1. CA. Durgesh Kabra DMKH & Co., Chartered Accountants Mumbai 28 th Aug 2011 1 Disclosure Requirements for Revised Schedule VI Revised Schedule VI MALAD GOREGAON CPE STUDY CIRCLE

2. Contents 14th April, 2011 Revised Schedule VI 2 Introduction Object Methodology adopted in determining the Financial Statement. General instructions Performa of Balance Sheet General instructions for preparation of balance sheet Performa of Statement of Profit & loss General instructions for preparation of statement of profit & loss. Comparison between Old & Revised Schedule VI

3. 14th April, 2011 Revised Schedule VI 3 Schedule VI of the Companies Act, 1956, prescribes the format of financial statements and disclosure requirements for corporate entities in India. Considering the economic and regulatory changes that have taken place globally, and being as old as the Act itself (1956), schedule VI had completely outlived its utility. As per notification dated 28 th March, 2011 by Ministry of Corporate Affairs the revised Schedule VI is applicable to balance sheet & profit & loss account to be prepared for the financial year commencing on or from 01 st April 2011. Introduction

4. Object 14th April, 2011 Revised Schedule VI 4 One of the Main aim of revising schedule VI was to attain compatibility and convergence with IFRS in India. …why? In may 2008, MCA issued a press release in which it has committed to convergence with IFRS by April 1, 2011 At the G20 summit on financial Market and World Economy, then Finance Minister also committed to have convergence with IFRS in India Other main object of revising schedule VI was to eliminate numerous statistical and disclosure requirements which are not relevant from an investor perspective.

5. 14th April, 2011 Revised Schedule VI 5 Compliance with the Act and/or Accounting Standards: Requirements of the Act and/or Standards will override the related requirement of Schedule VI. General instructions Disclosures are required by the Companies Act shall be made in the notes to accounts Additional disclosures specified in the Accounting Standards shall be made in the notes to accounts or by way of additional statement unless required to be disclosed on the face of Financial Statements.

6. 14th April, 2011 Revised Schedule VI 6  Notes to the accounts shall contain information in addition to that presented in the Financial Statement and shall provide where required (a) narrative descriptions or disaggregations of the items recognized in those statements and (b) information about items that do not qualify for recognition in those statements. General instructions

7. 14th April, 2011 Revised Schedule VI 7  Each item on the face of the Balance sheet and statement of the profit and loss shall be cross- referenced to any related information in the notes to the accounts  Figures of previous period: – The corresponding amounts (comparatives) for the immediately preceding reporting period for all items shown in the Financial Statements including notes shall also be given.  Confusion between comparative figures and corresponding figures General instructions

8. 14th April, 2011 Revised Schedule VI 8  Presentation of figures: – Where Turnover: o < Rs. 100 crores = Figures to be in nearest hundreds, thousands, lakhs or millions or decimals thereof. o > Rs. 100 crores = Figures to be in nearest lakhs or millions or decimals thereof. Once a unit of measurement is used, it should be used uniformly in the Financial Statements General instructions

9. Part I – Format of Balance Sheet 14th April, 2011 Revised Schedule VI 9 Name of the Company……………………. Balance Sheet as at……………………… (Rupees in…………) ParticularsNote No. Figures as at the Figures as at the end of the end of the current reporting previous reporting period period I. EQUITY AND LIABILITIES (1) Shareholders’ funds (a) Share capital (b) Reserves and surplus (c) Money received against share warrants ( 2)Share application money pending allotment (3)Non-current liabilities (a) Long-term borrowings

10. (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 II. ASSETS Non-current assets (1) (a) Fixed assets (i)Tangible assets (ii)Intangible assets (iii)Capital work-in-progress (iv)Intangible assets under development Part I – Format of Balance Sheet 14th April, 2011 Revised Schedule VI 10

11. (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 See accompanying notes to the financial statements Part I – Format of Balance Sheet 14th April, 2011 Revised Schedule VI 11

12. General Instructions for Balance Sheet 14th April, 2011 Revised Schedule VI 12  An operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. Where the normal operating cycle cannot be identified, it is assumed to have a duration of 12 months.  A liability shall be classified as current when it satisfies any of the criteria SPECIFIED FOR ASSETS & all other liabilities shall be classified as non- current.

