1

A
PROJECT REPORT
ON
REVISED SCHEDULE VI
FOR
AMD & COMPANY
MASTER OF MANAGEMENT STUDIES (MMS)
UNIVERSITY OF MUMBAI

SUBMITTED TO
MARATHA MANDIRS
BABASAHEB GAWDE INSTITUTE OF
MANAGEMENT STUDIES
MUMBAI CENTRAL

SUBMITTED BY:
NIRAV JASWANT DARJI
BATCH: 2011-13
ROLL NO: 09


2


DECLARATION

I, Nirav Jaswant Darji student of Masters of Management Studies (Semester III) of
Babasaheb Gawde Institute of Management Studies (BGIMS), hereby declare that I
have successfully completed this project on REVISED SCHEDULE VI as a part of
my Summer Internship. The information incorporated in this project is true and
original to the best of my knowledge.

____________________________________
Signature












3


ACKNOWLEDGEMENT

I would like to acknowledge extremely valuable assistance provided by all the
Officers and other staff members for their great cooperation. They provide the proper
guidance and support time to time which helps me a lot to work in such competitive
environment and the timely completion of assignments. The office working
environment is very good.
First of all I would like to thank Mr .Arvind Darji (Partner) for giving me an
opportunity to work as summer trainee in AMD & Company and also I would like to
thank to all the staff members for their cooperation & help given by them.
Their experiences & feedback kept me on track and helped me produce much better
results.











4


INDEX

Chapter Topics Page No.
1. Executive Summary 5
2. Company Profile 6-16
2.1 About Firm 6
2.2 Clients 7
2.3 Range Of Services Provided by AMD Group 8-16
3. Introduction of Revised Schedule VI 17
4. Objectives of study 18
5. Literature Review 19-44
5.1 Major principles as per Revised Schedule VI 19-22
5.2 Liabilities New disclosure requirements 23-26
5.3 Assets New disclosure requirements 27-32
5.4 Major changes in the format of Balance Sheet 33-42
5.5 Major changes in the format of Statement of
Profit and Loss
43-48
6. Observation 49-50
7. Data Analysis 51-54
8. Interpretation 55-59
9. Limitations 60-79
9.1 Issues relating to balance sheet 60-72
9.2 Issues relating to P&L account 73-79
10. Conclusions 80
11. Bibliography 81











5

CHAPTER -1 EXECUTIVE SUMMARY
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
corporate 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.











6

CHAPTER 2 COMPANY PROFILE
2.1 About Firm
AMD & CO (previously known as Arvind Darji Associates) is a Chartered
Accountancy Firm based in Mumbai, India. The firm was started by Mr. Arvind M
Darji in 1988 and now is being supported by team of qualified professionals under his
leadership.
We were also selected by Honourable Special Court of India to conduct Investigation
audit of M/s. Abhay D. Narottam. In India, a large Security Scam had taken place in
the year 1992-93 in which public fund to the tune of US $ 3 Billion was siphoned off.
We were chosen by the Court to audit the accounts of one of the important scam
player M/s. Abhay D Narottam. We successfully completed the assignment to the
satisfaction of Honourable Special Court.
We, AMD & CO, focus at providing tailor made solutions to challenging problems of
our clients, and perform high quality and timely service.
AMD & CO, a professional firm, offers its clients a full range of services, including
financial, business advisory, tax regulatory services, etc.
Our clients include listed and non-listed companies and cover a broad spectrum of
industries ranging from Construction, Iron and Steel , Dairy and Food Products,
Healthcare, Gems and Diamond , Film production, Forgings, Automotive, Power
and Information Technology.
With India poised for playing a major role in the growth of the world economy, we
are well positioned to take on the rising demand for audit and allied services from
the domestic as well as the overseas companies.


7

2.2 Clients

We offer a wide range of financial and consultancy services to Corporate, Firms and
other entities. Over time, we have acquired experience of servicing diverse industries
as follows:

FMCG
Real estate and Construction
Drugs and Pharmaceuticals
Welding and fabricator
Gems and jewellers
Manufacturing and supplying mechanical spares to thermal & gas power plants
Milk, Ghee, Dairy and other food products
Iron and Steel
financial and Investment sector
Entertainment
Trust
Professionals






8

2.3 Range Of Services Provided by AMD Group


1. Corporate Advisory & Compliance
Assistance in incorporation of Company which includes obtaining the name
approval, drafting of the Memorandum and Articles of Association of the
Company, liaising with the Registrar of Company for obtaining the
Certificate of Incorporation etc. Assistance in registering with STPI, FIPB
and RBI where applicable.

Corporate
Arvisory &
Compliance
Audit &
Assurance
Taxation
FEMA
International
Taxation
Start-up
Ventures
Corporate
Law
Compliance
NRI Services
Project and
trade Finance,
PE funding OTS
& DRT
BPO


9

Advice on various matters under the Companies Act, 1956.
Identification of issues related to Companies Act, 1956 and providing
suitable guidance and solution.
Drafting and maintenance of minutes of Board and Shareholders meeting,
Maintenance of statutory records and registers.
Business Advisory for promoters & senior management in respect to long
term strategy Brand Building, Growth Plans and Related Matters.
Assistance in preparation and filing of various Forms and Returns with the
Registrar of Companies.

2. Audit and Assurance
Auditing & Assurance Services are vital for any Financial Management setup. It
ensures proper working of the organization according to laid down internal controls
and also the efficiency and effectiveness of the controls itself, to identify deficiency in
the system, if any and suggest corrective measures. At AMD & CO, we offer a
complete range of Assurance Solutions to help improve your financial efficiency,
accuracy and stability.
Our Audit & Assurance Services include:-
Statutory Audit
Internal/operational/Management/system Audit
Tax Audit
Special purpose Audit
Pre-Audit Compilations


10

Due Diligence
Corporate Compliance
Opinions on Indian Accounting Standards and International Financial
Reporting Standards (IFRS)
Conversion from Indian GAAPs to IFRS
3. Tax Planning
Tax Planning, Tax Management, Corporate Taxation.
Representing before tax authorities including Tax Appellate Tribunals for
assessment proceedings, appeal and petitions. Representation for Search and
Seizure cases, Representation before the Ministry of Finance for
approvals/exemptions under Tax Statute.
Advising business entities on tax implications consequent to acquisition or
succession.
Advising of tax strategies for reconstruction of entities, acquisitions,
amalgamations, liquidation and mergers.
Making applications to Specified Authorities for tax rebate/exemptions under
Income Tax Act.
Taxation of NGO.




