Introduction
Section 211(1) of the Companies Act, 1956 requires all companies to draw up the Balance Sheet and Statement of Profit and Loss account as per the form set out in Schedule VI. The pre-revised Schedule VI was introduced in 1976.
As mentioned in the Foreword of the ICAI Guidance Note on Revised Schedule VI to the Companies Act, 1956 (ICAI GN), “to make Indian business and companies competitive and globally recognisable, a need was felt that format of Financial Statements of Indian corporates should be comparable with international format. Since most of the Indian Accounting Standards are being made at par with the international Accounting Standards, the changes to format of Financial Statements to align with the Accounting Standards will make Indian companies competitive on the global financial world. Taking cognisance of imperative situation and need, the Ministry of Corporate Affairs revised the existing Schedule VI to the Companies Act, 1956”.
The Ministry of Company Affairs (MCA) vide Notification dated 28th February 2011 notified the format of Revised Schedule VI. Further vide Notification dated 30th March 2011, it was clarified that the “The new format shall come into force for the Balance Sheet and Profit and Loss Account to be prepared for the financial year commencing on or after 1st April 2011”.
The ICAI GN issued in December 2011 gives detailed guidance on the Revised Schedule VI and the manner in which the various instructions contained in Revised Schedule VI are to be interpreted.
The structure of Revised Schedule VI is as under:
(a) General Instructions
(b) Part I — Form of Balance Sheet
(c) General Instructions for preparation of Balance Sheet
(d) Part II —Form of Statement of Profit and Loss
(e) General Instructions for preparation of Statement of Profit and Loss
It should be noted that besides the format for preparation of Balance Sheet and Profit and Loss statement as notified by the Revised Schedule VI, there are other disclosure requirements also. These disclosures are:
(a) Disclosures as per the notified Accounting Standards i.e., as per the Companies (Accounting Standards) Rules, 2006;
(b) Disclosures under the Companies Act, 1956 (e.g., on buyback of shares — section 77, political contributions — section 293, etc.);
(c) Disclosures under Statutes (e.g., as per the Micro, Small and Medium Enterprises Development Act, 2006);
(d) Disclosures as per other ICAI pronouncements (e.g., disclosure on MTM exposure for derivatives);
(e) In case of listed companies, disclosures under Clause 32 of the Listing Agreement (e.g., Loans to associate companies, etc.)
Applicability of the Revised Schedule VI
As mentioned in the Notification dated 30th March 2011, financial statements for all companies have to be prepared using the format given by Revised Schedule VI for financial years commencing on or after 1st April 2011.
A company having its financial year ending on, say, 30th June 2011, 30th September 2011 or 31st December 2011 cannot adopt the new format since their financial years have not commenced on or after 1st April 2011. Since the format of Revised Schedule VI is a statutory format, a company cannot decide to follow the same even on a voluntary basis. However, if a company decides to prepare its financial statements from 1st April 2011 to 31st December 2011 (i.e., for a period of 9 months), it will have to prepare the same using the format of Revised Schedule VI.
All companies registered under the Companies Act, 1956 have to prepare their financial statements using Revised Schedule VI. However, proviso to section 211 exempts banking companies, insurance companies and companies engaged in generation or supply of electricity from following the said format since these are governed by their respective statutes. However, since the Electricity Act 2003 and the Rules thereunder do not prescribe any format for preparing financial statements, such companies will have to follow the format laid down by the Revised Schedule VI till a separate format is prescribed.
Listed companies require to publish information on quarterly and annual basis in the prescribed format in terms of clauses 41(l)(ea) and 41(l)(eaa) of the Listing Agreement. These formats are inconsistent with formats under the Revised Schedule VI. However, since the formats are statutory formats as per the Listing Agreement, the same will have to be followed till the time a new format is prescribed under Clause 41 of the Listing Agreement.
Companies which are in the process of making an issue of shares (IPO/FPO) have to file ‘offer documents’ containing among other details, financial information of the last 5 years. The formats of Balance Sheet and Statement of Profit and Loss prescribed under the SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2009 (‘ICDR Regulations’) are inconsistent with the format of the Balance Sheet/Statement of Profit and Loss in the Revised Schedule VI. However, since the formats of Balance Sheet and Statement of Profit and Loss under ICDR Regulations are only illustrative, to make the data comparable and meaningful for users, companies will be required to use the Revised Schedule VI format to present the restated financial information for inclusion in the offer document. It may also be noted that the MCA had vide General Circular No. 62/2011, dated 5th September 2011 has clarified that ‘the presentation of Financial Statements for the limited purpose of IPO/FPO during the financial year 2011-12 may be made in the format of the pre-revised Schedule VI under the Companies Act, 1956. However, for period beyond 31st March 2012, they would prepare only in the new format as prescribed by the present Schedule VI of the Companies Act, 1956’.
Revised Schedule VI requires that except in the case of the first financial statements (i.e., for the first year after incorporation), the corresponding amounts for the immediately preceding period are to be disclosed in the Financial Statements including the Notes to Accounts. Accordingly, corresponding information will have to be presented starting from the first year of application of the Revised Schedule VI. Thus, for the Financial Statements for the financial year 2011-12 corresponding amounts need to be given for the financial year 2010-11. This will require all companies to take an extra effort to compile the corresponding amounts for 2010-11 for disclosing in Revised Schedule VI prepared for the financial year 2011-12.
All companies whether private or public, whether listed or unlisted, and irrespective of their size in terms of turnover, assets, etc. (other than those mentioned in para 9 above) will have to adhere to the new format of financial statements from 2011-12 onwards. Many small or family-owned companies which are run as an extension of partnerships will have difficulties in adopting the new formats since they may not have the necessary trained manpower or infrastructure for such changeover.
Major principles as per Revised Schedule VI
Revised Schedule VI has eliminated the concept of ‘Schedules’. Such information will now have to be provided in the ‘Notes to accounts’. Accordingly, the manner of cross-referencing to various other information contained in financial statements will also be changed to ‘Note number’ as against ‘Schedule number’ in pre-revised Schedule VI.
As per general instructions contained in the Revised Schedule VI, the terms used shall carry the meanings as per the applicable Accounting Standards (AS). As per the ICAI GN, the applicable AS for this purpose shall mean the AS notified by the Companies (Accounting Standards) Rules, 2006.
Revised Schedule VI requires that if compliance with the requirements of the Companies Act, 1956 (Act) and/or AS requires a change in the treatment or disclosure in the financial statements, the requirements of the Act and/or AS will prevail over Revised Schedule VI.
As per preface to the AS issued by ICAI, if a particular AS is not in conformity with law, the provisions of the said law or statute will prevail. Using this principle, disclosure requirements of existing Schedule VI were considered to prevail over AS. However, since the Revised Schedule VI gives specific overriding status to the requirements of AS notified by the Companies (Accounting Standards) Rules, 2006, the same would prevail over the Revised Schedule VI.
There are several instances of conflict between provisions of the Revised Schedule VI and the notified AS e.g., definition of Current Investments as per the Revised Schedule VI and AS-11, definition of Cash and Cash Equivalents as per the Revised Schedule VI and AS-3, treatment of proposed dividend as per the Revised Schedule VI and AS-4, etc. In all such cases, provisions of the AS will prevail over the Revised Schedule VI.
The nomenclature for the Profit and Loss account is now changed to ‘Statement of Profit and Loss’. Also, only the vertical format is prescribed for both Balance Sheet and the Statement of Profit and Loss.
The format of the Statement of Profit and Loss as per the Revised Schedule VI does not contain disclosure of appropriations like transfer to reserves, proposed dividend, etc. These are now to be disclosed in the Balance Sheet as part of adjustments in ‘Surplus in Statement of Profit and Loss’ contained in ‘Reserves and Surplus’. Further, debit balance of ‘profit and loss account’, if any, is to be disclosed as a reduction from ‘Reserves and Surplus’ (even if the final figure of Reserves and Surplus becomes negative).
It is clarified by the Revised Schedule VI that the requirements mentioned therein are minimum requirements. Thus, additional line items, sub-line items and sub-totals can be presented as an addition or substitution on the face of the financial statements if the company finds them necessary or relevant for understanding of the company’s financial position. Also, in preparing the financial statements, a balance will have to be maintained between providing excessive detail that may not assist users of the financial statements and not providing important information as a result of too much aggregation.
Revised Schedule VI requires use of the same unit of measurement uniformly throughout the financial statements and ‘Notes to Accounts’. Rounding off requirements, if opted, are to be followed uniformly throughout the financial statements and ‘Notes to Accounts’. The rounding off requirements as per prerevised Schedule VI and as per the Revised Schedule VI are summarised in the following table:
Pre-revised Schedule VI | Revised Schedule VI |
Turnover less than Rs.100 crore Round off to the nearest hundreds, thousands or decimal thereof | Turnover < Rs.100 crore Round off to the nearest hundreds, thousands, lakhs or millions or decimalthereof. |
Turnover Rs.100 to 500 crore Round off to the nearest hundreds, thousands, lakhs or millions or decimalthereof | Turnover over Rs.100 crore Round off to the nearest lakhs, millions or crores, or decimal thereof. |
Turnover over Rs.500 crore Round off to the nearest hundreds, thousands, lakhs, millions or crores, or decimal thereof. | |
Some disclosures no longer required in the Revised Schedule VI
The disclosure requirements as per the Revised Schedule VI do not contain several disclosures which were required by pre-revised Schedule VI. Some of these are:
(a) Disclosures relating to managerial remuneration and computation of net profits for calculation of commission;
(b) Information relating to licensed capacity, installed capacity and production;
(c) Information on investments purchased and sold during the year;
(d) Investments, sundry debtors and loans & advances pertaining to companies under the same management;
(e) Maximum amounts due on account of loans and advances from directors or officers of the company;
(f) Commission, brokerage and non-trade discounts; and
(g) Information as required under Part IV of pre-revised Schedule VI.
Major changes in the format of Balance Sheet
Equity and Liabilities
A new disclosure requirement regarding details of number of shares held by each shareholder holding more than 5% shares in the company is inserted by the Revised Schedule VI. The ICAI GN has clarified that in the absence of any specific indication of the date of holding, such information should be based on shares held as on the Balance Sheet date. For this disclosure, the names of the shareholders would be normally available from the Register of Members required to be maintained by every company.
Details pertaining to number of shares issued as bonus shares, shares bought back and those allotted for consideration other than cash needs to be disclosed only for a period of five years immediately preceding the Balance Sheet date including the current year. Under the pre-revised Schedule VI requirement is to disclose such items at all times.
In case of listed companies, share warrants are issued to promoters and others in terms of SEBI guidelines. Since such warrants are effectively and ultimately intended to become part of capital, Revised Schedule VI requires that the same be disclosed as part of the Shareholders’ funds as a separate line-item —‘Money received against share warrants.’ In case the said warrants are forfeited, the amount already paid up would be transferred to ‘Capital Reserve’ and disclosed as part of ‘Reserves and Surplus’.
There are specific disclosures required by the Revised Schedule VI for ‘Share Application money pending allotment’. It has been also stated that share application money not exceeding the issued capital and only to the extent not refundable is to be included under ‘Equity’ and share application money to the extent refundable is to be separately shown under ‘Other current liabilities’. Disclosures required regarding share application, whether included under ‘Equity’ or under ‘Other current liabilities’ are as under:
(a) terms and conditions;
(b) number of shares proposed to be issued;
(c) the amount of premium, if any;
(d) the period before which shares are to be allotted;
(e) whether the company has sufficient authorised share capital to cover the share capital amount on allotment of shares out of share application money;
(f) Interest accrued on amount due for refund;
(g) The period for which the share application money has been pending beyond the period for allotment as mentioned in the share application form along with the reasons for such share application money being pending.
A major change in the format of balance sheet as per the Revised Schedule VI is the classification of all items of liabilities and assets into Current and Non-Current. The terms ‘Current’ and ‘Non-Current’ are defined by Revised Schedule VI as under:
(a) A liability is classified as Current if it satisfies any of the following criteria:
(i) it is expected to be settled in the company’s normal operating cycle;
(ii) it is held primarily for the purpose of being traded;
(iii) it is due to be settled within 12 months after the reporting date;
or
(iv) The company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
All other liabilities shall be classified as non-current.
(b) An asset shall be classified as current when it satisfies any of the following criteria:
(i) It is expected to be realised in, or is intended for sale or consumption in the company’s normal operating cycle;
(ii) It is held primarily for the purpose of being traded;
(iii) It is expected to be realised within 12 months after the reporting date;
or
(iv) It is cash or cash equivalent unless it is restricted from 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.
(c) ‘Operating Cycle’ is defined by Revised Schedule VI as “An operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Where the normal operating cycle cannot be identified, it is assumed to have duration of twelve months”.
(d) Thus, all companies will need to bifurcate balances in respect of all liabilities and assets into ‘current’ and ‘non-current’. The definitions contain four conditions out of which even if one is satisfied, the said liability or asset would be classified as ‘current’. If none of the conditions are satisfied the said liability or asset will be classified as ‘non-current’. The four conditions are quite subjective since they use phrases like ‘expected’, ‘held primarily’, ‘due to be settled’, etc.
(e) As per the definition, current liabilities would include items such as trade payables, employee salaries and other operating costs that are expected to be settled in the company’s normal operating cycle or due to be settled within twelve months from the reporting date. Thus, liabilities that are normally payable within the normal operating cycle of a company, are classified as current even if they are due to be settled more than twelve months after the end of the balance sheet date.
(f) Similarly, as per the definition, current assets would include assets like raw materials, stores, consumable tools, etc. which are intended for consumption or sale in the course of the company’s normal operating cycle. Such items of inventory are to be classified as current even if the same are not actually consumed or realised within twelve months after the balance sheet date. Current assets would also include inventory of finished goods since they are held primarily for the purpose of being traded. They would also include trade receivables which are expected to be realised within twelve months from the balance sheet date.
(g) A company can have multiple operating cycles in case they are manufacturing/dealing in different products. In such cases, the bifurcation into ‘current’ and ‘non-current’ can become difficult.
(h) Companies will also need to bifurcate all their borrowings into ‘current’ and ‘non-current’. It is possible that the same borrowing will be classified into two components depending on the portion repayable within/after twelve months from the balance sheet date. Other details in respect of borrowings such as whether secured (with terms of security) or unsecured, whether guaranteed or not, details of repayment of loans, details of redemption in case of debentures, etc. are also required to be disclosed.
(i) Since the format of the balance sheet mentions Deferred Tax Liability (DTL)/Deferred Tax Asset (DTA) as a non-current liability/asset, the same is to be always classified as non-current and cannot be classified as ‘current’ even if the deferred tax liability/asset would become payable or receivable within twelve months of the balance sheet date. It should be also noted that such DTL/DTA is always disclosed on a net basis as required by AS-22.
(j) For several items of liabilities/assets, the aforesaid classification exercise can become quite cumbersome and time-consuming for companies especially since the same is also required to be done for 2010-11.
In case of loans taken by a company, Revised Schedule VI requires specific disclosure of period and amount of continuing default as on the balance sheet date in repayment of loans and interest to be specified separately in each case.
Revised Schedule VI requires disclosure of loans and advances taken from related parties. ‘Related Parties’ for this purpose would mean those parties as defined by AS-18.
Revised Schedule VI requires disclosure of ‘Trade Payables’ as part of ‘other non-current liabilities’ or ‘current liabilities’. A payable can be classified as ‘trade payable’ if it is in respect of amount due on account of goods purchased or services received in the normal course of business. As per the prerevised Schedule VI, the term used was ‘Sundry Creditors’ which included amounts due in respect of goods purchased or services received as well as in respect of other contractual obligations. Since amounts due under contractual obligations can no longer be included within ‘trade payables’, items like dues payables in respect of statutory obligations like contribution to provident fund, purchase of fixed assets, contractually reimbursable expenses, interest accrued on trade payables, etc. will need to be classified as ‘others’.
Assets
As per Revised Schedule VI, the disclosure for fixed assets is to be segregated into:
(a) Tangible assets;
(b) Intangible assets;
(c) Capital work-in-progress; and
(d) Intangible assets under development
The classification of tangible assets is similar to the one under pre-revised Schedule VI, but has a separate item for ‘Office Equipment’. Besides, ‘Plant and Machinery’ is now renamed as ‘Plant and Equipment’.
Classification of intangible assets as a separate item of Fixed Assets is introduced by Revised Schedule VI. It is also required to classify ‘Computer Software’ separately within ‘Intangible Assets’.
It is also necessary to separately disclose, a reconciliation of 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 businesscombinations (i.e., on account of amalgamations/demergers, etc.) and other adjustments (like capitalisation of borrowing costs as per AS-16) and the related depreciation/amortisation and impairment losses/reversals.
Since Revised Schedule VI specifically requires capital advances to be included under long-term loans and advances, the same cannot be included under capital work-in-progress. The same also cannot be therefore included within current assets. There is also a specific requirement to include ‘assets given/taken on lease’, both tangible and intangible under each of the items of fixed assets.
As per Revised Schedule VI, all Investments are to be bifurcated into ‘current’ and ‘non-current’. They also further need to be classified (as in the pre-revised Schedule VI) into trade/non-trade and quoted/unquoted.
The classification of investments is to be done as under:
(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;
(f) Investments in Mutual Funds;
(g) Investments in partnership firms; and
(h) Other investments (specifying nature thereof).
Revised Schedule VI also requires that under each classification, details need to be given of names of bodies corporate indicating separately whether they are:
(a) subsidiaries,
(b) associates,
(c) joint ventures, or
(d) controlled special purpose entities.
In regard to investments in the capital of partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each partner) need to be given. It is possible that the partnership firm maintains both ‘capital’ and ‘current’ accounts of its partners. In that case, the balance in ‘capital’ account will be classified as a ‘non-current’ investment in the balance sheet of the company, whereas the balance in ‘current’ account is classified as ‘current' investment.
In case the company has an investment in a ‘Limited Liability Partnership’ (LLP), the disclosure norms of ‘partnership firm’ (as discussed in para 41 above) will not apply since an LLP is considered as a ‘body corporate’.
As per Revised Schedule VI, all loans and deposits, deposits, etc. given by a company are to be classified into ‘current’ and ‘non-current’.
Revised Schedule VI requires disclosure of loans and advances given to related parties. ‘Related Parties’ for this purpose would mean those parties as defined by AS-18.
Revised Schedule VI requires disclosure of ‘Trade Receivables’ as part of ‘other non-current assets’ or ‘current assets’. A receivable shall be classified as ‘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. As per the prerevised Schedule VI, the term ‘sundry debtors’ included amounts due in respect of goods sold or services rendered or in respect of other contractual obligations as well. Since, amounts due under contractual obligations cannot be included within ‘Trade Receivables’, items like dues in respect of insurance claims, sale of fixed assets, contractually reimbursable expenses, interest accrued on trade receivables, etc. will need to be classified within ‘others’.
The pre-revised Schedule VI required separate presentation of debtors for those outstanding for a period exceeding six months (based on billing date) and ‘other debtors’. However, for the ‘current’ portion of ‘Trade Receivables’, the Revised Schedule VI requires separate disclosure of ‘Trade Receivables outstanding for a period exceeding six months from the date they became due for payment’. This requirement can result in a lot of work for companies since it would mean modifying their accounting systems to compile the amounts exceeding six months based on the due date. Giving corresponding data for 2010-11 would also result in added work for most companies.
The requirement for classifying ‘loans and advances’ and ‘trade receivables’ into secured/unsecured and good/doubtful also continues in Revised Schedule VI.
The Revised Schedule VI does not contain any specific disclosure requirement for the unamortised portion of expense items such as share issue expenses, ancillary borrowing costs and discount or premium relating to borrowings. These items were included under the head ‘Miscellaneous Expenditure’ as per the pre-revised Schedule VI. Though, Revised Schedule VI does not mention disclosure of any such item, since additional line items can be added on the face or in the notes, unamortised portion of such items can be disclosed (both ‘current’ as well as ‘non-current’ portion), under the head ‘other current/non-current assets’ depending on whether the amount will be amortised in the next 12 months or thereafter.
The term ‘cash and bank balances’ existing in the pre-revised Schedule VI is replaced under Revised Schedule VI by ‘Cash and Cash Equivalents’. These are to be classified into:
(a) Balances with banks;
(b) Cheques, drafts on hand;
(c) Cash on hand; and
(d) Others (specify nature).
For ‘Cash and Cash Equivalents’, disclosure is also separately required as per Revised Schedule VI for:
(a) Earmarked balances with banks (for example, for unpaid dividend);
(b) Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments;
(c) Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated;
(d) Bank deposits with more than twelve months maturity shall be disclosed separately.
Major changes in the format of Statement of Profit and Loss
Revised Schedule VI requires disclosure of ‘Revenue from Operations’ on the face of the statement of profit and loss. In the case of a company other than a finance company, such ‘Revenue from Operations’ is to be disclosed as:
(a) Sale of products
(b) Sale of services
(c) Other operating revenues
(d) Less: Excise duty
Though Revised Schedule VI specifically requires disclosure of Sale of Products on ‘gross of excise’ basis, there is no mention of whether Sales Tax/VAT and Service Tax is also to be included or not in sale of products or sale of services, respectively. Though not entirely free of doubt, the ICAI GN has stated that “Whether revenue should be presented gross or net of taxes should depend on whether the company is acting as a principal and hence responsible for paying tax on its own account or, whether it is acting as an agent i.e., simply collecting and paying tax on behalf of government authorities. In the former case, revenue should also be grossed up for the tax billed to the customer and the tax payable should be shown as an expense. However, in cases, where a company collects tax only as an intermediary, revenue should be presented net of taxes.” (Also refer BCAJ February 2012 ‘Gaps in GAAP’ for a discussion on whether taxes should be disclosed gross or net).
In addition to Revenue from Operations, Revised Schedule VI also requires disclosure of ‘Other Operating Revenue’ as well as ‘Other Income’. The term ‘Other Operating Revenue’ is not defined by Revised Schedule VI. The ICAI GN has however clarified that “this would include revenue arising from a company’s operating activities, i.e., either its principal or ancillary revenue-generating activities, but which is not revenue arising from the sale of products or rendering of services. Whether a particular income constitutes ‘other operating revenue’ or ‘other income’ is to be decided based on the facts of each case and detailed understanding of the company’s activities. The classification of income would also depend on the purpose for which the particular asset is acquired or held”.
In respect of a finance company, Revised Schedule VI requires ‘Revenue from Operations’ to include revenue from:
(a) Interest and
(b) Other financial services.
Though the term ‘finance company’ is not defined by Revised Schedule VI, the ICAI GN states that “the same should be taken to include all companies carrying on activities which are in the nature of ‘business of non-banking financial institution’ as defined in section 45I(f) of the Reserve Bank of India Act, 1935”.
In case of all companies, Revised Schedule VI requires ‘Other income’ to be disclosed on the face of the statement of profit and loss. For this purpose ‘Other Income’ is to be classified as:
(a) Interest Income (in case of a company other than a finance company);
(b) Dividend Income;
(c) Net gain/loss on sale of Investments;
(d) Other non-operating income (net of expenses directly attributable to such income).
As can be seen from the above, in the case of all company (including a finance company) Dividend income and Net gain/loss on sale on investments will be always classified as ‘Other Income’.
‘Other Income’ will also include share of profits/ losses in a partnership firm. Though there is no specific requirement mentioned for the same in the Revised Schedule VI, the ICAI GN mentions that the same should be separately disclosed. The ICAI GN also requires that in case the financial statements of the partnership firm are not drawn up to the same date as that of the company, adjustments should be made for effects of significant transactions and events that occur between the two dates and in any case, the difference between the two reporting dates should not be more than six months.
Revised Schedule VI requires the aggregate of the following expenses to be disclosed on the face of the Statement of Profit and Loss:
(a) Cost of materials consumed
(b) Purchases of stock-in-trade
(c) Changes in inventories of finished goods, work in progress and stock in trade
(d) Employee benefits expense
(e) Finance costs
(f) Depreciation and amortisation expense
(g) Other expenses.
The ICAI GN mentions that for the purpose of disclosure, ‘Cost of materials consumed’, should be based on ‘actual consumption’ rather than ‘derived consumption’. In such a case, excesses/ shortages should be separately disclosed rather than included in the amount of ‘cost of materials consumed’. This requirement was also contained in the ICAI pronouncements on the pre-revised Schedule VI.
As per Revised Schedule VI separate disclosure is also required for the following items which are classified under ‘Other Expenses’:
(a) Consumption of stores and spare parts;
(b) Power and fuel;
(c) Rent;
(d) Repairs to buildings;
(e) Repairs to machinery;
(f) Insurance;
(g) Rates and taxes, excluding taxes on income;
(h) Miscellaneous expenses.
The threshold for disclosure of ‘Miscellaneous Expenses’ is changed to those that exceed ‘1% of revenue from operations or Rs.100,000 whichever is higher’ as against the requirement of pre-revised Schedule VI of ‘1% of total revenue or Rs.5,000 whichever is higher’.
The format of Statement of Profit and Loss in Revised Schedule VI also requires specific disclosures of ‘Exceptional’, ‘Extraordinary’, items and ‘Discontinuing Operations’. These terms are defined by AS-4, AS-5 and AS-24, respectively and disclosures should be done in accordance with these definitions.
Disclosures by way of Notes
Besides the above disclosures, Revised Schedule VI also requires disclosures by way of Notes attached to the financial statements. Some of the major requirements are as under:
(a) For manufacturing companies: raw materials consumed and goods purchased under broad heads;
(b) For trading companies: purchases of goods traded under broad heads;
(c) For companies rendering services: gross income derived from services rendered under broad heads.
Revised Schedule VI does not require disclosure of quantitative details for any of the above categories of companies. The same is also clearly mentioned in para 10.7 of the ICAI GN.
The ICAI GN also mentions that ‘broad heads’ for the purpose of the disclosure in para 62 above are to be decided taking into account the concept of materiality and presentation of ‘True and Fair’ view of financial statements. The said GN also mentions that normally 10% of the total value of sales/services, purchases of trading goods and consumption of raw materials is considered as an acceptable threshold for determination of broad heads.
Revised Schedule VI requires disclosures of ‘Contingent liabilities and commitments’. For this purpose, besides others, ‘other commitments’ are also to be disclosed. Such disclosure of ‘other commitments’ was not required as per pre-revised Schedule VI.
There is no explanation of what would be covered as part of ‘other commitments’ in Revised Schedule VI. The ICAI GN has however clarified that disclosures required to be made for ‘other commitments’ should include ‘only those non-cancellable contractual commitments (cancellation of which will result in a penalty disproportionate to the benefits involved) based on the professional judgment of the management which are material and relevant in understanding the financial statements of the company and impact the decision making of the users of financial statements. Examples may include commitments in the nature of buyback arrangements, commitments to fund subsidiaries and associates, non-disposal of investments in subsidiaries and undertakings, derivative related commitments, etc.’
Most of the other disclosure requirements as per Revised Schedule VI in Notes are similar to the requirements of pre-revised Schedule VI.
Implementation of Revised Schedule VI
As can be seen from the above, disclosure requirements of Revised Schedule VI are quite different from those existing in the pre-revised Schedule VI. Many of these disclosures and concepts (like ‘current’, non-current’) are similar to terms and concepts used in IFRS. Unless, companies gear up well in time to adhere to these new requirements for 2011-12 (and corresponding figures for 2010-11), it will be difficult for them to meet the reporting deadlines of the Companies Act, 1956.
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GUIDANCE NOTE
ON
THE REVISED SCHEDULE VI
TO THE COMPANIES ACT, 1956
The Institute of Chartered Accountants of India
(Set up by an Act of Parliament)
New Delhi © THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
All rights reserved. No part of this publication may be reproduced, stored
in a retrieval system, or transmitted, in any form, or by any means,
electronic mechanical, photocopying, recording, or otherwise, without
prior permission, in writing, from the publisher.
Edition : December, 2011
Committee/Department : Corporate Laws & Corporate Governance
Published by : The Publication Department on behalf of
the Institute of Chartered Accountants of
India, ICAI Bhawan, Post Box No. 7100,
Indraprastha Marg, New Delhi - 110 002.
Printed by : Sahitya Bhawan Publications, Hospital
Road, Agra 282 003
December/2011/5,000 Copies Foreword
The Ministry of Corporate Affairs of the Government of India has been taking
many initiatives for overhauling the Companies Act, 1956 through major
amendments, circulars and notifications. To make Indian business and
companies competitive and globally recognisable, a need was felt that format
of Financial Statements of Indian corporates should be comparable with
international format. Since most of the Indian Accounting Standards are
being made at par with the international Accounting Standards, the changes
to format of Financial Statements to align with the Accounting Standards will
make Indian companies competitive on the global financial world. Taking
cognizance of imperative situation and need, the Ministry of Corporate Affairs
revised the existing Schedule VI to the Companies Act, 1956 and made it
applicable to all companies for the Financial Statements to be prepared for
the financial year commencing on or after April 1, 2011.
The Institute through its Corporate Laws & Corporate Governance Committee
undertook the exercise of bringing out a Guidance Note for the benefit of the
members of the profession. This Guidance Note replaces its earlier
publication titled ‘Statement on the Amendments to Schedule VI’ to the
Companies Act, 1956 which was first introduced in the year 1976.
In formalising the Guidance Note to the Revised Schedule VI to the
Companies Act, 1956, the Study Group, the Committee and the Council had
detailed deliberations and discussions. Lot of efforts and endeavour has
gone in the process and I commend the Corporate Laws & Corporate
Governance Committee in bringing out this timely and useful publication. I
place on record my appreciation to the entire team of Committee under the
Chairmanship, CA. S. Santhanakrishnan.
The Study Group under the convenorship of CA. Nilesh S. Vikamsey, ViceChairman of the Committee, with four members CA. Sandeep Gupta, CA.
Vijay Maniar, CA. Paresh Clerk and CA. Himanshu Kishnadwala deserves
special compliments and mention for their substantial effort and time in
having in-depth technical study and discussion in numerous meetings to
bring out this Guidance Note. I also express my thanks to CA. Arpit K Patel
and CA. S. Ramachandran for their valuable inputs.
My appreciation to the Secretariat of the Committee comprising Dr. P T
Giridharan, Joint Director, Ms. S. Rita, CA. Sarika Singhal, CA. Sonia Taneja, iv
Ms. Shruti Soni and CA. Vijayanti Jain for their back-up support in bringing
out this publication.
I sincerely hope that this publication would be of immense help to the
members in carrying out their professional assignment.
New Delhi CA G. Ramaswamy
5
th
December, 2011 President Preface
The corporate laws of an economy are a sine qua non for economic growth.
In today’s global economic scenario, entrepreneurs are looking forward to
economies that have the best, compact and easy laws and procedures that
facilitate quick establishment of companies. The Indian Company Law, which
had its legislative origin after independence, had gone through a number of
amendments since 1956. The Ministry of Corporate Affairs has been taking
timely and pro-active initiatives by making the existing law simple, compact
with less cumbersome procedures. Apart from the large number of sections
contained in the Act, there are a number of Schedules to the Companies Act,
1956 which the Ministry has been re-looking at from time to time. With its
total makeover at this juncture, it is almost at par with the laws elsewhere in
the globe and making the country as a platform for inviting off-shore
investments.
As ‘Accounting Standards’ have become mandatory and more so the road
map towards convergence of IFRS has been drawn up, Schedule VI to the
Companies Act, 1956 became an important piece of document, which
necessitated the Ministry very recently to revise in terms of contents, format
and to align itself with that of existing Accounting Standards.
The Revised Schedule VI to the Companies Act, 1956 became applicable to
all companies for the preparation of Financial Statements beginning on or
from 1.4.2011. It is a major step and members of the profession have a
greater role and responsibility in its preparation. To facilitate the preparation
of Financial Statements in compliance with the Revised Schedule VI, the
ICAI has brought out this Guidance Note for the benefit of its members.
In this connection, I take this opportunity in thanking the honourable
President of ICAI, CA. G. Ramaswamy and the Vice President of ICAI CA.
Jaydeep N. Shah for their moral support and encouragement in bringing out
the publication. I place on record my appreciation to CA Nilesh S. Vikamsey,
the Vice-Chairman of the Corporate Laws and Corporate Governance
Committee and his team of study group comprising CA. Sandeep Gupta, CA.
Vijay Maniar, CA. Paresh Clerk and CA. Himanshu Kishnadwala for their
extensive work in the preparation of this document. I also thank my
colleagues in the Committee for having participated in the discussion and
sharing their suggestions and comments. I also thank CA. Manoj Fadnis,
Chairman of the Accounting Standards Board, CA. Abhijit Bandyopadhyay, vi
Chairman and the members of the Auditing and Assurance Standards Board
for their invaluable comments and suggestions in the process of discussion.
The Secretariat to the Committee (comprising Dr. P.T. Giridharan, Ms. S.
Rita, CA. Sarika Singhal, CA. Sonia Taneja, Ms. Shruti Soni and
CA. Vijayanti Jain) also deserves appreciation for having participated and
contributed to the technical deliberations at various study group/committee
meetings.
I sincerely believe that the members of the profession, industries, companies,
Chambers of Commerce and other bodies will find the publication immensely
useful.
8
th
December, 2011 CA S. Santhanakrishnan
Chairman
Corporate Laws & Corporate Governance Committee Index
S.No. Contents Page No.
1. Introduction 1
2. Objective and Scope 1-2
3. Applicability 2-4
4. Summary of the Revised Schedule VI 5-9
5. Structure of the Revised Schedule VI 9
6. General Instructions to Revised Schedule VI 9-14
7. General Instructions For Preparation of Balance
Sheet: Notes 1 to 5
15-20
8. Part I Form of Balance Sheet and Note 6 to General
Instructions For Preparation of Balance Sheet
20-56
9. Part II- Statement of Profit and Loss 56-72
10. Other additional information to be disclosed by way of
Notes to Statement of Profit and Loss
72-78
11. Other Disclosures 79-92
12. Multiple Activity Companies 93
Annexures 94-153
Annexure A - Notification on Revised Schedule VI 94-115
Annexure B Circular No 62/2011 as released by
Ministry of Corporate Affairs
116
Annexure C- Comparison of Old and Revised
Schedule VI
117-150
Annexure D - Illustrative List of Disclosures
required under the Companies Act,
1956
151
Annexure E - List of Accounting Standards as on
31
st
August, 2011 notified under the
Companies (Accounting Standards)
Rules, 2006 pursuant to section 211
(3C)
152-153 viii 1. Introduction
1.1 Schedule VI to the Companies Act, 1956 (‘the Act’) provides the
manner in which every company registered under the Act shall prepare its
Balance Sheet, Statement of Profit and Loss and notes thereto. In the light of
various economic and regulatory reforms that have taken place for
companies over the last several years, there was a need for enhancing the
disclosure requirements under the Old Schedule VI to the Act and
harmonizing and synchronizing them with the notified Accounting Standards
as applicable (‘AS’/‘Accounting Standard(s)’). Accordingly, the Ministry of
Corporate Affairs (MCA) has issued a revised form of Schedule VI on
February 28, 2011. The relevant notification along with the Revised Schedule
VI to the Act is given in Annexure A (pg 94-115). As per the relevant
notifications, the Schedule applies to all companies for the Financial
Statements to be prepared for the financial year commencing on or after April
1, 2011.
1.2 The requirements of the Revised Schedule VI however, do not apply to
companies as referred to in the proviso to Section 211 (1) and Section 211
(2) of the Act, i.e., any insurance or banking company, or any company
engaged in the generation or supply of electricity or to any other class of
company for which a form of Balance Sheet and Profit and Loss account has
been specified in or under any other Act governing such class of company.
1.3 It may be clarified that for companies engaged in the generation and
supply of electricity, however, neither the Electricity Act, 2003, nor the rules
framed thereunder, prescribe any specific format for presentation of Financial
Statements by an electricity company. Section 616(c) of the Companies Act
states that the Companies Act will apply to electricity companies, to the extent it
is not contrary to the requirements of the Electricity Act. Keeping this in view,
Revised Schedule VI may be followed by such companies till the time any other
format is prescribed by the relevant statute.
2. Objective and Scope
2.1. The objective of this Guidance Note is to provide guidance in the
preparation and presentation of Financial Statements of companies in
accordance with various aspects of the Revised Schedule VI. However, it
does not provide guidance on disclosure requirements under Accounting
Standards, other pronouncements of the Institute of Chartered Accountants
of India (ICAI), other statutes, etc.Guidance Note on the Revised Schedule VI to the Companies Act, 1956
2
2.2. In preparing this Guidance Note, reference has been made to the
Accounting Standards notified under the Companies (Accounting Standards)
Rules, 2006 (as amended) given in Annexure E (pg 152-153), other
Accounting Standards issued by the ICAI (yet to be notified under the Act)
and various other pronouncements of the ICAI. The primary focus of the
Guidance Note has been to lay down broad guidelines to deal with practical
issues that may arise in the implementation of the Revised Schedule VI.
2.3. As per the clarification issued by ICAI regarding the authority attached
to the Documents Issued by ICAI, “‘Guidance Notes’ are primarily designed
to provide guidance to members on matters which may arise in the course of
their professional work and on which they may desire assistance in resolving
issues which may pose difficulty. Guidance Notes are recommendatory in
nature. A member should ordinarily follow recommendations in a guidance
note relating to an auditing matter except where he is satisfied that in the
circumstances of the case, it may not be necessary to do so. Similarly, while
discharging his attest function, a member should examine whether the
recommendations in a guidance note relating to an accounting matter have
been followed or not. If the same have not been followed, the member should
consider whether keeping in view the circumstances of the case, a disclosure
in his report is necessary.”
3. Applicability
3.1. As per the Government Notification no. F.No.2/6/2008-C.L-V dated 30-
3-2011, the Revised Schedule VI is applicable for the Balance Sheet and
Profit and Loss Account to be prepared for the financial year commencing on
or after April 1, 2011.
3.2. Early adoption of the Revised Schedule VI is not permitted since
Schedule VI is a statutory format.
3.3. The Revised Schedule VI requires that except in the case of the first
Financial Statements laid before the company after incorporation, the
corresponding amounts for the immediately preceding period are to be
disclosed in the Financial Statements including the Notes to Accounts.