13. General Instructions for Balance Sheet 14th April, 2011 Revised Schedule VI 13  A receivable shall be classified as a ‘trade receivable’ if it is in respect of the amount due on account of goods sold or services rendered in the normal course of business.  A payable shall be classified as a ‘trade payable’ if it is in respect of the amount due on account of goods purchased or services received in the normal course of business.

14. 14th April, 2011 Revised Schedule VI 14 New Line Items - Liabilities:  Money received against Share Warrants  Trade Payables  Share Application Money pending allotment  Separate headings for classifying Non current and Current Liabilities. General Instructions for Balance Sheet New Line Items - Assets:  Intangible Assets under development  Trade Receivables  Separate headings for classifying Non  current and Current Assets.  Cash and cash equivalents.

15. Share Capital 14th April, 2011 Revised Schedule VI 15  Shares in respect of each class in the company held by a) its holding company b) its ultimate holding company including shares held by or by subsidiaries c) associates of the holding company or the ultimate holding company in aggregate;  Shares in the company held by each shareholder holding more than 5 percent shares specifying the number of shares held;  The Rights, Preference & Restrictions attaching to each Class of Shares

16. Reserves and Surplus 14th April, 2011 Revised Schedule VI 16  Surplus i.e. balance in Statement of Profit & Loss disclosing allocations and appropriations such as dividend, bonus shares and transfer to/from reserves etc. (Additions and deductions since last balance sheet to be shown under each of the specified heads)  A reserve specifically represented by earmarked investments shall be termed as a ‘fund’.  Debit balance of statement of profit and loss shall be shown as a negative figure under the head ‘Surplus’. Similarly, the balance of ‘Reserves and Surplus’, after adjusting negative balance of surplus, if any, shall be shown under the head ‘Reserves and Surplus’ even if the resulting figure is in the negative.

17. Long-Term & Short Term Borrowings 14th April, 2011 Revised Schedule VI 17  Loans and advances from related parties.  Period and amount of continuing default as on the balance sheet date in repayment of loans and interest, shall be specified separately in each case.

18. Long Term & Short Term Provisions 14th April, 2011 Revised Schedule VI 18 The amounts shall be classified as:  Provision for employee benefits.  Others (specify nature).

19. Other current liabilities 14th April, 2011 Revised Schedule VI 19 The amounts shall be classified as: (a) Current maturities of long-term debt; (b) Current maturities of finance lease obligations; (c) Interest accrued but not due on borrowings; (d) Interest accrued and due on borrowings; (e) Income received in advance; (f) Unpaid dividends (g) Application money received for allotment of securities and due for refund and interest accrued thereon. (h) Unpaid matured deposits and interest accrued thereon (i) Unpaid matured debentures and interest accrued thereon (j) Other payables (specify nature);

20. Tangible & Intangible Assets 14th April, 2011 Revised Schedule VI 20  Movement between opening & closing balances to be given  Details of reduction – by way of reduction of capital, revaluation etc. to be given by way of a note  Assets under lease shall be separately specified under each class of asset.

21. Non-current investments 14th April, 2011 Revised Schedule VI 21  Non-current investments shall be classified as trade investments and other investments and it includes Investment property;  Under each classification, details of names of the bodies corporate (indicating separately whether such bodies are (i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled special purpose entities in whom investments have been made and the nature and extent of the investment so made in each such body corporate.

