirement of disclosure? Is default like non-compliance of debt covenants need to be disclosed? Can a borrowing be bifurcated into long-term as well as other current liability?

49 LONG TERM BORROWINGS - FORMAT Particulars Current Period Previous Period Non- Current Current Non- Current Current Secured Non-Convertible Debentures Term-Loans from Banks Long-term maturities of finance lease obligations Total Unsecured Bonds Deposits Deferred Payment Liabilities Loans and Advances from Related Parties xxxx xxxx xxx xxx xxxx xxx xxxxx xxx xxx xxx xx xxxx xxx xxx xxxx xxxx xxx xxx xxxx xxx xxxxx xxx xxx xx xxx xxx xxxx Total xxxxx xxxxx xxxxx xxxxx

50 LONG TERM BORROWINGS - FORMAT 1. Non-convertible Debentures referred to above to the extent of: 1. Rs. xxx are secured by way of mortgage / charge on the immovable properties situated at Bahadurgarh Plant of the Company 2. Rs. xxx are secured by way of mortgage / charge on the immovable properties situated at Gurgaon Plant of the Company 2. Term Loans from Banks referred to above to the extent of: 1. Rs. xxx are secured by way of mortgage / charge on the plant and machinery at Manesar Plant of the Company. It would mature on having 33 remaining installments amounting to Rs. xxxx each and bearing x% (Pr. Yr. x%) 2. Rs. xxx are secured by way of mortgage / charge on the Vehicles of the Company. It would mature on having 21 remaining installments amounting to Rs. xxxx each and bearing x% (Pr Yr x%) 3. Finance lease obligations are secured against leased assets 4. Loans and advances from related parties are due to be matured in and is carrying x% interest rate (Pr. Yr. x%)

51 LONG TERM BORROWINGS - FORMAT 5. Maturity profile and rate of interest of non-convertible debentures are as under: Rate of Maturity Profile Interest X% xx xx xx xx - - X% xx xx - X% xx 6. Maturity profile and rate of interest of bonds are as under: Rate of Maturity Profile Interest X% xx xx xx xx - - X% xx xx - X% xx xx 7. Maturity profile and rate of interest of deposits are as under: Rate of Interest Maturity Profile X% xx xx xx - - X% xx xx xx xx xx X% xx xx xx xx -

52 DEFERRED TAX LIABILITY To be disclosed as non- current liability in Schedule III Para 30 of AS- 22- presentation- after the head unsecured loan? It is being amended by revision to AS 22 Para 31 of AS- 22 breakup of major components of the respective balances to be disclosed.

53 OTHER LONG-TERM LIABILITIES Other Long-term liabilities to be classified as: Trade Payables Others (specifying nature) Trade Payable is not same as sundry creditors under old Schedule VI. Trade Payable is an amount due on account of goods purchased or services received in normal course of business. MSMED disclosure is required.

54 LONG-TERM PROVISIONS Long-term provisions to be classified as: Provision for Employee benefits Others (specifying nature) AS 15, Employee Benefits governs measurement of various employee benefit obligations, but their classification as current and non-current will be governed by criteria laid down in Schedule III. Others Example - warranties

55 SHORT TERM BORROWINGS Classification Loans repayable on demand From banks From other parties Loans and advances from related parties Deposits Other loans and advances Disclosure Secured, unsecured and guaranteed by directors to be shown separately. Period and amount of default in payment of principal and interest as on the balance sheet date.

