Article discusses Amendments in Schedule-III to Companies Act, 2013 which are Effective from FY 2021-22
MCA has amended Schedule III of Companies Act 2013 on 24th March 2021 with an objective to increase transparency and provide additional disclosures to users of financial statements.
These amendments are effective from 1 April 2021 therefore applicable to the Financials prepared for FY 2021 22. Some of changes in Schedule III are also in line with changes in CARO 2020, so companies can provide required information in financial statements for Auditors to report in CARO 2020.
Kindly note that the amendments are applicable for Division I, Division II and Division III entities meaning thereby it is applicable for IGAAP, IND AS and NBFC Companies. This article covers the changes applicable to Division-I & Division-II entities only.
Financial Statements shall also contain the corresponding comparatives for the immediately preceding reporting period of all the items shown in the Financials including notes to accounts . However, the corresponding comparative requirements for the immediately preceding year would not be applicable in case of first Financial Statements laid before the company after its incorporation.
Impact of the amendment are as under:
- Enhanced disclosure for companies to which IGAAP/ IND AS is applicable and for NBFCs
- Aligned with additional reporting requirements under CARO 2020
- Enhanced Auditor’s reporting requirements
- Increase transparency and provide additional disclosures to users of financial
statements.
Brief changes in the Schedule-III (Division- I and/or Division- II)
A. Rounding off Provisions –(Applicable for Division-I & Division-II entities)
-
- Earlier, rounding off provisions was not mandatory for division-I companies which was applicable for division-II companies. Now, rounding off is mandatory for both the entities whether it is a division-I entity or a division-II entity.
- Rounding off needs to be done for all the entities (IGAAP or IND-AS) based upon the “Total Income” of the Company instead of “Turnover” of the Company. Earlier rounding off needs to be done on the basis of Turnover of the company
PART-I: BALANCE SHEET
1. Amendment in Non-Current Assets presentation (applicable to division-I entity)
-
- Heading and sub-headings are amended. Word intangible assets is added after Property, Plant & Equipments. After amendment, Non-Current Assets should be presented as under:
Non- Current Assets
Property, Plant and Equipments and Intangible Assets
(i) Property, Plant and Equipments
(ii) Intangible Assets
2. Insertion of disclosure for Shareholding of Promoters (applicable to Division-I & Division-II entity)
Disclosure of shareholding promoters and percentage of change during the year has been added for all the companies. Currently only listed companies are required to make specific disclosures.
| Shares held by promoters at the end of the year | % Change during the year*** | |||
| S. No. | Promoter name | No. of Shares** | % of total shares** | |
| Total | ||||
* Promoter here means promoter as defined in the Companies Act, 2013.
** Details shall be given separately for each class of shares.
*** 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.
3. Current Maturity of Long-term borrowings needs to be disclosed separately under the heading “Short-term borrowings” instead of showing it under the head “Other Current Liabilities”. Now, disclosure needs to be made as under:
Short-term borrowings
(v) Current maturity of long-term borrowings
(Above amendment is applicable for both Division-I & Division-II entities)
4. Trade Payables due for Payment- Ageing required to be given (applicable to both DIV-I & DIV-II entities)
The following ageing schedule shall be given for Trade payables due for payment:
| Particulars | Outstanding for following periods from due date of payment # | ||||
| Less than 1 year | 1-2 years | 2-3 years | More than 3 years | Total | |
| (i) MSME | |||||
| (ii) Others | |||||
| (iii) Disputed dues – MSME | |||||
| (iv) Disputed dues – Others | |||||
# Similar information shall be given where no due date of payment is specified in that case disclosure shall be from the date of the transaction.
Unbilled dues shall be disclosed separately
5. Sub-heading current maturity of long-term debts is omitted under the head Other Current Liabilities which is in line with the amendment given in point no. 4 above.
6. Nomenclature of “Tangible Asset” is changed to “Property, Plant & Equipments”.
7. Revaluation of Property, Plant & Equipments (PPE) and Intangible assets (applicable to Division-I & Division-II entity)
Upon revaluation of PP&E / Intangible assets, the company is required to make disclosure with respect to amount of change due to revaluation (if change is 10% or more in aggregate of the net carrying value of each class of PPE / Intangible assets).
Moreover, it shall also disclose as to whether the revaluation (where carried out) is based on the valuation by a registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017.
8. Trade Receivables- categorised under the heading non-current & current assets (applicable to Division-I & Division-II entity)
Trade receivables are to be reported under two headings viz. under the heading “M. Non-current assets” and under the heading “P. Trade Receivable”
Ageing schedule for Trade receivables under both the categories are to be given in the following format:
| Particulars | Outstanding for following periods from due date of payment# | |||||
| Less than 6 months | 6 months – 1 year | 1-2 years | 2-3 years | More than 3 years | Total | |
| (i) Undisputed Trade
receivables – considered good |
||||||
| (ii) Undisputed Trade Receivables –considered doubtful | ||||||
| (iii) Disputed Trade Receivables -considered good | ||||||
| (iv) Disputed Trade Receivables -considered doubtful | ||||||
# Similar information shall be given where no due date of payment is specified, in that case disclosure shall be from the date of the transaction.