11

4. FEMA / International Taxation
We provide advisory and compliance services encompassing the entire gamut of
foreign exchange law as detailed below:
Compliance of the procedure including chartered Accountants Certification
for repatriation of income / assets from India
Residential status
Investment in Business in India directly and by floating offshore companies
Setting up a branch/liaison/project office in India
Portfolio investments in India
Banking and remittances
Formation of Company and Setting up a branch outside India
Advising on Double Taxation Avoidance Agreement (DTAA) treaty with
various countries.
Any specific advice required in relation to FEMA / RBI matters
Transfer pricing procedural compliances and audit.
International taxation

5. Start-up Ventures
We act as business advisors and financial consultants to strategize and overseas the
implementation of business initiation plans. We support start-up ventures at all stages
of the business cycle - from identifying appropriate entry routes to assisting in deal
structuring and providing post set-up services.


12


Entry strategy
We suggest, plan and implement entry strategy in India for your business by doing an
analysis of various factors i.e. Compliance with applicable Statutes, Taxation,
Designing and structuring of suitable entity, etc.

Financial modelling
We enable creation of dynamic financial models for your business, incorporating all
possible factors that would impact the return and risk associated with the venture.

Location studies
We offer various location studies by evaluating the relative advantage of different
Location based on well-defined multi-perspective geographic, economic, political and
International taxation factors.

Joint Ventures/ Partner search and evaluation
This includes identifying potential partners, evaluating their strengths, weaknesses
and synergistic capabilities besides recommending appropriate Joint Venture
structures.

Due diligence reviews
We conduct in-depth transaction scrutiny on credentials of Indian/ foreign companies/
groups prior to entering into business venture.




13

Regulatory approvals
We arrange for the complete set of regulatory approvals required from Foreign
Investment Promotion Board (FIPB)/ Secretarial of Industrial Approvals (SIA),
Reserve Bank of India (RBI), Registrar of Companies (ROC) and other concerned
authorities.

Representative office facility
We organize the office infrastructure and manpower during the 'in transit period' of a
start up when it is in the process of setting up office in India.

6. Corporate law compliance
Give you complete peace of mind by carrying out your corporate law
compliances.
Company formations.
Preparation and filing of statutory returns.
Preparation of all documentation related to minutes and resolutions.
Maintenance of statutory books.
Advice related to Stock Exchange Compliances.
General advice on company law/SEBI issues.



14

7. NRI Services
We have creditable experience of providing multitude of services to a diverse client
profile.
Where can we help ?
Compliances regarding repatriation of assets to/from India.
Procedure for redesignation of all Indian bank accounts.
Opening of Resident foreign currency (RFC) account.
Information to all companies, funds, etc., of whom shares and securities are
held by the non-resident, regarding the change of residential status/relocation
to India.
Compliance in respect of the Indian income-tax Act, 1961 e.g. application for
PAN in case you do not have a PAN.
Compliances in respect of Wealth-tax Act, in case required e.g. filing of
wealth-tax return.
Repatriation of legacies/inherited assets and taxability in India thereon
Facilitate clearance required under FEMA from RBI to continue to hold assets
outside India.
Facilitate re-investment of sale proceeds of assets acquired outside India.
Plan residential status under FEMA and Income Tax Services.
Plan tax liability in India.
Make fresh investments in business outside India.
Investment and business consultancy in India.


15


8. Project and Trade Finance, PE Funding, OTS and DRT
Finance is the life blood of any organization, having too less of blood leads to anemia
in human beings, similarly paucity of finance leads to decrease in activities or
shelving of future expansion plans of any organization and may even lead to failure of
business. We offer services for arranging finance for businesses to meet its various
needs. Our services include PE (Private Equity) Funding, Project Financing through
banks and other financial institutions etc. Brief details of our services are provided
below.
Project and Trade Finance
We provide funding advisory services for various requirements of our clients like
Project Financing, Term Loan, Working Capital Limits, CC Limits, Packing Credit,
Overdraft etc. We provide end to end services starting from assessment of client
requirements, preparation of project reports / financial statements till finalization of
funding and disbursement. We have liaison with various banks, financial institutions
and other funding agencies and have expertise in the procedures adopted by them for
the funding process.

Private Equity Funding
Private Equity funding is one of the least cost funding available (as compared to debt)
for high growth prospect companies. PE Funding do not require any fixed
commitment of returns and are looking for medium term capital appreciation of their
investments. These funding options are mostly viable for high growth prospect
companies requiring financial resources for future expansion. We provide end to end


16

services for obtaining PE Funding and are currently dealing with most of major PE
Funding companies in India.

9. Business Process Outsourcing(BPO)
Large and Small firms, Businesses and individuals are now getting into outsourcing of
various parts of their accounting, taxation, auditing work. It is more affordable to let a
dedicated group of specialists do the work for you.
The firm offers outsourcing services in the areas of accountancy and book
keeping. This includes maintenance of books and records as well as the
preparation and finalization of accounts.
The firm also helps its clients in recruitment of personnel in fields of
accounting and finance.














17

CHAPTER-3 INTRODUCTION OF REVISED SCHEDULE VI
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
Schedule applies to all companies for the Financial Statements to be prepared for the
financial year commencing on or after April 1, 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. 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 there
under, 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.



18

CHAPTER-4 OBJECTIVE OF STUDY
Learnt how to make balance sheet and profit & loss account as per Revised
Schedule VI.
To understand procedure of such amendment.
To learn the impact of change in the Revised Schedule VI towards the
company.



















19

CHAPTER-5 LITERATURE REVIEW
5.1 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


20

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 companys
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


21

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 decimal thereof.
Turnover Rs.100 to 500 crore
Round off to the nearest
hundreds, thousands, lakhs or
millions or decimal thereof
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.






22

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.










