Analysis of Companies Act Schedule III Amendment applicable wef 01.04.2022

The Companies in India requires to prepare their financial statements in form of Schedule III to the Companies Act, 2013. Schedule III of Companies Act, 2013 came into force with effect from the 1st April, 2014 vide Notification S.O.902(E), dated 26th March 2014 and subsequently amended vide Notification G.S.R. 679(E), dated 4th September 2015, vide Notification G.S.R. 404(E), dated 6th April 2016 and vide Notification G.S.R. 1022(E), dated 11th October, 2018 and very recently vide Notification G.S.R. 207(E), dated 24th March, 2021.

Schedule III of Companies Act, 2013 divided into 3 divisions:

Division I – Financial Statements for a company whose Financial Statements are required to comply 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.

The recent amendment dated 24th March, 2021 to amend Schedule III to the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 and Companies (Audit and Auditors) Rule, 2014 to enhance the disclosures required to be made by the Company in its Financial Statements. The main aim of the amendments in Schedule III of the Companies Act, 2013 is to improve the transparency in the financial statements of the company. By these amendments MCA is increasing stringency in compliance and adding numerous additional disclosures in Financial Statement, Directors Report and Audit Report. In recent years, there have been substantial changes in the reporting requirement by the auditors, but no such corresponding amendments were made in Schedule-III for the preparation of the financial statements. Thus, to align the company’s financial statements in accordance with the auditor’s reporting requirements. Majority of the amendments to Schedule III to the Companies Act, 2013 have been undertaken in response to the amendments covered in the newly issued Companies (Auditors and Report Order) 2020 and the Companies (Indian Accounting Standards) Amendment Rules, 2020. These amendments are in the form of reclassification of items items/sub items, renaming of items and additional disclosure to financial statements etc. To tune with this ICAI also revised ‘Guidance note on Schedule III to the Companies Act, 2013’. This write-up is about amendment in Division I to schedule III to the Companies Act, 2013.

1. Earlier is was optional but not it is mandatory to rounding off the figures appearing in the Financial Statements depending upon the Total Income of the company, as given below:—

[Total Income]	Rounding off
(a) less than one hundred crore rupees	To the nearest hundreds, thousands, lakhs or millions, or decimals thereof.
(b)one hundred crore rupees or more	To the nearest lakhs, millions or crores, or decimals thereof.

2. To tune with AS-10 “Property, Plant and Equipment” under the heading “II Assets”, under sub-heading “Non-current assets”, the item “Tangible Assets” changed to “Property, Plant and Equipment and Intangible assets”

3. A company shall disclose Shareholding of Promoters* in the Notes – Share Capital, as below:

Shares held by promoters at the end of the year				% Change during theyear***
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. ”

4. Sub-item “current maturities of Long term borrowings” reclassified under “Short-term borrowings” from “Other current liabilities”.

5. The following ageing schedule shall be given for Trade payables due for payment:-

Trade Payables ageing schedule

(Amount in Rs.)

Particulars	Outstanding for following periods fromdue date of payment#
	Less than           1year	1-2years	2-3years	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;

6. For 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 ”

7. For 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, disposal 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 assets) and other adjustments and the related depreciation and impairment losses or reversals shall be disclosed separately.”

8. Sub- item “(ia) Security Deposits” reclassified under “Other non-current assets” from “Long-term loans and advances”

9. For trade receivables outstanding, both non-current and current following ageing schedule shall be   given:

Trade Receivables ageing schedule

(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
(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.”;

10. 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.”;

11. Additional Regulatory Information

(i) Title deeds of Immovable Property not held in name of the Company

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	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

#Relative here means relative as defined in the Companies Act, 2013.

*Promoter here means promoter as defined in the Companies Act, 2013.

(ii) 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,

(iii) 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

”;

(iv) 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

*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**:

(Amount in Rs.)

CWIP	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.

(v) Intangible assets under development:

(a) For Intangible assets under development, following ageing schedule shall be given:

Intangible assets under development aging schedule

(Amount in Rs.)

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 zally 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**:

(Amount in Rs.)

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.

(vi) Details of Benami Property held

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

(vii) 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

(b) if not, summary of reconciliation and reasons of material discrepancies, if any to be adequately

(viii) Wilful Defaulter*

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.

(ix) 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)

(x) 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.

(xi) 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.

(xii) 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

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.

But what items are considered while calculating ratios are not mentioned in notification for that we can refer Annexure B to guidance notes on division I – Non Ind AS Schedule III to the companies act, 2013.

[Annexure B]

[Guidance notes on division I – Non Ind AS Schedule III to the companies act, 2013]

Analytical Ratios

1. Current Ratio

The current ratio indicates a company’s overall liquidity position. It is widely used by banks in making decisions regarding the advancing of working capital credit to their clients.

Current Ratio = Current Assets/ Current Liabilities

2. Debt – Equity Ratio

Debt-to-equity ratio compares a Company’s total debt to shareholders equity. Both of these numbers can be found in a Company’s balance sheet.