Accordingly, corresponding information will have to be presented starting
from the first year of application of the Revised Schedule VI. Thus for the
Financial Statements prepared for the year 2011-12 (1
st
April 2011 to 31
st
March 2012), corresponding amounts need to be given for the financial year
2010-11.
3.4. ICAI had earlier issued the Statement on the Amendments to Schedule
VI to the Companies Act, 1956 in March 1976 (as amended). Wherever Guidance Note on the Revised Schedule VI to the Companies Act, 1956
3
guidance provided in this publication is different from the guidance in the
aforesaid Statement, this Guidance Note will prevail.
3.5. Applicability of the Revised Schedule VI format to interim Financial
Statements prepared by companies in the first year of application of the
Schedule:
Relevant paragraphs of AS-25 Interim Financial Reporting are quoted below:
“10. If an enterprise prepares and presents a complete set of Financial
Statements in its interim financial report, the form and content of those
statements should conform to the requirements as applicable to annual
complete set of Financial Statements.
11. If an enterprise prepares and presents a set of condensed Financial
Statements in its interim financial report, those condensed statements should
include, at a minimum, each of the headings and sub-headings that were
included in its most recent annual Financial Statements and the selected
explanatory notes as required by this Statement. Additional line items or
notes should be included if their omission would make the condensed interim
Financial Statements misleading.”
3.6. Accordingly, if a company is presenting condensed interim Financial
Statements, its format should conform to that used in the company’s most
recent annual Financial Statements, i.e., the Old Schedule VI. However, if it
presents a complete set of Financial Statements, it should use the Revised
Schedule VI, i.e., the new format applicable to annual Financial Statements.
3.7. The format of Balance Sheet currently prescribed under Clause 41 to
the Listing Agreement based on the Old Schedule VI is inconsistent with the
format of Balance Sheet in the Revised Schedule VI. Till Clause 41 is
revised, this issue to be addressed by companies as explained below :
3.7.1. Clauses 41(I)(ea) and 41(I)(eaa) to the Listing Agreement regarding
presentation of Balance Sheet items in half-yearly and annual audited
results, respectively states as under:
“(ea) As a part of its audited or unaudited financial results for the half-year,
the company shall also submit by way of a note, a statement of assets and
liabilities as at the end of the half-year.
(eaa) However, when a company opts to submit un-audited financial results
for the last quarter of the financial year, it shall, submit a statement of assets
and liabilities as at the end of the financial year only along with the audited
financial results for the entire financial year, as soon as they are approved by
the Board.” Guidance Note on the Revised Schedule VI to the Companies Act, 1956
4
3.7.2. Further, Clause 41(V)(h) regarding format of Balance Sheet items
states as under:
“(h) Disclosure of Balance Sheet items as per items (ea) shall be in the
format specified in Annexure IX drawn from Schedule VI of the Companies
Act, or its equivalent formats in other statutes, as applicable.”
Based on the above:
(a) For Half yearly results: Though the requirement in clause 41(V)(h)
makes a reference to the Schedule VI for the presentation of Balance
Sheet items, in case of half-yearly results of a company, it has
prescribed a specific format for the purpose. Hence, till the time a new
format is prescribed by the Securities and Exchange Board of India
(SEBI) under Clause 41, companies will have to continue to present
their half-yearly Balance Sheets based on the format currently
specified by the SEBI.
(b) For Annual audited yearly results: Clause 41(V) (h) does not refer to
any format for the purposes of annual statement of assets and
liabilities. Since companies have to prepare their annual Financial
Statements in the Revised Schedule VI format, companies should use
the same format of Revised Schedule VI for submission to stock
exchanges as well.
3.8. The formats of the Balance Sheet and Statement of Profit and Loss
prescribed under the SEBI (Issue of Capital & Disclosure Requirements)
Regulations 2009 (‘ICDR Regulations’) is inconsistent with the format of the
Balance Sheet/ Statement of Profit and Loss in the Revised Schedule VI.
However, the formats of Balance Sheet and Statement of Profit and Loss
under ICDR Regulations are “illustrative formats”. Accordingly, to make the
data comparable and meaningful for users, companies should use the
Revised Schedule VI format to present the restated financial information for
inclusion in the offer document. Consequently, among other things, this will
involve classification of assets and liabilities into current and non-current for
earlier years presented as well.
Attention is also invited to the General Circular no 62/2011 dated 5
th
September 2011 issued by the Ministry of Company Affairs which clarifies
that ‘the presentation of Financial Statements for the limited purpose of
IPO/FPO during the financial year 2011-12 may be made in the format of the
pre-revised Schedule VI under the Companies Act, 1956. However, for
period beyond 31
st
March 2012, they would prepare only in the new format as
prescribed by the present Schedule VI of the Companies Act, 1956’. [Refer
Annexure B (pg 116) for Circular] Guidance Note on the Revised Schedule VI to the Companies Act, 1956
5
4. Summary of Revised Schedule VI
4.1. Main principles
4.1.1. The Revised Schedule VI requires that if compliance with the
requirements of the Act and / or the notified Accounting Standards requires a
change in the treatment or disclosure in the Financial Statements as
compared to that provided in the Revised Schedule VI, the requirements of
the Act and / or the notified Accounting Standards will prevail over the
Schedule.
4.1.2. The Revised Schedule VI clarifies that the requirements mentioned
therein for disclosure on the face of the Financial Statements or in the notes
are minimum requirements. Line items, sub-line items and sub-totals can be
presented as an addition or substitution on the face of the Financial
Statements when such presentation is relevant for understanding of the
company’s financial position and /or performance.
4.1.3. In the Old Schedule VI, break-up of amounts disclosed in the main
Balance Sheet and Profit and Loss Account was given in the Schedules.
Additional information was furnished in the Notes to Account. The Revised
Schedule VI has eliminated the concept of ‘Schedule’ and such information is
now to be furnished in the Notes to Accounts.
4.1.4. The terms used in the Revised Schedule VI will carry the meaning as
defined by the applicable Accounting Standards. For example, the terms
such as ‘associate’, ‘related parties’, etc. will have the same meaning as
defined in Accounting Standards notified under Companies (Accounting
Standards) Rules, 2006.
4.1.5. In preparing the Financial Statements including the Notes to Accounts,
a balance will have to be maintained between providing excessive detail that
may not assist users of Financial Statements and not providing important
information as a result of too much aggregation.
4.1.6. All items of assets and liabilities are to be bifurcated between current
and non-current portions and presented separately on the face of the
Balance Sheet. Such classification was not required by the Old Schedule VI.
4.1.7. There is an explicit requirement to use the same unit of measurement
uniformly throughout the Financial Statements and notes thereon. Moreover,
rounding off requirements (where opted for) have been changed to eliminate
the option of presenting figures in terms of hundreds and thousands if
turnover exceeds 100 crores.Guidance Note on the Revised Schedule VI to the Companies Act, 1956
6
4.2. Major changes related to the Balance sheet
4.2.1. The Revised Schedule VI prescribes only the vertical format for
presentation of Financial Statements. Thus, a company will now not have an
option to use horizontal format for the presentation of Financial Statements
as prescribed in Old Schedule VI.
4.2.2. Current and non-current classification has been introduced for
presentation of assets and liabilities in the Balance Sheet. The application of
this classification will require assets and liabilities to be segregated into their
current and non-current portions. For instance, current maturities of a longterm borrowing will have to be classified under the head “Other current
liabilities.”
4.2.3. Number of shares held by each shareholder holding more than 5
percent shares in the company now needs to be disclosed. In the absence of
any specific indication of the date of holding, such information should be
based on shares held as on the Balance Sheet date.
4.2.4. Details pertaining to aggregate number and class of shares allotted for
consideration other than cash, bonus shares and shares bought back will
need to be disclosed only for a period of five years immediately preceding
the Balance Sheet date including the current year.
4.2.5. Any debit balance in the Statement of Profit and Loss will be disclosed
under the head “Reserves and surplus.” Earlier, any debit balance in Profit
and Loss Account carried forward after deduction from uncommitted reserves
was required to be shown as the last item on the Assets side of the Balance
Sheet.
4.2.6. Specific disclosures are prescribed for Share Application money. The
application money not exceeding the capital offered for issuance and to the
extent not refundable will be shown separately on the face of the Balance
Sheet. The amount in excess of subscription or if the requirements of
minimum subscription are not met will be shown under “Other current
liabilities.”
4.2.7. The term “sundry debtors” has been replaced with the term “trade
receivables.” ‘Trade receivables’ are defined as dues arising only from goods
sold or services rendered in the normal course of business. Hence, amounts
due on account of other contractual obligations can no longer be included in
the trade receivables.
4.2.8. The Old Schedule VI required separate presentation of debtors
outstanding for a period exceeding six months based on date on which the Guidance Note on the Revised Schedule VI to the Companies Act, 1956
7
bill/invoice was raised whereas, the Revised Schedule VI requires separate
disclosure of trade receivables outstanding for a period exceeding six months
from the date the bill/invoice is due for payment.
4.2.9. “Capital advances” are specifically required to be presented separately
under the head “Loans & advances” rather than including elsewhere.
4.2.10. Tangible assets under lease are required to be separately specified
under each class of asset. In the absence of any further clarification, the term
“under lease” should be taken to mean assets given on operating lease in the
case of lessor and assets held under finance lease in the case of lessee.
4.2.11. In the Old Schedule VI, details of only capital commitments were
required to be disclosed. Under the Revised Schedule VI, other commitments
also need to be disclosed.
4.2.12. The Revised Schedule VI requires disclosure of all defaults in
repayment of loans and interest to be specified in each case. Earlier, no such
disclosure was required in the Financial Statements. However, disclosures
pertaining to defaults in repayment of dues to a financial institution, bank and
debenture holders continue to be required in the report under Companies
(Auditor’s Report) Order, 2003 (CARO).
4.2.13. The Revised Schedule VI introduces a number of other additional
disclosures. Some examples are:
(a) Rights, preferences and restrictions attaching to each class of shares,
including restrictions on the distribution of dividends and the
repayment of capital;
(b) Terms of repayment of long-term loans;
(c) In each class of investment, details regarding names of the bodies
corporate in whom investments have been made, indicating separately
whether such bodies are (i) subsidiaries, (ii) associates, (iii) joint
ventures, or (iv) controlled special purpose entities, and the nature and
extent of the investment made in each such body corporate (showing
separately partly-paid investments);
(d) Aggregate provision for diminution in value of investments separately
for current and long-term investments;
(e) Stock-in-trade held for trading purposes, separately from other finished
goods. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
8
4.3. Main changes related to Statement of Profit and Loss
4.3.1. The name has been changed to “Statement of Profit and Loss” as
against ‘Profit and Loss Account’ as contained in the Old Schedule VI.
4.3.2. Unlike the Old Schedule VI, the Revised Schedule VI lays down a
format for the presentation of Statement of Profit and Loss. This format of
Statement of Profit and Loss does not mention any appropriation item on its
face. Further, the Revised Schedule VI format prescribes such ‘below the
line’ adjustments to be presented under “Reserves and Surplus” in the
Balance Sheet.
4.3.3. In addition to specific disclosures prescribed in the Statement of Profit
and Loss, any item of income or expense which exceeds one percent of the
revenue from operations or Rs. 100,000 (earlier 1 % of total revenue or Rs.
5,000), whichever is higher, needs to be disclosed separately.
4.3.4. The Old Schedule VI required the parent company to recognize
dividends declared by subsidiary companies even after the date of the
Balance Sheet if they were pertaining to the period ending on or before the
Balance Sheet date. Such requirement no longer exists in the Revised
Schedule VI. Accordingly, as per AS-9 Revenue Recognition, dividends
should be recognized as income only when the right to receive dividends is
established as on the Balance Sheet date.
4.3.5. In respect of companies other than finance companies, revenue from
operations need to be disclosed separately as revenue from (a) sale of
products, (b) sale of services and (c) other operating revenues.
4.3.6. Net exchange gain/loss on foreign currency borrowings to the extent
considered as an adjustment to interest cost needs to be disclosed
separately as finance cost.
4.3.7. Break-up in terms of quantitative disclosures for significant items of
Statement of Profit and Loss, such as raw material consumption, stocks,
purchases and sales have been simplified and replaced with the disclosure
of “broad heads” only. The broad heads need to be decided based on
considerations of materiality and presentation of true and fair view of the
Financial Statements.
4.4. Disclosures no longer required
The Revised Schedule VI has removed a number of disclosure requirements
that were not considered relevant in the present day context. Examples
include: Guidance Note on the Revised Schedule VI to the Companies Act, 1956
9
(a) Disclosures relating to managerial remuneration and computation of
net profits for calculation of commission;
(b) Information relating to licensed capacity, installed capacity and actual
production;
(c) Information on investments purchased and sold during the year;
(d) Investments, sundry debtors and loans & advances pertaining to
companies under the same management;
(e) Maximum amounts due on account of loans and advances from
directors or officers of the company;
(f) Commission, brokerage and non-trade discounts
However, there are certain disclosures such as value of imports calculated
on CIF basis, earnings/expenditure in foreign currency, etc. that still continue
in the Revised Schedule VI. A comparison of Old and Revised Schedule VI is
given in Annexure C (pg 117-150).
5. Structure of the Revised Schedule VI
The Structure of Revised Schedule VI is as under:
I. General Instructions
II. Part I – Form of Balance Sheet
III. General Instructions for Preparation of Balance Sheet
IV. Part II – Form of Statement of Profit and Loss
V. General Instructions for Preparation of Statement of Profit and Loss
6. General Instructions to The Revised Schedule VI
6.1. The General Instructions lay down the broad principles and guidelines
for preparation and presentation of Financial Statements.
6.2. As laid down in the Preface to the Statements of Accounting
Standards issued by ICAI, if a particular Accounting Standard is found to be
not in conformity with law, the provisions of the said law will prevail and the
Financial Statements should be prepared in conformity with such law.
Accordingly, by virtue of this principle, disclosure requirements of the Old
Schedule VI were considered to prevail over Accounting Standards.
However, since the Revised Schedule VI gives overriding status to the
requirements of the Accounting Standards and other requirements of the Act,
such principle of law overriding the Accounting Standards is inapplicable in
the context of the Revised Schedule VI. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
10
6.3. The Revised Schedule VI requires that if compliance with the
requirements of the Act including applicable Accounting Standards require
any change in the treatment or disclosure including addition, amendment,
substitution or deletion in the head/sub-head or any changes inter se, in the
Financial Statements or statements forming part thereof, the same shall be
made and the requirements of Revised Schedule VI shall stand modified
accordingly.
6.4. Implications of all instructions mentioned above can be illustrated by
means of the following example. One of the line items to be presented on the
face of the Balance Sheet under Current assets is “Cash and cash
equivalents”. The break-up of these items required to be presented by the
Revised Schedule VI comprises of items such as Balances with banks held
as margin money or security against borrowings, guarantees, etc. and bank
deposits with more than 12 months maturity. According to AS-3 Cash Flow
Statements, Cash is defined to include cash on hand and demand deposits
with banks. Cash Equivalents are defined as short term, highly liquid
investments that are readily convertible into known amounts of cash and
which are subject to an insignificant risk of changes in value. The Standard
further explains that an investment normally qualifies as a cash equivalent
only when it has a short maturity of three months or less from the date of
acquisition. Hence, normally, deposits with original maturity of three months
or less only should be classified as cash equivalents. Further, bank balances
held as margin money or security against borrowings are neither in the
nature of demand deposits, nor readily available for use by the company, and
accordingly, do not meet the aforesaid definition of cash equivalents. Thus,
this is an apparent conflict between the requirements of the Revised
Schedule VI and the Accounting Standards with respect to which items
should form part of Cash and cash equivalents. As laid down in the General
Instructions, Para 1 of Revised Schedule VI, requirements of the Accounting
Standards would prevail over the Revised Schedule VI and the company
should make necessary modifications in the Financial Statements which may
include addition, amendment, substitution or deletion in the head/sub-head or
any other changes inter se. Accordingly, the conflict should be resolved by
changing the caption “Cash and cash equivalents” to “Cash and bank
balances,” which may have two sub-headings, viz., “Cash and cash
equivalents” and “Other bank balances.” The former should include only the
items that constitute Cash and cash equivalents defined in accordance with
AS 3 (and not the Revised Schedule VI), while the remaining line-items may
be included under the latter heading. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
11
6.5. Para 2 of the General Instructions to the Revised Schedule VI states
that the disclosure requirements of the Schedule are in addition to and not in
substitution of the disclosure requirements specified in the notified
Accounting Standards. They further clarify that the additional disclosures
specified in the Accounting Standards shall be made in the Notes to
Accounts or by way of an additional statement unless required to be
disclosed on the face of the Financial Statements. All other disclosures
required by the Act are also required to be made in the Notes to Accounts in
addition to the requirements set out in the Revised Schedule VI.
6.6. An example to illustrate the above point is the specific disclosure
required by AS-24 Discontinuing Operations on the face of the Statement of
Profit and Loss which has not been incorporated in the Revised Schedule VI.
The disclosure pertains to the amount of pre-tax gain or loss recognised on
the disposal of assets or settlement of liabilities attributable to the
discontinuing operation. Accordingly, such disclosures specifically required
by the Accounting Standard on the face of either the Statement of Profit and
Loss or Balance Sheet will have to be so made even if not forming part of the
formats prescribed under the Revised Schedule VI.
6.7. All the other disclosures required by the Accounting Standards will
continue to be made in the Financial Statements. Further, the disclosures
required by the Act will continue to be made in the Notes to Accounts. An
example of this is the separate disclosure required by Section 293A of the
Act for donations made to political parties. Such disclosures would be made
in the Notes. An illustrative list of disclosures required under the Act is
enclosed as Annexure D (pg 151).
6.8. Though not specifically required by the Revised Schedule VI,
disclosures mandated by other Acts or legal requirements will have to be
made in the Financial Statements. For example, The Micro, Small and
Medium Enterprises Development (MSMED) Act, 2006 requires specified
disclosures to be made in the annual Financial Statements of the buyer
wherever such Financial Statements are required to be audited under any
law. Accordingly, such disclosures will have to be made in the buyer
company’s annual Financial Statements.
6.9. The above principle would apply to disclosures required by other legal
requirements as well such as, disclosures required under Clause 32 to the
Listing Agreement, etc. A further extension of the above principle also means
that specific disclosures required by various pronouncements of regulatory
bodies such as the ICAI announcement for disclosures on derivatives and
unhedged foreign currency exposures, and other disclosure requirements
prescribed by various ICAI Guidance Notes, such as Guidance Note on Guidance Note on the Revised Schedule VI to the Companies Act, 1956
12
Employee Share-based Payments, etc. should continue to be made in the
Financial Statements in addition to the disclosures specified by the Revised
Schedule VI.
6.10. In the Old Schedule VI, break-up of amounts disclosed on the face of
the Balance Sheet and Profit and Loss Account was required to be given in
the Schedules. Additional information was required to be furnished in the
Notes to Account. The Revised Schedule VI requires all information relating
to each item on the face of the Balance Sheet and Statement of Profit and
Loss to be cross-referenced to the Notes to Accounts. The manner of such
cross-referencing to various other informations contained in the Financial
Statements has also been changed to “Note No.” as compared to “Schedule
No.” in the Old Schedule VI. Hence, the same is suggestive of a change in
the old format of presentation from Schedules and Notes to Accounts to the
new format of only Notes to Accounts. The instructions state that the Notes
to Accounts should provide where required, narrative descriptions or
disaggregations of items recognized in those statements. Hence,
presentation of all narrative descriptions and disaggregations should
preferably be presented in the form of Notes to Accounts rather than in the
form of Schedules. Such style of presentation is also in line with the manner
of presentation of Financial Statements followed by companies internationally
and would facilitate comparability of Financial Statements.
6.11. Para 3 of the General Instructions of the Revised Schedule VI also
states that the Notes to Accounts should also contain information about items
that do not qualify for recognition in Financial Statements. These disclosures
normally refer to items such as Contingent Liabilities and Commitments
which do not get recognised in the Financial Statements. These have been
dealt with later in this Guidance Note. Some of the other disclosures relating
to items that are not recognised in the Financial Statements also emanate
from the Accounting Standards, such as, disclosures required under AS 9
Revenue Recognition on circumstances in which revenue recognition is to be
postponed pending the resolution of significant uncertainties. Contingent
Assets, however, are not to be disclosed in the Financial Statements as per
AS 29 Provisions, Contingent Liabilities and Contingent Assets.
6.12. The General Instructions also lay down the principle that in preparing
Financial Statements including Notes to Accounts, a balance shall be
maintained between providing excessive detail that may not assist users of
Financial Statements and not providing important information as a result of
too much aggregation. Compliance with this requirement is a matter of
professional judgement and may vary on a case to case basis based on facts
and circumstances. However, it is necessary to strike a balance between Guidance Note on the Revised Schedule VI to the Companies Act, 1956
13
overburdening Financial Statements with excessive detail that may not assist
users of Financial Statements and obscuring important information as a
result of too much aggregation. For example, a company should not obscure
important information by including it among a large amount of insignificant
detail or in a way that it obscures important differences between individual
transactions or associated risks.
6.13. The Revised Schedule VI has specifically introduced a new
requirement of using the same unit of measurement uniformly across the
Financial Statements. Such requirement should be taken to imply that all
figures disclosed in the Financial Statements including Notes to Accounts
should be of the same denomination.
6.14. The Revised Schedule VI has also introduced new rounding off
requirements as compared to the Old Schedule VI. The new requirement
does not prescribe the option to present figures in terms of hundreds and
thousands if the turnover equals or exceeds `Rs. 100 crores. Rather, they
allow rounding off in crores, which was earlier permitted only when the
turnover equaled or exceeded five hundred crores rupees. Similarly, where
turnover is below `Rs. 100 crore, the Revised Schedule VI gives an option to
present figures in lakhs and millions as well, which did not exist earlier.
However, it is not compulsory to apply rounding off and a company can
continue to disclose full figures. But, if the same is applied, the rounding off
requirement should be complied with.
Old Schedule VI Revised Schedule VI
• Turnover < Rs. 100 Crores –
Round off to the nearest
hundreds, thousands or decimal
thereof
• Turnover Rs. 100 to Rs. 500
Crores - Round off to the nearest
hundreds, thousands, lakhs or
millions or decimal thereof
• Turnover > Rs. 500 Crores -
Round off to the nearest
hundreds, thousands, lakhs,
millions or crores, or decimal
thereof.
• Turnover < Rs. 100 Crores - Round
off to the nearest hundreds,
thousands, lakhs or millions or
decimal thereof.
• Turnover > Rs. 100 Crores -
Round off to the nearest lakhs,
millions or crores, or decimal thereof
6.15. The instructions also clarify that the terms used in the Revised
Schedule VI shall be as per the applicable Accounting Standards. For
example, the term ‘related parties’ used at several places in the Revised Guidance Note on the Revised Schedule VI to the Companies Act, 1956
14
Schedule VI should be interpreted based on the definition given in AS-18
Related Party Disclosures.
6.16. The Notes to the General Instructions re-clarify that the Revised
Schedule VI sets out the minimum requirements for disclosure in the
Financial Statements including notes. It states that line items, sub-line items
and sub-totals shall be presented as an addition or substitution on the face of
the Balance Sheet and Statement of Profit and Loss when such presentation
is relevant to an understanding of the company’s financial position or
performance or to cater to industry/sector-specific disclosure requirements,
apart from, when required for compliance with amendments to the Act or the
Accounting Standards.
The application of the above requirement is a matter of professional
judgement. The following examples illustrate this requirement. Earnings
before Interest, Tax, Depreciation and Amortisation is often an important
measure of financial performance of the company relevant to the various
users of Financial Statements and stakeholders of the company. Hence, a
company may choose to present the same as an additional line item on the
face of the Statement of Profit and Loss. The method of computation adopted
by companies for presenting such measures should be followed consistently
over the years. Further, companies should also disclose the policy followed
in the measurement of such line items.
6.17. Similarly, users and stakeholders often want to know the liquidity
position of the company. To highlight the same, a company may choose to
present additional sub-totals of Current assets and Current liabilities on the
face of the Balance Sheet.
6.18. One example of addition or substitution of line items, sub-line items
and sub-totals to cater to industry-specific disclosure requirements can be
noted from Non-Banking Financial (Non-Deposit Accepting or Holding)
Companies Prudential Norms (Reserve Bank) Directions, 2007. The
Directions prescribe that every non-banking finance company is required to
separately disclose in its Balance Sheet the provisions made under the
Directions without netting them from the income or against the value of
assets. Though not specifically required by the Schedule, such addition or
substitution of line items can be made in the notes forming part of the
Financial Statements as well. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
15
7. General Instructions For Preparation of Balance
Sheet : Notes 1 To 5
7.1. Current/Non-current assets and liabilities:
The Revised Schedule VI requires all items in the Balance Sheet to be
classified as either Current or Non-current and be reflected as such. Notes 1
to 3 of the Revised Schedule VI define Current Asset, Operating Cycle and
Current Liability as below:
7.1.1. “An 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 consumption
in, the company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is expected to be realized within twelve 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 twelve months after
the reporting date.
All other assets shall be classified as non-current.”
7.1.2. “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 twelve months.”
7.1.3. “A liability shall be classified as current when 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;
(c) it is due to be settled within twelve months after the reporting date; or
(d) the company does not have an unconditional right to defer settlement
of the liability for at least twelve months after the reporting date. Terms
of a 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-current.” Guidance Note on the Revised Schedule VI to the Companies Act, 1956
16
7.1.4. The Revised Schedule VI defines “current assets” and “current
liabilities”, with the non-current category being the residual. It is therefore
necessary that the balance pertaining to each item of assets and liabilities
contained in the Balance Sheet be split into its current and non-current
portions and be classified accordingly as on the reporting date.
7.1.5. Based on the definition, current assets include assets such as raw
material and stores which are intended for consumption or sale in the course
of the company’s normal operating cycle. Items of inventory which may be
consumed or realized within the company’s normal operating cycle should be
classified as current even if the same are not expected to be so consumed or
realized within twelve months after the reporting date. Current assets would
also include assets held primarily for the purpose of being traded such as
inventory of finished goods. They would also include trade receivables which
are expected to be realized within twelve months from the reporting date and
Cash and cash equivalents which are not under any restriction of use.
7.1.6. Similarly, current liabilities would include items such as trade
payables, employee salaries and other operating costs that are expected to
be settled in the company’s normal operating cycle or due to be settled within
twelve months from the reporting date. It is pertinent to note that such
operating liabilities are normally part of the working capital of the company
used in the company’s normal operating cycle and hence, should be
classified as current even if they are due to be settled more than twelve
months after the end of the reporting date.
7.1.7. Further, any liability, pertaining to which the company does not have
an unconditional right to defer its settlement for at least twelve months after
the Balance Sheet/reporting date, will have to be classified as current.
7.1.8. The application of this criterion could be critical to the Financial
Statements of a company and requires careful evaluation of the various
terms and conditions of a loan liability. To illustrate, let us understand how
this requirement will apply to the following example:
Company X has taken a five year loan. The loan contains certain debt
covenants, e.g., filing of quarterly information, failing which the bank can
recall the loan and demand repayment thereof. The company has not filed
such information in the last quarter; as a result of which the bank has the
right to recall the loan. However, based on the past experience and/or based
on the discussions with the bank the management believes that default is
minor and the bank will not demand the repayment of loan. According to the
definition of Current Liability, what is important is, whether a borrower has an
unconditional right at the Balance Sheet date to defer the settlement Guidance Note on the Revised Schedule VI to the Companies Act, 1956
17
irrespective of the nature of default and whether or not a bank can exercise
its right to recall the loan. If the borrower does not have such right, the
classification would be “current.” It is pertinent to note that as per the terms
and conditions of the aforesaid loan, the loan was not repayable on demand
from day one. The loan became repayable on demand only on default in the
debt covenant and bank has not demanded the repayment of loan up to the
date of approval of the accounts. In the Indian context, the criteria of a loan
becoming repayable on demand on breach of a covenant, is generally added
in the terms and conditions as a matter of abundant caution. Also, banks
generally do not demand repayment of loans on such minor defaults of debt
covenants. Therefore, in such situations, the companies generally continue
to repay the loan as per its original terms and conditions. Hence, considering
that the practical implications of such minor breach are negligible in the
Indian scenario, an entity could continue to classify the loan as “non-current”
as on the Balance Sheet date since the loan is not actually demanded by the
bank at any time prior to the date on which the Financial Statements are
approved. However, in case a bank has recalled the loan before the date of
approval of the accounts on breach of a loan covenant that occurred before
the year-end, the loan will have to be classified as current. Further, the
above situation should not be confused with a loan which is repayable on
demand from day one. For such loans, even if the lender does not demand
repayment of the loan at any time, the same would have to be continued to
be classified as ”current”.
7.2. The term “Operating Cycle” is defined as the time between the
acquisition of assets for processing and their realization in Cash or cash
equivalents. A company’s normal operating cycle may be longer than twelve
months e.g. companies manufacturing wines, etc. However, where the
normal operating cycle cannot be identified, it is assumed to have a duration
of twelve months.
7.2.1. Where a company is engaged in running multiple businesses, the
operating cycle could be different for each line of business. Such a company
will have to classify all the assets and liabilities of the respective businesses
into current and non-current, depending upon the operating cycles for the
respective businesses.
Let us consider the following other examples:
1. A company has excess finished goods inventory that it does not
expect to realize within the company’s operating cycle of fifteen
months. Since such finished goods inventory is held primarily for the
purpose of being traded, the same should be classified as “current”. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
18
2. A company has sold 10,000 tonnes of steel to its customer. The sale
contract provides for a normal credit period of three months. The
company’s operating cycle is six months. However, the company does
not expect to receive the payment within twelve months from the
reporting date. Therefore, the same should be classified as “NonCurrent” in the Balance Sheet. In case, the company expects to realize
the amount upto 12 months from the Balance Sheet date (though
beyond operating cycle), the same should be classified as “current”.
7.3. For the purpose of Revised Schedule VI, a company also needs to
classify its employee benefit obligations as current and non-current
categories. While AS-15 Employee Benefits governs the measurement of
various employee benefit obligations, their classification as current and noncurrent liabilities will be governed by the criteria laid down in the Revised
Schedule VI. In accordance with these criteria, a liability is classified as
“current” if a company does not have an unconditional right as on the
Balance Sheet date to defer its settlement for twelve months after the
reporting date. Each company will need to apply these criteria to its specific
facts and circumstances and decide an appropriate classification of its
employee benefit obligations. Given below is an illustrative example on
application of these criteria in a simple situation:
(a) Liability toward bonus, etc., payable within one year from the Balance
Sheet date is classified as “current”.
(b) In case of accumulated leave outstanding as on the reporting date, the
employees have already earned the right to avail the leave and they
are normally entitled to avail the leave at any time during the year. To
the extent, the employee has unconditional right to avail the leave, the
same needs to be classified as “current” even though the same is
measured as ‘other long-term employee benefit’ as per AS-15.
However, whether the right to defer the employee’s leave is available
unconditionally with the company needs to be evaluated on a case to
case basis – based on the terms of Employee Contract and Leave
Policy, Employer’s right to postpone/deny the leave, restriction to avail
leave in the next year for a maximum number of days, etc. In case of
such complexities the amount of Non-current and Current portions of
leave obligation should normally be determined by a qualified Actuary.
(c) Regarding funded post-employment benefit obligations, amount due
for payment to the fund created for this purpose within twelve months
is treated as “current” liability. Regarding the unfunded postemployment benefit obligations, a company will have settlement
obligation at the Balance Sheet date or within twelve months for Guidance Note on the Revised Schedule VI to the Companies Act, 1956
19
employees such as those who have already resigned or are expected
to resign (which is factored for actuarial valuation) or are due for
retirement within the next twelve months from the Balance Sheet date.
Thus, the amount of obligation attributable to these employees is a
“current” liability. The remaining amount attributable to other
employees, who are likely to continue in the services for more than a
year, is classified as “non-current” liability. Normally the actuary should
determine the amount of current & non-current liability for unfunded
post-employment benefit obligation based on the definition of Current
and Non-current assets and liabilities in the Revised Schedule VI.
7.4. The Revised Schedule VI requires Investments to be classified as
Current and Non-Current. However, AS 13 ‘Accounting for Investments’
requires to classify Investments as Current and Long-Term. As per AS 13,
current investment is an investment that is by its nature readily realisable and
is intended to be held for not more than one year from the date on which
such investment is made. A long-term investment is an investment other than
a current investment.
7.4.1. Accordingly, as per AS-13, the assessment of whether an Investment
is “Long-term” has to be made with respect to the date of Investment
whereas, as per the Revised Schedule VI, “Non-current” Investment has to
be determined with respect to the Balance Sheet date.
7.4.2. Though the Revised Schedule VI clarifies that the Accounting
Standards would prevail over itself in case of any inconsistency between the
two, it is pertinent to note that AS-13 does not lay down presentation norms,
though it requires disclosures to be made for Current and Long-term
Investments. Accordingly, presentation of all investments in the Balance
Sheet should be made based on Current/Non-current classification as
defined in the Revised Schedule VI. The portion of long-term investment as
per AS 13 which is expected to be realized within twelve months from the
Balance Sheet date needs to be shown as Current investment under the
Revised Schedule VI.
7.5. Settlement of a liability by issuing of equity
7.5.1. The Revised Schedule VI clarifies that, “the terms of a liability that
could, at the option of the counterparty, result in its settlement by the issue of
equity instruments do not affect its classification”. A consequence of this is
that if the conversion option in convertible debt is exercisable by the holder
at any time, the liability cannot be classified as “current” if the maturity for
cash settlement is greater than one year. A question therefore arises as to
how does the aforesaid requirement affect the classification of items for say, Guidance Note on the Revised Schedule VI to the Companies Act, 1956
20
a) convertible debt where the conversion option lies with the issuer, or b)
mandatorily convertible debt instrument.
7.5.2. Based on the specific exemption granted only to those cases where
the conversion option is with the counterparty, the same should not be
extended to other cases where such option lies with the issuer or is a
mandatorily convertible instrument. For all such cases, conversion of a
liability into equity should be considered as a means of settlement of the
liability as defined in the Framework For the Preparation and Presentation of
Financial Statements issued by ICAI. Accordingly, the timing of such
settlement would also decide the classification of such liability in terms of
Current or Non-current as defined in the Revised Schedule VI.
7.6 As per the classification in the Revised Schedule VI and in line with
the ICAI’s earlier announcement with regard to the presentation and
classification of net Deferred Tax asset or liability, the same should always
be classified as “non-current”.
8. Part I: Form of Balance Sheet and Note 6 to General
Instructions for Preparation of Balance Sheet
As per the Framework for The Preparation and Presentation of Financial
Statements, asset, liability and equity are defined as follows:
An asset is a resource controlled by the enterprise as a result of past events
from which future economic benefits are expected to flow to the enterprise.
A liability is a present obligation of the enterprise arising from past events,
the settlement of which is expected to result in an outflow from the enterprise
of resources embodying economic benefits.
Equity is the residual interest in the assets of the enterprise after deducting
all its liabilities.
I. Equity and Liabilities
8.1. Shareholders’ Funds
Under this head, following line items are to be disclosed:
¾ Share Capital;
¾ Reserves and Surplus;
¾ Money received against share warrants. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
21
8.1.1. Share capital
8.1.1.1. Notes to the General Instructions require a company to disclose in
the Notes to Accounts line items/sub-line items referred to in Notes 6A to 6Q.
Clauses (a) to (l) of Note 6 A deal with disclosures for Share Capital and
such disclosures are required for each class of share capital (different
classes of preference shares to be treated separately).
8.1.1.2. As per ICAI Guidance Note on Terms Used in Financial Statements,
‘Capital’ refers “to the amount invested in an enterprise by its owners e.g.
paid-up share capital in a corporate enterprise. It is also used to refer to the
interest of owners in the assets of an enterprise.”
8.1.1.3. The said Guidance Note defines ‘Share Capital’ as the “aggregate
amount of money paid or credited as paid on the shares and/or stocks of a
corporate enterprise.”
8.1.1.4. In respect of disclosure requirements for Share Capital, the Revised
Schedule VI states that “different classes of preference share capital to be
treated separately”. A question arises whether the preference shares should
be presented as share capital only or does it mean that a company
compulsorily needs to decide whether preference shares are liability or equity
based on its economic substance using AS 31 Financial Instruments:
Presentation principles and present the same accordingly. The Revised
Schedule VI deals only with presentation and disclosure requirements.
Accounting for various items is governed by the applicable Accounting
Standards. However, since Accounting Standards AS 30 Financial
Instruments : Recognition and Measurement, AS 31 and AS 32 Financial
Instruments: Disclosures are yet to be notified and Section 85(1) of the Act
refers to Preference Shares as a kind of share capital, Preference Shares will
have to be classified as Share Capital.
8.1.1.5. Presently, in the Indian context, generally, there are two kinds of
share capital namely - Equity and Preference. Within Equity/Preference
Share Capital, there could be different classes of shares, say, Equity Shares
with or without voting rights, Compulsorily Convertible Preference Shares,
Optionally Convertible Preference Shares, etc. If the preference shares are
to be disclosed under the head ‘Share Capital’, until the same are actually
redeemed, they should continue to be shown under the head ‘Share Capital’.
Preference shares of which redemption is overdue should continue to be
disclosed under the head ‘Share Capital’. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
22
8.1.1.6. Clause (a) of Note 6A - the number and amount of shares
authorized :
As per the Guidance Note on Terms Used in Financial Statements
‘Authorised Share Capital’ means “the number and par value, of each class
of shares that an enterprise may issue in accordance with its instrument of
incorporation. This is sometimes referred to as nominal share capital.”
8.1.1.7. Clause (b) of Note 6A - the number of shares issued, subscribed
and fully paid, and subscribed but not fully paid :
The disclosure is for shares:
• Issued;
• Subscribed and fully paid;
• Subscribed but not fully paid.
Though the disclosure is only for the number of shares, to make the
disclosure relevant to understanding the company’s share capital, even the
amount for each category should be disclosed. Issued shares are those
which are offered for subscription within the authorised limit. It is possible
that all shares offered are not subscribed to and to the extent of
unsubscribed portion, there will be difference between shares issued and
subscribed. As per the Guidance Note on Terms Used in Financial
Statements, the expression ‘Subscribed Share Capital’ is “that portion of the
issued share capital which has actually been subscribed and allotted. This
includes any bonus shares issued to the shareholders.”