22. Non-current investments 14th April, 2011 Revised Schedule VI 22  Investments carried at other than at cost should be separately stated specifying the basis for valuation thereof.  The following shall also be disclosed: (a) Aggregate amount of quoted investments and market value thereof; (b) Aggregate amount of unquoted investments; (c) Aggregate provision for diminution in value of investments

23. Long-term loans and advances 14th April, 2011 Revised Schedule VI 23 (i) Long-term loans and advances shall be classified as: (a) Capital Advances; (b) Security Deposits; (c) Loans and advances to related parties (giving details thereof); (d) Other loans and advances (specify nature). (ii) The above shall also be separately sub-classified as: (a) Secured, considered good; (b) Unsecured, considered good; (c) Doubtful. (iii) Allowance for bad and doubtful loans and advances shall be disclosed under the relevant heads separately.

24. Inventories 14th April, 2011 Revised Schedule VI 24 (i) Inventories shall be classified as: (a) Raw materials; (b) Work-in-progress; (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). (ii) Goods-in-transit shall be disclosed under the relevant sub-head of inventories. (iii) Mode of valuation shall be stated.

25. Trade Receivables (i) Aggregate amount of Trade Receivables outstanding for a period exceeding six months from the date they are due for payment should be separately stated. (ii) Trade receivables shall be sub-classified as: (a)Secured, considered good; (b)Unsecured considered good; (c)Doubtful. (iii) Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately. 14th April, 2011 25 Revised Schedule VI

26. Cash and cash equivalents (i) Cash and cash equivalents shall be classified as: (a) Balances with banks; (b) Cheques, drafts on hand; (c) Cash on hand; (d) Others (specify nature). (ii) Earmarked balances with banks (for example, for unpaid dividend) shall be separately stated. (iii) Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments shall be disclosed separately. (iv) Bank deposits with more than 12 months maturity shall be disclosed separately. (from the date of deposit or as on March 31 st 2011) 14th April, 2011 26 Revised Schedule VI

27. Contingent liabilities & commitments & Others 14th April, 2011 Revised Schedule VI 27  The amount of dividends proposed to be distributed to equity and preference shareholders for the period and the related amount per share shall be disclosed separately. Arrears of fixed cumulative dividends on preference shares shall also be disclosed separately.  Where in respect of an issue of securities made for a specific purpose, the whole or part of the amount has not been used for the specific purpose at the balance sheet date, there shall be indicated by way of note how such unutilized amounts have been used or invested.

28. Contingent liabilities & commitments & Others 14th April, 2011 Revised Schedule VI 28  If, in the opinion of the Board, any of the assets other than fixed assets and non- current investments do not have a value on realization in the ordinary course of business at least equal to the amount at which they are stated, the fact that the Board is of that opinion, shall be stated.

29. 14th April, 2011 Revised Schedule VI 29 Name of the Company……………………. Profit and loss statement for the year ended ……………………… (Rupees in…………) ParticularsNote No. Figures for the Figures for the current reporting current reporting period period I. Revenue from operations II. Other income III. Total Revenue (I + II) IV. Expenses: Cost of materials consumed Purchases of Stock-in-Trade Changes in inventories of finished goods Work-in-progress and Stock-in-Trade PART II – Format of Statement of Profit & loss

30. Employee benefits expense Finance costs Depreciation and amortization expense Other expenses Total expenses V. Profit before exceptional and extraordinary items tems and tax (III-IV) VI. Exceptional items VII. Profit before extraordinary items and tax (V - VI) VIII. Extraordinary Items IX. Profit before tax (VII- VIII) X. Tax expense: (1) Current tax (2) Deferred tax 14th April, 2011 Revised Schedule VI 30 PART II – Format of Statement of Profit & loss

31. XI Profit (Loss) for the period from continuing operations (VII-VIII) XII Profit/(loss) from discontinuing operations XII ITax 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 (2) Diluted See accompanying notes to the financial statements PART II – Format of Statement of Profit & loss 14th April, 2011 Revised Schedule VI 31

32. 14th April, 2011 Revised Schedule VI 32 General Instructions for Preparation P&L  Now known as ‘Profit and Loss Statement for the year ended ________’.  Format specified in new Schedule.  Exceptional and extraordinary items need to be disclosed separately on the face of the Statement of Profit and Loss. The details of the same as also of any prior period items should be disclosed in the notes.  Profit / loss before and after tax from discontinuing operations and the tax expense from discontinuing operations need to be disclosed separately on the face of the Statement of Profit and Loss.