Debt – Equity Ratio = Total Debt/ Shareholder’s Equity

3. Debt Service Coverage Ratio

Debt Service coverage ratio is used to analyse the firm’s ability to pay-off current interest and instalments.

Debt Service Coverage Ratio = Earnings available for debt service / Debt Service

Earning for Debt Service = Net Profit before taxes + Non-cash operating expenses like depreciation and other amortizations + Interest + other adjustments like loss on sale of Fixed assets etc.

Debt service = Interest & Lease Payments + Principal Repayments.

“Net Profit after tax” means reported amount of “Profit / (loss) for the period” and it does not include items of other comprehensive income.

4. Return on Equity (ROE):

It measures the profitability of equity funds invested in the Company. The ratio reveals how profitability of the equity-holders’ funds have been utilized by the Company. It also measures the percentage return generated to equity-holders. The ratio is computed as:

ROE = Net Profits after taxes – Preference Dividend (if any) / Average Shareholder’s Equity

5. Inventory Turnover Ratio

This ratio also known as stock turnover ratio and it establishes the relationship between

the cost of goods sold during the period or sales during the period and average inventory held during the period. It measures the efficiency with which a Company utilizes or manages its inventory.

Inventory Turnover ratio = Cost of goods sold OR sales/ Average Inventory

Average inventory is (Opening + Closing balance / 2)

When the information opening and closing balances of inventory is not available then the ratio can be calculated by dividing COGS OR Sales by closing balance of Inventory.

6. Trade receivables turnover ratio

It measures the efficiency at which the firm is managing the receivables.

Trade receivables turnover ratio = Net Credit Sales / Average Accounts Receivable

Net credit sales consist of gross credit sales minus sales return. Trade receivables includes sundry debtors and bill’s receivables.

Average trade debtors = (Opening + Closing balance / 2)

When the information about credit sales, opening and closing balances of trade debtors is not available then the ratio can be calculated by dividing total sales by closing balances of trade receivables.

7. Trade payables turnover ratio

It indicates the number of times sundry creditors have been paid during a period. It is calculated to judge the requirements of cash for paying sundry creditors. It is calculated by dividing the net credit purchases by average creditors.

Trade payables turnover ratio = Net Credit Purchases / Average Trade Payables

Net credit purchases consist of gross credit purchases minus purchase return

When the information about credit purchases, opening and closing balances of trade creditors is not available then the ratio is calculated by dividing total purchases by the closing balance of trade creditors.

8. Net capital turnover ratio

It indicates a company’s effectiveness in using its working capital.

The working capital turnover ratio is calculated as follows: Net Sales divided by the average amount of

working capital during the same period.

Net capital turnover ratio = Net Sales/ Average Working Capital

Net Sales shall be calculated as total sales minus sales returns.

Working capital shall be calculated as current assets minus current liabilities.

9. Net profit ratio

It measures the relationship between net profit and sales of the business.

Net Profit Ratio = Net Profit / Net Sales

Net profit shall be after tax.

Net sales shall be calculated as total sales minus sales returns.

10. Return on capital employed (ROCE)

Return on capital employed indicates the ability of a company’s management to generate returns for both the debt holders and the equity holders. Higher the ratio, more efficiently is the capital being employed by the company to generate returns.

ROCE = Earning before interest and taxes /  Capital Employed

Capital Employed = Tangible Net Worth + Total Debt + Deferred Tax Liability

11. Return on investment

Return on investment (ROI) is a financial ratio used to calculate the benefit an investor will receive in relation to their investment cost. The higher the ratio, the greater the benefit earned. The one of widely used method is Time Weighted Rate of Return (TWRR) and the same should be followed to calculate ROI. It adjusts the return for the timing of investment cash flows and its formula / method of calculation is commonly available. However, the same is given below for quick reference:

{MV(T1) – MV(T0) – Sum [C(t)]}

ROI = _________________________

{MV(T0) + Sum [W(t) * C(t)]}

where,
T1 = End of time period
T0 = Beginning of time period
t = Specific date falling between T1 and T0
MV(T1) = Market Value at T1
MV(T0) = Market Value at T0
C(t) = Cash inflow, cash outflow on specific date
W(t) = Weight of the net cash flow (i.e. either net inflow or net outflow) on day ‘t’, calculated as [T1 – t] / T1

Companies may provide ROI separately for each asset class (e.g., equity, fixed income, money market, etc.).

(xiii) 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.

(xiv) Utilisation of Borrowed funds and share premium:

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

(II) date and amount of fund further advanced or loaned or invested by such Intermediaries to other intermediaries or Ultimate Beneficiaries alongwith complete details of the ultimate

(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

(II) date and amount of fund further advanced or loaned or invested other intermediaries or Ultimate Beneficiaries alongwith complete details of the other intermediaries’ or ultimate

(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).;

(iii) 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:- “(ba) Grants or donations received (relevant in case of section 8 companies only)”;

(II) in paragraph “5. Additional information”, after item (viii) and the entries relating thereto, the following shall be inserted, namely:-

“(ix) 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 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.;

(x) Corporate Social Responsibility (CSR)

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

(xi) 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:-

(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.”