Though there is no requirement to disclose the amount per share called, if
shares are not fully called, it would be appropriate to state the amount per
share called. As per the definition contained in the Guidance Note on Terms
Used in Financial Statements, the expression ‘Paid-up Share Capital’ is “that
part of the subscribed share capital for which consideration in cash or
otherwise has been received. This includes bonus shares allotted by the
corporate enterprise.” As per the Old Schedule VI, debit balance on the
allotment or call account is presented in the Balance Sheet not as an asset
but by way of deduction from Called-up Capital. However, as required by
Clause (k) of Note 6A of the Revised Schedule VI, calls unpaid are to be
disclosed separately as per the Revised Schedule VI.
However, the unpaid amount towards shares subscribed by the subscribers
of the Memorandum of Association should be considered as 'subscribed and
paid-up capital' in the Balance Sheet and the debts due from the subscriber
should be appropriately disclosed as an asset in the balance sheet. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
23
8.1.1.8. Clause (c) of Note 6A – par value per share :
Par value per share is the face value of a share as indicated in the Capital
Clause of the Memorandum of Association of a company. It is also referred
to as ‘face value’ per share. In the case of a company having share capital,
(unless the company is an unlimited company), the Memorandum shall also
state the amount of share capital with which the company is registered and
their division thereof into shares of fixed amount as required under clause (a)
to the sub-section (4) of section 13 of the Act. In the case of a company
limited by guarantee, Memorandum shall state that each member undertakes
to contribute to the assets of the company in the event of winding-up while
he is a member or within one year after he ceases to be a member, for
payment of debts and liabilities of the company, as the case may be. There is
no specific mention for the disclosure by companies limited by guarantee and
having share capital, and companies limited by guarantee and not having
share capital. Such companies need to consider the requirement so as to
disclose the amount each member undertakes to contribute as per their
Memorandum of Association.
8.1.1.9. Clause (d) of Note 6A - a reconciliation of the number of shares
outstanding at the beginning and at the end of the reporting period :
As per the Revised Schedule VI, opening number of shares outstanding,
shares issued, shares bought back, other movements, etc. during the year
and closing number of outstanding shares should be shown. Though the
requirement is only for a reconciliation of the number of shares, as given for
the disclosure of issued, subscribed capital, etc. [Clause (b) of Note 6A]
above, to make the disclosure relevant for understanding the company’s
share capital, the reconciliation is to be given even for the amount of share
capital. Reconciliation for the comparative previous period is also to be
given. Further, the above reconciliation should be disclosed separately for
both Equity and Preference Shares and for each class of share capital within
Equity and Preference Shares.
8.1.1.10. Clause (e) of Note 6A - the rights, preferences and restrictions
attaching to each class of shares including restrictions on the
distribution of dividends and the repayment of capital.
As per the Guidance Note on Terms Used in Financial Statement, the
expression ‘Preference Share Capital’ means “that part of the share capital of
a corporate enterprise which enjoys preferential rights in respect of payments
of fixed dividend and repayment of capital. Preference shares may also have
full or partial participating rights in surplus profits or surplus capital.” The
rights, preferences and restrictions attached to shares are based on the
classes of shares, terms of issue, etc., whether equity or preference. In Guidance Note on the Revised Schedule VI to the Companies Act, 1956
24
respect of Equity Share Capital, it may be with voting rights or with
differential voting rights as to dividend, voting or otherwise in accordance
with such rules and subject to such conditions as may be prescribed under
Companies (Issue of Share Capital with Differential Voting Rights) Rules,
2001. In respect of Preference shares, the rights include (a) as respects
dividend, a preferential right to be paid a fixed amount or at a fixed rate and,
(b) as respects capital, a preferential right of repayment of amount of capital
on winding up. Further, Preference shares can be cumulative, noncumulative, redeemable, convertible, non-convertible etc. All such rights,
preferences and restrictions attached to each class of preference shares,
terms of redemption, etc. have to be disclosed separately.
8.1.1.11. Clause (f) of Note 6A - shares in respect of each class in the
company held by its holding company or its ultimate holding company
including shares held by or by subsidiaries or associates of the holding
company or the ultimate holding company in aggregate :
The requirement is to disclose shares of the company held by -
• Its holding company;
• Its ultimate holding company;
• Subsidiaries of its holding company;
• Subsidiaries of its ultimate holding company;
• Associates of its holding company; and
• Associates of its ultimate holding company.
Aggregation should be done for each of the above categories.
The terms ‘subsidiary’, ‘holding company’ and ‘associate’ should be
understood as defined under AS-21, Consolidated Financial Statements and
AS-18, Related Party Disclosures. Based on the aforesaid definitions, for the
purposes of the above disclosures, shares held by the entire chain of
subsidiaries and associates starting from the holding company and ending
right up to the ultimate holding company would have to be disclosed. Further,
all the above disclosures need to be made separately for each class of
shares, both within Equity and Preference Shares.
8.1.1.12. Clause (g) of Note 6A - shares in the company held by each
shareholder holding more than 5 percent shares specifying the number
of shares held :
In the absence of any specific indication of the date of holding, the date for
computing such percentage should be taken as the Balance Sheet date. For Guidance Note on the Revised Schedule VI to the Companies Act, 1956
25
example, if during the year, any shareholder held more than 5% Equity
shares but does not hold as much at the Balance Sheet date, disclosure is
not required. Though it is not specified as to whether the disclosure is
required for each class of shares or not, companies should disclose the
shareholding for each class of shares, both within Equity and Preference
Shares. Accordingly, such percentage should be computed separately for
each class of shares outstanding within Equity and Preference Shares. This
information should also be given for the comparative previous period.
8.1.1.13. Clause (h) of Note 6A - shares reserved for issue under
options and contracts/commitments for the sale of shares/
disinvestment, including the terms and amounts :
Shares under options generally arise under promoters or collaboration
agreements, loan agreements or debenture deeds (including convertible
debentures), agreement to convert preference shares into equity shares,
ESOPs or contracts for supply of capital goods, etc. The disclosure would be
required for the number of shares, amounts and other terms for shares so
reserved. Such options are in respect of unissued portion of share capital.
8.1.1.14. Clause (i) of Note 6A – For the period of five years immediately
preceding the date as at which the Balance Sheet is prepared : (a)
Aggregate number and class of shares allotted as fully paid up pursuant
to contract(s) without payment being received in cash. (b) Aggregate
number and class of shares allotted as fully paid up by way of bonus
shares. (c) Aggregate number and class of shares bought back.
(a) Aggregate number and class of shares allotted as fully paid up
pursuant to contract(s) without payment being received in cash.
The following allotments are considered as shares allotted for payment
being received in cash and not as without payment being received in
cash and accordingly, the same are not to be disclosed under this
Clause:
(i) If the subscription amount is adjusted against a bona fide debt
payable in money at once by the company;
(ii) Conversion of loan into shares in the event of default in
repayment.
(b) Aggregate number and class of shares allotted as fully paid up by way
of bonus shares.
As per the Guidance Note on Terms Used in Financial Statements
‘Bonus shares’ are defined as shares allotted by capitalisation of the
reserves or surplus of a corporate enterprise. The requirement of Guidance Note on the Revised Schedule VI to the Companies Act, 1956
26
disclosing the source of bonus shares is omitted in the Revised
Schedule VI.
(c) Aggregate number and class of shares bought back.
The total number of shares bought back for each class of shares
needs to be disclosed.
All the above details pertaining to aggregate number and class of shares
allotted for consideration other than cash, bonus shares and shares bought
back need to be disclosed only if such event has occurred during a period of
five years immediately preceding the Balance Sheet date. Since disclosure is
for the aggregate number of shares, it is not necessary to give the year-wise
break-up of the shares allotted or bought back, but the aggregate number for
the last five financial years needs to be disclosed.
8.1.1.15. Clause (j) of Note 6A - Terms of any securities convertible into
equity/preference shares issued along with the earliest date of
conversion in descending order starting from the farthest such date:
This disclosure would cover securities, such as Convertible Preference
Shares, Convertible Debentures/bonds, etc. – optionally or otherwise into
equity.
Under this Clause, disclosure is required for any security, when it is either
convertible into equity or preference shares. In this case, terms of such
securities and the earliest date of conversion are required to be disclosed. If
there are more than one date of conversion, disclosure is to be made in the
descending order of conversion. If the option can be exercised in different
periods then earlier date in that period is to be considered. In case of
compulsorily convertible securities, where conversion is done in fixed
tranches, all the dates of conversion have to be considered. Terms of
convertible securities are required to be disclosed under this Clause.
However, in case of Convertible debentures/bonds, etc., for the purpose of
simplification, reference may also be made to the terms disclosed under the
note on Long-term borrowings where these are required to be classified in
the Balance Sheet, rather than disclosing the same again under this clause.
8.1.1.16. Clause (k) of Note 6(A) - Calls unpaid (showing aggregate
value of calls unpaid by directors and officers):
A separate disclosure is required for the aggregate value of calls unpaid by
directors and also officers of the company. The Old Schedule VI required
disclosures of calls due by directors only. The total calls unpaid should be
disclosed. The terms ‘director’ and ‘officer’ should be interpreted based on
the definitions in the Act. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
27
8.1.2. Reserves and Surplus
Note 6(B) of the General Instructions deals with the disclosures of “Reserves
and Surplus” in the Notes to Accounts and the classification thereof under
the various types of reserves.
8.1.2.1. Reserve:
The Guidance Note on Terms Used in Financial Statements defines the term
‘Reserve’ as “the portion of earnings, receipts or other surplus of an
enterprise (whether capital or revenue) appropriated by the management for
a general or a specific purpose other than a provision for depreciation or
diminution in the value of assets or for a known liability.” ‘Reserves’ should
be distinguished from ‘provisions’. For this purpose, reference may be made
to the definition of the expression `provision’ in AS-29 Provisions, Contingent
Liabilities and Contingent Assets.
As per AS-29, a `provision’ is “a liability which can be measured only by
using a substantial degree of estimation”. A ‘liability’ is “a present obligation
of the enterprise arising from past events, the settlement of which is
expected to result in an outflow from the enterprise of resources embodying
economic benefits.” 'Present obligation’ – “an obligation is a present
obligation if, based on the evidence available, its existence at the Balance
Sheet date is considered probable, i.e., more likely than not.”
8.1.2.2. Capital Reserves :
It is necessary to make a distinction between capital reserves and revenue
reserves in the accounts. A revenue reserve is a reserve which is available
for distribution through the Statement of Profit and Loss. The term “Capital
Reserve” has not been defined under the Revised Schedule VI. However, as
per the Guidance Note on Terms Used in Financial Statements, the
expression ‘capital reserve’ is defined as “a reserve of a corporate enterprise
which is not available for distribution as dividend”. Though the Revised
Schedule VI does not have the requirement of “transferring capital profit on
reissue of forfeited shares to capital reserve”, since profit on re-issue of
forfeited shares is basically profit of a capital nature and, hence, it should be
credited to capital reserve.
8.1.2.3. Capital Redemption Reserve :
Under the Act, Capital Redemption Reserve is required to be created in the
following two situations:
a) Under the provisions of Section 80 of the Act, where the redemption of
preference shares is out of profits, an amount equal to nominal value Guidance Note on the Revised Schedule VI to the Companies Act, 1956
28
of shares redeemed is to be transferred to a reserve called ‘capital
redemption reserve’.
b) Under Section 77AA of the Act, if the buy-back of shares is out of free
reserves, the nominal value of the shares so purchased is required to
be transferred to capital redemption reserve from distributable profit.
8.1.2.4. Securities Premium Reserve :
The Guidance Note of Terms Used in Financial Statements defines ‘Share
Premium’ as “the excess of the issue price of shares over their face value.”
Though the terminology used in the Revised Schedule VI is ‘Securities
Premium Reserve” the nomenclature as per the Act is “Securities Premium
Account”. Accordingly, the terminology of the Act should be used.
8.1.2.5. Debenture Redemption Reserve :
According to Section 117C of the Act where a company issues debentures
after the commencement of this Act, it is required to create a debenture
redemption reserve for the redemption of such debentures. The company is
required to credit adequate amounts, from out of its profits every year to
debenture redemption reserve, until such debentures are redeemed.
On redemption of the debentures for which the reserve is created, the
amounts no longer necessary to be retained in this account need to be
transferred to the General Reserve.
8.1.2.6. Revaluation Reserve :
As per the Guidance Note of Terms Used in Financial Statements,
‘Revaluation reserve’ is ‘a reserve created on the revaluation of assets or net
assets of an enterprise represented by the surplus of the estimated
replacement cost or estimated market values over the book values thereof.’
Accordingly, if a company has carried out revaluation of its assets, the
corresponding amount would be disclosed as “Revaluation Reserve”
8.1.2.7. Share Options Outstanding Account :
Presently, as per the Guidance Note on Accounting for Employee Sharebased Payments, Stock Options Outstanding Account is shown as a separate
line-item. The Revised Schedule VI requires this item to be shown as a part
of ‘Reserve and Surplus’.
8.1.2.8. Other Reserves (specify the nature and purpose of reserve and
the amount in respect thereof) :
Every other reserve which is not covered in the paragraphs 8.1.2.2 to 8.1.2.7
is to be reflected as `Other Reserves’. However, since the nature, purpose Guidance Note on the Revised Schedule VI to the Companies Act, 1956
29
and the amount are to be shown, each reserve is to be shown separately.
This would include reserves to be created under other statutes like Tonnage
Tax Reserve to be created under the Income Tax Act, 1961.
8.1.2.9. Surplus i.e. balance in Statement of Profit and Loss disclosing
allocations and appropriations such as dividend, bonus shares and
transfer to/from reserves, etc.
Appropriations to the profit for the year (including carried forward balance) is
to be presented under the main head ’Reserves and Surplus’. Unlike the
current prevalent practice, under the Revised Schedule VI, the Statement of
Profit and Loss will no longer reflect any appropriations, like dividends
transferred to Reserves, bonus shares, etc.
Please also refer to the discussion in Para 10.9 below.
8.1.2.10. Additions and deductions since the last Balance Sheet to be
shown under each of the specified heads:
This requires the company to disclose the movement in each of the reserves
and surplus since the last Balance Sheet.
Please refer to Para 10.9 of this Guidance note.
8.1.2.11 As per Revised Schedule VI, a reserve specifically represented by
earmarked investments shall be termed as a ‘fund’
8.1.2.12 Debit balance in the Statement of Profit and Loss and in
Reserves and Surplus:
Debit balance in the Statement of Profit and Loss which would arise in case
of accumulated losses, is to be shown as a negative figure under the head
‘Surplus’. The aggregate amount of the balance of ‘Reserves and Surplus’, is
to be shown after adjusting negative balance of surplus, if any. If the net
result is negative, the negative figure is to be shown under the head
‘Reserves and Surplus’.
8.1.3. Money received against Share Warrants
Generally, in case of listed companies, share warrants are issued to
promoters and others in terms of the Guidelines for preferential issues viz.,
SEBI (Issue of Capital and Disclosure Requirements), Guidelines, 2009. AS
20 Earning Per Share notified under the Companies (Accounting Standards)
Rules, 2006 defines ‘share warrants’ as “financial instruments which give the
holder the right to acquire equity shares”. Thus, effectively, share warrants
are nothing but the amount which would ultimately form part of the
Shareholders’ funds. Since shares are yet to be allotted against the same, Guidance Note on the Revised Schedule VI to the Companies Act, 1956
30
these are not reflected as part of Share Capital but as a separate line-item –
‘Money received against share warrants.’
8.2. Share Application Money pending allotment
8.2.1. Share Application money pending allotment is to be disclosed as a
separate line item on the face of Balance Sheet between “Shareholders’
Funds” and “Non-current Liabilities”. Share application money not exceeding
the issued capital and to the extent not refundable is to be disclosed under
this line item. If the company’s issued capital is more than the authorized capital
and approval of increase in authorized capital is pending, the amount of share
application money received over and above the authorized capital should be
shown under the head “Other Current Liabilities”.
8.2.2. Clause (g) of Notes 6G lists various circumstances and specifies the
information to be disclosed in respect of share application money. However,
amount shown as ‘share application money pending allotment’ will not
include share application money to the extent refundable. For example, the
amount in excess of issued capital, or where minimum subscription
requirement is not met. Such amount will have to be shown separately under
‘Other Current Liabilities’.
8.2.3. Various disclosure requirements pertaining to Share Application
Money are as follows:
• terms and conditions;
• number of shares proposed to be issued;
• the amount of premium, if any;
• the period before which shares are to be allotted;
• whether the company has sufficient authorized share capital to cover
the share capital amount on allotment of shares out of share
application money;
• Interest accrued on amount due for refund;
• The period for which the share application money has been pending
beyond the period for allotment as mentioned in the share application
form along with the reasons for such share application money being
pending.
The above disclosures should be made in respect of amounts classified
under both Equity as well as Current Liabilities, wherever applicable.
8.2.4. As per power given under section 92 of the Act, a company, if so
authorized by its Articles, may accept from any member the whole or a part Guidance Note on the Revised Schedule VI to the Companies Act, 1956
31
of the amount remaining unpaid on any shares held by him, although no part
of that amount has been called up. The shareholder who has paid the money
in advance is not a creditor for the amount so paid as advance, as the same
cannot be demanded for repayment and the company cannot pay him back
unless Articles so provide. The amount of calls paid in advance does not
form part of the paid-up capital. The Department of Company Affairs has
clarified that it is better to show “Calls in Advance” under the head “Current
Liabilities and Provisions” (Letter No. 8/16(1)/61-PR, dated 9.5.1961). Thus,
under the Revised Schedule VI, calls paid in advance are to be reflected
under “Other Current Liabilities”. The amount of interest which may accrue
on such advance should also is to be reflected as a liability.
8.2.5. “Share application money pending allotment” is required to be shown
as a separate line item on the face of the Balance Sheet after Shareholders’
Funds. However, under “Other current liabilities” there is a statement that
Share application money not exceeding the issued capital and to the extent
not refundable shall be shown under the head Equity. The two requirements
appear to be conflicting. However, from the format as set out in the
Schedule, it appears that the Regulator’s intention is to specifically highlight
the amount of Share application money pending allotment, though they may
be, in substance, in nature of Equity. Accordingly, the equity element should
continue to be disclosed on the face of the Balance Sheet as a separate line
item, rather than as a component of Shareholders’ Funds.
8.3. Non-current liabilities
A liability shall be classified as current when 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;
(c) it is due to be settled within twelve months after the reporting date; or
(d) the company does not have an unconditional right to defer settlement of the
liability for at least twelve months after the reporting date. Terms of a 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-current.
Based on the above definitions, on the face of the Balance Sheet, the
following items shall be disclosed under non-current liabilities.
• Long-term borrowings;
• Deferred tax liabilities (Net); Guidance Note on the Revised Schedule VI to the Companies Act, 1956
32
• Other Long-term liabilities;
• Long-term provisions.
8.3.1. Long-term borrowings:
8.3.1.1. Long-term borrowings shall be classified as:
(a) Bonds/debentures;
(b) Term loans;
• from banks;
• 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) Other loans and advances (specify nature).
8.3.1.2. Borrowings shall further be sub-classified as secured and
unsecured. Nature of security shall be specified separately in each case.
8.3.1.3. Where loans have been guaranteed by directors or others, the
aggregate amount of such loans under each head shall be disclosed. The
word “others” used in the phrase “directors or others” would mean any
person or entity other than a director. Therefore, this is not restricted to mean
only related parties. However, in the normal course, a person or entity
guaranteeing a loan of a company will generally be associated with the
company in some manner.
8.3.1.4. Bonds/debentures (along with the rate of interest and particulars of
redemption or conversion, as the case may be) shall be stated in
descending order of maturity or conversion, starting from farthest redemption
or conversion date, as the case may be. Where bonds/debentures are
redeemable by installments, the date of maturity for this purpose must be
reckoned as the date on which the first installment becomes due.
8.3.1.5. Particulars of any redeemed bonds/ debentures which the company
has power to reissue shall be disclosed.
8.3.1.6. 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. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
33
8.3.1.7. The phrase "long-term" has not been defined. However, the
definition of ‘non-current liability’ in the Revised Schedule VI may be used as
long-term liability for the above disclosure. Also, the phrase "term loan" has
not been defined in the Revised Schedule VI. Term loans normally have a
fixed or pre-determined maturity period or a repayment schedule.
8.3.1.8. As referred to in the 2005 edition of the ICAI Statement on
Companies (Auditor’s Report) Order, 2003 (CARO) in the banking industry,
for example, loans with repayment period beyond thirty six months are
usually known as “term loans”. Cash credit, overdraft and call money
accounts/ deposit are, therefore, not covered by the expression “terms
loans”. Term loans are generally provided by banks and financial institutions
for acquisition of capital assets which then become the security for the loan,
i.e., end use of funds is normally fixed.
8.3.1.9 Deferred payment liabilities would include any liability for which
payment is to be made on deferred credit terms. E.g. deferred sales tax
liability, deferred payment for acquisition of fixed assets etc.
8.3.1.10 The current maturities of all long-term borrowings will be disclosed
under ‘other current liabilities’ and not under long-term borrowings and shortterm borrowings. Hence, it is possible that the same bonds / debentures /
term loans may be bifurcated under both long-term borrowings as well as
under other current liabilities. Further, long-term borrowings are to be subclassified as secured and unsecured giving the nature of the security for the
secured position.
8.3.1.11 The Revised Schedule VI also stipulates that the nature of security
shall be specified separately in each case. A blanket disclosure of different
securities covering all loans classified under the same head such as ‘All
Term loans from banks’ will not suffice. However, where one security is given
for multiple loans, the same may be clubbed together for disclosure purposes
with adequate details or cross referencing.
8.3.1.12 The disclosure about the nature of security should also cover the
type of asset given as security e.g. inventories, plant and machinery, land
and building, etc. This is because the extent to which loan is secured may
vary with the nature of asset against which it is secured.
8.3.1.13 When promoters, other shareholders or any third party have given
any personal security for any borrowing, such as shares or other assets held
by them, disclosure should be made thereof, though such security does not
result in the classification of such borrowing as secured. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
34
8.3.1.14 The Revised Schedule VI requires that under the head
“Borrowings,” period and amount of “continuing default (in case of long-term
borrowing) and default (in case of short-term borrowing) as on the Balance
Sheet date in repayment of loans and interest shall be specified separately in
each case". The word “loan” has been used in a more generic sense. Hence,
the disclosures relating to default should be made for all items listed under
the category of borrowings such as bonds/ debentures, deposits, deferred
payment liabilities, finance lease obligations, etc. and not only to items
classified as “loans” such as term loans, or loans and advances ,etc.
8.3.1.15 Also, a company need not disclose information for defaults other
than in respect of repayment of loan and interest, e.g., compliance with debt
covenants. The Revised Schedule VI requires specific disclosures only for
default in repayment of loans and interest and not for other defaults.
8.3.1.16 Though two different terms, viz., continuing default (in case of longterm borrowing) and default (in case of short-term borrowing) have been
used, the requirement should be taken to disclose default “as on the Balance
Sheet date” in both the cases. Pursuant to this requirement, details of any
default in repayment of loan and interest existing as on the Balance Sheet
date needs to be separately disclosed. Any default that had occurred during
the year and was subsequently made good before the end of the year does
not need to be disclosed.
8.3.1.17 Terms of repayment of term loans and other loans shall be
disclosed. The term ‘other loans’ is used in general sense and should be
interpreted to mean all categories listed under the heading ‘Long-term
borrowings’ as per Revised Schedule VI. Disclosure of terms of repayment
should be made preferably for each loan unless the repayment terms of
individual loans within a category are similar, in which case, they may be
aggregated.
8.3.1.18 Disclosure of repayment terms should include the period of maturity
with respect to the Balance Sheet date, number and amount of instalments
due, the applicable rate of interest and other significant relevant terms if any.
8.3.1.19 Deposits classified under Borrowings would include deposits
accepted from public and inter corporate deposits which are in the nature of
borrowings.
8.3.1.20 Loans and advances from related parties are required to be
disclosed. Advances under this head should include those advances which
are in the nature of loans. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
35
8.4. Other Long-term liabilities
This should be classified into:
a) Trade payables; and
b) Others.
8.4.1 A payable shall be classified as 'trade payable' if it is in respect of
amount due on account of goods purchased or services received in the
normal course of business. As per the Old Schedule VI, the term 'sundry
creditors’ included amounts due in respect of goods purchased or services
received or in respect of other contractual obligations as well. Hence,
amounts due under contractual obligations can no longer be included within
Trade payables. Such items may include dues payables in respect of
statutory obligations like contribution to provident fund, purchase of fixed
assets, contractually reimbursable expenses, interest accrued on trade
payables, etc. Such payables should be classified as "others" and each such
item should be disclosed nature-wise. However, Acceptances should be
disclosed as part of trade payables in terms of the Revised Schedule VI.
8.4.2 The Micro, Small and Medium Enterprises Development (MSMED) Act,
2006 however, requires specified disclosures to be made in the annual
Financial Statements of the buyer wherever such Financial Statements are
required to be audited under any law. Though not specifically required by the
Revised Schedule VI, such disclosures will still be required to be made in the
annual Financial Statements.
8.4.3 The following disclosures are required under Sec 22 of MSMED Act
2006 under the Chapter on Delayed Payments to Micro and Small
Enterprises:
(a) the principal amount and the interest due thereon (to be shown
separately) remaining unpaid to any supplier as at the end of
accounting year;
(b) the amount of interest paid by the buyer under MSMED Act, 2006
along with the amounts of the payment made to the supplier beyond
the appointed day during each accounting year;
(c) the amount of interest due and payable for the period (where the
principal has been paid but interest under the MSMED Act, 2006 not
paid);
(d) The amount of interest accrued and remaining unpaid at the end of
accounting year; and Guidance Note on the Revised Schedule VI to the Companies Act, 1956
36
(e) The amount of further interest due and payable even in the succeeding
year, until such date when the interest dues as above are actually paid
to the small enterprise, for the purpose of disallowance as a deductible
expenditure under section 23.
The terms ''appointed day'', ''buyer'', ''enterprise'', ''micro enterprise'', ''small
enterprise'' and ''supplier'', shall be as defined under clauses (b), (d), (e), (h),
(m) and (n) respectively of section 2 of the Micro, Small and Medium
Enterprises Development Act, 2006.
8.5. Long-Term Provisions
8.5.1 This should be classified into provision for employee benefits and
others specifying the nature. Provision for employee benefits should be
bifurcated into long-term (non-current) and other current and the long-term
portion is disclosed under this para. All long-term provisions, other than
those related to employee benefits should be disclosed separately based on
their nature. Such items would include Provision for warranties etc. While
AS-15 Employee Benefits governs the measurement of various employee
benefit obligations, their classification as current and non-current liability will
be governed by the criteria laid down in the Revised Schedule VI.
Accordingly, a liability is classified as current if a company does not have an
unconditional right as on the Balance Sheet date to defer its settlement for
12 months after the reporting date. Each company will need to apply these
criteria to its specific facts and circumstances and decide an appropriate
classification for its employee benefit obligations.
8.6. Current Liabilities
This should be classified on the face of the Balance Sheet as follows:
¾ Short-term borrowings;
¾ Trade payables;
¾ Other current liabilities;
¾ Short-term provisions.
8.6.1. Short-term borrowings
8.6.1.1. (i) Short-term borrowings shall be classified as:
(a) Loans repayable on demand
¾ from banks;
¾ from other parties.
(b) Loans and advances from related parties; Guidance Note on the Revised Schedule VI to the Companies Act, 1956
37
(c) Deposits;
(d) Other loans and advances (specify nature).
(ii) Borrowings shall further be sub-classified as secured and unsecured.
Nature of security shall be specified separately in each case.
(iii) Where loans have been guaranteed by directors or others, the
aggregate amount of such loans under each head shall be disclosed.
(iv) Period and amount of default as on the Balance Sheet date in
repayment of loans and interest shall be specified separately in each
case.
8.6.1.2 Loans payable on demand should be treated as part of short-term
borrowings. Short-term borrowings will include all loans within a period of 12
months from the date of the loan. In the case of short-term borrowings, all
defaults existing as at the date of the Balance Sheet should be disclosed
(item-wise). Current maturity of long-term borrowings should not be classified
as short-term borrowing. They have to be classified under Other current
liabilities. Guidance on disclosure on various matters under this Para should
also be drawn, to the extent possible, from the guidance given under Longterm borrowings.
8.6.2.Trade payables
Guidance on disclosure under this clause should be drawn from the guidance
given under Other Long-term borrowings to the extent applicable.
8.6.3.Other current liabilities
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). Guidance Note on the Revised Schedule VI to the Companies Act, 1956
38
The portion of long term debts / lease obligations, which is due for payments
within twelve months of the reporting date is required to be classified under
“Other current liabilities” while the balance amount should be classified under
Long-term borrowings.
Trade Deposits and Security Deposits which are not in the nature of
borrowings should be classified separately under Other Non-current/Current
liabilities. Other Payables may be in the nature of statutory dues such as
Withholding taxes, Service Tax, VAT, Excise Duty etc.
8.6.4.Short-term provisions
The amounts shall be classified as:
(a) Provision for employee benefits;
(b) Others (specify nature).
Others would include all provisions other than provisions for employee
benefits such as Provision for dividend, Provision for taxation, Provision for
warranties, etc. These amounts should be disclosed separately specifying
nature thereof.
II. Assets
8.7. Non-current assets
Definition and Presentation
An 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 consumption in
the company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is expected to be realized within twelve 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 twelve months after
the reporting date.
All other assets shall be classified as ‘non-current’.
Based on the above definition, on the face of the Balance Sheet, the
following items shall be disclosed under non-current assets: -
(a) Fixed Assets Guidance Note on the Revised Schedule VI to the Companies Act, 1956
39
(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
8.7.1 Fixed Assets
Fixed assets are classified as:
S.
No.
Particulars Relevant Accounting Standards as
notified under Companies
(Accounting Standards) Rules, 2006
1. Tangible assets AS 10, AS 6
2. Intangible assets AS 26
3. Capital work-in-progress AS 10
4. Intangible assets under
development
AS 26
8.7.1.1 Tangible Assets
The company shall disclose the following in the Notes to Accounts as per 6(I)
of Part I of the Revised Schedule VI.
(i) Classification shall be given as:
(a) Land;
(b) Buildings;
(c) Plant and Equipment;
(d) Furniture and Fixtures;
(e) Vehicles;
(f) Office equipment;
(g) Others (specify nature).
(ii) Assets under lease shall be separately specified under each class of
asset.
The term “under lease” should be taken to mean assets given on
operating lease in the case of lessor and assets held under finance Guidance Note on the Revised Schedule VI to the Companies Act, 1956
40
lease in the case of lessee. Further, leasehold improvements should
continue to be shown as a separate asset class.
(iii) A reconciliation of 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 and
other adjustments and the related depreciation and impairment
losses/reversals shall be disclosed separately.
All acquisitions, whether by way of an asset acquisition or through a business
combination are to be disclosed as part of the reconciliation in the note on
Fixed Assets. Acquisitions through ‘Business Combinations’ need to be
disclosed separately for each class of assets. Similarly, though not
specifically required, it is advisable that asset disposals through demergers,
etc. may also be disclosed separately for each class of assets.
The term “business combination” has not been defined in the Act or the
Accounting Standards as notified under the Companies (Accounting
Standards) Rules, 2006. However, related concepts have been enumerated
in AS 14 Accounting for Amalgamations and AS 10 Accounting for Fixed
Assets. Accordingly, such terminology should be interpreted to mean an
amalgamation or acquisition or any other mode of restructuring of a set of
assets and/or a group of assets and liabilities constituting a business.
Other adjustments should include items such as capitalization of exchange
differences where such option has been exercised by the Company as per
AS 11 The Effects of Changes in Foreign Exchange Rates and/or
adjustments on account of exchange fluctuations for fixed assets in case of
non-integral operations as per AS 11 and/or borrowing costs capitalised in
accordance with AS 16 Borrowing Costs. Such adjustments should be
disclosed separately for each class of assets.
Since reconciliation of gross and net carrying amounts of fixed assets is
required, the corresponding depreciation/amortization for each class of asset
should be disclosed in terms of Opening Accumulated Depreciation,
Depreciation/amortization for the year, Deductions/Other adjustments and
Closing Accumulated Depreciation/Amortization. Similar disclosures should
also be made for Impairment, if any, as applicable.
(iv) Where any amounts have been written-off on a reduction of capital or
revaluation of assets or where sums have been added on revaluation of
assets, every Balance Sheet subsequent to date of such write-off or
addition shall show the reduced or increased figures, as applicable.
Disclosure by way of a note would also be required to show the amount
of the reduction or increase, as applicable, together with the date Guidance Note on the Revised Schedule VI to the Companies Act, 1956
41
thereof for the first five years subsequent to the date of such reduction
or increase.
The Revised Schedule VI has introduced office equipment as a separate line
item while dropping items like, live stock, railway sidings, etc. However, if the
said items exist, the same should be disclosed separate asset class
specifying nature thereof.
The Revised Schedule does not prescribe any particular classification/
presentation for leasehold land. AS 19 Leases, excludes land leases from its
scope. The accounting treatment for leasehold land should be continued with
as is being currently followed under the prevailing Indian generally accepted
accounting principles and practices. Accordingly, Leasehold land should also
continue to be presented as a separate asset class under Tangible Assets.
Also, Freehold land should continue to be presented as a separate asset
class.
AS 10 Accounting for Fixed Assets also requires a company to disclose
details such as gross book value of revalued assets, method adopted to
compute revalued amounts, nature of indices used, year of appraisal,
involvement of external valuer as long as the concerned assets are held by
the enterprise.
The Revised Schedule VI is clear that the disclosure requirements of the
Accounting Standards are in addition to disclosures required under the
Schedule. Also, in case of any conflict, the Accounting Standards will prevail
over the Schedule. Keeping this in view, companies should make disclosures
required by the Revised Schedule VI only for five years. However, details
required by AS 10 will have to be given as long as the asset is held by the
company.
However, it may be noted that, AS 26 Intangible Assets does not permit
revaluation of intangible assets.
8.7.1.2 Intangible assets
The company shall disclose the following in the Notes to Accounts as per
6(J) of Part I of the Revised Schedule VI.
(i) Classification shall be given as:
(a) Goodwill;
(b) Brands /trademarks;
(c) Computer software;
(d) Mastheads and publishing titles; Guidance Note on the Revised Schedule VI to the Companies Act, 1956
42
(e) Mining rights;
(f) Copyrights, and patents and other intellectual property rights,
services and operating rights;
(g) Recipes, formulae, models, designs and prototypes;
(h) Licenses and franchise;
(i) Others (specify nature).
(ii) A reconciliation of 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 and
other adjustments and the related amortization and impairment
losses/reversals shall be disclosed separately.
(iii) Where sums have been written-off on a reduction of capital or
revaluation of assets or where sums have been added on revaluation
of assets, every Balance Sheet subsequent to date of such write-off,
or addition shall show the reduced or increased figures as applicable
and shall by way of a note also show the amount of the reduction or
increase, as applicable, together with the date thereof for the first five
years subsequent to the date of such reduction or increase.
Classification of intangible assets (as listed above) has been introduced
under the Revised Schedule VI, which did not exist earlier.
The guidance given above on Tangible Assets, to the extent applicable, is
also to be used for Intangible Assets.
8.7.1.3 Capital work-in-progress
As per the Revised Schedule VI, capital advances should be included under
Long-term loans and advances and hence, cannot be included under capital
work-in-progress.
8.7.1.4 Intangible assets under development
Intangible assets under development should be disclosed under this head
provided they can be recognised based on the criteria laid down in AS 26
Intangible Assets.
8.7.2 Non-current investments
(i) Non-current investments shall be classified as trade investments and
other investments and further classified as:
(a) Investment property;
(b) Investments in Equity Instruments; Guidance Note on the Revised Schedule VI to the Companies Act, 1956
43
(c) Investments in preference shares;
(d) Investments in Government or trust securities;
(e) Investments in debentures or bonds;
(f) Investments in Mutual Funds;
(g) Investments in partnership firms;
(h) Other non-current investments (specify nature).
Under each classification, details shall be given 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 (showing separately investments which are partly-paid). In
regard to investments in the capital of partnership firms, the names of
the firms (with the names of all their partners, total capital and the
shares of each partner) shall be given.
(ii) Investments carried at other than at cost should be separately stated
specifying the basis for valuation thereof.
(iii) 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
If a debenture is to be redeemed partly within 12 months and balance after
12 months, the amount to be redeemed within 12 months should be
disclosed as current and balance should be shown as non-current.
8.7.2.1 Trade Investment
Note 6(K)(i) of Part I requires that non-current investments shall be classified
as "trade investment" and "other investments". The term “trade investments”
is defined neither in Revised Schedule VI nor in Accounting Standards.
The term "trade investment" is, however, normally understood as an
investment made by a company in shares or debentures of another company,
to promote the trade or business of the first company.
8.7.2.2 Investment property
As per AS 13 Accounting for Investments, an investment property is an
investment in land or buildings that are not intended to be occupied
substantially for use by, or in the operations of, the investing enterprise. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
44
8.7.2.3 Aggregate provision for diminution in value
As per the Revised Schedule VI, this amount should be disclosed separately
in the notes. However, as per AS 13 all long-term (non-current) investments
are required to be carried at cost. However, when there is a decline, other
than temporary, in the value of a long-term investment, the carrying amount
is reduced to recognize the decline. Accordingly, the value of each long-term
investment should be carried at cost less provision for other than temporary
diminution in the value thereof. It is recommended to disclose the amount of
provision netted-off for each long-term investment.
However, the aggregate amount of provision made in respect of all noncurrent investments should also be separately disclosed to comply with the
specific disclosure requirement in Revised Schedule VI.
8.7.2.4 Controlled special purpose entities
Under investments, there is also a requirement to disclose the names of
bodies corporate, including separate disclosure of investments in “controlled
special purpose entities” in addition to subsidiaries, etc. The expression
“controlled special purpose entities” however, has not been defined either in
the Act or in the Revised Schedule VI or in the Accounting Standards.
Accordingly, no disclosures would be additionally required to be made under
this caption. If and when such terminology is explained/ introduced in the
applicable Accounting Standards, the disclosure requirement would become
applicable.
