GUIDANCE NOTE ON
DIVISION III - SCHEDULE III
TO THE COMPANIES ACT, 2013
FOR
NBFC THAT IS REQUIRED TO
COMPLY WITH IND AS
(Revised January, 2022 Edition)
GUIDANCE NOTE
ON
DIVISION III - SCHEDULE III
TO THE COMPANIES ACT, 2013 FOR
NBFC THAT IS REQUIRED TO
COMPLY WITH IND AS
(Revised January, 2022 Edition)
Corporate Laws & Corporate Governance Committee
INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
New Delhi
© The Institute of Chartered Accountants of India
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system or transmitted in any form or by any means electronic,
mechanical, photocopying, recording or otherwise without prior permission in
writing from the publisher.
First Edition : October 2019
Second Edition : January 2022
Committee/Department : Corporate Laws & Corporate Governance
Committee
E-mail : clcgc@icai.in
Website : www.icai.org
Price : Rs. 200/-
ISBN No. : 978-81-8441-971-9
Published by
: The Publication Department on behalf of the
Printed by Institute of Chartered Accountants of India. ICAI
Bhawan, Post Box No. 7100, Indraprastha Marg,
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Agra 282 003
Foreword to the Second Edition
Division-III to the Schedule III to the Companies Act, 2013 was first notified
by the Ministry of Corporate Affairs (MCA) in October, 2018 for the Non-
Banking Financial Companies (NBFCs) that are required to comply with the
Indian Accounting Standards (Ind AS) and therefore, the Institute of
Chartered Accountants of India (ICAI) through its Corporate Laws &
Corporate Governance Committee (CL&CGC) brought out the Guidance Note
on Division-III to the Schedule III to the Companies Act, 2013 in the year
2019 to assist the members in discharging their duties and responsibilities
more effectively and efficiently.
In the year 2021, the MCA has revised Division-III to Schedule III to
incorporate several additional disclosure requirements vide its notification
dated 24th March 2021; thereby necessitating the need to revise the
aforementioned Guidance Note earlier issued by ICAI in 2019.
Major amendments that have been introduced in Division-III relate to
disclosure of Ageing Schedule of Trade Payables, Trade Receivables,
Capital work in progress (CWIP) and Intangible Assets under developments,
disclosure of shareholding of Promoters, Ratios, Undisclosed Income, Crypto
Currency, and Wilful Defaulters.
In light of the same, the CL&CGC of ICAI has decided to revise the earlier
edition of the Guidance Note to incorporate the guidance on additional and
significant matters introduced vide recent amendments.
I heartily congratulate Corporate Laws & Corporate Governance Committee
of ICAI to for taking this initiative and coming up with the Revised Edition of
Guidance Note on Division-III to Schedule III to the Companies Act, 2013.
I compliment CA. Shriniwas Y. Joshi, Chairman, Corporate Laws & Corporate
Governance Committee, CA. Anuj Goyal, Vice-Chairman and all the
members of the Corporate Laws & Corporate Governance Committee who
have made invaluable contribution in the revision of this Guidance Note.
I am sure that the members and other stakeholders at large would find the
Guidance Note immensely useful.
CA. Nihar N. Jambusaria
President, ICAI
Date: 21-01-2022
New Delhi
Preface to the Second Edition
In October, 2018 the Ministry of Corporate Affairs (MCA) has brought in
substantial changes in the Schedule III to the Companies Act, 2013. The
Division-III to Schedule III to the Companies Act, 2013 got notified pursuant to
the applicability of Indian Accounting Standards (Ind AS) to Non-Banking
Financial Companies (NBFCs) which fall under the prescribed criteria w.e.f. 01st
April 2018.
Considerable changes have been brought in the Division III to Schedule III to the
Companies Act, 2013 vide MCA Notification dated 24th March, 2021 which are
aimed to improve the quality and reliability of financial statements. Certain new
disclosure requirements have been added.
In this regard, a need was felt to provide guidance to professionals and other
stakeholders in preparation of financial statements in line with the requirements
of Schedule III to the Companies Act, 2013.
Therefore, the Corporate Laws & Corporate Governance Committee decided to
revise the “Guidance Note on the Division-III to Schedule III to the Companies
Act, 2013” as brought out by it earlier. The Revised Edition of the Guidance Note
provides sufficient and appropriate guidance for the newly added disclosures.
We would like to convey our sincere gratitude to the President ICAI CA. Nihar N
Jambusaria, and the Vice President ICAI CA. (Dr.) Debashis Mitra for supporting
us in bringing out the publication.
We also wish to place on record our sincere thanks to all the Committee
members & Special Invitees for their suggestions, support and guidance in
finalizing this Guidance Note.
Our thanks to the Study Group members CA. Dhinal Shah, CA. Sandeep Shah,
CA. Himanshu Kishnadwala, CA. Vijay Maniar, CA. Aniruddha Godbole,
Shri Shriraj Bhandari, CA. Ritesh Goyal, CA. Pratik Haria, CA. Ankit Kaistha,
CA. Sumit Seth, CA. Nayan C Ratanghayra, and CA. Sandeep Mishra for their
contribution in Revising the Guidance Note.
We would also like to thank Shri Rakesh Sehgal, Director and CA. Sarika
Singhal, Secretary to the Committee and team members Ms Seema Jangid and
CA. Nikita Aggarwal for their technical and administrative support.
We sincerely believe that the members of the profession, industry & other
stakeholders would find the publication immensely useful.
CA. Shriniwas Y Joshi CA. Anuj Goyal
Chairman, Vice Chairman,
Corporate Laws & Corporate Corporate Laws & Corporate
Governance Committee Governance Committee
Date: 20-01-2022
New Delhi
Foreword to the First Edition
The Ministry of Corporate Affairs (MCA) has earlier amended the formats for
Division I and Division II to Schedule III to the Companies Act and has also
notified the formats of Division III to Schedule III pertaining to Non-Banking
Financial Companies (NBFCs) that are required to comply with Indian
Accounting Standards (Ind AS).
The revised formats of Division III have brought changes with regard to the
classification of trade payables, trade receivables and loan receivables. Also,
with the amendments, there is change in the terminology of Schedule III to align
it with Ind AS. As the Ind AS has become applicable on NBFCs that fall within the
prescribed criteria w.e.f. 1st April, 2018, with the prescription of Division III to
Schedule III, the presentation of the financial results will be in line with the Indian
Accounting Standards.
In light of the changes to Division III to Schedule III, a need was felt by the
Institute of Chartered Accountants of India (ICAI) for providing appropriate
guidance to the members so that the requirements of Schedule III can be
complied with by the NBFCs that are required to prepare their financial
statements as per Ind AS in letter and spirit.
I am happy that the Corporate Laws & Corporate Governance Committee of ICAI
has undertaken the task of preparing the Guidance Note on the Division III to
Schedule III of the Companies Act, 2013 for necessary guidance of NBFCs and
all others involved. Detailed notes have also been provided on various items of
the Schedule III and issues and intricacies involved therein which will surely help
the readers.
I commend the efforts of CA. (Dr.) Debashis Mitra, Chairman, CA.
Chandrashekhar V. Chitale, Vice-Chairman and all the members of the
Corporate Laws & Corporate Governance Committee who have made invaluable
contribution in preparing this Guidance Note.
I am confident that the members and other stakeholders would find the Guidance
Note immensely useful.
CA Prafulla P. Chhajed
President ICAI
Preface to the First Edition
The Institute of Chartered Accountants of India (ICAI) through the Corporate
Laws & Corporate Governance Committee (CLCGC) had issued Guidance Notes
on Division I and Division II to Schedule III to the Companies Act 2013 and the
same were revised on the basis of amendments which were notified by the
Ministry of Corporate Affairs vide Notification dated 11.10.2018.
In October, 2018, the Ministry of Corporate Affairs notified Division III to
Schedule III to the Companies Act, 2013 which contained the format of Financial
Statements as well as Disclosure Requirements for Non- Banking Financial
Companies (NBFCs) that are required to comply with the Indian Accounting
Standards (Ind AS).
In view of the above, CLCGC of ICAI decided to bring out a Guidance Note on
Division III to Schedule III to the Companies Act 2013. The Note provides
guidance on each of the items of the Balance Sheet & Statement of Profit and
Loss. Few illustrations have also been included on application of the principles
provided in the Guidance Note.
We would like to convey our sincere gratitude to the President of ICAI, CA.
Prafulla P. Chhajed, and the Vice President ICAI, CA. Atul Kumar Gupta for
supporting us in bringing out the publication. We are also thankful to all our
Central Council Colleagues & other Members /Special Invitees of the Committee
for their valuable inputs in giving shape to this Guidance Note.
Our special thanks to CA. Shriniwas Y. Joshi, Central Council Member and
Convenor of the Study Group comprising of CA. Charanjit Attra, CA. Sandeep
Shah, CA. Ritesh Goyal, Shri Avinash Chander, CA. Krishna Vyas and CA.
Manan Lakhani for their sincere efforts in bringing out this Publication.
The Committee would like to acknowledge the valuable inputs received from the
Nominees of Reserve Bank of India to the Study Group namely Shri P.K.
Chophla, Shri Anuj Sharma and Shri Sandeep Parmar.
We would also like to thank Secretary to the Committee CA. Sarika Singhal and
Ms Seema Jangid and CA. Deepa Agarwal for their technical and administrative
support.
We trust that this Guidance Note would be very useful to the members of the
Institute and others interested in the subject.
CA. (Dr.) Debashis Mitra CA. Chandrashekhar V. Chitale
Chairman, Vice- Chairman,
Corporate Laws & Corporate Laws &
Corporate Governance Committee Corporate Governance Committee
Index
1. Introduction ........................................................................................ 1
2. Objective and Scope ........................................................................... 2
3. Applicability ........................................................................................ 4
4. Main principles – Summary of Division III to Schedule III ..................... 5
5. Structure of Division III to Schedule III............................................... 10
6. General Instructions for Preparation of Financial Statements:
Notes 1 to 10 .................................................................................... 10
7. Part I Notes: General Instructions for Preparation of Balance Sheet... 13
8. Part I – Form of Balance Sheet and Notes – General Instructions
for Preparation of Balance Sheet: Notes 6 to 11 ................................ 13
9. Part II – Statement of Profit and Loss and Notes – General
Instructions for Preparation of Statement of Profit and Loss:
Notes 1 to 10 .................................................................................. 103
10. Other Comprehensive Income ......................................................... 120
11. Additional information to be disclosed by way of Notes to
Statement of Profit and Loss ........................................................... 122
12. Part III – General Instructions for Preparation of Consolidated
Financial Statements ...................................................................... 126
Annexure A : Division III to Schedule III to the Companies Act, 2013 ....... 138
Annexure B : Illustrative List of Disclosures required under the
Companies Act, 2013......................................................... 201
Annexure C : List of Indian Accounting Standards notified as on date ...... 203
Annexure D : General Circular No. 39/2014 dated 14th October 2014 ....... 205
Glossary ................................................................................................. 206
1. Introduction
1.1 Schedule III to the Companies Act, 2013 (‘the Act’) was notified along
with the Act itself on 29 August, 2013 thereby providing the manner in which
every company registered under the Act shall prepare its Financial
Statements. Financial Statements as defined under the Act include Balance
Sheet, Statement of Changes in Equity for the period, the Statement of Profit
and Loss for the period, Cash flow statement as applicable for the period and
Notes.
1.2 Ministry of Corporate Affairs (‘MCA’) notified Indian Accounting
Standards (‘Ind AS’) on 16 February, 2015 thereby laying down the initial
roadmap for all companies, except insurance companies, banking companies
and non-banking finance companies, for adoption of Ind AS (‘MCA
roadmap’). Further, MCA notified amendments to Schedule III to the Act on 6
April, 2016 whereby:
1.2.1 The original Schedule III was renamed as ‘Division I’ to
Schedule III (‘Non-Ind AS Schedule III’) – which gives a format
of Financial Statements for Non-Ind AS companies, that are
required to comply with the Companies (Accounting Standards)
Rules, 2006 (as amended from time to time). In other words,
Non-Ind AS companies, will be required to prepare Financial
Statements as per Companies (Accounting Standards) Rules,
2006 (as amended from time to time), as per the format of
Division I to Schedule III to the Act.
1.2.2 ‘Division II’ - ‘Ind AS Schedule III’ was inserted to give a format
of Financial Statements for companies that are required to
comply with the Companies (Indian Accounting Standards)
Rules, 2015, as amended from time to time (‘Companies Ind AS
Rules’). This was newly inserted into Schedule III for companies
that adopt Ind AS as per Rule 4(1)(i) or Rule 4(1)(ii) or Rule
4(1)(iii) of the Companies Ind AS Rules. Accordingly, such
Companies, while preparing its first and subsequent Ind AS
Financial Statements, would apply Division II to Ind AS
Schedule III to the Act.
1.3 The MCA issued a notification dated 30 March, 2016 announcing the
Ind AS roadmap for non-banking financial companies (‘NBFC’). Further, MCA
notified amendments to Schedule III to the Act on 11 October, 2018 whereby:
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1.3.1 ‘Division III’ to Schedule III’ (Refer Annexure A, Pg 138) was
inserted to give a format of Financial Statements for NBFC’s
that are required to comply with the Companies (Indian
Accounting Standards) Rules, 2015, as amended from time to
time (‘Companies Ind AS Rules’). As per the Companies Ind
AS Rules, “Non-Banking Financial Company” means a Non-
Banking Financial Company as defined in clause (f) of section
45-I of the Reserve Bank of India Act, 1934 and includes
Housing Finance Companies, Merchant Banking companies,
Micro Finance Companies, Mutual Benefit Companies,
Venture Capital Fund Companies, Stock Broker or Sub-Broker
Companies, Nidhi Companies, Chit Companies, Securitisation
and Reconstruction Companies, Mortgage Guarantee
Companies, Pension Fund Companies, Asset Management
Companies and Core Investment Companies.’ Accordingly,
NBFC’s while preparing its first and subsequent Ind AS
Financial Statements, would apply Division III to Schedule III
to the Act.
1.4 It may, however, be clarified that for companies engaged in the
generation or supply of electricity, neither the Electricity Act, 2003, nor the
rules framed thereunder, prescribe any specific format for presentation of
Financial Statements by an electricity company. Section 1(4) of the Act
states that the Act will apply to electricity companies, to the extent it is not
inconsistent with the provisions of the Electricity Act. Keeping this in view,
Division III to Schedule III, Division I or Division II as applicable may be
followed by such companies till the time any other format is prescribed by the
relevant Statute.
2. Objective and Scope
2.1 The objective of this Guidance Note is to provide guidance in the
preparation and presentation of Financial Statements in accordance with
various aspects of Division III to Schedule III, for NBFC’s adopting Ind AS.
The disclosure requirements under Ind AS, the Companies Act, 2013, other
pronouncements of the Institute of Chartered Accountants of India (ICAI),
other Statutes, etc., would be in addition to the guidance provided in this
Guidance Note. Paragraph 9 of Division III of Schedule III further states that
where any Act, Regulation, Guidelines or Circulars issued by the relevant
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Regulators from time to time requires specific disclosures to be made in the
standalone financial statements of an NBFC, the said disclosures shall be
made in addition to those required under this Schedule.
2.2 Guidance given in ‘Guidance Note on Division I to the Schedule III to
the Companies Act, 2013’ published in February 2016 and revised in
January 2022 would continue to be applied by Non-Ind AS companies which
are required to prepare Financial Statements as per the format of Non-Ind
AS Schedule III.
2.3 In preparing this Guidance Note, reference has been made to Ind AS
notified under Section 133 of the Act read together with Paragraph 3 of the
Companies Ind AS Rules given in Annexure C (Pg 203) and various other
pronouncements of the ICAI. The primary focus of the Guidance Note is to
lay down broad guidelines to deal with practical issues that may arise in the
implementation of Division III to Schedule III while preparing Financial
Statements as per Ind AS. The Guidance Note would primarily provide
guidance on the line items contained in the Division III to the Schedule III
rather than the specific issues which an NBFC may face.
2.4 This Guidance Note includes changes to presentation and disclosure
requirements of Division III to Schedule III pursuant to Ind AS notified up to
March 31, 2021.
2.5 As per the clarification issued by ICAI regarding the authority attached
to the Documents issued by ICAI, ‘Guidance Notes’ are primarily designed to
provide guidance to members on matters which may arise in the course of
their professional work and on which they may desire assistance in resolving
issues which may pose difficulty. Guidance Notes are recommendatory in
nature. A member should ordinarily follow recommendations in a guidance
note relating to an auditing matter except where he is satisfied that in the
circumstances of the case, it may not be necessary to do so. Similarly, while
discharging his attest function, a member should examine whether the
recommendations in a Guidance Note relating to an accounting matter have
been followed or not. If the same have not been followed, the member should
consider whether keeping in view the circumstances of the case, a disclosure
in his report is necessary.
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3. Applicability
3.1 As per the Government Notification no. S.O. 902 (E) dated 26th March,
2014, Schedule III is applicable for the Financial Statements prepared for the
financial year commencing on or after April 1, 2014. As per the Government
Notification no. G.S.R. 404(E) dated April 6, 2016, Schedule III is amended
to include a format of Financial Statements for a company preparing
Financial Statements in compliance with the Companies Ind AS Rules.
Further, as per the Government Notification no. G.S.R. 1022 (E) dated
October 11, 2018, the Schedule III is amended to include a format of
Financial Statements for an NBFC preparing Financial Statements in
compliance with the Companies Ind AS Rules. Schedule III has been further
amended vide the Government Notification dated 24th March, 2021 to include
certain additional presentation and disclosures requirements and changes
some existing requirements. These changes need to be applied in
preparation of financial statements for the financial year commencing on or
after 1st April, 2021. Every Non-Banking Financial company as defined in the
Companies (Indian Accounting Standards) (Amendment) Rules, 2016 to
which Indian Accounting Standards apply, shall prepare its financial
statements in accordance with this Schedule or with such modification as
may be required under certain circumstances. Additionally, preparers of
financial statements should also consider requirements of the Act as well as
other Statutes, Notifications, Circulars issued by various Regulators. Division
III to Schedule III requires that except in the case of the first Financial
Statements laid before the company after incorporation, the corresponding
amounts (i.e. comparatives) for the immediately preceding period are to be
disclosed in the Financial Statements including the Notes to Accounts. Thus,
for the Financial Statements prepared for the financial year 2018-19 (i.e. 1st
April 2018 to 31st March 2019), corresponding amounts need to be given for
the financial year 2017-18. As per Ind AS 101, a company’s first Ind AS
financial statements shall include at least three balance sheets, two
statements of profit and loss, two statements of cash flows and two
statements of changes in equity and related notes. This Guidance Note does
not deal with the presentation aspects of reconciliations that are required to
be provided as a part of a company’s first Ind AS financial statements.
3.2 For applicability, in the first and subsequent years, of Division III to
Schedule III format by a company to its interim Financial Statements (other
than quarterly, half-yearly and annual financial results published as per SEBI
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guidelines), relevant paragraphs of Ind AS 34 – Interim Financial Reporting
are quoted below:
“9. If an entity publishes a complete set of Financial Statements in
its interim financial report, the form and content of those
statements shall conform to the requirements of Ind AS 1 for a
complete set of Financial Statements.
10. If an entity publishes a set of condensed Financial Statements
in its interim financial report, those condensed statements shall
include, at a minimum, each of the headings and subtotals that
were included in its most recent annual Financial Statements
and the selected explanatory notes as required by this
Standard. Additional line items or notes shall be included if their
omission would make the condensed interim Financial
Statements misleading.”
In case, a company is presenting condensed interim Financial Statements,
its format should also conform to that used in the company’s most recent
annual Financial Statements, i.e., which would be as per Division III to
Schedule III.
3.3 Listed entities shall follow guidelines issued by SEBI by way of
circulars prescribing formats for publishing financial results (quarterly, half-
yearly and annual) which are guided by the relevant provisions of the Ind AS
and Division III to Schedule III and may make suitable modifications, as
applicable.
4. Main principles – Summary of Division III to
Schedule III
4.1 Every Non-Banking Financial company as defined in the Companies
(Indian Accounting Standards) (Amendment) Rules, 2016 to which Indian
Accounting Standards apply, shall prepare its financial statements in
accordance with this Schedule or with such modification as may be required
under certain circumstances.
4.2 As per Paragraph 1 of Part III of Division III where a Non-Banking
Financial Company (NBFC) is required to prepare Consolidated Financial
Statements, i.e., consolidated balance sheet, consolidated statement of
changes in equity and consolidated statement of profit and loss, the NBFC
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shall mutatis mutandis follow the requirements of this Schedule as applicable
to an NBFC in the preparation of balance sheet, statement of changes in
equity and statement of profit and loss. However, where the consolidated
financial statements contain elements pertaining to NBFCs and other than
NBFCs, mixed basis of presentation may be followed for consolidated
financial statements where both kinds of operations are significant.
4.3 Financial Statements include Balance Sheet, Statement of Changes in
Equity for the period, Statement of Profit and Loss for the period and Notes.
Cash Flow Statement shall be prepared in accordance with the requirements
of the relevant Ind AS.
4.4 Balance sheet
— Division III provides a format of the balance sheet and sets out
the minimum requirements of disclosure on the face of the
balance sheet for NBFCs.
— Items presented in the balance sheet are to be classified as
financial and non-financial.
— Division III follows the order of liquidity for presenting line items
on the face of financial statements however, it provides flexibility
to the Company in terms of changing the order of presentation
of line items on the face of financial statements or changing the
order of line items within the schedules in order of liquidity, if
appropriate, considering the operations performed by the NBFC.
— It requires an NBFC to disclose such information that enables
users of its financial statements to evaluate the NBFC’s
objectives, policies and processes for managing capital.
4.5 Statement of Profit and Loss
— The division provides a format of the statement of profit and loss
and sets out the minimum requirements of disclosure on the
face of the statement of profit and loss.
— Items comprising ‘revenue from operations’ and ‘other
comprehensive income’ have to be disclosed on the face of the
statement of profit and loss.
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4.6 Statement of changes in equity
— The statement of changes in equity would reconcile opening to
closing amounts for each component of equity including
reserves and surplus and items of other comprehensive income.
Also the changes in equity share capital due to prior period
errors and the corresponding restated opening balance of equity
share capital needs to be disclosed.
— NBFCs were earlier specifically required to disclose the
statutory reserves as part of ‘other equity’ in the statement of
changes in equity. The company shall continue the same
practice of disclosing it separately as other reserves.
— Additionally, the conditions or restrictions for distribution
attached to statutory reserves have to be separately disclosed
in the notes as stipulated by the relevant statute.
The statement of changes in equity would require disclosure for the
current reporting period as well as the previous reporting period.
4.7 Materiality
NBFCs are required to disclose all ‘material’ items in their financial
statements i.e., the items if they could, individually or collectively, influence
the economic decisions that users make on the bases of financial
statements. Materiality depends on the size and nature of the item judged in
particular circumstances. However, while preparing the statement of profit
and loss, it specifies that an NBFC should disclose a note for any item of
‘other income’ or ‘other expenditure’ which exceeds 1 per cent of the total
income, in addition to the consideration of materiality.
A General Instruction on ‘Materiality’ has been included in Note 7 to General
Instructions for Preparation of Financial Statements and a revision made by
Notification No. G.S.R. 463(E) dated 24th July 2020, requires Financial
Statements to disclose items/ information that could, individually or
collectively, influence the economic decisions that users make on the bases
of the Financial Statements. Such influence arises from information being
omitted, misstated or obscured (i.e. communicated in a way that has a similar
effect of omitting or misstating it).Materiality depends on the size or nature of
the item or a combination of both, to be judged based on particular facts and
in particular circumstances. Moreover, Paragraph 29 of Ind AS 1 states w.r.t.
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‘materiality’ that an entity shall present separately each material class of
similar items. An entity shall present separately items of a dissimilar nature
or function unless they are immaterial except when required by law. Further,
reference to Paragraph 29 to 31 of Ind AS 1 should be considered when
determining materiality and aggregation.
The General Instructions for Preparation of Financial Statements also lay
down the principle that in preparing Financial Statements including Notes, a
balance shall be maintained between providing excessive detail that may not
assist users of Financial Statements and not providing important information
as a result of too much aggregation. Compliance with this requirement is a
matter of professional judgement and may vary on a case to case basis
based on facts and circumstances. However, it is necessary to strike a
balance between overburdening Financial Statements with excessive detail
that may not assist users of Financial Statements and obscuring important
information as a result of too much aggregation. For example, a company
should not obscure important information by including it among a large
amount of insignificant detail or in a way that it obscures important
differences between individual transactions or associated risks.
4.8 As per Paragraph 60 of Ind AS 1, an entity shall present current and
non-current assets, and current and non-current liabilities, as separate
classifications in its balance sheet except if a presentation based on liquidity
provides information that is reliable and more relevant. The format prescribed
by Division III is currently a liquidity based format. Thus the assets and
liabilities are classified as financial and non-financial instead of current, non-
current classification as required by Division I and Division II to Schedule III.
However as per Paragraph 61 of Ind AS 1 whichever method of presentation
is adopted, an entity shall disclose the amount expected to be recovered or
settled after more than twelve months for each asset and liability line item.
Disclosure regarding recovery or settlement within 12 months after the
reporting date and more than 12 months after the reporting date shall be
provided separately in the financial statements.
4.9 Division III to Schedule sets out the minimum requirements for
disclosure on the face of the Financial Statements, i.e., Balance Sheet,
Statement of Changes in Equity for the period, the Statement of profit and
Loss for the period (The term 'Statement of Profit and Loss' has the same
meaning as 'profit and loss Account) and Notes. Cash flow statement shall
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be prepared, where applicable, in accordance with the requirement of the
relevant Indian Accounting Standard.. Line items, sub-line items and sub-
totals shall be presented as an addition or substitution on the face of the
Financial Statements when such presentation is relevant to an understanding
of the NBFC’s financial position or performance or to cater to categories of
NBFCs as prescribed by the relevant regulator or sector-specific disclosure
requirements or when required for compliance with the amendments to the
relevant statutes or under the Indian Accounting Standards. For e.g., line
items required by Paragraph 54 and Paragraph 82 of Ind AS 1 should be
included, as an addition to or substitution of the Division III to Schedule III
line items on the face of Balance Sheet and Statement of Profit and Loss,
respectively.
4.10 Disclosures required under Ind AS (for e.g., fair value measurement
reconciliation, fair value hierarchy, risk management and capital
management, disclosure of interests in other entities, components of other
comprehensive income, reconciliations on first-time adoption of Ind AS, etc.)
shall be made in the Notes or by way of additional statement(s) unless
required to be disclosed on the face of the Financial Statements.
4.11 Where any Act, Regulation, Guidelines or Circulars issued by the
relevant Regulators from time to time require specific disclosures to be made
in the standalone and consolidated financial statements of an NBFC, the said
disclosures shall be made in addition to those required under Division III to
Schedule III.
4.12 Note 8 to General Instructions for Preparation of Financial Statements
in Division III to Schedule III states that the terms used in Division III to
Schedule III will carry the same meaning as defined by the applicable Ind AS.
For example, the terms such as ‘associate’, ‘related parties’, etc. will have
the same meaning as defined in Ind AS notified under the Companies Ind AS
Rules.
4.13 For any terms which are not specifically defined in Ind AS, attention
may also be drawn to the Conceptual Framework for Financial Reporting
under Indian Accounting Standards (‘Ind AS Framework’) issued by ICAI.
However, if any term is not defined in the Ind AS Framework, the entity may
consider the principles described in paragraph 10 to paragraph 12 of Ind AS
8 for developing and applying an accounting policy.
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4.14 An NBFC preparing financial statements as per this Schedule may
change the order of presentation of line items on the face of financial
statements or order of line items within the notes in order of liquidity, if
appropriate, considering the operations performed by the NBFC.
5. Structure of Division III to Schedule III
The Structure of Division III to Schedule III is as under:
A. General Instructions for Preparation of Financial Statements of a Non-
Banking Financial Company (NBFC) that is required to comply with Ind
AS (‘General Instructions for Preparation of Financial Statements’)
B. Part I – Form of Balance Sheet and Statement of Changes in Equity
C. Part I Notes – General Instructions for Preparation of Balance Sheet
D. Part II – Form of Statement of Profit and Loss
E. Part II Notes – General Instructions for Preparation of Statement of
Profit and Loss
F. Part III – General Instructions for the Preparation of Consolidated
Financial Statements
6. General Instructions for Preparation of
Financial Statements: Notes 1 to 10
6.1 The General Instructions lay down the broad principles and guidelines
for preparation and presentation of Financial Statements.
6.2 As laid down in Part A of the Annexure to Companies Ind AS Rules,
Ind AS, which are specified, are intended to be in conformity with the
provisions of applicable laws. However, if due to subsequent amendments in
the law, a particular Ind AS is found to be not in conformity with law, the
provisions of the said law will prevail and the Financial Statements should be
prepared in conformity with such law. In such a scenario, the statement of
compliance with Ind AS should be considered in the light of the principle of
overriding effect of law over Ind AS when applying the presentation or
disclosure requirements of Division III to Schedule III.
6.3 Division III to Schedule III requires that if compliance with the
requirements of the Act, Regulation, Guidelines or Circulars issued by the
relevant Regulators from time to time including applicable Ind AS require any
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change in the presentation or disclosure including addition, amendment,
substitution or deletion in the head/sub-head or any changes in the Financial
Statements or Notes to Accounts thereof, the same shall be made and the
requirements of Division III to Schedule III shall stand modified accordingly.
6.4 Note 3 of the General Instructions for Preparation of Financial
Statements state that the disclosure requirements of Division III to Schedule
III are in addition to and not in substitution of the disclosure requirements
specified in Ind AS. They further clarify that the disclosures specified in Ind
AS shall be made in the Notes or by way of additional statement(s) unless
required to be disclosed on the face of the Financial Statements. Similarly, all
other disclosures as required by the Act shall be made in the Notes in
addition to the requirements set out in this Schedule.
6.5 Examples to illustrate the above point are:
(a) Specific disclosure is required by Paragraph 33 of Ind AS-105
Non-current Assets Held for Sale and Discontinued Operations
which has not been incorporated in Division III to Schedule III.
(b) Ind AS-107 Financial Instruments: Disclosures, which requires
disclosure of information that enable users of the Financial
Statements to evaluate the significance of financial instruments
for its financial position and performance.
6.6 Disclosures required by Ind AS as well as by the Act will continue to
be made in the Financial Statements and in the Notes to Accounts. An
example of this is the separate disclosure required by Sub Section (3) of
Section 182 of the Act for donations made to political parties. Such
disclosures would be made in the Notes. An illustrative list of disclosures
required under the Act is enclosed as Annexure B (Pg 201).
6.7 The above principle would apply to disclosures to be made in
compliance with other regulatory requirements such as, disclosures required
under Regulation 34 (including Schedule V) of the SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015; the statutory requirements
by RBI such as Asset-Liability Management, Concentration of exposure,
Asset Quality etc.; any additional disclosure requirements created by NHB
directions issued by National Housing Bank and any pronouncements by
ICAI etc.
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6.8 Division III to Schedule III requires all information relating to each item
on the face of the Balance Sheet and Statement of Profit and Loss to be
cross-referenced to the Notes. The manner of such cross-referencing to
various other information contained in the Financial Statements has been
retained as “Note No.” in Division III to Schedule III. The instructions state
that the Notes to Accounts should provide where required with narrative
descriptions or disaggregation of items recognized in those statements.
Hence, presentation of all narrative descriptions and disaggregation should
preferably be presented in the form of Notes rather than in the form of
Schedules. Such style of presentation is also in line with the manner of
presentation of Financial Statements followed by companies internationally
and would facilitate comparability of Financial Statements.
6.9 Note 4 of the General Instructions for Preparation of Financial
Statements also states that the Notes should also contain information about
items that do not qualify for recognition in Financial Statements. These
disclosures normally refer to items such as Contingent Liabilities and
Commitments which do not get recognised in the Financial Statements.
These have been dealt with in Paragraph 8.2.12 (Pg 51).
6.10 Division III to Schedule III requires using the same unit of
measurement uniformly across the Financial Statements. Such requirement
should be taken to imply that all figures disclosed in the Financial Statements
including Notes should be of the same denomination, except where a
different denomination may be required, say for ratios or metrics in order to
increase its understandability.
6.11 Division III to Schedule III has specified the rounding off requirements,
as given below:
Division III to Schedule III
• Total Income < Rs. 100 Crores - Round off to the nearest hundreds,
thousands, lakhs or millions or decimal thereof.
• Total Income >= Rs. 100 Crores - Round off to the nearest lakhs,
millions or crores, or decimal thereof
6.12 A Note below Note 10 of the General Instructions for Preparation of
Financial Statements clarifies that Division III to Schedule III sets out the
minimum requirements for disclosure in the Financial Statements including
notes. It states that line items, sub-line items and sub-totals shall be
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presented as an addition or substitution on the face of the Financial
Statements when such presentation is relevant to the understanding of the
NBFC’s financial position or performance or to cater to categories of NBFC’s
as prescribed by the relevant regulator or sector-specific disclosure
requirements, apart from, when required for compliance with amendments to
the relevant statutes or Ind AS.