Unbilled dues shall be disclosed separately.
Division-II Entities are required to report ageing schedule of trade receivables in following format:
Trade receivables are to be reported under two headings viz. under the heading “M. Non-current assets” and under the heading “P. Trade Receivable”
| Particulars | Outstanding for following periods from due date of payment# | |||||
| Less than 6 months | 6 months – 1 year | 1-2 years | 2-3 years | More than 3 years | Total | |
| (i) Undisputed Trade receivables – considered good | ||||||
| (ii) Undisputed
Trade Receivables –which have significant increase in credit risk |
||||||
| (iii) Undisputed
Trade Receivables |
||||||
| (iv) Disputed
Trade Receivables -considered good |
||||||
| (v) Disputed
Trade Receivables – which have significant increase in credit risk
|
||||||
| (vi) Disputed
Trade Receivables -credit impaired |
||||||
# Similar information shall be given where no due date of payment is specified, in that case disclosure shall be from the date of the transaction.
Unbilled dues shall be disclosed separately.
9. Where the company has not used the borrowings from banks and financial institutions for the specific purpose for which it was taken at the balance sheet date, the company shall disclose the details of where they have been used. (Applicable to DIV-I & DIV-II entities)
10. If, in the opinion of the Board, any of the assets other than PPE and Intangible Assets2 and non-current investments do not have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated, the fact that the Board is of the that opinion, shall be stated.
2Intangible assets have also been included.
11. Title deeds of Immovable Property not held in name of the Company – The disclosure shall be given for PPE, Investment Property, PPE retired from active use and held for disposal & Others in the following format:
(Applicable to DIV-I & DIV-II entities)
| Relevant line item in the Balance sheet | Description of item of property | Gross carrying value | Title deeds
held in 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 com pany** |
| (i) PPE | Land Building | |||||
| (ii) Investment Property | Land Building | |||||
| (iii) PPE retired from active use and held for disposal | Land Building | |||||
| (iv) Others |
# Relative here means relative as defined in the Companies Act, 2013.
* Promoter here means promoter as defined in the Companies Act, 2013.
12. Revaluation of PPE/ Intangible Assets– Upon revaluation of PP&E / Intangible assets, the company is required to disclose as to whether the revaluation is based on the valuation by a registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017. (Applicable to DIV-I & DIV-II entities)
13. Following disclosures shall be made 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
| 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 |
(Above amendment is applicable to both DIV-I & DIV-II entities)
14. Capital Work-in Progress (CWIP) (Applicable to both DIV-I & DIV-II entities)
a) For Capital-work-in progress, following ageing schedule shall be given:
CWIP aging schedule
| 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 |
|||||
* Total shall tally with CWIP amount in the balance sheet.
b) For capital-work-in progress, whose completion is overdue or has exceeded its cost compared to its original plan, following CWIP completion schedule shall be given**:
| CWIP | To be completed in | |||
| Less than 1 year | 1-2 years | 2-3 years | More than 3 years | |
| Project 1 | ||||
| Project 2 | ||||
| Project 3 | ||||
**Details of projects where activity has been suspended shall be given separately.
15) Intangible Assets under development (applicable to both DIV-I & DIV-II entities)
a) For Intangible Assets under development, following ageing schedule shall be given:
Intangible Assets under development aging schedule
| Intangible Assets under Development | 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 |
|||||
* Total shall tally with the amount of Intangible assets under development in the balance sheet.
b) For Intangible assets under development, whose completion is overdue or has exceeded its cost compared to its original plan, following Intangible assets under development completion schedule shall be given**:
| Intangible Assets under Development | To be completed in | |||
| Less than 1 year | 1-2 years | 2-3 years | More than 3
years |
|
| Project 1 | ||||
| Project 2 | ||||
**Details of projects where activity has been suspended shall be given separately.
16. Details of Benami Property held (applicable to both DIV-I & DIV-II entities)
Where any proceedings have been initiated or pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and the rules made thereunder, the company shall disclose the following:
a) Details of such property, including year of acquisition,
b) Amount thereof,
c) Details of Beneficiaries,
d) If property is in the books, then reference to the item in the Balance Sheet,
e) If property is not in the books, then the fact shall be stated with reasons,
f) 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,
g) Nature of proceedings, status of same and company’s view on same.
17. Borrowing on the basis of security of Current Assets (applicable to both DIV-I & DIV-II entities)
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.
18. Wilful Defaulter* (applicable to both DIV-I & DIV-II entities)
Where 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.
19. Relationship with Struck off Companies (applicable to both DIV-I & DIV-II entities)
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) |
20. Registration of charges or satisfaction with Registrar of Companies (applicable to both DIV-I & DIV-II entities)
Where any charges or satisfaction yet to be registered with Registrar of Companies beyond the statutory period, details and reasons thereof shall be disclosed.
21. Compliance with number of layers of companies (applicable to both DIV-I & DIV-II entities)
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.