56 OTHER CURRENT LIABILITIES The amount shall be classified as: Current maturities of long term debts Current maturities of finance lease obligations Interest accrued but not due on borrowings Interest accrued and due on borrowings Income received in advance Unpaid dividends Share Application money due for refund and interest accrued thereon (including advances for allotment of share Capital) Unpaid matured deposit and interest thereon Unpaid matured debentures and interest thereon Other payables

57 OTHER CURRENT LIABILITIES Others payable may include: Statutory obligations like, ESI, PF, VAT, CST, etc. Liability for purchase of fixed assets Contractually reimbursable expenses Interest accrued on trade payables Expenses Payable. TDS Payable Trade / Security Deposit Mark-to to-market loss on forward and option contracts Retention Monies Accrued salaries and benefits

58 FORM OF BALANCE SHEET (PART 2) Particulars II. ASSETS (1)Non-current assets (a) Fixed assets (i) Tangible assets (ii) Intangible assets (iii) Capital work-in-progress (iv) Intangible assets under development (b) Non- current investments (c) Deferred tax assets (Net) (d) Long term loans and advances (e) Other non-current assets (2) Current assets (a) Current investments (b) Inventories (c) Trade receivables (d) Cash and cash equivalents (e) Short term loans and advances (f) Other current assets TOTAL Note No Figures as at the end of the CRP Figures as at the end of the PRP

59 CURRENT AND NON-CURRENT ASSETS Criteria to be met to classify as current asset: Expected to be realised in or intended for sale or consumption in normal operating cycle of the co., Held primarily for the purpose of trading, Expected to be realised within 12 months from the closing date or It is cash or cash equivalent. Operating cycle time between the acquisition of assets for processing and their realisation in cash or cash equivalents. If can not be identified- duration of twelve months. All other assets shall be classified as non-current.

60 FIXED ASSETS - CLASSIFICATION Fixed Asset on the face of the Balance Sheet has to be classified as follows: Tangible Assets Intangible Assets Capital work-in in-progress Intangible assets under development

61 FIXED ASSETS-TANGIBLE TANGIBLE ASSETS Classification shall be given as: Land Building Plant and equipment Furniture and fixtures Vehicles Office equipments Others Assets under lease to be specified under each head. Reconciliation of gross & net carrying amount of each class of assets - beginning to close of a/cing period Written-off or add on account of revaluation of assets shall show reduced figure and shall give by way of note ( for 5 yrs) the details of such revaluation.

62 FIXED ASSETS-INTANGIBLE ASSETS Classification shall be given as: Goodwill Brands/trade marks Computer software Mastheads and publishing titles Mining rights Copyrights, patents and other IPRs Recipes, formulae, models, designs and prototypes Licenses and franchises. Others A reconciliation of gross and net carrying amount of each class of assets from beginning to close of accounting period. Written off or add on account of revaluation of assets shall show reduced figure and shall give by way of note ( for 5 yrs) the details of such revaluation.

63 FIXED ASSETS Assets under lease would mean: For Lessor - Asset given on Operating Lease For Lessee - Asset taken on Financial Lease A reconciliation should be made for fixed assets: The gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing: Additions Disposals Acquisitions through business combinations Other adjustments Related depreciation Impairment losses / reversals

64 FIXED ASSETS Reconciliation of capital work-in in-progress and intangible assets under development is not required AS 10 requires to disclose gross book value of revalued assets, method to be adopted to compute revalued amounts, nature of indices used, yr of appraisal & involvement of external valuer as long as concerned assets are held by it. Live stock, railway sidings, etc. - separate asset class. Assets held for sale not fixed asset but current asset Leasehold land separate class under tangible asset Capital advances not to be grouped as Capital Work- in-progress but long term loans and advances?

65 NON- CURRENT INVESTMENTS To be classified as trade investments and other investments and further classified as investment in: Property Equity instruments Preference shares Government and trust securities Debentures and bonds Mutual funds Partnership firms Others

66 NON- CURRENT INVESTMENTS Names of the bodies corporate in whom investments have been made : Subsidiaries / Associates / Joint ventures / Controlled special purpose entities Nature and extent of investment so made in each such body corporate (showing separately -partly paid-up) With regard to investment in partnership firm: Name of the firm; Names of all their partners Total capital ; Shares of each partner Investments carried at other than cost should be separately stated specifying the basis of valuation thereof. Aggregate amount of quoted investments & market value thereof Aggregate amount of unquoted investments Aggregate provision for diminution in value of investments

67 LONG TERM LOANS AND ADVANCES To be classified as: Capital advances Security deposits Loans and advances to related parties Others (specifying nature) Sub-classification into: Secured, considered good Unsecured, considered good Doubtful Allowance for bad and doubtful loans and advances under relevant heads Due by directors and other officers, firms and companies in which directors are interested to be separately stated.