7. Part I Notes: General Instructions for
Preparation of Balance Sheet
7.1 Financial/ Non-financial assets and liabilities:
Division III to Schedule III requires all items in the Balance Sheet of an NBFC
to be classified as either Financial or Non-financial and be reflected as such.
Further Paragraph 54 of Ind AS 1 also specifies a requirement of presenting
financial assets and liabilities as line items on the balance sheet separately
from other items.
8. Part I – Form of Balance Sheet and Notes –
General Instructions for Preparation of
Balance Sheet: Notes 6 to 11
Framework for Conceptual Framework for Financial Reporting under Indian
Accounting Standards’ issued by ICAI (hereinafter referred to as Ind AS
Framework) defines the terms asset, liability and equity which are as follows:
An asset is a present economic resource controlled by the entity as a result
of past events.
An economic resource is a right that has the potential to produce economic
benefits.
A liability is a present obligation of the entity to transfer an economic
resource as a result of past events.
Equity is the residual interest in the assets of the entity after deducting all its
liabilities.
8.1 Assets
On the face of the Balance Sheet, Division III to Schedule III requires the
following items to be presented under financial assets and non-financial
assets:
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Financial assets
(a) Cash and cash equivalents
(b) Bank Balance other than included in (a) above
(c) Derivative financial instruments
(d) Receivables
(I) Trade Receivables
(II) Other Receivables
(e) Loans
(f) Investments
(g) Other Financial assets (to be specified)
Non-financial assets
(a) Inventories
(b) Current Tax Assets (Net)
(c) Deferred Tax Assets (Net)
(d) Investment Property
(e) Biological assets other than bearer plants
(f) Property, Plant and Equipment
(g) Capital work-in-progress
(h) Intangible assets under development
(i) Goodwill
(j) Other Intangible assets
(k) Other non-financial assets (to be specified)
Financial Assets
8.1.1. Cash and cash equivalents:
Cash and cash equivalents shall be classified as:
(a) Cash on hand;
(b) Balances with banks (of the nature of cash and cash equivalents);
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(c) Cheques, drafts on hand; and
(d) Others (specify nature).
The term ‘Cash and cash equivalents’ is not defined in Division III to
Schedule III. According to Ind AS-7, Statement of Cash Flows, Cash is
defined to include cash on hand and demand deposits with banks. Cash
Equivalents are defined as short term, highly liquid investments that are
readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value.
Ind AS 7 further explains that an investment normally qualifies as a cash
equivalent only when it has a short maturity of, say, three months or less
from the date of acquisition. This would include term deposits with banks that
have an original maturity of three months or less. However, bank balances
(including term deposits) held as margin money or security against
borrowings are neither in the nature of demand deposits, nor readily
available for use by the company, and accordingly, do not meet the aforesaid
definition of cash equivalents.
Further, interest accrued on a fixed deposit is included in the carrying value
of fixed deposit.
Generally, there should not be a difference in the amount of cash and cash
equivalents as per Ind AS 1 and as per Ind AS 7. However, as per Paragraph
8 of Ind AS 7 “where bank overdrafts which are repayable on demand form
an integral part of an entity’s cash management, bank overdrafts are
included as a component of cash and cash equivalents. A characteristic of
such banking arrangements is that the bank balance often fluctuates from
being positive to overdrawn.” Although Ind AS 7 permits bank overdrafts to
be included as cash and cash equivalents, however for the purpose of
presentation in the balance sheet, it is not appropriate to include bank
overdraft as a component of cash and cash equivalents unless the offset
conditions as given in paragraph 42 of Ind AS 32 are complied with. Bank
overdraft, in the balance sheet, should be included as ‘borrowings’ under
Financial Liabilities.
8.1.2. Bank Balances other than cash and cash equivalents
Bank balances other than cash and cash equivalents as above, i.e. having a
maturity of more than three months shall be disclosed as Bank Balances
other than cash and cash equivalents on the face of the Balance Sheet.
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Further, Note (A) of General Instructions for Preparation of Balance Sheet
requires the following disclosures with regard to Bank Balance other than
cash and cash equivalents:
(a) Earmarked balances with banks (for e.g., for unpaid dividend) shall be
separately stated;
(b) Balances with banks to the extent held as margin money or security
against the borrowings, guarantees, other commitments shall be
disclosed separately;
(c) Repatriation restrictions, if any, in respect of cash and bank balances
shall be separately stated.
The disclosure regarding ‘bank balances other than cash and cash
equivalents’ should include items such as balances with banks held as
margin money or security against borrowings, guarantees, etc.
8.1.3. Derivative Financial Instruments:
As per Appendix A of Ind AS 109, ‘derivative’ is defined as “A financial
instrument or other contract within the scope of the Standard with all three of
the following characteristics:
(a) its value changes in response to the change in a specified interest
rate, financial instrument price, commodity price, foreign exchange
rate, index of prices or rates, credit rating or credit index, or other
variable, provided in the case of a non-financial variable that the
variable is not specific to a party to the contract (sometimes called the
‘underlying’).
(b) it requires no initial net investment or an initial net investment that is
smaller than would be required for other types of contracts that would
be expected to have a similar response to changes in market factors.
(c) it is settled at a future date.”
The following should be disclosed in the note for Derivative Financial
Instruments:
An explanation should be given for the use of derivatives, how the risk is
mitigated and for what purpose has the company entered into derivative
contracts in accordance with Paragraphs 21A to 21F of Ind AS 107. Eg. to
hedge its foreign currency risks, interest rate risks and equity price risks a
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company may enter into the following kinds of derivative contracts such as -
interest rate swaps, cross-currency swaps, forward foreign exchange
contracts, futures and options on interest rates, foreign currencies and
equities etc.
A cross-reference to the financial risks section for management of risks
arising from derivatives should be done. As per paragraphs 31 to 33 of Ind
AS 107, an entity shall disclose information that enables users of its financial
statements to evaluate the nature and extent of risks arising from financial
instruments to which the entity is exposed at the end of the reporting period.
Disclosures should explain what the financial risks are, how the entity
manages the risks and why the entity enters into various derivative contracts
to hedge the risks, i.e, Credit risk, liquidity risk, market risk and other risk.
Derivatives are measured at fair value and carried as assets when their fair
value is positive and as liabilities when their fair value is negative. The
notional amount and fair value of such derivatives are disclosed separately in
the Notes to Accounts. Changes in the fair value of derivatives are included
in net gain on fair value changes in the statement of profit and loss unless
hedge accounting is applied.
Embedded derivative separated from host contract and accounted separately
as per Ind AS 109 requirements should be disclosed under the relevant
heading,
Part I below caters to disclosure of all derivative financial instruments held by
the Company.
Part II below requires analysis of derivatives included in Part I above into
different categories of hedge accounting specified in Ind AS 109 and risk
management purposes.
The notional amounts, fair value – assets, and fair value – liabilities shall be
disclosed for each category and sub-category of derivative financial
instruments as:
1. Part I
(i) Currency Derivatives
— Spot and forwards
— Currency futures
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— Currency swaps
— Options purchased
— Options sold (written)
— Others
Subtotal (i)
(ii) Interest Rate Derivatives
— Forward rate agreements and interest rate swaps
— Options purchased
— Options sold (written)
— Futures
— Others
Subtotal (ii)
(iii) Credit Derivatives
(iv) Equity Linked Derivatives
(v) Other Derivatives (Please specify)
Total Derivative financial instruments (i) + (ii) + (iii) + (iv) + (v)
2. Part II
Included in above (Part I) are derivatives held for hedging and risk
management purposes as follows
(i) Fair value hedging
— Currency Derivatives
— Interest rate derivatives
— Credit derivatives
— Equity linked derivatives
— Others
Subtotal (i)
(ii) Cash flow hedging
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— Currency Derivatives
— Interest rate derivatives
— Credit derivatives
— Equity linked derivatives
— Others
Subtotal (ii)
(iii) Net investment hedging
(iv) Undesignated derivatives
Total Derivative financial instruments (i) + (ii) + (iii) + (iv)
With respect to hedges and hedge accounting, NBFCs may provide a
description in accordance with the requirements of Indian Accounting
Standards, of how derivatives are used for hedging, explain types of hedges
recognized for accounting purposes and their usage/ application by the
entity.
8.1.4. Receivables:
Receivables are classified as ‘Trade and Other Receivables’.
A receivable should be classified as 'trade receivable' if it is in respect of the
amount due on account of goods sold or services rendered in the normal
course of business and the company has a right to an amount of
consideration that is unconditional (i.e. if only the passage of time is required
before payment of that consideration is due).
Other receivables would generally mean receivables emanating from items
that are classified as ‘others’ under ‘Revenue from Operations’. Other
receivables shall also include debts due by directors or other officers of the
NBFC or any of them either severally or jointly with any other person or debts
due by firms including limited liability partnerships (LLPs), private companies
respectively in which any director is a partner or a director or a member if the
same is not in the nature of trade receivables, however, the same is required
to be disclosed separately in the financial statements.
Refer Paragraph 8.1.7 (Pg 31) for items that may be classified as ‘other
financial assets’.
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Receivables shall be sub-classified as:
(i) (a) Receivables considered good - Secured;
(b) Receivables considered good - Unsecured;
(c) Receivables which have significant increase in credit risk; and
(d) Receivables – credit impaired
(ii) Allowance for impairment loss shall be disclosed under the relevant
heads separately.
(iii) Debts due by directors or other officers of the NBFC or any of them
either severally or jointly with any other person or debts due by firms
including limited liability partnerships (LLPs), private companies
respectively in which any director is a partner or a director or a
member should be separately stated.
Impairment of Trade Receivables
As per Ind AS 109, a company is required to recognize a loss allowance (i.e.
impairment) for expected credit losses on financial assets including trade
receivables.
The impairment requirements in Ind AS 109 are based on forward-looking
expected credit loss (ECL) model which requires an application of one of the
following:
(a) The general approach, where an entity recognises ECL in the following
stages viz.,
• credit exposures for which there has not been a significant
increase in credit risk since initial recognition;
• credit exposures for which there has been a significant increase
in credit risk since initial recognition but not credit-impaired;
• credit exposures that are credit impaired;
(b) The simplified approach, where an entity does not separately track
changes in credit risk.
(c) The purchased or originated credit-impaired approach.
For trade receivables that do not contain a significant financing component, it
is a requirement to apply a simplified approach, while for trade receivables
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that contain a significant financing component, and for lease receivables, a
choice between a general approach or simplified approach is available.
Application Guidance to Ind AS 109 allows using practical expedients when
measuring expected credit losses if they are consistent with the
measurement principles reflecting a probability-weighted outcome, the time
value of money and reasonable and supportable information that is available
without undue cost or effort at the reporting date about past events, current
conditions and forecasts of future economic conditions, for e.g., using a
provision matrix based calculation of expected credit loss on trade
receivables.
Disclosures under the general approach
If a company chooses to calculate impairment loss under the general
approach for trade receivables containing significant financing component,
then the disclosures representing the following different categories of Trade
Receivables would be provided (amounts are illustrative only):
Trade Receivables
Particulars Exposure Loss Net
Allowance Amount
Rs. Rs. Rs.
Considered good – Secured -- -- --
Considered good – Unsecured* 1,25,000 13,000 1,12,000
Trade Receivables which have 20,000 10,000 10,000
significant increase in credit risk
Trade Receivables – credit 5,000 4,000 1,000
impaired
Total 1,50,000 27,000 1,23,000
* It is assumed for simplicity that all the Trade Receivables considered good
are Unsecured.
Similar table as mentioned above would be required for any debts due which
are in the nature of trade receivables and where general approach has been
used by the company for any debts due by any directors or other officers of
the NBFC or any of them either severally or jointly with any other person or
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debts due by firms including limited liability partnerships (LLPs), private
companies respectively in which any director is a partner or a director or a
member
Except in case of purchased or originated credit-impaired trade receivables
where a company only recognises cumulative changes in lifetime expected
credit losses since initial recognition, the impairment loss allowance does not
reduce the carrying amount of the trade receivables.
In disclosing ‘Trade Receivables which have significant increase in credit
risk’, the company shall disclose the amount of trade receivables that have
experienced significant increase in credit risk since initial recognition but are
not credit-impaired.
In disclosing ‘Trade Receivables – credit impaired’, the company shall
disclose the amount of trade receivables which are credit impaired as
defined in Ind AS- 109 .
The balance amount of trade receivables which have neither experienced
significant increase in credit risk nor are credit impaired as per Ind AS 109,
shall be disclosed as ‘good’.
For calculating the loss allowance, reference shall be drawn from Ind AS
109.
Disclosures under the simplified approach
If a company chooses to calculate impairment under the simplified approach
for trade receivables containing significant financing component and for the
impairment calculated on trade receivables that do not contain significant
financing component, then the company is not required to separately track
changes in credit risk of trade receivables as the impairment amount
represents “lifetime” expected credit loss.
Accordingly, based on a harmonious reading of Ind AS 109 and the break-up
requirements under Schedule III, the disclosures for all such trade
receivables would be made as below, irrespective of whether they contain a
significant financing component or not (amounts are illustrative only):
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Trade Receivables
Particulars Exposure Loss Net
Allowance Amount
Rs.
Rs. Rs.
Considered Good – Secured -- -- --
25,000 1,75,000
Considered Good – 2,00,000
Unsecured*
Trade Receivables which have -- -- --
significant increase in credit
risk
Trade Receivables – credit -- -- --
25,000 1,75,000
impaired
Total 2,00,000
* It is assumed for simplicity that all the Trade Receivables are Unsecured.
Break-up of trade receivables into ‘significant increase in credit risk’
and ‘credit impaired’
Ind AS 109 neither prohibits nor mandates a company to perform individual
assessment of credit risk for some of its financial assets. If a company
performs individual credit risk assessment on specific parties despite the
normal collective pool-based assessment for a group of parties falling under
a particular credit exposure bucket (e.g., ageing, rating, etc.) and if it
indicates that a trade receivable has experienced a significant increase in
credit risk or is credit impaired then disclosures to be provided are as under.
The disclosure of trade receivables in the manner as required by Schedule III
shall be made specifically where the company has a trade receivable for
which credit risk is assessed individually. However, the disclosure of ‘trade
receivables – credit impaired’ shall be made if such a trade receivable meets
the definition of ‘credit impaired’ as per Ind AS 109.
When a company has assessed credit risk on an individual basis irrespective
of recognition of a loss allowance on collective basis, it is recommended that
a company should disclose the following by way of a footnote just after the
illustrative table given below:
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• The amount of trade receivables for which the company has assessed
credit risk on an individual basis; and
• The amount of loss allowance recognized for such trade receivables.
Trade Receivables
Particulars Exposure Loss Net
Allowance Amount
Considered Good – Secured Rs.
Considered Good – -- Rs. Rs.
Unsecured* 1,50,000 -- --
Trade Receivables which have 25,000 1,25,000
significant increase in credit
risk -- -- --
Trade Receivables – credit
impaired 50,000 50,000 --
Total 2,00,000 75,000
1,25,000
*Where a company has performed credit assessment on an individual basis
and the assessment indicates that the trade receivable has experienced
significant increase in credit risk but is not credit impaired, in that case the
exposure of such a trade receivable and its respective loss allowance would
be shown as part of Considered good - Secured and Considered good –
Unsecured as the case may be. This is because, in case of ‘trade
receivables’ under the simplified approach, a company is not required to
separately track the changes in credit risk and even if the company does
individual assessment it will not be possible for a company to establish that
there has been significant increase in credit risk. Hence, any exposure of
trade receivables other than that which is credit impaired and the respective
loss allowance will be shown as part of Considered Good – Secured /
Unsecured as the case may be.
Similar tables as mentioned above would be required for any debts due by
directors or other officers of the NBFC or any of them either severally or
jointly with any other person or debts due by firms including limited liability
partnerships (LLPs), private companies respectively in which any director is a
partner or a director or a member.
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Presentation of loss allowance
Except in case of purchased or originated credit-impaired trade receivables
where a company only recognises cumulative changes in lifetime expected
credit losses since initial recognition, the impairment loss allowance does not
reduce the carrying amount of the trade receivables. Accordingly, the total
expected credit loss allowance is presented as a deduction in a single line
item from the total carrying amount of the trade receivables, as shown above.
The above disclosures are consistent with the requirements of Ind AS 109
and the requirements under Division III to Schedule III may be modified in
the light of Paragraph 2 of ‘General Instructions for Preparation of Financial
Statements of a Company Required to comply with Ind AS’ to Division III to
Schedule III.
Impairment of Other Receivables
Similar disclosures as mentioned above under the general approach may be
made for impairment of Other Receivables.
Ageing of Receivables
This disclosure requires the company to provide ageing of the trade
receivables outstanding as on the balance sheet date and as per the
prescribed format. However, in order to tie-up the amounts presented in the
‘total’ column with the amounts presented in the financial statements or
notes, two additional columns with heading ‘Unbilled’ and the heading ‘Not
due’ shall be added before the ageing columns to separately disclose the
amount for unbilled receivables and the amount of trade receivables which
are not due, respectively. An entity could have an unconditional right to
consideration before it invoices its customers, in which case it records an
unbilled receivable. For example, this could occur if an entity has satisfied its
performance obligations but has not yet issued the invoice.
The amounts presented under disputed and undisputed categories for each
category of credit profile should add up and match with the total amount
presented in a separate disclosure for the same category of credit profile. For
e.g., the amount of ‘Undisputed Trade Receivables – considered good’ and
‘Disputed Trade Receivables – considered good’ when added up should
match with the added up amount of ‘Trade Receivables considered good –
Secured’ and ‘Trade Receivables considered good – Unsecured’ provided as
part of a separate disclosure.
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The ageing of the trade receivables needs to be determined from the due
date of the invoice. Due date is generally considered to be the date on which
the payment of an invoice falls due. The due date of an invoice is determined
based on terms agreed upon between the buyer and supplier.
In case if the due date is neither agreed in writing nor orally, then the ageing
related disclosure needs to be prepared from the transaction date. Ind AS
115 requires that an asset arising from contract with customers to be
recognized as a receivable when the entity’s right to consideration is
unconditional (that is, when payment is due only on the passage of time) and
such recognition date, which is based on reasonable evidences in
compliance with the principles of the applicable accounting standards, can be
considered as transaction date for the purpose of ageing disclosure.
Schedule III requires split of trade receivables between ‘disputed’ and
‘undisputed’. These terms have not been defined in the Schedule III
A dispute is a matter of facts and circumstances of the case; However,
dispute means disagreement between two parties demonstrated by some
positive evidence which supports or corroborates the fact of disagreement. In
case there are any disputes such fact should also be considered while
assessing the credit risk associated with respective party while computing
the impairment loss. However, a dispute might not always be an indicator of
counterparty’s credit risk and vice-versa. Hence, both of these should be
evaluated independently for the purpose of making these disclosures. (Refer
the term “Dispute” as defined under the Insolvency and Bankruptcy Code,
2016)
8.1.5. Loans
An NBFC shall disclose the following in the Notes under the head ‘Loans’:
(i) Bills purchased and bills discounted
(ii) Loans repayable on demand
(iii) Term Loans
(iv) Leasing
(v) Factoring
(vi) Others (to be specified, example of ‘Others’ could be Intercorporate
Deposits, Staff loans, loans to related parties, etc.)
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Loans should be classified as per Ind AS 109 as measured at amortised cost,
at fair value through Other Comprehensive Income, fair value through Profit
or Loss, or designated at fair value through Profit or Loss.
The impairment loss allowance as per Ind AS 109 should be disclosed as a
separate line item under the aforesaid measurement categories as
applicable.
A break up of the total loans should also be disclosed as:
(a) Secured by tangible assets
(b) Secured by intangible assets
(c) Covered by Bank/ Government Guarantee
(d) Unsecured
As per ICAI’s Glossary of Terms Used in Financial Statements, ‘Secured
loan’ is defined as loan secured wholly or partly against an asset.
The security wise break-up of loans as mentioned above shall additionally
disclose as a separate line item of loans secured by book debts, fixed
deposits and other working capital items as applicable. Loans to the extent
they are covered by guarantees of Indian/ Foreign Governments and Indian/
foreign banks shall be included in line item (c) above. Government refers to
Government, Government Agencies, and similar bodies whether local,
national or international. All loans or parts thereof that are not classified
under the previous sub-heads shall be included in line item (d) above. The
total of the above line items, after deducting impairment loss allowance in a
separate line item, should match with the net loans and advances.
Additional disclosure of loans within India and outside India is required to be
made. Further, within India, loans should be classified as those from public
sector and others (to be specified). Advances to Central and State
Governments and other Government undertakings including Government
Companies and statutory corporations are to be included in the category
‘Public Sector’. All other loans are included in ‘Others’ category for example
loans to retail or Corporate or industry-wise classification etc. based on the
business of the company.
All the above-mentioned disclosures are required to be given for each of the
measurement categories, namely, measured at amortised cost, at fair value
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through other comprehensive income, fair value through Profit or Loss or
designated at fair value through Profit or Loss.
As per Ind AS 109, in case of loans measured at fair value through other
comprehensive income, the fair value changes shall be presented in other
comprehensive income. A company shall estimate a portion of fair value
change, if any, attributable to a change in credit risk of such loans, by
applying the impairment requirements of Ind AS 109 in recognising and
measuring the loss allowance, and disclose the same in the statement of
profit and loss with a corresponding impact in other comprehensive income.
In other words, the company shall not reduce/increase the carrying amount of
such loans in the balance sheet on account of change in the credit risk as the
loan needs to be presented at fair value.
For finance lease receivables, an entity shall apply the presentation and
disclosure requirements under Ind AS 116 in addition to the requirements of
Division III to Schedule III. The disclosure requirements of Ind AS 107 would
also apply to such receivables.
Ind AS 107 has prescribed extensive disclosures (qualitative and
quantitative) pertaining to Credit Risk on financial instruments of an entity.
The same will be required over and above the disclosure requirements stated
in the Division III of Schedule III.
8.1.6. Investments
Investments shall be classified as:
(i) Investments in Mutual funds
(ii) Investments in Government securities
(iii) Investments in Other approved securities
(iv) Investments in Debt Securities
(v) Investments in Equity Instruments
(vi) Investments in Subsidiaries
(vii) Investments in Associates
(viii) Investments in Joint Ventures
(ix) Others (Specify)
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Investments should further be classified as:
(a) Measured at amortised cost,
(b) Fair value through Other Comprehensive Income,
(c) Fair value through Profit or Loss, and
(d) Designated at fair value through Profit or Loss.
Additional disclosure of Investments within and outside India is required to be
provided.
Where the NBFC has used a basis other than amortised cost or fair value,
the same may be included in column ‘Others’, with the basis of measurement
to be disclosed as a footnote. e.g. Investment in subsidiaries measured at
cost under Ind AS 27 shall be classified under ‘Others’ in the Separate
Financial Statements of the NBFC.
The impairment loss allowance as per Ind AS 109 should be disclosed as a
separate line item under the sub-heads (measurement categories) mentioned
above.
8.1.6.1 Aggregate amount of impairment in value of investments
As per Division III to Schedule III, this amount should be disclosed
separately. As per Ind AS 109, the company is required to recognize a loss
allowance (i.e. impairment) for expected credit losses on investments
measured at amortized cost. Such loss allowance should be presented as an
adjustment to the amortized cost of the investment.
As per Ind AS 109, in case of debt investments measured at fair value
through other comprehensive income, the fair value changes will be
presented in other comprehensive income. A company should estimate a
portion of fair value change, if any, attributable to a change in credit risk of
such investment, by applying the impairment requirements of Ind AS 109 in
recognising and measuring the loss allowance, and disclose the same in the
statement of profit and loss with a corresponding impact in other
comprehensive income. In other words, the company shall not
reduce/increase the carrying amount of such investment in the balance sheet
on account of change in the credit risk as the investment needs to be
presented at fair value. Disclosure pertaining to impairment shall be
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
disclosed by way of Notes in accordance with the requirements of Ind AS
107.
As per Ind AS 109, equity instruments measured at other than at cost and
debt instruments measured at fair value through profit or loss do not require
a separate evaluation of impairment amount. Hence, in such cases, the
disclosure pertaining to impairment shall not be applicable.
For the purpose of disclosing aggregate provision for impairment in the value
of investments, an entity shall disclose an amount equal to the aggregate
amount of impairment recognized and measured in accordance with Ind AS
109, as stated in the paragraphs above.
The aggregate provision for impairment as per Ind AS 36 should be
presented in totality, where relevant for each measurement category.
8.1.6.2 Investments in Subsidiaries / Associates / Joint Ventures
The terms ‘subsidiary’, ‘associate’ and ‘joint venture’ shall be as defined in
the respective Ind AS. Ind AS 32, Ind AS 107 and Ind AS 109 scope out
those interests in subsidiaries, associates, joint ventures that are accounted
for in accordance with Ind AS 110 Consolidated Financial Statements, Ind AS
27 Separate Financial Statements or Ind AS 28 Investments in Associates
and Joint Ventures.
In some cases, Ind AS 110, Ind AS 27 or Ind AS 28 require or permit an
entity to account for an interest in a subsidiary, associate or joint venture in
accordance with Ind AS 109. Accordingly, only in its Separate Financial
Statements, the entity shall present such interests in a subsidiary, associate
or joint venture under the head Investments’ separately as per the prescribed
schedule.
As per Part III, General Instructions for the Preparation of Consolidated
Financial Statements, the Consolidated Financial statements shall further
disclose the information as per the requirements specified in the applicable
Indian Accounting Standards notified under the Companies (Indian Ac-
counting Standards) Rules 2015. Thus, for an entity’s Consolidated Financial
Statements, investments accounted using the equity method (i.e. associates
and joint ventures) need to be shown as a separate line item outside
‘Financial Assets’, as per the requirements of Ind AS 1, Paragraph 54.
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Structured Entities
Division III to Schedule III does not require an entity to specifically disclose
investments in ‘structured entities’. However in case a company has
investments in ‘structured entities’ then the same may be disclosed in
addition to investments in subsidiaries, associates, and joint ventures. Where
an entity holds investments in subsidiaries, associates and joint ventures
which are structured entities, it shall include such investments in the
respective line items of investments in subsidiaries, associates and joint
ventures. Unconsolidated structured entities shall be disclosed as part of
‘others’.
Ind AS-112 Disclosure of Interests in Other Entities states that a “structured
entity” is an entity that has been designed so that voting or similar rights are
not the dominant factor in deciding who controls the entity, such as when any
voting rights are related to administrative tasks only and the relevant
activities are directed by means of contractual arrangements.
Division II to Schedule III also requires disclosure of the ‘nature and extent’
of the investments so made. In case of an investment in other than a
structured entity, the nature and extent would imply the number of such
instruments held and the face value of such instrument. In case of a
Structured Entity, rights are mainly established by way of contractual
arrangements and therefore as a part of ‘nature and extent’, a brief
description of the nature of contracts may be provided along with the rights
held in such entities as evidenced by such contracts.
8.1.7. Other Financial assets:
Other financial assets should include items such as dues in respect of
insurance claims, sale of Property, Plant and Equipment, contractually
reimbursable expenses, security deposits etc. In case advances are of the
nature of a financial asset as per Ind AS 32, these are to be disclosed under
‘other financial assets’ separately.
Other financial assets may also include receivables emanating from items
that are classified as ‘other Income’.
Application money paid towards securities
Any application money paid towards securities, where security has not been
allotted on the date of the Balance Sheet, shall be disclosed as a separate
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
line item under ‘other financial assets’. If the amount is material, details about
the date of allotment or when the allotment is expected to be completed may
also be disclosed.
Non-Financial Assets
8.1.8. Inventories:
(i) Inventories shall be classified as:
(a) Raw materials;
(b) Work-in-progress;
(c) Finished goods;
(d) Stock-in-trade (in respect of goods acquired for trading);
(e) Stores and spares;
(f) Loose tools;
(g) Others (specify nature).
(ii) Goods-in-transit shall be disclosed under the relevant sub-head of
inventories.
(iii) Mode of valuation shall be stated.
As per Division III to Schedule III, goods in transit should be included under
relevant heads with suitable disclosure. Further, mode of valuation for each
class of inventories should be disclosed.
The heading “Finished goods” should comprise all finished goods other than
the stock-in-trade acquired for trading purposes.
8.1.9. Current Tax Assets (Net):
If amount of tax already paid in respect of current and prior periods exceeds
the amount of tax due for those periods (assessment year-wise and not
cumulative unless tax laws allow e.g., say tax laws in the country of overseas
subsidiary permits), then such excess tax shall be recognised as an asset.
8.1.10. Investment property:
Ind AS 40, Investment Property, defines Investment Property as the property
(land or a building—or part of a building—or both) held (by the owner or by
the lessee as a right of use asset) to earn rentals or for capital appreciation
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
or both, rather than for: (a) use in the production or supply of goods or
services or for administrative purposes; or (b) sale in the ordinary course of
business.
Division III to Schedule III requires a reconciliation of the gross and net
carrying amounts of each class of property at the beginning and end of the
reporting period showing additions, disposals, acquisitions through business
combinations and other adjustments and the related depreciation and
impairment losses or reversals shall be disclosed separately.
The guidance given below on Property, Plant and Equipment, to the extent
applicable, is also to be used for Investment Property.
8.1.11. Biological assets other than bearer plants:
As per Ind AS-41 Agriculture, a biological asset is a living animal or plant.
Examples of biological assets are sheep, Trees in a timber plantation, Dairy
Cattle, Cotton plants, Tea bushes, Oil palms, Fruit trees, etc. Some plants,
for example, cotton plants, tea bushes, oil palms, fruit trees, grape vines,
usually meet the definition of a bearer plant. However, the produce growing
on bearer plants, viz., cotton, tea leaves, oil palm fruit, fruits and grapes are
biological assets other than bearer plants.
As per Ind AS 41, an entity shall present a reconciliation of changes in the
carrying amount of biological assets between the beginning and the end of
the current period. The reconciliation shall include:
(i) the gain or loss arising from changes in fair value less costs to sell;
(ii) increases due to purchases;
(iii) decreases attributable to sales and biological assets classified as held
for sale (or included in a disposal group that is classified as held for
sale) in accordance with Ind AS 105;
(iv) decreases due to harvest;
(v) increases resulting from business combinations;
(vi) net exchange differences arising on the translation of financial
statements into a different presentation currency, and on the
translation of a foreign operation into the presentation currency of the
reporting entity; and
(vii) other changes.
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The guidance given below on Property, Plant and Equipment, to the extent
applicable, is also to be used for Biological Assets other than bearer plants.
8.1.12. Property, Plant and Equipment:
The company shall disclose the following in the Notes under the head
‘Property, Plant and Equipment’:
(i) Classification shall be given as:
(a) Land;
(b) Buildings;
(c) Plant and Equipment;
(d) Furniture and Fixtures;
(e) Vehicles;
(f) Office equipment;
(h) Bearer Plants;
(g) Others (specify nature).
(ii) Assets under lease shall be separately specified under each class of
asset as part of Notes.
(iii) 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 or reversals shall be disclosed separately
As per Paragraph 47 of Ind AS 116 a lessee shall either present in the
balance sheet or disclose in the notes: right-of-use assets separately from
other assets. If a lessee does not present right-of-use assets separately in
the balance sheet, the lessee shall:
(i) include right-of-use assets within the same line item as that within
which the corresponding underlying assets would be presented if they
were owned; and
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(ii) disclose which line items in the balance sheet include those right-of-
use assets.
Illustrative Table
Particulars Buildings
Freehold Owner Right of
Occupied Use under
property a lease
Current Year
At cost or fair value at the beginning of
the year
Additions
Revaluation adjustment, if any
Disposals
Reclassification from/to held for sale
Other adjustments (please specify)
At cost or fair value at the end of the
year
Accumulated depreciation and
impairment as at the beginning of the
year
Depreciation for the year
Disposals
Impairment/(reversal) of impairment
Reclassification from/to held for sale
Other adjustments (please specify)
Accumulated depreciation and
impairment as at the end of year
Net carrying amount as at the end of the
year (A)
Total
Similar presentation may be provided for all the above mentioned assets.
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
8.1.12.1 Since reconciliation of gross and net carrying amounts of Property,
Plant and Equipment, Investment Property and Other Intangible assets is
required, the corresponding depreciation/amortization for each class of asset
should be disclosed in terms of Opening Accumulated Depreciation,
Depreciation / amortization for the period, Deductions / Other adjustments
and Closing Accumulated Depreciation / Amortization. Similar disclosures
should also be made for Impairment, if any, as applicable.
8.1.12.2 As per Ind AS 101, Paragraph D5 and D6, an entity may elect to
measure an item of property, plant and equipment at the date of transition to
Ind ASs at its fair value or use a previous GAAP revaluation as deemed cost.