22. Following Ratios to be disclosed: (applicable to both DIV-I & DIV-II entities)
a) Current Ratio,
b) Debt-Equity Ratio,
c) Debt Service Coverage Ratio,
d) Return on Equity Ratio,
e) Inventory turnover ratio,
f) Trade Receivables turnover ratio,
g) Trade payables turnover ratio,
h) Net capital turnover ratio,
i) Net profit ratio,
j) Return on Capital employed,
k) Return on investment.
The company shall explain the items included in numerator and denominator for computing the above ratios. Further explanation shall be provided for any change in the ratio by more than 25% as compared to the preceding year.
23. Compliance with approved Scheme(s) of Arrangements (applicable to both DIV-I & DIV-II entities)
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.
24. Utilisation of Borrowed funds and share premium: (applicable to both DIV-I & DIV-II entities)
A. Where company has advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall
(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;
the company shall disclose the following:
(i) date and amount of fund advanced or loaned or invested in Intermediaries with complete details of each Intermediary.
(ii) date and amount of fund further advanced or loaned or invested by such Intermediaries to other intermediaries or Ultimate Beneficiaries along with complete details of the ultimate beneficiaries.
(iii) date and amount of guarantee, security or the like provided to or on behalf of the Ultimate Beneficiaries
(iv) declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and Companies Act has been complied with for such transactions and the transactions are not violative of the Prevention of Money-Laundering act, 2002 (15 of 2003).;
B. Where a company has received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall
(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries, the company shall disclose the following:
i. date and amount of fund received from Funding parties with complete details of each Funding party.
ii. date and amount of fund further advanced or loaned or invested other intermediaries or Ultimate Beneficiaries along with complete details of the other intermediaries’ or ultimate beneficiaries.
iii. date and amount of guarantee, security or the like provided to or on behalf of the Ultimate Beneficiaries
iv. declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and Companies Act has been complied with for such transactions and the transactions are not violative of the Prevention of Money-Laundering act, 2002 (15 of 2003).
PART-II: STATEMENT OF PROFIT & LOSS AND NOTES
1. Revenue from operations- Total Revenue has been substituted by Total Income. Division-I entities are required to report revenue from operations in the following format:
I. Revenue from operations xxxxxxx
II. Other Income xxxxxxx
III. . Total Income3 (I + II) xxxxxxx
3 Earlier it was total revenue now it is “total Income”
2. Grants or donations received (relevant for section 8 companies only)
Separate line item under the head “Revenue from operations” shall be given for any grants or donations received by section 8 company. Section 8 company shall disclose it as “Grants or Donations received”.
3. Following additional information shall required to be given which are in line with reporting requirements under CARO 2020:
(i) Undisclosed income (applicable to both DIV-I & DIV-II entities)
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 (such as, search or survey or any other relevant provisions of 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.
(ii) Corporate Social Responsibility (CSR) (applicable to both DIV-I & DIV-II entities)
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 years 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.
(iii) Details of Crypto Currency or Virtual Currency (applicable to both DIV-I & DIV-II entities)
Where the Company has traded or invested in Crypto currency or Virtual Currency during the financial year, the following shall be disclosed:
a) profit or loss on transactions involving Crypto currency or Virtual Currency
b) amount of currency held as at the reporting date,
c) deposits or advances from any person for the purpose of trading or investing in Crypto Currency/ virtual currency.
Brief changes in the Schedule-III (Division- II entities)
Apart from the amendments discussed above, following are the few amendments applicable specifically to the entities following Ind-AS accounting.
PART-I: BALANCE SHEET
1. Insertion of sub heading Lease Liabilities
Lease liabilities is required to be disclosed as a separate line item under the heading “Non-Current Liabilities” and “Current Liabilities”. Lease liabilities are required to be reported under the sub-heading Financial Liabilities after Borrowings. Now disclosure shall be given as under:
Non-Current Liabilities
(a) Financial Liabilities
(i) Borrowings
(ia) Lease Liabilities
Current Liabilities
(a) Financial Liabilities
(i) Borrowings
(ia) Lease Liabilities
2. Statement of Changes in Equity
Earlier, for equity share capital, companies were required to disclose balance at the beginning and end of the reporting period along with changes during the year.
Also, nature of prior period errors, amount of correction in financial statements and its effect on basic & diluted earnings per share shall also required to be disclosed as per Ind-AS 8.
After the amendment, following disclosures are required to be given:
A. Equity Share Capital
B. Other Equity
Following disclosure is required to be given for current as well as for previous reporting period:
3. Bank deposits with more than 12 months maturity
Earlier, the Companies were required to disclose “Bank deposits with more than 12 months maturity” under the sub-heading “Other Financial Assets” now it shall require to be disclosed as a separate line item as under:
Other Financial Assets
(i) Security Deposits
(ii) Bank deposits with more than 12 months maturity
(iii) Others (to be specified)
4. Insertion of sub heading “Other Financial Assets” under the head Financial Assets
“VA. Other Financial Assets: This is an all-inclusive heading, which incorporates financial assets that do not fit into any other financial asset categories, such as, Security Deposits.”
5. The Company shall disclose as to whether the fair value of investment property (as measured for disclosure purposes in the financial statements) is based on the valuation by a registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017.
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