33. 14th April, 2011 Revised Schedule VI 33 General Instructions for Preparation P&L  Any item of income or expenditure which exceeds one percent of the revenue from operations or Rs. 1,00,000 whichever is higher should be disclosed separately.  Broad heads shall be decided taking into account the concept of materiality and presentation of true and fair view of financial statements.  The items to be disclosed under Revenue from Operations have been specifically indicated for both finance companies and others. Note:- Broad heads shall be decided taking into account the concept of materiality and presentation of true and fair view of financial statements,”.

34. 14th April, 2011 Revised Schedule VI 34 Comparison between Old & Revised Schedule VI Sr. No. ParticularsOld Schedule VIRevised Schedule VI 1)Form of Balance Sheet Both horizontal and vertical form were allowed Only vertical form of Balance Sheet has been specified in the revised Schedule VI 2)Form of Profit and Loss Account No format specified for Profit and Loss Account Form of Profit and Loss Account specified under Part II 3)Profit and Loss Appropriation Account Opening surplus, proposed dividend and transfer to/ from reserves were shown in Profit and Loss Appropriation Account Transfer from/ to reserves to be shown under the heading Reserves & Surplus only. No requirement of separate Profit and Loss Appropriation Account.

35. 14th April, 2011 Revised Schedule VI 35 Sr. No. ParticularsOld Schedule VIRevised Schedule VI 4)Rounding off of Figures appearing in financial statement Turnover of less than Rs. 100 Crs - R/off to the nearest Hundreds, thousands or decimal thereof Turnover of Rs. 100 Crs or more but less than Rs. 500 Crs - R/off to the nearest Hundreds, thousands, lakhs or millions or decimal thereof Turnover of Rs. 500 Crs or more - R/off to the nearest Hundreds, thousands, lakhs, millions or crores, or decimal thereof Turnover of less than Rs. 100 Crs - R/off to the nearest Hundreds, thousands, lakhs or millions or decimal thereof Turnover of Rs. 100 Crs or more - R/off to the nearest lakhs, millions or crores, or decimal thereof Comparison… (ii)

36. 14th April, 2011 Revised Schedule VI 36 Sr. No. ParticularsOld Schedule VIRevised Schedule VI 5)Net Working CapitalCurrent assets & Liabilities are shown together under application of funds. The net working capital appears on balance sheet. Assets & Liabilities are to be bifurcated into current & Non-current & to be shown separately. Hence, net working capital will not be appearing in B/S. 6)Fixed AssetsThere was no bifurcation required in to tangible & intangible assets. Capital advances used to be shown under the Head Capital Work in Progress under Fixed Assets Fixed assets to be shown under non-current assets and have to be bifurcated into Tangible & intangible assets. Capital advances to be shown under the head ‘Long term Loans & Advances’ Comparison… (iii)

37. 14th April, 2011 Revised Schedule VI 37 Sr. No. ParticularsOld Schedule VIRevised Schedule VI 7)BorrowingsShort term & long term borrowings are grouped together under the head Loan funds sub-head Secured / Unsecured Long term borrowings to be shown under non-current liabilities and short term borrowings to be shown under current liabilities with separate disclosure of secured / unsecured loans. Period and amount of continuing default as on the balance sheet date in repayment of loans and interest to be separately specified 8)DepositsLease deposits are part of loans & advances Lease deposits to be disclosed as long term loans & advances under the head non-current assets Comparison… (iv)

38. 14th April, 2011 Revised Schedule VI 38 Sr. No. ParticularsOld Schedule VIRevised Schedule VI 9)InvestmentsBoth current & non- current investments to be disclosed under the head investments Current and non-current investments are to be disclosed separately under current assets & non-current assets respectively. 10)Loans & Advances Loans & Advance are disclosed along with current assets Loans & Advance to subsidiaries & others to be disclosed separately. Loans & Advances to be broken up in long term & short term and to be disclosed under non-current & current assets respectively. Loans & Advance from related parties & others to be disclosed separately. 11)Deferred Tax Assets / Liabilities Deferred Tax assets / liabilities to be disclosed separately Deferred Tax assets / liabilities to be disclosed under non-current assets / liabilities as the case may be. Comparison… (v)