23

5.2 Liabilities New disclosure requirements
1. Share Capital
a. Reconciliation of the number of shares outstanding at the beginning and at the end
of the reporting period
b. The rights, preferences and restrictions attached to each class of shares including
restrictions on the distribution of dividends and the repayment of capital
c. Shares of each class 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.
d. Shares in the company held by each shareholder holding more than 5 percent shares
specifying the number of shares held. This clause requires number of shareholders
holding more than 5 % shareholding and total number of shares hold by those
shareholders.
e. Shares reserved for issue under options and contracts/commitments for the sale of
shares/disinvestment, including the terms and amounts
2. Shares Application money pending Allotment (including advance against
share application money)
a. Exhaustive disclosure requirement in case of above now prescribed. For e.g.
1. Terms and conditions for issuance of shares
2. Amount of premium and period before which new shares need to be issued
3. Period of pendency of such allotment and reasons for such
4. That the company is having sufficient authorized capital to cover the share capital
amount resulting from allotment of shares out of Share application money.


24

3. Reserves & Surplus
a. The balance of Reserves and Surplus, after adjusting negative balance of surplus
(profit & loss account), if any, shall be shown under the head Reserves and Surplus
even if the resulting figure is in the negative.
4. Non-current Liabilities
a. Format
1. Long-term borrowings
2. Deferred tax liabilities (Net)
3. Other long term liabilities
4. Long-term provisions
b. Significant new disclosure requirements in case of:
1. Long term borrowings
(i) Related parties transactions in case of long term loans and advances as a sub line
item of long term borrowings.
(ii) Terms of repayment of all loans now need to be stated
(iii) 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.
2. Other Long term liabilities
(i) Trade payables now need to be bifurcated into current and non-current. Non-
current part to appear here.



25

3. Long term provisions
(i) Provision for employee benefits now to be classified under current and non-
current. Non-current part to appear here. This calls for realignment of earlier years
reporting figure also.
5. Current Liabilities
a. Format
1. Short-term borrowings
2. Trade payables
3. Other current liabilities
4. Short-term provisions
b. Significant additional requirements in case of
1. Short term borrowings
(i) Related parties transactions in case of short term loans and advances as a sub line
item of short term borrowings.
(ii) 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.
2. Other current liabilities
(i) Interest accrued but not due on borrowings. It should be applicable for interest
payable within 12 months after the end of the reporting period. In other cases same
should form part of non-current liability.
(ii) Application money received for allotment of securities and due for refund.



26

3. Short term provisions
(i) Provision for employee benefits now to be classified under current and non-
current. Current part to appear here. This calls for realignment of earlier years
reporting figure also.

















27

5.3 Assets New disclosure requirements
Assets are now required to be reported under current and non-current.
1. Non-current assets
a. Format
1. Fixed Assets
a. Tangible Assets
b. Intangible Assets
c. Capital Work in progress Related to Tangible assets
d. Intangible assets under development
2. Non-current investments
3. Deferred Tax assets (net)
4. Long term loans and advances
5. Other non-current assets
b. Significant disclosure requirements in case of
1. Tangible assets
a. Assets under lease shall be separately identified under each class of asset.
b. Any acquisitions through business combinations and other adjustments and the
related depreciation and impairment losses/reversal shall be disclosed separately. The
term Business combination however has not been defined under The Companies
Act or any of the notified Accounting standards. The definition of business


28

combination as defined under Ind AS 103 on Business Combinations can be
referred here as;
A transaction or other event in which an acquirer obtains control of one or more
businesses. Transactions sometimes referred to as 'true mergers' or 'mergers of equals'
are also business combinations as that term is used in this IFRS.
The above seems having no significant impact under existing scenario where the term
has not been used by the existing notified Accounting Standards except the separate
disclosure of addition/deduction in case of Amalgamation as defined under
Accounting standard -14 on Accounting for Amalgamations.
c. The Conflict of Schedule VI and existing notified Accounting Standard relating to
accounting treatment of forex loss/gain of long term loans, especially in case of
capitalization, has been removed under revised guidelines by way of not prescribing
any guidelines for such treatment under revised schedule VI. Now the accounting
treatment of foreign exchange fluctuation will be governed by Accounting standard
11 The effects of changes in foreign exchange Rates together with effect of
notification no. GSR 225(E) dated 31.3.2009
d. Now separate disclosure requirements for office equipment under tangibles Assets.
However the requirement of disclosing Railways sidings, development of properties
and live stocks has been removed and now can be merged with suitable sub headings
or can be shown separately under other
2. Intangible assets
a. Intangible assets are to be classified as:



29

i. Goodwill
ii. Brands/trademarks
iii. Computer software
iv. Mastheads and publishing titles
v. Mining rights
vi. Copyrights, and patents and other intellectual property rights, services, and
operating rights
vii. Recipes, formulae, models, designs and prototypes
viii. Others (Specify nature)
3. Non-current Investments
a. Non-current investments to be further classified into trade investments and other
investments and further classified as:
i. Investment property
ii. Investments in Equity Instruments
iii. Investments in preference shares
iv. Investments in Government or trust securities
v. Investments in debentures and bonds
vi. Investments in Mutual funds
vii. Investments in partnership firms
Note: There was no separate disclosure requirement for investment property earlier.
Investment property has been defined under AS- 13 Accounting for Investments as
an investment in land or building that are not intended to be occupied substantially for
use by , or in the operations of , investing enterprise. Now under the revised


30

guidelines, investment property needs to be disclosed separately under the head non-
current investments and guidelines of AS-13 shall be applied.
b. 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).
c. The Requirement of investment purchased and sold during the year and disclosure
of investment in Companies under same management has been done away with.
4. Long term Loans and advances
a. Long-term loans and advances shall be classified as:
i. Capital advances
ii. Security deposits
iii. Investments Loans and advances to related parties (giving details thereof)
iv. Other loans and advances
Note:
1. Wherever the above (except capital advances) are realized or adjusted within 12
months from the end of the reporting period should fall under the sub head category
of current assets.
2. The requirement of loans and advances to companies under same management has
been done away with.