68 LONG TERM LOANS AND ADVANCES -?? Capital Advance given by the company against which machinery is expected to be delivered in three months- should this be grouped under Current Assets? What details in respect of related parties need to be disclosed? What constitute Other Loans & Advances? Prepaid Expenses, Advance Tax, CENVAT credit, VAT credit, etc if expected not to be realised within 12 months of the reporting date or operating cycle, whichever is longer

69 OTHER NON-CURRENT ASSETS Other non-current assets to be classified as: Long-term Trade Receivables (including on deferred credit terms) Others (specifying nature) Sub-classification into: Secured, considered good Unsecured, considered good Doubtful Allowance for bad and doubtful debts Due by directors and other officers, firms and companies in which directors are interested to be separately stated.

70 CURRENT INVESTMENTS To be classified as investment in: Equity instruments Preference shares Govt and trust securities Debentures and bonds Mutual funds Partnership firms Others Basis of valuation shall be given for each individual investment. No need to classify current investments into trade and others.

71 CURRENT INVESTMENTS Names of the bodies corporate in whom investments have been made : Subsidiaries / Associates / Joint ventures / Controlled special purpose entities Nature and extent of investment so made in each such body corporate (showing separately -partly paid-up) With regard to investment in partnership firm: Name of the firm; Names of all their partners Total capital ; Shares of each partner Aggregate amount of quoted investments & market value Aggregate amount of unquoted investments Aggregate provision for diminution in value of investments Provision for Diminution, means the amount written down based on measurement principles of Current Investments as per AS 13 on a cumulative basis. It is not actually a provision.

72 INVENTORIES Classification into: Raw Materials Work-in in-progress Finished goods Stock-in in-trade (trading goods) Stores and spares Loose tools Others (specifying nature) Finished goods should include all goods except acquired for trading purposes Goods-in in-transit -disclose under relevant sub-head Mode of valuation to be stated

73 CURRENT ASSETS- TRADE RECEIVABLES Words Sundry Debtors have been replaced with Trade Receivables. Separate disclosure on outstanding for a period exceeding six months from the date they became due for payment. old from date of billing Sub-classification into: Secured, considered good Unsecured, considered good Doubtful

74 CURRENT ASSETS- TRADE RECEIVABLES Allowance for bad and doubtful debts Due by directors and other officers, firms and companies in which directors are interested to be separately stated Where no due date is specifically agreed upon, normal credit period allowed should be considered Trade receivable would be current if it is likely to be realized within 12 months from date of B/S or within operating cycle of the business.

75 CASH AND CASH EQUIVALENTS To be classified as: Balances with banks Cheques, drafts in hand Cash on hand Others (specifying nature) Earmarked balances with banks to be stated separately (e.g. unpaid dividend) Balances with banks kept as margin money or security against the borrowings to be disclosed separately. Bank deposits with more than 12 months maturity shall be disclosed separately.

76 CASH AND CASH EQUIVALENTS Repatriation restrictions, if any, in respect of cash and bank balances shall be stated separately. AS3 vis-à-vis Schedule III Cash and Bank Balances Cash and Cash Equivalents Balances with banks Cheques, drafts in hand Bank deposit with less than 3 months original maturity Cash on hand Other Bank Balances Balances with Banks to the extent held as margin money Unclaimed dividend a/c Earmarked a/c for unclaimed right issue application refund Bank deposit with less than 12 months maturity

77 SHORT TERM LOANS AND ADVANCES To be classified as: Loans and advances to related parties Others (specifying nature) Sub-classification into: Secured, considered good Unsecured, considered good Doubtful Allowance for bad and doubtful loans and advances under relevant heads Due by directors and other officers, firms and companies in which directors are interested to be separately stated.