Further, as per Paragraph D7AA of Ind AS 101, an entity may also consider
previous GAAP carrying amount of all its property, plant and equipment as its
deemed cost on the date of transition. In case when a company applies
Paragraph D5 or Paragraph D7AA, the deemed cost considered on the date
of transition shall become the new ‘gross block’ and accordingly presented in
the reconciliation statement as required by Division III to Schedule III.
8.1.12.3 In case a company wants to disclose information regarding gross
block of assets, accumulated depreciation and provision for impairment as
per previous GAAP, the same may only be disclosed as an additional
information by way of a note forming part of the financial statements.
8.1.12.4 All acquisitions, whether by way of an asset acquisition or through
a business combination are to be disclosed as part of the reconciliation in the
note on Property, Plant and Equipment (refer Paragraph 8.1.12 at Pg 34),
Investment Property (refer Paragraph 8.1.10 at Pg 32) Other Intangible
assets (refer Paragraph 8.1.16 at Pg 38) and Biological Assets other than
bearer plants (refer Paragraph 8.1.11 at Pg 33). Acquisitions through
‘Business Combinations’ need to be disclosed separately for each class of
assets. Similarly, though not specifically required, it is advisable that asset
disposals through demergers, etc. may also be disclosed separately for each
class of assets.
8.1.12.5 Other adjustments may include items as required by disclosure
requirements of Ind AS 16 and such disclosure should be made in the
manner prescribed therein. It may also include, for example net exchange
gain / loss arising on the translation of the financial statements from the
functional currency into a presentation currency.
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8.1.12.6 Under Division III to Schedule III, land and building are presented
as two separate classes of property, plant and equipment. In contrast,
paragraph 37 of Ind AS 16 gives an example of grouping land and building
under same class for revaluation purposes. The Paragraph states that a
class of property, plant and equipment is a grouping of assets of a similar
nature and use in an entity's operations. However, companies should
continue to present land and building separately as given in Division III to
Schedule III and such presentation needs to be followed consistently.
8.1.12.7 Ind AS Schedule III requires separate disclosure of the amount of
change due to revaluation, where change is 10% or more in the aggregate of
the net carrying value of each class of Property, Plant and Equipment. In
contrast, paragraph 73 of Ind AS 16 requires reconciliation of the carrying
amount at the beginning and end of the period showing increases or
decreases resulting from revaluations, irrespective of the percentage change.
Accordingly, separate presentation of the amount of change due to
revaluation should be continued, irrespective whether such a change is 10%
or more, in order to comply with a broader presentation requirement of Ind
AS 16 and such presentation needs to be followed consistently.
8.1.12.8 For assets given on lease, an entity shall apply the presentation
and disclosure requirements under Ind AS 116 in addition to the
requirements of Ind AS Schedule III.
8.1.12.9 For assets obtained on lease and accounted as right-of-use (ROU)
assets, an entity shall apply the presentation and disclosure requirements
under Ind AS 116 in addition to the requirements of Ind AS Schedule III.
8.1.13. Capital work-in-progress
As per Division III to Schedule III, capital advances should be included under
other non-financial assets and hence, should not be included under capital
work-in-progress. The capital work-on-progress shall be disclosed as a
separate line-item on the face of the balance sheet.
8.1.14. Intangible assets under development
Intangible assets under development should be disclosed under this head
provided they can be recognized based on the criteria laid down in Ind AS-38
Intangible Assets.
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8.1.15. Goodwill
Division III to Schedule III requires a company to present Goodwill as a
separate line item on the face of the balance sheet apart from ‘Other
Intangible Assets’. Further, it requires a reconciliation of the gross and net
carrying amount of goodwill at the beginning and end of the reporting period
showing additions, impairments, disposals and other adjustments.
8.1.16. Other Intangible assets
The company shall disclose the following in the Notes to Accounts:
(i) Classification shall be given as:
(a) Brands / trademarks;
(b) Computer software;
(c) Mastheads and publishing titles;
(d) Mining rights;
(e) Copyrights, patents, other intellectual property rights, services
and operating rights;
(f) Recipes, formulae, models, designs and prototypes;
(g) Licenses and franchises;
(h) Others (specify nature).
(ii) 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 assets)
and other adjustments and the related amortization and impairment
losses or reversals shall be disclosed separately.
The guidance given above on Property, Plant and Equipment, to the extent
applicable, is also to be used for Other Intangible Assets.
8.1.17. Contract assets and impairment thereof
Ind AS 115 requires in case of a contract with customer, when either party
has performed, to present a contract asset in the balance sheet as a line item
separate from trade receivables. Contract asset arises if an entity performs
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
by transferring goods or services to a customer before the customer pays
consideration or before payment is due. It excludes any amounts presented
as a receivable.
The presentation requirements of trade receivables (viz., secured and
unsecured, considered good, significant increase in credit risk and credit
impaired) may be applied to contract assets if a company has sufficient and
appropriate information.
Ind AS 115 also requires impairment of contract assets to be measured,
presented and disclosed on the same basis as a financial asset that is
within the scope of Ind AS 109.
Accordingly, all the requirements as outlined above for trade receivables
(Paragraph 8.1.4 at Pg 19) shall be applied to contract assets as well, to the
extent applicable and based on the information available, for e.g., ageing
analysis for contract assets may not be feasible.
8.1.18. Other non-financial assets (to be specified)
Capital advances are advances given for procurement of Property, Plant and
Equipment including bearer plants, Investment Property, Other Intangible
Assets or Biological Assets which are non-financial assets. Typically,
companies do not expect to realize them in cash. Rather, over the period,
these get converted into Property, Plant and Equipment including bearer
plants, Investment Property, Other Intangible assets or Biological Assets,
respectively, which are non-financial assets. Hence, capital advances should
be treated as other non-financial assets irrespective of when the Property,
Plant and Equipment including bearer plants, Investment Property, Other
Intangible assets or Biological Assets are expected to be received.
Security Deposits under Other non-financial assets should include those
deposits which do not meet the definition of a financial asset.
‘Other advances’ include all other items in the nature of advances which do
not meet the definition of a financial asset viz., Prepaid expenses, GST
receivable, etc.
It may be noted that in case advances are of the nature of a financial asset
as per Ind AS 32, these are to be disclosed under ‘Other financial assets’
separately.
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Non-current Assets and disposal group held for sale
As per Paragraph 38 of Ind AS 105, Non-current Assets Held for Sale and
Discontinued Operations, an entity shall present a non-current asset
classified as held for sale and the assets of a disposal group classified as
held for sale separately from other assets in the balance sheet. The major
classes of assets classified as held for sale shall be separately disclosed
either in the balance sheet or in the notes.
8.2 Liabilities and Equity
Liabilities
On the face of the Balance Sheet, Division III to Schedule III requires the
following items to be presented under financial liabilities as well as non-
financial liabilities:
Financial Liabilities
(a) Derivative financial instruments
(b) Payables
(I) Trade Payables
(i) total outstanding dues of micro enterprises and small
enterprises
(ii) total outstanding dues of creditors other than micro
enterprises and small enterprises
(II) Other Payables
(i) total outstanding dues of micro enterprises and small
enterprises
(ii) total outstanding dues of creditors other than micro
enterprises and small enterprises
(c) Debt Securities
(d) Borrowings (Other than Debt Securities)
(e) Deposits
(f) Subordinated Liabilities
(g) Other financial liabilities (to be specified)
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Non-financial Liabilities
(a) Current tax liabilities (Net)
(b) Provisions
(c) Deferred tax liabilities (Net)
(d) Other non-financial liabilities (to be specified)
Financial Liabilities
8.2.1 Payables
Division III to Schedule III requires presentation of ‘Payables’ as a separate
line item on the face of the Balance Sheet under ‘Financial Liabilities’. The
following shall be disclosed as sub-heads on the face of the Balance Sheet
under payables as per Division III of Schedule III:
(I) Trade Payables
(i) Total outstanding dues of micro enterprises and small
enterprises
(ii) Total outstanding dues of creditors other than micro
enterprises and small enterprises
(II) Other Payables
(i) Total outstanding dues of micro enterprises and small
enterprises
(ii) Total outstanding dues of creditors other than micro
enterprises and small enterprises
8.2.1.1 A payable shall be classified as 'trade payable' if it is in respect of
the amount due on account of goods purchased or services received in the
normal course of business. Amounts due under contractual obligations other
than purchase of goods and services or statutory payables shall not be
included within Trade Payables. Such items may include dues payable in
respect of statutory obligations like contribution to provident fund or
contractual obligations like contractually reimbursable expenses, amounts
due towards purchase of capital goods, etc. These amounts should be shown
under Non-financial liabilities.
8.2.1.2 Unpaid Creditors for Capital goods and Debts due to directors or
other officers of the NBFC or any of them either severally or jointly with any
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
other person or debts due to firms including LLPs, Private companies
respectively in which director is a partner or a director or a member, if they
are not in the nature of ‘Trade Payables’, should be classified as ‘Other
payables’.
As per Schedule III, the Payables should present separately the portion
representing outstanding dues of micro and small enterprises and others.
Amount due from ‘Medium enterprises’ shall form part of ‘Others’.
8.2.1.3 As per the requirements of Schedule III the following shall be
disclosed:
(a) the principal amount and the interest due thereon (to be shown
separately) remaining unpaid to any supplier at the end of each
accounting year;
(b) the amount of interest paid by the buyer in terms of section 16 of the
Micro, Small and Medium Enterprises Development Act, 2006, along
with the amount of the payment made to the supplier beyond the
appointed day during each accounting year;
(c) the amount of interest due and payable for the period of delay in
making payment (which has been paid but beyond the appointed day
during the year) but without adding the interest specified under the
Micro, Small and Medium Enterprises Development Act, 2006;
(d) the amount of interest accrued and remaining unpaid at the end of
each accounting year; and
(e) the amount of further interest remaining due and payable even in the
succeeding years, until such date when the interest dues above are
actually paid to the small enterprise, for the purpose of disallowance of
a deductible expenditure under section 23 of the Micro, Small and
Medium Enterprises Development Act, 2006.
Similar requirements are given under The Micro, Small and Medium
Enterprises Development (MSMED) Act, 2006.
8.2.1.4 The terms ''appointed day'', ''buyer'', ''enterprise'', ''micro enterprise'',
“medium enterprise”, ''small enterprise'' and'' supplier'', shall be as defined
under clauses (b), (d), (e), (h), (m) and (n) respectively of section 2 of the
Micro, Small and Medium Enterprises Development Act, 2006.
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8.2.1.5 Ageing of trade payables due for payment
This disclosure requires the company to provide ageing of trade payables
due for payment as on the balance sheet date and as per the prescribed
format. The trade payables shall be ‘not due for payment’ if the company has
an unconditional right to defer payment of those trade payables for at least
12 months from the balance sheet. The ageing requirement shall not apply to
these trade payables not due for payment
In order to tie-up the amounts presented in the ‘total’ column with the
amounts presented in the financial statements or notes, two additional
columns with heading ‘Unbilled’ and the heading ‘Not due’ shall be added
before the ageing columns to separately disclose the amount for unbilled
payables and the amount of trade payables which are not due, respectively.
Ind AS 37 states that trade payables are liabilities to pay for goods or
services that have been received or supplied and have been invoiced or
formally agreed with the supplier. Unbilled trade payables shall include
accruals which are not classified as provisions under IND AS 37.
Ind AS 37 defines a “provision” as a liability of uncertain timing or amount.
Provisions can be distinguished from other liabilities such as trade payables
and accruals because there is uncertainty about the timing or amount of the
future expenditure required in settlement. Although it is sometimes necessary
to estimate the amount or timing of accruals, the uncertainty is generally
much less than for provisions. It is clarified that a “provision” shall not be
considered as unbilled trade payables.
The amounts to be presented under (i) MSME and (ii) Others shall include
those trade payable dues that are undisputed.
Due date shall be the date by when a buyer should make payment to the
supplier as per terms agreed upon between the buyer and supplier. In case if
the due date is neither agreed in writing nor oral, then the disclosure needs
to be prepared from the transaction date. Transaction date shall be the date
on which the liability is recognized in the books of the accounts as per the
requirement of applicable standards.
A dispute is a matter of facts & circumstances of the case; However, dispute
means a disagreement between two parties demonstrated by some positive
evidence which supports or corroborates the fact of disagreement.
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8.2.2 Debt Securities
8.2.2.1 The head ‘Debt Securities’ under ‘Financial Liabilities’ will include
securities (secured or unsecured) other than those which are classified as
‘Subordinated debt’. Debt securities shall comprise of liability component of
Compound Financial instruments as per Ind AS and Other such as Bonds
and Debentures. Debt securities should be further classified into the
following measurement categories such as
(a) Amortised Cost,
(b) Fair Value through Profit or Loss and
(c) Designated at Fair Value through Profit or Loss.
8.2.2.2 Additional disclosures of Debt securities within India and Outside
India are required to be made.
8.2.2.3 Refer Paragraph 8.2.14.8 (Pg 85) on guidance on liability
component of compound financial instrument. Moreover disclosure
requirements as applicable to other debt securities shall be applicable to
‘liability component of compound financial instrument’ under the heading
‘Debt securities’
8.2.2.4 Bonds or debentures (along with the rate of interest, and particulars
of redemption or conversion, as the case may be) shall be stated in
ascending order of maturity or conversion, starting from earliest redemption
or conversion date, as the case may be. Where bonds/debentures are
redeemable by instalments, the date of maturity for this purpose must be
reckoned as the date on which the first instalment becomes due.
8.2.2.5 Particulars of any redeemed bonds or debentures which an NBFC
has power to reissue shall be disclosed.
8.2.2.6 Liabilities arising out of Securitisation transactions resulting into
issue of debt securities shall be classified as debt securities.
8.2.3 Borrowings (Other than Debt Securities)
Borrowings (Other than Debt Securities) shall be classified as:
(a) Term Loans
(i) From banks
(ii) From other parties
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(b) Deferred payment liabilities
(c) Loans from related parties
(d) Finance lease obligations*
(e) Liability component of compound financial instruments
(f) Loans repayable on demand
(i) From banks
(ii) From other parties
(g) Other loans (specify nature) – example securitization liabilities.
*Division III to Schedule III requires finance lease obligation to be disclosed
under Borrowings; however basis the facts and circumstances of the case
the presentation may be different i.e. if it is presented as other financial
liabilities instead of Borrowings under Ind AS 116.
8.2.3.1 The borrowings should be further classified into the following
measurement categories such as:
(a) Amortised Cost,
(b) Fair value through Profit or Loss and
(c) Designated at Fair Value through Profit or Loss.
Additional disclosures of Borrowings within India and Outside India are
required to be made.
8.2.3.2 Borrowings shall further be sub-classified as secured and
unsecured. Nature of security shall be specified separately in each case.
8.2.3.3 Where borrowings have been guaranteed by directors or others, the
aggregate amount of such borrowings under each head shall be disclosed.
The word “others” used in the phrase “directors or others” would mean any
person or entity other than a director. Therefore, this is not restricted to mean
only parties related to the directors.
8.2.3.4 Terms of repayment of term loans and other loans are also required
to be stated.
8.2.3.5 Period and amount of default as on the Balance Sheet date in
repayment of borrowings and interest shall be specified separately in each
case.
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8.2.3.6 The phrase "term loan" has not been defined in Schedule III. Term
loans normally have a fixed or pre-determined maturity period and / or
repayment schedule.
8.2.3.7 Deferred payment liabilities would include any liability for which
payment is to be made on deferred credit terms. E.g. deferred payment for
acquisition of Property, Plant and Equipment, etc.
8.2.3.8 Division III to Schedule III also stipulates that the nature of security
shall be specified separately in each case. A blanket disclosure of different
securities covering all loans classified under the same head such as ‘All
Term loans from banks’ will not suffice. However, where one security is given
for multiple loans, the same may be clubbed together for disclosure purposes
with adequate details or cross referencing.
8.2.3.9 Disclosure about the nature of security should also cover the type of
asset given as security e.g. inventories, plant and machinery, land and
building, etc. This is because the extent to which loan is secured may vary
with the nature of asset against which it is secured.
8.2.3.10 When promoters, other shareholders or any third party have given
any personal security for any borrowing, such as shares or other assets held
by them, disclosure should be made thereof, though such security does not
result in the classification of such borrowing as secured.
8.2.3.11 Division III to Schedule III requires that under the head
“Borrowings,” period and amount of default as on the Balance Sheet date, in
repayment of borrowings and interest shall be specified separately in each
case. Even one default by a company would create an obligation to disclose
the period and amount of default. Further, in line with Paragraph 18 of Ind AS
107, if there was a default during the reporting period, an entity shall provide
a disclosure even if the default was remedied before the financial statements
were approved for issue.
8.2.3.12 The word “loan” has been used in a generic sense. Hence, the
disclosures relating to default should be made for all items listed under the
category of borrowings such as deferred payment liabilities, lease
obligations, etc. and not only to items classified as “loans” such as term
loans, etc.
8.2.3.13 Division III to Schedule III requires separate disclosure for default,
as on the balance sheet date, in repayment of borrowings and interest but
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does not require any disclosure of breaches. However, Paragraph 19 of Ind
AS 107 would require an entity to disclose those breaches made during the
reporting period, which permitted the lender to demand accelerated
repayment and, were not remedied on or before the end of the reporting
period.
8.2.3.14 Terms of repayment of term loans and other loans shall be
disclosed. The term ‘other loans’ is used in general sense and should be
interpreted to mean all categories listed under the heading ‘Borrowings’ as
per Division III to Schedule III. Disclosure of terms of repayment should be
made for each loan unless the repayment terms of individual loans within a
category are similar in which case these may be aggregated.
8.2.3.15 Disclosure of repayment terms should include the period of maturity
with respect to the Balance Sheet date, number and amount of instalments
due, the applicable rate of interest, other significant and relevant terms, if
any.
8.2.3.16 Loans from related parties are required to be disclosed. All the
disclosure requirements of borrowings would be applicable to such loans
from related parties.
8.2.3.17 Refer Paragraph 8.2.14.8 (Pg 85) for guidance on liability
component of compound financial instruments. Moreover, disclosure
requirements as applicable to Other Borrowings shall be applicable to
‘liability component of compound financial instruments’ under the heading
‘Borrowings’.
8.2.3.18 Liabilities arising out of Securitisation transactions resulting into
issue of borrowings shall be classified as borrowings.
8.2.4 Deposits
8.2.4.1 Deposits shall be classified as Public Deposits, from Banks, and from
others. ‘Others’ would also include Inter corporate deposits. Deposits should
be further classified into the following measurement categories such as:
(a) Amortised Cost,
(b) Fair Value through Profit or Loss and
(c) Designated at Fair Value through Profit or Loss.
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8.2.5 Subordinated Liabilities
Subordinated Liabilities shall be classified as:
(i) Perpetual Debt Instruments to the extent that do not qualify as equity;
(ii) Preference Shares other than those that qualify as equity;
(iii) Others (Specifying the nature and type of instrument issued).
The subordinated liabilities shall be disclosed both within and outside India.
‘Others’ will include those liabilities which are considered as subordinated by
the respective regulator, e.g. RBI has defined "subordinated debt" as
instrument, which is fully paid up, is unsecured and is subordinated to the
claims of other creditors and is free from restrictive clauses and is not
redeemable at the instance of the holder or without the consent of the
supervisory authority of the non-banking financial company.
Disclosures as required in respect of ‘debt securities’ will have to be given
and also additional disclosures as required by the RBI will have to be
provided.
8.2.6 Other Financial liabilities (to be specified)
Division III to Schedule III requires presenting ‘Other Financial Liabilities’ as
a separate line item on the face of the Balance Sheet under ‘Financial
Liabilities’. Items which meet the definition of financial liabilities as per Ind
AS 32 should be presented under this heading as under:
(i) Interest accrued;
(ii) Unpaid dividends;
(iii) Application money received for allotment of securities to the extent
refundable and interest accrued thereon;
(iv) Unpaid matured deposits and interest accrued thereon;
(v) Unpaid matured debentures and interest accrued thereon;
(vi) Margin money (to be specified); and
(vii) Others (specify nature)
Items which meet the definition of financial liabilities as per Ind AS 32, like
contingent consideration, derivative contracts, financial guarantee contracts
issued, contractually reimbursable expenses etc. should be presented under
other financial liabilities.
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Interest Accrued
Interest accrued on financial liabilities shall form part of their carrying amount
whether it is at amortized cost (i.e. as per effective interest method), or at fair
value. Accordingly, an entity shall not present ‘Interest Accrued’ separately
from the related financial liability.
Offsetting a Financial Asset and a Financial Liability
In accordance with Paragraph 42 of Ind AS 32, to offset a financial asset and
a financial liability, an entity must have a currently enforceable legal right to
set off the recognised amounts and the intention to either settle on a net
basis or to realize the asset and settle the liability simultaneously.
Non-financial liabilities
8.2.7 Current Tax Liabilities
Current tax is the amount of income taxes payable (recoverable) in respect of
the taxable profit (tax loss) for a period. The tax for current and prior periods
shall, to the extent unpaid, be recognised as a liability.
If the amount already paid in respect of current and prior periods exceeds the
amount due for those periods, the excess shall be recognised as an asset.
8.2.8 Provisions
The provisions shall be classified as:
(a) Provision for employee benefits;
(b) Others (specify nature).
‘Others’ would include all provisions other than provisions for employee
benefits such as provision for litigation, provision for decommissioning
liabilities, loan commitments etc. These amounts should be disclosed
separately specifying nature thereof.
For loan commitments and financial guarantee contracts as per Ind AS 109
the loss allowance is recognised as a provision. An entity should disclose
information about the changes in the loss allowance for financial assets
separately from those for loan commitments and financial guarantee
contracts. However, if a financial instrument includes both a loan (i.e.
financial asset) and an undrawn commitment (i.e. loan commitment)
component and the entity cannot separately identify the expected credit
losses on the loan commitment component from those on the financial asset
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component, the expected credit losses on the loan commitment should be
recognised together with the loss allowance for the financial asset. To the
extent that the combined expected credit losses exceed the gross carrying
amount of the financial asset, the expected credit losses should be
recognised as a provision.
8.2.9 Deferred Tax Liability (Net)
Ind AS 12 requires companies to recognise deferred tax assets or liabilities
using a balance sheet approach, i.e. comparing the Ind AS carrying value of
the asset or liability to its tax base.
8.2.10Other non-financial liabilities (to be specified)
The amounts shall be classified as:
(a) Revenue received in advance;
(b) Other advances (specify nature);
(c) Others (specify nature).
Other advances that satisfy the requirements for being classified as non-
financial liabilities should be classified under this head. The definition of the
terms ‘financial instruments’, ‘financial asset’, ‘financial liability’ and ‘equity’
as defined in Ind AS 32 may be referred to in order to determine items that
may get classified as financial and non-financial liabilities for example,
amount received in advance. ‘Others’ should include items under other non-
financial liabilities e.g., statutory dues payable, legal claims outstanding.
Trade Deposits and Security Deposits, which do not meet the definition of
financial liabilities, should be classified as ‘Others’ grouped under this head.
‘Others’ may also include liabilities in the nature of statutory dues such as
Withholding taxes, Goods and Services Tax (GST), etc.
Contract Liability
Ind AS 115 requires in case of a contract with customer, when either party
has performed, to present a contract liability in the balance sheet. Contract
liability arises if a customer pays consideration, or an entity has a right to an
amount of consideration that is unconditional (i.e. a receivable), before the
entity transfers a good or service to the customer, the entity shall present the
contract as a contract liability when the payment is made or the payment is
due (whichever is earlier).
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A company shall apply the requirements of Ind AS 1 and Ind AS 32 to
determine whether it is appropriate to offset contract assets and liabilities
against other balance sheet items (e.g., receivables).
8.2.11 Liabilities for assets held for sale
As per Paragraph 38 of Ind AS 105, the liabilities of a disposal group
classified as held for sale shall be presented separately from other liabilities
in the balance sheet. Those assets and liabilities shall not be offset and
presented as a single amount. The major classes of assets and liabilities
classified as held for sale shall be separately disclosed either in the balance
sheet or in the notes.
8.2.12 Contingent liabilities and commitments
(i) Contingent liabilities shall be classified as:
(a) Claims against the company not acknowledged as debt;
(b) Guarantees excluding financial guarantees; and
(c) Other money for which the company is contingently liable.
(ii) Commitments shall be classified as:
(a) Estimated amount of contracts remaining to be executed on
capital account and not provided for;
(b) Uncalled liability on shares and other investments partly paid
(c) Other commitments (specify nature)
The provisions of Ind AS-37 Provisions, Contingent Liabilities and Contingent
Assets, will be applied for determining contingent liabilities.
8.2.12.1 Division III to Schedule III requires guarantees other than financial
guarantees to be disclosed as a part of contingent liabilities, since financial
guarantees are recognized on the balance sheet in accordance with Ind AS
109. Ind AS 107 specifies certain disclosure in respect of the exposure to
credit risk on financial guarantee contracts as a part of the disclosures on
‘credit risk exposures’, which an entity should provide in its Notes to
Accounts.
Where a company undertakes to perform its own obligations, and for this
purpose issues, what is called a "guarantee", it does not represent a
contingent liability and it is misleading to show such items as contingent
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liabilities in the Balance Sheet. For various reasons, it is customary for
guarantees to be issued by Bankers e.g. for payment of insurance premium,
deferred payments to foreign suppliers, letters of credit, etc. For this
purpose, the company issues a "counter-guarantee" to its Bankers. Such a
"counter-guarantee" is not really a guarantee at all, but is an undertaking to
perform what is, in any event, the obligation of the company, namely, to pay
the insurance premium when demanded or to make deferred payments when
due. Hence, such performance guarantees and counter guarantees should
not be disclosed as contingent liabilities.
8.2.12.2 Division III to Schedule III also requires disclosures pertaining to
various commitments such as capital commitments not provided for and
uncalled liability on shares. It also requires disclosures pertaining to ‘Other
commitments’, with specification of nature thereof.
8.2.12.3 The word ‘commitment’ has not been defined in Schedule III. The
Glossary of Terms Used in Financial Statements issued by ICAI defines
‘Capital Commitment’ as future liability for capital expenditure in respect of
which contracts have been made. Hence, drawing inference from that
definition, the term ‘commitment’ would simply imply future liability for
contractual expenditure. Accordingly, the term ‘Other commitments’ would
include all expenditure related to contractual commitments apart from capital
commitments such as employee contracts, lease commitments, etc.
However, the disclosure of all contractual commitments should be made
bearing in mind the overarching principle under Note 4(ii) in General
Instructions for Preparation of Financial Statements that “a balance shall be
maintained between providing excessive detail that may not assist users of
Financial Statements and not providing important information as a result of
too much aggregation.”
8.2.12.4 Disclosures relating to lease commitments are required to be
disclosed as per Ind AS-116 Leases, for example short term leases as per
Paragraph 55 of Ind AS 116.
8.2.12.5 Accordingly, the disclosures required to be made for ‘other
commitments’ should include only those non-cancellable contractual
commitments (i.e. cancellation of which will result in a penalty
disproportionate to the benefits involved) based on the professional
judgement of the management which are material and relevant in
understanding the Financial Statements of the company and impact the
decision making of the users of Financial Statements. Examples may include
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commitments in the nature of buy-back arrangements, commitments to fund
subsidiaries and associates, non-disposal of investments in subsidiaries and
undertakings, derivative related commitments, etc. Care should be taken to
ensure that items that are to be reflected as liabilities under Ind AS do not
get disclosed under this head and appropriate disclosure required by Ind AS
should be complied with.
8.2.12.6 Division III to Schedule III requires disclosure of the amount of
dividends proposed to be distributed to equity and preference shareholders
for the period and the related amount per share to be disclosed separately.
Though, the Act prohibits issue of irredeemable preference shares, Division
III to Schedule III requires separate disclosure of the arrears of fixed
cumulative dividends on irredeemable preference shares. The term
‘irredeemable’ is used in the context of compulsorily convertible preference
shares rather than in the context of perpetual preference shares which are
neither convertible nor redeemable. Ind AS-10 Events after the Reporting
Period, requires that dividends in respect of the period covered by the
Financial Statements, which are proposed or declared by the enterprise after
the Balance Sheet date but before approval of the Financial Statements,
should not be adjusted but should be disclosed in accordance with Ind AS-1
Presentation of Financial Statements.
Division III to Schedule III requires that where, in respect of an issue of
securities made for a specific purpose, the whole or part of the amount has
not been used for the specific purpose at the Balance Sheet date, then the
company shall indicate by way of note, how such unutilized amounts have
been used or invested.
8.2.12.7 The Schedule III requires that 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.
It is not necessary to establish a one-to-one relationship with the amount of
borrowing and its utilisation. It is quite often found that the amount of
borrowing obtained is deposited in the common account of the company from
which subsequently the utilisation is made. In such cases, it should not be
construed that the amount has not been utilised for the purpose for which it
was obtained. Accordingly, this needs to be determined based on overall
position of balance sheet at the reporting period.
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Normally, when banks or financial institutions make direct payments to the
vendors/suppliers, then it becomes easier to build a nexus between the
source and application of funds.
8.2.12.8 Additional Regulatory Information
MCA has introduced several new disclosure requirements in its notification
dated 24th March 2021 as part of amendments to Schedule III and grouped
them under ‘additional regulatory information’. They are as below:
(i) Title deeds of Immovable Property not held in the 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 Description Gross Title Whether title Property Reason
held for not
line item in of item of carrying deeds deed holder since being held
which in the
the property value held is a date name of
Balance in the promoter, the
company**
Sheet name director or
of relative# of
promoter* /
director or
employee of
promoter /
director
PPE Land XX XX XX XX XX
PPE Building XX XX XX XX XX
Investment Land XX XX XX XX XX
property
Investment Building XX XX XX XX XX
property
Non- Land XX XX XX XX XX
current
asset held
for sale
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Non- Building XX XX XX XX XX
current
asset held
for sale
Others XX XX XX XX XX XX
# Relative here means relative as defined in the Act.
* Promoter here means promoter as defined in the Act.
** also indicate if in dispute
This disclosure requires the company to provide details, in the prescribed
format, of all the immovable properties (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.
The Act does not define the term “Immovable Property”. However, as per
General Clauses Act, 1897, “Immovable Property shall include land, benefits
to arise out of land, and things attached to the earth, or permanently
fastened to anything attached to the earth”. In the absence of any specific
guidance, the immovable properties presented under ‘property, plant and
equipment’, ‘investment property’ or classified as non-current asset held for
sale would be covered in the scope of this disclosure but immovable property
items presented as inventory by companies carrying on real estate business
will not fall under this disclosure.
The Act does not define ‘title deeds’. In general, title deeds mean a legal
deed or document constituting evidence of a right, (eg. registered sale deed,
transfer deed, conveyance deed of land) especially to the legal ownership of
the immovable property.
In case of leased assets, title deeds would imply the lease agreements and
related documents. Where the Company is the lessee of an immovable
property and the lease agreements are not duly executed in favour of the
lessee then appropriate disclosure has to be provided for such immovable
properties.
The prescribed format requires disclosure of ‘relevant line item in the
Balance Sheet’ and ‘description of item of property’. The prescribed format
cover various line items in the Balance Sheet i.e. PPE, Investment Property
etc. and therefore, ‘others’ is a residual category that may be used to
disclose those immovable properties which could not otherwise be disclosed
as part of the prescribed line items. For example, plant and machinery items
or equipment, bearer plants, any other item of PPE that would be covered
within the meaning of ‘immovable property’.
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While making this disclosure in the financial statements, the company should
disclose the following information:
(i) Gross carrying value – the company shall disclose the amount in the
financial statements;
(ii) Title deeds held in the name of – the company shall disclose the full
name of the individual/entity/person holding the title of immovable
property;
(iii) Whether title deed holder is a promoter, director or relative of promoter
/ director or employee of promoter / director – the company shall
disclose the relationship between itself and the individual/entity/person
holding the title of immovable property;
(iv) Property held since which date – the company shall disclose the date
since the property is held and where the exact date is not available, it
shall disclose the month and year since the property is held.
(v) Reason for not being held in the name of the company, also indicating
if there is a dispute – the company shall state the reason for the
immovable property not being held in the name of the company (for
example, the documents are under preparation or the registration
process of transfer of name is in progress as on the balance sheet
date). In case the title deeds of immovable property are not being held
in the name of company due to a dispute, the company shall state the
nature of dispute.
(ii) Revaluation of Investment Property
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
(iii) Revaluation of Property, Plant and Equipment
Where the Company has revalued its Property, Plant and Equipment,
(including Right-of-use assets), 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, 2017.
This clause requires a Company to disclose whether the fair valuation of its
Investment Property (only as measured for the purpose of disclosure in the
financial statements), and revaluation of its Property, Plant and Equipment
(including Right-of-Use Assets) during the year is based on the valuation by
a registered valuer as defined above. In case the Company has not used
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registered valuer for such fair value/revaluation purposes, the fact needs to
be disclosed in the financial statements.