8.7.2.5 Basis of valuation
The Revised Schedule VI requires disclosure of the “basis of valuation” of
non-current investments which are carried at other than cost. However, what
should be understood by such terminology has not been clarified. The term
‘basis of valuation’ was not used in the Old Schedule VI. Hence, the same
may be interpreted in the following ways:
One view is that basis of valuation would mean the market value, or valuation
by independent valuers, valuation based on the investee’s assets and
results, or valuation based on expected cash flows from the investment, or
management estimate, etc. Hence, for all investments carried at other than
cost, the basis of valuation for each individual investment should be
disclosed.
The other view is that, disclosure for basis of valuation should be either of:
• At cost;
• At cost less provision for other than temporary diminution; Guidance Note on the Revised Schedule VI to the Companies Act, 1956
45
• Lower of cost and fair value.
However, making disclosures in line with the latter view would be sufficient
compliance with the disclosure requirements.
8.7.2.6 Quoted investments
The term quoted investments has not been defined in the Revised Schedule
VI. The expression “quoted investment”, as defined in the Old Schedule VI,
means an investment as respects which there has been granted a quotation
or permission to deal on a recognized stock exchange, and the expression
“unquoted investment” shall be construed accordingly.
8.7.2.7 Under each sub-classification of Investments, there is a requirement
to disclose details of investments including names of the bodies corporate
and the nature and extent of the investment in each such boy corporate. The
term “nature and extent” should be interpreted to mean the number and face
value of shares. There is also a requirement to disclose partly-paid shares.
However, it is advisable to clearly disclose whether investments are fully paid
or partly paid.
8.7.2.8 Disclosure relating to partnership firms in which the company
has invested, etc. (under Current and Non-current Investments in the
Balance Sheet)
A company, as a juridical person, can enter into partnership. The Revised
Schedule VI provides for certain disclosures where the company is a partner
in partnership firms.
In the Balance Sheet, under the sub-heading “Current Investments” and
“Non-current Investments”, separate disclosure is to be made of any
investment in the capital of partnership firm by the company. In addition, in
the Notes to Accounts separate disclosure is required with regard to the
names of the firms, along with the names of all their partners, total capital
and the shares of each partner.
The disclosure in the Balance Sheet relating to the value of the investment in
the capital of a partnership firm as the amount to be disclosed as on the date
of the Balance Sheet can give rise to certain issues, the same are discussed
in the following paragraphs.
(a) In case of a change in the constitution of the firm during the year, the
names of the other partners should be disclosed by reference to the
position existing as on the date of the company’s Balance Sheet.
(b) The total capital of the firm to be disclosed should be with reference to
the amount of the capital on the date of the company’s Balance Sheet. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
46
If it is not practicable to draw up the Financial Statements of the
partnership upto such date and, are drawn up to different reporting
dates, drawing analogy from AS-21 and AS-27, adjustments should be
made for the effects of significant transactions or other events that
occur between those dates and the date of the parent’s Financial
Statements. In any case, the difference between reporting dates
should not be more than six months. In such cases, the difference in
reporting dates should be disclosed.
(c) For disclosure of the share of each partner it is suggested to disclose
share of each partner in the profits of the firm rather than the share in
the capital since, ordinarily, the expression “share of each partner” is
understood in this sense. Moreover, disclosure is already required of
the total capital of the firm as well as of the company’s share in that
capital. The share of each partner should be disclosed as at the date
of the company’s Balance Sheet
(d) The Statement of investments attached to the Balance Sheet is
required to disclose, inter alia, the total capital of the partnership firm
in which the company is a partner. Where such a partnership firm has
separate accounts for partner’s capital, drawings or current, loans to or
from partners, etc., disclosure must be made with regard to the total of
the capital accounts alone, since this is what constitutes the capital of
the partnership firm. Where, however, such accounts have not been
segregated, or where the partnership deed provides that the capital of
each partner is to be calculated by reference to the net amount at his
credit after merging all the accounts, the disclosure relating to the
partnership capital must be made on the basis of the total effect of
such accounts taken together.
Separate disclosure is required by reference to each partnership firm in
which the company is a partner. The disclosure must be made along with the
name of each such firm and must then indicate the total capital of each firm,
the names of all the partners in each firm and the respective shares of each
partner in the firm.
8.7.2.9 A limited liability partnership is a body corporate and not a
partnership firm as envisaged under the Partnership Act, 1932. Hence,
disclosures pertaining to Investments in partnership firms will not include
investments in limited liability partnerships. The investments in limited liability
partnerships will be disclosed separately under other investments. Also, other
disclosures prescribed for Investment in partnership firms, need not be made
for investments in limited liability partnerships. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
47
8.7.3 Long-term loans & advances
(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.
(iv) Loans and advances due by directors or other officers of the company or
any of them either severally or jointly with any other persons or amounts
due by firms or private companies respectively in which any director is a
partner or a director or a member should be separately stated.
Under the Revised Schedule VI, Capital Advances are not be classified
under Capital Work in Progress, since they are specifically to be disclosed
under this para.
Capital advances are advances given for procurement of fixed assets which
are non-current assets. Typically, companies do not expect to realize them in
cash. Rather, over the period, these get converted into fixed assets which, by
nature, are non-current assets. Hence, capital advances should be treated as
non-current assets irrespective of when the fixed assets are expected to be
received and should not be classified as Short-Term/Current.
Details of loans and advances to related parties need to be disclosed. Since
the Revised Schedule VI states that the terms used therein should be
interpreted based on applicable the Accounting Standards, the term “details”
should be interpreted to understand the disclosure requirements contained in
AS 18 Related Party Disclosure. Accordingly, making disclosures beyond the
requirements of AS-18 would not be necessary.
Other loans and advances should include all other items in the nature of
advances recoverable in cash or kind such as Prepaid expenses, Advance
tax, CENVAT credit receivable, VAT credit receivable, Service tax credit
receivable, etc. which are not expected to be realized within the next twelve
months or operating cycle whichever is longer, from the Balance Sheet date. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
48
Each item of loans and advances should be further sub-classified as a)
Secured, considered good, b) Unsecured, considered good and c) Doubtful.
Further, the amount of allowance for bad and doubtful loans and advances is
required to be disclosed separately under the “relevant heads”. Therefore,
the amount of such allowance also should be disclosed separately for each
category of loans and advances.
8.7.4 Other non-current assets
Other non-current assets shall be classified as:
(i) Long term Trade Receivables (including trade receivables on deferred
credit terms);
(ii) Others (specify nature)
Long term Trade Receivables, shall be sub-classified as:
(i) (a) Secured, considered good;
(b) Unsecured considered good;
(c) Doubtful
(ii) Allowance for bad and doubtful debts shall be disclosed under the
relevant heads separately.
(iii) Debts due by directors or other officers of the company or any of them
either severally or jointly with any other person or debts due by firms
or private companies respectively in which any director is a partner or
a director or a member should be separately stated.
A receivable shall be classified as '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. Whereas as per the Old Schedule VI, the term 'sundry
debtors' included amounts due in respect of goods sold or services rendered
or in respect of other contractual obligations as well. Hence, amounts due
under contractual obligations cannot be included within Trade Receivables.
Such items may include dues in respect of insurance claims, sale of fixed
assets, contractually reimbursable expenses, interest accrued on trade
receivables, etc. Such receivables should be classified as "others" and each
such item should be disclosed nature-wise.
Guidance in respect of above items may also be drawn from the guidance
given in respect of Long-term loans & advances to the extent applicable.
The Revised Schedule VI does not contain any specific disclosure
requirement for the unamortized portion of expense items such as share Guidance Note on the Revised Schedule VI to the Companies Act, 1956
49
issue expenses, ancillary borrowing costs and discount or premium relating
to borrowings. The Old Schedule VI required these items to be included
under the head “Miscellaneous Expenditure.”
As per AS 16 Borrowing Costs ancillary borrowing costs and discount or
premium relating to borrowings could be amortized over the loan period.
Further, share issue expenses, discount on shares, ancillary costs-discountpremium on borrowing, etc., being special nature items are excluded from
the scope of AS 26 Intangible Assets (Para 5). Keeping this in view, certain
companies have taken a view that it is an acceptable practice to amortize
these expenses over the period of benefit, i.e., normally 3 to 5 years. The
Revised Schedule VI does not deal with any accounting treatment and the
same continues to be governed by the respective Accounting
Standards/practices. Further, the Revised Schedule VI is clear that additional
line items can be added on the face or in the notes. Keeping this in view,
entity can disclose the unamortized portion of such expenses as
“Unamortized expenses”, under the head “other current/ non-current assets”,
depending on whether the amount will be amortized in the next 12 months or
thereafter.
8.8 Current assets
As per the Revised Schedule VI, all items of assets and liabilities are to be
bifurcated between current and non-current portions. In some cases, the items
presented under the “non-current” head of the Balance Sheet do not have a
corresponding “current” head especially for Assets. For example: Security
Deposits have been shown under “Long-term loans & advances”, however, the
same is not reflected under the “short-term loans & advances”. Since Revised
Schedule VI permits the use of additional line items, in such cases the current
portion should be classified under the Short-term category of the respective
balance as a separate line item and other relevant disclosures e.g. doubtful
amount, related provision etc. should be made.
8.8.1 Current investments
(i) Current investments shall be classified as:
(a) Investments in Equity Instruments;
(b) Investment in Preference Shares
(c) Investments in government or trust securities;
(d) Investments in debentures or bonds;
(e) Investments in Mutual Funds; Guidance Note on the Revised Schedule VI to the Companies Act, 1956
50
(f) Investments in partnership firms
(g) Other investments (specify nature).
Under each classification, details shall be given 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 (showing separately investments which are partly-paid). In
regard to investments in the capital of partnership firms, the names of
the firms (with the names of all their partners, total capital and the
shares of each partner) shall be given.
(ii) The following shall also be disclosed:
(a) The basis of valuation of individual investments
(b) Aggregate amount of quoted investments and market value
thereof;
(c) Aggregate amount of unquoted investments;
(d) Aggregate provision made for diminution in value of investments.
Guidance in respect of above items may be drawn from the guidance given in
respect of Non-current investments to the extent applicable.
Based on these criteria, if a debenture is to be redeemed partly within twelve
months and balance after twelve months, the amount to be redeemed within
twelve months should be disclosed as current and balance should be shown
as non-current.
Additionally, the Revised Schedule VI also require basis of valuation of
individual investment. It is pertinent to note that there is no requirement to
classify investments into trade & non-trade in respect of current investments.
The aggregate provision for diminution in the value of current investments
that needs to be separately disclosed is the amount written down based on
the measurement principles of Current Investments as per AS-13 on a
cumulative basis, though such write-down is not actually a ‘provision’ as per
the Standard.
8.8.2 Inventories
(i) Inventories shall be classified as:
(a) Raw materials;
(b) Work-in-progress; Guidance Note on the Revised Schedule VI to the Companies Act, 1956
51
(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.
As per the Revised Schedule VI, goods in transit should be included under
relevant heads with suitable disclosure. Further, mode of valuation for each
class of inventories should be disclosed.
The heading Finished goods should comprise of all finished goods other than
those acquired for trading purposes.
8.8.3 Trade Receivables (current)
(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.
(iv) Debts due by directors or other officers of the company or any of them
either severally or jointly with any other person or debts due by firms
or private companies respectively in which any director is a partner or
a director or a member should be separately stated.
A trade receivable will be treated as current, if it is likely to be realized within
twelve months from the date of Balance Sheet or operating cycle of the
business.
The Old Schedule VI required separate presentation of debtors
(i) outstanding for a period exceeding six months (i.e., based on billing date)
and (ii) other debtors. However, the Revised Schedule VI requires separate
disclosure of “Trade Receivables outstanding for a period exceeding six Guidance Note on the Revised Schedule VI to the Companies Act, 1956
52
months from the date they became due for payment” only for the current
portion of trade receivables.
Where no due date is specifically agreed upon, normal credit period allowed
by the company should be taken into consideration for computing the due
date which may vary depending upon the nature of goods or services sold
and the type of customers, etc.
All other guidance given under Long-term Trade Receivables to the extent
applicable are applicable here also.
8.8.4 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) Repatriation restrictions, if any, in respect of cash and bank balances
shall be separately stated.
(v) Bank deposits with more than twelve months maturity shall be
disclosed separately.
The term "cash and bank balances" in the Old Schedule VI is replaced with
‘Cash and cash equivalents’ in the Revised Schedule VI.
Please also refer to the earlier discussion under the section on General
Instructions in para 6.4 for classification of items under this head.
“Other bank balances” would comprise of items such as balances with banks
to the extent of held as margin money or security against borrowings etc, and
bank deposits with more than three months maturity. Banks deposits with
more than more than twelve months maturity will also need to be separately
disclosed under the sub-head ‘Other bank balances’. The non-current portion
of each of the above balances will have to be classified under the head
“Other Non-current assets” with separate disclosure thereof. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
53
8.8.5 Short-term loans & Advances
(i) Short-term loans and advances shall be classified as:
(a) Loans and advances to related parties (giving details thereof);
(b) Others (specify nature).
(ii) The above shall also be 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.
(iv) Loans and advances due by directors or other officers of the company or
any of them either severally or jointly with any other person or amounts
due by firms or private companies respectively in which any director is a
partner or a director or a member shall be separately stated.
The guidance for disclosures under this head should be drawn from guidance
given for items comprised within Long-term Loans and Advances.
8.8.6 Other current assets (specify nature)
This is an all-inclusive heading, which incorporates current assets that do not
fit into any other asset categories e.g. unbilled Revenue, unamortised
premium on forward contracts etc.
In case any amount classified under this category is doubtful, it is advisable
that such doubtful amount as well as any provision made there against
should be separately disclosed.
8.8.7 Contingent liabilities and commitments
(i) Contingent liabilities shall be classified as:
(a) Claims against the company not acknowledged as debt;
(b) Guarantees;
(c) Other money for which the company is contingently liable
(ii) Commitments shall be classified as:
(a) Estimated amount of contracts remaining to be executed on
capital account and not provided for;
(b) Uncalled liability on shares and other investments partly paid
(c) Other commitments (specify nature). Guidance Note on the Revised Schedule VI to the Companies Act, 1956
54
8.8.7.1 The provisions of AS-29 Provisions, Contingent Liabilities and
Contingent Assets, will be applied for determining contingent liabilities.
8.8.7.2 A contingent liability in respect of guarantees arises when a
company issues guarantees to another person on behalf of a third party e.g.
when it undertakes to guarantee the loan given to a subsidiary or to another
company or gives a guarantee that another company will perform its
contractual obligations. However, where a company undertakes to perform its
own obligations, and for this purpose issues, what is called a "guarantee", it
does not represent a contingent liability and it is misleading to show such
items as contingent liabilities in the Balance Sheet. For various reasons, it is
customary for guarantees to be issued by Bankers e.g. for payment of
insurance premia, deferred payments to foreign suppliers, letters of credit,
etc. For this purpose, the company issues a "counter-guarantee" to its
Bankers. Such "counter-guarantee" is not really a guarantee at all, but is an
undertaking to perform what is in any event the obligation of the company,
namely, to pay the insurance premia when demanded or to make deferred
payments when due. Hence, such performance guarantees and counterguarantees should not be disclosed as contingent liabilities.
8.8.7.3 The Revised Schedule VI also requires disclosures pertaining to
various commitments such as Capital commitments not provided for and
Uncalled liability on shares. It also requires disclosures pertaining to ‘Other
commitments’, with specification of nature thereof, which was not required by
the Old Schedule VI.
8.8.7.4 The word ‘commitment’ has not been defined in the Revised
Schedule VI. The Guidance Note on Terms Used in Financial Statements
issued by ICAI defines ‘Capital Commitment’ as future liability for capital
expenditure in respect of which contracts have been made. Hence, drawing
inference from such definition, the term ‘commitment’ would simply imply
future liability for contractual expenditure. Accordingly, the term ‘Other
commitments’ would include all expenditure related contractual commitments
apart from capital commitments such as commitments arising from long-term
contracts for purchase of raw material, employee contracts, lease
commitments, etc. The scope of such terminology is very wide and may
include contractual commitments for purchase of inventory, services,
investments, sales, employee contracts, etc. However, to give disclosure of
all contractual commitments would be contrary to the overarching principle
under General Instructions that “a balance shall be maintained between
providing excessive detail that may not assist users of Financial Statements
and not providing important information as a result of too much aggregation.” Guidance Note on the Revised Schedule VI to the Companies Act, 1956
55
8.8.7.5 Disclosures relating to lease commitments for non-cancellable leases
are required to be disclosed by AS-19 Leases.
8.8.7.6 Accordingly, the disclosures required to be made for ‘other
commitments’ should include only those non-cancellable contractual
commitments (i.e. cancellation of which will result in a penalty
disproportionate to the benefits involved) based on the professional
judgement of the management which are material and relevant in
understanding the Financial Statements of the company and impact the
decision making of the users of Financial Statements.
Examples may include commitments in the nature of buy-back arrangements,
commitments to fund subsidiaries and associates, non-disposal of
investments in subsidiaries and undertakings, derivative related
commitments, etc.
8.8.7.7 The Revised Schedule VI requires disclosure of the amount of
dividends proposed to be distributed to equity and preference shareholders
for the period and the related amount per share to be disclosed separately. It
also requires separate disclosure of the arrears of fixed cumulative dividends
on preference shares. The Old Schedule VI specifically required proposed
dividend to be disclosed under the head “Provisions.” In the Revised
Schedule VI, this needs to be disclosed in the notes. Hence, a question that
arises is as to whether this means that proposed dividend is not required to
be provided for when applying the Revised Schedule VI. AS-4 Contingencies
and Events Occurring After the Balance Sheet date requires that dividends
stated to be in respect of the period covered by the Financial Statements,
which are proposed or declared by the enterprise after the Balance Sheet
date but before approval of the Financial Statements, should be adjusted.
Keeping this in view and the fact that the Accounting Standards override the
Revised Schedule VI, companies will have to continue to create a provision
for dividends in respect of the period covered by the Financial Statements
and disclose the same as a provision in the Balance Sheet, unless AS-4 is
revised. Hence, the disclosure to be made in the notes is over and above the
disclosures pertaining to a) the appropriation items to be disclosed under
Reserves and Surplus and b) Provisions in the Balance Sheet.
8.8.7.8 The Revised Schedule VI requires that 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. Such a requirement existed in the Old Schedule VI as well. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
56
8.8.7.9 The Revised Schedule VI also states that 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. A similar requirement existed in the Old Schedule VI
as well. It is difficult to contemplate a situation where any asset other than
fixed assets and non-current investments has a realizable value that is lower
than its carrying value, and the same is not given effect to in the books of
account, since Accounting Standards do not permit the same. AS 13
Accounting for Investments requires current investments to be valued at
lower of cost and fair value. AS 2 Valuation of Inventories also requires
inventories to be valued at the lower of cost and net realizable value. Further,
Allowance for bad and doubtful debts is required to be shown as a deduction
from both Long-term loans & advances and Other Non-current assets as well
as Trade Receivables and Short-term loans and advances as per Schedule
VI. Hence, a diligent application of the requirements of Accounting Standards
and Schedule VI will normally not leave any scope for making any additional
disclosures in this regard.
9. Part II – Statement of Profit and Loss
Part II deals with disclosures relating to the Statement of Profit and Loss.
The format prescribed is the vertical form wherein disclosure for revenues
and expenses is in various line items. Part II of the Schedule contains items I
to XVI which lists items of Revenue, Expenses and Profit / (Loss). “General
Instructions for Preparation of Statement of Profit and Loss” govern the other
disclosure and presentation.
As per the Guidance Note ‘Terms Used in Financial Statements’, the phrase
‘Profit and Loss statement’ is defined as “the Financial Statement which
presents the revenues and expenses of an enterprise for an accounting
period and shows the excess of revenues over expenses (or vice versa) It is
also known as profit and loss account.”
As per Note 1 to “General Instructions for Preparation of Statement of Profit
and Loss”, the provisions of this part also apply to the income and
expenditure account referred to in section 210(2) of the Companies Act, 1956
in the same manner as they apply to a Statement of Profit and Loss.
The specific format laid down for presentation of various items of Income and
Expenses in the Statement of Profit and Loss indicates that expenses should
be aggregated based on their nature. Accordingly, functional classification of
expenses is prohibited. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
57
As per the Framework For The Preparation and Presentation Of Financial
Statements, Income and expenses are defined as follows:
(a) Income is increase in economic benefits during the accounting period
in the form of inflows or enhancements of assets or decreases of
liabilities that result in increases in equity, other than those relating to
contributions from equity participants.
(b) Expenses are decreases in economic benefits during the accounting
period in the form of outflows or depletions of assets or incurrences of
liabilities that result in decreases in equity, other than those relating to
distributions to equity participants.
9.1 Revenue from operations:
The aggregate of Revenue from operations needs to be disclosed on the
face of the Statement of Profit and Loss as per Revised Schedule VI
9.1.1 Note 2(A) to General Instructions for the Preparation of Statement of
Profit and Loss require that in respect of a company other than a finance
company, Revenue from operations is to be separately disclosed in the
notes, showing revenue from:
(a) Sale of products
(b) Sale of services
(c) Other operating revenues
(d) Less: Excise duty
9.1.2 As per AS-9 “Revenue Recognition”, the above disclosure in respect of
Excise Duty needs to be shown on the face of the Statement of Profit and
Loss. Since Accounting Standards override Revised Schedule VI, the
presentation in respect of excise duty will have to be made on the face of the
Statement of Profit and Loss. In doing so, a company may choose to present
the elements of revenue from sale of products, sale of services and other
operating revenues also on the face of the Statement of Profit and Loss
instead of the Notes.
9.1.3 Indirect taxes such as Sales tax, Service tax, Purchase tax etc. are
generally collected from the customer on behalf of the government in majority
of the cases. However, this may not hold true in all cases and it is possible
that a company may be acting as principal rather than as an agent in
collecting these taxes. Whether revenue should be presented gross or net of
taxes should depend on whether the company is acting as a principal and
hence responsible for paying tax on its own account or, whether it is acting
as an agent i.e. simply collecting and paying tax on behalf of government Guidance Note on the Revised Schedule VI to the Companies Act, 1956
58
authorities. In the former case, revenue should also be grossed up for the tax
billed to the customer and the tax payable should be shown as an expense.
However, in cases, where a company collects tax only as an intermediary,
revenue should be presented net of taxes.
9.1.4 However, as per the Guidance Note on Value Added Tax, “Value
Added Tax (VAT) is collected from the customers on behalf of the VAT
authorities and, therefore, its collection from the customers is not an
economic benefit for the enterprise and it does not result in any increase in
the equity of the enterprise”. Accordingly, VAT should not be recorded as
Revenue of the enterprise. At the same time, the payment of VAT should not
be treated as an expense in the Financial Statements of the company.
9.1.5 Further, as per the definition of Revenue in the Guidance Note on
Terms Used in Financial Statement, “It excludes amounts collected on behalf
of third parties such as certain taxes”. The Guidance Note on VAT further
states, “Where the enterprise has not charged VAT separately but has made
a composite charge, it should segregate the portion of sales which is
attributable to tax and should credit the same to ‘VAT Payable Account’ at
periodic intervals”.
9.1.6 For non-finance companies, revenue from operations needs to be
disclosed separately as revenue from
(a) sale of products,
(b) sale of services and
(c) other operating revenues.
It is important to understand what is meant by the term “other operating
revenues” and which items should be classified under this head vis-à-vis
under the head “Other Income”.
9.1.7 The term “other operating revenue” is not defined. This would include
Revenue arising from a company’s operating activities, i.e., either its
principal or ancillary revenue-generating activities, but which is not revenue
arising from the sale of products or rendering of services. Whether a
particular income constitutes “other operating revenue” or “other income” is
to be decided based on the facts of each case and detailed understanding of
the company’s activities. The classification of income would also depend on
the purpose for which the particular asset is acquired or held. For instance, a
group engaged in manufacture and sale of industrial and consumer products
also has one real estate arm. If the real estate arm is continuously engaged
in leasing of real estate properties, the rent arising from leasing of real estate
is likely to be “other operating revenue”. On the other hand, consider a
consumer products company which owns a 10 storied building. The company Guidance Note on the Revised Schedule VI to the Companies Act, 1956
59
currently does not need one floor for its own use and has given the same
temporarily on rent. In that case, lease rent is not an “other operating
revenue”; rather, it should be treated as “other income”.
9.1.8 To take other examples, sale of Fixed Assets is not an operating
activity of a company, and hence, profit on sale of fixed assets should be
classified as other income and not other operating revenue. On the other
hand, sale of manufacturing scrap arising from operations for a
manufacturing company should be treated as other operating revenue since
the same arises on account of the company’s main operating activity.
9.1.9 Net foreign exchange gain should be classified as Other Income. This
is because such gain or loss arises purely on account of fluctuation in
exchange rates and not on account of sale of products or services rendered,
unless the business of the company is to deal in foreign exchange.
9.1.10 As per Note 2(A) to General Instructions for Preparation of
Statement of Profit and loss, in respect of a finance company, revenue from
operations shall include revenue from
(a) Interest; and
(b) Other financial services
Revenue under each of the above heads is to be disclosed separately by
way of Notes to Accounts to the extent applicable.
9.1.11 The term finance company is not defined under the Companies Act,
1956, or Revised Schedule VI. Hence, the same should be taken to include
all companies carrying on activities which are in the nature of “business of
non-banking financial institution” as defined under section 45I(f) of the
Reserve Bank of India Act, 1935.
The relevant extract is reproduced below:
(a) ‘‘business of a non-banking financial institution’’ means carrying on of
the business of a financial institution referred to in clause (c) and includes
business of a non-banking financial company referred to in clause (f);
(c) ‘‘financial institution’’ means any non-banking institution which carries
on as its business or part of its business any of the following activities,
namely:–
(i) the financing, whether by way of making loans or advances or
otherwise, of any activity other than its own:
(ii) the acquisition of shares, stock, bonds, debentures or securities
issued by a Government or local authority or other marketable
securities of a like nature: Guidance Note on the Revised Schedule VI to the Companies Act, 1956
60
(iii) letting or delivering of any goods to a hirer under a hire-purchase
agreement as defined in clause (c) of section 2 of the Hire-Purchase
Act, 1972:
(iv) the carrying on of any class of insurance business;
(v) managing, conducting or supervising, as foreman, agent or in any
other capacity, of chits or kuries as defined in any law which is for the
time being in force in any State, or any business, which is similar
thereto;
(vi) collecting, for any purpose or under any scheme or arrangement by
whatever name called, monies in lumpsum or otherwise, by way of
subscriptions or by sale of units, or other instruments or in any other
manner and awarding prizes or gifts, whether in cash or kind, or
disbursing monies in any other way, to persons from whom monies are
collected or to any other person, but does not include any institution,
which carries on as its principal business,–
(a) agricultural operations; or
(aa) industrial activity; or
(b) the purchase or sale of any goods (other than securities) or the
providing of any services; or
(c) the purchase, construction or sale of immovable property, so
however, that no portion of the income of the institution is
derived from the financing of purchases, constructions or sales
of immovable property by other persons;
Explanation.– For the purposes of this clause, ‘‘industrial
activity’’ means any activity specified in sub-clauses (i) to (xviii)
of clause (c) of section 2 of the Industrial Development Bank of
India Act, 1964;
(f) ‘‘non-banking financial company’’ means–
(i) a financial institution which is a company;
(ii) a non-banking institution which is a company and which has as
its principal business the receiving of deposits, under any
scheme or arrangement or in any other manner, or lending in
any manner;
(iii) such other non-banking institution or class of such institutions,
as the bank may, with the previous approval of the Central
Government and by notification in the Official Gazette, specify; Guidance Note on the Revised Schedule VI to the Companies Act, 1956
61
9.1.12 Accordingly, applying the aforesaid definition, the term “finance
company” would cover all NBFCs - Asset Finance companies, Investment
companies, Leasing and Hire Purchase companies, Loan companies, Infra
Finance companies, Core Investment companies, Micro-finance companies,
etc. Further, Housing Finance Companies regulated by National Housing
Bank should also be considered as a finance company.
9.2 Other income:
The aggregate of ‘Other income’ is to be disclosed on face of the Statement
of Profit and Loss.
9.2.1 As per Note 4 to General Instructions for the preparation of Statement
of Profit and Loss ‘Other Income shall be classified as:
(a) Interest Income (in case of a company other than a finance company);
(b) Dividend Income;
(c) Net gain / loss on sale of investments;
(d) Other non-operating income (net of expenses directly attributable to
such income).
9.2.2 All kinds of interest income for a company other than a finance
company should be disclosed under this head such as interest on fixed
deposits, interest from customers on amounts overdue, etc.
9.2.3 Clause (a) of Note 5 (vii) requires a separate disclosure for Dividends
from subsidiary companies. The Old Schedule VI specifically required parent
companies to recognise dividend declared by subsidiary companies even if
declared after the Balance Sheet date if they are related to the period
covered by the Financial Statements. The Revised Schedule VI does not
prescribe any such accounting requirement. Accordingly, dividend income
from subsidiary companies should be recognized in accordance with AS-9,
i.e. only when they have a right to receive the same on or before the Balance
Sheet date. Normally, the right to receive is established only when the
dividend is approved by the shareholders at the Annual General Meeting of
the investee company. In the first year of application of Revised Schedule VI,
dividend income recognised in the immediately preceding year based on the
aforesaid requirements of Old Schedule VI should not be derecognized for
the comparatives presented.
To recognize dividend based on the right to receive would constitute a
change in accounting policy which should be applied prospectively. Dividend
approved by the shareholders of the subsidiary in the current year but
already recognised by the holding company in the previous year’s Financial Guidance Note on the Revised Schedule VI to the Companies Act, 1956
62
Statements as per Old Schedule VI should not be again recognised in the
first year of application of Revised Schedule VI. Necessary disclosures as
per AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies pertaining to change in accounting policy should be
made in the Notes to Accounts.
9.2.4 Other income items such as interest income, dividend income and net
gain on sale of investments should be disclosed separately for Current as
well as Long-term Investments as required by AS 13 “Accounting for
Investments”. If it is a net loss the same should be classified under
expenses.
9.2.5 For other non-operating income, income should be disclosed under
this head net off expenses directly attributable to such income. However, the
expenses so netted off should be separately disclosed.
9.3 Share of profits/losses in a Partnership firm
9.3.1 Though, there is no specific requirement in the Revised Schedule VI to
disclose profit or losses on investments in a partnership firm as was required
by the Old Schedule VI, the same should be disclosed as discussed as
under.
9.3.2 Share of profit or loss in a partnership firm accrues the moment the
same is computed and credited or debited to the Capital/Current/any other
account of the company in the books of the partnership firm. Hence, the
same should be accordingly accounted for in the books of the company.
9.3.3 Separate disclosure of profits or losses from partnership firms should
be made. In a case where the company was a partner during the year but is
not a partner at the end of the year, the disclosure should be made for the
period during which the company was a partner.
9.3.4 The company's share of the profits or losses of the partnership firm
should be calculated by reference to the company's own accounting year.
The Financial Statements of the partnership for computing the share of
profits and losses should be drawn up to the same reporting date. If it is not
practicable to draw up the Financial Statements of the partnership upto such
date and, are drawn up to a different reporting date, drawing analogy from
AS-21 and AS-27, adjustments should be made for the effects of significant
transactions or other events that occur between that date and the date of the
parent’s Financial Statements. In any case, the difference between reporting
dates should not be more than six months. In such cases, the difference in
reporting dates should be disclosed. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
63
9.3.5 In case the year ending of the company and of the firm fall on different
dates, the Financial Statements of the company should also contain a note to
indicate that the accounting period of the partnership firm in respect of which
the profits or losses have been accounted for in the company's books.
9.3.6 If however, a partnership firm happens to be in the nature of a Jointly
Controlled Operation as defined in AS-27, the share of incomes, expenses,
assets or liabilities will have to be accounted for in the Standalone Financial
Statements as prescribed in AS-27.
9.3.7 In case the partnership firm is a Subsidiary under AS-21, Associate
under AS-23 or Jointly Controlled Entity/Jointly Controlled Operation under
AS-27, in the Consolidated Financial Statements, the share of profit/loss from
the firm should be accounted for in terms of the applicable Accounting
Standard as stated above.
9.3.8 The aforesaid principles should also be applied to accounting for the
share of profits and losses in an Association of Persons (AOP).
9.4 Share of profits/losses in a Limited Liability Partnership
(LLP)
9.4.1 A Limited Liability Partnership, as per the LLP Act, is a body corporate
and the share of profit/loss in the LLP does not accrue to the partners till the
same is transferred to the Partners’ Capital/Current Account as per the terms
of the LLP Agreement. Accordingly, the share of profit/loss should be
accounted in the books of the company as and when the same is credited/
debited to the Partners’ Capital Account.
9.4.2 Depending upon the terms of agreement between the Partners, the
LLP may be a Subsidiary under AS-21, Associate under AS-23 or Jointly
Controlled Entity under AS-27. Hence, accounting in respect of the same in
the Consolidated Financial Statements would be governed by the applicable
Accounting Standards.
9.5 Expenses
The aggregate of the following expenses are to be disclosed on the face
of the Statement of Profit and Loss:
¾ Cost of materials consumed
¾ Purchases of Stock-in-Trade
¾ Changes in inventories of finished goods, work in progress and stock
in trade
¾ Employee benefits expense Guidance Note on the Revised Schedule VI to the Companies Act, 1956
64
¾ Finance costs
¾ Depreciation and amortization expense
¾ Other expenses
9.5.1 Cost of materials consumed
9.5.1.1 This disclosure is applicable for manufacturing companies. Materials
consumed would consist of raw materials, packing materials (where
classified by the company as raw materials) and other materials such as
purchased intermediates and components which are ‘consumed’ in the
manufacturing activities of the company. Where packing materials are not
classified as raw materials the consumption thereof should be disclosed
separately. However, intermediates and components which are internally
manufactured are to be excluded from the classification:
9.5.1.2 For purpose of classification of inventories, internally manufactured
components may be disclosed as below:
i. where such components are sold without further processing they are
to be disclosed as 'finished products'.
ii. where such components are sold only after further processing, the
better course is to disclose them as 'work-in-progress' but they may
also be disclosed as 'manufactured components’ subject to further
processing or with such other suitable description as 'semi-finished
products' or 'intermediate products'.
iii. where such components are sometimes sold without further
processing and sometimes after further processing it is better to
disclose them as 'manufactured components'.
9.5.1.3 For the purpose of interpreting the requirement to classify the raw
materials, some guidance may be necessary with regard to the question as
to what constitutes raw materials. According to the strict dictionary
connotation of this term, raw materials would include only materials obtained
in the state of nature. Such a definition would, however, be unrealistic in
context of this requirement because it would exclude even a basic material
such as steel. Generally speaking, the term “raw materials” would include
materials which physically enter into the composition of the finished product.
Materials, such as stores, fuel, spare parts etc, which do not enter physically
into the composition of the finished product, would therefore, be excluded
from the purview of the term “raw materials”.
9.5.1.4 The requirement is silent with regard to containers and packaging
materials. It is, therefore, open to question whether such materials constitute Guidance Note on the Revised Schedule VI to the Companies Act, 1956
65
a category of “raw materials” for the purpose of the classification. The matter
should be decided in the light of the facts and circumstances of each case,
the nature of the containers and packaging materials, their relative value in
comparison to the raw materials consumed, and other similar considerations.
Where, however, packaging materials, because of their nature are included
in raw materials it is preferable to show the description as “raw materials
including packaging materials consumed”.
9.5.1.5 Since in case of a company which falls under the category of
manufacturing or manufacturing and trading company, disclosure is required
with regard to raw materials consumed, care should be taken to ensure that
the figures relate to actual consumption rather than “derived consumption”.
The latter figure is ordinarily obtained by deducting the closing inventory from
the total of the opening inventory and purchases, but this figure may not
always represent a fair indication of actual consumption because it might
conceal losses and wastages. On the other hand, if the figure of actual
consumption can be compiled from issue records or other similar data, it is
likely to be more accurate. Where this is not possible, the derived figure of
consumption may be shown and it is left to the company, according to the
circumstances of each case, to determine whether any footnote is required to
indicate that the consumption disclosed is on the basis of derived figures
rather than actual records of issue.
9.5.1.6 Where the consumption is disclosed on the basis of actual records
of issue, a further question arises with regard to the treatment of shortages,
losses and wastages. In most manufacturing companies, these are
inevitable. It is, therefore, suggested that the company should itself establish
reasonable norms of acceptable margins. Any shortages, losses or wastages
which are within these norms may be regarded as an ordinary incidence of
the manufacturing process and may, therefore, be included in the figure of
consumption. On the other hand, any shortages, losses or wastages which
are beyond the permitted margin or when they are known to have occurred
otherwise than in the manufacturing process, should not be included in the
consumption figures. Whether or not such abnormal variations need to be
separately disclosed in the accounts would depend upon the facts and
circumstances of each case. The General Instructions for Preparation of
Statement of Profit and Loss does not require any specific disclosures.
9.5.1.7 In the case of industries where there are several processes,
materials may move from process to process, so that the finished product of
one department constitutes the raw materials of the next. Since the
disclosure requirement provides only for disclosure of raw material under
broad heads and goods purchased under broad heads and also having Guidance Note on the Revised Schedule VI to the Companies Act, 1956
66
regard to the fact that the consumption of raw materials for production of
such intermediates would have to be accounted as raw materials consumed,
it follows that internal transfers from one department to another should be
disregarded in determining the consumption figures to be disclosed. .
9.5.2 Purchases of Stock in Trade
Stock-in-trade refers to goods purchased normally with the intention to resell
or trade in. In case, any semi-finished goods/materials are purchased with an
intention of doing further processing activities on the same, the same should
be included in ‘cost of materials consumed’ rather than under this item.
9.5.3 Changes in inventories of finished goods, work-in-progress and
stock-in-trade
This requires disclosure of difference between opening and closing
inventories of finished goods, work-in-progress and stock-in-trade. The
difference should be disclosed separately for finished goods, work in
progress and stock in trade.