31

5. Other non-current assets
Trade receivable realizable beyond 12 months from end of the reporting period or
trade receivables on deferral credit terms which are receivable beyond 12 months
from the end of reporting period should be disclosed here. and balance should be
disclosed under current assets category.
2. Current assets
a. Format
a. Current Investments
b. Inventories
c. Trade Receivables
d. Cash and Cash equivalents
e. Short term loans and advances
f. Other current assets
b. Significant changes
i. The term sundry debtors has been substituted 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. Therefore, amounts due on account of
other contractual obligations, which were earlier included in the sundry debtors, can
no longer be included in the trade receivables.
ii. Previous Schedule VI required separate disclosure of debtors (i) outstanding for a
period exceeding 6 months (i.e., based on billing date) and (ii) other debtors, in a
Schedule to the balance sheet. However, the revised Schedule VI requires separate


32

disclosure of trade receivables outstanding for a period exceeding 6 months from the
date they became due for payment.
iii. No needs to mention bank balance with schedule banks and other banks. All the
banks are now falls under the same category. Further the requirements of giving
maximum balances in non schedules banks have also been removed.
iv. Revised schedule VI now talks about Cash Equivalents- Cash Equivalent as per
AS- 3 are short terms, highly liquid investments that are readily convertible into
known amount of cash and which are subject to an insignificant risk of change in
values. The revised schedule VI under dis- aggregations of cash & cash equivalent is
however silent about the same.
v. Earmarked balances with banks (for example, for unpaid dividend) shall be
separately stated.
vi. Balances with banks to the extent held as margin money or security against the
borrowings, guarantees, other commitments shall be disclosed separately.
vii. Repatriation restrictions, if any, in respect of cash and bank balances shall be
separately stated.
viii. Bank deposits with more than 12 months maturity shall be disclosed separately.
ix. Good s in transit to be reported for each class of inventory.





33

5.4 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


34

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 companys 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.


35

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
companys 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


36

the companys 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 companys 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


37

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.




38

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 business combinations (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.


39

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


40

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 pre revised 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


41

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:


42

(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.
















43

5.5 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 companys operating activities, i.e.,


44

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 companys 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).


45

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


46

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.




47

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


48

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.

















49

CHAPTER-6 OBSERVATION
Structural Changes- Balance Sheet
Particulars

Note
No.
Current
Year
Figures
Previous
Year
Figures
I. EQUITY AND LIABILITIES
1 Shareholders funds
(a) Share capital

XX XX
(b) Share Application Money Received XX XX
(c) Share Premium XX XX
(d) Reserves and surplus

XX XX



2 Non-current liabilities
(a) Long-term borrowings

XX XX
(b) Deferred tax liabilities (Net)

XX XX



3 Current liabilities
(a) Short-term borrowings

XX XX
(b) Trade payables

XX XX
(c) Other current liabilities

XX XX
(d) Short-term provisions

XX XX





TOTAL XX XX
II. ASSETS
Non-current assets
1 (a) Fixed assets





Tangible assets XX XX


Gross block XX XX


Less: Depreciation XX XX


Net block XX XX
(b) Non-current investments

XX XX



2 Current assets
(a) Inventories

XX XX
(b) Trade receivables

XX XX
(c) Cash and cash equivalents

XX XX
(d) Short-term loans and advances

XX XX
(e) Miscellaneous Expenditure XX XX


TOTAL XX XX




50

Structural Changes- Profit & Loss Account
Particulars
Note
No
Current
Year
Previous
Year

I. Revenue from operations XX XX
II. Other Income XX XX
III. Total Revenue (I +II) XX XX
IV. Expenses:
Cost of materials consumed XX XX
Purchase of Stock-in-Trade XX XX
Changes in inventories of finished goods, work-in-
progress and Stock-in-Trade XX XX
Employee benefit expense XX XX
Financial costs XX XX
Depreciation and amortization expense XX XX
Other expenses XX XX
Total Expenses XX XX

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

XX XX


VI. Exceptional Items XX XX

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

VIII. Extraordinary Items XX XX

IX. Profit before tax (VII - VIII) XX XX

X. Tax expense:
(1) Current tax XX XX
(2) Deferred tax XX XX

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

XX XX


XII. Profit/(Loss) from discontinuing operations XX XX

XIII. Tax expense of discounting operations XX XX

XIV. Profit/(Loss) from Discontinuing operations (XII -
XIII) XX XX

XV. Profit/(Loss) for the period (XI + XIV) XX XX

XVI. Earning per equity share:
(1) Basic XX XX
(2) Diluted XX XX


51

CHAPTER -7 DATA ANALYSIS
PRIYA GEMS EXPORTS PRIVATE LIMITED
Balance Sheet as at 31ST MARCH 2012


( in Rs)
Particulars

Note
No.

31/03/2012

31/03/2011
I. EQUITY AND LIABILITIES
1 Shareholders funds
(a) Share capital


3,27,00,900

3,00,00,000

(b)


Share Application Money
Received

3,50,92,408

8,10,76,000
(c) Share Premium


13,23,45,100

-
(d) Reserves and surplus


1,10,12,767

21,78,365





2 Non-current liabilities


(a) Long-term borrowings


3,67,14,281

5,83,48,980
(b) Deferred tax liabilities (Net)


38,202

3,635





3 Current liabilities


(a) Short-term borrowings


21,63,50,024

22,80,43,774
(b) Trade payables


97,48,36,280

57,64,40,966
(c) Other current liabilities


75,38,512

23,36,630
(d) Short-term provisions


63,50,000

20,50,000







TOTAL

1,45,29,78,474

98,04,78,351




















52

Particulars

Note
No.

31/03/2012

31/03/2011
II. ASSETS
Non-current assets
1 (a) Fixed assets




Tangible assets




Gross block


97,85,540

83,01,240


Less: Depreciation


14,16,700

2,79,343


Net block


83,68,840

80,21,897
(b) Non-current investments


-

56,68,082





2 Current assets


(a) Inventories


41,69,55,977

31,90,76,566
(b) Trade receivables


99,03,02,654

58,72,09,888
(c) Cash and cash equivalents


43,28,211

20,49,055
(d)
Short-term loans and
advances


3,27,22,792

5,80,52,864
(e) Miscellaneous Expenditure


3,00,000

4,00,000


TOTAL

1,45,29,78,474

98,04,78,351









( in Rs)


53

Profit and loss statement for the year ended 31/03/2012

( ` in Rs)
Particulars

Note
No.