(iv) Revaluation of Intangible Assets
Where the Company has revalued its Intangible assets, 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, 2017.
This clause requires a Company to disclose whether revaluation of its
Intangible Assets during the year is based on the valuation by a registered
valuer as defined above. In case the Company has not used registered
valuer for such fair value/revaluation purposes, the fact needs to be
disclosed in the financial statements.
(v) Loans or Advances
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 the Companies Act 2013) either severally or jointly with
any other person that are:
(a) repayable on demand
(b) without specifying any terms or period of repayment
Type of Borrower Amount of loan or Percentage to the
advance in the nature total Loans and
Promoters of loan outstanding Advances in the
Directors
KMPs nature of loans
Related Parties
This disclosure requires the company to provide details of the amount in
respect of loans or advances in the nature of loans either repayable on
demand or without specifying any terms or period of repayment granted to
promoters, directors, KMPs and related parties (all of these to be identified
as defined under Companies Act, 2013).
Whether an advance is in the nature of a loan would depend upon the facts
and circumstances of each case. For example, a normal advance against an
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order, in accordance with the normal trade practice would not be an advance
in the nature of loan. But if an advance is given for an amount which is far in
excess of the value of an order or for a period which is far in excess of the
period for which such advances are usually extended as per the normal trade
practice, then such an advance may be in the nature of a loan to the extent
of such excess. When a trade practice does not exist, a useful guide would
be to consider the period of time required by the supplier for the execution of
the order, that is, the time between the purchase of the raw material and the
delivery of the finished product. An advance which exceeds this period would
normally be an advance in nature of loan unless there is an evidence to the
contrary. Similarly, a stipulation regarding interest may normally be an
indication that the advance is in nature of a loan but this by itself is not
conclusive and there may also be advances which are not in the nature of
loan and which carry interest.
For the purpose of making this disclosure, the relationship should be
considered on the date of loan and the amount should be outstanding as at
the balance sheet date.
The prescribed format has been modified to provide similar information for
the comparative reporting period(s) as given below, while the amounts and
percentages shall be disclosed at an aggregate level with separate
categorization into ‘repayable on demand’ and ‘without specifying any terms
or period of repayment’:
Current Period Previous Period
Type of Amount % of Amount % of
outstanding* Total^
Borrower outstanding* Total^
Promoters
Directors
KMPs
Related
Parties
Total
* represents loan or advance in the nature of loan
^ represents percentage to the total Loans and Advances in the nature of
loans
Moreover, the amount outstanding should be the gross carrying amount
(without netting the provision for doubtful debts or impairment loss
allowance) included by the company in its respective balance sheet.
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(vi) Capital Work-in-Progress (CWIP) ageing schedule / completion
schedule
(a) For CWIP, the following ageing schedule shall be given:
CWIP ageing schedule
(Amount in Rs.)
CWIP Amount in CWIP for a period of Total*
Projects in Less 1-2 2-3 More
progress than 1 years years than 3
year years
Projects
temporarily
suspended
* Total shall tally with CWIP amount in the balance sheet.
This disclosure requires the total amount of CWIP as presented in the
financial statements to be split between two broad categories viz., ‘Projects
in progress’ and ‘Projects temporarily suspended’ along with its ageing
schedule. The disclosure is not required to be presented at an asset/project
level however, the total amount presented in this disclosure should tally with
the total amount of CWIP as presented in the financial statements.
As this disclosure needs to be provided at every balance sheet date, the
ageing for an item of CWIP shall be determined from the date of its initial
recognition to the date of balance sheet. Accordingly, it may so happen that
for a single asset/project recognized as a CWIP, the ageing for the total
amount of CWIP shall fall into different ageing buckets as at a particular
balance sheet date. This can be explained with the help of below example:
Company A is commissioning a plant. The project activity was in progress at
the end of the reporting period (year 4). It has incurred following
expenditures on various items in commissioning that plant:
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Period 1 Amount CWIP Balance
Year 1 100 at the year-end
100
Year 2 150 250
Year 3 250 500
Year 4 50 550
1 For illustration purpose, it has been assumed that the expenditure has been
incurred on first day of each year.
Disclosure as at the end of Year 4 shall be made as follows:
CWIP Amount in CWIP for a period of Total
Less 1-2 2-3 More
than 1 years years than 3
year years
Projects in 50 250 150 100 550
progress
Projects - - - - -
temporarily
suspended
* Total shall tally with CWIP amount in the balance sheet.
When temporary suspension is a necessary part of the process of getting an
asset ready for its intended use, the project should not be considered to have
been temporarily suspended and the CWIP related to such projects should
continue to be presented under ‘Projects in progress’.
The classification of assets/projects into ‘projects in progress’ and ‘projects
temporarily suspended’ needs to be evaluated at each reporting date. Any
change in status during the reporting period or any time after end of the
reporting period will not change the classification of assets/projects for above
disclosure purposes. For e.g., if a project was temporarily suspended for
most of the time during the reporting period but development of the asset
resumes before the end of the reporting period, then the ageing of its related
CWIP amounts will be presented under ‘Projects in progress’.
Similarly, where a project is temporarily suspended at the end of reporting
period but development on same resumes after end of reporting period, then
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the ageing of its related CWIP amounts will be presented under ‘Projects
temporarily suspended’.
Any change in the asset’s/project’s category of disclosure as at the end of
current period will not affect disclosure given for that asset/project as at the
end of previous period. For e.g., where a project is in progress at the end of
current reporting period but was temporarily suspended at the end of
previous reporting period, the ageing schedule as at end of current period
will show the asset/project as part of the category ‘projects in progress’ while
the ageing schedule as at the end of previous period will continue to present
the asset/project as part of the category ‘project temporarily suspended’.
The requirements mentioned above in respect of CWIP shall be applicable
for investment property under development.
(b) For CWIP, 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 Less than To be completed in More than
Project 1 1 year 1-2 years 2-3 years 3 years
Project 2
** Details of projects where activity has been suspended shall be given
separately.
In respect of assets/projects forming part of CWIP and which have become
overdue compared to their original plans or where cost is exceeded
compared to original plans, disclosure is required to be given for expected
completion timelines in defined ageing brackets. Any variation between an
asset’s/project’s actual completion timeline or it’s actual cost and the
respective estimate is required to be evaluated from the original plan (i.e.
original completion timelines and original estimated costs). A company’s
‘original plan’ shall be considered as that plan which is approved by the
relevant approving authority and on the basis of which implementation
progress is evaluated. Such an original plan shall include management’s
estimates and assumptions w.r.t future business, economy / industry and
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regulatory environments and such assumptions shall be subject to change
from time to time resulting in a ‘revised plan’. Management shall apply
judgement in determining whether such revisions in the plans are in the
nature of a fresh ‘Original Plan’ or simply an update of estimates and
assumptions such that the original plan is revisited and revised. When plans
are subsequently revisited and revised, same should not be considered for
determining variation when making above disclosures.
Disclosure is required only in those cases where the actual cost of an
asset/project has already exceeded the estimated cost as per original plan or
actual timelines for completion of an asset/project have exceeded the
estimated timelines as per original plan. Such assessment needs to be done
at each reporting date.
This disclosure is required to be made at project level and separately for the
two categories viz., ‘Projects in progress’ and ‘Projects temporarily
suspended’.
Further, for the purpose of this disclosure, projects that are not considered as
material at an individual level can be aggregated and disclosed under the
relevant category.
The prescribed disclosure may be slightly modified as below:
CWIP Less than To be completed in More than
1 year 1-2 years 2-3 years 3 years
Projects in
progress
Project 1
Project 2
Projects
temporarily
suspended
Project 1
Project 2
* Total shall tally with CWIP amount in the balance sheet.
The prescribed format of disclosure seems to require a disclosure for both
categories (exceeded cost or overdue) on a combined basis instead of
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
separately disclosing for each trigger viz., projects which are overdue and
projects where cost have exceeded. However, the company may choose to
provide disclosure for each trigger separately.
Neither Schedule III nor Ind AS 16 defines ‘project’. Project may be
construed as smallest group of assets having a common intended use. For
e.g., group of assets in an integrated plant may be treated as one project.
The identification of project will require judgement and management needs to
identify project based on facts of each case. Project identification should be
consistent with how management identifies and monitors progress on group
of assets internally.
(vii) Intangible assets under development ageing schedule /
completion schedule
(a) For intangible assets under development, the following ageing
schedule shall be given:
Intangible assets under development ageing schedule
(Amount in Rs.)
Intangible Amount in Intangible asset under Total*
assets development for a period of
under
Less 1-2 2-3 More
developme than 1 years years than 3
nt year 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**:
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(Amount in Rs.)
Intangible assets To be completed in
under development
Less 1-2 years 2-3 years More
Project 1 than 1 than 3
year years
Project 2
** Details of projects where activity has been suspended shall be given
separately.
All the relevant guidance given for a similar disclosure of capital work-in-
progress to the extent applicable to Intangible assets under development are
applicable here also.
(viii) 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
(Prohibitions) 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 the
same.
The disclosure requirement refers to Benami Transactions (Prohibition) Act,
1988. The name of the aforesaid Act has been changed to Prohibition of
Benami Property Transactions Act, 1988 in the year 2016. Therefore, for the
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purpose of disclosures, reference shall be made to Prohibition of Benami
Property Transactions Act, 1988 (as amended in 2016).
For the meaning of the relevant terms, reference has to be made to
Prohibition of Benami Property Transactions Act, 1988 (as amended from
time to time) and the rules made thereunder. Relevant definitions applicable
for this disclosure are reproduced below:
Section 2(8) – "benami property" means any property which is the subject
matter of a benami transaction and also includes the proceeds from such
property;
Section 2(9) – “benami transaction" means,
(A) a transaction or an arrangement:
(a) where a property is transferred to, or is held by, a person, and
the consideration for such property has been provided, or paid
by, another person; and
(b) the property is held for the immediate or future benefit, direct or
indirect, of the person who has provided the consideration,
except when the property is held by—
(i) a Karta, or a member of a Hindu undivided family, as the case
may be, and the property is held for his benefit or benefit of
other members in the family and the consideration for such
property has been provided or paid out of the known sources of
the Hindu undivided family;
(ii) a person standing in a fiduciary capacity for the benefit of
another person towards whom he stands in such capacity and
includes a trustee, executor, partner, director of a company, a
depository or a participant as an agent of a depository under the
Depositories Act, 1996 (22 of 1996) and any other person as
may be notified by the Central Government for this purpose;
(iii) any person being an individual in the name of his spouse or in
the name of any child of such individual and the consideration
for such property has been provided or paid out of the known
sources of the individual;
(iv) any person in the name of his brother or sister or lineal
ascendant or descendant, where the names of brother or sister
or lineal ascendant or descendent and the individual appear as
joint-owners in any document, and the consideration for such
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
property has been provided or paid out of the known sources of
the individual; or
(B) a transaction or an arrangement in respect of a property carried out or
made in a fictitious name;
(C) a transaction or an arrangement in respect of a property where the
owner of the property is not aware of, or, denies knowledge of, such
ownership; or
(D) a transaction or an arrangement in respect of a property where the
person providing the consideration is not traceable or is fictitious.
Explanation – For the removal of doubts, it is hereby declared that
benami transaction shall not include any transaction involving the
allowing of possession of any property to be taken or retained in part
performance of a contract referred to in section 53A of the Transfer of
Property Act, 1882 (4 of 1882), if, under any law for the time being in
force,—
(i) consideration for such property has been provided by the
person to whom possession of property has been allowed but
the person who has granted possession thereof continues to
hold ownership of such property;
(ii) stamp duty on such transaction or arrangement has been paid;
and
(iii) the contract has been registered;
Section 2(10) - “benamidar” means a person or a fictitious person, as the
case may be, in whose name the benami property is transferred or held and
includes a person who lends his name;
Section 2(19) - “Initiating Officer” means an Assistant Commissioner or a
Deputy Commissioner as defined in clauses (9A) and (19A) respectively of
section 2 of the Income-tax Act, 1961;
Section 2(26) - "property" means assets of any kind, whether movable or
immovable, tangible or intangible, corporeal or incorporeal and includes any
right or interest or legal documents or instruments evidencing title to or
interest in the property and where the property is capable of conversion into
some other form, then the property in the converted form and also includes
the proceeds from the property.
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The Initiating Officer (IO), as the name indicates is an authority who initiates
the proceedings under the aforesaid Act. As per section 2(19) of aforesaid
Act, the IO is the Assistant/ Deputy Commissioner of Income Tax. Chapter IV
of the aforesaid Act deals with the provisions relating to attachment,
adjudication, and confiscation of property involved in benami transaction.
The IO collects the material during the investigation of suspicious benami
transaction, and based on such material in his possession, if he has reason
to believe that any person is benamidar in respect of the property, then he
has to record the reasons in writing and then issue a show cause notice to
such benamidar asking why the property should not be treated as benami
property. The IO issues the show cause notice under section 24(1) of
Prohibition of Benami Property Transactions Act, 1988. A copy of the show-
cause notice shall be sent to the beneficial owner also if his identity is
known.
With the above background and guidance from the Prohibition of Benami
Property Transactions Act, 1988 (as amended in 2016), when making this
disclosure in the financial statements, the company should provide the
following information:
(i) Details of such property, including year of acquisition – the company
shall disclose the details like name and nature of the property, as
available and also the year of acquisition;
(ii) Amount thereof – the company shall disclose the amount of acquisition
cost incurred at the time of acquisition of the property;
(iii) Details of Beneficiaries – the company shall disclose these details w.r.t
beneficiaries viz., name, address, any government identification
number (for e.g., PAN, Aadhar Card, SSN, CIN, etc) and relationship
with the company;
(iv) If property is in the books, then reference to the item in the Balance
Sheet – the company shall disclose the line item of the balance sheet
in which such property is presented, if it is recognised in the books of
accounts;
(v) If property is not in the books, then the fact shall be stated with
reasons – the company shall state the fact along with the reason for
the property not recognised in the books of accounts of the company;
(vi) 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 – the company shall provide details like the Initiating
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Officer, date of show-cause notice, name and nature of the property
which is the subject of the proceedings etc.;
(vii) Nature of proceedings, status of same and company’s view on same –
the company shall specify, as part of the nature of proceedings,
whether it involves an attachment, adjudication and/or confiscation of
property. The company shall also state the fact around the status of
the proceedings and its view on the same.
(viii) In case of a dispute on the proceedings initiated or pending against
the company, the company shall state the fact along with the period
(no. of years) since the beginning of the dispute till the balance sheet
date.
(ix) Security of current assets against borrowings
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.
This clause requires the company to provide certain disclosure in case it has
borrowings from banks or financial institutions on the basis of security of
current assets. It is not specified whether the existence of borrowings should
be assessed as at the end of the reporting period or during the reporting
period. However, there is similar reporting requirement for the auditors as per
the Companies (Auditors’ Report) Order, 2020 (‘CARO 2020’), whereby the
clause refers to the words ‘during any point of time of the year’. Accordingly,
the disclosure requirement shall apply if the company has borrowings ‘during
any point of time of the year’ from banks or financial institutions on the basis
of the security of the current assets.
Schedule III to the Act defines a current asset as under:
“An asset shall be classified as current when it satisfies any of the following
criteria:
(a) it is expected to be realized in, or is intended for sale or consumption
in, the company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is expected to be realized within twelve months after the reporting
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
date; or
(d) it is Cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least twelve months after
the reporting date.
The Company shall provide this disclosure considering the sanctioned
borrowings even if the same is unutilized during the period or as at the end of
the reporting period. The utilization may be more or less than the sanctioned
amounts, but such cases will also be covered for the purpose of reporting.
The term "sanction" here should include fresh sanction during the reporting
period as well as limits renewed or due for renewal during the reporting
period. Moreover, both fund based and non-fund based credit facilities
availed by the Company shall be included for the purpose of this disclosure.
However, this would exclude any borrowings which are sanctioned on the
basis of security of the assets other than current assets.
Although company may be submitting monthly returns/statements to the
lenders, reporting under this clause is confined to the quarterly
returns/statements only. For instance, if the company submits returns/
statements on a monthly basis say for the months of April, May and June,
then the disclosure would be required in the context of the
returns/statements submitted solely for the month of June, being the relevant
return as at the end of a quarter.
Such returns/statements may include, book debt statements, , statements on
ageing analysis of the debtors/other receivables to be submitted in stipulated
format on a periodic basis to lenders.
The Statement as submitted to the Banks/Financial Institutions should be
compared to the Books of Accounts of the Company.
If any discrepancy arises when such returns/statements are compared with
the books of account, then the Company is required to provide summary of
reconciliation and reasons of material discrepancies. Instances of such
differences may be relating to difference in the amount of debtors/creditors,
ageing analysis of debtors, etc., between the books of account and the
returns/statements submitted to banks/financial institutions.
The disclosure required under this clause should also be made, if applicable,
where borrowings have been availed based on security of current assets of
other companies/entities within the same Group as the reporting entity.
Illustrative format for disclosure is as follows (to be given separately for each
company/entity within the group):
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
Quarte Nam Particular Amoun Amount Amount Reason for
r e of s of t as per as of material
bank Securities books reported differenc discrepancie
June Provided of in the e s
20XX Bank accoun quarterly
X Trade t return/ XX
receivable statemen
s XX t
Loans
receivable XX
(x) Wilful Defaulter
Where a company is 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)
A ‘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 Companies Act 2013) or consortium thereof, in accordance
with the guidelines on wilful defaulters issued by the Reserve Bank of India.
This disclosure requirement applies to any company that has been declared
as a wilful defaulter by any lender who has powers to declare a company as
a wilful defaulter at any time during the financial year or after the end of
reporting period but before the date when financial statements are approved
or in an earlier period and the default has continued for the whole or part of
the current year. Such lenders shall include any bank or financial institution
or any other lender in which such powers shall be vested pursuant to
relevant regulations.
Reserve Bank of India vide its master circular RBI/2014
15/73DBR.No.CID.BC.57/20.16.003/2014-15 dated July 1, 2014 on Wilful
Defaulters (“RBI Circular”) as updated from time to time has defined that a
"wilful default" would be deemed to have occurred if any of the following
events is noted:-
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(i) The unit has defaulted in meeting its payment / repayment obligations
to the lender even when it has the capacity to honour the said
obligations.
(ii) The unit has defaulted in meeting its payment / repayment obligations
to the lender and has not utilised the finance from the lender for the
specific purposes for which finance was availed of but has diverted the
funds for other purposes.
(iii) The unit has defaulted in meeting its payment / repayment obligations
to the lender and has siphoned off the funds so that the funds have not
been utilised for the specific purpose for which finance was availed of,
nor are the funds available with the unit in the form of other assets.
(iv) The unit has defaulted in meeting its payment / repayment obligations
to the lender and has also disposed off or removed the movable or
immovable property given by him or it for the purpose of securing a
term loan without the knowledge of the bank/lender.
Reserve Bank of India has prescribed a transparent mechanism for
identification of wilful defaulters. The term ‘lender’ appearing in the RBI
Circular covers all banks/financial institutions to which any amount is due,
provided it is arising on account of any banking transaction, including off
balance sheet transactions such as derivatives, guarantee and letter of
credit.
It is possible that the company may not have been declared as wilful
defaulter as at the date of the balance sheet but has been so declared before
the financial statements are approved for issue. A question, therefore, arises
whether the reporting under this clause is to be considered as at the balance
sheet date or on the date of approval of the financial statements. It is clarified
that the events upto date of approval of financial statements should be
considered for disclosure under this clause.
(xi) 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 the Companies
Act, 1956, the company shall disclose the following details:
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Name of Nature of transactions Balance Relationship
the struck with struck off company outstanding with the struck
off company, if
off Investment in securities
company Receivables any, to be
Payables disclosed
Shares held by struck off
company
Other outstanding
balances (to be specified)
This disclosure requires the company to provide details of the balances
outstanding in respect of transactions undertaken with a company struck off
under section 248 of the Companies Act, 2013 or section 560 of the
Companies Act, 1956.
When making this disclosure in the financial statements, the company should
provide the following information:
(i) Name of the struck off company – the company shall disclose the
name of the company which has been struck off by the respective
Registrar of Companies and such information is available vide public
notice (Form No. STK-7) u/s 248 of the Act, at any time during the
reporting period or in an earlier reporting period if any balance in
respect of the transactions with the struck off company is outstanding
at the period end, on the website of Ministry of Corporate Affairs;
(ii) Nature of transactions with struck off company – the company shall
use the prescribed format in grouping the nature of its transactions
with each struck off company. It shall utilise and specify as part of
‘other outstanding balances’ any other transactions that do not fit into
the prescribed categories;
(iii) Balance outstanding – the company shall disclose the amount
outstanding as the gross carrying amount (without netting the
provision for doubtful debts or impairment loss allowance) included in
its respective balance sheet; If any transaction with a struck off
company has happened during a financial year and settled / reversed /
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squared off, etc., during the same financial year such that the balance
outstanding is NIL as at the end of the reporting period, the company
is required to disclose those transactions as well in the similar format
as prescribed below;
(iv) Relationship with the struck off company, if any, to be disclosed – the
company shall disclose the relationship with the struck off company
evaluated as per the definition of ‘related party’ under section 2(76) of
the Act. For the purpose of this disclosure, such relationship between
the company and the struck off company should exist as at the
respective balance sheet date.
However, when providing the above disclosure, the details should not be
included for those companies whose names were struck off during the
financial year but an order had been passed by any adjudicating authority
(for e.g., NCLT) restoring the company’s name before approval of the
financial statements.
The illustrative format is as given below:
Name of Nature of Balance Relationshi Balance Relationshi
the transaction outstandin p with the outstandin p with the
struck off struck off
struck s with g as at company, if g as at company, if
off struck off current any, to be previous any, to be
company period disclosed period disclosed
compan
y
Investment
in securities
Receivables
Payables
Shares held
by struck off
company
Other
outstanding
balances (to
be
specified)
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(xii) Registration of charges or satisfaction with Registrar of
Companies (ROC)
Where any charges or satisfaction yet to be registered with ROC beyond the
statutory period, details and reasons thereof shall be disclosed.
The Company shall provide the details in relation to each charge or
satisfaction that are not registered by the statutory date. Such details may
include a brief description of the charges or satisfaction, the location of the
Registrar, the period (in days or months) by which such charge had to be
registered and the reason for delay in registration.
(xiii) 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.
(xiv) Analytical Ratios
Following analytical ratios need to be disclosed:
(a) Capital to risk-weighted assets ratio (CRAR)
(b) Tier I CRAR
(c) Tier II CRAR
(d) Liquidity Coverage Ratio
An illustrative format for this disclosure is given below:
Ratio Numera Denomi Current Previou % Reason
tor nator Period s Period Varianc for
Capital to
risk-weighted e varianc
assets ratio e (if
(CRAR) above
Tier I CRAR 25%)
Tier II CRAR
Liquidity
Coverage
Ratio.
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The items that are considered as part of the numerator and as part of the
denominator should be such that a reference to the respective line item in
the financial statements or notes could be easily drawn. Such items should
be consistent for the periods presented and should also be consistent with
the industry practice from time to time. In other words, if there is any change
in the current period in relation to any item in the numerator or denominator
for any ratio, then the same change shall be made for the comparative period
as well and a footnote shall be added to explain the change in the item along
with the reason thereof.
In order to determine the items to be included in numerator and in
denominator for any ratio, reference may be drawn from several sources for
e.g., regulatory notification / guidelines / circulars, ratio’s usage in common
parlance, investor reports, industry reports, market research reports,
approach of credit rating agencies, etc. There may be a need to factor in
company-specific and sector-specific nuances that may require necessary
modifications to the reference considered.
Ratios presented in any other place in annual report should be consistent
with the ratios mentioned in financial statement.
Also ratios should be consistent with the formulas prescribed by the
applicable regulatory bodies and as updated by the regulatory bodies from
time to time.
(xv) 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.
This requirement shall be applicable for schemes that have been approved
earlier and have an ongoing accounting impact as on the date of current or
comparative period financial statements where such requirements are
applied.
Section 232 of the Companies Act, 2013 contains requirement that no
compromise or arrangement shall be sanctioned by the competent authority
unless a certificate by the company’s auditor has been filed to the effect that
the accounting treatment, if any, proposed in the scheme of compromise or
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arrangement is in conformity with the accounting standards prescribed under
section 133 of the Companies Act, 2013.
Further, where a law requires a different treatment, accounting standards are
considered to be overruled to that extent. A scheme of arrangement
sanctioned by the competent authority under prevalent laws will have effect
of overriding requirements of the accounting standards where differing
requirements are present in sanctioned scheme vis-à-vis the requirement of
the relevant accounting standards.
Where an approved Scheme of Arrangement proposes an accounting
treatment that is given effect in the Company’s books of accounts, then a
disclosure shall be made that the effect of the Scheme of Arrangement in the
books of accounts is ‘in accordance with the Scheme’ and ‘in accordance
with accounting standards’. If there is any deviation between the accounting
treatment given in the Scheme and as per the accounting standards, then the
fact shall be stated along with an explanation of the deviation.
(xvi) Utilisation of Borrowed funds and share premium
(A) Where company has advanced or loaned or invested funds (either
borrowed funds or share premium or any other source 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.
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(IV) declaration that relevant provisions of the Foreign Exchange
Management Act, 1999 (42 of 1999) and the 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 to or 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 in
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).
The term Intermediary is not defined in the Act. The identification of any
other person(s) or entity(ies), including foreign entities as an intermediary
shall be made on the basis of their objective of receiving funds by way of
advance or loan or investment from the company with the understanding that
they / it shall
(i) directly (i.e. without any further intermediaries) or indirectly (i.e.
through further intermediaries) lend or invest in other persons or
entities identified in any manner whatsoever by or on behalf of the
company (Ultimate Beneficiaries); or
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(ii) provide any guarantee (viz. corporate, bank, personal or any other
form of guarantee), security or the like (i.e. it may include any assets,
comfort letter, Letter of Credit, Buyers credit, promissory note etc.) to
or on behalf of the Ultimate Beneficiaries,
The ultimate beneficiary is the company (irrespective of single intermediary
or multiple intermediaries used in the layer), when disclosure is to be made
for the utilisation of funds.
The term Funding Party is not defined in the Act. The identification of any
person(s) or entity(ies), including foreign entities as a Funding Party shall be
made on the basis of their objective of providing funds to the company with
the understanding that they / it shall
(i) directly (i.e. without any further funding party) or indirectly (i.e. through
further funding party) 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 (viz. corporate, bank, personal or any other
form of guarantee), security or the like (i.e. it may include any assets,
comfort letter, Letter of Credit, Buyers credit, promissory note etc.) to
or on behalf of the Ultimate Beneficiaries,
The ultimate beneficiary is the funding party (in case of single layer) or the
ultimate funding party (in case of multiple layers), when disclosure is to be
made for the receipt of funds.
This disclosure requires company to cover transactions that do not take
place directly between the company and the ultimate beneficiary but are
camouflaged by including a pass- through entity in order to hide the ultimate
beneficiary. The pass-through entity acts on the instructions of the company
for channelling the funds to the ultimate beneficiary as identified by the
company. It might be noted that the reporting obligation includes inbound as
well as outbound funding transactions. It is implied that advances given or
received in the ordinary course of business (e.g., advance to employees,
advance to customers or suppliers against provision of goods or services,
etc.) shall not be covered as part of this disclosure requirement.
For the purpose of this disclosure, the company may restrict to disclose only
the pass through transactions during the current year i.e. for the funds
received on or after 01.4.2021 and the amounts unutilized as on 01.04.2021
which are now utilized in the current year.
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When providing this disclosure, the term ‘complete details’ used at various
places would mean that details of each particular party / entity should include
the name, registered address, any government identification number (for
e.g., PAN, SSN, CIN etc.) and relationship with the company making the
disclosure.
The term ‘with the understanding (whether recorded in writing or otherwise)’
shall be construed basis appropriate evidences for e.g., board or shareholder
resolutions, investment agreements, share purchase agreements, term
sheets, or any other relevant / appropriate documents evidencing such an
understanding either specifically in writing or otherwise (i.e. not specifically
but through the objective / understanding of the overall transaction / flow of
funds).
EQUITY
8.2.13 Equity
Under this head, following line items are to be disclosed on the face of the
Balance Sheet:
• Equity Share Capital and
• Other Equity;
Division III to Schedule III, Part I – Format of Balance Sheet, includes not
only the format of Balance Sheet but also includes a ‘Statement of Changes
in Equity’ comprising (A) Equity Share Capital and (B) Other Equity.
Presentation and Disclosures for both of these are included in Note (S) and
(T) to General Instructions for Preparation of Balance Sheet.
In the Statement of Changes in Equity, the portion for ‘Equity Share Capital’
provides reconciliation for current/previous reporting period:
(a) Balance at the beginning of the current / previous reporting period;
(b) Changes in equity share capital due to prior period errors;
(c) Restated balance at the beginning of the current/previous reporting
period,
(d) Changes in Equity share capital during the current/previous year;
(e) Balance at the end of the current/previous reporting period.
As a part of Statement of Changes in Equity, the portion for ‘Other Equity’
requires an entity to provide a reconciliation during a particular reporting
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period, as a part of one single statement, of all items other than equity share
capital, that are attributable to the holders of equity instruments of an entity.
The items included in columnar form are listed below:
(a) Share application money pending allotment;
(b) Equity component of compound financial instruments;
(c) Reserves and Surplus:
(i) Capital Reserve;
(ii) Securities Premium;
(iii) Other Reserves (specify nature);
(iv) Retained Earnings;
(d) Debt instruments at fair value through other comprehensive income;
(e) Equity instruments at fair value through other comprehensive income;
(f) Effective portion of Cash Flow Hedges;
(g) Revaluation Surplus;
(h) Exchange differences on translating the financial statements of a
foreign operation;
(i) Other items of other comprehensive income (specify nature);
(j) Money received against share warrants;
(k) Non-controlling interests (for Statement of Changes in Equity of
Consolidated Financial Statements)
The reconciliation of above line items needs to be provided for
current/previous reporting period by way of the following line items:
(i) Balance at the beginning of the current / previous reporting period;
(ii) Changes in accounting policy or prior period errors;
(iii) Restated balance at the beginning of the current/previous reporting
period;
(iv) Total comprehensive income for the current / previous year;
(v) Dividends;
(vi) Transfer to retained earnings;
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(vii) Any other change (to be specified);
(viii) Balance at the end of the current/previous reporting period.
Reconciliation as described in Paragraph 109 of Ind AS 1 provides that,
“changes in an entity’s equity between the beginning and the end of the
reporting period reflect the increase or decrease in its net assets during the
period. Except for changes resulting from transactions with owners acting in
their capacity as owners (such as equity contributions, reacquisitions of the
entity’s own equity instruments and dividends) and transaction costs directly
related to such transactions, the overall change in equity during a period
represents the total amount of income and expenses, including gains and
losses, generated by the entity’s activities during that period.”
Schedule III provides two options for presentation of re-measurement of
defined benefit plans and fair value changes relating to own credit risk of
financial liabilities designated at fair value through profit or loss:
(i) recognise as a part of retained earnings with separate disclosure of
such items along with the relevant amounts in the Notes
(ii) shown as a separate column under Reserves and Surplus
The above two items are initially taken to Other Comprehensive Income
in the Statement of Profit and Loss.
8.2.14. Equity Share Capital
8.2.14.1 Notes to the General Instructions for Preparation of Balance Sheet
require a company to disclose in the Notes items referred to in Note (S).
Such disclosures are required for each class of equity share capital. The
disclosure requirements for share capital are common under Non-Division III
to Schedule III as well as Division III to Schedule III. However, Division III
restricts the disclosures to ‘Equity’ while Division I makes it applicable to all
kinds of ‘Share Capital’ but states an exception that different classes of
preference shares are to be treated separately.
8.2.14.2 As per ICAI Glossary of Terms Used in Financial Statements,
‘Capital’ is defined as “Under a financial concept of capital, such as invested
money or invested purchasing power, capital is synonymous with the net
assets or equity of the enterprise. Under a physical concept of capital, such
as operating capability, capital is regarded as the productive capacity of the
enterprise based on, for example, units of output per day”
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8.2.14.3 The said Guidance Note defines ‘Share Capital’ as the “aggregate
amount of money paid or credited as paid on the shares and/or stocks of a
corporate enterprise.”
8.2.14.4 Section 2(84) of the Act defines “share” as “a share in the share
capital of a company and includes stock”. While, section 2(30) of the Act
defines “debenture” to “include debenture stock, bonds or any other
instrument of a company evidencing a debt, whether constituting a charge on
the assets of the company or not”. Further, section 43 of the Act gives two
kinds of share capital of a company limited by shares viz.,
(a) Equity share capital;
(b) Preference share capital.
8.2.14.5 On the other hand, Ind AS 32 defines an equity instrument as “any
contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities”. The accounting definition of ‘Equity’ is principle
based as compared to the legal definition of ‘Equity’ or ‘Share’, such that any
contract that evidences residual interest in an entity’s net assets is termed as
‘Equity’ irrespective of whether it is legally recognized as a ‘Share’ or not.
