Insights into the practical issues on Schedule II to the Companies Act, 2013

Schedule II and Schedule III and a brief on

Nidhi Companies

Indicative Useful life prescribed in Schedule II

Presentation at the Refresher Course on 3600 of Annual Report
organised by the Schedule II will not apply to certain industries
Corporate Laws and Corporate Governance Committee of ICAI
and hosted by
Vijayawada Branch of SIRC of ICAI
on 25 May 2022 If Companies are using different useful life, justification to be
included in the financials

Chinnsamy Ganesan
FCA DISA(ICA)

Useful life of an asset Frequently asked questions

What is useful life of an asset?

Situation I Situation II Whether change in useful life is change in accounting policy or

accounting estimate?
Actual life of the asset 15 15

Company plans to replace the asset 10 15 What about extra shift depreciation?
with a new one after
Useful life of the asset for the 10 15
purposes of depreciation under the Whether reason to be given even if the Company adopts useful life
Companies Act 2013 lower than the Schedule II rates?

Useful life to be evaluated at each reporting period

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Components Cost Approach Frequently asked questions

Whether component cost approach is mandatory?

Asset has to be split into their significant components having
different useful lives
Whether all assets has to be componentized?

Each component has to be depreciated based on its respective How to allocate cost to various components?
useful life

New components replaced – Income tax issues

Replacement of an old component is no more a revenue
expenditure
Whether to engaging experts is mandatory?

Corporate reporting is more enhanced Formant of financial statements

Normal
Normal NBFCs with
Companies
Companies Ind AS
with Ind AS

Schedule III Schedule III Schedule III

Division I Division II Division III

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What is new? Major Changes

Mandatory rounding off of figures in the financial

Schedule III – Division I, II and III were amended
statements

Amendments shall apply for the year ended March 31, The heading of “Tangible Assets’ to be changed as
2022 “Property, Plant and Equipment”

Disclosure of promoters holding and the change during

Amendments are in line with changes in CARO 2020
the year

Current maturities of long term borrowings are now to be

Amendments mainly affect presentation and disclosures
shown under “Short term borrowings”

It may result in opening of pandora box Ageing schedule of certain items of Balance Sheet

Major Changes Major Changes

Under “Other Non Current Assets” a new item of CSR spending and unspent details to be disclosed with
“Security Deposits” to be included reasons

End use of borrowings to be disclosed if not in line with

CSR spending through related parties to be disclosed
the terms of sanction

To disclose compliance with creation, modification and To disclose proceedings under Benami Transactions
satisfaction of charges for secured loans (Prohibition) Act, 1988

Preferable to disclose the discrepancies in physical To disclose whether quarterly returns filed with banks
verification of inventories, if more than 10% for borrowings against current assets are in agreement
with the books of account

Loans and advances to Promoters, Directors, KMPs and Whether Company was declared as a wilful defaulter by
their relatives to be disclosed any bank or financial institutions or other lenders

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 Major Changes Major Changes

To disclose relationship and amounts outstanding with

Struck off Companies Whether the Company have any transaction which are
not recorded in the books of accounts that has been
To disclose compliance number of layers of investment surrendered or disclosed as income in the tax
companies assessments under the Income Tax Act, 1961

To disclose key financial ratios, formula used for To disclose whether the Company traded or invested in
calculation and reasons for variance of 25% or more Crypto Currency or virtual currency during the financial
year
If there are any scheme of arrangement during the year,
the compliance with the accounting standards to be
disclosed To disclose the reclassification of previous year figures
upon complying with Schedule III Amendments
Advance or loan or investment to intermediaries and
receipt of funds from intermediaries to be disclosed

Mandatory Rounding Off Illustrative disclosures

Rules for rounding off

Can company give full figures?

• Total Income < Rs. 100 Crores

- Round off to the nearest
hundreds, thousands, lakhs or What is meant by Total Income? Illustrative Disclosures
millions or decimal thereof (Refer separate excel file)

• Total Income > Rs. 100 Crores

- Round off to the nearest Can we use different units of measurement
lakhs, millions or crores, or in FS and notes?
decimal thereof

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Share Capital – Frequently Asked Questions Share Application Money – Frequently Asked Questions

Reconciliation of shares outstanding at the beginning and at the end of the

year - whether only for equity shares?
Whether Share application money be presented as part of ‘Shareholders’
Shares held more than 5% – whether based on the legal owners or beneficial Funds’?
ownership
How to disclose the Share application money, if Company does not have
What is the disclosure required in case Consolidated promoter holding is more sufficient authorised share capital ?
than 5% but individual holding is less than 5% each?

Is there any special consideration required with respect to Acceptance of

Disclosure of bonus/ shares issued for consideration other than cash? Deposit Rules 2014?

Borrowings – Frequently Asked Questions Current and deferred taxes – Frequently Asked Questions

Whether to disclose deferred tax assets and deferent tax liabilities separately
on the face of the balance sheet?
Whether a term loan has to be classified as current liability on default of loan
covenants? Whether to disclose current tax assets and current tax liabilities on the face of
the balance sheet?

What is the appropriate classification in respect of term loans became NPA?

How to disclose Minimum Alternate Tax Credit Entitlement?

How to classify cash credit/ overdraft facilities etc which are renewed year on
year? How to disclose provision created in the books in respect of disputed taxes?

How to classify loans from promoters repayable on demand but never

demanded in the past? Whether to classify deferred tax into current and non current?

Whether to classify current tax assets into current and non current?

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Liabilities – Frequently Asked Questions Loans and advances – How to disclose them?

Whether trade payable will always be current?

Rental deposits and Security Deposits

Whether creditors for expenses are part of trade payable? Balances with Government authorities

Whether dues to employees are part of trade payables? Claims/ refunds due from Government

How to disclose security deposits received from customers? Unamortised ancillary borrowing costs

How to disclose retention money payable? Advance Tax in excess of Provision for Tax

Income Tax Refundable

Whether advance received for sale of fixed assets is a non current liability?

Profit and Loss – Frequently Asked Questions Notes on accounts – Frequently Asked Questions

How to present revenue from operations?

What is the difference between Other operating income and Other income? Is there any mandatory order in which the notes on accounts to be presented?

What are the disclosure requirements for Quantitative details based on “broad
Whether any clear demarcation between commitments and contingencies?
heads”?

Whether inapplicable line items can be removed from the minimum disclosure
Is it enough to make disclosures required as per Schedule III only?
required on the face of the financial statements?

What is the impact of omission of a material disclosure in the notes on

What are the Presentation requirements for Prior period items? accounts?

Is there any threshold limits given for disclosing any items separately?

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Questions? Thank you

? ganesanca@yahoo.com/ 0 99401 30403