Vivek Rajan. V
01. What is the date of applicability of the New Schedule VI?
The New Schedule VI is applicable to all companies for financial statements prepared for financial year commencing on or after 01.04.2011 except banking, insurance and electricity companies which are governed by their own reporting formats under the respective pronouncements.
02. What are the summary of differences between the New Schedule VI and the Old Schedule VI?
The summary of the differences between the New Schedule VI and the Old Schedule VI are presented in the following table in PART A, for Balance Sheet items. For the Profit and Loss account, format for presenting them is given in PART B (no such format was prescribed under Old Schedule VI). The requirements of the old Schedule VI continue to apply unless the contrary is specifically stated in this FAQ. If there is a conflict between the Accounting Standards and the New Schedule VI, the Accounting Standard shall prevail.
PART A–BALANCE SHEET ITEMS – Only significant differences between New Schedule VI and Old Schedule VI and items that require additional disclosure requirements as compared to Old Schedule VI are covered in this table
|
Particulars [A] |
New Schedule VI[B] |
Old Schedule VI[C] |
| Share Capital | A. The following should be additionally disclosed
ü Shares held by holding company or ü Shares held by ultimate holding company including shares held by subsidiaries or associates of holding or ultimate holding company ü Shares held by shareholders holding more than 5 % specifying the number of shares held B. The following historical disclosures are to be given for transactions that occurred over the previous five years ü Aggregate number and class of shares allotted as fully paid up pursuant to contracts(s) without payments being received in cash. ü Aggregate number and class of shares allotted as fully paid up by way of bonus shares ü Aggregate number and class of shares bought back.
|
|
| Reserves and Surplus | Surplus – Balance in Profit & Loss Account
|
a) The surplus in the profit and loss account is after appropriations and allocationsb) The debit balance in the profit and loss account after adjustment against the free/ uncommitted reserves should be disclosed in the Assets side of Balance Sheet |
| Share Application Money Pending Allotment | The following disclosures shall be made
I. the period for which it is outstanding II. the reason for non allotment should be disclosed. |
This disclosure requirement was not there in this reporting format. |
| Deferred tax Liabilities/ Assets | This should be given as part of non-current liabilities /assets. As compared to Old Schedule VI, here the place of disclosure is indirectly stated. | Deferred tax liabilities would be disclosed after unsecured loans and deferred tax assets would be disclosed after investments. This was not required by the schedule but was an Accounting Standard requirement. |
| Current Liabilities | Liability will be classified as current liability if any one( and not all) of the following is satisfied01.it is expected to be settled in the company’s normal operating cycle(on most cases it will be less than 12 months)
02. it is held primarily for the purpose of being traded 03. it is due to be settled within 12 months after the reporting date. 04. the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date Note: Where the normal operating cycle cannot be identified , it is assumed to have a duration of 12 months The following items are item heads to be presented i. Short Term Borrowings ii. Trade Payables iii. Other Current liabilities iv. Short Term Provisions If Trade payables cannot be classified as Current Liabilities, it can be classified as Long Term Liabilities |
The item to be reported under this head would beü Acceptances
ü Sundry Creditors ü Others etc The meaning and the terminology that was in use hitherto has been changed. |
| Current Assets | An asset will be classified as a current assert only when it satisfies any of the following criteria01. It is expected to be realized in , or is intended for sale or consumption in the company’s normal operating cycle
02. it is held primarily for the purpose of being traded 03. it is expected to be realized within 12 months after the reporting date. 04. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date Note: Where the normal operating cycle cannot be identified , it is assumed to have a duration of 12 months Trade Receivables Aggregate amount of Trade Receivables outstanding for a period exceeding six months from the date they are due for payment should be separately stated If Trade receivables cannot be classified as Current Assets, it can be classified as Long Term Trade Receivables under the head Non –Current Assets Cash and Cash Equivalents shall include apart from other items , the following
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The definition of the current assets has been changed and the terminology hitherto in use has undergone a change and breakup of balances as between schedule and non-schedule banks are dispensed with. |
| Fixed Assets/ Capital work-in-progress | Capital work-in-progress should include only those assets which are under construction becausea) Capital Advance should be included under long term loans and advances and