Accordingly, all instruments (including convertible preference shares and
convertible debentures) that meet the definition of ‘Equity’ as per Ind AS 32
in its entirety and when they do not have any component of liability, should
be considered as having the nature of ‘Equity’ for the purpose of Division III
to Schedule III. Such instruments shall be termed as ‘Instruments entirely
equity in nature’.
As per Paragraph 11 of Ind AS 32 “The issuer of a financial instrument shall
classify the instrument, or its component parts, on initial recognition as a
financial liability, a financial asset or an equity instrument in accordance with
the substance of the contractual arrangement and the definitions of a
financial liability, a financial asset and an equity instrument.” A preference
share, for example, may display either equity or liability characteristics
depending on the substance of the rights attaching to it.
8.2.14.6 Instruments entirely equity in nature, may be presented as a
separate line item on the face of the Balance Sheet under ‘Equity’ after
‘Equity Share Capital’ but before ‘Other Equity’, as shown below:
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Name of the Company……….
Balance Sheet as at……………
(Rupees in………….)
Particulars Note Figures Figures
as at the as at the
No. end of end of
current previous
reporting reporting
period period
EQUITY AND LIABILITIES
Equity
(a) Equity Share Capital
(b) Instruments entirely equity in
nature
(c) Other Equity
In the Statement of Changes in Equity, the reconciliation for instruments
entirely equity in nature should be presented as below:
STATEMENT OF CHANGES IN EQUITY
Name of the Company………………….. (Rupees in……………)
A. Equity Share Capital
(1) Current reporting period
Balance at Changes in Restated Changes in Balance at the
balance at equity share end of the
the Equity Share the capital during current
beginning the current reporting
beginning Capital due of the year period
current
of the to prior reporting
period
current period errors
reporting
period
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(2) Previous reporting period
Balance at Changes Restated Changes Balance at
the in Equity balance at in equity the end of
beginning Share the share the previous
of the Capital beginning capital reporting
previous due to of the during the period
reporting prior previous previous
period reporting year
period errors
period
B. Instruments entirely equity in nature *
(a) Compulsorily Convertible Preference Shares
Balance at the Changes in Restated Changes in Balance at the
beginning of compulsorily balance compulsorily end of the
the current convertible at the convertible current
reporting preference beginning preference reporting
period shares due of the shares during period
to prior current the current
period reporting year
errors period
(b) Compulsorily Convertible Debentures
Balance at the Changes in Restated Changes in Balance at
beginning of compulsorily balance compulsorily the end of the
the current convertible at the convertible current
reporting debenture beginning debentures reporting
period due to prior of the during the period
period current current year
errors reporting
period
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(c) [Instrument] (Any other instrument entirely equity in nature)
Balance at the Changes Restated Changes in Balance at the
beginning of in balance end of the
the current Instrument at the [Instrument] reporting
reporting due to beginning period
period prior of the during the
period current
errors reporting period
period
Similar reconciliation needs to be provided for previous year as well.
C. Other Equity
[Table providing reconciliation of Other Equity]
* It is assumed that Instruments entirely equity in nature have such terms and
conditions that qualify them for being entirely equity in nature based on the
criteria given in Paragraph 16 of Ind AS 32. It is assumed that Compulsorily
Convertible Preference Shares and Compulsorily Convertible Debentures in
the above illustrative disclosure qualify for classification as entirely equity;
however, companies should assess terms and conditions specific to their
instruments for deciding whether they are entirely equity in nature.
All the disclosures as required by Note (S) to General Instructions in
Preparation of Balance Sheet shall be provided for all instruments entirely
equity in nature, to the extent applicable.
8.2.14.7 Premium received on Compulsorily Convertible Preference Shares
which are entirely equity in nature shall be classified and presented as a part
of ‘Other Equity’ under ‘Securities Premium’.
8.2.14.8 As per Paragraph 28 of Ind AS 32, “The issuer of a non-derivative
financial instrument shall evaluate the terms of the financial instrument to
determine whether it contains both a liability and an equity component. Such
components shall be classified separately as financial liabilities, financial
assets or equity instruments in accordance with paragraph 15”. Hence, all
those compound financial instruments which have both ‘Equity’ and ‘Liability’
components, shall be split and their ‘Equity component’ shall be presented
under ‘Other Equity’ portion of Statement of Changes in Equity while their
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‘Liability component’ shall be presented as a separate line item under either
‘Debt Securities’ or ‘Borrowings’.
8.2.14.9 Division III to Schedule III, Notes 3 and 4 of Other Classification
related General Instructions highlight that the disclosure and presentation
requirements as applicable to the relevant class of ‘Equity’ or ‘Liability’ shall
be applicable mutatis mutandis to the instruments (including, their
components) classified and presented under the relevant heads in ‘Equity’
and ‘Liabilities’. Accordingly, it is recommended that the companies provide
all the relevant disclosures for ‘Equity component of a compound financial
instruments’ as applicable to ‘Equity Share Capital’ (given in Note (S) of
General Instructions for Preparation of Balance Sheet), to the extent
applicable. An example could be to disclose, for equity component of a
compound financial instrument, terms as per Clause (j) (referred to in Para
no. 8.2.14.19 at Pg 92) i.e. terms of any securities convertible into equity
shares issued along with the earliest date of conversion in descending order
starting from the farthest such date, etc. For the liability component of
compound financial instruments, all the disclosures applicable to ‘Debt
Securities’ and ‘borrowings’ (refer Paragraph 8.2.2 and 8.2.3) shall be made,
to the extent applicable. An example could be to disclose the rate of interest,
particulars of redemption or conversion stated in descending order of
maturity or conversion, etc. However, for those instruments which are entirely
liability in nature, all disclosures applicable to ‘Borrowings’ or ‘Debt
Securities’ should be made.
8.2.14.10 Clause (a) of Note (S) - the number and amount of shares
authorized:
As per the ICAI’s Glossary of Terms Used in Financial Statements,
‘Authorised Share Capital’ or “nominal capital” means such capital as is
authorised by the memorandum of a company to be the maximum amount of
share capital of the company”
This disclosure is to be provided for instruments entirely equity in nature as
well as for compound instruments that have an equity component, to the
extent applicable.
8.2.14.11 Clause (b) of Note (S) - the number of shares issued,
subscribed and fully paid, and subscribed but not fully paid:
The disclosure is for shares:
• Issued;
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• Subscribed and fully paid;
• Subscribed but not fully paid.
Though the disclosure is only for the number of shares under each of the
above three categories, to make the disclosure relevant to understanding the
company’s share capital, even the amount for each category above should
be disclosed. Issued shares are those which are offered for subscription
within the authorised limit. It is possible that all shares offered are not
subscribed to and to the extent of unsubscribed portion, there will be
difference between shares issued and subscribed. As per the ICAI’s Glossary
of Terms Used in Financial Statements, the expression ‘Subscribed Share
Capital’ means “such part of the capital which is for the time being
subscribed by the members of a company;”
Though there is no requirement to disclose the amount per share called, if
shares are not fully called, it should be appropriate to state the amount per
share called.
As per the definition contained in the Glossary of Terms Used in Financial
Statements, the expression ‘Paid-up Share Capital’ or “share capital paid-up”
means “such aggregate amount of money credited as paid-up as is
equivalent to the amount received as paid up in respect of shares issued and
also includes any amount credited as paid-up in respect of shares of the
company, but does not include any other amount received in respect of such
shares, by whatever name called”
This disclosure is to be provided for instruments entirely equity in nature as
well as for compound instruments that have an equity component, to the
extent applicable.
8.2.14.12 Clause (c) of Note (S) – par value per share:
Par value per share is the face value of a share as indicated in the Capital
Clause of the Memorandum of Association of a company. It is also referred
to as ‘face value’ per share. In the case of a company having share capital,
(unless the company is an unlimited company), the Memorandum shall also
state the amount of share capital with which the company is registered and
their division thereof into shares of fixed amount as required under clause
(e)(i) to the sub-section (1) of section 4 of the Act. In the case of a company
limited by guarantee, Memorandum shall state that each member undertakes
to contribute to the assets of the company in the event of winding-up while
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he is a member or within one year after he ceases to be a member, for
payment of debts and liabilities of the company, as the case may be. There is
no specific mention for the disclosure by companies limited by guarantee and
having share capital, and companies limited by guarantee and not having
share capital. Such companies need to consider the requirement so as to
disclose the amount each member undertakes to contribute as per their
Memorandum of Association.
This disclosure is to be provided for instruments entirely equity in nature as
well as for compound instruments that have an equity component, to the
extent applicable.
8.2.14.13 Clause (d) of Note (S)– a reconciliation of the number of
shares outstanding at the beginning and at the end of the reporting
period:
As per Division III to Schedule III, opening number of shares outstanding,
shares issued, shares bought back, other movements, etc. during the year
and closing number of outstanding shares should be shown. Though the
requirement is only for a reconciliation of the number of shares, as given for
the disclosure of issued, subscribed capital, etc. [Clause (b) of Note (S)]
above, to make the disclosure relevant for understanding the company’s
share capital, the reconciliation is to be given even for the amount of share
capital. Reconciliation for the comparative previous period is also to be
given. Further, the above reconciliation should be disclosed separately for
each class of Equity Shares issued.
This disclosure is to be provided for instruments entirely equity in nature.
Also, for compound instruments having both equity and liability components,
the reconciliation should be given for total number of shares / debentures
outstanding, which will facilitate understanding the movement of compound
instruments upon either redemption or conversion or when both occur partly.
8.2.14.14 Clause (e) of Note (S)– the rights, preferences and restrictions
attaching to each class of shares including restrictions on the
distribution of dividends and the repayment of capital:
As per the
ICAI’s Glossary of Terms Used in Financial Statements, the expression
‘Preference Share Capital’ refers to “a preference share is a share carrying
preferential rights to dividends and repayment of capital.”
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The Glossary of Terms used in Financial Statement has also defined the
expression ‘Preference Share Capital” as ‘‘preference share capital’’, with
reference to any company limited by shares, means that part of the issued
share capital of the company which carries or would carry a preferential right
with respect to—
(a) payment of dividend, either as a fixed amount or an amount calculated at
a fixed rate, which may either be free of or subject to income-tax; and
(b) repayment, in the case of a winding up or repayment of capital, of the
amount of the share capital paid-up or deemed to have been paid-up,
whether or not, there is a preferential right to the payment of any fixed
premium or premium on any fixed scale, specified in the memorandum or
articles of the company;”
The rights, preferences and restrictions attached to shares are based on the
classes of shares, terms of issue, etc., whether equity or preference. In
respect of Equity Share Capital, it may be with voting rights or with
differential voting rights as to dividend, voting or otherwise in accordance
with such rules and subject to such conditions as may be prescribed under
Companies (Share Capital and Debentures) Rules, 2014. In respect of
Preference Shares, the rights include (a) with respect to dividend, a
preferential right to be paid a fixed amount or at a fixed rate and, (b) with
respect to capital, a preferential right of repayment of amount of capital on
winding up. For Compulsorily Convertible Debentures, the rights could be
with the holder to convert into Equity Shares.
This disclosure is to be provided for instruments entirely equity in nature as
well as for compound instruments that have an equity component, to the
extent applicable.
8.2.14.15 Clause (f) of Note (S)– shares in respect of each class in the
company held by its holding company or its ultimate holding company
including shares held by subsidiaries or associates of the holding
company or the ultimate holding company in aggregate:
The requirement is to disclose shares of the company held by -
• Its holding company;
• Its ultimate holding company;
• Subsidiaries of its holding company;
• Subsidiaries of its ultimate holding company;
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• Associates of its holding company; and
• Associates of its ultimate holding company.
Aggregation should be done for each of the above categories.
The terms ‘subsidiary’ and ‘associate’ should be understood as defined
under Ind AS 110 and Ind AS 28. The term ‘holding company’ is not defined
in Ind AS, therefore, it may be referred from the definition as per Section 2
(46) of the Act. The equivalent term ‘parent’ is defined in Ind AS 110.
Notwithstanding the aforesaid definitions, for the purposes of the above
disclosures, shares held by the entire chain of subsidiaries and associates
starting from the holding company and going right up to the ultimate holding
company would have to be disclosed.
In case of a joint arrangement viz., a joint venture or a joint operation
conducted through a separate legal entity, disclosure may be made for
shares of such joint arrangement held by its venturers.
This disclosure is to be provided for instruments entirely equity in nature, to
the extent applicable.
8.2.14.16 Clause (g) of Note (S)–shares in the company held by each
shareholder holding more than 5 percent shares specifying the number
of shares held:
In the absence of any specific indication of the date of holding, the date for
computing such percentage should be taken as the Balance Sheet date. For
example, if during the year, any shareholder held more than 5% Equity
shares but does not hold as much at the Balance Sheet date, disclosure is
not required. Though it is not specified as to whether the disclosure is
required for each class of shares or not, companies should disclose the
shareholding for each type of Equity Instruments. Accordingly, such
percentage should be computed separately for each class of shares
outstanding within Equity Shares. This information should also be given for
the comparative previous period.
This disclosure is to be provided for instruments entirely equity in nature, to
the extent applicable.
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8.2.14.17 Clause (h) of Note (S)– shares reserved for issue under
options and contracts or commitments for the sale of shares or
disinvestment, including the terms and amounts:
Shares under options generally arise under promoters or collaboration
agreements, loan agreements or debenture deeds (including convertible
debentures), agreement to convert preference shares into equity shares,
ESOPs or contracts for supply of capital goods, etc. The disclosure would be
required for the number of shares, amounts and other terms for shares so
reserved. Such options are in respect of unissued portion of share capital.
This disclosure is to be provided for instruments entirely equity in nature as
well as for compound instruments that has an equity component and liability
component, to the extent applicable.
8.2.14.18 Clause (i) of Note (S) – For the period of five years
immediately preceding the date as at which the Balance Sheet is
prepared: (a) Aggregate number and class of shares allotted as fully
paid up pursuant to contract(s) without payment being received in cash.
(b) Aggregate number and class of shares allotted as fully paid up by
way of bonus shares. (c) Aggregate number and class of shares bought
back:
(a) Aggregate number and class of shares allotted as fully paid up
pursuant to contract(s) without payment being received in cash.
The following illustrate the allotments which are considered as shares
allotted for payment being received in cash and not as without
payment being received in cash and accordingly, the same are not to
be disclosed under this Clause:
(i) If the subscription amount is adjusted against a bona fide debt
payable in money at once by the company;
(ii) Conversion of loan into shares in the event of default in
repayment.
(b) Aggregate number and class of shares allotted as fully paid up by way
of bonus shares.
As per the Glossary of Terms Used in Financial Statements, ‘Bonus
shares’ are defined as shares allotted by capitalisation of the reserves
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or surplus of a corporate enterprise. The requirement of disclosing the
source of bonus shares is omitted in Schedule III.
(c) Aggregate number and class of shares bought back.
The total number of shares bought back for each class of shares
needs to be disclosed.
All the above details pertaining to aggregate number and class of shares
allotted for consideration other than cash, bonus shares and shares bought
back need to be disclosed only if such event has occurred during a period of
five years immediately preceding the Balance Sheet date. Since disclosure is
for the aggregate number of shares, it is not necessary to give the year-wise
break-up of the shares allotted or bought back, but the aggregate number for
the last five financial years needs to be disclosed.
This disclosure is to be provided for instruments entirely equity in nature, to
the extent applicable.
8.2.14.19 Clause (j) of Note (S)– Terms of any securities convertible into
equity/preference shares issued along with the earliest date of
conversion in descending order starting from the farthest such date:
Under this Clause, disclosure is required for any security, when it is either
convertible into equity or preference shares. In this case, terms of such
securities and the earliest date of conversion are required to be disclosed. If
there are more than one date of conversion, disclosure is to be made in the
descending order of conversion. If the option can be exercised in different
periods then earlier date in that period is to be considered. In case of
compulsorily convertible securities, where conversion is done in fixed
tranches, all the dates of conversion have to be considered. Terms of
convertible securities are required to be disclosed under this Clause.
However, in case of Convertible debentures/bonds, etc., for the purpose of
simplification, reference may also be made to the terms disclosed under the
note on borrowings where these are required to be classified in the Balance
Sheet, rather than disclosing the same again under this clause.
This disclosure is to be provided for instruments entirely equity in nature and
compound instruments that have an equity component and a liability
component. In other words, this disclosure is not required for instruments
entirely liability in nature (for e.g., those instruments which entirely meet the
definition of a financial liability as per Paragraph 11 of Ind AS 32) since
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similar disclosure needs to be provided as a part of ‘Borrowings’.
Accordingly, duplication of disclosures is not intended.
8.2.14.20 Clause (k) of Note (S) - Calls unpaid (showing aggregate value
of calls unpaid by directors and officers):
A separate disclosure is required for the aggregate value of calls unpaid by
directors and also officers of the company.
However, the unpaid amount towards shares subscribed by the subscribers
of the Memorandum of Association should be considered as 'subscribed and
paid-up capital' in the Balance Sheet and the debts due from the subscriber
should be appropriately disclosed as an asset in the balance sheet.
This disclosure is to be provided for instruments entirely equity in nature, to
the extent applicable.
8.2.14.21 Clause (m) of Note (S) - An NBFC shall disclose information
that enables users of its financial statements to evaluate the NBFC’s
objectives, policies and processes for managing capital.
Paragraph 134 of Ind AS 1 also requires an entity to disclose information that
enables users of its financial statements to evaluate the entity’s objectives,
policies and processes for managing capital. Hence guidance as stated in
Paragraph 135 and 136 of Ind AS 1 may be referred upon for this disclosure.
8.2.14.22 Clause (n) of Note (S) - Disclosure of Shareholding of
Promoters
For the purpose of disclosure, promoter definition should be considered as
per the Companies Act, 2013. The prescribed format requires disclosure only
in respect of shares held at the end of the year, however, companies should
also disclose number and percentage of shares at the beginning of the year
as additional columns in order to facilitate an understanding of the
percentage change during the year.
Percentage change during the year needs to be computed with respect to
shares held at the beginning of the year or where shares have been issued
for the first time during the reporting period, such percentage change needs
to be computed from date of such issuance. For e.g., if the shares have been
issued for the first time in the month of August; then the opening date should
be construed from August rather than April, which implies that if from the
month of August till March there has been no change, then the % change will
be shown as “NIL”.
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This disclosure shall be made separately for each class of shares
outstanding, similar to the disclosure made for shareholders under other
clauses (for e.g., clause (g) of Note 6(D)(I)).
The percentage of total shares for a particular class of shares should be
calculated considering the total number of shares issued by the Company for
that particular class.
This disclosure is to be provided for instruments entirely equity in nature, to
the extent applicable.
In case of restatement due to prior period error, the column/line items
‘balance at the beginning of the current reporting period/previous reporting
period’ in the statement of changes in equity shall include the balances as
originally presented in the previous years’ financial statements. The
adjustments on account of correction of prior period errors should be
included in the column/line items ‘changes due to prior period errors’ to arrive
at restated balance at the beginning of respective period.
8.2.15 Other Equity
Note (T) of the General Instructions for Preparation of Balance Sheet deals
with the disclosures of “Other Equity” in the Notes. Disclosure should be
made for the nature and amount of each item.
Disclosures in ‘Other Equity’ are required to be made for the following:
(i) Share application money pending allotment
Share Application money pending allotment is to be disclosed as a
separate line item under Other Equity. Note 2 of Other Classification
related General Instructions states that share application money
pending allotment shall be classified into equity or liability in
accordance with relevant Ind AS. Share application money to the
extent not refundable shall be shown in this line item and share
application money to the extent refundable shall be separately shown
under ‘other financial liabilities’.
(ii) Equity component of compound financial instruments
For compound financial instruments that have both equity as well as
liability component, Ind AS 32 requires splitting the two components
and separately recognizing ‘equity component of compound financial
instrument’. Such equity component is required to be presented as a
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part of ‘Other Equity’ under this head. On the other hand, the ‘liability
component of compound financial instrument’ is required to be
presented as a part of ‘Borrowings’ (refer Paragraph 8.2.3 at Pg 44.).
For recommended disclosures for equity component of compound
financial instruments, refer to the guidance given in Paragraph
8.2.14.8 (Pg 85).
(iii) Reserves and Surplus – these shall be further disclosed as (discussed
in Paragraph 8.2.15.1 at Pg 97):
(a) Capital Reserve;
(b) Securities Premium;
(c) Other Reserves
(i) Capital Redemption Reserve;
(ii) Debenture Redemption Reserve;
(iii) Share Options Outstanding Account;
(iv) Statutory Reserves;
(v) Others – (specify the nature and purpose of each reserve
and the amount in respect thereof);
(d) Retained Earnings.
(iv) Debt Instruments through Other Comprehensive Income –
As per Ind AS 109, investments are subsequently measured at FVOCI
based on the company’s business model for managing the portfolio of
debt instruments as well as the debt instruments’ contractual cash flow
characteristics. Any fair value gain or loss on debt instruments
measured at FVOCI is presented as a part of Other Equity under this
heading until the debt instrument is derecognized;
(v) Equity Instruments through Other Comprehensive Income –
As per Ind AS 109, companies have an irrevocable option to designate
investments in equity instruments to be measured at FVOCI. For such
instruments, the cumulative fair value gain or loss is presented as a
part of Other Equity under this heading;
(vi) Effective portion of Cash Flow Hedges –
For all qualifying cash flow hedges, this component of Other Equity
associated with the hedged item (i.e. cash flow hedge reserve) is
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adjusted to the lower of the cumulative change in the fair value of the
hedging instrument and the cumulative change in the fair value of the
hedged item attributable to the hedged risk. The portion of the gain or
loss on the hedging instrument that is determined to be an effective
hedge (i.e. the portion that is offset by the change in the cash flow
hedge reserve) is recognized in Other Comprehensive Income. Also,
Ind AS 109 requires that exchange differences on monetary items that
qualify as hedging instruments in a cash flow hedge are recognized
initially in other comprehensive income to the extent that the hedge is
effective;
(vii) Revaluation Surplus –
As per Ind AS 16 and Ind AS 38, if an asset’s carrying amount is
increased as a result of revaluation, the increase shall be recognized
in other comprehensive income and accumulated in equity under the
heading of revaluation surplus. However, such increase shall be
recognized in profit or loss to the extent that it reverses a revaluation
decrease of the same asset previously recognized in profit or loss.
Correspondingly, decreases as a result of revaluation are recognized
in other comprehensive income thereby reducing the amount
accumulated under this heading of revaluation surplus, to the extent of
any credit balance existing in the revaluation surplus in respect of that
asset.
(viii) Exchange differences on translating the Financial Statements of a
foreign operation –
In accordance with Ind AS 21 The Effects of Changes in Foreign
Exchange Rates, the exchange differences arising on translation of the
financial statements of foreign operation from functional currency to
presentation currency needs to be included in this head of OCI.
(ix) Other items of Other Comprehensive Income (specific nature)
Any other items that need to be presented in Other Comprehensive
Income as per the relevant Ind AS shall be included under this head of
Other Comprehensive Income.
Refer Paragraph 8.2.15.3 (Pg 100) for guidance on presentation of ‘re-
measurement of defined benefit plans’.
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(x) Money received against share warrants
Generally, in case of listed companies, share warrants are issued to
promoters and others in terms of the Guidelines for preferential issues
viz., SEBI (Issue of Capital and Disclosure Requirements), Guidelines,
2009. Ind AS 33, Earnings per Share, defines ‘warrants’ as “financial
instruments which give the holder the right to acquire equity shares”.
Thus, effectively, warrants are nothing but the amount which would
ultimately form part of the Shareholders’ funds. Since shares are yet to
be allotted against the same, these are not reflected as part of Share
Capital but as a separate line item – ‘Money received against share
warrants.’
8.2.15.1 Reserves & Surplus:
Ind AS 103, Appendix C on Business Combinations under Common Control
defines the term ‘Reserve’ as “the portion of earnings, receipts or other
surplus of an entity (whether capital or revenue) appropriated by the
management for a general or a specific purpose other than a provision for
depreciation.” ‘Reserves’ should be distinguished from ‘provisions’. For this
purpose, reference may be made to the definition of the term ‘provision’ in
Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets.
As per Ind AS 37, a ‘provision’ is “a liability of uncertain timing or amount”. A
‘liability’ is “a present obligation of the entity arising from past events, the
settlement of which is expected to result in an outflow from the entity of
resources embodying economic benefits.” ‘Present obligation’ – “an
obligation is a present obligation if, taking account of all available evidence, it
is more likely than not that a present obligation exists at the end of the
reporting period”.
(a) Capital Reserves:
It is necessary to make a distinction between capital reserves and revenue
reserves in the accounts. A revenue reserve is a reserve which is available
for distribution. The term “Capital Reserve” has not been defined under
Division III to Schedule III. However, as per the ICAI’s Glossary of Terms
Used in Financial Statements, the expression ‘capital reserve’ is defined as
“a reserve of a corporate enterprise which is not available for distribution as
dividend”. Though Division III to Schedule III does not have the requirement
of “transferring capital profit on reissue of forfeited shares to capital reserve”,
since profit on re-issue of forfeited shares is basically transaction with the
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shareholders / owners of the entity, it should be recognized in equity as a
credit to Capital Reserve.
A gain on bargain purchase arising in a business combination where clear
evidence of the underlying reasons does not exist, shall be recognized
directly in equity as Capital Reserve as per Paragraph 36 of Ind AS 103.
Further as per Paragraph 34 of Ind AS 103 where clear evidence of the
underlying reasons exists the acquirer shall recognise the resulting gain in
other comprehensive income on the acquisition date and accumulate the
same in equity as capital reserve.
(b) Securities Premium:
The Glossary of Terms Used in Financial Statements defines ‘Share
Premium’ as “the excess of the issue price of shares over their face value.”
Other Reserves (specify the nature and purpose of reserve and the
amount in respect thereof):
Every other reserve which is not covered in above paragraphs is to be
reflected as ‘Other Reserves’. However, since the nature, purpose and the
amount are to be shown, each reserve under ‘Other Reserves’ is to be
shown separately in Notes to Accounts. This would include e.g., reserves to
be created under other statutes.
(i) Capital Redemption Reserve:
Under the Act, Capital Redemption Reserve is required to be created
in the following two situations:
(a) Under the provisions of Section 55 of the Act, where the
redemption of preference shares is out of profits, an amount
equal to nominal value of shares redeemed is to be transferred
to a reserve called ‘capital redemption reserve’.
(b) Under Section 69 of the Act, if the buy-back of shares is out of
free reserves, the nominal value of the shares so purchased is
required to be transferred to capital redemption reserve from
distributable profit.
(ii) Debenture Redemption Reserve:
According to Section 71 of the Act where a company issues
debentures, it is required to create a debenture redemption reserve for
the redemption of such debentures. The company is required to credit
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adequate amounts, out of its profits every year to debenture
redemption reserve, until such debentures are redeemed.
On redemption of the debentures for which the reserve is created, the
amounts no longer necessary to be retained in this account need to be
transferred to the Retained Earnings. The Ministry of Corporate Affairs
on 19th August 2019 has amended the Companies (Share Capital &
Debentures) Rules by removing Debenture Redemption Reserve
requirement for Listed Companies, NBFCs and HFCs.
(iii) Share Options Outstanding Account:
Division III to Schedule III requires Share Options Outstanding
Account to be shown as a part of ‘Reserves and Surplus’ under ‘Other
Reserves’.
(iv) Statutory Reserves:
Division III to Schedule III requires Statutory Reserves to be shown as
a part of ‘Reserves and Surplus’ under ‘Other Reserves’. For instance,
Section 29C (i) of The National Housing Bank Act, 1987 defines that
every housing finance institution which is a Company shall create a
reserve fund and transfer therein a sum not less than twenty percent
of its net profit every year as disclosed in the statement of profit and
loss before any dividend is declared. For this purpose, any special
reserve created by the Company under Section 36(1) (viii) of Income
tax Act 1961, is considered to be an eligible transfer.
Similarly, section 45-IC of Reserve Bank of India Act, 1934 requires
every non-banking financial company to create a reserve fund to
transfer a sum not less than twenty per cent of its net profit every year
as disclosed in the profit and loss account and before any dividend is
declared.
Thus, the amounts transferred to such reserve and the nature and
purpose of the reserve shall be disclosed.
(c) Additions and deductions since the last Balance Sheet to be
shown under each of the specified heads:
This requires the company to disclose the movement in each of the reserves
and surplus since the last Balance Sheet.
Further, as per Division III to Schedule III, a reserve specifically represented
by earmarked investments shall disclose the fact that it so represented.
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(d) Debit balance of Statement of Profit and Loss and negative
balance of Other Equity:
Debit balance of Statement of Profit and Loss which would arise in case of
accumulated losses, is to be shown as a negative figure under the head
‘Retained Earnings’. The aggregate amount of the balance of ‘Other Equity’,
is to be shown after adjusting negative balance of retained earnings, if any. If
the net result is negative, the negative figure is to be shown under the head
‘Other Equity’.
8.2.15.2 Gain/Loss on changes in the proportion held by non-
controlling interests
Ind AS 110, Paragraph B96 requires that an entity shall recognize directly in
‘Equity’ any difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid or
received, and attribute it to the owners of the parent.
Ind AS 1, Paragraph 106(d)(iii) requires that for each component of equity, a
reconciliation between the carrying amount at the beginning and the end of
the period, separately disclosing changes resulting from changes in
ownership interests in subsidiaries that do not result in a loss of control, shall
be made.
For such difference, which is a gain / loss on changes in the proportion held
by non-controlling interests, Ind AS does not specify whether such gain / loss
should be presented separately under ‘Capital Reserve’ or under ‘Other
Reserves’. Division III to Schedule III also does not specify anything in this
regard. An entity may present such gain / loss separately as ‘Gain/Loss on
change in proportion held by NCI’ shown under ‘Other Reserves’ by
specifying the nature.
8.2.15.3 Reconciliation of items in Other Equity
Reconciliations for each component of other equity, both for the current
period and previous period are required to be made in the following manner
(to the extent applicable):
(i) Balance at the beginning of the reporting period
(ii) Changes in accounting policy or prior period error
(iii) Restated balance at the beginning of the reporting period
(iv) Total Comprehensive Income for the year
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(v) Dividends
(vi) Transfer to retained earnings
(vii) Any other change (to be specified)
(viii) Balance at the end of reporting period
Apart from the above items, Division III to Schedule III requires that:
• Re-measurement of defined benefit plans; and
• Fair value changes relating to own credit risk of financial liabilities
designated at fair value through profit or loss, shall be recognised as a
part of retained earnings with separate disclosure of such items along
with the relevant amounts in the Notes or shall be shown as a
separate column under Reserves and Surplus.
Ind AS 19 requires that re-measurements of the net defined benefit liability
(asset) recognized in other comprehensive income shall not be reclassified to
profit or loss in a subsequent period. However, the entity may transfer those
amounts recognized in other comprehensive income within equity.
Division III to Schedule III requires ‘re-measurements of defined benefit
plans’ during the reporting period to be shown as a separate line item in
other comprehensive income. (Refer Paragraph 10.2)
As per Division III to Schedule III requirement mentioned above, such re-
measurements of defined benefit plans, shall be recognized as a part of
retained earnings with separate disclosure of this item along with the relevant
amounts in the Notes to Accounts. Alternatively, it can also be presented as
a separate column under Reserves and Surplus.
Accordingly, a company shall present the re-measurements of defined
benefit plans at the end of each reporting period as a part of retained
earnings or separately under Reserves and Surplus
8.3 Regulatory Deferral Account Balances
Regulatory Deferral Account Balances are defined in Ind AS 114 as those
arising when an entity provides goods or services to customers at a price or
rate that is subject to rate regulation.
Note 5 of Other Classification Related General Instructions requires
Regulatory Deferral Account Balances to be presented in the Balance Sheet
in accordance with the relevant Ind AS.
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Accordingly, as per Ind AS 114, the separate line items for the totals of all
regulatory deferral account debit balances and the totals of all regulatory
deferral account credit balances shall be distinguished from the assets and
liabilities that are presented in accordance with other Standards by the use of
sub-totals, which are drawn before the regulatory deferral account balances
are presented.
8.4 Presentation of earlier comparative period
Note 1 to Other Classification Related General Instructions states that when
a company applies an accounting policy retrospectively or makes a
restatement of items in the financial statements or when it reclassifies items
in its financial statements, the company shall attach to the Balance Sheet, a
Balance Sheet as at the beginning of the earliest comparative period
presented.
Similar requirement is also in Paragraph 40A of Ind AS 1, which requires an
entity to present a third balance sheet as at the beginning of the preceding
period in addition to the minimum comparative financial statements required
if:
(a) An entity applies an accounting policy retrospectively, makes a
retrospective restatement of items in its financial statements or
reclassifies items in its financial statements; and
(b) The retrospective application, retrospective restatement or the
reclassification has a material effect on the information in the balance
sheet at the beginning of the preceding period.
