The Ministry of Corporate Affairs with a view of transparency and disclosure, made significant amendments in Schedule III to the Companies Act, 2013 by directing the Companies/Statutory Auditors to provide additional details of certain transactions in the Balance Sheet/Profit & Loss Account/Schedules on Balance Sheet/Profit & Loss Account. These changes are made applicable w.e.f. 01-04-2021 i.e. Companies/Statutory Auditors have to incorporate these amendments in the financial statements for the period ended 31-03-2022. I would like to give overview of these amendments.

♣ BALANCE SHEET AMENDMENTS

1. TRADE PAYABLE: On the signing page of Balance Sheet, under the heading TRADE PAYABLES, Company/Auditor need to disclose-

A. Total outstanding dues to MSME

B. Total outstanding dues to other creditors

For giving disclosure of the same, Company/Auditor is required to check the status of creditor under MSME and need to obtain MSME registration certificate from the respective creditor.

2. TANGIBLE ASSETS: On the signing page of Balance Sheet, name of the heading- Tangible Asset shall be replaced with new heading- Property, Plant and Equipment. Further, separate details of Intangible Asset to be provide after the heading Property, Plant and Equipment.

3. SHAREHOLDING OF PROMOTERS: In Note-2 (Share Capital), Company/Auditor is required to give details of shareholding of the Promoters along with changes in their shareholding in the following manner-

Details of shareholding of Promoters
Sr.
Name of the Promoter
No. of shares held at the beginning
% of shares held at the beginning
No. of shares held at the end
% of shares held at the end
No. of shares transferred/gifted/Issued, if any
% of change in the shareholding, if any.

A. Company needs to identify the Promoter as per the Companies Act;

B. Separate details shall be given for each class (Equity/Preference/DVR).

4. TRADE PAYABLES: From now onwards, Company/Auditor needs to give age wise disclosure of trade payable in the following manner-

Amount in Rs.
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
UNDISPUTED DUES
MSME
Others
DISPUTED DUES
MSME
Others

For the age wise analysis of creditors, Company/Auditor needs to-

A. Check the date of issue of invoice by creditor;

B. Ascertain the last day of payment (Normally 45 days from the date of issue of invoice);

C. Obtain balance confirmation letter from the creditor;

D. Any dispute raised by the creditor on the amount of dues;

E. Obtain MSME registration certificate from the creditor;

F. Reason for the delay.

Further, Company/Auditor needs to disclose unbilled dues separately in the schedule.

5. PROPERTY, PLANT AND EQUIPMENT: 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, amount of change due to revaluation (if change is 10% or more in the aggregate of the net carrying value of each class of Property, Plant and Equipment) and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed separately.

6. INTANGIBLE ASSETS: 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, amount of change due to revaluation (if change is 10% or more in the aggregate of the net carrying value of each class of intangible asset) and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed separately.

7. TRADE RECEIVABLES: From now onwards, Company/Auditor needs to give age wise disclosure of trade receivable in the following manner-

Amount in Rs.
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
UNDISPUTED RECEIVABLES
Considered good
Considered doubtful
DISPUTED RECEIVABLES
Considered good
Considered doubtful

For the age wise analysis of debtors, Company/Auditor needs to-

A. Check the date of issue of invoice;

B. Ascertain the last day of payment as per the terms and conditions, if any;

C. Obtain balance confirmation letter from the debtor;

D. Any dispute raised on the amount of dues;

E. Reason for the delay.

Further, Company/Auditor needs to disclose unbilled dues separately in the schedule.

8. 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. For this purpose, Auditor needs to check loan agreement entered into by the Company with banks and financial institutions.

9. IMMOVABLE PROPERTY NOT HELD IN COMPANY’S NAME:

The Company shall provide the details of all the immovable property (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 format given below and where such immovable property is jointly held with others, details are required to be given to the extent of the company’s share.

Relevant line item in the Balance sheet Descr-iption of item of property Gross carrying value Title deeds held in the name of Whether title deed holder is a Promoter/ Director,  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, also indicate if in dispute
PPE (Property, Plant, Equipment) Land
Building
Investment property
Land
Building
PPE retired from active use and held for disposal
Land
Building
Others, if any

A. 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 (Plant & Machinery class) as defined under rule 2 of the Companies (Registered Valuers and Valuation) Rules, 2017.

10. LOANS AND ADVANCES GIVEN TO PROMOTERS: If Company has given any loan/advance to the Promoter/Director/KMP/Related Parties, following details shall be given in the format-

Sr. Type of borrower Amount of loan/advance given Balance of loan/advance at the end of FY % of loan/advance against total loan/advance
1. Promoter
2. Director
3. KMP
4. Related Party

11. CAPITAL WORK IN PROGRESS: From now onwards, Company/Auditor need to give age wise analysis of Capital WIP in the following manner-

Amount in CWIP for a period of
CWIP Less than 1 year 1-2 years 2-3 years More than 3 years Total
Projects in progress
Projects temporarily suspended

12. DETAILS OF BENAMI PROPERTY: Where any proceedings have been initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 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.

13. 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.

Amendments in Schedule III to Companies Act, 2013

14. REGISTRATION OF CHARGES OR SATISFACTION WITH REGISTRAR OF COMPANIES:

Where any charges or satisfaction yet to be registered with RoC beyond the statutory period, details and reasons thereof shall be disclosed by the Auditor in the Notes to Accounts.

15. RATIO ANALYSIS: Following Ratios to be disclosed:-

(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.

♣ PROFIT AND LOSS AMENDMENTS

1. TOTAL INCOME: For the word TOTAL REVENUE, the word TOTAL INCOME shall be substituted after ascertaining the aggregate of revenue from operations and other income. For Section 8 Companies, following shall be included separately in the Total Income-

A. Revenue from Operations

B. Other Income

C. Grant/Donation received

2. UNDISCLOSED INCOME: 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 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.

3. CORPORATE SOCIAL RESPONSIBILITY: Where Company falls under the provisions of Section 135 i.e. CSR provisions, Auditor needs to give disclosure of following in the Notes to Accounts-

(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. For e.g. contribution to a trust/society 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.

4. DETAILS OF CRYPTO/VIRTUAL CURRENCY: 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.

To comply with all these amendments, Company/Auditor needs to check each and every aspect of financial transactions thoroughly and needs to incorporate these amendments in the financials of 31-03-2022 onwards.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. The entire contents of this document have been prepared on the basis of relevant provisions and rules and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided. I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information.

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5 Comments

    1. Sarvajit S. Yadwad says:

      All Companies to whom the Companies (Accounting Standard) Rules, 2006 applies. As far as I know, AS rules are applicable to all Companies irrespective of its nature.

    1. Sarvajit S. Yadwad says:

      Sir, these amendments are applicable w.e.f 01-04-2021 i.e from FY 21-22. We can see these changes in the financials of 31-03-2022

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