b) Intangible Assets under development that qualify for capitalization, should be stated separately |
Capital work-in-progress included assets under construction, capital advances and intangible assets under development. |
| Investments regardless of whether it is Non-Current Investment or Current Investment | Aggregate provision for diminution in value of investments should be disclosed | There weren’t such requirements in this reporting format. |
| Miscellaneous expenditure to the extent not written off | There is no specific disclosure requirement | There was specific disclosure requirement |
| Format of Balance Sheet | Only Vertical Format is prescribed. For Format of Balance Sheet please refer Part -C | Vertical and Horizontal format was prescribed, but Vertical format was predominantly followed. |
PART-B- PROFIT &LOSS ACCOUNT- The format for presentation is given below (no such format was prescribed under old Schedule VI)
| Particulars | Note | 31.03.2011 (Rs.) | 31.03.2010 (Rs.) |
| Revenue from Operations | |||
| Other Income | |||
| Total Revenue | |||
| Expenses | |||
| Cost of materials consumed | |||
| Purchases of stock-in trade | |||
| Changes in inventories of finished goods and work-in-progress and stock in trade | |||
| Employee Benefit Expenses | |||
| Finance Cost | |||
| Depreciation and amortization expenses | |||
| Other Expenses | |||
| Total Expenses | |||
| Profit before exceptional and extraordinary items and tax | |||
| Exceptional Items | |||
| Profit before extraordinary items | |||
| Extraordinary Items | |||
| Profit before tax | |||
| Tax Expense(1) Current Tax
(2) Deferred Tax |
|||
| Profit/(loss) for the period from continuing operations | |||
| Profit/(loss) from discontinuing operations | |||
| Tax Expense of discontinuing operations | |||
| Profit/(loss) from discontinuing operations (after tax) | |||
| Profit/(loss) for the period | |||
| Earnings per equity share(1) Basic
(2) Diluted |
The significant points of differences between the old and New Schedule VI to the Companies Act, 1956 with respect to the Profit and Loss Accounts is summarized in the table given below
|
Particulars [A] |
New Schedule VI[B] |
Old Schedule VI[C] |
| Format for presentation | Format has been specified and minimum line items to be presented has been specified | Neither of the format or minimum line items were specified |
| Profit & Loss Account would end with | Current Year Profit | Appropriations from profit if any |
| Classification of Expenses | Based on Nature of Expenses- E.g. Line Item “Employee Benefit Expenses” | Based on nature or based on function |
| Criterion for separate disclosure | Any item of income or expenditure which exceeds 1% of the revenue from operations or Rs.1, 00,000 whichever is higher shall be disclosed separately. | Any item under which the expenses exceed 1% of total revenue of the company or Rs.5000 whichever is higher, shall be disclosed separately |
| Disclosures relating to managerial remuneration | It is withdrawn in this reporting format | The computation under section 350 of the Companies Act, 1956 was to be given |
| Exceptional and Extraordinary Items | It is to be disclosed separately | There were no such requirements. |
| Quantitative details | Quantitative details are not required to be given. But major heads of consumption like raw materials, goods purchased are to be given under broad heads. | The value of raw materials consumed giving item wise breakup and indication of quantities thereof was required to be given. |
| Interest Income | TDS for the Current Year and the previous year need not be given along the line item | TDS for the Current Year and the previous year was supposed to be given along the line item |
PART-C- Format of Balance Sheet in New Schedule VI to the Companies Act, 1956
| PARTICULARS | Note | 31.03.2011 (Rs.) | 31.03.2010 (Rs.) |
| I.EQUITY AND LIABILITIES | |||
| Shareholders’ Fund | |||
| Share Capital | |||
| Reserves and Surplus | |||
| Money received against share warrants | |||
| Share Application money pending allotment | |||
| Non-current liabilities | |||
| Long Term Borrowings | |||
| Deferred Tax liabilities(Net) | |||
| Other Long-term liabilities | |||
| Long-term provisions | |||
| Current liabilities | |||
| Short-term borrowings | |||
| Trade payables | |||
| Other current liabilities | |||
| Short-term provisions | |||
| TOTAL | |||
| II ASSETS | |||
| Non-current assets | |||
| Fixed Assets | |||
| a. Tangible Assets | |||
| b. Intangible Assets | |||
| c. Capital work-in-progress | |||
| d. Intangible assets under development | |||
| Non-current investments | |||
| Deferred tax assets(net) | |||
| Long-term loans and advances | |||
| Other Non-current assets | |||
| Current Assets | |||
| Current investments | |||
| Inventories | |||
| Trade receivables | |||
| Cash and Cash equivalents | |||
| Short-term loans and advances | |||
| Other current assets | |||
| TOTAL |
Items given in bold and small font are sub-headings
Rounding off
There is a change in the manner in which the figures appearing in the Financial Statements should be rounded off and it is separately summarized in the following two tables.