Further, para 41 of Ind AS 1 require an entity to reclassify comparative
amounts, unless impracticable, if an entity changes the presentation or
classification of items in its financial statements of the current reporting
period.
However, MCA notified amendments to Division III - Schedule III would result
in the Company either changing the presentation or classification of certain
line items in its financial statements. Such changes result in providing
additional information to the users of the financial statements and are
required to be made by Companies in order to comply with the statutory
requirements of Division III - Schedule III. The company may not present a
third balance sheet as at the beginning of the preceding period when
preparing financial statements in line with the amended requirements of
Division III - Schedule III,
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9. Part II – Statement of Profit and Loss and
Notes – General Instructions for Preparation
of Statement of Profit and Loss: Notes 1 to 10
Part II deals with disclosures relating to the Statement of Profit and Loss.
The format prescribed is the vertical form wherein disclosures for revenues
and expenses have been given in various line items. Part II contains items I
to XVIII which lists items of Revenue, Expenses, Profit / (Loss) and Other
Comprehensive Income. “General Instructions for Preparation of Statement
of Profit and Loss” govern the other disclosures and presentation aspects
related to the Statement of Profit and Loss.
As per Note 1 of “General Instructions for Preparation of Statement of Profit
and Loss”, the provisions of this part also apply to the income and
expenditure account referred to in sub-clause (ii) of clause (40) of section 2
of the Act in the same manner as they apply to a Statement of Profit and
Loss.
As per Note 2 of “General Instructions for Preparation of Statement of Profit
and Loss”, the Statement of Profit and Loss shall include:
(1) Profit or loss for the period;
(2) Other Comprehensive Income for the period.
The sum of (1) and (2) above is ‘Total Comprehensive Income’.
‘Profit or Loss’ is defined in Ind AS 1 as ‘the total of income less expenses,
excluding the components of other comprehensive income.
‘Other comprehensive income’ is defined in Ind AS 1 as ‘comprising items of
income and expense (including reclassification adjustments) that are not
recognised in profit or loss as required or permitted by other Ind ASs.
Other comprehensive income shall be presented as:
(a) Items that will not be reclassified to profit or loss and its related
income tax effects;
(b) Items that will be reclassified to profit or loss and its related income
tax effects.
‘Reclassification adjustments’ are defined in Ind AS 1 as amounts
reclassified to profit or loss in the current period that were recognised in
other comprehensive income in the current or previous periods.
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The Statement of Profit and Loss is a single statement of profit and loss, with
profit or loss and other comprehensive income presented in two sections, as
per Part II of Division III to Schedule III. The sections are presented together,
with the profit or loss section presented first followed directly by the other
comprehensive income section. This is in sync with Paragraph 10A of Ind
AS 1.
Ind AS 1 prohibits an entity from presenting any items of income or expense
as extraordinary items, in the statement of profit and loss or in the notes.
Accordingly, there are no line items like ‘Extraordinary items’ and ‘Profit
before extraordinary items and tax’ in this Schedule.
The specific format laid down for presentation of various items of Income and
Expenses in the Statement of Profit and Loss indicates that expenses should
be aggregated based on their nature, which is in sync with Ind AS 1
Paragraph 99. Accordingly, functional classification of expenses is
prohibited.
As per the Ind AS Framework for the Preparation and Presentation of
Financial Statements, income and expenses are defined as follows:
(a) Income encompasses is increases in assets, or decreases in liabilities,
that results in increases in equity, other than those relating to
contributions from holders of equity claims.
(b) Expenses are decreases in assets, or increases in liabilities, that
result in decreases in equity, other than those relating to distributions
to holders of equity claims.
Further, separate line items should be included in the profit or loss section of
the Statement of Profit and Loss to present the following items in line with
Paragraph 82 of Ind AS 1:
(a) Revenue, presenting separately interest revenue calculated using the
effective interest method;
(b) Gains and losses arising from the de-recognition of financial assets
measured at amortized cost;
(c) Finance costs;
(d) Impairment losses (including impairment gains or reversals of
impairment losses) determined as per Ind AS 109, Section 5.5;
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(e) Share of profit or loss of associates and joint ventures accounted for
using the equity method;
(f) Any gain or loss arising from a difference between the previous
amortized cost of the financial asset and its fair value at the date when
the financial asset is reclassified from amortized cost to fair value
through profit or loss;
(g) Any cumulative gain or loss previously recognized in other
comprehensive income that is reclassified to profit or loss, when the
financial asset is reclassified from fair value through other
comprehensive income to fair value through profit or loss;
(h) A single amount for the total of discontinued operations, as per Ind AS
105.
In separately disclosing the above, consideration should be given to Note 5
and Note 9 of General Instructions for Preparation of Statement of Profit and
Loss, that requires disclosure of any item of ‘Other Income’ or ‘Other
Expenses’ exceeding one percent of the total income, in addition to the
consideration of ‘materiality’. An entity should consider these requirements
as mutually exclusive.
9.1. Revenue from operations
The aggregate of revenue from operations needs to be disclosed on the face
of the Statement of Profit and Loss as per Schedule III.
9.1.1. Note 3 of General Instructions for the Preparation of Statement of
Profit and Loss requires that revenue from operations is to be separately
disclosed on the face of the Statement of Profit and Loss, showing:
(a) Interest Income;
(b) Dividend Income;
(c) Rental Income;
(d) Fees and commission Income;
(e) Net gain on fair value changes;
(f) Net gain on de-recognition of financial instruments under amortised
cost category;
(g) Sale of products (including Excise duty);
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(h) Sale of services; and
(i) Others (to be specified)
9.1.2. For the purpose of presentation Ind AS 113 and 115 will have to be
referred to. As per the definition of Revenue in Ind AS 115, “revenue is
income arising in the course of an entity’s ordinary activities” and income is
defined in Ind AS 115, “increases in economic benefits during the accounting
period in the form of income or enhancements of assets or decreases of
liabilities that result in an increase in equity, other than those relating to
contributions from equity participants”. Further, as per Ind AS 115, revenue
includes only the gross increase in economic benefits occurring to the entity
on its own account. Amounts collected, in capacity of an agent, on behalf of
third parties such as sales taxes, goods and services taxes and value added
taxes are not economic benefits which flow to the entity and do not result in
increases in equity. Therefore, they are excluded from revenue. Similarly, in
an agency relationship, the gross increase in economic benefits include
amounts collected on behalf of the principal and which do not result in
increases in equity for the entity. The amounts collected on behalf of the
principal are not revenue.
9.1.3. Under the GST regime, the collection of GST by an entity would not be
an inflow on the entity’s own account but it shall be made on behalf of the
government authorities. Accordingly, the revenue from operations should be
presented net of GST.
9.1.4. The revenue from operation shall include:
9.1.4.1. Interest Income:
As per Note 3 of General Instructions for Preparation of Profit and Loss,
Interest Income shall be classified as:
(a) Interest on loans;
(b) Interest income from investments;
(c) Interest on deposits with banks;
(d) Other interest income
Interest income should be classified based on the financial assets measured
at fair value through OCI, at amortised cost, or classified as fair value
through profit or loss.
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As per Paragraph 82 (a) of Ind AS 1, in addition to items required by other
Ind ASs, the profit or loss section of the statement of profit and loss shall
include line items that presenting separately interest revenue calculated
using the effective interest method.
Ind AS 107, Paragraph 20(b) requires total interest revenue calculated using
the effective interest method for financial assets that are measured at
amortized cost and that are measured at FVOCI, to be shown separately.
The effective interest rate is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial instrument or, when
appropriate, a shorter period, to the net carrying amount of the financial
asset.
‘Other Interest’ Income includes any other interest/ discount income not
included in sub-heads (a), (b) and (c) as mentioned above. Dividend in the
nature of interest should be classified here as per the requirements of Indian
Accounting Standards. Also, interest income on unwinding of security
deposits and interest received on delayed payments by customers should be
classified under other interest income. Interest income on income tax refund
which is in the nature of income tax should be treated as per Ind AS 12.
Ind AS 107 Paragraph B5(e) requires a company to disclose whether interest
income from financial assets measured at FVTPL is included as a part of fair
value changes. Accordingly, a company shall disclose as its accounting
policy, whether it presents interest income on financial assets at FVTPL as a
part of fair value changes or presents separately.
9.1.4.2. Dividend Income:
As per Paragraph 5.7.1A of Ind AS 109 dividends are recognised in profit or
loss only when:
(a) the entity’s right to receive payment of the dividend is established;
(b) it is probable that the economic benefits associated with the dividend
will flow to the entity; and
(c) the amount of the dividend can be measured reliably.
As per Paragraph 5.7.6 of Ind AS 109 if the entity makes an irrevocable
election to present the fair value changes in other comprehensive income, it
shall recognize in profit or loss dividends from that investment in accordance
with Paragraph 5.7.1A of Ind AS 109.
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Further, Ind AS 107 Paragraph B5(e) requires a company to disclose
whether dividend income on financial assets measured at FVTPL is included
as a part of fair value changes. Accordingly, a company shall disclose as its
accounting policy, whether it presents dividend income on financial assets at
FVTPL as a part of fair value changes or presents separately.
9.1.4.3. Rental Income
Rental income shall include rent on investment property and operating lease
payments received if the entity is in the nature of renting business.
9.1.4.4. Fees and commission income:
Fees that are not an integral part of effective interest rate in accordance with
Ind AS 109 should be considered under this head. ‘Fees and Commission
Income’ shall include all remuneration on services such as commission on
collections, commission/ exchange on remittances and transfers, commission
on letters of credit and guarantees, commission on Government business,
commission on other permitted agency business including consultancy,
distribution of third party products and other services, brokerage, fees
charged for servicing a loan, loan syndication fees etc.
9.1.4.5. Net gain/(loss) on fair value changes:
As per Note 4 of General Instructions for preparation of Statement of Profit
and Loss, the fair value gains or losses (net) on financial assets which are
measured at FVTPL should be presented under ‘Revenue from Operations’
with the following line items:
(A) Net Gain/ (Loss) on financial instruments at fair value through profit or
loss
(i) On trading portfolio
— Investments
— Derivatives
— Others
(ii) On financial instruments designated at fair value through profit
or loss
(B) Others (to be specified)
Total Net gain/ (loss) on fair value changes (C)
Fair value changes:
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— Realised
— Unrealised
Total Net gain/ (loss) on fair value changes (D) to tally with (C)
The fair value changes in this schedule are other than those arising on
account of accrued interest income/ expense.
The amount of net loss under this section should be disclosed in Expenses –
Net loss on fair value changes.
‘Others’ may include instruments other than those held for trading or
designated at fair value through profit or loss such as debt instruments which
are classified as fair value through profit or loss and on de-recognition of
debt instruments classified as fair value through other comprehensive
income.
Further, Paragraph B5 (e) of Ind AS 107 as mentioned above is also required
to be referred.
9.1.4.6. Others (to be specified):
The term “others” is not defined. This would include revenue arising from a
company’s operating activities, i.e., either its principal or ancillary revenue-
generating activities, but which is not revenue arising from the sub-items
mentioned above. Whether a particular income constitutes “other operating
revenue” or “other income” is to be decided based on the facts of each case
and detailed understanding of the company’s activities.
9.2. Other income
The aggregate of ‘Other income’ is to be disclosed on the face of the
Statement of Profit and Loss. As per Note 5 of General Instructions for the
Preparation of Statement of Profit and Loss, ‘Other Income’ shall be
classified as:
(a) Net gain/ (loss) on ineffective portion of hedges;
(b) Net gain/ (loss) on de-recognition of property, plant and equipment;
(c) Net gain or loss on foreign currency transaction and translation (other
than those considered as finance cost) (to be specified) and
(d) Others (to be specified)
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As per Paragraph 6.5.11 (b) and (c) of Ind AS 109, for designated and
qualifying cash flow hedges, the effective portion of the cumulative gain or
loss on the hedging instruments is initially recognised directly in OCI within
equity (cash flow hedge reserve). The ineffective portion of the gain or loss
on the hedging instrument is recognised immediately in net gain/loss on fair
value changes in the statement of profit and loss.
Net gain/ (loss) on derecognition of property, plant and equipment includes
profit/loss on sale of furniture, land and building, motor vehicles, etc. Only
the net position should be shown. If the net position is a loss, the amount
should be shown as an expense.
Any gains on account of foreign exchange fluctuations are to be disclosed
separately as per Ind AS 21. Thus, net exchange gain should be classified
under other income and the amount so included should be separately
disclosed.
Interest on income tax refund shall form part of ‘others’ under ‘Other Income’.
Rental income other than that presented under ‘Revenue from operations’
shall be disclosed under ‘others’.
Income under ‘others’ should be disclosed net off expenses directly
attributable to such income. However, the expenses so netted off should be
separately disclosed.
Any item under the head ‘Other Income’ which exceeds one per cent of the
total income should be presented separately.
9.3. Expenses
The aggregate of the following expenses is to be disclosed on the face
of the Statement of Profit and Loss:
• Finance Costs
• Fees and commission expense
• Net loss on fair value changes
• Net loss on de-recognition of financial instruments under amortised
cost category
• Impairment of financial instruments
• Cost of materials consumed
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• Purchases of Stock-in-Trade
• Changes in inventories of finished goods, stock-in-trade and work-in-
progress
• Employee benefits expense
• Depreciation, amortization and impairment
• Other expenses (to be specified)
9.3.1 Finance Costs
As per Note 6 of the General Instructions for the Preparation of the
Statement of Profit and Loss, disclosure of finance costs is to be bifurcated
under the following:
(a) Interest on deposits
(b) Interest on borrowings
(c) Interest on debt securities
(d) Interest on subordinated liabilities
(e) Other interest expense
The finance costs should be classified based on financial liabilities measured
at fair value through profit or loss and on financial liabilities measured at
amortised cost. The latter should be calculated as per the effective interest
method as per Ind AS 107.
a) Interest on deposits: Interest on deposits includes interest paid on all
types of deposits including deposits from banks and other institutions.
Interest on deposits also includes unwinding of the discount that results in an
increase in financial liabilities such as security deposits for assets taken on
lease.
b) Interest on borrowings: Interest on borrowings includes
discount/interest on all borrowings and refinance from banks and other
institutions and agencies.
Interest in respect of lease liabilities recognised in accordance with Ind AS
116, Leases
c) Interest on debt securities: Interest on debt securities includes interest
on bonds/ debentures and liability component of financial instruments.
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d) Interest on subordinated liabilities: This includes interest expense on
all subordinated liabilities.
e) Other interest expense: Other interest expense includes the following:
1. Increases in the carrying amount of provisions / decommissioning
liabilities where such increase reflects the passage of time;
2. Net interest on net defined benefit liability which reflects the change in
net defined benefit liability that arises from the passage of time.
9.3.2 Ind AS 21 and Ind AS 23 deal with foreign exchange differences
arising on foreign currency transactions included in the financial statements
of an entity. The same shall be disclosed under ‘Other interest expense’
finance cost. All exchange differences within the purview of Ind AS 21 are
recognized as exchange differences and presented accordingly. However, all
exchange differences arising from foreign currency borrowings are within the
purview of Ind AS 23 and are regarded as a cost of borrowing irrespective of
whether they are capitalized or not as a part of the cost of the asset. In
accordance with Ind AS 23 – ‘Borrowing Costs’, borrowing costs that are
directly attributable to the acquisition, construction or production of a
qualifying asset form part of the cost of that asset. For the purpose of
capitalization, borrowing costs also include exchange difference regarded as
an adjustment to borrowing costs. Exchange differences eligible for
capitalization are determined in accordance with Paragraph 6(e) and 6A of
Ind AS 23. Accordingly, in case a company has utilized its foreign currency
borrowings for the purpose of acquisition or construction of a qualifying
asset, it would capitalize certain portion of foreign exchange differences in
accordance with the Paragraph 6(e) and 6A of Ind AS 23. All other borrowing
costs are recognized as an expense. For presenting foreign exchange
differences arising on foreign currency borrowings in the statement of profit
and loss, there is no specific requirement to apply the limit prescribed in
paragraphs 6(e) and 6A of Ind AS 23 since the nature of the exchange
difference on foreign currency borrowings is effectively a cost of borrowing.
Accordingly, the entire foreign exchange differences relating to foreign
currency borrowings to the extent not capitalized in accordance with Ind AS
23 should be presented under the head ‘finance costs’.
9.3.3 Fees and commission expense
Fees and commission expenses include all expenses on services such as
commission on documents sent on collection, commission/ exchange on
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remittances and transfers, commission on letters of credit, and guarantees,
commission on other permitted agency business including consultancy and
other services, brokerage, etc. If any of these elements are required to be
included for the purpose of computing effective interest rate under Indian
Accounting Standards, it should not be included under this head.
9.3.4 Net loss on fair value changes
(Refer Paragraph 9.1.4.5. at Pg 108 for the line items to be presented as a
part of Net gains (losses) on fair value changes)
9.3.5 Impairment of financial instruments
As per Note 8 of the General Instructions for the Preparation of the
Statement of Profit and Loss, disclosure of impairment of financial
instruments is to be bifurcated under the following:
(a) Loans
(b) Investments
(c) Others (to be specified)
The same is to be further classified based on financial instruments measured
at fair value through OCI, and on financial instruments measured at
amortised cost.
Ind AS 109 requires that its impairment provisions are also applied to loan
commitments and trade receivables. Thus, such impairments would be
included under the sub-head ‘Others’ as mentioned above.
Excess of amount of loss written-off over the accumulated loss allowance is
of the nature of impairment loss and should thus be presented under this line
item. In case of subsequent recoveries which are higher than previously
written off asset, the nature of recoveries is similar to reversals of impairment
and should thus be presented in the impairment line in profit or loss as it
would provide useful and relevant information to the users of the financial
statements.
9.3.6 Employee benefits expense
As per Paragraph 7 of Ind AS 19 an employee may provide services to an
entity on a full-time, part-time, permanent, casual or temporary basis. For the
purpose of this Standard, employees include directors and other
management personnel.
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This line item under the schedule requires disclosure of the following details:
9.3.6.1 Salaries and wages
The aggregate amounts paid/payable by the company for payment of
salaries and wages are to be disclosed here. Expenses on account of bonus,
leave encashment, compensation and other similar payments also need to
be disclosed here. Where a separate fund is maintained for gratuity payouts,
contribution to Gratuity Fund should be disclosed under the sub-head
Contribution to provident and other funds.
9.3.6.2 Contribution to provident and other funds
The aggregate amounts paid / payable by a company on account of
contributions to provident fund and other funds like Superannuation fund,
ESI, Labour Welfare Fund, etc., are to be disclosed here. This is true for
defined contribution plans since the expense recognized for a defined benefit
plan is not necessarily the amount of the contribution due for the period.
Contributions for such funds for contract labour may also be separately
disclosed here. However, penalties and other similar amounts paid to the
statutory authorities are not strictly in the nature of ‘contribution’ and should
not be disclosed here.
9.3.6.3 Share based payment to employees
The amount of expense under this head should be determined in accordance
with Ind AS 102 – Share-based Payments and/or the SEBI (Employee Stock
Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999,
as applicable. Companies should also consider all disclosures required by
Ind AS 102.
9.3.6.4 Staff welfare expense
The total expenditure on staff welfare is to be disclosed herein.
9.3.7 Depreciation, amortization and impairment
A company should disclose depreciation provided on Property, Plant and
Equipment, Investment Property and amortization of intangible assets and
any impairment under this head.
9.3.8 Other Expenses
All other expenses not classified under other heads will be classified here. As
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per Note 9 of General Instructions for Preparation of Profit and Loss, Other
expenses shall be bifurcated into:
(c) Rent, taxes and energy costs;
(d) Repairs and maintenance;
(e) Communication costs;
(f) Printing and stationery;
(g) Advertisement and publicity;
(h) Director’s fees, allowances, and expenses;
(i) Auditor’s fees and expenses;
(j) Legal and Professional charges;
(k) Insurance;
(l) Other expenditure.
Rent, taxes and energy costs: Rent will include expenses such as rent on low
value or short term leases i.e. in respect of leases which are not accounted
for under Ind AS 116. Taxes shall include municipal and other taxes
(excluding income tax) and energy cost shall include electricity and other
similar charges and levies.
Repairs and maintenance: This includes repairs to company’s property, plant
and equipment and their maintenance charges, etc.
Communication costs: This includes postal charges (like stamps),
telephones, courier costs, facsimile, e-mail, internet, SWIFT charges etc.
Printing and stationery: This includes cost of books, forms and stationery
used by the company and other printing charges which are not incurred by
way of publicity expenditure.
Advertisement and publicity: This includes expenditure incurred by the
company for advertisement and publicity purposes including printing charges
on publicity material.
Director’s fees, allowances and expenses: This includes sitting fees and all
other items of expenditure incurred on behalf of directors including all
allowances and expenses on behalf of directors. The daily allowance, hotel
charges, conveyance charges, etc. which though in the nature of
reimbursement of expenses incurred may be included under this head.
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Auditor’s fees and expenses: This includes the fees paid to the statutory
auditors and branch auditors for professional services rendered and all
expenses for performing their duties, even though they may be in the nature
of reimbursement of expenses.
Legal and Professional charges: All legal expenses and reimbursement of
expenses incurred in connection with legal services are to be included here.
Professional charges could include fee paid for consultancy, valuations, etc.
Insurance: This includes insurance charges on company’s property, plant
and equipment, etc.
Other expenditure: All expenses other than those not included in any of the
other heads like license fees, donations, subscriptions to papers, periodicals,
entertainment expenses, travel expenses, etc. may be included under this
head.
Any item under the head ‘Other expenditure’ which exceeds one per cent of
the total income shall be presented separately.
9.4. Exceptional items
The term ‘Exceptional items’ is neither defined in Division III to Schedule III
nor in Ind AS. However, Ind AS 1 requires separate disclosures of certain
items of similar nature in Paragraphs 85, 86, 97 and 98.
Paragraph 85 states that additional line items, headings and subtotals in the
statement of profit and loss shall be presented, when such presentation is
relevant to an understanding of the entity’s financial performance.
Further, Paragraph 86 states that disclosing the components of financial
performance assists users in understanding the financial performance
achieved and in making projections of future financial performance. An entity
considers factors including materiality and the nature and function of the
items of income and expense.
Paragraph 97 states that when items of income or expense are material, an
entity shall disclose their nature and amount separately. Paragraph 98 gives
circumstances that would give rise to the separate disclosure of items of
income and expense and includes:
(a) Write-downs of inventories to net realisable value or of property, plant
and equipment to recoverable amount, as well as reversals of such
write-downs;
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(b) restructurings of the activities of an entity and reversals of any
provisions for the costs of restructuring;
(c) disposals of items of property, plant and equipment;
(d) disposals of investments;
(e) discontinued operations;
(f) litigation settlements; and
(g) other reversals of provisions.
In case the company has more than one such item of income / expense of
the above nature which is exceptional, then such items should be disclosed
on the face of the Statement of Profit and Loss. Details of all the individual
items should be disclosed in the Notes.
9.5. Tax expense
This is to be disclosed on the face of the Statement of Profit and Loss and
bifurcated into:
(1) Current tax, and
(2) Deferred tax
9.5.1 Current tax
The term ‘Current tax’ has been defined under Ind AS-12 Income Taxes as
the amount of income taxes payable (recoverable) in respect of the taxable
profit (tax loss) for a period. Hence, details of all taxes on income payable
under the applicable taxation laws should be disclosed here.
Any interest on shortfall in payment of advance income-tax is in the nature of
finance cost and hence should not be clubbed with the ‘Current tax’. The
same should be classified as interest expense under finance costs. However,
such amount should be separately disclosed.
Any penalties levied under Income tax laws should not be classified as
‘Current tax’. Penalties which are compensatory in nature should be treated
as interest and disclosed in the manner explained above. Other tax penalties
should be classified under ‘Other Expenses’.
Excess/Short provision of tax relating to earlier years should be separately
disclosed.
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9.5.2 Deferred tax
Any charge/credit for deferred taxes needs to be disclosed separately on the
face of the Statement of Profit and Loss.
Ind AS 12 defines ‘deferred tax liabilities’, ‘deferred tax assets’, ‘temporary
differences’ as:
‘Deferred tax liabilities’ are the amounts of income taxes payable in future
periods in respect of taxable temporary differences;
‘Deferred tax assets’ are the amounts of income taxes recoverable in future
periods in respect of:
(a) deductible temporary differences;
(b) the carry forward of unused tax losses; and
(c) the carry forward of unused tax credits.
‘Temporary differences’ are differences between the carrying amount of an
asset or liability in the balance sheet and its tax base
Ind AS 12 has the concept of temporary. Moreover, deferred tax asset is
defined in Ind AS 12 to include the carry forward of unused tax credits. MAT
Credits are in the form of unused tax credits that are carried forward by the
company for a specified period of time. Accordingly, MAT Credit Entitlement
should be grouped with Deferred Tax Asset (net) in the Balance Sheet of an
entity and a separate note should be provided specifying the nature and
amount of MAT Credit included as a part of deferred tax. However, the
company should review at each balance sheet date the reasonable certainty
to recover deferred tax asset including MAT Credit Entitlement.
Correspondingly, MAT Credit Entitlement should be grouped with deferred
tax in the Statement of Profit and Loss and a separate note should be
provided specifying the amount of MAT Credit.
9.6. Profit / (loss) from discontinued operations
The term ’discontinued operations’ is defined in Ind AS 105, “Non-current
Assets Held for Sale and Discontinued Operations” as a component of an
entity that either has been disposed of or is classified as held for sale and:
(a) represents a separate major line of business or geographical area of
operations,
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(b) is part of a single co-ordinated plan to dispose of a separate major line
of business or geographical area of operations; or
(c) is a subsidiary acquired exclusively with a view to resale.
Profit or loss from Discontinued Operations needs to be separately disclosed
on the face of Statement of Profit and Loss. This disclosure is in line with the
disclosure requirement of Ind AS 105 Paragraph 33(a) which requires a
single amount in the statement of profit and loss comprising the total of: (i)
post-tax profit or loss of discontinued operations; and (ii) post-tax gain or loss
recognized on the measurement to fair value less costs to sell or on the
disposal of the assets or disposal group(s) constituting the discontinued
operation.
Further, Ind AS-105 Paragraph 33(b) requires an entity to present an
analysis of a single amount either in Notes or on the face of the Statement of
Profit and Loss:
(i) the revenue, expenses and pre-tax profit or loss of discontinued
operations;
(ii) the gain or loss recognised on the measurement to fair value less
costs to sell or on the disposal of the assets or disposal group(s)
constituting the discontinued operation; and
(iii) the related income tax expense as required by paragraph 81(h) of Ind
AS 12.
If the above analysis is presented in the Statement of Profit and Loss, then it
shall be presented in a section identified as relating to discontinued
operations, i.e. separately from continuing operations.
9.7. Tax expense of discontinued operations
In case there are any taxes payable / tax credits available on profits / losses
of discontinued operations, the same need to be disclosed as a separate line
item on the Statement of Profit and Loss, when presenting a separate
analysis as per Paragraph 33(b) of Ind AS 105, as stated above in Paragraph
9.5.
9.8. Earnings per equity share
Computation of Basic and Diluted Earnings per Share should be made in
accordance with Ind AS 33, Earnings per Share. It is pertinent to note that
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the nominal value of equity shares should be disclosed along with the
Earnings per Share figures as required by Ind AS 33.
10. Other Comprehensive Income
10.1 ‘Other comprehensive income’ (OCI) is defined in Ind AS 1 as
‘comprising items of income and expense (including reclassification
adjustments) that are not recognised in profit or loss as required or permitted
by other Ind ASs.
10.2 Note 10 of General Instructions for Preparation of Statement of Profit
and Loss state that ‘Other Comprehensive Income’ shall be classified into:
(a) Items that will not be reclassified to profit or loss and its related
income tax effects:
(1) Changes in revaluation surplus;
(2) Re-measurements of the defined benefit plans;
(3) Equity Instruments through other comprehensive income;
(4) Fair value changes relating to own credit risk of financial
liabilities designated at fair value through profit or loss;
(5) Share of Other Comprehensive Income in Associates and Joint
Ventures, to the extent not to be classified into profit or loss;
and
(6) Others (specify nature);
(b) Items that will be reclassified to profit or loss and its related income
tax effects:
(1) Exchange differences in translating the financial statements of a
foreign operation;
(2) Debt Instruments through other comprehensive income;
(3) The effective portion of gain and loss on hedging instruments in
a cash flow hedge;
(4) Share of Other Comprehensive Income in Associates and Joint
Ventures, to the extent to be classified into profit or loss; and
(5) Others (specify nature).
10.3 As a part of the definition of OCI given in Ind AS 1, the components of
OCI, which are in addition to above, are stated to include:
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Items that will not be reclassified to profit or loss and its related income tax
effects:
(a) Gains and losses on hedging instruments that hedge investments in
equity instruments measured through Other Comprehensive Income;
(b) Changes in time value of options when separating the intrinsic value
and time value of an option contract and designating only intrinsic
value changes as the hedging instrument;
(c) Changes in the value of the forward elements of forward contracts
when separating the forward element and spot element of a forward
contract and designating only spot element changes as hedging
instrument;
(d) Changes in the value of the foreign currency basis spread of a
financial instrument when excluding it from the designation of that
financial instrument as the hedging instrument.
10.4 Ind AS 1, Paragraph 91 gives a choice of presentation for tax effects
of items presented in other comprehensive income. An entity may present
items of OCI either:
(a) Net of related tax effects, or
(b) Before related tax effects with one amount shown for the aggregate
amount of income tax relating to those items.
However, Schedule III requires an entity to present items of OCI in aggregate
and the related tax effects to be shown separately.
10.5 Further, an entity shall present for each component of equity, an
analysis of other comprehensive income by item as required by Ind AS 1,
Paragraph 106A (including, reclassification adjustments as required by Ind
AS 1, Paragraph 92). Such presentation may be made either in the
Statement of Changes in Equity or in the Notes to Accounts.
10.6 Division III to Schedule III does not highlight the presentation of
bargain purchase gains arising in a business combination. Paragraph 34 of
Ind AS 103, requires an acquirer to recognize a bargain purchase gain in
other comprehensive income on the acquisition date, after meeting the
requirements of Paragraph 36 of Ind AS 103. Such gain shall be attributed to
the acquirer (i.e. parent and not non-controlling interest) and may be
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presented under ‘Other Items of other comprehensive income’ in statement
of changes in equity. The above would also hold true in case of an
acquisition of a business which is accounted for in Separate Financial
Statements. However, if Paragraph 36 requirements are not met, then, the
acquirer shall recognize and disclose such gain directly in capital reserve as
per Paragraph 36A of Ind AS 103.
11. Additional information to be disclosed by way
of Notes to Statement of Profit and Loss
Besides the above disclosures, Note 11 of the General instructions for
Preparation of Statement of Profit and Loss also require disclosure by way of
notes, additional information regarding aggregate expenditure and income on
the following items:
11.1 Depreciation, amortization and impairment [Clause (i) of
Note 11]
A company should disclose depreciation provided on Property, Plant and
Equipment, Investment Property and amortization of intangible assets and
any impairment under this head.
11.2 Payments to the auditor [Clause (ii) of Note 11]
Payments covered here should be for payments made to the firm of
auditor(s). Expenses incurred towards auditor’s remuneration should be
disclosed under each of the following sub-heads as follows:
(a) As Auditor,
(b) For taxation matters,
(c) For company law matters,
(d) For other services,
(e) For reimbursement of expenses;
11.3 In case of NBFCs covered under section 135, disclosures
pertaining to corporate social responsibility activities
[Clause (iii) and (vi) of Note 11]
This new requirement introduced by the Act is that the companies which are
covered under Section 135 are required to disclose the amount of
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expenditure incurred on corporate social responsibility activities. The
Guidance Note on Accounting for Expenditure on Corporate Social
Responsibility Activities issued by the ICAI may be referred to for disclosure
requirements, which are essentially as under:
(a) From the perspective of better financial reporting and in line with the
requirements of Schedule III in this regard, it is recommended that all
expenditure on CSR activities, that qualify to be recognised as
expense should be recognised as a separate line item as ‘CSR
expenditure’ in the statement of profit and loss. Further, the relevant
note should disclose the break-up of various heads of expenses
included in the line item ‘CSR expenditure’.
(b) The notes to accounts relating to CSR expenditure should also contain
the following:
(1) Gross amount required to be spent by the company during the
year.
(2) Amount spent during the year on:
(i) Construction/acquisition of any asset
(ii) On purposes other than (i) above
The above disclosure, to the extent relevant, may also be made in the
notes to the cash flow statement, where applicable.
(c) Details of related party transactions, e.g., contribution to a trust
controlled by the company in relation to CSR expenditure as per Ind
AS 24, Related Party Disclosures.
(d) Where a provision is made in accordance with the above paragraph,
above the same should be presented as per the requirements of
Schedule III to the Act. Further, movements in the provision during the
year should be shown separately.