78 CONTINGENT LIABILITIES & COMMITMENTS Contingent Liabilities to be classified as (to the extent not provided for): Claims against company not acknowledged as debt Guarantees Other money for which the company is contingently liable Commitments to be classified as (to the extent not provided for): Estimated amount of contracts remaining to be executed on capital account and not provided for Uncalled liability on shares and other investments partly paid Other commitments (specify nature)

79 OTHER DISCLOSURES IN NOTES B/S Amount of dividend to be distributed to equity & preference shareholders & related amount per share. AS-4 revision is accordingly being made: If dividends are declared after the balance sheet date but before the financial statements are approved for issue, the dividends are not recognised as a liability at the balance sheet date because no obligation exists at that time. Such dividends are disclosed in the notes. Arrears of fixed cumulative dividends on preference shares. Where securities (equity / preference) issued for specific purpose, but whole / part not used for that specific purpose how the unutilized amount is used / invested. If any asset other than fixed assets and non-current investments are not stated at realizable value in ordinary course of business in the opinion of the Board.

80 PROFIT & LOSS - BASICS Specific Format - only vertical format to be allowed. P L now to be called Statement of Profit & Loss No Appropriation accounts in Statement of Profit & Loss. Appropriation to be disclosed in R& S Surplus Item of Income/expense >1% of revenue from operation or Rs. 1,00,000/- (earlier Rs 5000/-) whichever is higher, will be disclosed as separate items under respective heads. Major exclusions Managerial Remuneration & Computation thereof. Details of licensed capacity, installed capacity. Quantitative information about actual production, purchase, sales, consumption etc.

81 FORM OF STATEMENT OF PROFIT AND LOSS Particulars I. Revenue from operations 21 II. Other income 22 III Total Revenue (I + II) Iv. Expenses 23 V. Profit before exceptional and extraordinary items and tax (III - IV) VI. Exceptional items 24 VII. Profit before extraordinary items and tax (V-VI) VIII. Extraordinary items 25 IX. Profit before tax (VII-VIII) X. Tax Expenses 26 XI. Profit (loss) for the period from continuing operations (IX-X) XII Profit (Loss) from the discontinuing business 27 XIII Tax expenses of discontinuing operations 28 XIV. Profit (Loss) from discontinuing operations (after tax) (XII-XIV) XV. Profit (Loss) for the period (XI+XIV) 29 XVI. Earnings per equity share Note No. Figures for the CRP Figure for the PRP

82 REVENUE FROM OPERATIONS Distinction of finance company and other companies For companies other than finance company: Sale of Products Sale of Services Other Operating Revenues Less: Excise Duty For Finance company: Interest Other Financial services As per AS 9 presentation for excise duty - on face of PL Revenues to be grossed up of indirect taxes if on principal basis. If on agency basis net off.

83 REVENUE - FINANCE COMPANY As per RBI 45 I (c) & (f) Asset finance company Investment companies Leasing & hire purchase companies Loan companies Infra finance companies Core investment companies Micro-finance companies Housing finance companies Others

84 OTHER INCOME To be classified as: Interest income (other than for finance company) Dividend Dividend from subsidiary company Net gain / loss on sale of investments Other non-operating operating income Interest, dividend, etc. to be disclosed separately for Current as well as Non Current Investments Dividend to be accounted for only when right to receive as on B/S date change in Accounting policy Other Income be shown net off expenses. However expenses so netted off are to be shown separately.

