Amendment In Schedule III under Companies Act 2013
Schedule III to Companies Act, 2013 (hereafter referred to as the Schedule) was modified vide notification dated March 24, 2021 to enhance various additional disclosure requirements while preparing the financial statements of a company. These amendments are applicable to audit reports issued in respect of accounting years commencing on or after April 1st, 2021.
Purpose:
- To disclosure requirements to align with amended CARO Reporting requirements
- More Transparency.
Schedule III divided into three parts:
- Division 1: Financial Statements for a company whose Financial Statements are drawn up with the Companies (Accounting Standards) Rules, 2006.
- Division II: Financial Statements for a company whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015.
- Division III:Financial Statements for a Non-Banking Financial Company (NBFC) whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015
Brief on amendments to Schedule III Division I, to the Act (for Companies whose financial statements are required to comply with the Accounting Standards):
Part I – Balance Sheet:
Shareholding of Promoter:
The note on Share Capital in the Financial Statements shall mention details of the Shareholding of the Promotes along with changes, if any, during the Financial Year in the following format:
| Shares held by promotes at the end of the Year | % Change during the Year | |||
| S. No. | Promoter’s Name | No. of Shares | % of total shares | |
| Total | ||||
- Details separately for each class of shares.
- The percentage change shall be computed with respect to the number at the beginning of the year or if issued during the year for the first time then with respect to the date of issue
In earlier schedule Shareholding of Promoters & % Change during the Year was not mentioned.
Trade Payable (Creditors) ageing Schedule:
As per the amended Schedule, companies are now required to disclose an ageing schedule with respect to duration of years of trade payables in the following format
| Particulars | Outstanding for following periods from due date of payment | Total | |||
| Less than 1 yr. | 1-2 yrs. | 2-3 yrs. | More than 3 yrs. | ||
| (i) MSME | |||||
| (ii) Others | |||||
| (iii) Disputed dues- MSME | |||||
| (iv) Disputed dues- Others | |||||
In the original schedule, there was no requirement of disclosing the ageing of trade payables and not required to of disclose disputed dues out of total amounts of trade payables. Total balances were required to be disclosed.
Trade receivables (Debtors) ageing Schedule:
Companies are now required to disclose an ageing schedule in respect of trade payables for various period(s).
Trade schedule Format
| Particulars | Outstanding for following periods from due date of payment | Total | ||||
| Less than 6 months | 6 months- 1 year | 1-2 yrs. | 2-3 yrs. | More than 3 yrs. | ||
| (i) Undisputed Trade receivables- considered good | ||||||
| (ii) Undisputed Trade Receivables- Considered Doubtful | ||||||
| (iii) Disputed Trade Receivables considered good | ||||||
| (iv) Disputed Trade Receivables considered doubtful | ||||||
In the original schedule, there was no requirement of disclosing the ageing of trade receivables beyond the period of 6 months.
companies are required to disclose trade receivables categorised under the head, Categorised as:
- considered good, doubtful and credit impaired
- Trade receivables balances, where there is a significant increase in credit risks
- undisputed and disputed.
Title deeds of Immovable Property not held in name of the Company
Details of all the immovable properties (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) whose title deeds are not held in the name of the company in following format and where such immovable property is jointly held with others, details are required to be given to the extent of the company’s share as under:
| Relevant line item in the Balance sheet | Description of item of property | Gross carrying value | Title deeds held in the name of | Whether title deed holder is a promoter, director or relative# of promoter*/director or employee of promoter/director | Property held since which date | Reason for not being held in the name of the company** |
| PPE
-Investment property -PPE retired from active use and held for disposal others |
Land Building
Land Building Land Building |
– | – | – | – | **also indicate if in dispute |
In original schedule there was no such requirement.
Disclosure on Revaluation of Assets:
Where the Company has revalued its Property, Plant and Equipment, the company shall disclose as to whether the revaluation is based on the valuation by a registered valuer as defined under rule 2 of the Companies (Registered Valuers and Valuation) Rules, 2017.
Disclosure on Loans/ Advance to Directors/ KMP/ Related parties:
Where Loans or Advances in the nature of loans are granted to promoters, directors, KMPs and the related parties (as defined under Companies Act, 2013,) either severally or jointly with any other person, that are:
(a) Repayable on demand or
(b) Without specifying any terms or period of repayment, following disclosures are required:
| Type of Borrower | Amount of loan or advance in the nature of loan outstanding | Percentage to the total Loans and Advances in the nature of loans |
| Promoters | ||
| Directors | ||
| KMPs | ||
| Related Parties |
- The above disclosure requirements will provide further details on the quantum of lending to above related entities and and as to the materiality of balance as compared to total loans and advances, will be useful to readers of financial statements to understand the exposures of the company to above entities.
- It may be noted that most corporate frauds were committed by diversion of companies funds, borrowed or owned, to direct or indirect related parties and high quantum and frequency of such transactions may be indicators of potential risks on account of these transactions.
- The Schedule should also require disclosures of ageing of such balances (as in case of trade debtors) and old balances are high, it will raise a red alert, requiring justification from management by auditors as well. In case, there are no justifiable reasons, auditors would need to consider impact on audit reports.