9.5.4 Employee benefits expense [Note 5(i)(a)]
This requires disclosure of the following details:
9.5.4.1 Salaries and wages
The aggregate amounts paid/payable by the company for payment of
salaries and wages are to be disclosed here. Expenses on account of bonus,
leave encashment, compensation and other similar payments also need to
be disclosed here. Where a separate fund is maintained for Gratuity payouts,
contribution to Gratuity fund should be disclosed under the sub-head
Contribution to provident and other funds.
The term employee should be deemed to include directors who are either in
whole-time or part-time employment of the company. It will exclude those
directors who attend only Board meetings and are not under a contract of
service with the company. Those who act as consultants or advisers without
involving the relationship of master and servant with the company should
also be excluded. A distinction should be made between persons engaged
under a contract of service and those engaged under a contract for services.
Only the former are to be included in the computation. Whether part-time
employees are to be included would depend on the facts and circumstances
of each case - the basic criterion being whether they are employed under a
contract of service or a contract for services. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
67
9.5.4.2 Contribution to provident and other funds
The aggregate amounts paid/payable by a company on account of
contributions to provident fund and other funds like Gratuity fund,
Superannuation fund, etc. are to be disclosed here.
Contributions for such funds for contract labour may also be separately
disclosed here. However, penalties and other similar amounts paid to the
statutory authorities are not strictly in the nature of ‘contribution’ and should
not be disclosed here.
9.5.4.3 Expense on Employee Stock Option Scheme (ESOP) and
Employee Stock Purchase Plan (ESPP)
The amount of expense under this head should be determined in accordance
with the Guidance Note on Accounting for Employee Share based Payments
and/or the SEBI (Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999, as applicable. All disclosures required
by the aforesaid Guidance Note should be made here.
9.5.4.4 Staff welfare expense
The total expenditure on Staff welfare is to be disclosed herein.
9.5.5 As per Note 3 of to the General Instructions for the Preparation of
the Statement of Profit and Loss, disclosure of Finance costs is to be
bifurcated under the following:
(A) Interest expense
(B) Other borrowing costs
(C) Applicable net gain/loss on foreign currency transactions and
translation
A) Interest expense
This would cover interest paid on borrowings from banks and others, on
debentures, bonds or similar instruments etc. Finance charges on finance
leases are in the nature of interest expense and hence should also be
classified as interest expense. In the absence of any bifurcation required for
interest paid on fixed period loans and other borrowings as required under
the Old Schedule VI, the same need not be given.
B) Other borrowing costs
Other borrowing costs would include commitment charges, loan processing
charges, guarantee charges, loan facilitation charges, discounts/premium on
borrowings, other ancillary costs incurred in connection with borrowings, or
amortization of such costs, etc. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
68
C) Applicable net gain/loss on foreign currency transactions and
translation
As per Para 4(e) of AS-16, borrowing costs also include exchange
differences arising from foreign currency borrowings to the extent that they
are regarded as an adjustment to interest costs. Any such exchange
differences would need to be disclosed under this head.
9.5.6 Depreciation and amortization expense [Note 5(i) (b)]
A company has to disclose depreciation provided on fixed assets and
amortization of intangible assets under this head.
9.5.7 Other Expenses
All other expenses not classified under other heads will be classified here.
For this purpose, any item of expenditure which exceeds one percent of the
revenue from operations or `Rs. 1,00,000, whichever is higher (as against
the requirement of Old Schedule VI of 1 percent of total revenue or Rs. 5,000
whichever is higher), needs to be disclosed separately.
Further Note 5(vi) requires a separate disclosure of each of the following
items, which will also be classified under ‘Other expenses’
¾ Consumption of stores and spare parts;
¾ Power and fuel;
¾ Rent;
¾ Repairs to buildings;
¾ Repairs to machinery;
¾ Insurance;
¾ Rates and taxes, excluding taxes on income;
¾ Miscellaneous expenses.
9.6 Exceptional items
The term ‘Exceptional items’ is not defined in Revised Schedule VI. However,
AS-5 “Net Profit or Loss for the period, Prior period items and changes in
Accounting Policies” has a reference to such items in Paras 12, 13 and 14.
“Para 12: When items of income and expense within profit or loss from
ordinary activities are of such size, nature or incidence that their disclosure is
relevant to explain the performance of the enterprise for the period, the
nature and amount of such items should be disclosed separately.Guidance Note on the Revised Schedule VI to the Companies Act, 1956
69
Para 13: Although the items of income and expense described in paragraph
12 are not extraordinary items, the nature and amount of such items may be
relevant to users of Financial Statements in understanding the financial
position and performance of an enterprise and in making projections about
financial position and performance. Disclosure of such information is
sometimes made in the notes to the Financial Statements.
Para 14: Circumstances which may give rise to the separate disclosure of
items of income and expense in accordance with paragraph 12 include: the
write-down of inventories to net realisable value as well as the reversal of
such write-downs; a restructuring of the activities of an enterprise and the
reversal of any provisions for the costs of restructuring;”
9 disposals of items of fixed assets;
9 disposals of long-term investments;
9 legislative changes having retrospective application;
9 litigation settlements; and
9 other reversals of provisions.
In case the company has more than one such item of income / expense of
the above nature, the aggregate of such items should be disclosed on the
face of the Statement of Profit and Loss. Details of the all individual items
should be disclosed in the Notes. [Note 5 (i) (k) to the General Instructions
for preparation of the Statement of Profit and Loss]
9.7 Extraordinary items
The term ‘Extraordinary items’ is not defined in Revised Schedule VI.
However, AS 5 “Net Profit or Loss for the period, Prior period items and
changes in Accounting Policies” at para 4.2 defines ‘extraordinary items’ as:
‘Extraordinary items are income or expenses that arise from events or
transactions that are clearly distinct from the ordinary activities of the
enterprise and, therefore, are not expected to recur frequently or regularly.
Further para 8 of AS-5 discusses about the disclosure of extraordinary items
as below:
Extraordinary items should be disclosed in the Statement of Profit and Loss
as a part of net profit or loss for the period. The nature and the amount of
each extraordinary item should be separately disclosed in the Statement of
Profit and Loss in a manner that its impact on current profit or loss can be
perceived.”
In case the company has more than one such item of income / expense of
the above nature, the aggregate of such items should be disclosed on the Guidance Note on the Revised Schedule VI to the Companies Act, 1956
70
face of the Statement of Profit and Loss. Details of the all individual items
should be disclosed in the Notes. [Note 5 (i) (k) to the General Instructions
for Preparation of the Statement of Profit and Loss].
9.8 Tax expense:
This is to be disclosed on the face of the Statement to Profit and Loss and
bifurcated into:
(1) Current tax and
(2) Deferred tax
9.8.1 Current tax
9.8.1.1 The term ‘Current tax’ has been defined under AS-22 “Accounting
for Taxes” on Income as the amount of income tax determined to be payable
(recoverable) in respect of the taxable income (tax loss) for a period. Hence,
details of all taxes on income payable under the applicable taxation laws
should be disclosed here.
9.8.1.2 Presentation for Minimum Alternate Tax (MAT) credit should be
made as prescribed by the ICAI Guidance Note on “Accounting for Credit
Available in Respect of Minimum Alternative tax under the Income-tax Act,
1961’. The relevant portion is as under:
“Profit and Loss Account:
15. According to paragraph 6 of Accounting Standards Interpretation (ASI) 6,
‘Accounting for Taxes on Income in the context of Section 115JB of the
Income-tax Act, 1961’, issued by the Institute of Chartered Accountants of
India, MAT is the current tax. Accordingly, the tax expense arising on
account of payment of MAT should be charged at the gross amount, in the
normal way, to the profit and loss account in the year of payment of MAT. In
the year in which the MAT credit becomes eligible to be recognised as an
asset in accordance with the recommendations contained in this Guidance
Note, the said asset should be created by way of a credit to the profit and
loss account and presented as a separate line item therein.”
The Disclosure in this regard should be made as under :
Current tax (MAT) XX
Less : MAT credit entitlement (XX)
Net Current tax XX
9.8.1.3 Any interest on shortfall in payment of advance income-tax is in the
nature of finance cost and hence should not be clubbed with the Current tax. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
71
The same should be classified as Interest expense under finance costs.
However, such amount should be separately disclosed.
9.8.1.4 Any penalties levied under Income tax laws should not be classified
as Current tax. Penalties which are compensatory in nature should be
treated as interest and disclosed in the manner explained above. Other tax
penalties should be classified under Other expenses.
9.8.1.5 Wealth tax payable by a company on assets liable for wealth tax
should not be included within current tax since the same is not a tax on
income. Accordingly, wealth tax should be included in Rates and taxes under
other expenses.
9.8.1.6 Excess/Short provision of tax relating to earlier years should be
separately disclosed.
9.8.2 Deferred tax
9.8.2.1 Any charge/credit for deferred taxes needs to be disclosed
separately on the face of the Statement of Profit and Loss.
9.8.2.2 AS 22 “Accounting for Taxes on Income” defines ‘Deferred tax’ as
the tax effect of timing differences.
Timing differences are defined as “differences between taxable income and
accounting income for a period that originate in one period and are capable
of reversal in one or more subsequent periods.”
9.9 Profit / (loss) for the period from Discontinuing operations
9.9.1 The term ’Discontinuing operations’ is defined in AS 24 “Discontinuing
operations” as a component of an enterprise:
a. that the enterprise, pursuant to a single plan, is:
(i) disposing of substantially in its entirety, such as by selling the
component in a single transaction or by demerger or spin-off of
ownership of the component to the enterprise's shareholders; or
(ii) disposing of piecemeal, such as by selling off the component's
assets and settling its liabilities individually; or
(iii) terminating through abandonment; and
b. that represents a separate major line of business or geographical area
of operations; and
c. that can be distinguished operationally and for financial reporting
purposes. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
72
9.9.2 Profit or loss from Discontinuing Operations needs to be separately
disclosed on the face of Statement of Profit and Loss. This disclosure is in
line with the disclosure requirement of AS-24 Para 32(a) which requires the
amount of pre-tax profit or loss from ordinary activities attributable to the
discontinuing operation during the current financial reporting period, and the
income tax expense related thereto to be disclosed on the face of the
Statement of Profit and Loss.
9.9.3 Further, AS-24 Para 32(b) requires the following disclosure to be made
on the face of the Statement of Profit and Loss as well:
“(b) the amount of the pre-tax gain or loss recognised on the disposal of
assets or settlement of liabilities attributable to the discontinuing operation.”
Accordingly, such disclosures for discontinuing operations should be made
wherever applicable.
9.10 Tax expense of discontinuing operations
In case there are any taxes payable / tax credits available on profits / losses
of discontinuing operations, the same needs to be disclosed as a separate
line item on the Statement of Profit and Loss.
9.11 Earnings per equity share
Computation of Basic and Diluted Earnings Per Share should be made in
accordance with AS 20 Earnings Per Share. It is pertinent to note that the
nominal value of equity shares should be disclosed along with the Earnings
Per Share figures as required by AS 20.
10 Other additional information to be disclosed by way
of Notes to Statement of Profit and Loss
Besides the above disclosures, Para 5 of the General instructions for
Preparation of Statement of Profit and Loss also require disclosure on the
following items:
10.1 Adjustments to the carrying amount of investments [Clause
(h) of Note 5(i)]
In case there are any adjustments to carrying amount of investments
pursuant to diminution in value of the investment (or reversal thereof) in
conformity with AS 13 “Accounting for Investments”, the same should be
disclosed here. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
73
10.2 Net gain or loss on foreign currency translation (other than
considered as finance cost) Clause (i) of Note 5(i)
Any gains / losses on account of foreign exchange fluctuations are to be
disclosed separately as per AS 11. Thus net exchange loss should be
classified under Other expenses and the amount so included should be
separately disclosed. Under this head, exchange differences to the extent
classified as borrowing costs as per Para 4(e) of AS-16 should not be
disclosed. Refer para 9.5.5 [Note 3(c) of Revised Schedule VI].
10.3 Payments to the auditor [Clause (j) of Note 5(i)]
Payments covered here should be for payments made to the firm of
auditor(s). Expenses incurred towards such auditor’s remuneration should be
disclosed under each of the following sub-heads as follows:
As :
(a) Auditor,
(b) For taxation matters,
(c) For company law matters,
(d) For management services,
(e) For other services,
(f) For reimbursement of expenses;
10.4 Prior period items [Clause (l) of Note 5 (i) ]
The term ‘Prior period Items’ is not defined in Revised Schedule VI. AS 5
“Net Profit or Loss for the period, Prior period items and changes in
Accounting Policies”, in para 4.3 defines ‘Prior period items’ as “Prior period
items are income or expenses which arise in the current period as a result of
errors or omissions in the preparation of the Financial Statements of one or
more prior periods”.
10.5 The Revised Schedule VI requires the following additional
information to be given by way of notes:
Nature of company Disclosures required
Manufacturing companies Raw materials under broad heads
Goods purchased under broad heads
Trading companies Purchases of goods traded under
broad heads
Companies rendering or
supplying services
Gross income derived from services
rendered under broad heads Guidance Note on the Revised Schedule VI to the Companies Act, 1956
74
Company that falls under
more than one category
It will be sufficient compliance with
the requirements, if purchases, sales
and consumption of raw material and
the gross income from services
rendered are shown under broad
heads.
10.6 The disclosure requirements to be made for the above in the
Financial Statements are discussed as under:
The disclosures required as above are not very clear and give rise to the
following questions:
(a) Whether a company is required to disclose quantitative details or not?
(b) Whether a manufacturing company will disclose purchase, sale or
consumption of raw materials?
(c) What is meant by “good purchased” in case of manufacturing
companies?
(d) While there is a requirement to disclose gross income in case of a
service company and sales in case of a company falling under more
than one category, there is no clear requirement to disclose sales for a
manufacturing or a trading company.
(e) With regard to a company falling under more than one category
different interpretations seem possible. One interpretation is that it
should disclose purchase, sale and consumption for raw material. The
other interpretation is that purchase relates to traded goods, sale
relates to all goods sold (both manufactured goods and traded goods)
and for raw material, only consumption needs to be disclosed.
10.7 Since the Revised Schedule VI gives a note stating that “Broad heads
shall be decided taking into account the concept of materiality and
presentation of true and fair view of Financial Statements”, a company may
consider the following in deciding the disclosures required:
(a) Apparently, there is no need to give quantitative details for any of the
items.
(b) Considering the ambiguity and on a conservative interpretation, a
manufacturing company may disclose the following under broad heads:
(i) Consumption of major items of raw materials (including other
items classified as raw material such as intermediates/
components/packing material) Guidance Note on the Revised Schedule VI to the Companies Act, 1956
75
(ii) Goods purchased for trading (if any)
(iii) Though the Revised Schedule VI does not specifically require, it
is also suggested to disclose major items of opening and closing
stock. However, it is not mandatory.
(iv) Considering the requirement to disclose gross income in case of
a service company and sales in case of a company falling in
more than one category, disclosure of sales of finished goods
should also be made under broad heads.
(c) The term “broad heads” may be interpreted to mean broad categories
of raw materials, goods purchased, etc. These categories should be
decided based on the nature of each business and other facts and
circumstances. Normally, 10 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
heads. Any other threshold can also be considered taking into account
the concept of materiality and presentation of true and fair view of
Financial Statements.
(d) Similar principle may be followed to decide disclosure requirement in
other cases.
10.8 Based on the above perspectives, given below is a suggested format
for making this disclosure:
10.8.1 Manufacturing company
(Amount in `)
Particulars Consumption
Raw materials
Raw material A XX
(YY)
Raw material B XX
(YY)
Others XX
(YY)
Total XX
(YY)
Particulars Purchases
Goods purchased Guidance Note on the Revised Schedule VI to the Companies Act, 1956
76
Traded item A XX
(YY)
Traded item B XX
(YY)
Others XX
(YY)
Total XX
(YY)
Particulars Sales
values
Closing
Inventory
Opening
Inventory
Manufactured goods
Finished goods A XX
(YY)
XX XX
Finished goods B XX
(YY)
XX XX
Others XX
(YY)
XX XX
Total XX
(YY)
XX XX
Traded goods
Traded goods A XX
(YY)
XX XX
Traded goods B XX
(YY)
XX XX
Others XX
(YY)
XX XX
Total XX
(YY)
XX XX
Particulars WIP
Work in Progress
Goods A WIP XX
(YY)
Goods B WIP XX Guidance Note on the Revised Schedule VI to the Companies Act, 1956
77
(YY)
Others XX
(YY)
Total XX
(YY)
10.8.2 Trading company
Particulars Purchase Sales
Traded goods
Traded goods A XX
(YY)
XX
(YY)
Traded goods B XX
(YY)
XX
(YY)
Others XX
(YY)
XX
(YY)
Total XX
(YY)
XX
(YY)
10.8.3 Service Company
Particulars Amount
Services rendered
Service A XX
(YY)
Service B XX
(YY)
Others XX
(YY)
Total XX
(YY)
Note : Figures in brackets represent previous year figures.
A company falling under more than one category will make the above
disclosures, to the extent relevant. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
78
10.9 The aggregate, if material, of any amounts set aside or
proposed to be set aside, to reserve [Clause (a) of Note 5(iv)]
10.9.1 Disclosure is required for amounts set aside or proposed to be set
aside to reserves out of the profits for the period. The said transfers can be
in terms of the applicable statute under which the Financial Statements are
prepared i.e., the Companies Act, 1956 or any other applicable statute e.g.
Income Tax Act, 1961, or RBI Act, 1932, etc. Further, profits may also be
appropriated to free reserves as deemed appropriate by the management.
10.9.2 The transfer to reserves as above should, however, not include
provisions made to meet any specific liability, contingency or commitment
known to exist at the date as on which the Balance Sheet is made up.
10.10 The aggregate, if material, of any amounts withdrawn from
such reserves [Clause (b) of Note 5 (iv):
In case the company has made any withdrawals from any reserves created in
terms of Clause (a) of Note 5(iv) above, the same is to be disclosed
separately.
It may be noted that such setting aside as well as withdrawal from reserves is
to be disclosed under applicable Line item of Reserves and Surplus, and not
under the Statement of Profit and Loss since the same is an appropriation of
profits and not a charge against revenue.
10.11 The aggregate, if material, of the amounts set aside to
provisions made for meeting specific liabilities, contingencies or
commitments and amounts withdrawn from such provisions, as
no longer required [Clause (a) of Note 5(v) and Clause (b) of Note
5(v)]
The amounts in respect of the items under this requirement should be separately
disclosed as a charge to the Statement of Profit and Loss. Provisions no longer
required should be credited to the Statement of Profit and Loss.
10.12 Clause (b) of Note 5(vii) requires disclosure for ‘Provisions
for losses of subsidiary companies’.
However, as per AS-13, a provision in respect of losses made by subsidiary
companies is made only when the same results in an other than temporary
diminution in the value of investments in the subsidiary. Accordingly, the
aforesaid disclosure should be made separately only where such a provision
has been made in respect of the investment in such loss-making subsidiary. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
79
11 Other Disclosures
The Statement of Profit and Loss shall also contain by way of a note the
following information, namely:-
(a) Value of imports calculated on C.I.F basis by the company during the
financial year in respect of –
I. Raw materials;
II. Components and spare parts;
III. Capital goods;
(b) Expenditure in foreign currency during the financial year on account of
royalty, know-how, professional and consultation fees, interest, and
other matters;
(c) Total value if all imported raw materials, spare parts and components
consumed during the financial year and the total value of all
indigenous raw materials, spare parts and components similarly
consumed and the percentage of each to the total consumption;
(d) The amount remitted during the year in foreign currencies on account
of dividends with a specific mention of the total number of non-resident
shareholders, the total number of shares held by them on which the
dividends were due and the year to which the dividends related;
(e) Earnings in foreign exchange classified under the following heads,
namely:-
¾ Export of goods calculated on F.O.B. basis;
¾ Royalty, know-how, professional and consultation fees;
¾ Interest and dividend;
¾ Other income, indicating the nature thereof
11.1 Value of imports calculated on C.I.F. basis by the company during
the financial year [Clause (a) of Note 5(viii)]
The above disclosure is to be given in respect of –
Raw materials;
Components and spare parts;
Capital goods.
11.1.1 One of the requirements of disclosure as a note to the Statement of
Profit and Loss is the value of imports of raw materials calculated on C.I.F. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
80
basis. The manner in which the term “raw materials” should be interpreted for
this purpose, is as discussed in para 9.5.1.3 of this Guidance Note.
11.1.2 Disclosure is also required to be made as to the value of imports of
components and spare parts and capital goods respectively. The term
“components” may be interpreted in the same manner as the term
“intermediates or components” in connection with the requirement, discussed
earlier in para 9.5.1.2 of this Guidance Note, to disclose the consumption of
purchased components or intermediates. The term “spare parts” would
ordinarily relate to spare parts for plant and machinery and other capital
equipment. The total value of imports of components and spare parts may be
disclosed in the aggregate. It may be appropriate to sub-classify the value of
imports between components and spare parts respectively since the nature
of these two items is not entirely similar. Such separate classification
however, is not a mandatory requirement of the Revised Schedule VI.
However, wherever the records for raw materials and components are
maintained together, the information required under this clause pertaining to
components can be presented collectively with raw materials.
11.1.3 As regards “capital goods”, disclosure would be involved in respect of
imported plant and machinery, furniture and fixtures, transport equipment,
intangible assets and other types of expenditure which is treated as capital
expenditure in the books of account. It is undoubtedly anomalous to disclose
the value of imports of capital goods by way of a note on the Statement of
Profit and Loss, since by the very definition, capital assets do not form part of
the Statement of Profit and Loss. However, since this is the specific
requirement of the Revised Schedule VI, it would have to be complied as
such. Since this disclosure is required for the Statement of Profit and Loss, it
would not be advisable to disclose the imports of capital goods by way of a
note on Fixed Assets- Tangible Assets or Capital work-in-progress, even
though it would be more appropriate to do so.
11.1.4 It is significant that this requirement covers only imported spare parts. It
apparently does not apply to goods imported for sale, imported stores, etc.
However, the practice followed by most companies is that imported stores are
being clubbed with imported spare parts for the purposes of this disclosure. This
is probably due to the practical difficulty involved in separating stores from spare
parts. Hence, where it is not possible to segregate the two owing to practical
difficulties, the total value of imports of stores and spare parts may be shown
against a caption which clearly indicates that the value shown relates to both the
stores as well as the spare parts.
11.1.5 The disclosure in respect of imports of the foregoing items is to be
made on accrual basis. This is because disclosure is required in respect of Guidance Note on the Revised Schedule VI to the Companies Act, 1956
81
the value of imports “during the financial year”. Consequently, if the particular
item has been imported during the accounting year, it should be disclosed as
such, even though the payment is not made in that year.
11.1.6 It is also to be noted that the disclosure under this requirement relates
to the imports as such. It is not linked with the consumption of the material or
utilization of capital goods.
11.1.7 While a subsequent requirement relates to expenditure in foreign
currency for designated items, the requirement presently under discussion is
not linked with any particular expenditure in foreign currency or local
currency. Consequently, the value of imports of raw materials, components
and spare parts and capital goods is to be disclosed irrespective of whether
or not such imports have resulted in an expenditure in foreign currency. It is
possible that imports may have been arranged on Rupee payment terms
without involving any foreign currency expenditure but even so, the value of
the imports would have to be suitably disclosed.
11.1.8 Disclosure should be made in Indian currency. Where the imports
involve foreign currency expenditure, the amount be disclosed would be the
corresponding Rupee value of the imports as translated in the books of
account on normal principles relating to the translation of foreign currencies.
11.1.9 The value of the imports is to be calculated on C.I.F. basis – that is
inclusive of cost, insurance and freight. It is possible that the imported
materials may have been shipped by an Indian carrier and the insurance may
have been arranged with an Indian insurer, so that, really, there is no
element of import of services with regard to the insurance and freight. Even
so, the Revised Schedule VI requires the value of the imports to be disclosed
on a C.I.F. basis, and while this may be anomalous in the types of situations
indicated above, the requirement should ordinarily be complied with. If for
any reason, there is some practical difficulty in disclosing the value of the
imports on C.I.F. basis, a footnote should be appended to the statement
indicating the precise method by which the value of imports has been arrived
at. For example, it may be stated that, because of practical difficulties in
disclosing the value of imports on C.I.F. basis, such disclosure has been
made on F.O.B. basis. Without attempting to particularize the various
circumstances under which it may be difficult to disclose the value of imports
on a C.I.F. basis, one example may be cited. A company may have standing
arrangements with a shipping line or with an insurer so that all imports are
covered through such a standing arrangement, In that case, it may be
difficult to allocate the insurance or freight to each specific shipment.
Similarly, if a company is a self insurer, or if it owns its own fleet of ships,
disclosure of the value of imports cannot be made on a C.I.F. basis. In Guidance Note on the Revised Schedule VI to the Companies Act, 1956
82
situations of this kind the matter should be covered by a suitable explanatory
note but otherwise, wherever possible, the value of imports should be
disclosed on a C.I.F. basis. It may be noted that the requirement to disclose
the value on a C.I.F. basis relates to the method of computation of the value,
rather than the terms of the import contract. It is not to be implied that this
method of valuation is restricted to a case where the import contract is itself
on a C.I.F. basis.
11.1.10 Disclosure is required with regard to the value of imports “by the
company”. This implies that only direct imports by the company are involved
in the disclosure. If the company purchases imported materials in the open
market, no disclosure would be necessary under this requirement. Similarly,
if the company canalized its imports through another agency such as the
State Trading Corporation, no disclosure would be required, since it is the
latter agency which is the importing entity. On the other hand, if a company
purchases import entitlements and thereafter imports materials on the basis
of those entitlements, the value of such imports would need to be disclosed,
since they are the imports of the company, irrespective of the manner in
which the company procured the import entitlements. Within this rather broad
statement of the case, it is apprehended that practical difficulties may arise in
determining whether or not a particular import has been made “by the
company”.
11.1.11 For the purpose of this requirement, only direct imports are to be
taken into consideration. Imported materials purchased locally, and imports
canalized through other sources, need not be disclosed. While this distinction
may be clear in the large majority of cases, problems may arise in individual
cases. In particular, in the case of indirect imports, care should be taken to
determine whether the source from which the imports have been obtained
represent an agency or an independent principal. If a company has
appointed a person or a company as its agent for the purpose of securing the
import of raw materials, etc., the imports through such agent must be
regarded as the company’s imports, and the value of such imports should be
disclosed pursuant to the requirement under this Note. On the other hand, if
another person or company has already imported the materials and the
company in question merely purchases such imported materials, on a
principal to principal basis, (except in cases where importing the materials is
done under specific requisition resulting in substance agent-principal
relationship) the value of such imports should be ignored by the latter
company, and included by the former.
11.1.12 The value of imports should also include goods which are in transit
on the Balance Sheet date, provided significant risks and rewards of Guidance Note on the Revised Schedule VI to the Companies Act, 1956
83
ownership in those goods have already passed to the purchasing company.
For the purpose of determining whether or not the property has passed,
reference may be made to the terms of the import contract, and recognized
legal principles, relating to this matter. Conversely, goods-in-transit at the
beginning of the year should be excluded on a similar basis so that they do
not form part of the value of the current year’s imports or succeeding year’s
for the purpose of the same disclosure relating to the value of imports.
11.1.13 Since the requirement is to disclose the value of imports during the
accounting year, it may be necessary to determine when the significant risks
and rewards of ownership to the goods has passed from the overseas
exporter to the Indian importer in accordance with the well recognized legal
principles relating to this matter, irrespective of the fact whether or not the
goods have been physically received.
11.1.14 A particular problem may, however, arise in the case of import of
capital goods where delivery is to be made in installments through part
shipments from time to time. The contract may provide for the total value of
the entire shipment and it may, therefore, be difficult to determine the
separate value of the part shipments received during the accounting year.
Since the disclosure which is required is in respect of imports during the
accounting year, it may be necessary to estimate, on a reasonable basis, the
separate value of part shipments. If such estimates are reasonable, no
objection needs be taken thereto.
11.1.15 It follows from this that, in appropriate cases, the disclosure would
include the value of goods in transit at the end of the year if the significant
risks and rewards of ownership in such goods has already passed to the
Indian importer. Conversely, it may be necessary to exclude the value of the
opening inventory in transit if the title to such inventory had already passed
to the Indian importer prior to the end of the previous year.
11.1.16 For the purpose of working out the C.I.F. value of imports, it may be
necessary to make approximations in suitable cases. For example, a
company may be actually importing materials on the basis of F.O.B.
contracts so that the values directly available from its records would be those
relating to F.O.B. terms. In such cases, a standard formula may be applied in
order to convert the F.O.B. values to C.I.F. For example, the company’s
accountant may calculate that a loading of, say, eleven per cent on the
F.O.B. values is ordinarily adequate and correct in order to convert the
F.O.B. values to C.I.F. If such approximations are reasonable, no objection
should ordinarily be taken thereto. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
84
11.2 Expenditure in foreign currency during the financial year [Clause
(b) of Note 5(viii)]
The above is to be disclosed for expenditure incurred on account of royalty,
know-how, professional and consultation fees, interest and other matters;
11.2.1 In addition to the requirement discussed earlier relating to the
disclosure of the value imported materials, and the disclosure relating to the
consumption of imported materials as compared to indigenous materials,
there is also a further requirement to disclose expenditure in foreign currency
on account of royalty, know-how, professional consultation fees, interest, and
other matters.
11.2.2 In this particular case, the disclosure is to be made with regard to the
expenditure in foreign currency. Consequently, if no foreign currency
expenditure is involved, no disclosure would be required, even though the
specific services covered by this requirement have been imported free of
cost or against Rupee payment or against any other method of payment or
adjustment not involving the expenditure of foreign currency. Although the
disclosure is required to be made with regard to items involving expenditure
in foreign currency, the amount to be disclosed would be the Indian Rupee
amount. It should be noted that every company is required to follow accrual
system of accounting and the requirement refers to ‘expenditure’, the
disclosure should be on the basis of the expenditure incurred and recorded in
the books of account and not on the basis of remittance. The appropriate
Rupee figure can be obtained by converting the foreign exchange figure
through the application of a rate of exchange which is suitable for that
purpose, having regard to normal principles of foreign currency
translation/conversion in accounts. If so desired, the foreign currency figure
may also be given as additional information but this cannot be regarded as
mandatory.
11.2.3 While the requirement relating to the disclosure of imports clearly
specifies the different heads under which the disclosure is to be made, and
while the requirement relating to foreign exchange earnings also similarly
indicates the specific heads under which the disclosure is to be classified,
there is no such requirement with regard to the disclosure of expenditure in
foreign currency. It is true that the specific items in respect of which such
disclosure is to be made have been indicated, but this does not by itself
imply that the disclosure is to be classified with reference to those items. At
the same time, since such classification should not be difficult, it is advisable
to classify the foreign currency expenditure between royalty, know-how,
professional consultation fess, interest and other matters. In other words, the
classification as between these items is certainly desirable but is probably Guidance Note on the Revised Schedule VI to the Companies Act, 1956
85
not mandatory, having regard to the precise terms of the Revised Schedule
VI. It may also be noted that under old Schedule VI, for the same
requirement, the practice has been to classify between different heads and
disclose.
11.2.4 The various items specified above do not call for any particular
comments since they are expressed through well understood terms. The
residual item relating to “other matters” appears to be sufficiently exhaustive
so as to cover any items for which foreign currency expenditure is involved. It
is necessary to point out that disclosure is required with regard to “other
matters” rather than with regard to “other similar matters”. Consequently, it
would not be reasonable to infer that disclosure is limited to items of a nature
similar to royalty, know-how, professional consultation fees and interest. At
the same time, however, it would be unreasonable to suggest that disclosure
should be made once again with regard to the expenditure involved in foreign
currency for an item whose import value has already been disclosed in
response to the earlier requirement. Ordinarily, the requirement presently
under discussion relates to expenditure on intangible items rather than on the
import of tangible goods. However, if any foreign currency expenditure on the
import of tangible goods has not been disclosed pursuant to the earlier
requirements, it would need to be disclosed under this requirement. For
example, foreign currency expenditure on the import of stores may not have
been disclosed on the basis that the earlier requirement necessitates
disclosure only with regard to the value of imports of “components and spare
parts”. In that case, the foreign currency expenditure involved in the import of
stores would need to be disclosed under the requirement presently under
discussion since this requirement covers “expenditure in foreign currency” on
account of royalty, know-how, professional consultation fees, interest and
other matters. Disclosure would also be involved under this requirement of
any foreign currency expenditure in the payment of taxes in an overseas
country on income earned in that country in a case where the payment of such
taxes involves actual remittance from India. Where, however, the payment of
taxes in the overseas country is made through deduction at source rather than
by actual remittance from India, the method of disclosure has been suggested
in a subsequent paragraph of this Note dealing with foreign exchange
earnings where it has been recommended that foreign exchange earnings
received subject to deduction of tax at source should be disclosed both gross
and net.
11.2.5 The disclosure of expenditure in foreign currency is to be made on
accrual basis since all the items in the Statement of Profit and Loss are
stated on an accrual basis. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
86
11.2.6 A further question which needs to be resolved is whether the
disclosure is to be made of the gross amount of the expenditure, or of the
net amount after tax deduction at source, in a case where such deduction is
involved. So far as the company in concerned the gross expenditure is the
amount of expenditure incurred in foreign currency even though a part of it
may have been paid in Rupees to the Government to meet the statutory
obligation of deducting tax at source. Deduction of tax at source by itself is
not the finality of the matter and is merely a preliminary stage towards
settlement of tax liability of the non-resident. Ultimately, on assessment of
the non-resident, the full amount of tax deducted at source may have to be
refunded. In view of this, the preferable course seems to be to disclose the
gross expenditure that has been incurred by the company.
11.2.7 Disclosure is to be limited only to those cases where the company
itself incurs a foreign currency expenditure. Where an expenditure involves
foreign currency but the original payment by the company itself is in Rupees,
no disclosure is necessary. For instance, if a company has borrowed a loan
from a Government agency and incurs expenditure in payment of interest on
that loan, the company may be aware that the interest paid by it to the
Government agency in Rupees will ultimately be remitted by the Government
agency to a foreign lender. However, since the company itself does not incur
any foreign currency expenditure, no disclosure is required in its accounts.
11.3 Total value of all imported raw materials, spare parts and
components consumed during the financial year and the total value of
all indigenous raw materials, spare parts and components similarly
consumed and the percentage of each to the total consumption;
[Clause (c) of Note 5(viii)]
11.3.1 Apart from the disclosure relating to the C.I.F. value of imports,
separate disclosure is also required with reference to the value of imported
raw materials, spare parts and components consumed during the accounting
year. There is no guidance, for the purpose of this requirement, as to the
manner in which the imported materials are to be evaluated i.e., C.I.F. basis
or F.O.B. basis or any other basis. Even though the value of materials
imported by the company itself is required to be stated on a C.I.F. basis, it
does not follow that this basis is necessarily appropriate to the disclosure of
the value of imported materials consumed. In the latter case, it would be
more appropriate to make the disclosure on the basis of the actual cost to
the company of the imported materials which have been consumed, since it
is this cost which enters into the company’s accounts. Consequently, the
value of imported materials consumed should include not only their cost but
also incidental expenses directly related to the purchase of such materials. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
87
There is another reason for this suggestion and that is based on the fact that
the value imported materials consumed is required to be compared with the
value of indigenous materials consumed. Moreover, in the company’s
accounts, the total figure shown for consumption of materials (inclusive of
indigenous and imported materials) would ordinarily be based on the value
inclusive of the cost of such materials and various incidental charges.
Therefore, in order to facilitate correlation with the total amount shown for
consumption of materials in the Statement of Profit and Loss account as well
as in order to facilitate comparison between the value of indigenous
consumption and imported consumption, it is desirable that the value of
imported materials consumed should be stated on a similar and consistent
basis by including the cost of such materials and various incidental charges.
11.3.2 On the face of it, it would appear that this requirement duplicates the
earlier requirement relating to the disclosure of the value of imports of raw
materials, components and spare parts. However, there is a difference. The
earlier requirement relates to the disclosure of the value of imports per se
irrespective of whether or not the materials imported have been consumed in
the company’s operations. The latter requirement, on the other hand relates
only to the value of the imported materials consumed in the company’s
operation.
11.3.3 As in the case of earlier requirement, it is not relevant to consider
whether or not the imported materials which have been consumed have
necessitated an expenditure in foreign currency. Even if no foreign currency
expenditure is involved, the value of consumption of imported materials is
still required to be disclosed.
11.3.4 The disclosure is to be made in Indian currency by applying normal
methods for the translation of foreign currencies where the original
expenditure was incurred in a foreign currency.
11.3.5 A question may arise whether to include the consumption of locally
purchased materials of foreign origin. Apart from the difficulties of
ascertaining which locally purchased materials are of imported origin, it is
logical to interpret this requirement as requiring disclosure only of materials
imported directly or indirectly by the company. This would include materials
imported directly by the company as well as indirect imports made to be
company’s knowledge or at its request through canalizing agents such as the
State Trading Corporation.
11.3.6 It is not entirely clear whether the requirement herein implies that the
value of imported raw materials, spare parts and components should be
separately disclosed for each of these three items, or whether a composite Guidance Note on the Revised Schedule VI to the Companies Act, 1956
88
disclosure for all the three items taken together is sufficient. The latter part of
this clause states that “the percentage of each to the total consumption” is
also to be disclosed. This may be taken to imply that the consumption is to
be shown separately for raw materials, spare parts and components
respectively. However, wherever the records for raw materials and
components are maintained together, the information required under this
clause can be presented collectively.
11.3.7 While raw materials are undoubtedly consumed in the course of
operations, this term is hardly appropriate to spare parts and components.
Spare parts may be utilized for repairs and maintenance or for other similar
purposes, and components may be assembled into the finished product. In
either case, the spare parts and components can hardly be said to have been
“consumed”. However, without going into the semantics relating to the word
“consumed”, the intention appears to be reasonably clear and disclosure
may, therefore, be made on the basis of indicating the value of imported
spare parts and components utilized in the company’s operations.
11.3.8 In addition to disclosing the value of imported raw materials spare
parts and components consumed during the accounting year, disclosure is
also required with regard to the value of indigenous raw materials, spare
parts and components similarly consumed during that year. In both cases,
the value of the consumption should be determined on the same identical
basis, so that like is compared with like. Thereafter, it is also required that
the relative percentages of consumption value in respect of imported items
and indigenous items should be stated as a percentage of total consumption
for each of the categories of raw materials, spare parts and components
respectively.