85 OTHER OPERATING REVENUES V/S OTHER INCOME Other Operating Revenue Revenue arising from company s operating activities In case co has a real estate arm & continuously engaged in leasing out - rent Sale of manufacturing scrap Other Income Revenue arising from other than company s operating activities In case a part of building being temporarily let out - rent Profit on sale of fixed assets Net foreign exchange gain Interest; dividend Net gain on sale of investment

86 PROFIT FROM PARTNERSHIP FIRM No specific requirement of disclosure in Schedule III Share in profit accrues the moment it is credited in partner s capital a/c. To be disclosed under Other Income / Expense If partner for a period and not full year disclosure to be made accordingly Company s share to be accounted for according to company s financial year AOP and LLP on similar basis

87 EXPENSES Disclosure on face of the PL: Cost of material consumed Purchase of stock-in in-trade Changes in inventories of finished goods Work-in in-progress and stock in trade Employee benefit expenses Finance cost Depreciation and amortization expenses Other expenses.

88 COST OF MATERIAL CONSUMED Applicable only to manufacturing companies Where packing materials are not classified as raw materials, consumption thereof - disclose separately Stores, fuel, spare parts etc do not enter physically into the product, to be disclosed separately. Company should provide for actual consumption and not the derived consumption. In case derived consumption is taken - suitable footnote Shortages / wastages if within norms of acceptable margin, should form part of consumption. Abnormal variations to be disclosed separately.

89 EMPLOYEE BENEFITS EXPENSES Master servant relationship is important Salaries and wages Bonus Leave encashment Compensations Contribution to provident and other funds Gratuity funds, Superannuation funds Penalties and similar amounts not to be disclosed here ESOP & ESPP Staff welfare expenses

90 FINANCE COST Interest expense Interest on borrowings, debentures, bonds, etc. Finance charges on finance lease are in nature of interest Interest on fixed period loans & other borrowings were required to be bifurcated- Now NOT required -Old Schedule VI Other borrowing costs Commitment charges Loan processing charges Guarantee charges Loan facilitation charges Discounts/ premium on borrowings Other ancillary costs costs Applicable net loss on foreign currency transactions to the extent they are regarded as adjust to interest cost

91 OTHER EXPENSES All other expenses will be grouped here. Following to be disclosed separately: Consumption of stores and spares Power and fuel Rent Repairs to buildings Repairs to machinery Insurance Rates and taxes, excluding taxes on income Miscellaneous expenses Any item of expenditure which exceeds 1% of the revenue from operations or Rs.1,00,000, whichever is higher - separate Items of similar nature can be classified under one head.

92 OTHER DISCLOSURE Interest Income Interest Expense Dividend Income Net Gain / loss on sale of investment Adjustment to carrying cost of investments Net gain/loss on foreign currency transaction and translation (other than considered under finance cost)

93 EXCEPTIONAL ITEMS AS - 5 Para 13: These items may not be extraordinary but the nature and amount of these items may be relevant to the users in understanding the financial statements & making projections. Para 14: Circumstances which may give rise to separate disclosure: Disposal of items of fixed assets Disposal of long term investments Para 12: When items within profit or loss from ordinary activities are of such size, nature or incidence that requires a separate disclosure Legislative changes having retrospective application Litigation settlements Write-down inventories to NRV & reversal of such write-down Other reversals of provisions

94 EXTRAORDINARY ITEMS AS-5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies Extraordinary items- income or expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the enterprises and are not expected to recur frequently or regularly. The nature and amount of each extraordinary item is separately disclosed in the statement of Profit and Loss in such manner that its impact on current profit or loss can be perceived.