39. 14th April, 2011 Revised Schedule VI 39 Sr. No. ParticularsOld Schedule VIRevised Schedule VI 12)Cash & Bank Balances Bank balance to be bifurcated in scheduled banks & others No such bifurcation required. Bank balances in relation to earmarked balances, held as margin money against borrowings, deposits with more than 12 months maturity, each of these to be shown separately. 13)Profit & Loss (Debit Balance) P&L debit balance to be separately disclosed in the Balance Sheet. Debit balance of Profit and Loss Account to be shown as negative figure under the head Surplus. Therefore, Reserve & Surplus can have a negative balance. Comparison… (vi)

40. 14th April, 2011 Revised Schedule VI 40 Sr. No. ParticularsOld Schedule VIRevised Schedule VI 14)Sundry Debtors Debtors outstanding for more than six months from invoice date to be shown separately Debtors outstanding for more than six months from the date they became due to be shown separately 15)Other current liabilities No specific mention for separate disclosure of Current maturities of long term debt No specific mention for separate disclosure of Current maturities of finance lease obligation Current maturities of long term debt to be disclosed under other current liabilities. Current maturities of finance lease obligation to be disclosed. Comparison… (vii)

41. 14th April, 2011 Revised Schedule VI 41 Sr. No. ParticularsOld Schedule VIRevised Schedule VI 16)Separate line item Disclosure criteria any item under which expense exceeds one per cent of the total revenue of the company or Rs. 5,000 which ever is higher; shall be disclosed separately any item of income / expense which exceeds one per cent of the revenue from operations or Rs. 1,00,000, which ever is higher; to be disclosed separately 17)Expense classification Function wise & nature wise Expenses in Statement of Profit and Loss to be classified based on nature of expenses 18)Finance CostFinance cost to be classified in fixed loans & other loans Finance cost shall be classified as interest expense, other borrowing costs & Gain / Loss on foreign currency transaction & translation Comparison… (viii)

42. 14th April, 2011 Revised Schedule VI 42 Sr. No. ParticularsOld Schedule VIRevised Schedule VI 19)Foreign exchange gain / loss Gain / Loss on foreign currency transaction to be shown under finance cost Gain / Loss on foreign currency transaction to be separated into finance costs and other expenses 20)PurchasesThe purchase made and the opening & closing stock, giving break up in respect of each class of goods traded in by the company and indicating the quantities thereof. Goods traded in by the company to be disclosed in broad heads in notes. Disclosure of quantitative details of goods is diluted. Goods-in-transit to be separately disclosed. Comparison… (ix)

43. 14th April, 2011 Revised Schedule VI 43 Sr. No. ParticularsOld Schedule VIRevised Schedule VI 21)TDS amount on Interest, royalty received TDS amount was required to be shown for Interest income etc. No requirement of disclosing TDS amounts separately 22)Managerial Remuneration and Commission Payment to directors and detailed calculation under section 198 was required to be disclosed No disclosure requirements for Managerial Remuneration 23)ESOP expensesNo requirement to show separately as part of Employee Benefits expense Expense on Employee Stock Option Scheme (ESOP) and Employee Stock Purchase Plan (ESPP) to be shown separately as part of Employee Benefits expense Comparison… (x)

44. 14th April, 2011 Revised Schedule VI 44 Sr. No. ParticularsOld Schedule VIRevised Schedule VI 24)Part III- Interpretation Terms provision, reserve, capital reserve, quoted investment etc. were defined No such specific definitions. 25)Part IV- Balance Sheet Abstract Details of company registration number, capital raised, Balance Sheet details, products etc. were required to be attached with financials No such requirement. Comparison… (xi)

45. THANK YOU 14th April, 2011 Revised Schedule VI 45