2011-12
01/01/2011
to
31/03/2011

I. Revenue from operations


1,66,32,54,553

63,89,07,541



II. Other income


3,10,82,914

83,78,355



III. Total Revenue


1,69,43,37,467

64,72,85,896



IV. Expenses:


Cost of materials consumed


1,60,79,40,524

62,82,13,636
Employee benefits expense


83,98,202

26,61,365
Finance costs


1,27,83,250

26,37,075
Administrative & Other Expenses


5,07,52,799

69,62,476
Depreciation and amortization expense

11,37,357

2,79,343

Other expenses - Preliminary Expenses
written off

1,00,000

1,00,000
Loss on sale of Mutual Fund

56,366 -
Total expenses

1,68,11,68,499

64,08,53,895

V.

Profit before exceptional and
extraordinary items and tax

1,31,68,968

64,32,001
VI. Exceptional items

-

-
VII. Profit before extraordinary items and tax

1,31,68,968

64,32,001
VIII. Extraordinary Items

-

-
IX. Profit before tax

1,31,68,968

64,32,001





54

Particulars

Note
No.

2011-12
01/01/2011
to
31/03/2011
X
Tax expense:
(1) Provision for Taxation

43,00,000

20,50,000
(2) Deferred tax

34,566

3,635

XI

Profit (Loss) for the period from continuing
operations

88,34,401

43,78,365
XII Profit/(loss) from discontinuing operations
XIII
Short Provision of Income Tax before
Conversion

-

22,00,000

XIV

Profit/(loss) from Discontinuing operations
(after tax)

88,34,401

21,78,365
XV Profit (Loss) for the period

88,34,401

21,78,365
XVI Earnings per equity share:


(1) Basic 2.70 0.73
(2) Diluted

2.76 0.73













55

CHAPTER-8 INTERPRETATION
Major disclosures omitted under REVISED SCHEDULE VI
(Balance Sheet)
1. Various disclosure under Micro, small and medium enterprises development Act
2006
2. Separate disclosures to dues to subsidiaries
3. Specific mention of amount dues to be credited to Investors education and
protection fund in case of dues for more than seven years. However disclosure
requirement of dues under specific heads still exists.
4. Specific mention of disclosure of provision for proposed dividends is missing in the
revised schedule VI. The disclosure requirements related to proposed dividend has
been dealt elaborately in later part of this analysis.















56

Major disclosure requirements retained under REVISED
SCHDULE VI (Balance Sheet)
a. Authorized, Issued, Subscribed and fully paid and subscribed but not fully paid.
b. Calls unpaid (showing aggregate value of calls unpaid by directors and officers)
c. Forfeited shares (amount originally paid up)
d. Where loans have been guaranteed by directors or others, the aggregate amount of
such loans under each head shall be disclosed.
e. Aggregate amount of quoted investments and market value thereof
f. Aggregate amount of unquoted investments.
g. Aggregate provision made for diminution in value of investments.
h. Sundry Debtors to be now called Trade receivable. Disclosures are the same as
earlier Schedule VI.
i. Contingent liabilities and commitments such as:
(a)Claims against the company not acknowledged as debt;
(b)Guarantees;
(c)Other money for which the company is contingently liable
(d)Estimated amount of contracts remaining to be executed on capital account and not
provided for;
(e) Uncalled liability on shares and other investments partly paid up.
j. 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.



57

Major disclosures omitted under REVISED SCHEDULE VI
(Profit & Loss)
a. Details of amount and quantity of turnover for each class of goods.
b. Details pertaining to licensed /installed and production quantity.
c. Details of opening and closing stock of goods
d. Quantity related information related to raw material consumption
e. Commission paid to sole selling agent and other selling agents.
f. Cash discount separately.
g. Details of arrear depreciation.
h. Separation of investment income from trade investment and other income.
i. Disclosure of TDS in respect of Interest income and investment income.
j. Director remuneration disclosure under section 198.
k. Computation of Net profit under section 349/350 of the Companies Act.











58

Major disclosure requirements retained under REVISED
SCHEDULE VI (profit & loss)
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, 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
shares held by them on 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.



59


f. 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.
f. Insurance.
g. Rates and taxes, excluding taxes on income.
h. Miscellaneous expenses:
g. Dividends from subsidiary companies and Provisions for losses of subsidiary
companies
h (a)The aggregate, if material, of any amounts set aside or proposed to be set aside,
to reserves, but not including provisions made to meet any specific liability,
contingency or commitment known to exist at the date as at which the balance-sheet is
made up.
(b) The aggregate, if material, of any amounts withdrawn from such reserves.
i. The aggregate, if material, of the amounts to 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.





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CHAPTER-9 LIMITATIONS
9.1 Issues relating to balance sheet
The revised Schedule VI requires different classes of preference shares to be treated
separately. Does it mean that a company compulsorily needs to decide whether its
preference shares are liability or equity based on their economic substance using AS
31 Financial Instruments: Presentation principles and present the same accordingly? If
yes, will all companies disclose the redeemable preference shares as liability?
The revised Schedule VI deals only with presentation and disclosure requirements.
Accounting for various items will be governed by the applicable standards. Keeping
this in view, we believe that the following position will apply:
1. If a company early adopts AS 30 Financial Instruments: Recognition and
Measurement, AS 31 and AS 32 Financial Instruments: Disclosures, it will decide the
liability and equity classification of preference shares based on the principles laid in
AS 31. If the application of these principles results in all or part of preference shares
being classified as liability, it will use the same classification, for presentation in the
balance sheet
2. However, if a company has not applied AS 30, AS 31 and AS 32, it can continue to
classify the preference shares as part of share capital. This is based on the argument
that there is no standard dealing with accounting for preference shares and therefore
past practice should prevail. Incidentally, the Companies Act also refers to the
preference shares as a kind of share capital.
The revised Schedule VI requires aggregate amount of both long-term and short-term
loans guaranteed by directors or others under each head to be disclosed. What is
meant by the term others?



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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 or promoters. 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.
The revised Schedule VI requires that under the head Borrowings, details 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 wordings give rise to following issues:
(a) Are the disclosures relating to default pertain to borrowing from banks and
financial institutions or are also required for items such as bonds/debentures, deposits,
finance lease obligations?
(b) Does a company need to disclose information for defaults other than repayment of
loan and interest, e.g., compliance with debt covenants?
(c) How should the terms default/ continuing default as on the balance sheet date be
interpreted?
Issues are as below
(a) In the above clause, the word loan has been used more in a more generic sense
and is not restricted like in CARO to borrowings from banks and financial
institutions. Hence, details of default in repayment of loans and interest need to be
disclosed for each of the items such as bonds/ debentures, deferred payment liability,
deposit, finance lease obligation, covered under the head Borrowings.
(b) The revised schedule VI requires specific disclosures only for default in
repayment of loans and interest. The revised Schedule VI does not require separate
disclosure for other defaults, e.g., default in compliance with debt covenants.