95 PRIOR PERIOD ITEMS No specific requirement in Schedule III AS -5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies: The nature and amount of prior period items should be separately disclosed in the statement of profit and loss in a manner that their impact on the current profit or loss can be perceived

96 TAX EXPENSE To be disclosed as: Current Tax Deferred Tax MAT is a current tax. In year of MAT credit becoming eligible: said asset should be created by way of credit to P&L A/c and presented as a separate line item. Interest on tax is in nature of finance cost & should be disclosed in finance cost and not as current tax. Penalties under IT laws if compensatory in nature - treated as interest. Other tax penalties - other expenses Wealth Tax is not a tax on income and should be included in Rates & Taxes under other expenses

97 DISCONTINUING OPERATIONS AS-24 - Definition of discontinuing operations Disclosure requirements of AS- 24 Revenue and expenses in respect of the ordinary activities Pre-tax profit or loss and the income tax expense relating to ordinary activities attributable to the discontinuing operation during the current financial reporting period.

98 EARNING PER EQUITY SHARE (1) Basic (2) Diluted As per Accounting Standard- 20 Par Value of shares also to be given

99 ADDITIONAL INFORMATION BY WAY OF NOTES In the case of a manufacturing company: Raw materials under broad heads Goods purchase under broad heads In case of all companies: Work-in progress under broad heads In the case of a trading company: Goods traded in under broad heads In the case of service company: Gross income from services rendered or supplied under broad heads

100 ADDITIONAL INFORMATION BY WAY OF NOTES In the case of other companies: Gross income derived under broad heads No quantities only values to be given Broad heads would mean 10% of value of sale/service or any other threshold taking into a/c concept of materiality and presentation of true and fair view of FS

101 ADDITIONAL INFORMATION BY WAY OF NOTES Payment to auditors: For Audit For tax matters For company law matters For management services For other services For reimbursement of expenses Prior period items to be disclosed separately.

102 ADDITIONAL INFORMATION BY WAY OF NOTES Transfer to/from Reserves: The aggregate of any amounts, if material, set aside or proposed to be set aside, to reserve but not including provisions Any amount withdrawn from such reserves Transfer to/from Provisions The aggregate of the amount, if material, set aside to provisions made to meeting liabilities, contingencies or commitments Any amount withdrawn from such provisions.

103 OTHER DISCLOSURES IMPORTS CIF Value of imports made during the year on CIF basis:- Raw Materials Components (intermediaries & components) & Spare Parts (for capital equipment) Capital Goods Aggregate amount in each category is required to be disclosed. Components & spare parts shall be disclosed separately, if practically separable. Value of imports is to be disclosed, even if payments not made or made in rupee terms. Only direct imports to be disclosed here. However imports through agent would be disclosed here. Import in transit to be included if risks & rewards are transferred.

104 OTHER DISCLOSURES EXP FOREIGN CURRENCY Expenditure in foreign currency on: Royalty Know-how Professional & consultation fee Interest Others No disclosure required if payment is made in Rupees, any other method or adjustment not involving forex No disclosure required if the company itself does not incur a foreign currency expenditure- where company makes payment in rupees and such other person makes forex remittance Disclosure on accrual basis. Gross expense to be disclosed

105 OTHER DISCLOSURES - CONSUMPTION Disclosure is to be made for all imported and indigenous Raw materials Spare parts (for plant & machinery and similar nature items) Components consumed during the financial year. Aggregate value of each item & its percentage with respect to total consumption is to be disclosed Actual cost to be taken not FOB or CIF value Total consumption should tally with PL

106 OTHER DISCLOSURES - DIVIDEND If paid in foreign currency, disclose: Total amount remitted during the year in foreign currency Total number of non-resident shareholders Total number of shares held by them on which dividend was due Year to which dividend relates Disclosure to be made in Indian currency If no dividend is remitted, no such disclosure is required Cash basis to be followed.

107 OTHER DISCLOSURES FC EARNINGS To be classified as: Export of goods (calculated on F.O.B. basis) Royalty, know how, professional and consultation fees Interest and dividends Other income (indicating the nature thereof) Disclosure to be made on accrual basis Disclosure is to be made with gross figures with a mention of tax deducted at source.

108 CA. Pramod Jain CA. Pramod Jain, Lunawat & Co