Under New Schedule VI
| Where the Turnover is | Rounding off permissible |
| Less than 100 Crore rupees | To the nearest hundreds, thousands, lakhs or millions, or decimal thereof. |
| 100 Crore rupees or more | To the nearest lakhs, millions or crores, or decimals thereof |
|
Consistency in rounding off methods intended to be followed in the years to come is strongly recommended |
|
Under Old Schedule VI
| Where the Turnover is | Rounding off permissible |
| Less than 100 Crore rupees | To the nearest hundreds or thousands or decimals thereof |
| 100 Crore rupees or more but less than 500 Crore rupees | To the nearest hundreds , thousands lakhs or millions , or decimals thereof |
| 500 Crore rupees or more | To the nearest hundreds , thousands, lakhs, millions or crores or decimals thereof |
03. What needs to be done if there is a conflict between the Schedule to the Act and the Accounting Standard?
In the New Schedule VI to the Companies Act, 1956 if there is a conflict between the Schedule and the Accounting Standards, then the Accounting Standards will prevail.
04. Is there any other additional requirement under the New Schedule VI to the Companies Act, 1956?
In the New Schedule to the Companies Act, 1956, each item on the face of the Balance Sheet and Statement of Profit and Loss shall be cross-referenced to any related information in the notes. This would ensure that the coherency in the financial statements would be appreciated to a greater extent by the users of the financial statements.
05. Can some examples be cited relating to certain items and how they differ from the Old Schedule VI to the Companies Act, 1956?
Many examples can be cited, but for convenience only two examples are given here in the form of a table –
| Name of the item &Reference to Accounting Standard [1] | Treatment under Old Schedule VI[2] | Treatment under New Schedule VI [3] | Short Reason & reference to New Schedule VI [4] |
| Finance Lease-In the books of Lessee – Lease rental liability @ end of Year 1 – Lease Term 4 Years | Entire amount due would have been classified under Current Liabilities/ Other r Liabilities | 01. Lease rental payable within 1 year from the reporting date is to be classified as current liability and 02. Lease rentals payable for the remaining lease term should be classified under Non-Current Liabilities | The definition of current liabilities includes the lines italicized in column 3 |
| Discount on issue of shares/ debentures | Discount on issue of shares / debentures would be classified under the Assets side as a separate line item | This is to be shown as a adjustment against the Reserves and Surplus | Though the schedule is silent on this, treatment can be in the same lines with respect to treatment of the debit balance in the profit and loss account. |
06. How to ensure that there is a smooth transition from the Old Schedule VI to the Act to the New Schedule VI to the Companies Act, 1956?
The transition from the Old Schedule VI to the New Schedule VI is not difficult and to ensure that there is a smooth transition and to have a good learning curve one can prepare the financial statements of the FY 2010-11 that would have been in the Old Schedule VI, in the format and manner prescribed by the New Schedule VI to the act.