MCA notification dated 24 March 2021 has included certain CSR-related
disclosure requirements in addition to the existing disclosures. The additional
disclosures included in clause (vi) of Note 11 with regard to CSR activities
are summarized below:-
(i) The amount of shortfall at the end of the year out of the amount
required to be spent by the Company during the year;
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(ii) The total of previous years’ shortfall amounts;
(iii) The reason for above shortfalls by way of a note;
(iv) The nature of CSR activities undertaken by the Company.
11.4 Disclosure in relation to undisclosed income
This clause brings in a new disclosure requirement. It requires that 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.
The Company shall also state whether the previously unrecorded income and
related assets have been properly recorded in the books of account during
the year.
In this context, it is relevant to understand the meaning of “undisclosed
income”. As per the Income Tax Act, 1961, "undisclosed income" includes
any money, bullion, jewellery or other valuable article or thing or any income
based on any entry in the books of account or other documents or
transactions, where such money, bullion, jewellery, valuable article, thing,
entry in the books of account or other document or transaction represents
wholly or partly income or property which has not been or would not have
been disclosed for the purposes of this Act, or any expense, deduction or
allowance claimed under this Act which is found to be false. The meaning of
“undisclosed income” shall be considered on the basis of the Income
Tax Act, 1961 or basis judicial decisions provided on undisclosed
income.
The emphasis under this clause is limited to examination of those
transactions, which were hitherto unrecorded in the books of account and
which were surrendered or disclosed as income in the tax assessments
under the Income Tax Act, 1961. The emphasis is on the words surrendered
or disclosed which implies that the company must have voluntarily admitted
to the addition of such income, which can be demonstrated on the basis of
the returns filed by the company.
Where a statement is made in the course of search and survey to verify the
nature of income so surrendered or disclosed however, such statement has
been retracted on the ground that such disclosure was obtained under force,
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coercion, etc. the income cannot be treated as surrendered or disclosed by
the company.
Accordingly, where the addition is made by the income tax authorities and
the company has disputed such additions, reporting under this clause is not
applicable. Even where the company chooses not to file an appeal, it cannot
be presumed that the company has surrendered or disclosed the income.
The details that are required to be provided by the company as part of this
disclosure are prescribed below:
Sr Assessm Secti Amount Transacti Assessm Whether FY in
. ent Year on of disclos on ent status transacti which
No the ed in descriptio on transacti
. Act tax n along recorded on is
return with in books recorded
value of
treated accounts
as ?
income
Proper recording, by implication, includes proper disclosure thereof in the
financial statements of the company which should be sufficient to enable the
users to understand the impact of such transactions. The nature of disclosure
shall depend on the nature of undisclosed income and the treatment thereof
if the same was duly disclosed and reported in the books of account in the
year to which the undisclosed income relates to.
In case the Company has not recorded /disclosed income in the books of
account/financial statements, as applicable, reasons for same shall be
disclosed.
11.5 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 or virtual currency.
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Virtual currency is a digital representation of value, other than a
representation of the Indian Rupee (INR) or a foreign currency (“real
currency”), that functions as a unit of account, a store of value, and a
medium of exchange. Some virtual currencies are convertible, which
means that they have an equivalent value in real currency or act as a
substitute for real currency.
Crypto currency is a form of digital/ virtual currency generated through a
series of written computer codes that rely on cryptography which is
encryption and is thus independent of any central issuing authority per se.
12. Part III – General Instructions for Preparation
of Consolidated Financial Statements
The Act defines a ‘subsidiary company’ and an ‘associate company’ which is
different from the definition of a ‘subsidiary’, an ‘associate’ and a ‘joint
venture’ under Ind AS. An amendment to the Companies (Accounts) Rules,
2014 on 4 September 2015, newly inserted Rule 4A which state that
“financial statements shall be in the form specified in Schedule III to the Act
and comply with Accounting Standards or Indian Accounting Standards as
applicable, provided that the items contained in financial statements shall be
prepared in accordance with the definitions and other requirements specified
in the Accounting Standards or the Indian Accounting Standards, as the case
may be.”
The Act mandates that the companies which have one or more subsidiaries
or associates (which as per the Act includes joint ventures) are required to
prepare Consolidated Financial Statements (CFS), except under certain
circumstances exempted under the Act and Rules.
Accordingly, Ind AS definitions of subsidiary, associate and joint venture
shall be considered for assessment of control, joint control and significant
influence even though the requirement of preparation of CFS will be
governed by the Act.
The companies are expected to prepare the Separate Financial Statements
in addition to Consolidated Financial Statements.
Part III of Division III to Schedule III provides for General Instructions for
Preparation of Consolidated Financial Statements. This is a new addition
brought in under the Act.
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12.1 General requirements
Where a company is required to prepare Consolidated Financial Statements,
i.e. consolidated balance sheet, consolidated statement of changes in equity
and consolidated statement of profit and loss, the company shall mutatis
mutandis follow the requirements of this Schedule as applicable to a
company in preparation of the Separate Financial Statements. This means
that all the reporting requirements of the Schedule III need to be aggregated
and reported for the group as a whole in the Consolidated Financial
Statements. However, where the consolidated financial statements contains
elements pertaining to NBFCs and other than NBFCs, mixed basis of
presentation may be followed for consolidated financial statements where
both kinds of operations are significant.
In addition, the Consolidated Financial Statements shall disclose the
information as per the requirements specified in the applicable Ind AS
notified under the Companies Ind AS Rules, including the following, namely:
(1) Profit or loss attributable to ‘non-controlling interest’ and to ‘owners of
the parent’ in the statement of profit and loss shall be presented as
allocation for the period. Further, ‘total comprehensive income’ for the
period attributable to ‘non-controlling interest’ and to ‘owners of the
parent’ shall be presented in the statement of profit and loss as
allocation for the period. The aforesaid disclosures for ‘total
comprehensive income’ shall also be made in the statement of
changes in equity. In addition to the disclosure requirements in the
Indian Accounting Standards, the aforesaid disclosures shall also be
made in respect of ‘other comprehensive income’. This requirement is
in line with Paragraph 81B of Ind AS 1.
(2) ‘Non-controlling interests’ in the Balance Sheet and in the Statement
of Changes in Equity, within equity, shall be presented separately from
the equity of the ‘owners of the parent’.
(3) Investments accounted for using the equity method.
(4) Ind AS 110 Paragraph B96 deals with changes in proportion held by
non-controlling interest. When the proportion of the equity held by non-
controlling interests changes, an entity shall adjust the carrying
amounts of the controlling and non-controlling interests to reflect the
changes in their relative interests in the subsidiary. The entity shall
recognise directly in equity any difference between the amount by
127
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
which the non-controlling interests are adjusted and the fair value of
the consideration paid or received, and attribute it to the owners of the
parent. An entity may present such gain / loss separately as ‘Non-
controlling Interest Reserve’ shown under ‘Other Reserves’ by
specifying the nature.
All of these would also indicate the need to obtain such information for all the
subsidiaries / associates for preparing the Consolidated Financial
Statements, including where such subsidiaries / associates are not audited
under the Act.
However, due note has to be taken of the fact that the Schedule III itself
states that the provisions of the schedule are to be followed mutatis mutandis
for a Consolidated Financial Statements. MCA has also clarified vide General
Circular No. 39 / 2014 dated 14th October 2014 that Schedule III to the Act
[Refer Annexure D(Pg 205)] read with the applicable Accounting Standards
does not envisage that a company while preparing its CFS merely repeats
the disclosures made by it under stand-alone accounts being consolidated.
Accordingly, the company would need to give all disclosures relevant for CFS
only.
In this context, the requirements of Division III to Schedule III shall apply to a
CFS, subject to the following exemptions / modifications based on the
relevance to the CFS:
Division III to Schedule III Applicability to CFS (if left blank,
Requirements is applicable, as it is)
Share capital – authorized, issued, It is adequate to present paid up
subscribed and paid up capital and any calls in arrears
Note: It has no relevance in the CFS
context.
Sources from which bonus shares Not relevant at CFS level and
are issued, e.g., capitalisation of hence, may be dispensed with.
profits or Reserves or from
Securities Premium Account.
Disclosure of all unutilized monies Not relevant at CFS level and
out of the issue indicating the form hence, may be dispensed with.
in which such unutilized funds have
been invested.
128
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(a) Period and amount of On all these items, disclosure can
continuing default as on the be limited to those which are
Balance Sheet date in material to the CFS; materiality
repayment of borrowings and could be considered at 10% of the
interest, shall be specified respective balance sheet item
separately in each case.
(b) Loans and advances due by
directors or other officers of the
company or any of them either
severally or jointly with any
other persons or amounts due
by firms or private companies
respectively in which any
director is a partner or a
director or a member should be
separately stated
(c) Debts due by directors or other
officers of the company or any
of them either severally or
jointly with any other person or
debts due by firms or private
companies respectively in which
any director is a partner or a
director or a member should be
separately stated
(d) Where in respect of an issue of
securities made for a specific
purpose, the whole or part of
the amount has not been used
for the specific purpose at the
Balance Sheet date, there shall
be indicated by way of note how
such unutilized amounts have
been used or invested.
Share application money pending Separate disclosure should be given
allotment shall be classified into for such monies due outside the
equity or liability in accordance with group in respect of entities which are
relevant Ind AS. Share application consolidated.
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
money to the extent not refundable
shall be shown under the head
‘Equity’ and share application
money to the extent refundable shall
be separately shown under ‘Other
financial liabilities’.
Additional information for disclosure: Not relevant at CFS level and
(a) Payments to the auditor as (a) hence, may be dispensed with.
auditor,(b) for taxation matters,
(c) for company law matters, (d)
for other services, (e) for
reimbursement of expenses;
(b) In case of Companies covered
under section 135, amount of
expenditure incurred on
corporate social responsibility
activities
(c) Disclosures required as per the
MSMED Act, 2006
MCA notification dated 24 March 2021 has included certain disclosure
requirements in addition to the existing disclosures. The applicability of
additional disclosures at Consolidated financial statement (CFS) level with
regard to its applicability is summarized below:-
The below requirements need to be disclosed at CFS level
Schedule III Requirement Description
Disclosure of Shareholding
Promoters of Company should disclose the
promoter shareholding at the CFS
Trade Payables ageing schedule level.
Generally, the promoter would be
same for CFS level and standalone
level.
Trade payable ageing schedule
should be disclosed at the CFS level
after applying the principles of
consolidation.
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
Trade Receivables ageing schedule Trade receivables ageing schedule
should be prepared at the CFS level
after applying the principles of
consolidation.
Revaluation of Property, Plant and In case revaluation of property is
Equipment done at CFS level, or for any of the
group entity, company may disclose
the following:
1. Name of the entity in which
revaluation is done;
2. Type & nature of PPE revalued;
3. Indicate whether the revaluation
is based on the valuation as per
the registered valuer.
Loans or Advances - additional This disclosure should be done at
disclosures the CFS level, on similar lines as the
‘Related Party Transactions’ are
disclosed in CFS. In other words,
parties to whom such loans or
advances are provided should be
assessed at consolidated group
level for the purpose of this
disclosure.
Details of Benami Property held Company should disclose the
required details of benami property
at CFS level providing the name of
each subsidiary / group entity that
has such Benami Property.
In case if there is any benami
proceedings initiated against any
associate company*, then Company
should disclose in case if the
proceeding is material to the group.
Wilful Defaulter Company should disclose the
required details of wilful defaulter at
CFS level providing the name of
each subsidiary / group entity that is
131
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
declared as a wilful defaulter.
In case if there is any wilful default
by an associate company*, then
Company should disclose if the
default is material to the group.
Relationship with Struck off Company should disclose the
Companies required details of relationship with
struck off companies at CFS level
providing the name of each
subsidiary / group entity that has
such a relationship.
In case if any of the subsidiary is the
under the struck off company list,
Company should indicate that fact
as a part of disclosure.
In case if there is any associate
company* having relationship with
struck off companies, then company
should disclose if the transaction is
material to the group.
Compliance with number of layers of Company should disclose this fact of
companies compliance for each entity in its
group.
Disclosure pertaining to ‘undisclosed Company should disclose the
income’ required details of undisclosed
income at CFS level providing the
name of each subsidiary / group
entity that has an ‘undisclosed
income’.
In case if there is any associate
company* having undisclosed
income, then Company should
disclose if such income is material
to the group.
* as defined under the Act
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
The below requirements need to be disclosed at CFS level, only if
material in nature
Schedule III Requirement Description
Capital work-in-progress (CWIP) CWIP ageing schedule shall be
ageing schedule / completion given at CFS level if it is material to
schedule the group i.e. more than 10% of the
respective balance sheet item in
CFS.
Intangible assets under development Ageing schedule shall be given at
ageing schedule / completion CFS level if it is material to the group
schedule i.e. more than 10% of the respective
balance sheet item in CFS.
Security of current assets against This disclosure shall be provided at
borrowings CFS level if it is material to the group
i.e. more than 10% of the respective
balance sheet item in CFS.
Compliance with approved This disclosure shall be provided at
Scheme(s) of Arrangements CFS level if it is material to the group
i.e. more than 10% of the respective
financial statement line item in CFS.
Utilization of Borrowed funds and This disclosure shall be provided at
share premium CFS level after applying principles of
consolidation i.e. this disclosure
would be for funds borrowed /
invested outside the group.
However, it shall be disclosed only if
material i.e. more than 10% of the
respective financial statement line
item in CFS.
Disclosure pertaining to ‘details of This disclosure shall be provided at
crypto currency or virtual currency’ CFS level if it is material to the group
i.e. more than 10% of the respective
financial statement line item in CFS.
133
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
Not relevant at CFS level and hence, may be dispensed with
Schedule III Requirement Description
Title deeds of Immovable Property This requirement is not relevant at
not held in the name of the Company the CFS level and hence company
need not disclose in the CFS.
Registration of charges or This requirement is not relevant at
satisfaction with Registrar of the CFS level and hence company
Companies
need not disclose in the CFS.
Analytical Ratios This requirement is not relevant at
the CFS level and hence company
need not disclose in the CFS.
12.2 Indian Accounting Standards
The Consolidated Financial Statements shall also disclose the information as
required under the various Indian Accounting Standards applicable.
12.3 Additional information on the entities included in the
Consolidated Financial Statements
Division III to Schedule III also requires specific disclosure of additional
information on the entities which are included in the Consolidated Financial
Statements in the following format:
Name Net Assets i.e., Share in profit Share in other Share in total
of the total assets or loss comprehensive comprehensive
entity minus total
in the liabilities income income
Group
As % of Amount As % of Amount As % of Amou As % of Amount
Consolid Consolid consolidated nt total
ated ated other comprehen
net profit or comprehensi sive
assets loss ve income income
Parent
Subsidiari
es
Indian
1
2
134
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
3
…
…..
Foreign
1
2
3
…
…..
Non-
controlling
interest in
all
subsidiari
es
Associate
s
(Investme
nt as per
equity
method)
Indian
1
2
3
…
…
Foreign
1
2
3
…
…..
Joint
Ventures
(Investme
nt as per
135
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
equity
method)
Indian
1
2
3
…
…..
Foreign
1
2
3
…
…..
TOTAL
Certain joint arrangements which are of the nature of joint operations will be
consolidated to the extent of the share of joint operator based on the
principles laid down in Ind AS 111. Even though the above table does not
specify a disclosure about joint operations’ net assets, profit or loss, other
comprehensive income and total comprehensive income, it should be
disclosed in similar manner as disclosed for joint ventures. This requirement
would apply only if a joint operation is conducted through a separate legal
entity.
Moreover, as regards consolidation adjustments (including elimination of
intra-group transactions), it should be ensured that these are either disclosed
as a single line item separately or adjusted in the information (e.g., net
assets) disclosed for the parent and its each component.
These are necessary in order to match the respective amounts reported in
Consolidated Financial Statements with the respective total amounts in the
above table.
12.4 Entities not consolidated
Entities which are not covered in the Consolidated Financial Statements,
whether subsidiaries, associates or joint ventures are to be listed in the
Consolidated Financial Statements along with the reasons for not
136
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
consolidating such entities. Additional disclosure requirements as set out in
Ind AS 112 should also be complied with in this regard.
12.5 Definition of terms relevant for consolidation
The terms “Control”, “Subsidiary” and “Associate” are defined very differently
in the Act as compared to definition in Ind AS. Rule 6 of the Companies
(Accounts) Rules, 2015 however states that Consolidated Financial
Statements shall be prepared in accordance with the provisions of Division III
to Schedule III of the Act and the applicable Ind AS. Further, Rule 4A of the
Companies (Accounts) Rules, 2015 provides that the items contained in the
financial statements shall be prepared in accordance with the definitions and
other requirements specified in Ind AS.
137
Annexure A
Schedule III
(See Section 129)
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.
GENERAL INSTURCTIONS FOR PREPARATION OF FINANCIAL
STATEMENTS OF A NON- BANKING FINANCIAL COMPANY (NBFC)
THAT IS REQUIRED TO COMPLY WITH INDIAN ACCOUNTING
STANDARDS (Ind AS).
1. Every Non-Banking Financial company as defined in the Companies
(Indian Accounting Standards) (Amendment) Rules, 2016 to which
Indian Accounting Standards apply, shall prepare its financial
statements in accordance with this Schedule or with such modification
as may be required under certain circumstances.
2. Where compliance with the requirements of relevant Act, Regulations,
Guidelines or Circulars issued by the relevant regulator from time to
time including Indian Accounting Standards (Ind AS) (except the option
of presenting assets and liabilities in accordance with current, non-
current classification as provided by relevant Ind AS) as applicable to
the NBFCs require any change in treatment or disclosure including
addition, amendment, substitution or deletion in the head or sub-head
or any changes inter se, in the financial statements or statements
forming part thereof, the same shall be made and the requirements
under this Schedule shall stand modified accordingly.
3. The disclosure requirements specified in this Schedule are in addition
to and not in substitution of the disclosure requirements specified in
the Indian Accounting Standards. Additional disclosures specified in
the Indian Accounting Standards shall be made in the Notes or by way
of additional statement or statements unless required to be disclosed
on the face of the Financial Statements. Similarly, all other disclosures
138
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
as required by the Companies Act, 2013 shall be made in the Notes in
addition to the requirements set out in this Schedule.
4. (i) Notes shall contain information in addition to that presented in the
Financial Statements and shall provide where required-
(a) narrative descriptions or disaggregation’s of items recognised in
those statements; and
(b) information about items that do not qualify for recognition in
those statements.
(ii) Each item on the face of the Balance Sheet, Statement of Changes in
Equity and Statement of Profit and Loss shall be cross-referenced to
any related information in the Notes. In preparing the Financial
Statements including the Notes, a balance shall be maintained
between providing excessive details that may not assist users of
Financial Statements and not providing important information as a
result of too much aggregation.
5. Depending upon the total income of the NBFC, the figures appearing
in the Financial Statements shall be rounded off as below:
Total Income Rounding off
(i) less than one hundred To the nearest hundreds, thousands,
crore rupees lakhs or millions, or decimals thereof.
(ii) one hundred crore To the nearest, lakhs, millions or
rupees or more crores, or decimals thereof.
Once a unit of measurement is used, it should be used uniformly in the
Financial Statements.
6. Financial Statements shall contain the corresponding amounts
(comparatives) for the immediately preceding reporting period for all
items shown in the Financial Statements including Notes except in the
case of first Financial Statements after incorporation.
7. Financial Statements shall disclose all material items, i.e., the items if
they could, individually or collectively, influence the economic
decisions that users make on the basis of the financial statements.
Materiality depends on the size or nature of the item or a combination
of both, to be judged in the particular circumstances.
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
8. For the purpose of this Schedule, the terms used herein shall have the
same meanings assigned to them in Indian Accounting Standards.
9. Where any Act, Regulation, Guidelines or Circulars issued by the
relevant Regulators from time to time requires specific disclosures to
be made in the standalone financial statements of an NBFC, the said
disclosures shall be made in addition to those required under this
Schedule.
10. The NBFCs preparing financial statements as per this Schedule may
change the order of presentation of line items on the face of financial
statements or order of line items within the schedules in order of
liquidity, if appropriate, considering the operations performed by the
NBFC.
Note: This Schedule sets out the minimum requirements for disclosure on
the face of the Financial Statements, i.e., Balance Sheet, Statement of
Changes in Equity for the period, the Statement of Profit and Loss for the
period (The term ‘Statement of Profit and Loss‘ has the same meaning as
‘Profit and Loss Account‘) and Notes. Cash flow statement shall be prepared,
where applicable, in accordance with the requirements of the relevant Indian
Accounting Standard.
Line items, sub-line items and sub-totals shall be presented as an addition or
substitution on the face of the Financial Statements when such presentation
is relevant to an understanding of the NBFC‘s financial position or
performance or to cater to categories of NBFC’s as prescribed by the
relevant regulator or sector-specific disclosure requirements or when
required for compliance with the amendments to the relevant statutes or
under the Indian Accounting Standards.
140
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
Part I — Balance Sheet
Name of the Non-Banking Financial Company…………………….
Balance Sheet as at……………………
(Rupees in)
Particulars Note Figures as Figures as at the
No. at the end end of the
of current previous
reporting reporting period
period
1 2 3
ASSETS
(1) Financial Assets
(a) Cash and Cash
equivalents
(b) Bank Balance other
than (a) above
(c) Derivative financial
instruments
(d) Receivables
(I) Trade Receivables
(II) Other
Receivables
(e) Loans
(f) Investments
(g) Other Financial
assets (to be
specified)
(2) Non-financial
Assets
(a) Inventories
(b) Current tax assets
(Net)
(c) Deferred tax Assets
(Net)
141
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(d) Investment Property
(e) Biological assets
other than bearer
plants
(f) Property, Plant and
Equipment
(g) Capital work-in-
progress
(h) Intangible assets
under development
(i) Goodwill
(j) Other Intangible
assets
(k) Other non-financial
assets (to be
specified)
Total Assets
LIABILITIES AND
EQUITY
Liabilities
(1) Financial Liabilities
(a) Derivative financial
instruments
(b) Payables
(I)Trade Payables
(i) total outstanding
dues of micro
enterprises and small
enterprises
(ii) total outstanding
dues of creditors
other than micro
enterprises and small
enterprises
(II) Other Payables
142
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(i) total outstanding
dues of micro
enterprises and small
enterprises
(ii) total outstanding
dues of creditors
other than micro
enterprises and small
enterprises
(c) Debt Securities
(d) Borrowings (Other
than Debt Securities)
(e) Deposits
(f) Subordinated
Liabilities
(g) Other financial
liabilities(to be
specified)
(2) Non-Financial
Liabilities
(a) Current tax liabilities
(Net)
(b) Provisions
(c) Deferred tax
liabilities (Net)
(d) Other non-financial
liabilities(to be
specified)
(3) Equity
(a) Equity Share capital
(b) Other Equity
Total Liabilities and
Equity
See accompanying notes to the financial statements
143
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
STATEMENT OF CHANGES IN EQUITY1
Name of the Company..............
A. Equity Share Capital
(1) Current reporting period
Balance at Changes in Restated Changes in Balance at
the Equity balance at equity share the end of the
beginning of Share the capital during current
the current Capital due beginning of the current reporting
reporting to prior the current year period
period period reporting
errors period
(2) Previous reporting period
Balance at Changes in Restated Changes in Balance at
the Equity balance at equity share the end of the
beginning of Share the capital during previous
the previous Capital due beginning of the previous reporting
reporting to prior the previous year period
period period reporting
errors period
1 Amended pursuant to MCA Notification G.S.R. 207(E) dated 24th March 2021
144
B. Other Equity
GN on Division III – Schedule III to the Companies Act 2013 for NBFC
…(1) Current reporting period
145 Reserves and Surplus
Share Equity Capi Secur Other Retain Debt Equity Effecti Reval Excha Other Money Total
applic compo tal ities Rese ed instru Instru ve uation nge items receiv
ation nent of Res Premi rves Earnin ments ments portio Surplu differe of ed
mone compo erve um (spec gs throug throug n of s nces Other agains
y und ify h h Cash on Compr t
pendi financi natur Other Other Flow transla ehensi share
ng al e) Compr Compr Hedge ting ve warra
allotm instru ehensi ehensi s the Incom nts
ent ments ve ve financi e(spec
Incom Incom al ify
e e statem nature
ents of )
a
foreig
n
operat
ion
Balance
at the
beginnin
g of the
current GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
reporting146
period
Changes
in
accounti
ng policy
or prior
period
errors
Restated
balance
at the
beginnin
g of the
current
reporting
period
Total
Compreh
ensive
Income
for the
current
year
GN on Division III – Schedule III to the Companies Act 2013 for NBFCDividend
…s
147Transfer
to
retained
earnings
Any
other
change
(to be
specified
)
Balance
at the
end of
the
current
reporting
period
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …(2) Previous reporting period
148
Reserves and Surplus
Share Equity Capi Secur Other Retain Debt Equity Effecti Reval Excha Other Money Total
applic compo tal ities Rese ed instru Instru ve uation nge items receiv
ation nent of Res Premi rves Earnin ments ments portio Surplu differe of ed
mone compo erve um (spec gs throug throug n of s nces Other agains
y und ify h h Cash on Compr t
pendi financi natur Other Other Flow transla ehensi share
ng al e) Compr Compr Hedge ting ve warra
allotm instru ehensi ehensi s the Incom nts
ent ments ve ve financi e(spec
Incom Incom al ify
e e statem nature
ents of )
a
foreig
n
operat
ion
Balance
at the
beginnin
g of the
previous
reporting
period
GN on Division III – Schedule III to the Companies Act 2013 for NBFCChanges
…in
accounti
149ng policy
or prior
period
errors
Restated
balance
at the
beginnin
g of the
previous
reporting
period
Total
Compreh
ensive
Income
for the
previous
year
Dividend
s
Transfer
to
retained GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
earnings150
Any
other
change
(to be
specified
)
Balance
at the
end of
the
previous
reporting
period
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
Note: Re-measurement of defined benefit plans and fair value changes
relating to own credit risk of financial liabilities designated at fair value
through profit or loss shall be recognised as a part of retained earnings with
separate disclosure of such items along with the relevant amounts in the
Notes or shall be shown as a separate column under Reserves and Surplus.
Notes
GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET
A Non-Banking Financial company shall disclose the following in the notes to
accounts:
(A) Cash and cash equivalents: Cash and cash equivalents shall be
classified as:
(i) Cash on hand
(ii) Balances with Banks (of the nature of cash and cash
equivalents);
(iii) Cheques, drafts on hand; and
(iv) Others (specify nature).
Cash and Bank balances: The following disclosures with regard to
cash and bank balances shall be made:
(i) Earmarked balances with banks (for example, for unpaid
dividend) shall be separately stated.
(ii) Balances with banks to the extent held as margin money or
security against the borrowings, guarantees, other commitments
shall be disclosed separately.
(iii) Repatriation restrictions, if any, in respect of cash and bank
balances shall be separately stated.
(B) Derivative financial Instruments
1 Explain use of derivatives
2 Cross-reference to Financial Risks section for management of
risks arising from derivatives.
151
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(Current Year) (Previous Year)
Part I Notion Fair Fair Notion Fair Fair
al Value Value - al Value Value -
(i)Currency Liabiliti Liabiliti
derivatives: amoun - amoun -
-Spot and ts Asset es ts Asset es
forwards
-Currency s s
Futures
-Currency
swaps
-Options
purchased
-Options sold
(written)
-Others
Subtotal (i)
(ii)Interest
rate
derivatives
-Forward Rate
Agreements
and Interest
Rate Swaps
-Options
purchased
-Options sold
(written)
-Futures
-Others
Subtotal(ii)
(iii)Credit
derivatives
(iv)Equity
linked
152
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
derivatives
(v)Other
derivatives
(Please
specify)
Total
Derivative
Financial
Instruments
(i)+(ii)+(iii)+(iv)
+ (v)
Part II
Included in
above (Part I)
are derivatives
held for
hedging and
risk
management
purposes as
follows:
(i)Fair value
hedging:
- Currency
derivatives
- Interest rate
derivatives
- Credit
derivatives
- Equity linked
derivatives
- Others
Subtotal (i)
(ii)Cash flow
hedging:
- Currency
derivatives
- Interest Rate
derivatives
153
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
- Credit
derivatives
- Equity linked
derivatives
- Others
Subtotal (ii)
(iii)Net
investment
hedging:
(iv)Undesigna
ted
Derivatives
Total
Derivative
Financial
Instruments
(i)+
(ii)+(iii)+(iv)
With respect to hedges and hedge accounting, NBFCs may provide a
description in accordance with the requirements of Indian Accounting
Standards, of how derivatives are used for hedging, explain types of hedges
recognized for accounting purposes and their usage/application by the entity.
(C) Receivables:
(i) Receivables shall be sub-classified as:
(a) Receivables considered good - Secured;
(b) Receivables considered good - Unsecured;
(c) Receivables which have significant increase in Credit Risk; and
(d) Receivables - credit impaired
(ii) Allowance for impairment loss allowance shall be disclosed under the
relevant heads separately.
(iii) Debts due by Directors or other officers of the NBFC or any of them
either severally or jointly with any other person or debts due by firms
including limited liability partnerships (LLPs), private companies
respectively in which any director is a partner or a director or a
member should be separately stated.
154
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(iv)2 For trade receivables outstanding, following ageing schedule shall be
given:
Trade Receivables aging schedule
(Amount in Rs.)
Particulars Outstanding for following periods from due date
of payment#
Less 6 1-2 2-3 More Total
years than 3
than 6 months Years years
months -1 year
(i) Undisputed
Trade
receivables —
considered good
(ii) Undisputed
Trade
Receivables —
which have
significant
increase in
credit risk
(iii) Undisputed
Trade
Receivables —
credit impaired
(iv) Disputed
Trade
Receivables—
considered good
(v) Disputed
Trade
Receivables —
which have
significant
increase in
credit risk
(vi) Disputed
2 Inserted pursuant to MCA Notification G.S.R. 207(E) dated 24th March 2021
155
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
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
156
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …(D) Loans
157
(Current Year) (Previous Year)
Amort At Fair Value Sub- Tota Amort At Fair Value Sub- Total
ised Through Thro Desig total l ised Through Thro Desig total
cost Other ugh nated cost Other ugh nated
Compreh profi at fair Compreh profi at fair
ensive t or value ensive t or value
Income loss throug Income loss throug
h h
profit profit
or loss or loss
(1) (2) (3) (4) (5=2+ (6=1 (7) (8) (9) (10) (11=8+ (12=(7)
3+4) +5) 9+10) +(11)
Loans
(A)
(i) Bills
Purchased
and Bills
Discounted
(ii) Loans
repayable
on Demand
(iii) Term
Loans GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(iv)
Leasing
(v)
Factoring
(vi) Others
(to be
specified)
Total (A) -
Gross
Less
:Impairmen
t loss
allowance
Total (A) -
Net
(B)
(i) Secured
by tangible
assets
(ii)Secured
by
intangible
assets GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
159
(iii)
Covered by
Bank/Gove
rnment
Guarantee
s
(iv)
Unsecured
Total (B)-
Gross
Less:
Impairment
loss
allowance
Total (B)-
Net
(C) (I)
(Loans in
India
(i) Public
Sector
(ii) Others
(to be GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
specified)
Total (C)-
Gross
Less:
Impairment
loss
allowance
Total(C)
(I)-Net
(C) (II)
Loans
outside
India
Less:
Impairment
loss
allowance
Total (C)
(II)- Net
Total C(I)
and C(II)
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …(E) Investments
161
Investments
(Current Year) (Previous Year)
Invest Amort At Fair Value Su Oth Tot Amort At Fair Value Ot Tot
ments ised Through Thro Desig b- ers* al ised Through Thro Desig Sub he al
cost Other ugh nated Tot cost Other ugh nated - rs
Compreh profi at fair al Compreh profi at fair Tot *
ensive t or value ensive t or value al
Income loss throug Income loss throug
h h
profit profit
or or
loss loss
(1) (2) (3) (4) (5)= (6) (7)= (8) (9) (10) (11) (12) (1 (14)
(2)+ (1)+ = 3) =
(3)+ (5)+ (9) (8)
(4) (6) + +
(10) (12)
+ +
(11) (13)
Mutual
funds
Governm
ent GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
securitie
s
Other
approve
d
securitie
s
Debt
securitie
s
Equity
instrume
nts
Subsidia
ries
Associat
es
Joint
Ventures
Others
(specify)
Total —
Gross GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(A)163
(i)
Investm
ents
outside
India
(ii)
Investm
ents in
India
Total (B)
Total (A)
to tally
with (B)
Less:
Allowan
ce for
Impairm
ent loss
(C)
Total —
Net D=
(A)-(C)
* Other basis of measurement such as cost may be explained as a footnote
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(F) Investment Property
A reconciliation of the gross and net carrying amounts of each class of
property at the beginning and end of the reporting period showing additions,
disposals, acquisitions through business combinations and other adjustments
and the related depreciation and impairment losses or reversals shall be
disclosed separately.