11.3.9 Care should be taken to ensure that the total consumption agrees with
the figures in the Statement of Profit and Loss. In the case of consumption of
raw materials, the separate figures for such consumption is generally
disclosed in one figure in the Statement of Profit and Loss, in which case, the
total consumption classified as between imported and indigenous should
agree with this figure. Sometimes, however, the total consumption of raw
materials is not shown as one figure in the Statement of Profit and Loss.
Instead, a note is given indicating the consumption of raw materials shown
under more than one head of account. In that case, care should be taken to
ensure that the total figure for consumption of raw materials analysed as
between imported and indigenous agrees with the total consumption shown
in the Statement of Profit and Loss inclusive of the figure of consumption
charged to other heads of account. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
89
11.3.10 The term “spare parts” for the purpose of the foregoing requirements
would refer to spares for plant and machinery and other items of a similar
nature or intended for a similar purpose. This term would not ordinarily
include stores. The term “stores” refers to materials and supplies which
assist the manufacturing process but which do not directly enter into the
furnished product. It is a term of wider import than “spare parts” and
ordinarily, the term “stores” would include “spare parts”. Since the present
requirement is limited to spare parts, it would appear to be unnecessary to
disclose the separate figures relating to the consumption of stores – imported
and indigenous. It is somewhat curious that disclosure should be required
with regard to spare parts and not with regard to stores, but this is
nevertheless, the logical interpretation of the words used in the relevant
clause. Where the segregation between stores and spare parts is not
possible owing to practical difficulties, the value of consumption of imported
and indigenous stores and spare parts may be shown against a caption
which clearly indicates that the value shown relates to both stores and spare
parts.
11.3.11 As regards spare parts, the substantive requirement of Revised
Schedule VI (Other expenses para 9.5.7) requires a composite figure to be
disclosed in respect of consumption of stores and spare parts, whereas the
analysis here is required only in respect of consumption of spare parts.
Consequently, the total figure analysed for consumption of spare parts may
not agree directly with the figure disclosed in the Statement of Profit and
Loss for consumption of stores and spare parts, unless in the Statement of
Profit and Loss, these two figures are separately itemized. In any case,
however, a reconciliation statement should be kept on the company’s
working paper files to indicate that the figures have been agreed.
11.3.12 As regards components, the clause does not indicate clearly
whether the classification of imported and indigenous components is to be
restricted to purchased components, or whether it would also include
components manufactured internally. Normally, imported components would
in any case be restricted to those which are purchased, with the possible
exception of a rare case in which components are fabricated outside India by
a branch or department of the same company and are then shipped to India
for incorporation into the finished product. Ignoring such an exception, it
would appear that if imported components are to be restricted to those which
are purchased, indigenous components would also have to be similarly
restricted, otherwise the comparison would be vitiated. Consequently, it is
suggested that this requirement may be interpreted in a manner whereby the
classification of components between imported and indigenous would be Guidance Note on the Revised Schedule VI to the Companies Act, 1956
90
limited to purchased components, ignoring any components which are
manufactured internally.
11.3.13 Under some systems accounting, the consumption is originally
charged in the accounts on the basis of standard or pre-determined rates.
Periodically, an adjustment is made in the total consumption account in order
to accord with the actual rates at which relevant materials may have been
purchased. A problem may arise with reference to the classification of the
total net debit or credit for such price adjustment as between imported and
indigenous consumption. The most obvious method of solving this difficulty –
which should be acceptable in most cases – is to allot the total debit or credit
adjustment between imported and indigenous consumption, in the same ratio
as the figure for imported and indigenous consumption prior to such debit or
credit adjustment. A similar procedure may also be followed in the case of
any other special debit or credit adjustments which are entered in the
consumption accounts to reflect adjustments to the total consumption figure.
On a slightly different context, a similar problem arises where the same item
is partly purchased locally and partly imported and stocks are not physically
kept separately. In such cases, it appears to be permissible to assume that
consumption is on a pro-rata basis, e.g., in the ratio of opening stock plus
purchase.
11.4 Total amount remitted during the year in foreign currencies on
account of dividends with a specific mention of the total number of nonresident shareholders, the total number of shares held by them on
which the dividends were due and the year to which the dividends
related [Clause (d) of Note 5(viii)];
11.4.1 The requirement is to the disclosure with regard to the amount
remitted to non-resident shareholders on account of dividends. This
disclosure is to be made with reference to the amount remitted during the
accounting year in foreign currencies. Consequently, if the dividend has been
paid to a non-resident shareholder in Indian Rupees, disclosure would not
appear to be necessary. Also, if a non-resident shareholder has indicated
that all dividends payable to him are to be deposited in a Rupee account with
his bankers in India, and if such deposit is actually made on the basis of the
necessary sanctions from the Reserve Bank of India, no disclosure would be
required because such a deposit does not constitute any payment in foreign
currency. It is possible that the non-resident shareholder may ultimately
arrange for foreign currency remittances out of his Rupee bank account but
this would be no concern of the company which pays the dividends into his
Rupee bank account. However, by way of additional information, deposits Guidance Note on the Revised Schedule VI to the Companies Act, 1956
91
regarding such dividends paid in the bank account may be given, indicating
the fact.
11.4.2 As in the case of other disclosure relating to imports, exports, foreign
exchange expenditure and earnings, etc. the amount to be disclosed in
respect of foreign currency dividends is to be stated in Indian Rupees. If so
desired, additional information may be furnished with regard to the foreign
currency equivalent to the dividend, which has been remitted, but the basic
requirement is to disclose the rupee amount. Disclosure of the foreign
currency equivalent is not mandatory.
11.4.3 Since disclosure is required with regard to the “amount remitted
during the year”, it would appear that the information is to be furnished in the
year of actual payment of dividend rather than in the year in which the
dividend is proposed or declared. In other words, the disclosure should be
made on a cash basis, contrary to the fact that the other disclosures are to
be made on accrual basis.
11.4.4 In addition to the disclosure relating to the amount of dividends
remitted in foreign currency, further disclosure is also required with regard to
the number of non-resident shareholders to whom the dividends were
remitted, the number of shares held by them, and the year to which the
dividends relate. These requirements should not be difficult to comply with
and no particular problem in likely to be encountered.
11.4.5 A question may arise as to whether or not any information is to be
furnished with regard to the number of non-resident shareholders and the
number of shares held by them, in particular year in which no dividend has
been remitted to the non-resident shareholders. The answer is in negative,
since, as already indicated earlier, the information relating to the number of
non-resident shareholders and the number of shares held by them is
intended to be linked to the basic information relating to the dividends
remitted to non-resident shareholders.
11.5 Earnings in Foreign exchange [Clause (e) of Note 5 (viii)]
11.5.1 Foreign exchange earnings have to be classified under the following
heads:-
(i) export of goods calculated on F.O.B. basis;
(ii) royalty, know-how, professional and consultation fees;
(iii) interest and dividends; and
(iv) other income (indicating the nature thereof). Guidance Note on the Revised Schedule VI to the Companies Act, 1956
92
11.5.2 In this case also, as in the case of disclosure relating to foreign
currency expenditure, the question arises as to whether foreign currency
earnings have to be disclosed on a cash basis or on an accrual basis. The
considerations relating to this aspect of the matter are similar to those
discussed earlier in connection with the requirement relating to the disclosure
of foreign currency expenditure. Since the Statement of Profit and Loss is
prepared on an accrual basis, it may be suggested that foreign currency
earnings should also be disclosed on a similar basis.
11.5.3 Since, foreign exchange earnings are to be disclosed on an accrual
basis, the subsequent receipt of foreign exchange in a later year should be
ignored, as otherwise the same earnings would be disclosed twice.
11.5.4 A further question which arises is whether the foreign exchange
earnings should be disclosed gross of tax or whether they should be
disclosed net of any tax deducted at source in the overseas country in which
earnings have arisen. One way of looking at the matter is that the actual
amount of earnings is the amount received after deduction of overseas tax at
source, where such deduction is involved. On the other hand, the tax which
is deducted at source in the overseas country is available by way of credit
against the tax payable in that country. But for this credit, actual or
constructive remittance may be involved from India to the overseas country
for the purpose of meeting the tax liability in that country. It is, therefore,
suggested that the more appropriate basis of disclosure would be gross of
tax with a mention of the net of tax earnings and tax deducted at source. A
further advantage of this method of disclosure is that the amount which is so
disclosed would agree with the financial accounts, since, in the books of
accounts kept in India, the gross amount of the foreign exchange earnings
would be credited to revenue, while the tax deducted at source would be
debited to an appropriate account relating to payment of taxes.
11.5.5 While the requirement relating to the disclosure of imports requires
the “value of imports” to be disclosed, the disclosure of exports requires the
“earnings from export of goods” to be disclosed. It would probably have been
more consistent if the relevant clause had required the value of exports to be
disclosed, rather than the earnings.
11.5.6 Considerations that apply in determining whether a purchase is an
import by the company will also apply in determining whether sales is an
export by the company. Any sales made direct by the company through an
agent to any overseas buyer is an export by the company. However, goods
sold to any canalizing agent like the State Trading Corporation for export is
not the company’s export. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
93
12 Multiple Activity Companies
Where a company has multiple activities e.g. both manufacturing and trading
i.e. it falls under more than one category, it should comply with the various
disclosure requirements relating to each of its classified activities. For
instance, in respect of its manufacturing activities, such a company should
comply with the requirements relating to a manufacturing company, whereas
in respect of its trading or service activities, it should comply with the
requirements relating to those categories of companies. However, in case of
complexities in segregating the required information it would be sufficient
compliance if the information is disclosed with respect to main activities with
a suitable disclosure explaining the reasons therefor. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
94
Annexure A
Notification on Revised Schedule VI
"NOTIFICATION NO. S.O. 447(E), DATED 28-2-2011 [AS AMENDED BY
NOTIFICATION NO. F.NO. 2/6/2008-CL-V, DATED 30-3-2011]
Whereas the Central Government in consultation with the National Advisory
Committee on Accounting Standards framed the Companies (Accounting
Standards), Rules, 2006 vide G.S.R. No. 739(E) dated the 7th December,
2006 and was subsequently amended vide notification numbering (i) G.S.R.
212(E), dated the 27
th
March, 2008 (ii) G.S.R. 225(E), dated the 31st March,
2009, in exercise of the powers conferred by clause (a) of sub-section (1) of
section 642, read with sub-section (1) of section 210A and sub-section (3C)
of section 211 of the Companies Act, 1956 (1 of 1956);
Now, therefore, in exercise of the powers conferred by sub-section (1) of
section 641 of the Companies Act, 1956 (1 of 1956), the Central
Government hereby replaces the existing Schedule VI to the said Act by the
following Schedule VI, namely:-
"SCHEDULE VI" (See section 211)"
The New Schedule VI will come into effect for all accounts prepared for
accounting year commencing on or after 01.04.2011 as per the following
notification.
NOTIFICATION [F. NO. 2/6/2008-C.L-V], DATED 30-3-2011.
In exercise of the powers conferred by clause (a) of sub-section (1) of
section 642 read with sub section(1) of section 210A and sub-section (3C) of
section 211 of the Companies Act,1956, (1 of 1956), the Central Government
hereby makes the following amendment to paragraph 2 of the notification
No.447(E) dated the 28
th
February, 2011:-
"The notification shall come into force for the Balance Sheet and Profit and
Loss Account to be prepared for the financial year commencing on or after 1-
4-2011". Guidance Note on the Revised Schedule VI to the Companies Act, 1956
95
SCHEDULE VI
(See section 211)
GENERAL INSTURCTIONS FOR PREPARATION OF BALANCE SHEET AND
STATEMENT OF PROFIT AND LOSS OF A COMPANY IN ADDITION TO THE
NOTES INCORPORATED ABOVE THE HEADING OF BALANCE SHEET
UNDER
GENERAL INSTRUCTIONS
1. Where compliance with the requirements of the Act including Accounting
Standards as applicable to the companies require any change in
treatment or disclosure including addition, amendment, substitution or
deletion in the head/sub-head or any changes inter se, in the Financial
Statements or statements forming part thereof, the same shall be made
and the requirements of the Schedule VI shall stand modified
accordingly.
2. The disclosure requirements specified in Part I and Part II of this
Schedule are in addition to and not in substitution of the disclosure
requirements specified in the Accounting Standards prescribed under the
Companies Act, 1956. 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 the
Financial Statements. Similarly, all other disclosures as required by the
Companies Act shall be made in the Notes to Accounts in addition to the
requirements set out in this Schedule.
3. Notes to Accounts shall contain information in addition to that presented
in the Financial Statements and shall provide where required (a)
narrative descriptions or disaggregations of items recognized in those
statements and (b) information about items that do not qualify for
recognition in those statements.
Each item on the face of the Balance Sheet and Statement of Profit and
Loss shall be cross-referenced to any related information in the Notes to
Accounts. In preparing the Financial Statements including the Notes to
Accounts, a balance shall be maintained between providing excessive
detail that may not assist users of Financial Statements and not
providing important information as a result of too much aggregation.
4. Depending upon the turnover of the company, the figures appearing in
the Financial Statements may be rounded off as below: Guidance Note on the Revised Schedule VI to the Companies Act, 1956
96
Once a unit of measurement is used, it should be used uniformly in the
Financial Statements.
5. Except in the case of the first Financial Statements laid before the
Company (after its incorporation) the corresponding amounts
(comparatives) for the immediately preceding reporting period for all
items shown in the Financial Statements including notes shall also be
given.
6. For the purpose of this Schedule, the terms used herein shall be as per
the applicable Accounting Standards.
Notes
This part of Schedule sets out the minimum requirements for disclosure on
the face of the Balance Sheet, and the Statement of Profit and Loss
(hereinafter referred to as “Financial Statements” for the purpose of this
Schedule) and Notes. Line items, sub-line items and sub-totals shall be
presented as an addition or substitution on the face of the Financial
Statements when such presentation is relevant to an understanding of the
company’s financial position or performance or to cater to industry/sectorspecific disclosure requirements or when required for compliance with the
amendments to the Companies Act or under the Accounting Standards.
PART I – Form of BALANCE SHEET
Name of the Company…………………….
Balance Sheet as at ………………………
(Rupees in…………)
Particulars Note
No.
Figures as at
the end of
current
reporting
period
Figures as
at the end
of the
previous
reporting
period
1 2 3 4
Turnover Rounding off
(i) less than one hundred crore
rupees
To the nearest hundreds,
thousands, lakhs or millions, or
decimals thereof.
(ii) one hundred crore rupees or
more
To the nearest, lakhs, millions or
crores, or decimals thereof. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
97
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
(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
(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
Guidance Note on the Revised Schedule VI to the Companies Act, 1956
98
TOTAL
See accompanying notes to the financial statements
Notes
GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET
1. An 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
consumption in, the company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is expected to be realized within twelve 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 twelve months after
the reporting date.
All other assets shall be classified as non-current.
2. 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.
3. A liability shall be classified as current when 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;
(c) it is due to be settled within twelve months after the reporting date;
or
(d) the company does not have an unconditional right to defer
settlement of the liability for at least twelve months after the
reporting date. Terms of a 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-current. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
99
4. 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.
5. 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.
6. A company shall disclose the following in the Notes to Accounts:
A. Share Capital
for each class of share capital (different classes of preference shares to
be treated separately):
(a) the number and amount of shares authorized;
(b) the number of shares issued, subscribed and fully paid, and
subscribed but not fully paid;
(c) par value per share;
(d) a reconciliation of the number of shares outstanding at the beginning
and at the end of the reporting period;
(e) the rights, preferences and restrictions attaching to each class of
shares including restrictions on the distribution of dividends and the
repayment of capital;
(f) shares in respect of each class in the company held by its holding
company or its ultimate holding company including shares held by or
by subsidiaries or associates of the holding company or the ultimate
holding company in aggregate;
(g) shares in the company held by each shareholder holding more than
5 percent shares specifying the number of shares held;
(h) shares reserved for issue under options and contracts/commitments
for the sale of shares/disinvestment, including the terms and
amounts;
(i) For the period of five years immediately preceding the date as at
which the Balance Sheet is prepared:
Aggregate number and class of shares allotted as fully paid up
pursuant to contract(s) without payment being received in cash.
Aggregate number and class of shares allotted as fully paid up
by way of bonus shares.
Aggregate number and class of shares bought back. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
100
(j) Terms of any securities convertible into equity/preference shares
issued along with the earliest date of conversion in descending order
starting from the farthest such date.
(k) Calls unpaid (showing aggregate value of calls unpaid by directors
and officers)
(l) Forfeited shares (amount originally paid up)
B. Reserves and Surplus
(i) Reserves and Surplus shall be classified as:
(a) Capital Reserves;
(b) Capital Redemption Reserve;
(c) Securities Premium Reserve;
(d) Debenture Redemption Reserve;
(e) Revaluation Reserve;
(f) Share Options Outstanding Account;
(g) Other Reserves – (specify the nature and purpose of each
reserve and the amount in respect thereof);
(h) Surplus i.e. balance in Statement of Profit and 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)
(ii) A reserve specifically represented by earmarked investments shall
be termed as a ‘fund’.
(iii) 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.
C. Long-Term Borrowings
(i) Long-term borrowings shall be classified as:
(a) Bonds/debentures.
(b) Term loans
From banks Guidance Note on the Revised Schedule VI to the Companies Act, 1956
101
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)Other loans and advances (specify nature).
(ii) Borrowings shall further be sub-classified as secured and
unsecured. Nature of security shall be specified separately in each
case.
(iii) Where loans have been guaranteed by directors or others, the
aggregate amount of such loans under each head shall be
disclosed.
(iv) Bonds/debentures (along with the rate of interest and particulars of
redemption or conversion, as the case may be) shall be stated in
descending order of maturity or conversion, starting from farthest
redemption or conversion date, as the case may be. Where
bonds/debentures are redeemable by installments, the date of
maturity for this purpose must be reckoned as the date on which the
first installment becomes due.
(v) Particulars of any redeemed bonds/ debentures which the company
has power to reissue shall be disclosed.
(vi) Terms of repayment of term loans and other loans shall be stated.
(vii) 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.
D. Other Long term Liabilities
Other Long term Liabilities shall be classified as:
(a) Trade payables
(b) Others
E. Long-term provisions
The amounts shall be classified as:
(a) Provision for employee benefits.
(b) Others (specify nature). Guidance Note on the Revised Schedule VI to the Companies Act, 1956
102
F. Short-term borrowings
(i) Short-term borrowings shall be classified as:
(a) Loans repayable on demand
From banks
From other parties
(b) Loans and advances from related parties.
(c) Deposits.
(d) Other loans and advances (specify nature).
(ii) Borrowings shall further be sub-classified as secured and
unsecured. Nature of security shall be specified separately in each
case.
(iii) Where loans have been guaranteed by directors or others, the
aggregate amount of such loans under each head shall be
disclosed.
(iv) Period and amount of default as on the Balance Sheet date in
repayment of loans and interest, shall be specified separately in
each case.
G. Other current liabilities
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. Share application money
includes advances towards allotment of share capital. The terms and
conditions including the number of shares proposed to be issued,
the amount of premium, if any, and the period before which shares
shall be allotted shall be disclosed. It shall also be disclosed
whether the company has sufficient authorized capital to cover the
share capital amount resulting from allotment of shares out of such
share application money. Further, the period for which the share Guidance Note on the Revised Schedule VI to the Companies Act, 1956
103
application money has been pending beyond the period for allotment
as mentioned in the document inviting application for shares along
with the reason for such share application money being pending
shall be disclosed. Share application money not exceeding the
issued capital and to the extent not refundable shall be shown under
the head Equity and share application money to the extent
refundable i.e., the amount in excess of subscription or in case the
requirements of minimum subscription are not met, shall be
separately shown under ‘Other current liabilities’
(h) Unpaid matured deposits and interest accrued thereon
(i) Unpaid matured debentures and interest accrued thereon
(j) Other payables (specify nature);
H. Short-term provisions
The amounts shall be classified as:
(a) Provision for employee benefits.
(b) Others (specify nature).
I. Tangible assets
(i) Classification shall be given as:
(a) Land.
(b) Buildings.
(c) Plant and Equipment.
(d) Furniture and Fixtures.
(e) Vehicles.
(f) Office equipment.
(g) Others (specify nature).
(ii) Assets under lease shall be separately specified under each class of
asset.
(iii) A reconciliation of 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
and other adjustments and the related depreciation and impairment
losses/reversals shall be disclosed separately.
(iv) Where sums have been written off on a reduction of capital or
revaluation of assets or where sums have been added on
revaluation of assets, every Balance Sheet subsequent to date of Guidance Note on the Revised Schedule VI to the Companies Act, 1956
104
such write-off, or addition shall show the reduced or increased
figures as applicable and shall by way of a note also show the
amount of the reduction or increase as applicable together with the
date thereof for the first five years subsequent to the date of such
reduction or increase.
J. Intangible assets
(i) Classification shall be given as:
(a) Goodwill.
(b) Brands /trademarks.
(c) Computer software.
(d) Mastheads and publishing titles.
(e) Mining rights.
(f) Copyrights, and patents and other intellectual property rights,
services and operating rights.
(g) Recipes, formulae, models, designs and prototypes.
(h) Licenses and franchise.
(i) Others (specify nature).
(ii) A reconciliation of 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 and other adjustments and
the related amortization and impairment losses/reversals
shall be disclosed separately.
(iii) Where sums have been written off on a reduction of capital
or revaluation of assets or where sums have been added on
revaluation of assets, every Balance Sheet subsequent to
date of such write-off, or addition shall show the reduced or
increased figures as applicable and shall by way of a note
also show the amount of the reduction or increase as
applicable together with the date thereof for the first five
years subsequent to the date of such reduction or increase.
K. Non-current investments
(i) Non-current investments shall be classified as trade investments
and other investments and further classified as:
(a) Investment property; Guidance Note on the Revised Schedule VI to the Companies Act, 1956
105
(b) Investments in Equity Instruments;
(c) Investments in preference shares
(d) Investments in Government or trust securities;
(e) Investments in debentures or bonds;
(f) Investments in Mutual Funds;
(g) Investments in partnership firms
(h) Other non-current investments (specify nature)
Under each classification, details shall be given 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 (showing separately investments which are partly-paid). In
regard to investments in the capital of partnership firms, the names
of the firms (with the names of all their partners, total capital and the
shares of each partner) shall be given.
(ii) Investments carried at other than at cost should be separately stated
specifying the basis for valuation thereof.
(iii) 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 Guidance Note on the Revised Schedule VI to the Companies Act, 1956
106
L. Long-term loans and advances
(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.
(iv) Loans and advances due by directors or other officers of the
company or any of them either severally or jointly with any other
persons or amounts due by firms or private companies respectively
in which any director is a partner or a director or a member should
be separately stated.
M. Other non-current assets
Other non-current assets shall be classified as:
(i) Long Term Trade Receivables (including trade receivables on
deferred credit terms);
(ii) Others (specify nature)
(iii) Long term Trade Receivables, shall be sub-classified as:
(i) (a) Secured, considered good;
(b)Unsecured considered good;
(c)Doubtful
(ii) Allowance for bad and doubtful debts shall be disclosed under
the relevant heads separately.
(iii) Debts due by directors or other officers of the company or any of
them either severally or jointly with any other person or debts
due by firms or private companies respectively in which any
director is a partner or a director or a member should be
separately stated. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
107
N. Current Investments
(i) Current investments shall be classified as:
(a) Investments in Equity Instruments;
(b) Investment in Preference Shares
(c) Investments in government or trust securities;
(d) Investments in debentures or bonds;
(e) Investments in Mutual Funds;
(f) Investments in partnership firms
(g) Other investments (specify nature).
Under each classification, details shall be given 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 (showing separately investments which are partly-paid). In
regard to investments in the capital of partnership firms, the names
of the firms (with the names of all their partners, total capital and the
shares of each partner) shall be given.
(ii) The following shall also be disclosed:
(a) The basis of valuation of individual investments
(b) Aggregate amount of quoted investments and market value
thereof;
(c) Aggregate amount of unquoted investments;
(d) Aggregate provision made for diminution in value of
investments.
O. Inventories
(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; Guidance Note on the Revised Schedule VI to the Companies Act, 1956
108
(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.
P. 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.
(iv) Debts due by directors or other officers of the company or any of
them either severally or jointly with any other person or debts due by
firms or private companies respectively in which any director is a
partner or a director or a member should be separately stated.
Q. 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) Repatriation restrictions, if any, in respect of cash and bank
balances shall be separately stated.
(v) Bank deposits with more than 12 months maturity shall be disclosed
separately. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
109
R. Short-term loans and advances
(i) Short-term loans and advances shall be classified as:
(a) Loans and advances to related parties (giving details thereof);
(b) Others (specify nature).
(ii) The above shall also be 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.
(iv) Loans and advances due by directors or other officers of the
company or any of them either severally or jointly with any other
person or amounts due by firms or private companies respectively in
which any director is a partner or a director or a member shall be
separately stated.
S. Other current assets (specify nature).
This is an all-inclusive heading, which incorporates current assets that
do not fit into any other asset categories.
T. Contingent liabilities and commitments
(to the extent not provided for)
(i) Contingent liabilities shall be classified as:
(a)Claims against the company not acknowledged as debt;
(b)Guarantees;
(c)Other money for which the company is contingently liable
(ii) Commitments shall be classified as:
(a) Estimated amount of contracts remaining to be executed on
capital account and not provided for;
(b) Uncalled liability on shares and other investments partly paid
(c) Other commitments (specify nature).
U. 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. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
110
V. 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.
W. 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
PART II – Form of STATEMENT OF PROFIT AND LOSS
Name of the Company…………………….
Profit and loss statement for the year ended ………………………
(Rupees in…………)
Particulars Note
No.
Figures for
the current
reporting
period
Figures for
the previous
reporting
period
I. Revenue from operations xxx xxx
II. Other income xxx xxx
III. Total Revenue (I + II) xxx xxx
IV. Expenses:
Cost of materials consumed
Purchases of Stock-in-Trade
Changes in inventories of
finished goods work-inprogress and Stock-in-Trade
Employee benefits expense
Finance costs
Depreciation and
amortization expense
Other expenses
Total expenses
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
V. Profit before exceptional and
extraordinary items and tax
(III-IV)
xxx xxx
VI. Exceptional items xxx xxx
VII. Profit before extraordinary xxx xxx Guidance Note on the Revised Schedule VI to the Companies Act, 1956
111
items and tax (V - VI)
VIII. Extraordinary Items xxx xxx
IX. Profit before tax (VII- VIII) xxx xxx
X Tax expense:
(1) Current tax
(2) Deferred tax
xxx
xxx
xxx
xxx
XI. Profit (Loss) for the period
from continuing operations
(VII-VIII)
Xxx xxx
XII Profit/(loss) from
discontinuing operations
Xxx xxx
XIII. Tax expense of discontinuing
operations
Xxx xxx
XIV. Profit/(loss) from
Discontinuing operations
(after tax) (XII-XIII)
Xxx xxx
XV. Profit (Loss) for the period
(XI + XIV)
xxx xxx
XVI. Earnings per equity share:
(1) Basic
(2) Diluted
xxx
xxx
xxx
xxx
See accompanying notes to the financial statements
GENERAL INSTRUCTIONS FOR PREPARATION OF STATEMENT OF
PROFIT AND LOSS
1. The provisions of this Part shall apply to the income and expenditure
account referred to in sub-section (2) of Section 210 of the Act, in like
manner as they apply to a statement of profit and loss.
2. (A) In respect of a company other than a finance company revenue from
operations shall disclose separately in the notes revenue from
(a) sale of products;
(b) sale of services;
(c) other operating revenues;
Less:
(d) Excise duty. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
112
(B) In respect of a finance company, revenue from operations shall
include revenue from
(a) Interest; and
(b) Other financial services
Revenue under each of the above heads shall be disclosed
separately by way of Notes to Accounts to the extent applicable.
3. Finance Costs
Finance costs shall be classified as:
(a) Interest expense;
(b Other borrowing costs;
(c) Applicable net gain/loss on foreign currency transactions and
translation.
4. Other income
Other income shall be classified as:
(a) Interest Income (in case of a company other than a finance
company);
(b) Dividend Income;
(c) Net gain/loss on sale of investments
(d) Other non-operating income (net of expenses directly attributable to
such income).
5. Additional Information
A Company shall disclose by way of notes additional information
regarding aggregate expenditure and income on the following items:-
(i) (a) Employee Benefits Expense [showing separately (i) salaries and
wages, (ii) contribution to provident and other funds, (iii)
expense on Employee Stock Option Scheme (ESOP) and
Employee Stock Purchase Plan (ESPP), (iv) staff welfare
expenses].
(b) Depreciation and amortization expense;
(c) Any item of income or expenditure which exceeds one per cent
of the revenue from operations or Rs.1,00,000, whichever is
higher;
(d) Interest Income; Guidance Note on the Revised Schedule VI to the Companies Act, 1956
113
(e) Interest Expense;
(f) Dividend Income;
(g) Net gain/ loss on sale of investments;
(h) Adjustments to the carrying amount of investments;
(i) Net gain or loss on foreign currency transaction and translation
(other than considered as finance cost);
(j) Payments to the auditor as (a) auditor,(b) for taxation matters,
(c) for company law matters, (d) for management services, (e)
for other services, (f) for reimbursement of expenses;
(k) Details of items of exceptional and extraordinary nature;
(l) Prior period items;
(ii) (a) In the case of manufacturing companies,-
(1) Raw materials under broad heads.
(2) goods purchased under broad heads.
(b) In the case of trading companies, purchases in respect of goods
traded in by the company under broad heads.
(c) In the case of companies rendering or supplying services, gross
income derived form services rendered or supplied under broad
heads.
(d) In the case of a company, which falls under more than one of
the categories mentioned in (a), (b) and (c) above, it shall be
sufficient compliance with the requirements herein if purchases,
sales and consumption of raw material and the gross income
from services rendered is shown under broad heads.
(e) In the case of other companies, gross income derived under
broad heads.
(iii) In the case of all concerns having works in progress, works-inprogress under broad heads.
(iv) (a) The aggregate, if material, of any amounts set aside or
proposed to be set aside, to reserve, but not including
provisions made to meet any specific liability, contingency or
commitment known to exist at the date as to which the balancesheet is made up.
(b) The aggregate, if material, of any amounts withdrawn from such
reserves. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
114
(v) (a) The aggregate, if material, of the amounts set aside to
provisions made for meeting specific liabilities, contingencies or
commitments.
(b) The aggregate, if material, of the amounts withdrawn from such
provisions, as no longer required.
(vi) Expenditure incurred on each of the following items, separately for
each item:-
(a) Consumption of stores and spare parts.
(b) Power and fuel.
(c) Rent.
(d) Repairs to buildings.
(e) Repairs to machinery.
(g) Insurance.
(h) Rates and taxes, excluding, taxes on income.
(i) Miscellaneous expenses,
(vii) (a) Dividends from subsidiary companies.
(b) Provisions for losses of subsidiary companies.
(Viii) The profit and loss account shall also contain by way of a note the
following information, namely:-
a) Value of imports calculated on C.I.F basis by the company
during the financial year in respect of –
I. Raw materials;
II. Components and spare parts;
III. Capital goods;
b) Expenditure in foreign currency during the financial year on
account of royalty, know-how, professional and consultation
fees, interest, and other matters;
c) Total value if all imported raw materials, spare parts and
components consumed during the financial year and the total
value of all indigenous raw materials, spare parts and
components similarly consumed and the percentage of each
to the total consumption; Guidance Note on the Revised Schedule VI to the Companies Act, 1956
115
d) The amount remitted during the year in foreign currencies on
account of dividends with a specific mention of the total
number of non-resident shareholders, the total number of
shares held by them on which the dividends were due and the
year to which the dividends related;
e) Earnings in foreign exchange classified under the following
heads, namely:-
I. Export of goods calculated on F.O.B. basis;
II. Royalty, know-how, professional and consultation fees;
III. Interest and dividend;
IV. Other income, indicating the nature thereof
Note:-Broad heads shall be decided taking into account the concept of
materiality and presentation of true and fair view of Financial
Statements”.Guidance Note on the Revised Schedule VI to the Companies Act, 1956
116
Annexure B
General Circular No.62/2011
F. No.17/244/2011-CL-V - Dt. 05.09.2011
Government of India
Ministry of Corporate Affairs
To
All Regional Directors
All Registrar of Companies
All Official Liquidators
Sub: Clarification on notification no. S.O. 447 (E) dated 28.02.2011 on
Revised Schedule VI (shall be effective from 01.04.2011)
The undersigned is directed to refer to this Ministry’s notification no. S.O.
447 (E) dated 28.02.2011 regarding Revised Schedule VI of the Companies
Act, 1956 and to say that clarification has been sought that during the current
year, Ministry has amended the Schedule VI which is to take effect for
accounts closing 31
st
March 2012. During the Financial Year, in case
companies intend to go for Initial Public Offer/Further Public Offer, they are
expected to prepare accounts in the new schedule VI format. If previous
figures are reclassified in accordance with new Schedule VI, this will pose
enormous amount of administrative work and difficulty in making such
changes besides making comparison with previous year unrealistic.
2. The Ministry has examined this matter and clarifies that the presentation
of Financial Statements for the limited purpose of IPO/FPO during the
Financial Year 2011-12 may be made in the format of the pre-revised
Schedule VI under the Companies Act, 1956. However, for period beyond
31
st
March 2012, they would prepare only in the new format as prescribed by
the present Schedule VI of the Companies Act, 1956. Also the companies
would ensure that it will prepare and file the Annual Accounts for the
Financial Year 2011-12 as per revised Schedule VI of the Companies Act,
1956.
3. This issues with the approval of the Corporate Affairs Minister.
Guidance Note on the Revised Schedule VI to the Companies Act, 1956
117
Annexure C
Comparison of Old and revised Schedule VI
Old v/s Revised (2011)
Schedule VI (OLD) Schedule VI (Revised – 2011)
PART I
BALANCE – SHEET
I. SOURCES OF FUNDS I. EQUITY & LIABILITIES
(1) Shareholders’ Funds
(a) Capital
(b) Reserves & Surplus
(1) Shareholders’ Funds
(a) Share Capital
(b) Reserves & Surplus
(c) Money received against share
warrants
(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
(2) Loan Funds
(a) Secured Loans
(b) Unsecured Loans
(3) Deferred Tax Liabilities (Net)
(4) Current Liabilities & Provisions
(Reclassified)
(a) Liabilities
(b) Provisions
------------------
TOTAL
------------------
(4) Current Liabilities
(a) Short-term borrowings
(b) Trade payables
(c) Other current liabilities
(d) Short-term provisions
----------------
TOTAL
---------------
II. APPLICATION OF FUNDS II. ASSETS
(1) Fixed Assets
(a) Gross Block
(b) Less: depreciation
(c) Net Block
(d) Capital Work-in-Progress
(1) Non-Current Assets
(a) Fixed Assets
(i) Tangible Assets
(ii) Intangible Assets
(iii)Capital Work-in-Guidance Note on the Revised Schedule VI to the Companies Act, 1956
118
(2) Investments (Long term and
Current)
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
(3) Deferred Tax Assets (Net)
(4) Current Assets, Loans and
advances
(a) Inventories
(b) Sundry debtors
(c) Cash and Bank balances
(d) Loans & Advances
(e) Other 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
(5) (a) Miscellaneous expenditure
to the extent not written off
or adjusted.
(b) Profit and Loss Account
___________
TOTAL
___________
__________
TOTAL
_________
PART I
I. SOURCES OF FUNDS I. EQUITY & LIABILITIES
¾ Permitted both Vertical and
Horizontal forms of presentation.
¾ Permits only VERTICAL form of
presentation.
¾ Used “Sources” and “Application of
Funds” as Headings in the Vertical
Form.
¾ Uses “Equity & Liabilities” and
“Assets” as Headings.
SHAREHOLDERS’ FUNDS
(1) Shareholders’ funds were
classified as -
a. Capital
b. Reserves & Surplus
(1) Shareholders’ funds are
classified as –
a. Share Capital
b. Reserves & Surplus
c. Money received against
Share Warrant. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
119
(a) Share Capital
For each class of Capital –
(a) Authorized
(b) Issued
(c) Subscribed
(d) Par value per share
(e) Calls unpaid
¾ By Directors
¾ By Others
(f) Forfeited shares (Amount
originally paid – up). Any Capital
profit on reissue of Forfeited
shares should be transferred to
Capital Reserve.
(g) Terms of redemption or
conversion (if any) of any
redeemable preference Capital to
be stated, together with the
earliest date of redemption.
Particulars of the different
classes of Preference
shares to be given.
(h) In case of Subsidiary companies,
the number of shares held by the
holding company as well as by
the ultimate holding company
and its subsidiaries must be
separately stated.
(i) Shares allotted as fully paid,
pursuant to a contract, for
consideration other than cash,
should be separately shown.
Shares allotted as fully paid-up,
by way of Bonus shares
(specifying the source from which
such Bonus shares are issued
e.g., Capitalization of Profits or
Reserves or from Share
Premium Account)
(a) Share Capital
For each class of Capital –
(a)Authorized
(b)Issued
(c) Subscribed & Fully paid up
(d)Subscribed & not fully paid up
(e)Par value per share
(f) Calls unpaid
¾ By Directors
¾ By Officers
(g) Forfeited shares (amount
originally paid-up)
(h)A reconciliation of the number of
shares outstanding at the
beginning and at the end of the
reporting period.
(i) The rights, preferences and
restrictions attaching to each
class of shares including
restrictions on the distribution of
dividends and the repayment of
capital.
Terms of any securities
convertible into equity/
preference shares issued
along with the earliest date
of conversion in
descending order starting
from the farthest such date. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
120
(j) Shares in respect of each class
in the company held by its
holding company or its ultimate
holding company including
shares held by subsidiaries or
associates of the holding
company or the ultimate holding
company in aggregate.
(k) Shares in the company held by
each shareholder holding more
than 5 percent shares
specifying the number of shares
held.
(l) Shares reserved for issue under
options and contracts/
commitments for sale of
shares/disinvestment, including
the terms and amounts.