The above would be of greater significance when the audit for FY 2011-12 commences, as by that time the previous year’s figures for FY 2011-12 would have been captured in the New Schedule VI and a good base would also have been laid.
Request by the author Every effort has been made to avoid errors or omissions in this FAQ. In spite of this errors might have crept in. The readers are requested by the author, to bring to his notice any mistake or error for which act, the author shall be ever grateful.
Nita
Yes the comparitives are required to be presented in the corresponding notes also. This requirement is very much there. For further queries you can reach me @ gsv.vivekrajan@gmail.com . Thank you
should the comperatives which are required to be presented be presented in their respective schedules i.e notes also..!! is there this requirement also.
Presentation of financial statements of any entity ( companies ) is more transparent in the Revised Schedule VI than older one . I think , all the entity should adopt the system with some modification as per the respective statutes . Say financial statements of a partner ship firm may draw their financial statements as per this system. Financial statement in other entity should be renamed as 1. ” Statement of Assets & Liabilities ” 2.” Statement of Profit and loss ” 3.” Statement of cash Flow ‘ information there to as per the companies Act. or near there to as per requirements of the respective Acts and Rules .
Cross checking of transaction might be possible .
CA. Subhash Chandra Podder , FCA.
Kolkata
28/07/2012
Mr.Ashok Garg
Please refer to the Notification No.447E dated 28/02/2011 issued by the Ministry of Corporate Affairs. From the general instructions in the notification, it can be inferred that, if there is a conflict between the Accounting Standards and the Schedule VI then the Accounting Standards shall prevail.
Please also refer to the FAQ on Revised Schedule VI issued by the Institute of Chartered Accountants of India in this regard.
As per paragraph 46 of Accounting Standard -11(Revised 2003)(based on NotificationNo. G.S.R.225(E) dated 31st March 2009) , the exchange differences arising on reporting of long term foreign currency monetary items pertaining to acquisition of depreciable fixed asset can be added to or deducted from the cost of the asset as the case may be and shall be depreciated over the balance life of the asset. This is at the option of the enterprise. This treatment was originally permitted to be done from 7th December 2006 till 31st March 2012. By Notification No.913 (E) dated 29th December 2011, the Ministry of Corporate Affairs has extended it to period ending on or before 31st March 2020.
Mr.Bhavin Kubavat
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Interest u/s 234 C of Income-tax Act, 1961 should be classified as additional information by way of notes under the head Interest Expenditure. This should not be classified as Finance Cost as this interest is not the cost for taking the loan facility.
Answer to question No. 3 does not appear to be correct. Please see the link link http://www.caalley.com/as/tr_as11.html and especially the second sentence of 4th paragraph. It appears to be the announcement by the Institute.
Interest u/s 234C of the Income Tax Act,1961, paid in 2010-2011. Can we classify as a Finance Cost or something else under Revised Shedule VI for the purpose of realine the previous year’s figures.(i.e. Financial Year 2011-2012, P.Y.2010-2011). How classify interest in 2010-2011.
Dear Mr.Dipak,
Yes, the New Schedule VI is applicable in the situation that you have mentioned. The change from March ending to December ending does not have a bearing in this scenario.
Q Is revised schedule VI applicable for a company who has changed its financial year from March ending to December ending? Because of this change the client is required to prepare financial for 9 months commencing from April,11 to December,11.
Dear all,
I thank each and everyone of you for your comments. Your comments have motivated me.
Regards
V.Vivek Rajan
Hi Vivek,
Excellent write up! You have spared no effort in bringing out the intricacies involved in the New Schedule VI. Looking forward to many more such articles from you. Keep up the Good Work!
Regards,
Dave.
A good article fro brief description of new Schedule VI
Good effort to bring out the matter in concise form.
Well informative statement presentation in Revised Schedule VI to the Companies Act.1956.
Deserve appreciation. Every broad head and sub head, including notes have significant cross checking system.
CA. Subhash Chandra Podder
Kolkata
15/01/2012
Good.Article
It clears basic doubts about applicability and issues with Revised Schedule VI