62

However, a company should consider the impact of such default on current and non-
current classification and going concern implications.
(c) Though the MCA has used two different terms, viz., continuing default (in case of
long-term borrowing) and default (in case of short-term borrowing), the requirement
is to disclose default as on the balance sheet date in both the cases. Pursuant to this
requirement, the details of any default in repayment of loan and interest existing as on
the balance sheet needs to be separately disclosed. Any default that had occurred
during the year and was subsequently made good before the end of the year is not
required to be disclosed.
The revised Schedule VI requires a liability to be classified as current if the company
does not have an unconditional right to defer its settlement for at least twelve months
after the reporting date. How this requirement will apply to the following two cases:
(a) A company has taken a loan which is repayable on demand. However, based on
the past experience, it is not expected that the lender will demand the repayment
within next 12 months.
(b) Company B has taken a 5 year loan. The loan contains certain debt covenants, e.g.,
filing of quarterly information. The company defaulted in filing of such information
in the previous quarter, with the effect that loan has become repayable on demand.
However, based on the past experience, the management believes that default is minor
and the bank will not demand the repayment of loan. It has also started the process of
getting waiver for this default. After the reporting period and before the approval of
the financial statements for issue, the bank agreed to waive the default and not to
demand payment as a consequence of the default.



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(c) A company has taken a 5 year term loan. Out of abundant caution the banks
include a covenant that they have a right to recall the loan on demand even where the
company has not violated any of the debt covenants.
The requirements of the revised Schedule VI concerning current and non-current
classification are peculiar to Indian companies. We suggest that companies should
familiarize themselves with these requirements in detail, after going through guidance
in Ind-AS 1 Presentation of Financial Statements and other related guidance. If there
is any doubt, they should consult their auditors / external professional advisors. Based
on the guidance given, the following position may apply in the above cases:
(a) Since the company does not have an unconditional right to defer the settlement of
loan for at least 12 months after the reporting date, it will classify the loan as current.
This is despite the fact that based on the past experience, it is not expected that the
lender will demand the repayment within the next 12 months.
(b) In our view, what is important is whether a borrower has an unconditional right to
defer the settlement 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. However, it should be noted that such issues may
involve legal interpretation of the loan agreement as to whether a borrower has an
unconditional right to defer settlement. The legal interpretation would have to
consider not only the wordings in the loan agreement, but also whether those clauses
are legally enforceable as per the laws of the land, for example, the Banking
Regulation Act. The revised Schedule VI does not specify whether the deferment
right should be ascertained at the reporting date or events after the balance sheet date
can be considered. It may be noted that as per the requirements of AS 4 Contingencies
and Events Occurring after the Balance Sheet, when assessing the impact of events


64

subsequent to the balance sheet date, one has to judge if those events confirm the
conditions at the balance sheet date or arose after the balance sheet date. In the given
case, at the balance sheet date, the default was not waived and hence the loan had
become payable on demand and should therefore be classified as current. The
subsequent waiver would change the classification from current to non-current
but at the date the waiver is made. We believe that this may be an important issue for
many companies and hence the MCA/ ICAI guidance is necessary.
(c) Since the borrower does not have an unconditional right to defer settlement, the
same should be treated as current liability.
It may also be noted that while the criteria for classification of liability is based on the
borrowers unconditional right to defer the payment, the classification from the
lenders perspective is decided based on the expected realization. Thus, it is likely that
while the borrower will classify the above loans as current liability, the same will get
classified as non-current asset in the financial statements of lender.
From a perusal of the revised Schedule VI, it is clear that a company also needs to
classify its employee benefit obligations in current and non-current categories for
disclosure purposes. What is the appropriate basis for classification of these
obligations into current and non-categories? Does the application of this requirement
may even require the obligations such as defined benefit post employment obligations
and other long-term employee benefits to be bifurcated into current and non-current
components?
While AS 15 Employee Benefits governs the measurement of various employee
benefit obligations, there classification as current and non-current liability 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


65

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 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 entitled to avail the leave
at any time during the year. Hence, it is disclosed as a current liability even if it is
measured as other long-term employee benefit under AS 15.
(c) Regarding funded post-employment benefit obligations, amount due for payment
to the fund within 12 months created for this purpose is treated as current liability.
(d) Regarding unfunded post-employment benefit obligations, a company will have
settlement obligation at the balance sheet date or within 12 months for employees
such as those who have already resigned or are expected to resign or are due for
retirement within the next 12 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 the next
12 months, is classified as non-current liability. If the management believes that the
amount of current liability is not material, the entire amount may be classified as non-
current.
In the revised Schedule VI, there is no requirement to disclose information regarding
outstanding amounts and interest due to Micro, Small and Medium Enterprises or
those required under Clause 32 of the Listing Agreement. Does it mean that


66

companies can avoid making these disclosures in the financial statements?
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.
Hence, though not required by the revised Schedule VI, such disclosures will still be
required in the audited annual financial statements.
We believe that the same principle will apply to the disclosures required under Clause
32 of the Listing Agreement and disclosures required by other applicable laws/
pronouncements issued by regulatory bodies, e.g., the disclosure regarding unhedged
foreign currency exposures required by the ICAI announcement.
In case of tangible and intangible assets, where sums have been written off on
reduction of capital or revaluation of assets or where sums have been added on
revaluation of assets, the revised Schedule VI requires each company to disclose the
amount of reduction or increase together with the date thereof for the first five years
subsequent to the date of such reduction or increase. However, paragraph 39 (iii) of
AS 10 Accounting for Fixed Assets requires that a company should 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. Considering the specific
requirements of the revised Schedule VI, can a company avoid making disclosures
required under AS 10 beyond 5 years? Further, what is the relevance of this
requirement for intangible assets?
The revised Schedule VI is clear that the disclosure requirements of 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