(m) For the period of five years
immediately preceding the date
as at which the Balance Sheet
is prepared:
¾ Aggregate number and
class of shares allotted as
fully paid up pursuant to
contract(s) without payment
being received in cash.
¾ Aggregate number and
class of shares allotted as
fully paid up by way of
bonus shares.
¾ Aggregate number and
class of shares bought
back.
(b) Reserves and Surplus
(a) Capital Reserves
(b) Capital Redemption
Reserve
(c) Share Premium Account
(b) Reserves and Surplus
(a) Capital Reserves
(b)Capital Redemption
Reserve
(c)Securities Premium
Reserve Guidance Note on the Revised Schedule VI to the Companies Act, 1956
121
(d) Other Reserves specifying the
nature of each Reserve and the
amount in respect thereof.
¾ Surplus i.e. the balance in the
Profit and Loss Account after
providing for proposed allocation,
viz. Dividend, Bonus or
Reserves.
¾ Debit balance in the Profit & Loss
Account shall be shown as a
deduction from the uncommitted
reserves, if any. If debit balance
of Profit & Loss is in excess of
uncommitted reserves, the same
shall be shown under “ASSETS”
as Profit & Loss.
¾ Additions and deductions since
the last balance-sheet to be
shown under each of the
specified heads.
¾ SINKING FUND
The word “fund” in relation to any
“Reserve” should be used only
where such Reserve is
specifically represented by
earmarked Investments.
¾ Proposed additions to Reserve.
(d)Debenture Redemption
Reserve
(e) Revaluation Reserve
(f) Share Options Outstanding
Account
(g) Other Reserves – (specify
the nature and purpose of
each reserve and the
amount in respect thereof)
¾ Surplus i.e. the balance in the
balance in the statement of
Profit & Loss disclosing
allocations and appropriations
such as dividends, bonus
shares and transfer to/from
reserves etc.
¾ 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.
¾ Additions and deductions
since the last balance-sheet
to be shown under each of
the specified heads.
¾ A reserve specifically
represented by earmarked
investments shall be termed
as a ‘fund’. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
122
(2) (2) Share application money
pending allotment
LIABILITIES
¾ Secured Loans (SL)
¾ Unsecured Loans (UL)
¾ Current Liabilities and Provisions
(CLP)
¾ Non – Current Liabilities (NCL)
¾ Current Liabilities (CL) (See note
below)
(3) Non –
Current
Liabilities
(4) Current
Liabilities
(3) Secured Loans; Unsecured
Loans; Current Liabilities &
Provisions.
(a) Long term
borrowings
(a)Short term
borrowings
(a) Debentures (SL/UL) (a) Bonds/
Debentures
¾ (b) Loans &
Advances
(SL)From
Banks
¾ From Others
Short-term
Loans and
Advances (UL)
¾ From Banks
¾ From Others
(b) Term
Loans
¾ From Banks
¾ From Others
Loans
Repayable
on Demand
¾ From Banks
¾ From Others
(c)Deferred
Payment
Liabilities
(d) Fixed Deposits (UL) (d) Deposits Deposits
(e) Loans and Advances from
Subsidiary (SL/UL)
(e) Loans and
Advances
from Related
Parties
Loans and
Advances from
Related Parties
(f) Long term
maturities of
Finance lease
obligations
(g) Other Loans & Advances
(SL/UL) – Specify Nature
(g) Other Loans &
Advances
(Specify
Nature)
Other Loans
& Advances
(Specify
Nature) Guidance Note on the Revised Schedule VI to the Companies Act, 1956
123
NOTE:
A liability shall be classified as current
when 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;
(c) It is due to be settled within twelve
months after the reporting date;
or
(d) The company does not have an
unconditional right to defer
settlement of the liability for at
least twelve months after the
reporting date. Terms of a 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-current.
EXPLANTIONS
(a) Loans are classified under Secured
and Unsecured. Nature of security
to be specified in each case.
(b) Loans guaranteed by the director or
manager – a mention thereof shall
also be made and also the
aggregate amount of such loan
under each head. Loans from
Directors and Managers to be
shown separately.
(c) Terms of Redemption or conversion
(if any) of debentures issued to be
stated together with the earliest
date of redemption or conversion.
EXPLANATIONS
(a) Borrowings to be sub
classified as Secured and
Unsecured. Nature of
security shall be specified
separately in each case.
(b) Loans guaranteed by the
directors and others –
aggregate amount of such
loans under each head shall
be disclosed.
(c) Bonds/debentures (along with
the rate of interest and
particulars of redemption or
conversion, as the case may be)
shall be stated in descending
order of maturity or conversion, Guidance Note on the Revised Schedule VI to the Companies Act, 1956
124
(d) Particulars of any redeemed
debentures which the company has
power to issue must be shown.
starting from farthest redemption
or conversion date, as the case
may be. Where
bonds/debentures are
redeemable by installments, the
date of maturity for this purpose
must be reckoned as the date on
which the first installment
becomes due.
(d) Particulars of any redeemed
bonds/ debentures which the
company has power to reissue
shall be disclosed.
(e) Terms of repayment of term
loans and other loans shall be
stated.
(f) Period and amount of continuing
default / default as on the
Balance Sheet date in repayment
of loans and interest, shall be
specified separately in each
case.
(b) Deferred Tax Liabilities (Net)
As a separate line item after
unsecured loan.
(b) Deferred Tax Liabilities (Net)
Under the head Non-Current
Liabilities.
(c) Current Liabilities (c)Other Long
Term
Liabilities
(c)Other
Current
Liabilities
(a) Creditors (CL)
¾ MSMED
¾ Others
(b) Acceptances
(c) Interest Accrued but not due on
loans (CL)
(d) Interest accrued and due (SL/UL) to
be included under appropriate subheads.
(e) Advance payments and unexpired
discounts for the portion for which
value has to be given (CL)
Investor Education and Protection
(a)Trade
Payable - A
payable
shall be
classified as
a trade
payable if it
is in respect
of the
amount due
on account
of goods
purchased
(a)Current
maturities of
long-term debt
(b)Current
maturities of
finance lease
obligations
(c)Interest
Accrued but
not due on
borrowing
(d)Income
accrued and Guidance Note on the Revised Schedule VI to the Companies Act, 1956
125
fund shall be credited by the
following amounts (f to j)
(f) Unpaid dividend (CL)
(g) Unpaid application money received
by the companies for allotment of
securities and due for payment. (CL)
(h) Unpaid matured deposits (CL)
(i) Unpaid matured debentures (CL)
(j) Interest accrued on the above (f-i)
(CL)
(k) Subsidiary Companies
(l) Other liabilities
or services
rendered in
the normal
course of
business.
(b) Others
due on
borrowings.
(e)Income
received in
advance
(f)Unpaid
dividend
(g)Application
money
received for
allotment of
securities and
due for refund
& interest
accrued
thereon.
(h)Unpaid
matured
deposits and
interest
accrued
thereon.
(i)Unpaid matured
debentures &
interest
accrued
thereon.
(j)
(k)
(l) Other Payables
(specify Nature)
PROVISIONS
(d) Provisions (d) Long term
Provisions
(d)Short term
Provisions
(a) Provident Fund Scheme
(b) Insurance, Pension and other
similar staff benefit schemes
(c) Provision for Taxation
(d) Proposed Dividend
(e) For Contingencies
(f) Other Provisions
(a) Provision for
employees’
benefits.
(b) Others
(Specify
Nature)
(a) Provision for
employees’
benefits.
(b)Others
(Specify
Nature) Guidance Note on the Revised Schedule VI to the Companies Act, 1956
126
II. APPLICATION OF FUNDS II. ASSETS
Non-Current Assets
(1) (a) Fixed Assets (1) (a) Fixed Assets
(i) Tangible Assets-Classification
Land
Building
Plant & Machinery
Furniture & Fitting
Vehicles
Railway Sidings
Development Property
Live Stock
Leasehold
Land
Building
Plant & Equipment
Furniture & Fixtures
Vehicles
Office Equipments
Others (Specify Nature)
Note: Assets under lease shall be
separately specified for each class of
Asset.
(ii) Intangible Assets-Classification
Goodwill
Trademarks
Patents
Goodwill
Brands/Trademarks
Computer Software
Mastheads & Publishing Titles
Mining Rights
Copyrights & Patents and other
intellectual property rights, services
and operating rights
Recipes, Formulae, Models, Designs
and Prototypes
Licenses & Franchise
Others (Specify Nature)
Capital Work-in-Progress (iii) Capital Work-in-Progress
(iv) Intangible Assets under
development
EXPLANATIONS
Where any sum has been written
off on a reduction of capital or
revaluation of assets, every
EXPLANATIONS
Where sums have been written off on
a reduction of capital or revaluation of
assets or where sums have been Guidance Note on the Revised Schedule VI to the Companies Act, 1956
127
Balance Sheet subsequent to such
reduction or revaluation shall show
the reduced figures and the date of
the reduction. For a period of five
years, the amount of the reduction
made shall also be stated.
Where sums have been added by
writing up the asset, each
subsequent Balance Sheet should
show the increased figures with
the date of the increase. For a
period of five years, the amount of
the increase shall also be stated.
added on revaluation of assets, every
Balance Sheet subsequent to date of
such write-off, or addition shall show
the reduced or increased figures as
applicable and shall by way of a note
also show the amount of the reduction
or increase as applicable together with
the date thereof for the first five years
subsequent to the date of such
reduction or increase.
PRESENTATION
Gross:
Opening Balance
Additions
Less: Disposals
-------------
Gross Block at year end
-------------
Total Depreciation written off/
Provided -------------
upto the year end
_______
Net Block
Gross:
Opening Balance
Additions
Acquisitions through
Business combination
Other Adjustments
______
Sub-total
Less: Disposals _______
Gross block at year end
_______
Less: Depreciation/Amortization
Opening depreciation/
amortization
Depreciation/Amortization for the
year
Impairment loss/Reversal of
Impairment Loss for the year
_______
Total depreciation at year end
_______
Net Carrying Value Guidance Note on the Revised Schedule VI to the Companies Act, 1956
128
INVESTMENTS
(b) Investments (b) Non-Current Investments
Investments were classified as:
1. Trade Investments
2. Other Investments – and further
classified as:-
(a) Immovable Property
(b) Investment in shares-Showing
separately shares fully paid-up
and partly paid-up,
distinguishing the different
classes of shares, and shares
held in subsidiary companies.
(c)
(d) Investment in Government or
Trust Securities.
(e) Invests in Bonds/Debentures –
Showing separately
bonds/debentures held in
subsidiary companies.
(f)
(g) Investment in Capital of
Partnership Firms
Balance of unutilized
monies raised in issues.
Non-current Investments to be
classified as:
1. Trade Investments
2. Other Investments – and further
classified as:-
(a) Investment Property
(b) Investment in Equity
Instruments
(c) Investment in Preference
Shares
(d) Investment in Government or
trust securities.
(e) Investments in debentures or
bonds.
(f) Investments in Mutual Funds
(g) Investment in Partnership
firms.
Other Non-current
Investments (Specify
Nature)
NOTES
(a) A statement of Investments
(whether shown under
‘Investment’ or under ‘Current
Assets’, a stock-in-trade)
separately classifying trade
investments and other investments
should be annexed to the balancesheet, showing the names of the
bodies corporate (indicating
separately the names of the
bodies corporate under the same
management) in whose shares or
(a) Under each classification, details
shall be given 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 (showing separately Guidance Note on the Revised Schedule VI to the Companies Act, 1956
129
debentures, investments have
been made (including all
investments, whether existing or
not, made subsequent to the date
as at which the previous balancesheet was made out) and the
nature and extent of the
investment so made in each such
body corporate; provided that in
case of an investment company,
that is to say, a company whose
principal business is the
acquisition of shares, stock,
debentures or other securities, it
shall be sufficient if the statement
shows only the investments
existing on the date as at which
the balance has been made out. In
regard to the investments in the
capital of partnership firms, the
names of the firms, (with names of
all their partners, total capital and
the shares of each partner) shall
be given in the statement.
investments which are partlypaid). In regard to investments in
the capital of partnership firms,
the names of the firms (with the
names of all their partners, total
capital and the shares of each
partner) shall be given.
(b) Investments: Mode of Valuation –
For example, COST or MARKET
VALUE
(b) Investments carried at other than
COST should be separately
stated specifying the basis for
valuing them.
(c) The following shall also be
disclosed:
(i) Aggregate amount of company’s
quoted investments and also the
market value thereof shall be
shown.
(ii) Aggregate amount of company’s
unquoted investments shall also
be shown.
(c) The following shall also be
disclosed:
(i) Aggregate amount of quoted
investments and market value
thereof;
(ii) Aggregate amount of unquoted
investments;
(iii) Aggregate provision for
diminution in value of
investments Guidance Note on the Revised Schedule VI to the Companies Act, 1956
130
(d) All unutilized monies out of the
issue must be separately
disclosed in the Balance Sheet of
the company indicating the form in
which such unutilized funds have
been invested.
(d) 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.
(c) Deferred Tax Assets (Net)
As a separate line item after
Investments.
(c) Deferred Tax Assets (Net)
Under the head Non-Current
Assets.
(d) Current Assets, Loans & Advances
(e) (i) Loans and Advances to
Subsidiaries
(ii) Advances and Loans to
partnership firms in which the
company or any of its
subsidiaries is a partner.
(d) Long Term Loans & Advances
(a) Capital Advances
(b) Security Deposits
(c) Loans and Advances to
Related Parties (giving details
thereof)
(d) Other Loans & Advances
(Specify Nature)
NOTES
Particulars to be given separately of:
(a) Secured, considered good
(b) Unsecured, considered good
(c) Doubtful or Bad
To be separately sub-classified as:
(a) Secured, considered good
(b) Unsecured, considered good
(c) Doubtful
Allowances for bad and doubtful loans
& Advances shall be disclosed under
relevant heads separately.
Loans & Advances due from directors
or other officers of the company or any
of them either severally or jointly with
any other person or debts due by firms
or by private companies respectively in
which any director is a partner or a
director or a member, to be separately
stated.
Loans & Advances due from other
companies under the same
Loans and advances due by directors
or other officers of the company or any
of them either severally or jointly with
any other persons or amounts due by
firms or private companies
respectively in which any director is a
partner or a director or a member
should be separately stated. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
131
management within the meaning of
sub-section (1-B) of section 370, to
be disclosed with the names of the
Companies.
The maximum amount due by
directors or other officers of the
company at any time during the
year to be shown by way of a note.
(e) Sundry Debtors (e) Other Non-Current Assets
(i) Long term Trade Receivable
(Including trade receivable on
defined credit terms)
(ii) Others (Specify Nature)
NOTE
CLASSIFICATION
Particulars to be given separately of:
(a) Secured, considered good
(b) Unsecured, considered good
(c) Doubtful or Bad
CLASSIFICATION
To be separately sub-classified as
(a) Secured, considered good
(b) Unsecured, considered good
(c) Doubtful
Allowances for bad and doubtful debts
shall be disclosed under relevant
heads separately
(2) (2) Current Assets (See Note Below)
(a) Current Investments
Current Investments to be
classified as:
(a) Investment in Equity Instruments
(b) Investment in Preference Shares
(c) Investment in Government or trust
securities
(d) Investments in debentures or
bonds.
(e) Investments in Mutual Funds
(f) Investment in Partnership firms.
(g) Other Investments (Specify
Nature)
(i) Under each classification, details
shall be given of names of the
bodies corporate (indicating Guidance Note on the Revised Schedule VI to the Companies Act, 1956
132
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 (showing
separately investments which are
partly-paid). In regard to
investments in the capital of
partnership firms, the names of the
firms (with the names of all their
partners, total capital and the
shares of each partner) shall be
given.
(ii) The following shall also be
disclosed:
(a) The basis of valuation of
individual investments
(b) Aggregate amount of quoted
investments and market
value thereof
(c) Aggregate amount of
unquoted investments
(d) Aggregate provision made for
the diminution in value of
investments.
NOTE:
An 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
consumption in, the company’s
normal operating cycle;
(b) It is held primarily for the purpose
of being traded;
(c) It is expected to be realized within
twelve months after the reporting
date; or Guidance Note on the Revised Schedule VI to the Companies Act, 1956
133
(d) It is Cash or cash equivalent
unless it is restricted from being
exchanged or used to settle a
liability for at least twelve months
after the reporting 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 cash
equivalents. Where the normal
operating cycle cannot be
identified, it is assumed to have a
duration of 12 months.
(b) Inventories (b) Inventories
CLASSIFICATION
(a) Raw-Materials
(b) Work-in-Progress
(c)
(d) Stock-in-Trade
(e) Stores and Spare Parts
(f) Loose-tools
NOTES:
(i)
(ii) Mode of valuation shall be stated.
CLASSIFICATION
(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)
NOTES:
(i) Goods in transit shall be
disclosed under the relevant
sub-head of inventories.
(ii) Mode of valuation shall be
stated.
(c) Sundry Debtors (c) Trade Receivables
(i) Debts outstanding for a period
exceeding six months
(ii) Sundry Debtors particulars to be
given separately of:
(a) Secured-Considered good
(b) Unsecured-Considered good
(c) Doubtful or Bad.
(i) Aggregate amount of Trade
Receivable outstanding for a
period exceeding six months
from the date they are due for
payment should be separately
shown.
(ii) Trade-Receivable shall be subclassified as Guidance Note on the Revised Schedule VI to the Companies Act, 1956
134
(iii)
(iv) Debts due by the directors or other
officers of the company or any of
them either severally or jointly with
any other person or debts due by
firms or private companies
respectively in which any director
is a partner or a director or a
member to be separately stated.
Debts due from other companies
under the same management
within the meaning of sub-section
(1-B) of section 370, to be
disclosed with the names of the
Companies.
The maximum amount due by
directors or other officers of the
company at any time during the
year to be shown by way of a note.
The amount to be shown under
sundry debtors shall include the
amounts due in respect of goods
sold or services rendered or in
respect of other contractual
obligations but shall not include
the amounts which are in the
nature of loans or advances.
(a) Secured-Considered good
(b) Unsecured-Considered good
(c) Doubtful
(iii) Allowances for bad and doubtful
debts shall be disclosed under
the relevant heads separately.
(iv) Debts due by directors or other
officers of the company or any of
them either severally or jointly
with any other person or debts
due by firms or private
companies respectively in which
any director is a partner or a
director or a member should be
separately stated.
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.
(d) Cash And Bank Balances (d) Cash and Cash Equivalents
Classified as
(a) Bank Balances:
(I) with scheduled banks
• Current account
• Call account
• Deposit account
(II) With others (with names)
• Current Account
• Call account
• Deposit account
Classified as:
(a) Balances with Banks
• Unpaid Dividend
• Margin Money
• Bank deposits with more than 12
months maturity Guidance Note on the Revised Schedule VI to the Companies Act, 1956
135
(b)
(c) Cash balance on hand
(d)
Note: The name of the bankers
other than scheduled banks and
maximum amount outstanding at
any time during the year from each
such banker.
The nature of the interest, if any, of
any director or his relative in each
of the bankers (other than
Scheduled Banks).
(b) Cheques, Drafts on hand.
(c) Cash-on-Hand
(d) Others (Specify)
(e) Loans & Advances (e) Short-Term Loans & Advances
(a) (i) Advances and loans to
subsidiaries
(ii) Advances and Loans to
partnership firms in which the
company or any of its
subsidiaries is a partner.
(b) (i) Bills Of Exchange
(ii) Advances recoverable in cash
or kind or for value to be received,
e.g., Rates, Taxes, Insurance etc.
(iii) Balances on current account
with Managing Agents or
Secretaries and Treasurers.
(iv) Balances with Customs, Port
Trust, etc. (where payable on
demand)
Some particulars to be disclosed:
(i) Loans & Advances particulars to be
given separately of:
(a) Secured-Considered good
(b) Unsecured-Considered good
(c) Doubtful or Bad.
(ii)
(a) Loans and advances to related
parties (giving details thereof)
(b) Others (specify name)
Sub-classification:
(i) The above loans & advances shall
be sub-classified as
(a) Secured-Considered good
(b) Unsecured-Considered good
(c) Doubtful
(ii) Allowances for bad and doubtful
loans & advances shall be
disclosed under the relevant
heads separately.
(iii) Loans & Advances due by
directors or other officers of the Guidance Note on the Revised Schedule VI to the Companies Act, 1956
136
(iii) Loans & Advances due by the
directors or other officers of the
company or any of them either
severally or jointly with any other
person or debts due by firms or
private companies respectively in
which any director is a partner or a
director or a member to be
separately stated.
Debts due from other companies
under the same management
within the meaning of sub-section
(1-B) of section 370, to be
disclosed with the names of the
Companies)
The maximum amount due by
directors or other officers of the
company at any time during the
year to be shown by way of a
note.
company or any of them either
severally or jointly with any other
person or amounts due by firms or
private companies respectively in
which any director is a partner or a
director or a member should be
separately stated.
(f) Other Current Assets
• Interest accrued on investment.
(f) Other Current Assets
• Incorporates current assets that
do not fit into any other asset
category. (Specify Nature)
• Interest accrued on Investments
• Export Incentive Receivables Guidance Note on the Revised Schedule VI to the Companies Act, 1956
137
Miscellaneous Expenditure (to the
extent not written off or adjusted)
(a) Preliminary expenses
(b) Expenses including commission or
brokerage on underwriting or
subscription of shares or
debentures
(c) Discount allowed on the issue of
shares or debentures
(d) Interest paid out of capital during
construction (also stating the rate of
interest)
(e) Development expenditure not
adjusted
(f) Other items (specifying nature)
Profit & Loss Account
Footnotes to the Balance Sheet Contingent Liabilities and
Commitments (to the extent not
provided for)
A footnote to the balance-sheet
may be added to show separately
(a) Claims against the company not
acknowledged as debts.
(b)
(c) Other money for which the
company is contingently liable.
The amount of any guarantees
given by the company on behalf
of directors or other officers of
the company shall be stated and
where practicable, the general
nature and amount of each such
contingent liability, if material
shall also be specified.
(d) Estimated amount of contracts
remaining to be executed on
Capital account & not provided
for.
(e) Uncalled liability on shares partly
(i) Contingent Liabilities
Contingent liabilities classified as:
(a) Claims against the company not
acknowledged as debt.
(b) Guarantees.
(c) Other money for which the
company is contingently liable.
(ii) Commitments to be classified
separately as:
(a) Estimated amount of Contracts
remaining to be executed on
Capital Account and not provided
for.
(b) Uncalled liability on shares and
other investments which are partly
paid. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
138
paid. (c) Other commitments (Specify
Nature)
Arrears of fixed cumulative dividends The amount of dividend 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.
If in the opinion of the Board, any of the
current assets, loans and advances
have not a value on realization in the
ordinary course of business at least
equal to amount at which they are
stated, the fact that the Board is of that
opinion shall be stated.
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.
PART II
Schedule VI (OLD) Schedule VI (Revised – 2011)
PROFIT AND LOSS ACCOUNT STATEMENT OF PROFIT AND LOSS
INCOME
(I) The Profit and Loss Account shall
set out the various items relating to
the income and expenditure of the
company engaged under the most
convenient heads and in particular
shall disclose the following
information in respect of the period
covered by the account :-
(i) Turnover, i.e. the aggregate
amount for which Sales are
affected by the company, giving the
amount of Sales in respect of each
class of goods dealt with by the
company, indicating the quantities
of such sales for each class
Form of Statement of Profit & Loss
(I) Revenue from Operations
(i) Revenue from operations in respect
of non-finance company:
(a) Sale of Products
(b) Sale of Services
(c) Other Operating Revenues
Less: Excise Duties
(ii) Revenue from operations in respect
to Finance company:
(a) Interest Guidance Note on the Revised Schedule VI to the Companies Act, 1956
139
separately.
In case of companies rendering or
supplying services, the gross income
derived from services rendered or
supplied.
In case of other companies, the gross
income derived under different heads.
(b) Other Financial Services
Revenue under each of the above
heads shall be disclosed separately by
way of Notes to Accounts to the extent
applicable.
In case of company rendering or
supplying services, gross income
derived from services rendered or
supplied under broad-head.
In case of other companies, gross
income derived from broad heads.
II. Other Income
(a) Interest Income, specifying nature
of the income.
(b) Dividend from subsidiary company.
(c) (i) Profit or Loss on investments
(showing distinctly profit/loss
earned/incurred from
partnership firm)
(ii) Amount of income from
investments, distinguishing
between Trade Investments and
other investments.
(d) Profit or Losses in respect of
transactions of a kind, not usually
undertaken by the company.
(e) Miscellaneous income
NOTE:
1. Amount of income-tax deducted on
(a) and (c) above, if the gross
income is stated.
2. Dividends declared by the subsidiary
companies after the date of
II. Other Income
(a) Interest income (other than a
finance company)
(b) (i) Dividend from subsidiary
companies
(ii) Dividend Income
(c) Net Gain/Loss on sale of
investments.
(d)Other non-operating income (net of
expenses directly attributable to
such income)
(e) Adjustments to the carrying value of
investments (Write-back)
(f) Net gain/loss on foreign currency
translation and transaction (other
than considered as finance cost) Guidance Note on the Revised Schedule VI to the Companies Act, 1956
140
balance-sheet should not be
included unless they are in respect
of period which closed on or before
the date of balance-sheet.
EXPENSES
(i) In case of manufacturing companies,-
The value of the raw materials
consumed, giving item-wise breakup and indicating the quantities
thereof. In this break-up, as far as
possible, all important basic raw
materials shall be shown
separately. The intermediates or
components procured from other
manufacturers may, if their list is
too large to be included in the
break-up, be grouped under
suitable headings without
mentioning the quantities, provided
all those items which in value
individually account for 10 per cent
or more of the total value of raw
material consumed shall be shown
as separate and distinct items with
quantities thereof in the break-up.
In this case, if a company falls
under more than one category, it
shall be sufficient compliance with
the requirements, if the total
amounts are shown in respect of
the opening and closing stocks,
Purchases, Sales and Consumption
of raw materials with value and
quantitative break-up and the gross
income from services rendered is
shown.
(ii) In case of trading companies, the
purchases made and the opening
and the closing stocks, giving
break-up in respect of each class of
goods traded in by the company
and indicating the quantities
(i) Cost of Materials consumed
(Manufacturing Companies) –
Raw Materials under broad heads.
In this case, if a company falls
under more than one category, it
shall be sufficient compliance with
the requirements, if purchases,
sales and consumption of raw
material and gross income from
services rendered is shown under
broad-heads.
(ii) Purchase of Stock-in-Trade
(Trading Companies) – goods
traded in by the company under
the broad-heads. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
141
thereof.
Note:
(a) In case, if a company falls under
more than one category, it shall be
sufficient compliance with the
requirements, if the total amounts
are shown in respect of opening
and closing stocks, purchases,
sales and consumption of raw
materials, with value and
quantitative break-up and the
gross income from services
rendered is shown.
(b) In case of Work-in-Progress, the
amounts for which such works
have been completed at the
commencement and at the end of
the accounting period.
Note 1: The quantities of raw materials
purchases, stocks and the turnover
shall be expressed in quantitative
denominations in which these are
normally purchased or sold in the
market.
Note 2: For the purpose of items for
which the company is holding separate
industrial licences shall be treated as a
separate class of goods, but where a
company has more than one industrial
licence for production of the same item
at different places or for expansion of
the licensed capacity, the item covered
by all such licences shall be treated as
one class.
Note 3: In giving the break-up of
purchases, stocks and turnover, items
like spare parts and accessories, the
list of which is too large to be included
in the break-up, may be grouped under
suitable headings without quantities,
provided all those items, which in value
Note:
(a) In case, if a company falls under
more than one category, it shall be
sufficient compliance with the
requirements, if purchases, sales
and consumption of raw materials
and gross income from services
rendered is shown under broad
heads.
(b) In case of Work-in Progress,
Work-in-Progress under broad
heads.
(iii) Changes in Inventories of
finished goods, Work-in-Progress
and Stock-in-trade. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
142
individually account for 10 per cent or
more of the total value of the
purchases, stocks or turnover, as the
case may be, are shown as separate
and distinct items with quantities
thereof in the break-up.
Expenditure incurred on each of the
following items, separately for each
item:-
(a) Salaries, Wages & Bonus
(b) Contribution to Provident & other
funds.
(d) Workmen & Staff Welfare expenses.
(iv) Employee benefits expense shall
disclose information regarding
aggregate expenditure on:-
(a) Salaries and Wages
(b) Contribution to Provident &
Other Funds
(c) Expense on employee stock
option scheme (ESOP) and
Employee Stock Purchase Plan
(ESPP)
(d) Staff Welfare Expenses.
Amount of Interest
(a) On company’s debentures
(b) On other fixed loans
(c) Interest paid to the managing
director and to the manager, if any.
(v) Finance Cost (on aggregate
basis)
(a) Interest Expense
(b) Other borrowing costs
(c) Applicable net gain/loss on
foreign currency translations &
transactions.
Depreciation, Renewals or diminution in
value of Fixed Assets.
(vi) Depreciation & Amortization
expenses
Expenses on each of the following
items, separately for each item:
(a) Consumption of Stores & Spares.
(b) Power & Fuel
(c) Rent
(d) Repairs to Building
(e) Repairs to Machinery
(f) Insurance
(g) Rates & Taxes (excluding Income
Tax)
(h) Miscellaneous Expenditure
Note: Any item under which expenses
exceed 1 per cent of total revenue or
Rs. 5,000 whichever is higher, shall be
(vii) Other expenses (on
aggregate basis)
Expenses on each of the
following items, separately for
each item:
(a) Consumption of Stores & Spares.
(b) Power & Fuel
(c) Rent
(d) Repairs to Building
(e) Repairs to Machinery
(f) Insurance
(g) Rates & Taxes (excluding
Income Tax)
(h) Miscellaneous Expenditure Guidance Note on the Revised Schedule VI to the Companies Act, 1956
143
shown separately and distinct item
against an appropriate account head in
P&L account and shall not be
combined with any other item under”
Miscellaneous Expenditure”
(i) Payment to Auditor
• As Auditor
• Taxation Matters
• Company Law Matters
• Management Services
• In any other manner
• For Expenses
(j) (i) The aggregate, if material, of any
amounts set aside or proposed to
be set aside, to reserve, but not
including provisions made to meet
any specific liability, contingency
or commitment known to exist at
the date as to which the balancesheet is made up.
(ii)The aggregate, if material, of any
amounts withdrawn from such
reserves.
(k)(i)The aggregate, if material, of the
amounts set aside to provisions
made for meeting specific liabilities,
contingencies or commitments.
(ii) The aggregate, if material, of the
amounts withdrawn from such
provisions, as no longer required.
Note: Any item under which
income or expenses exceed 1
per cent of revenue from
operations or Rs. 1,00,000
whichever is higher, shall be
shown separately and distinct
item against an appropriate
account head in P&L account
and shall not be combined with
any other item.
(i) Net loss on foreign currency
transaction and translation (other
than considered as finance cost)
(j) Payment to Auditors
• As Auditor
• For Taxation Matters
• For Company Law Matters
• For Management Services
• For Other Services
• For reimbursement of
expenses.
(k) Provision for losses of Subsidiary
companies.
(l) Adjustment to the carrying
amount investments.
(m) Net loss on sale of investments.
(n) Prior period items
(o) (i) The aggregate, if material, of
any amounts set aside or
proposed to be set aside, to
reserve, but not including
provisions made to meet any
specific liability, contingency or
commitment known to exist at
the date as to which the
balance-sheet is made up.
(ii) The aggregate, if material, of
any amounts withdrawn from
such reserves.
(p) (i) The aggregate, if material, of
the amounts set aside to Guidance Note on the Revised Schedule VI to the Companies Act, 1956
144
provisions made for meeting
specific liabilities, contingencies
or commitments.
(ii) The aggregate, if material, of
the amounts withdrawn from
such provisions, as no longer
required.
STATEMENT OF PROFIT &
LOSS (FACE REPORTING)
Profit before exceptional
and extraordinary items
and tax
XXX
Shall disclose every material feature,
including credits or receipts and debits
or expenses in respect of non-recurring
transactions or transactions of an
exceptional nature.
Exceptional items (with
details)
XXX
Profit before
extraordinary items and
tax
XXX
Extraordinary items (with
details)
XXX
Profit Before Tax XXX
The amount of charge for Indian Income
tax and other Indian taxation on profits,
including, where practicable, with Indian
income-tax any taxation imposed
elsewhere to the extent of the relief, if
any, from Indian Income tax and
distinguishing where practicable,
between income tax and other taxation.
Tax Expense
a.Current Tax XXX
b.Deferred Tax XXX
XXX
Profit/(Loss) for the
period from continuing
operations.
XXX
Profit/(Loss) from
discontinuing Operations XXX
Tax expense on
discontinuing operations XXX Guidance Note on the Revised Schedule VI to the Companies Act, 1956
145
Profit/(Loss) from
discontinuing Operations
(after tax)
XXX
Profit/(Loss) for the
period XXX
Earnings per equity
share
1. Basic
2. Diluted
XXX
XXX
BY WAY OF A NOTE the following
information shall be disclosed.
a) Value of imports calculated on
C.I.F basis by the company during
the financial year in respect of –
I. Raw materials;
II.Components and spare parts;
III. Capital goods;
b) Expenditure in foreign currency
during the financial year on
account of royalty, know-how,
professional and consultation
fees, interest, and other matters;
c) Value of all imported raw materials,
spare parts and components
consumed during the financial
year and the value of all
indigenous raw materials, spare
parts and components similarly
consumed and the percentage of
each to the total consumption;
d) The amount remitted during the year
in foreign currencies on account of
dividends, with a specific mention
of the number of non-resident
shareholders, the number of
BY WAY OF A NOTE the
following information shall be
disclosed.
a) Value of imports calculated on
C.I.F basis by the company
during the financial year in
respect of –
I. Raw materials;
II.Components and spare parts;
III. Capital goods;
b) Expenditure in foreign currency
during the financial year on
account of royalty, know-how,
professional and consultation
fees, interest, and other matters;
c) Total value of all imported raw
materials, spare parts and
components consumed during
the financial year and the total
value of all indigenous raw
materials, spare parts and
components similarly consumed
and the percentage of each to
the total consumption;
d) The amount remitted during the
year in foreign currencies on
account of dividends, with a
specific mention of the total
number of non-resident Guidance Note on the Revised Schedule VI to the Companies Act, 1956
146
shares held by them on which the
dividends were due and the year
to which the dividends related;
e) Earnings in foreign exchange
classified under the following
heads, namely:-
I. Export of goods calculated on
F.O.B. basis;
II.Royalty, know-how, professional
and consultation fees;
III. Interest and dividend;
IV. Other income, indicating the
nature thereof
shareholders, the total number of
shares held by them on which
the dividends were due and the
year to which the dividends
related;
e) Earnings in foreign exchange
classified under the following
heads, namely:-
I. Export of goods calculated on
F.O.B. basis;
II.Royalty, know-how, professional
and consultation fees;
III. Interest and dividend;
IV. Other income, indicating the
nature thereof
OTHER DISCLOSURES
(a) Commission paid to sole selling
agents within the meaning of
section 294 of the act.
(b) Brokerage and discount on sales,
other than the usual trade
discount.
(c) The amount provided for
depreciation, renewals or
diminution in value of fixed assets.
If such provision is not made by
means of a depreciation charge,
the method adopted for making
such provision.
If no provision is made for
depreciation, the fact that no
provision has been made shall be
stated and the quantum of arrears
of depreciation computed in
accordance with section 205(2) of
the Companies Act shall be
disclosed by way of a note.
(d) The profit & Loss account shall
also contain or give by way of a
note detail information showing Guidance Note on the Revised Schedule VI to the Companies Act, 1956
147
separately, the following payments
provided or made during the
financial year, to the directors
(including managing directors or
managers, if any, by the company,
the subsidiaries of the company
and any other person):-
(1) The managerial remuneration
u/s 198 of the act paid/payable
during the financial year to the
directors (including managing
directors or manager, if any)
(2) Other allowances and
commissions including
guarantee commission.
(3) Any other perquisites or
benefits in cash or in kind.
(4)
(i) Pensions
(ii) Gratuities
(iii) Payment from Provident funds,
in excess of own subscriptions
and interest thereon.
(iv) Compensation for loss of
office
(v)Consideration in connection
with retirement from office.
(e) The Profit & Loss account shall
contain or give by way of a note, a
statement showing the
computation of net profits in
accordance with section 349 of
the act with relevant details of the
calculation of the commissions
payable by way of percentage of
such profits to the directors
(including managing directors) or
manager, if any.
(f) The amounts reserved for-
• Repayment of share capital and
• Repayment of loans.
(g) 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. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
148
(g) The aggregate amount of the
dividends paid, and proposed, and
stating whether such amounts are
subject to deduction of income-tax
or not.
(h) Amount, if material, by which any
items shown in the profit and loss
statement, is affected by any
change in the basis of accounting.
(i) In case of manufacturing
companies, the profit and loss
account shall also contain, by way
of a note in respect of each class
of goods manufactured, detailed
quantitative information in regard
to the following namely:-
(i) The licensed capacity (where
license is in force)
(ii) The installed capacity and
(iii) The actual production
Note-1: The licensed capacity and
the installed capacity of the
company as on the last date of the
year to which the profit and loss
account relates, shall be
mentioned against items (i) and (ii)
above respectively.
Note-2: Against item (iii), the
actual production in respect of the
finished products meant for sale
shall be mentioned. In cases
where semi-processed products
are also sold by the company,
separate details thereof shall be
given.
Note-3: For the purpose of this
paragraph, the items for which the
company is holding separate
industrial licenses shall be treated
as separate classes of goods but
where a company has more than
one industrial licence for
(k) Except in the case of the first
Financial Statements laid before
the Company (after its
incorporation) the corresponding
amounts (comparatives) for the
immediately preceding reporting
period for all items shown in the
Financial Statements including Guidance Note on the Revised Schedule VI to the Companies Act, 1956
149
production of the same item at
different places or for expansion of
the licensed capacity, the item
covered by all such licences shall
be treated as one class.