- Capital-Work-in Progress (CWIP)
(a) For Capital-work-in progress, following ageing schedule shall be given:
CWIP aging schedule
| (Amount in Rs.) CWIP | Amount in CWIP for a period of | Total* | |||
| Less than 1 year | 1-2 years | 2-3 years | More than 3 years | ||
| Projects in progress
Projects temporarily suspended |
|||||
Details of Benami Property held
- Details of such property,
- Amount thereof,
- Details of Beneficiaries,
- If property is in the books, then reference to the item in the Balance Sheet,
- If property is not in the books, then the fact shall be stated with reasons,
- Where there are proceedings against the company under this law as an abetter of the transaction or as the transferor then the details shall be provided,
- Nature of proceedings, status of same and company’s view on same.
Details of Borrowing:
Where the Company has borrowings from banks or financial institutions on the basis of security of current assets, it shall disclose the following:-
a) Whether quarterly returns or statements of current assets filed by the Company with banks or financial institutions are in agreement with the books of accounts.
b) If not, summary of reconciliation and reasons of material discrepancies, if any to be adequately disclosed.
Wilful Defaulter:
A company is a declared wilful defaulter by any bank or financial Institution or other lender, following details shall be given:
a. Date of declaration as wilful defaulter,
b. Details of defaults (amount and nature of defaults),
* “wilful defaulter” here means a person or an issuer who or which is categorized as a wilful defaulter by any bank or financial institution (as defined under the Act) or consortium thereof, in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of India
Relationship with Struck off Companies: Where the company has any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956, the Company shall disclose the following details:-
| Name of struck off Company | Nature of transactions with struck-off Company | Balance outstanding | Relationship with the Struck off company, if any, to be disclosed |
| Investments in securities | |||
| Receivables | |||
| Payables | |||
| Shares held by stuck off company | |||
| Other outstanding balances (to be specified) |
Registration of charges or satisfaction with Registrar of Companies: Where any charges or satisfaction yet to be registered with Registrar of Companies beyond the statutory period, details and reasons thereof shall be disclosed.
Compliance with number of layers of companies Where the company has not complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017, the name and CIN of the companies beyond the specified layers and the relationship/extent of holding of the company in such downstream companies shall be disclosed.
Disclosure of Ratios:
The amendment requires the companies to disclose the following ratios:
- .Current Ratio,
- Debt-Equity Ratio,
- .Debt Service Coverage Ratio,
- Return on Equity Ratio,
- .Inventory turnover ratio,
- Trade Receivables turnover ratio,
- Trade payables turnover ratio,
- Net capital turnover ratio,
- Net profit ratio,
- Return on Capital employed,
- Return on investment.
Company shall explain the items included in the numerator and denominator for computing the above ratios and an explanation shall be provided for any change in the ratio by more than 25% as compared to the preceding year.
Details in respect of Utilization of Borrowed funds and share premium shall be provided in respect of:
a. Transactions where an entity has provided any advance, loan, or invested funds to any other person (s) or entity/ entities, including foreign entities.
b. Transactions where an entity has received any fund from any person (s) or entity/ entities, including foreign entity.
Compliance with approved Scheme(s) of Arrangements: Where any Scheme of Arrangements has been approved by the Competent Authority in terms of sections 230 to 237 of the Companies Act, 2013, the Company shall disclose that the effect of such Scheme of Arrangements have been accounted for in the books of account of the Company ‘in accordance with the Scheme’ and ‘in accordance with accounting standards’ and deviation in this regard shall be explained of holding of the company in such downstream companies shall be disclosed.
In Part II- Statement of Profit and Loss,-
(A) Under the heading “III. Total Revenue (I +II)”, for the word “Revenue”, the word “Income” shall be substituted;
(B) Under the heading “General Instructions for Preparation of Statement of Profit and Loss”,-
(I) in paragraph 2, in item (A), after sub-item (b), the following shall be inserted, namely:-
Grants and donation received (in case section 8 companies only)
Additional information related to
- CSR Disclosure:
Where the company covered under section 135 of the Companies Act, the following shall be disclosed with regard to CSR activities: –
A. amount required to be spent by the company during the year,
B. amount of expenditure incurred,
C. shortfall at the end of the year,
D. total of previous year’s shortfall,
E. reason for shortfall,
F. nature of CSR activities,
G. details of related party transactions, e.g., contribution to a trust controlled by the company in relation to CSR expenditure as per relevant Accounting Standard,
H. where a provision is made with respect to a liability incurred by entering into a contractual obligation, the movements in the provision during the year should be shown separately.
Undisclosed Income (Reconciliation of Income Tax and Companies Act):The Company shall give details of any transaction not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961, unless there is immunity for disclosure under any scheme and also shall state whether the previously unrecorded income and related assets have been properly recorded in the books of account during the year.
- Disclosure of above information enables users of financial statements to understand the impact of undisclosed income on financial statements of the company to understand and evaluate the appropriate recognition of undisclosed income in financial statements of the company, including tax implications and nature of disclosures.
- This will also indicate irregular practices followed by the company and reliability of information provided by the management and mechanism followed/tendency to hide income. This will put a question mark on integrity of the management the reliance to be placed on the management on information provided. This is particularly important for auditors as audit procedures may not always unearth transaction conducted outside the books of account.
Details of Crypto Currency or Virtual Currency:
- Where the Company has traded or invested in Crypto currency or Virtual Currency during the financial year, the following shall be disclosed: –
- profit or loss on transactions involving Crypto currency or Virtual Currency
- amount of currency held as at the reporting date,
- deposits or advances from any person for the purpose of trading or investing in Crypto Currency/ virtual currency
Author Bio
Is this format is applicable for FY 2020-21 balance sheet?