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view, we believe that companies will make disclosures required by the revised
Schedule VI only for 5 years. However, details required by AS 10 will have to be
given as long as the asset is held by the company, subject to materiality.
AS 26 Intangible Assets does not permit revaluation of intangible assets. Hence, the
revised Schedule VI requirement is relevant for intangible assets only in the context
of reduction of capital arising from the Court schemes.
Whether capital advances also need to be bifurcated between non-current and current
Categories? If yes, on what basis?
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 in the next
12 months or within their normal operating cycle. Rather, over the period, these get
categorized as one or more fixed assets. Hence, we believe that capital advances
should be treated as non-current assets.
Though the revised Schedule VI states that the terms used therein will be as per the
applicable accounting standards; however, it appears that the disclosures required
under the head cash and cash equivalents are not as per the definition of the said
term in AS 3 Cash Flow Statement. As per the revised Schedule, this heading will
include and separately disclose amounts such as bank balances held as margin money,
security against borrowings/ guarantees and bank deposits with more than 12 months
maturity. How can this conflict be resolved?
The revised Schedule VI not only mandates that the requirements of accounting
standards will prevail over the Schedule, it also clarifies that in case compliance with
an accounting standard requires any change in the treatment or disclosure including
addition, amendment, substitution or deletion in the head/sub-head, the same will be
made and requirements of the revised Schedule VI will stand modified accordingly.


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Hence, we believe that to resolve this conflict, the caption cash and cash
equivalents may be changed to Cash and bank balances, which may have two sub-
headings, viz., Cash and cash equivalents and Other bank balances. The former
will 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
balances will be included under the latter heading.
The earlier Schedule VI required the disclosure of only capital commitments.
However, the revised Schedule VI requires the disclosure of all commitments, i.e.,
including other commitments. What is the nature of commitments that will get
covered under this disclosure requirement?
The word commitment is not defined in the revised Schedule VI. From a general
inference perspective, this term may be interpreted to mean an unrecognized
contractual commitment, e.g., non-cancelable purchase, sale or employee contracts,
not recognized in the financial statements. The purchase and sale commitments extend
not only to capital items, but also inventory or services or investments.
However, we do not believe it is the intention of the regulator that all contractual non-
cancellable commitments would require disclosure as that would be contrary to the
overarching principle in the revised Schedule VI 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.
However, the acceptability of this view and exact disclosures required to be made can
only be clarified by an authoritative guidance from the regulators. Hence, we await
MCA/ICAIs guidance on the subject.
The existing Schedule VI required the proposed dividend to be disclosed under the
head Provisions. In the revised Schedule VI, this needs to be disclosed in the


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footnotes. Does it mean that proposed dividend is not required to be provided for
going forward?
AS 4 still 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 accounting standards override
revised Schedule VI, we believe that 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.
The format of the balance sheet prescribed under Clause 41 of the Listing Agreement
based on the existing Schedule VI will now be inconsistent with the format of the
balance sheet in the revised Schedule VI. How should companies address this issue
till Clause 41 is revised in line with the revised Schedule VI?
Clause 41 (I)(ea) and (eaa) of the Listing Agreement states as below for presentation
balance sheet items in half-yearly and annual audit results, respectively:
(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.
Further, Clause 41(V) (h) states as below for the format of balance sheet items:


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(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 guidance, we are of the following views on the issues raised:
(a) 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 this purpose. Further,
from the language, it does not appear that the format will be automatically amended in
case of any change in the Schedule VI format. Hence, we believe that till the time a
new format is prescribed by the SEBI under the Clause 41, companies will continue to
present their half-yearly balance sheet based on the existing Schedule VI.
(b) Annual audited yearly results: Apparently, the Clause 41(V)(h) regarding format
does not refer to annual audited balance sheet. Thus, two views seem possible on this
matter. One view is that since there is no prescribed format, a company can use the
format used in its annual financial statements, i.e., as per the revised Schedule VI. The
other view is that a company should use the same format of balance sheet items in its
half-yearly and annual audited results. Thus, it will continue to use the Clause 41
format for annual audited balance sheet. We believe that till Clause 41 is amended,
either view can be accepted.
We believe that this is an important matter and therefore the SEBI should provide
guidance.
The format of the balance sheet and P&L account prescribed under the SEBI (Issue of
Capital & Disclosure Requirements) Regulations (ICDR Regulations) will also now
be inconsistent with the format of the balance sheet/ P&L account in the revised


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Schedule VI. How should companies address this issue till the formats suggested
under ICDR Regulations are revised in line with the revised Schedule VI?
The formats of balance sheet and P&L account suggested under ICDR Regulations
are clearly stated as illustrative formats. Thus, once the revised Schedule VI
becomes effective, a company should use the format prescribed in the revised
Schedule VI to present the financial information for the purposes of inclusion in offer
document.
Under the investments note, there is a requirement to disclose the names of bodies
corporate, including separate disclosure of controlled special purpose entities in
addition to subsidiaries, etc. What is meant by controlled special purpose entities?
Since this term is neither defined under Indian GAAP (the applicable accounting
standards) nor in the revised Schedule VI, it is not clear how this term should be
interpreted. This term is defined under Ind-AS, however, it is questionable if Ind-AS
definitions can be used to interpret Indian GAAP/ Schedule VI terms. Hence, we
await MCA/ ICAIs guidance on the subject.
The revised Schedule VI requires the amount of trade receivables to be classified as
current and non-current assets, based on the prescribed criteria. However, it prescribes
the following disclosure for trade receivables only under the head current assets.
Aggregate amount of trade receivables outstanding for a period exceeding six
months from the date they are due for payment should be separately stated.
Does it mean that a company needs to make the above disclosure only for trade
receivables classified as current assets?
Yes, we believe that the requirement as currently drafted is applicable only in the case
of current trade receivables.


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The revised Schedule VI does not contain any specific disclosure requirement for the
unamortized portion of expense items such as share issue expenses, ancillary
borrowing cost and discount or premium relating to borrowings. The existing
Schedule VI required these items to be included under the head Miscellaneous
Expenditure. Does it mean that such expenses will have to be charged off to the P&L
immediately?
AS 16 Borrowing Costs alludes that ancillary borrowing cost and discount or
premium relating to borrowings could be amortized over the loan period. Further,
share issue expenses, discount on shares, ancillary cost-discount-premium on
borrowing, etc., being a special nature item are excluded from the scope of AS 26.
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, we believe that companies 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.