(j) The Central government may
direct that a company shall not be
obliged top show the amount set
aside to provisions other than
those relating to depreciation,
renewal or diminution in value of
assets, if the Central Government
is satisfied that the information
should not be disclosed in the
public interest and would prejudice
the company, but subject to the
condition that in any heading
stating an amount arrived at after
taking into account the amount set
aside as such, the provision shall
be so framed or marked as to
indicate that fact.
(k) Except in the case of the first profit
and loss account laid before the
company after the
commencement of the Companies
Act, the corresponding amounts
for the immediately preceding
financial year for all items shown
in the profit and loss account shall
also be given in the profit and loss
account.
(l) The figures in the Balance Sheet
may be rounded off as under:
• Less than Rs. 100 crores : to
the nearest hundreds or
thousands or decimal thereof
• Between Rs. 100 crore or
more, but less than Rs. 500
crores : to the nearest
hundreds, thousands, lakhs or
millions or decimal thereof
notes shall also be given.
(l) Turnover Rounding off
• Less than one hundred crore to
the nearest hundreds,
thousands, lakhs or millions, or
decimals thereof.
• One hundred crore rupees or
more to the nearest, lakhs,
millions or crores, more or
decimals thereof.
Once a unit of measurement
is used, it should be used
uniformly in the Financial
Statements. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
150
• Rs. 500 crores or more, to the
nearest hundreds, thousands,
lakhs, millions or crores or
decimal thereof.
PART III – Interpretations
PART IV – Balance Sheet abstract
and a company’s
general business
profile Guidance Note on the Revised Schedule VI to the Companies Act, 1956
151
Annexure D
Illustrative list of disclosures required under the
Companies Act 1956
1. Section 77A
Where a company purchases its own shares out of free reserves, then a sum
equal to the nominal value of the share so purchased shall be transferred to
the capital redemption reserve account referred to in clause (d) of the proviso
to sub-section (1) of section 80 and details of such transfer shall be disclosed
in the balance-sheet.
2. Section 211
(3A) Every profit and loss account and Balance Sheet of the company shall
comply with the Accounting Standards.
(3B) Where the profit and loss account and the Balance Sheet of the
company do not comply with the Accounting Standards, such companies
shall disclose in its profit and loss account and balance sheet, the following,
namely :-
(a) the deviation from the Accounting Standards;
(b) the reasons for such deviation; and
(c) the financial effect, if any, arising due to such deviation.
3. Section 293A
Every company shall disclose in its profit and loss account any amount or
amounts contributed by it to any political party or for any political purpose to
any person during the financial year to which that account relates, giving
particulars of the total amount contributed and the name of the party or
person to which or to whom such amount has been contributed.
4. Section 293B
1) The Board of directors of any company or any person or authority
exercising the powers of the Board of directors of a company, or of the
company in general meeting, may, notwithstanding anything contained in
sections 293 and 293A or any other provision of this Act or in the
memorandum, articles or any other instrument relating to the company,
contribute such amount as it thinks fit to the National Defence Fund or any
other Fund approved by the Central Government for the purpose of national
defence.
(2) Every company shall disclose in its profit and loss account the total
amount or amounts contributed by it to the Fund referred to in sub-section (1)
during the financial year to which the amount relates. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
152
Annexure E
List of Accounting Standards as on 31
st
August, 2011
notified under the Companies (Accounting Standards)
Rules, 2006 pursuant to section 211 (3C):
AS 1 Disclosure of accounting policies:
AS 2 Valuation of Inventories
AS 3 Cash Flow Statements
AS 4 Contingencies and Events Occurring After the Balance sheet Date
AS 5 Net Profit or Loss for the period, Prior Period items and Changes in
Accounting Policies.
AS 6 Depreciation Accounting.
AS 7 Construction Contracts.
AS 9 Revenue Recognition.
AS 10 Accounting for Fixed Assets.
AS 11 The Effects of Changes In Foreign Exchange Rates.
AS 12 Accounting for Government Grants.
AS 13 Accounting for Investments.
AS 14 Accounting for Amalgamation.
AS 15 Employee Benefits.
AS 16 Borrowing Costs.
AS 17 Segment Reporting.
AS 18 Related Party Disclosures.
AS 19 Accounting for Leases.
AS 20 Earnings Per Share.
AS 21 Consolidated Financial Statements.
AS 22 Accounting for Taxes on Income.
AS 23 Accounting for Investments in Associates in Consolidated Financial
Statements.
AS 24 Discontinuing Operations.
AS 25 Interim Financial Reporting. Guidance Note on the Revised Schedule VI to the Companies Act, 1956
153
AS 26 Intangible Assets.
AS 27 Financial Reporting of Interests in Joint Ventures.
AS 28 Impairment of Assets.
AS 29 Provisions, Contingent liabilities and Contingent assets.
SUPPLEMENT ON REVISED SCHEDULE VISupplement on Revised Schedule VI Page 2
TABLE OF CONTENTS
Contents Page no.
Introduction to Revised Schedule VI 3
Comparative analysis between Revised and old Schedule VI 6
Format of Revised Schedule VI 9Supplement on Revised Schedule VI Page 3
INTRODUCTION TO
REVISED SCHEDULE VI
Every company registered under the Act shall prepare its Balance Sheet, Statement of Profit and Loss
and notes thereto in accordance with the manner prescribed in Schedule VI to the Companies Act,
1956. To harmonise the disclosure requirements with the Accounting Standards and to converge
with the new reforms, the Ministry of Corporate Affairs vide Notification No. S.O. 447(E), dated 28
th
February 2011 replaced the existing Schedule VI of the Companies Act, 1956 with the revised one.
Government vide Notification No. F.N. 2/6/2008 – C.L-V dated 30
th
March 2011 made the revised
Schedule VI applicable to all companies for the financial year commencing from 01
st
April 2011. The
requirements of the Revised Schedule VI however, do not apply to companies as referred to in the
proviso to Section 211 (1) and Section 211 (2) of the Act, i.e., any insurance or banking company, or
any company engaged in the generation or supply of electricity or to any other class of company for
which a form of Balance Sheet and Profit and Loss account has been specified in or under any other
Act governing such class of company.
Key Features of Revised Schedule VI –Balance Sheet
• The revised schedule contains General Instructions, Part I – Form of Balance Sheet; General
Instructions for Preparation of Balance Sheet, Part II – Form of Statement of Profit and Loss;
General Instructions for Preparation of Statement of Profit and Loss.
• The Revised Schedule VI has eliminated the concept of ‘schedule’ and such information is now
to be furnished in the notes to accounts.
• The revised schedule gives prominence to Accounting Standards (AS) i.e. in case of any
conflict between the AS and the Schedule, AS shall prevail.
• The revised schedule prescribes a vertical format for presentation of balance sheet therefore, no
option to prepare the financial statement in horizontal format. It ensures application of uniform
format.
• All Assets and liabilities classified into current and non-current and presented separately on the
face of the Balance Sheet.
• Number of shares held by each shareholder holding more than 5% shares now needs to be
disclosed.
• Details pertaining to aggregate number and class of shares allotted for consideration other than
cash, bonus shares and shares bought back will need to be disclosed only for a period of five
years immediately preceding the Balance Sheet date.
• Any debit balance in the Statement of Profit and Loss will be disclosed under the head
“Reserves and surplus.” Earlier, any debit balance in Profit and Loss Account carried forward
after deduction from uncommitted reserves was required to be shown as the last item on the
asset side of the Balance Sheet.
• Specific disclosures are prescribed for Share Application money. The application money not
exceeding the capital offered for issuance and to the extent not refundable will be shown
separately on the face of the Balance Sheet. The amount in excess of subscription or if the Supplement on Revised Schedule VI Page 4
requirements of minimum subscription are not met will be shown under “Other current
liabilities.”
• The term “sundry debtors” has been replaced with the term “trade receivables.” ‘Trade
receivables’ are defined as dues arising only from goods sold or services rendered in the normal
course of business. Hence, amounts due on account of other contractual obligations can no
longer be included in the trade receivables.
• The Old Schedule VI required separate presentation of debtors outstanding for a period
exceeding six months based on date on which the bill/invoice was raised whereas, the Revised
Schedule VI requires separate disclosure of “trade receivables outstanding for a period
exceeding six months from the date the bill/invoice is due for payment.”
• “Capital advances” are specifically required to be presented separately under the head “Loans
& advances” rather than including elsewhere.
• Tangible assets under lease are required to be separately specified under each class of asset. In
the absence of any further clarification, the term “under lease” should be taken to mean assets
given on operating lease in the case of lessor and assets held under finance lease in the case of
lessee.
• In the Old Schedule VI, details of only capital commitments were required to be disclosed.
Under the Revised Schedule VI, other commitments also need to be disclosed.
Key Features of Revised Schedule VI – Statement of Profit and Loss
• The name has been changed to “Statement of Profit and Loss” as against ‘Profit and Loss
Account’ as contained in the Old Schedule VI.
• Unlike the Old Schedule VI, the Revised Schedule VI lays down a format for the presentation
of Statement of Profit and Loss. This format of Statement of Profit and Loss does not mention
any appropriation item on its face. Further, the Revised Schedule VI format prescribes such
‘below the line’ adjustments to be presented under “Reserves and Surplus” in the Balance
Sheet.
• As per revised schedule VI, any item of income or expense which exceeds one per cent of the
revenue from operations or Rs.100,000 (earlier 1 % of total revenue or Rs.5,000), whichever
is higher, needs to be disclosed separately.
• In respect of companies other than finance companies, revenue from operations need to be
disclosed separately as revenue from (a) sale of products, (b) sale of services and (c) other
operating revenues.
• Net exchange gain/loss on foreign currency borrowings to the extent considered as an
adjustment to interest cost needs to be disclosed separately as finance cost.
• Break-up in terms of quantitative disclosures for significant items of Statement of Profit and
Loss, such as raw material consumption, stocks, purchases and sales have been simplified and
replaced with the disclosure of “broad heads” only. The broad heads need to be decided based
on materiality and presentation of true and fair view of the financial statements.
**************Supplement on Revised Schedule VI Page 5
COMPARITIVE ANALYSIS BETWEEN OLD SCHEDULE VI
AND REVISED SCHEDULE VI
PARTICULARS OLD SCHEDULE VI REVISED SCHEDULE VI
Parts Part I (Balance Sheet), Part II
(Profit and Loss Account), Part III
(Interpretation) and Part IV
(Balance sheet Abstract of
company’s general business
profile)
Only two parts- Part I(Balance Sheet)
and Part II (Statement of Profit and
Loss)
Part III (Interpretation) and Part IV
(Balance sheet Abstract of company’s
general business profile) omitted.
Format of Balance
Sheet
Horizontal and Vertical formats
are prescribed.
Only vertical format is prescribed.
Rounding off
(R/off) of Figures
appearing in
financial statement
(a) Turnover of less than Rs. 100
Crs - R/off to the nearest
Hundreds, thousands or decimal
thereof
(b) 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
(c)Turnover of Rs. 500 Crs or
more - R/off to the nearest
Hundreds, thousands, lakhs,
millions or crores, or decimal
thereof
(a)Turnover of less than Rs. 100 Crs -
R/off to the nearest Hundreds,
thousands, lakhs or millions or
decimal thereof
(b)Turnover of Rs. 100 Crs or more -
R/off to the nearest lakhs, millions or
crores, or decimal thereof
Net Working
Capital
Current 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
and to be shown separately. Hence, net
working capital will not be appearing
on Balance sheet.
Fixed Assets There was no bifurcation required
into tangible & intangible assets.
Fixed assets to be shown under noncurrent assets and it has to be
bifurcated into Tangible & intangible
assets.Supplement on Revised Schedule VI Page 6
Borrowings Short term & long term
borrowings are grouped together
under the head Loan funds subhead 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
Finance lease
obligation
Finance lease obligations are
included in current liabilities
Finance lease obligations are to be
grouped under the head non-current
liabilities
Deposits Lease deposits are part of loans &
advances
Lease deposits to be disclosed as long
term loans & advances under the head
non-current assets
Investments Both 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.
Loans & Advances Loans & Advance are disclosed
along with current assets
Loans & Advances to be broken up in
long term & short term and to be
disclosed under non-current & current
assets respectively.
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.
Cash & Bank
Balances
Bank balance to be bifurcated in
scheduled banks & others
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.
Profit & Loss
(Dr Balance)
P&L debit balance to be shown
under the head Miscellaneous
expenditure & losses.
Debit balance of Profit and Loss
Account to be shown as negative
figure under the head Surplus.
Therefore, reserve & surplus balance
can be negative.
Sundry Creditors Creditors to be broken up in to
micro & small suppliers and other
creditors.
It is named as Trade payables and
there is no mention of micro & small
enterprise disclosure.Supplement on Revised Schedule VI Page 7
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.
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 whichever 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,
whichever is higher; to be disclosed
separately
Expense
classification
Function wise & nature wise Expenses in Statement of Profit and
Loss to be classified based on nature
of expenses
Finance Cost Finance 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.
****************Supplement on Revised Schedule VI Page 8
FORMAT OF REVISED SCHEDULE VI
The Ministry of Corporates Affairs specified the format of Schedule VI vide Notification No. S.O.
447(E), dated 28
th
February 2011 as follows:
A. General Instructions
B. Part I – Form of Balance Sheet
C. General Instructions for Preparation of Balance Sheet
D. Part II – Form of Statement of Profit and Loss
E.General Instructions for Preparation of Statement of Profit and Loss
A. General Instructions
1. Where compliance with the requirements of the Act, including the Accounting Standards as
applicable to companies, requires any change in treatment or disclosure including addition,
amendment, substitution or deletion in the head / sub-head or any changes inter se, in the
financial statements or statements forming part thereof, the same shall be made and the
requirements of the Schedule VI shall stand modified accordingly.
2. The disclosure requirements specified in Parts I and II of this Schedule are in addition to and
not in substitution of the disclosure requirements specified in the Accounting Standards
prescribed under the Companies Act, 1956. 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 the Financial Statements. Similarly,
all other disclosures as required by the Companies Act, 1956 shall be made in the notes to
accounts in addition to the requirements set out in this Schedule.
3. Notes to accounts shall contain information in addition to that presented in the Financial
Statements and shall provide where required :
(a) narrative descriptions or disaggregation of items recognised in those statements and
(b) information about items that do not qualify for recognition in those statements.
Each item on the face of the Balance Sheet and the Statement of Profit and Loss shall be
cross-referenced to any related information in the notes to accounts. In preparing the
Financial Statements including the notes to accounts, a balance shall be maintained between
providing excessive detail that may not assist users of financial statements and not providing
important information as a result of too much aggregation.
4. Depending upon the turnover of the company, the figures appearing in the Financial
Statements may be rounded off as below:
Turnover Rounding off
(i) less than one hundred crore rupees To the nearest hundreds, thousands, lakhs or
millions, or decimals thereof.
(ii) one hundred crore rupees or more To the nearest lakhs, millions or crores, or
decimals thereof.
Once a unit of measurement is used, it should be used uniformly in the Financial
Statements.Supplement on Revised Schedule VI Page 9
5. Except in the case of the first Financial Statements laid before the Company (after its
incorporation), the corresponding amounts (comparatives) for the immediately preceding
reporting period for all items shown in the Financial Statements including notes shall also be
given.
6. For the purpose of this Schedule, the terms used herein shall be as per the applicable
Accounting Standards.
This part of Schedule sets out the minimum requirements for disclosure on the face of the Balance
Sheet and the Statement of Profit and Loss (hereinafter referred to as “Financial Statements” for the
purpose of this Schedule) and Notes. Line items, sub-line items and sub-totals shall be presented as
an addition or substitution on the face of the Financial Statements when such presentation is relevant
to an understanding of the Company’s financial position or performance or to cater to industry /
sector specific disclosure requirements or when required for compliance with the amendments to the
Companies Act, 1956 or under the Accounting Standards.
B. Part I: Form of Balance Sheet
Name of the Company`
Balance Sheet as at 31 March, 20X2
Particulars Note
No.
As at 31
March, 20X2
As at 31
March, 20X1
Rs. Rs.
A 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
(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
B ASSETS
1 Non-current assetsSupplement on Revised Schedule VI Page 10
C. General Instructions for Preparation of Balance Sheet
1. An asset shall be classified as current when it satisfies any of the following criteria:
(a) it is expected to be realised 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;
(c) it is expected to be realised within twelve 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 twelve months after the reporting date.
All other assets shall be classified as non-current.
2. An operating cycle is the time between the acquisition of assets for processing and their
realisation in cash or cash equivalents. Where the normal operating cycle cannot be identified,
it is assumed to have duration of 12 months.
3. A liability shall be classified as current when 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;
(c) it is due to be settled within twelve months after the reporting date; or
(d) the company does not have an unconditional right to defer settlement of the liability
for at least twelve months after the reporting date. Terms of a liability that could, at
the option of the counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
(a) Fixed assets
(i) Tangible assets
(ii) Intangible assets
(iii) Capital work-in-progress
(iv) Intangible assets under development
(v) Fixed assets held for sale
(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
TOTALSupplement on Revised Schedule VI Page 11
All other liabilities shall be classified as non-current.
4. 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.
5. 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.
6. A company shall disclose the following in notes to accounts:
6A. Share capital
Clauses (a) to (l) of Notes 6 A deal with disclosures for Share Capital and such disclosures are
required for each class of share capital (different classes of preference shares to be treated
separately).
a. The number and amount of shares authorized
b. The number of shares issued, subscribed and fully paid, and subscribed but not fully
paid
c. Par value per share
d. A reconciliation of the number of shares outstanding at the beginning and at the end of
the reporting period
e. The rights, preferences and restrictions attaching to each class of shares including
restrictions on the distribution of dividends and the repayment of capital
f. Shares in respect of each class in the company held by its holding capacity or its
ultimate holding company including shares held by or by subsidiaries or associates of
the holding company or the ultimate holding company in aggregate
g. Shares in the company held by each
h. Shareholder holding more than 5 per cent shares specifying the number of shares held
i. Shares reserved for issue under options and contracts/commitments for the sale of
shares/disinvestment, including the terms and amounts
j. For the period of five years immediately preceding the date as at which the balance
sheet is prepared :
i. aggregate number and class of shares allotted as fully paid up pursuant to
contract(s) without payment being received in cash.
ii. aggregate number and class of shares allotted as fully paid up by way of bonus
shares.
iii. aggregate number and class of shares bought back.
k. Terms of any securities convertible into equity/preference shares issued along with the
earliest date of conversion in descending order starting from the farthest such date
l. Calls unpaid (showing aggregate value of calls unpaid by directors and officers)
6B. Reserves and Surplus
(i) Reserve and surplus shall classified as follows
a) Capital Reserves
b) Capital Redemption ReserveSupplement on Revised Schedule VI Page 12
c) Securities Premium Reserve
d) Debenture Redemption Reserve
e) Revaluation Reserve
f) Share Options Outstanding Account
g) Other Reserves (specify the nature and purpose of reserve and the amount in respect
thereof)
h) 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 the last Balance Sheet to be shown under each of the specified
head)
(ii) A reserve specifically represented by earmarked investments shall be termed as a ‘fund’.
(iii) 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.
6C. Non-Current Liabilities
a. Long-term borrowings:
• Long-term borrowings shall be classified as:
(a) Bonds/debentures;
(b) Term loans;
• from banks;
• 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) Other loans and advances (specify nature).
• Borrowings shall further be sub-classified as secured and unsecured. Nature of security
shall be specified separately in each case.
• Where loans have been guaranteed by directors or others, the aggregate amount of such
loans under each head shall be disclosed. The word “others” used in the phrase “directors
or others” would mean any person or entity other than a director.
• Bonds/debentures (along with the rate of interest and particulars of redemption or
conversion, as the case may be) shall be stated in descending order of maturity or
conversion, starting from farthest redemption or conversion date, as the case may be.
Where bonds/debentures are redeemable by installments, the date of maturity for this
purpose must be reckoned as the date on which the first installment becomes due. Supplement on Revised Schedule VI Page 13
• Particulars of any redeemed bonds/ debentures which the company has power to reissue
shall be disclosed.
• 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.
b. Other Long-term liabilities
This should be classified into:
a) Trade payables; and
b) Others.
c. Long-Term Provisions
This should be classified into
a) provision for employee benefits and
b) others specifying the nature.
6D. Current Liabilities
a. Short-term borrowings;
(i) (a) Loans repayable on demand
• from banks;
• from other parties.
(b) Loans and advances from related parties;
(c) Deposits;
(d) Other loans and advances (specify nature).
(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature of security
shall be specified separately in each case.
(iii) Where loans have been guaranteed by directors or others, the aggregate amount of such
loans under each head shall be disclosed.
(iv) Period and amount of default as on the Balance Sheet date in repayment of loans and
interest, shall be specified separately in each case.
b. Other current liabilities
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;Supplement on Revised Schedule VI Page 14
(j) Other payables (specify nature).
The portion of long term debts / lease obligations, which is due for payments within twelve months
of the reporting date is required to be classified under “Other Current liabilities” while the balance
amount should be classified under Long-term Borrowings. Other Payables would include amounts in
the nature of statutory dues such as Withholding taxes, Service Tax, VAT, Excise Duty etc.
c. Short-term provisions
The amounts shall be classified as:
(a) Provision for employee benefits;
(b) Others (specify nature).
6E. Non-Current Assets
a. Tangible assets
(i) Classification shall be given as:
(a) Land.
(b) Buildings.
(c) Plant and Equipment.
(d) Furniture and Fixtures.
(e) Vehicles.
(f) Office equipment.
(g) Others (specify nature).
(ii) Assets under lease shall be separately specified under each class of asset.
(iii) A reconciliation of 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 and other adjustments and the related depreciation and impairment
losses/reversals shall be disclosed separately.
(iv) Where sums have been written off on a reduction of capital or revaluation of assets or where
sums have been added on revaluation of assets, every balance sheet subsequent to date of such
write-off, or addition shall show the reduced or increased figures as applicable and shall by way
of a note also show the amount of the reduction or increase as applicable together with the date
thereof for the first five years subsequent to the date of such reduction or increase.
b. Intangible assets
(i) Classification shall be given as:
(a) Goodwill.
(b) Brands /trademarks.
(c) Computer software.
(d) Mastheads and publishing titles.
(e) Mining rights.Supplement on Revised Schedule VI Page 15
(f) Copyrights, and patents and other intellectual property rights, services and operating
rights.
(g) Recipes, formulae, models, designs and prototypes.
(h) Licenses and franchise.
(i) Others (specify nature).
(ii) A reconciliation of 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 and other adjustments and the related amortization and impairment
losses/reversals shall be disclosed separately.
(iii) Where sums have been written off on a reduction of capital or revaluation of assets or where
sums have been added on revaluation of assets, every balance sheet subsequent to date of such
write-off, or addition shall show the reduced or increased figures as applicable and shall by way
of a note also show the amount of the reduction or increase as applicable together with the date
thereof for the first five years subsequent to the date of such reduction or increase.
c. Non-current investments
(i) Non-current investments shall be classified as trade investments and other 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;
(f) Investments in Mutual Funds;
(g) Investments in partnership firms
(h) Other non-current investments (specify nature)
Under each classification, details shall be given 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 (showing separately investments
which are partly paid).
In regard to investments in the capital of partnership firms, the names of the firms (with the
names of all their partners, total capital and the shares of each partner) shall be given.
(ii) Investments carried at other than at cost should be separately stated specifying the basis for
valuation thereof.
(iii) 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
d. Long-term loans and advances
(i) Long-term loans and advances shall be classified as:Supplement on Revised Schedule VI Page 16
(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.
(iv) Loans and advances due by directors or other officers of the company or any of them either
severally or jointly with any other persons or amounts due by firms or private companies
respectively in which any director is a partner or a director or a member should be separately
stated.
e. Other non-current assets
Other non-current assets shall be classified as:
(i) Long Term Trade Receivables (including trade receivables on deferred credit terms);
(ii) Others (specify nature)
(iii) Long term Trade Receivables, shall be sub-classified as:
(i) (a) Secured, considered good;
(b)Unsecured considered good;
(c)Doubtful
(ii) Allowance for bad and doubtful debts shall be disclosed under the relevant heads
separately.
(iii) Debts due by directors or other officers of the company or any of them either
severally or jointly with any other person ordebts due by firms or private companies
respectively in which any director is a partner or a director or a member should be
separately stated.
6F. Current Investment
a. Current Investments
(i) Current investments shall be classified as:
(a) Investments in Equity Instruments;
(b) Investment in Preference Shares
(c) Investments in government or trust securities;
(d) Investments in debentures or bonds;
(e) Investments in Mutual Funds;
(f) Investments in partnership firms
(g) Other investments (specify nature).
Under each classification, details shall be given of names of the bodies corporate (indicating
separately whether such bodies are (i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) Supplement on Revised Schedule VI Page 17
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 (showing separately investments
which are partlypaid).
In regard to investments in the capital of partnership firms, the names of the firms (with the
names of all their partners, total capital and the shares of each partner) shall be given.
(ii) The following shall also be disclosed:
(a) The basis of valuation of individual investments
(b) Aggregate amount of quoted investments and market value thereof;
(c) Aggregate amount of unquoted investments;
(d) Aggregate provision made for diminution in value of investments.
b. Inventories
(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. Mode of valuation
shall be stated.
c. 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.
(iv) Debts due by directors or other officers of the company or any of them either severally or jointly
with any other person or debts due by firms or private companies respectively in which any
director is a partner or a director or a member should be separately stated.
d. 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.Supplement on Revised Schedule VI Page 18
(iii) Balances with banks to the extent held as margin money or security against the borrowings,
guarantees, other commitments shall be disclosed separately.
(iv) Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated.
(v) Bank deposits with more than 12 months maturity shall be disclosed separately.
e. Short-term loans and advances
(i) Short-term loans and advances shall be classified as:
(a) Loans and advances to related parties (giving details thereof);
(b) Others (specify nature).
(ii) The above shall also be 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.
(iv) Loans and advances due by directors or other officers of the company or any of them either
severally or jointly with any other person or amounts due by firms or private companies
respectivelyin which any director is a partner or a director or a member shall be separately
stated.
f. Other current assets (specify nature).
This is an all-inclusive heading, which incorporates current assets that do not fit into any other asset
categories.
6G. Contingent liabilities and commitments (to the extent not provided for)
(i) Contingent liabilities shall be classified as:
(a)Claims against the company not acknowledged as debt;
(b)Guarantees;
(c)Other money for which the company is contingently liable
(ii) Commitments shall be classified as:
(a) Estimated amount of contracts remaining to be executed on capital account and not
provided for;
(b) Uncalled liability on shares and other investments partly paid
(c) Other commitments (specify nature).
6H. 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.
6I. 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.Supplement on Revised Schedule VI Page 19
6J. 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
D. Part II – Form of Statement of Profit And Loss
Name of the Company
Statement of Profit and Loss for the year ended 31 March, 20X2
Particulars Note
No.
For the year
ended
31 March, 20X2
For the year
ended
31 March, 20X1
Rs. Rs.
A CONTINUING OPERATIONS
1 Revenue from operations (gross)
Less: Excise duty
Revenue from operations (net)
2 Other income
3 Total revenue (1+2)
4 Expenses
(a) Cost of materials consumed
(b) Purchases of stock-in-trade
(c) Changes in inventories of
finished goods, work-inprogress and stock-in-trade
(d) Employee benefits expense
(e) Finance costs
(f) Depreciation and amortisation
expense
(g) Other expenses
Total expenses
5 Profit / (Loss) before exceptional and
extraordinary items and tax (3 - 4)
6 Exceptional items
7 Profit / (Loss) before extraordinary
items and tax (5 + 6)
8 Extraordinary items
9 Profit / (Loss) before tax (7 + 8)
10 Tax expense:
(a) Current tax expense for current year
(b) (Less): MAT credit (where
applicable)Supplement on Revised Schedule VI Page 20
(c) Current tax expense relating to prior
years
(d) Net current tax expense
(e) Deferred tax
11 Profit / (Loss) from continuing
operations (9 +10)
B DISCONTINUING OPERATIONS
12.i Profit / (Loss) from discontinuing
operations (before tax)
12.ii Gain / (Loss) on disposal of assets /
settlement of liabilities attributable to
the discontinuing operations
12.iii Add / (Less): Tax expense of
discontinuing operations
(a) on ordinary activities attributable to
the discontinuing operations
(b) on gain / (loss) on disposal of assets
/ settlement of liabilities
13 Profit / (Loss) from discontinuing
operations (12.i + 12.ii + 12.iii)
C TOTAL OPERATIONS
14 Profit / (Loss) for the year (11 + 13)
15 Earnings per equity share:
(1) Basic
(2) Diluted
E. General Instructions for Preparation of Statement of Profit and Loss
1. The provisions of this Part shall apply to the income and expenditure account referred to in subsection (2) of Section 210 of the Act, in like manner as they apply to a statement of profit and
loss.
2. (A) In respect of a company other than finance company revenue from operations shall disclose
separately in the notes revenue from
(a) sale of products;
(b) sale of services;
(c) other operating revenues;
Less:
(d) Excise duty.
(B) In respect of a finance company, revenue from operations shall include revenue from
(a) Interest; and
(b) Other financial servicesSupplement on Revised Schedule VI Page 21
Revenue under each of the above heads shall be disclosed separately by way of notes to accounts
to the extent applicable.
3. Finance Costs: Finance costs shall be classified as:
(a) Interest expense;
(b) Other borrowing costs;
(c) Applicable net gain/loss on foreign currency transactions and translation.
4. Other income: Other income shall be classified as:
(a) Interest Income (in case of a company other than a finance company);
(b) Dividend Income;
(c) Net gain/loss on sale of investments
(d) Other non-operating income (net of expenses directly attributable to such income).
5. Additional Information: A Company shall disclose by way of notes additional information
regarding aggregate expenditure and income on the following items:-
(i) (a) Employee Benefits Expense [showing separately (i) salaries and wages, (ii) contribution to
provident and other funds, (iii) expense on Employee Stock Option Scheme (ESOP) and
Employee Stock Purchase Plan (ESPP), (iv) staff welfare expenses].
(b) Depreciation and amortization expense;
(c) Any item of income or expenditure which exceeds one per cent of the revenue from
operations or Rs.1,00,000, whichever is higher;
(d) Interest Income;
(e) Interest Expense;
(f) Dividend Income;
(g) Net gain/ loss on sale of investments;
(h) Adjustments to the carrying amount of investments;
(i) Net gain or loss on foreign currency transaction and translation (other than considered as
finance cost);
(j) Payments to the auditor as (a) auditor,(b) for taxation matters, (c) for company law
matters, (d) for management services, (e) for other services, (f) for reimbursement of
expenses;
(k) Details of items of exceptional and extraordinary nature;
(l) Prior period items;
(ii) (a) In the case of manufacturing companies,-
(1) Raw materials under broad heads.
(2) Goods purchased under broad heads.
(b) In the case of trading companies, purchases in respect of goods traded in by the company
under broad heads.
(c) In the case of companies rendering or supplying services, gross income derived form
services rendered or supplied under broad heads.Supplement on Revised Schedule VI Page 22
(d) In the case of a company, which falls under more than one of the categories mentioned in
(a), (b) and (c) above, it shall be sufficient compliance with the requirements herein if
purchases, sales and consumption of raw material and the gross income from services
rendered is shown under broad heads.
(e) In the case of other companies, gross income derived under broad heads.
(iii) In the case of all concerns having works in progress, works-in progress under broad heads.
(iv) (a) The aggregate, if material, of any amounts set aside or proposed to be set aside, to reserve,
but not including provisions made to meet any specific liability, contingency or
commitment known to exist at the date as to which the balance-sheet is made up.
(b) The aggregate, if material, of any amounts withdrawn from such reserves.
(v) (a) The aggregate, if material, of the amounts set aside to provisions made for meeting specific
liabilities, contingencies or commitments.
(b) The aggregate, if material, of the amounts withdrawn from such provisions, as no longer
required.
(vi) Expenditure incurred on each of the following items, separately for each item:-
(a) Consumption of stores and spare parts.
(b) Power and fuel.
(c) Rent.
(d) Repairs to buildings.
(e) Repairs to machinery.
(g) Insurance.
(h) Rates and taxes, excluding, taxes on income.
(i) Miscellaneous expenses
(vii) (a) Dividends from subsidiary companies.
(b)Provisions for losses of subsidiary companies.
(viii) The profit and loss account shall also contain by way of a note the following information,
namely:-
a) Value of imports calculated on C.I.F basis by the company during the financial year in
respect of –
I. Raw materials;
II. Components and spare parts;
III. Capital goods;
b) Expenditure in foreign currency during the financial year on account of royalty, know-how,
professional and consultation fees, interest, and other matters;Supplement on Revised Schedule VI Page 23
c) Total value if all imported raw materials, spare parts and components consumed during the
financial year and the total value of all indigenous raw materials, spare parts and
components similarly consumed and the percentage of each to the total consumption;
d) The amount remitted during the year in foreign currencies on account of dividends with a
specific mention of the total number of non-resident shareholders, the total number of
shares held by them on which the dividends were due and the year to which the dividends
related;
e) Earnings in foreign exchange classified under the following heads, namely:-
I. Export of goods calculated on F.O.B. basis;
II. Royalty, know-how, professional and consultation fees;
III. Interest and dividend;
IV. Other income, indicating the nature thereof
*DisclaimerThe Supplement on Revised Schedule VI has been prepared purely for academics purposes only and
it does not necessarily reflect the views of ICSI. Any person wishing to act on the basis of this
Supplement should do so only after cross checking with the original source.
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Revised Schedule VI Companies Act, 1956 — Presentation Transcript
- 1. REVISED SCHEDULE VI COMPANIES ACT, 1956
- 2. INTRODUCTION Ministry of Company affairs (MCA) vide its notification dt. 28th Feb 2011 replaced the existing schedule VI by the Revised Schedule VI. Revised schedule will apply to all the companies uniformly for the financial statements to be prepared for the financial year commencing on or after 01-04-2011 Comparatives for the immediately preceding reporting period for all items shown in the Financial Statements including notes shall also have to be given as per new format. Thus for the financial statements prepared for the year 2011-12 (1st April 2011 to 31st March 2012), comparative amounts need to be given for the financial year 2010-11. Revised Schedule VI however, do not apply to any insurance or banking company, or any company engaged in the generation or supply of electricity Revised Schedule VI has been developed in the framework of existing non-converged Indian Accounting Standards and has no connection with the converged Indian Accounting Standards.
- 3. MAIN PRINCIPLES OF REVISED SCHEDULE VI The requirements of the Companies Act, 1956 and the Accounting Standards will prevail over the Revised Schedule VI. Revised Schedule VI clarifies that the requirements mentioned therein for disclosure on the face of the financial statements or in the notes are minimum requirements Revised Schedule VI has eliminated the concept of ‘schedule‟ and such information is now to be furnished in the notes to accounts. All items of assets and liabilities are to be bifurcated between current and non-current. Rounding off requirements has been changed
- 4. I. EQUITY & LIABILITIES I. SOURCES OF FUNDS (1) Shareholders’ Funds (1) Shareholders’ Funds (a) Share Capital (a) Capital (b) Reserves & Surplus (b) Reserves & Surplus (c) Money recd against share warrants (2) Loan Funds (2) Share application money (a) Secured Loans pending allotment (b)Unsecured Loans (3) Non-current Liabilities (3) Deferred Tax Liabilities(Net) (a) Long-term borrowings (4) Current Liabilities & Provisions (b) Deferred tax liabilities (Net) (Reclassified) (c) Other long term liabilities (a) Liabilities (d) Long-term provisions (b) Provisions (4) Current Liabilities (a) Short-term borrowings (b) Trade payables (c) Other current liabilities (d) Short-term provisions Total Total
- 5. II. ASSETS II. APPLICATION OF FUNDS (1) (a) Fixed Assets (1) Fixed Assets (i) Tangible Assets (a) Gross Block (ii) Intangible Assets (b) Less: depreciation (iii) Capital Work-in-Progress (c) Net Block (iv) Intangible Assets under develop (d) Capital Work-in-Progress (b) Non-current Investments (2) Investments (Long term and Current) (c)Deferred tax assets (net) (3) Deferred Tax Assets (Net) (d) Long-term loans and advances (4) Current Assets, Loans and advances (e) Other non-current (a) Inventories assets (b) Sundry debtors (2) Current Assets (c) Cash and Bank balances (a) Current Investments (d) Loans & Advances (b) Inventories (e) Other current Assets (c) Trade Receivables (5) (a) Miscellaneous Expenditure (d) Cash and Cash equivalents (b) Profit and Loss Account (e) Short-term loans and advances (f) Other current assets Total Total
- 6. FEW MAJOR CHANGES IN BALANCE SHEET Only the vertical format for presentation of financial statements Shareholder holding more than 5 percent shares need to be disclosed Aggregate number and class of shares allotted for consideration other than cash need to be disclosed only for a period of five years Debit balance of profit& loss account will be disclosed under the head “Reserves and surplus. Sundry debtors” has been replaced with the term “trade receivables. Amount due on account of other contractual obligations can no longer be included in the trade receivables Disclosure of all defaults in repayment of loans and interest to be specified in each case. Earlier, no such disclosure was required . Tangible assets under lease are required to be separately specified
- 7. FEW MAJOR CHANGES IN PROFIT & LOSS A/C Name has been changed to “Statement of Profit and Loss” as against „Profit and Loss Account‟ Appropriation line items not to be presented on the face of Statement of Profit and Loss One percent of the revenue from operations or ` 100,000 needs to be disclosed separately Dividends from Subsidiary should be recognized as income only when the right to receive dividends is established as on the Balance Sheet date. Revenue from operations need to be disclosed separately as revenue from (a) sale of products, (b) sale of services and (c) other operating revenues
- 8. DISCLOSURE REQUIREMENTSRevised Schedule VI introduces a number of other additional disclosures. Ex: Terms of repayment of long-term loans need to be disclosed. Stock-in-trade held for trading purposes, separately from other finished goods Aggregate provision for diminution in value of investments separately for current and long-term Rights, preferences and restrictions attaching to each class of shares, including restrictions on the distribution of dividends and the repayment of capital investmentsRevised Schedule VI has removed a number of disclosure requirements. Ex: Information relating to licensed capacity, installed capacity and actual production Information on investments purchased and sold during the year Disclosures relating to managerial remuneration and computation of net profits for calculation of commission Investments, sundry debtors and loans & advances pertaining to companies under the same management
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