The Ministry of Corporate Affairs (MCA) has notified the Division III to Schedule III (Preparation of financial statements for NBFC whose financial statements are to be drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015 to the Companies Act, 2013.

The aforesaid Division III prescribes presentation of assets and liability for NBFCs on liquidity basis. Further, in order to maintain consistency, certain changes have been notified in following Divisions of Schedule III:Division I to Schedule III, applicable for financial statements for a company whose financial statements are required to comply with the Companies (Accounting Standards) Rules, 2006.

Division II to Schedule III, applicable for financial statements for a company whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015,

It may be recalled that the Ministry of Corporate affairs (MCA) vide notification dated March 30, 2016, has notified that NBFCs having net worth of Rs. 500 crores or more shall be required to prepare Ind AS compliant financial statements for accounting periods beginning on or after April 1, 2018, with comparatives and NBFCs having net worth of Rs. 250 crores or more shall be required to prepare Ind AS compliant financial statements for accounting periods beginning on or after April 1, 2019, with comparatives.

The need for separate formats for preparation of financial statements of NBFCs was felt due to following reasons:

  1. The nature of business operations of NBFCs is different from other companies. The NBFC’s are generally engaged in financing, leasing and other such activities.
  2. Ind AS 1, Presentation of Financial Statements, provides that for some entities, such as financial institutions, presentation of assets and liabilities in increasing or decreasing order of liquidity provides information that is reliable and more relevant than a current/non-current presentation because such entities do not supply goods or services within a clearly identifiable operating cycle.

Accordingly, after following due consultative process separate formats were formulated by the ICAI for NBFCs which have been confirmed by the NACAS and notified by MCA, Government of India.

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