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9.2 Issues relating to P&L account
For non-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. What is meant by the term other operating revenues?
The term other operating revenue is not defined. We believe that this may include
income arising from companys operating activities, i.e., either its principal or
ancillary revenue-generating activities, but which is not revenue arising from sale of
products or rendering of services. Whether a particular income constitutes other
operating income or other income may need to be decided based on the facts of
each case and detailed understanding of the companys activities. For instance, lets
take the case of a group engaged in manufacture and sale of industrial and consumer
products that has one real estate arm. The real estate arm is continuously engaged in
leasing of real estate properties. In this case, the rent arising from leasing of real estate
is likely to be other operating income. On the other hand, consider a consumer
products company which owns a 10 floor building. The company currently does not
need one floor for its own use and has given the same on rent. In that case, lease rent
is not an other operating income; rather, it should be treated as other income.
Should the net gains arising on foreign exchange fluctuations be included under the
head Other Operating Revenues or Other Income?
We believe that the classification of net foreign exchange gain should also be based
on the principles discussed in the previous issue. Typically, net gain arising on foreign
exchange fluctuations would relate to foreign currency debtors, creditors, loans, etc.,
which are part of the operating activities of the company. Hence, these gains can be
classified under the head Other Operating Revenues, with a separate disclosure
thereof in the notes to financial statements. However, in certain cases, where such


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gains are not related to the companys main operations and are arising from activities
such as speculation or purchase/ sale of foreign currency investments not related to
the companys main operations, these should be classified as Other Income.
However, this matter is not beyond doubt and hence the MCA/ ICAI guidance is
necessary.
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 Company that falls in 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.
Pursuant to the above requirements, what are the exact disclosures to be made in the
financial statements?
Apparently, the disclosures required are quite ambiguous. There are many points
which are not clear. Given below are some examples in this regard:
(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 material
(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 in more than one category, there is no
clear requirement to disclose sales for a manufacturing or a trading company.


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(e) With regard to a company falling in more than one category 2-3 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 consumptions needs to be disclosed.
To resolve this confusion, either the MCA or the ICAI should provide detailed
guidance explaining the disclosure requirements on a priority basis. Till such
guidance is provided by the MCA/ ICAI, each company will need to consider its
specific circumstances and arrive at appropriate disclosures in consultation with its
auditors/ external professional advisors. 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 perspectives in deciding the disclosures required:
(a) Apparently, there is no need to give quantitative details for any of the item.
(b) Considering the ambiguity and on a conservative interpretation, a manufacturing
company may disclose the following:
i. Purchase and consumption of major items of raw materials (including other items
classified as raw material such as intermediates/ components/ packing material)
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. This information will be readily
available with the companies and helps in reconciliation. However, it is not
mandatory.


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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, it is but logical to
also disclose sales of finished goods 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.
(d) Similar principle will be followed to decide disclosure requirement in other cases
On the lines of existing Schedule VI, the revised Schedule VI also requires certain
disclosures such as value of imports and expenditure in foreign currency. However, it
does not provide any specific guidance on how a company will comply with these
disclosure requirements. For example, will these disclosures be made on cash or
accrual basis? Will the principles and guidelines enumerated in the Statement on
Amendments to Schedule VI issued by ICAI continue to apply in the context of the
revised Schedule VI?
The ICAI had issued the Statement on Amendments to Schedule VI to address various
issues in the context of the existing Schedule VI. We believe that the ICAI should
issue a revised Statement/ Guidance Note to address various issues arising from the
revised Schedule VI. Till such time, we may continue using guidance in the old
Statement to the extent applicable, unless it is contrary to any notified accounting
standard/ revised Schedule VI etc.
Whether all the disclosures required for the annual financial statements under
Companies Act are also required to be furnished in the financial statements prepared
for tax purposes?



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We believe that the financial statements for tax purposes should be prepared using the
basic framework of the revised Schedule VI of the Companies Act, 1956. These
financial statements should include all disclosures required in accordance with the
accounting standards, without any exception. A company can avail the exemptions
from disclosure requirements given in explanation to paragraph 6 (ASI 15) of the
notified AS 21 Consolidated Financial Statements from presentation of statutory
information, not considered relevant for presentation of true and fair view of the
financial statements. However, under no circumstances, any disclosure considered
relevant for the purposes of Income-tax Act, including the determination of book
profit under section 1 15JB of the Income-tax Act, can be excluded from the tax
financial statements. Based on these perspectives, the following are some examples of
disclosures which companies may consider for exclusion from their tax financial
statements.
1. Disclosures related with additional statutory information as per the revised
Schedule VI need not be provided in tax financial statements. For example, the
following disclosures can be avoided.
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.



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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 shareholders, the total
number of shares held by them on which the dividends were due and the year to
which the dividends related.
e. Arrears of fixed cumulative dividends on preference shares.
f. 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.
g. Shares in the company held by each shareholder holding more than 5% 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. Particulars of any redeemed bonds/ debentures which the company has power to
reissue
j. Earnings in foreign exchange classified under the following heads:
i. Export of goods calculated on F.O.B. basis
ii. Royalty, know-how, professional and consultation fees


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iii. Interest and dividend
iv. Other income, indicating the nature thereof
k. Nature of security in case of both long-term and short-term borrowings
l. 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.




















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CHAPTER-10 CONCLUSION
Preparation of financial statements as per Revised Schedule VI is a challenging task
involving various practical issues. There may be a number of other issues which one
may come across while preparing financial statements as per Revised Schedule VI.
The issues may vary from company to company as well as industry to industry. Due
care and thorough analysis is required by the companies accomplishing this task.
Compiling of various information for the purpose of disclosure requirements as per
Revised Schedule VI, education of staff not only who are related to finance and
account but in the other departments as well viz. production, marketing and stores,
etc. is another challenge in preparation of financial statements as basic data are
provided by such staff. All companies should take the convergence exercise timely so
as to avoid any delay in preparation of and presentation of financial statements for the
year 2011-12 considering the time constraints in Clause 41 of Listing Agreement and
also under Section 210 read with Section 166 of Companies Act, 1956.













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CHAPTER -11 BIBLIOGRAPHY
www.bakertillysinghi.com
www.icai.org.in
www.mca.gov.in