(G) Biological Assets other than bearer plants:
A reconciliation of the carrying amounts of each class of assets at the
beginning and end of the reporting period showing additions, disposals,
acquisitions through business combinations and other adjustments shall be
disclosed separately.
(H) Property, Plant and Equipment
(i) Classification shall be given as:
(a) Land
(b) Buildings
(c) Plant and Equipment
(d) Furniture and Fixtures
(e) Vehicles
(f) Office equipment
(g) Bearer Plants
(h) Others (specify nature)
(ii) Assets under lease shall be separately specified under each class of
asset.
(iii)3 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 or reversals shall be disclosed separately.
3 Amended pursuant to MCA Notification G.S.R. 207(E) dated 24th March 2021
164
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(I) Goodwill
A reconciliation of the gross and net carrying amount of goodwill at the
beginning and end of the reporting period showing additions, impairments,
disposals and other adjustments.
(J) Other Intangible assets
(i) Classification shall be given as:
(a) Brands or trademarks
(b) Computer software
(c) Mastheads and publishing titles
(d) Mining rights
(e) Copyrights, patents, other intellectual property rights, services
and operating rights
(f) Recipes, formulae, models, designs and prototypes
(g) Licenses and franchises
(h) Others (specify nature)
(ii)4 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 assets)
and other adjustments and the related amortization and impairment
losses or reversals shall be disclosed separately.
(K) Payables
The following details relating to Micro, Small and Medium Enterprises shall
be disclosed:
(a) the principal amount and the interest due thereon (to be shown
separately) remaining unpaid to any supplier at the end of each
accounting year;
(b) the amount of interest paid by the buyer in terms of section 16 of the
Micro, Small and Medium Enterprises Development Act, 2006, along
with the amount of the payment made to the supplier beyond the
appointed day during each accounting year;
4 Amended pursuant to MCA Notification G.S.R. 207(E) dated 24th March 2021
165
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(c) the amount of interest due and payable for the period of delay in
making payment (which have been paid but beyond the appointed day
during the year) but without adding the interest specified under the
Micro, Small and Medium Enterprises Development Act, 2006;
(d) the amount of interest accrued and remaining unpaid at the end of
each accounting year; and
(e) the amount of further interest remaining due and payable even in the
succeeding years, until such date when the interest dues above are
actually paid to the small enterprise, for the purpose of disallowance of
a deductible expenditure under section 23 of the Micro, Small and
Medium Enterprises Development Act, 2006.
Explanation.- The terms ‘appointed day’, ‘buyer’, ‘enterprise’, ‘micro
enterprise’, ‘small enterprise’ and ‘supplier’, shall have the same meaning
assigned to those under clauses (b), (d), (e), (h), (m) and (n) respectively of
section 2 of the Micro, Small and Medium Enterprises Development Act,
2006.”
(KA)5 For trade payables due for payment, following ageing schedule shall
be given:
Trade Payables aging schedule
(Amount in Rs.)
Particulars Outstanding for following periods from due date
of payment#
Less than 1-2 2-3 More than 3 Total
1 year years years years
(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 Inserted pursuant to MCA Notification G.S.R. 207(E) dated 24th March 2021
166
(L) Debt Securities GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(Current Year) (Previous Year)
At At Fair Designate Total At At Fair Designated Total
Amortised Value d at fair (4)=(1)+(2)+(3) Amortised Value at fair (8)=(5)+(6)+(7)
Through value Through value
Cost profit or through Cost profit or through
loss profit or loss profit or
(1) (5) loss
loss
(2) (3) (6) (7)
Liability
component
of
compound
financial
instruments
Others
(Bonds/
Debenture
etc.)
Total (A)
Debt
securities
in India
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
168
Debt
securities
outside
India
Total (B) to
tally with
(A)
(i) bonds or debentures (along with the rate of interest, and particulars of redemption or conversion, as the case may be)
shall be stated in descending order of maturity or conversion, starting from earliest redemption or conversion date, as the
case may be. Where bonds/debentures are redeemable by instalments, the date of maturity for this purpose must be
reckoned as the date on which the first instalment becomes due;
(ii) particulars of any redeemed bonds or debentures which the NBFC has power to reissue shall be disclosed.
(M) Borrowings (Other than Debt Securities)
(Current Year) (Previous Year)
At Amortised At fair Designated Total At At fair Designated Total
Cost value at fair value Amortis value at fair value
through (4)=(1)+ ed Cost through (4)=(1)+(
(1) profit or through (2)+(3) profit or through 2)+(3)
loss profit or (1) loss profit or loss
loss
(2) (3) (2) (3)
(a)Term loans
(i)from banks GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
169
(ii)from other
parties
(b)Deferred
payment liabilities
(c)Loans from
related parties
(d) Finance lease
obligations
(e)Liability
component of
compound
financial
instruments
(f)Loans
repayable on
demand
(i)from banks
(ii)from other
parties
(g) Other loans
(specify nature)
Total (A)
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
170
Borrowings in
India
Borrowings
outside India
Total (B) to tally
with (A)
(i) Borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in
each case.
(ii) Where borrowings have been guaranteed by Directors or others, the aggregate amount of such borrowings under each
head shall be disclosed;
(iii) terms of repayment of term loans and other loans shall be stated; and
(iv) period and amount of default as on the balance sheet date in repayment of borrowings and interest shall be specified
separately in each case.
(N) Deposits :- GN on Division III – Schedule III to the Companies Act 2013 for NBFC …(Current Year)(Previous Year)
171
At At fair Designate Total At At fair Designate Total
Amortised value d at fair Amortised value d at fair
through value (4)=(1)+(2) through value (8)=(5)+(6)
Cost profit or through +(3) Cost profit or through +(7)
loss profit or loss profit or
(1) (5)
loss loss
Deposits
(i) Public (2) (3) (6) (7)
Deposits
(ii) From
Banks
(iii)From
Others
Total
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(O) Subordinated Liabilities
(Current Year) (Previous Year)
At At fair Design Total At At fair Design Total
Amorti value ated at Amorti value ated at
sed throug fair sed throug fair
Cost h profit value Cost h profit value
or loss throug or loss throug
h profit h profit
or loss or loss
(1) (2) (3) (4)=(1)+ (5) (6) (7) (8)=(5)+
(2)+(3) (6)+(7)
Perpetual
Debt
Instruments
to the
extent that
do not
qualify as
equity
Preference
Shares
other than
those that
qualify as
Equity
Others
(specifying
the nature
and type of
instrument
issued)
Total (A)
Subordinate
d Liabilities
in India
Subordinated
Liabilities
outside
India
Total (B) to
tally with
(A)
172
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(P) Other Financial Liabilities (to be specified):
Other Financial liabilities shall be classified as-
(a) Interest accrued;
(b) Unpaid dividends;
(c) Application money received for allotment of securities to the extent
refundable and interest accrued thereon;
(d) Unpaid matured deposits and interest accrued thereon;
(e) Unpaid matured debentures and interest accrued thereon;
(f) Margin money (to be specified); and
(g) Others (specify nature)
(Q) Provisions:
The amounts shall be classified as-
(a) Provision for employee benefits; and
(b) Others (specify nature)
(R) Other Non-financial liabilities (to be specified):
(a) Revenue received in advance;
(b) Other advances (Specify nature); and
(c) Others (specify nature).
(S) Equity Share Capital:
For each class of equity share capital:
(a) the number and amount of shares authorized;
(b) the number of shares issued, subscribed and fully paid, and
subscribed but not fully paid;
(c) par value per share;
(d) a reconciliation of the number of shares outstanding at the beginning
and at the end of the period;
173
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(e) the rights, preferences and restrictions attaching to each class of
shares including restrictions on the distribution of dividends and the
repayment of capital;
(f) shares in respect of each class in the company held by its holding
company or its ultimate holding company including shares held by or
by subsidiaries or associates of the holding company or the ultimate
holding company in aggregate;
(g) shares in the company held by each shareholder holding more than
five percent shares specifying the number of shares held;
(h) shares reserved for issue under options and contracts/commitments
for the sale of shares or disinvestment, including the terms and
amounts;
(i) For the period of five years immediately preceding the date at which
the Balance Sheet is prepared:
• Aggregate number and class of shares allotted as fully paid up
pursuant to contract without payment being received in cash;
• Aggregate number and class of shares allotted as fully paid up
by way of bonus shares; and
• Aggregate number and class of shares bought back;
(j) terms of any securities convertible into equity shares issued along with
the earliest date of conversion in descending order starting from the
farthest such date;
(k) calls unpaid (showing aggregate value of calls unpaid by Directors and
officers);
(l) forfeited shares (amount originally paid up)
(m) An NBFC shall disclose information that enables users of its financial
statements to evaluate the NBFC’s objectives, policies and processes
for managing capital.
174
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
6(n) A company shall disclose Shareholding of Promoters* as below:
Shares held by promoters at the end of the year % Change during
the year***
S. No Promoter No. of Shares** % of
name 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.
(T) Other Equity
(i) Other Reserves shall be classified in the notes as:
(a) Capital Redemption Reserve;
(b) Debenture Redemption Reserve;
(c) Share Options Outstanding Account;
(d) Statutory Reserves; and
(e) Others — (specify the nature and purpose of each reserve and
the amount in respect thereof); (Additions and deductions since
last balance sheet to be shown under each of the specified
heads)
(ii) Retained Earnings represents surplus i.e. balance of the relevant
column in the Statement of Changes in Equity;
(iii) A reserve specifically represented by earmarked investments shall
disclose the fact that it is so represented;
(iv) Debit balance of Statement of Profit and Loss shall be shown as a
negative figure under the head ‘retained earnings‘. Similarly, the
balance of ‘Other Equity‘, after adjusting negative balance of retained
6 Inserted pursuant to MCA Notification G.S.R. 207(E) dated 24th March 2021
175
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
earnings, if any, shall be shown under the head ‘Other Equity‘ even if
the resulting figure is in the negative;
(v) Under the sub-head ‘Other Equity‘, disclosure shall be made for the
nature and amount of each item; and
(vi) Under the sub-head ‘Other Equity‘, disclosure shall be made for
conditions or restrictions for distribution attached to statutory reserves.
(U) Contingent Liabilities and commitments (to the extent not
provided for)
(i) Contingent Liabilities shall be classified as:
(a) Claims against the company not acknowledged as debt;
(b) Guarantees excluding financial guarantees; and
(c) Other money for which the company is contingently liable
(ii) Commitments shall be classified as:
(a) Estimated amount of contracts remaining to be executed on
capital account and not provided for;
(b) Uncalled liability on shares and other investments partly paid;
(c) Other commitments (specify nature).
(V) The amount of dividends proposed to be distributed to equity and
preference shareholders for the period and the related amount per
share shall be disclosed separately. Arrears of fixed cumulative
dividends on irredeemable preference shares shall also be disclosed
separately.
(W) Where in respect of an issue of securities made for a specific purpose
the whole or part of amount has not been used for the specific purpose
at the Balance Sheet date, there shall be indicated by way of note how
such unutilized amounts have been used or invested.
(WA)7Where 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.
7 Inserted pursuant to MCA Notification G.S.R. 207(E) dated 24th March 2021
176
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(WB)8 Additional Regulatory Information
(i) Title deeds of Immovable Properties 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 following format 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 Descripti Gross Title Whether title Proper Reason
line item on of carryin deed deed holder is ty held for not
in the item of g s a promoter, since being
Balance property value held director or which held in
sheet in relative# of date the name
the promoter*/direc of the
nam tor or company
e of employee of **
promoter/direct
or
PPE - Land - - - - **also
Building indicate
if in
dispute
Investme Land
nt Building
property -
PPE Land
retired Building
from
active
use and
held for
disposal -
others
#Relative here means relative as defined in the Companies Act, 2013.
*Promoter here means promoter as defined in the Companies Act, 2013.
8 Inserted pursuant to MCA Notification G.S.R. 207(E) dated 24th March 2021
177
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(ii) 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.
(iii) Where the Company has revalued its Property, Plant and Equipment
(including Right-of-Use Assets), the company shall disclose as to
whether the revaluation is based on valuation by a Registered Valuer
as defined under rule 2 of Companies (Registered Valuers and
Valuation) Rules, 2017.
(iv) Where the Company has revalued its Intangible assets, the company
shall disclose as to whether the revaluation is based on valuation by a
Registered Valuer as defined under rule 2 of Companies (Registered
Valuers and Valuation) Rules, 2017.
(v) 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 the 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 Amount of loan or advance Percentage to the total
Borrower
in the nature of loan Loans and Advances in
outstanding the nature of loans
Promoters
Directors
KMPs
Related Parties
(vi) Capital-Work-in Progress (CWIP)
(a) For Capital-work-in progress, following ageing schedule shall be
given:
178
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
CWIP aging schedule
(Amount in Rs.)
CWIP Amount in CWIP for a period of Total*
Less than 1-2 years 2-3 More
than 3
1 year years 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 1-2 2-3 years More than 3
years
year years
Project 1
Project 2
**Details of projects where activity has been suspended shall be given
separately.
(vii) Intangible assets under development:
(a) For Intangible assets under development, following ageing schedule
shall be given:
179
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
Intangible assets under development aging schedule
Intangible assets Amount in CWIP for a period of (Amount in Rs.)
under Less than 1 1-2 2-3 Total*
development
year years 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 To be completed in (Amount in Rs.)
under development
Less than 1 1-2 2-3 years More than
Project 1 3 years
Project 2 year years
**Details of projects where activity has been suspended shall be given
separately.
(viii) 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 rules made thereunder, the company shall
disclose the following:-
(a) Details of such property,
(b) Amount thereof,
180
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(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.
(ix) 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.
(x) Wilful Defaulter*
Where a company is a declared wilful defaulter by any bank or financial
institution or other lender, following details shall be given, namely:-
(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 Companies Act, 2013) or consortium thereof, in
accordance with the guidelines on wilful defaulters issued by the Reserve
Bank of India.
(xi) Relationship with Struck off Companies
Where the company has any transactions with the companies struck off
under section 248 of Companies Act, 2013 or section 560 of Companies Act,
1956, the Company shall disclose the following details, namely:-
181
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
Name of Nature of transactions with Balance Relationship
with the Struck
struck off struck off Company outstanding off company, if
any, to be
Company disclosed
Investments in securities
Receivables
Payables
Shares held by stuck off
company
Other outstanding
balances (to be specified)
(xii) Registration of charges or satisfaction with Registrar of
Companies (ROC)
Where any charges or satisfaction yet to be registered with ROC beyond the
statutory period, details and reasons thereof shall be disclosed.
(xiii) 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.
(xiv) Following Ratios shall be disclosed.
(a) Capital to risk-weighted assets ratio (CRAR)
(b) Tier I CRAR
(c) Tier II CRAR
(d) Liquidity Coverage Ratio
(xv) 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
182
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
accordance with the Scheme‘ and in accordance with accounting standards‘.
Any deviation in this regard shall be explained.
(xvi) Utilisation of Borrowed funds and share premium:
(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
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(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).
(X) Other Classification related General Instructions
1. When an NBFC applies an accounting policy retrospectively or makes
a restatement of items in the financial statements or when it
reclassifies items in its financial statements, the NBFC shall attach to
the Balance Sheet, a “Balance Sheet” as at the beginning of the
earliest comparative period presented.
2. Share application money pending allotment shall be classified into
equity or liability in accordance with relevant Indian Accounting
Standards. Share application money to the extent not refundable shall
be shown under the head Equity and share application money to the
extent refundable shall be separately shown under ‘Other financial
liabilities‘.
3. Preference shares including premium received on issue, shall be
classified and presented as ‘Equity‘ or ‘Liability‘ in accordance with the
requirements of the relevant Indian Accounting Standards.
Accordingly, the disclosure and presentation requirements in this
regard applicable to the relevant class of equity or liability shall be
applicable mutatis mutandis to the preference shares. For instance,
plain vanilla redeemable preference shares shall be classified and
presented under ‘liabilities‘ as ‘borrowings‘ or ‘subordinated liability‘
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
and the disclosure requirements in this regard applicable to such
borrowings shall be applicable mutatis mutandis to redeemable
preference shares.
4. Compound financial instruments such as convertible debentures,
where split into equity and liability components, as per the
requirements of the relevant Indian Accounting Standards, shall be
classified and presented under the relevant heads in ‘‘Liabilities and
Equity‘.
5. Regulatory Deferral Account Balances shall be presented in the
Balance Sheet in accordance with the relevant Indian Accounting
Standards.
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
PART II — STATEMENT OF PROFIT AND LOSS
Name of the Non-Banking Financial Company.........
Statement of Profit and Loss for the period ended .........
(Rupees in.....)
Particulars Note No. Figures for Figures
the current for the
reporting previous
period reporting
period
Revenue from
operations
(i) Interest Income
(ii) Dividend Income
(iii) Rental Income
(iv) Fees and commission
Income
(v) Net gain on fair value
changes
(vi) Net gain on de-
recognition of financial
instruments under
amortised cost category
(vii) Sale of
products(including Excise
Duty)
(viii) Sale of services
(ix) Others (to be specified)
(I) Total Revenue from
operations
(II) Other Income (to be
specified)
(III) Total Income (I+II)
Expenses
(i) Finance Costs
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(ii) Fees and commission
expense
(iii) Net loss on fair value
changes
(iv) Net loss on de-
recognition of financial
instruments under
amortised cost category
(v) Impairment on financial
instruments
(vi) Cost of materials
consumed
(vii) Purchases of Stock-in-
trade
(viii) Changes in Inventories of
finished goods, stock-in-
trade and work-in-
progress
(ix) Employee Benefits
Expenses
(x) Depreciation,
amortization and
impairment
(xi) Others expenses (to be
specified)
(IV) Total Expenses (IV)
(V ) Profit / (loss) before
exceptional items and tax
(III-
(VI ) Exceptional items
(VII ) Profit/(loss) before tax (V
-VI )
(VIII) Tax Expense:
(1) Current Tax
(2) Deferred Tax
(IX) Profit / (loss) for the
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
period from continuing
operations(VII-VIII)
(X) Profit/(loss) from
discontinued operations
(XI) Tax Expense of
discontinued operations
(XII) Profit/(loss) from
discontinued operations
(After tax) (X-XI)
(XIII) Profit/(loss) for the
period (IX+XII)
(XIV) Other Comprehensive
Income
(A) (i) Items that will not
be reclassified to profit or
loss (specify items and
amounts)
(ii) Income tax relating to
items that will not be
reclassified to profit or
loss
Subtotal (A)
(B) (i) Items that will be
reclassified to profit or
loss (specify items and
amounts)
(ii) Income tax relating to
items that will be
reclassified to profit or
loss
Subtotal (B)
Other Comprehensive
Income (A + B)
(XV) Total Comprehensive
Income for the period
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(XIII+XIV) (Comprising
Profit (Loss) and other
Comprehensive Income
for the period)
(XVI) Earnings per equity
(XVII) share (for continuing
(XVIII) operations)
Basic (Rs.)
Diluted (Rs.)
Earnings per equity
share (for discontinued
operations)
Basic (Rs.)
Diluted (Rs.)
Earnings per equity
share (for continuing
and discontinued
operations)
Basic (Rs.)
Diluted (Rs.)
Notes: See accompanying notes to the financial statements
GENERAL INSTRUCTIONS FOR PREPARATION OF STATEMENT OF
PROFIT AND LOSS
1. The provisions of this Part shall apply to the income and expenditure
account, in like manner as they apply to a Statement of Profit and
Loss.
2. The Statement of Profit and Loss shall include:
(A) Profit or loss for the period;
(B) Other Comprehensive Income for the period.
The sum of (A) and (B) above is ‘Total Comprehensive Income‘.
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GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
3. Interest Income
Particulars (Current Year) (Previous Year)
Interest on On On Interest On On Interest
Loans Financi Financi Income Financi Financi Income
Interest
income from al al on al al on
investments Assets Assets Financi Assets Assets Financi
Interest on measur measur measur measur
deposits ed at ed at al ed at ed at al
with Banks Amorti Assets Amorti Assets
Other fair classifi fair classifi
interest value sed ed at value sed ed at
Income throug Cost throug Cost
Total h OCI fair h OCI fair
value value
throug throug
h profit h profit
or loss or loss
4. Net gain/ (loss) on fair value changes*
Particulars (Current (Previous
Year) Year)
(A) Net gain/ (loss) on financial
instruments at fair value through profit or
loss
(i) On trading portfolio
- Investments
- Derivatives
190
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
- Others
(ii) On financial instruments designated at
fair value through profit or loss
(B) Others ( to be specified)
Total Net gain/(loss) on fair value
changes (C)
Fair Value changes:
-Realised
-Unrealised
Total Net gain/(loss) on fair value
changes(D) to tally with (C)
*Fair value changes in this schedule are other than those arising on account
of accrued interest income/expense.
5. Other Income (to be specified)
Particulars (Current (Previous
Year) Year)
Net gain/(loss) on ineffective portion of
hedges
Net gain/(loss) on de-recognition of
property, plant and equipment
Net gain or loss on foreign currency
transaction and translation (other than
considered as finance cost)(to be
specified)
Others ( to be specified)*
Total
* Any item under the subhead ‘Others’ which exceeds one per cent of the
total income to be presented separately.
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6. Finance Costs
Particulars (Current Year) (Previous Year)
Interest on On Financial On On On Financial
deposits liabilities Financial Financial liabilities
Interest on measured at liabilities liabilities measured at
borrowings fair value measured measured Amortised
Interest on through profit at at fair value Cost
debt securities or loss Amortised through
Interest on Cost profit or loss
subordinated
liabilities
Other interest
expense
Total
7. Employee Benefits Expenses
Particulars (Current Year) (Previous Year)
Salaries and wages
Contribution to provident and
other funds
Share Based Payments to
employees
Staff welfare expenses
Others (to be specified)
Total
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8. Impairment on financial instruments
Particulars (Current Year) (Previous Year)
Loans On On On On Financial
Investments Financial Financial Financial instruments
Others (to instruments instruments instruments measured at
be measured measured measured Amortised
specified) at fair value at at fair value Cost
Total through Amortised through
OCI Cost OCI
9. Other expenses (to be specified)
Particulars (Current Year) (Previous Year)
Rent, taxes and energy costs
Repairs and maintenance
Communication Costs
Printing and stationery
Advertisement and publicity
Director‘s fees, allowances and
expenses
Auditor‘s fees and expenses
Legal and Professional charges
Insurance
Other expenditure
Total
* Any item under the subhead ‘Other expenditure’ which exceeds one per
cent of the total income to be presented separately.
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10. Other Comprehensive Income shall be classified into-
(A) Items that will not be reclassified to profit or loss
i. Changes in revaluation surplus;
ii. Remeasurements of the defined benefit plans;
iii. Equity Instruments through Other Comprehensive Income;
iv. Fair value changes relating to own credit risk of financial
liabilities designated at fair value through profit or loss;
v. Share of Other Comprehensive Income in Associates and Joint
Ventures, to the extent not to be classified into profit or loss;
and
vi. Others (specify nature).
(B) Items that will be reclassified to profit or loss;
i. Exchange differences in translating the financial statements of a
foreign operation;
ii. Debt Instruments through Other Comprehensive Income;
iii. The effective portion of gains and loss on hedging instruments
in a cash flow hedge;
iv. Share of Other Comprehensive Income in Associates and Joint
Ventures, to the extent to be classified into profit or loss; and
v. Others (specify nature).
11. Additional Information: An NBFC shall disclose by way of notes,
additional information regarding aggregate expenditure and income on the
following items:
i. Depreciation, amortisation and impairment
ii. payments to the auditor as (a) auditor, (b) for taxation matters, (c) for
company law matters, (d) for other services, (e) for reimbursement of
expenses;
iii. in case of NBFCs covered under section 135, amount of expenditure
incurred on corporate social responsibility activities; and
iv. details of items of exceptional nature
194
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v9. Undisclosed income
The Company shall give details of any transactions 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. Also, state whether the previously unrecorded income
and related assets have been properly recorded in the books of
account during the year.
vi. Corporate Social Responsibility (CSR)
Where the company (NBFC) 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 shall be shown separately.
vii. 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,
9 Inserted pursuant to MCA Notification G.S.R. 207(E) dated 24th March 2021
195
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
(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 or virtual currency.
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PART III- GENERAL INSTRUCTIONS FOR THE PREPARATION OF
CONSOLIDATED FINANCIAL STATEMENTS
(1) Where a Non-Banking Financial Company (NBFC) is required to
prepare Consolidated Financial Statements, i.e., consolidated balance sheet,
consolidated statement of changes in equity and consolidated statement of
profit and loss, the NBFC shall mutatis mutandis follow the requirements of
this Schedule as applicable to an NBFC in the preparation of balance sheet,
statement of changes in equity and statement of profit and loss. However,
where the consolidated financial statements contains elements pertaining to
NBFCs and other than NBFCs, mixed basis of presentation may be followed
for consolidated financial statements where both kinds of operations are
significant. In addition, the consolidated financial statements shall disclose
the information as per the requirements specified in the applicable Indian
Accounting Standards notified under the Companies (Indian Accounting
Standards) Rules 2015, including the following, namely:-
(i) Profit or loss attributable to ‘non-controlling interest’ and to ‘owners of
the parent‘ in the statement of profit and loss shall be presented as
allocation for the period. Further, ‘total comprehensive income’ for the
period attributable to ‘non-controlling interest’ and to ‘owners of the
parent‘ shall be presented in the statement of profit and loss as
allocation for the period. The aforesaid disclosures for ‘total
comprehensive income’ shall also be made in the statement of
changes in equity. In addition to the disclosure requirements in the
Indian Accounting Standards, the aforesaid disclosures shall also be
made in respect of ‘other comprehensive income‘.
(ii) ‘Non-controlling interests‘ in the Balance Sheet and in the Statement
of Changes in Equity, within equity, shall be presented separately from
the equity of the ‘owners of the parent‘.
(iii) Investments accounted for using the equity method.
(2) In Consolidated Financial Statements, the following shall be disclosed
by way of additional information:
197
Name of the Net Assets, i.e., total Share in profit or loss Share in other Share in total GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
entity in the assets minus total comprehensive income comprehensive income
Group liabilities
As % of Amount As % of Amount As % of Amount As % of total Amount
consolidated consolidated consolidated comprehensive
net assets profit or loss other income
comprehensive
income
Parent
Subsidiaries
Indian
1
2
3
.
.
Foreign
1
2
3
.
. GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
Non-controlling199
Interests in all
subsidiaries
Associates
(Investment as
per the equity
method)
Indian
1
2
3
.
.
Foreign
1.
2
3
.
.
Joint Ventures(as
per the GN on Division III – Schedule III to the Companies Act 2013 for NBFC …equity
method)200
Indian
1.
2
3
.
.
Foreign
1.
2
3
.
.
Total
(3) All subsidiaries, associates and joint ventures (whether Indian or foreign) will be covered under consolidated financial
statements.
(4) An entity shall disclose the list of subsidiaries or associates or joint ventures which have not been consolidated in the
consolidated financial statements along with the reasons of not consolidating.
Annexure B
Illustrative list of disclosures required under the Companies Act 2013
1. Section 69 - Transfer of certain sums to capital redemption reserve
account.
Where a company purchases its own shares out of free reserves or securities
premium account, a sum equal to the nominal value of the shares so
purchased shall be transferred to the capital redemption reserve account and
details of such transfer shall be disclosed in the balance sheet.
2. Section 129 - Financial Statements
(5) Without prejudice to sub-section (1), where the Financial Statements
of a company do not comply with the accounting standards referred to in sub-
section (1), the company shall disclose in its Financial Statements, the
deviation from the accounting standards, the reasons for such deviation and
the financial effects, if any, arising out of such deviation.
3. Section 131 - Voluntary revision of Financial Statements or Board’s
report
(1) If it appears to the directors of a company that—
(a) the Financial Statements of the company; or
(b) the report of the Board, do not comply with the provisions of section 129
or section 134 they may prepare revised Financial Statements or a revised
report in respect of any of the three preceding financial years after obtaining
approval of the Tribunal on an application made by the company in such form
and manner as may be prescribed and a copy of the order passed by the
Tribunal shall be filed with the Registrar:
Provided that the Tribunal shall give notice to the Central Government and
the Income tax authorities and shall take into consideration the
representations, if any, made by that Government or the authorities before
passing any order under this section:
Provided further that such revised Financial Statements or report shall not be
prepared or filed more than once in a financial year:
Provided also that the detailed reasons for revision of such Financial
Statements or report shall also be disclosed in the Board's report in the
relevant financial year in which such revision is being made.
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
4. Section 135 - Corporate Social Responsibility
(2) The Board's report under sub-section (3) of section 134 shall disclose
the composition of the Corporate Social Responsibility Committee.
5. Section 182 - Prohibitions and restrictions regarding political
contributions
(3) Every company shall disclose in its profit and loss account the total
amount contributed by it under this section during the financial year to which
the account relates.
6. Section 183 - Power of Board and other persons to make
contributions to national defence fund, etc.
(2) Every company shall disclose in its profit and loss account the total
amount or amounts contributed by it to the Fund referred to in sub-section (1)
during the financial year to which the amount relates.
7. Section 186 - Loan and investment by company
(4) The company shall disclose to the members in the Financial
Statements the full particulars of the loans given, investment made or
guarantee given or security provided and the purpose for which the loan or
guarantee or security is proposed to be utilised by the recipient of the loan or
guarantee or security.
8. Section 272 - Petition for winding up
(4) The Registrar shall be entitled to present a petition for winding up
under subsection (1) on any of the grounds specified in sub-section (1) of
section 271, except on the grounds specified in clause (b), clause (d) or
clause (g) of that sub-section:
Provided that the Registrar shall not present a petition on the ground that the
company is unable to pay its debts unless it appears to him either from the
financial condition of the company as disclosed in its balance sheet or from
the report of an inspector appointed under section 210 that the company is
unable to pay its debts:
Provided further that the Registrar shall obtain the previous sanction of the
Central Government to the presentation of a petition:
Provided also that the Central Government shall not accord its sanction
unless the company has been given a reasonable opportunity of making
representations.
202
Annexure C
List of Indian Accounting Standards notified as on date:
Ind AS Description
Ind AS 101 First-time Adoption of Indian Accounting Standards
Ind AS 102 Share-based Payment
Ind AS 103 Business Combinations
Ind AS 104 Insurance Contracts
Ind AS 105 Non-current Assets Held for Sale and Discontinued
Operations
Ind AS 106 Exploration for and Evaluation of Mineral Resources
Ind AS 107 Financial Instruments: Disclosures
Ind AS 108 Operating Segments
Ind AS 109 Financial Instruments
Ind AS 110 Consolidated Financial Statements
Ind AS 111 Joint Arrangements
Ind AS 112 Disclosure of Interests in Other Entities
Ind AS 113 Fair Value Measurement
Ind AS 114 Regulatory Deferral Accounts
Ind AS 115 Revenue from Contracts with Customers
Ind AS 1 Presentation of Financial Statements
Ind AS 2 Inventories
Ind AS 7 Statement of Cash Flows
Ind AS 8 Accounting Policies, Changes in Accounting Estimates and
Errors
Ind AS 10 Events after the Reporting Period
Ind AS 11 Construction Contracts
Ind AS 12 Income Taxes
Ind AS 16 Property, Plant and Equipment
GN on Division III – Schedule III to the Companies Act 2013 for NBFC …
Ind AS 17 Leases
Ind AS 19 Employee Benefits
Ind AS 20 Accounting for Government Grants and Disclosure of
Government Assistance
Ind AS 21 The Effects of Changes in Foreign Exchange Rates
Ind AS 23 Borrowing Costs
Ind AS 24 Related Party Disclosures
Ind AS 27 Separate Financial Statements
Ind AS 28 Investments in Associates and Joint Ventures
Ind AS 29 Financial Reporting in Hyperinflationary Economies
Ind AS 32 Financial Instruments: Presentation
Ind AS 33 Earnings per Share
Ind AS 34 Interim Financial Reporting
Ind AS 36 Impairment of Assets
Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets
Ind AS 38 Intangible Assets
Ind AS 40 Investment Property
Ind AS 41 Agriculture
204
Annexure D
General Circular No. 39/2014 dated: 14th October, 2014
To
All Regional Directors,
All registrars of Companies,
All Stakeholders
Subject: Clarification on matters relating to Consolidated Financial
Statements.
Sir,
Government has received representations from stakeholders seeking
clarifications on the manner of presentation of notes in Consolidated
Financial Statements (CFS) to be prepared under Schedule III to the Act.
These representations have been examined in consultation with the Institute
of Chartered Accountants of India (ICAI) and it is clarified that Schedule III to
the Act read with the applicable Accounting Standards does not envisage
that a company while preparing its CFS merely repeats the disclosures made
by it under stand-alone accounts being consolidated. In the CFS, the
company would need to give all disclosures relevant for CFS only.
2. This issues with the approval of the competent authority
Glossary
Act The Companies Act, 2013
Ind AS Schedule III Division II to Ind AS Schedule III
Ind AS Indian Accounting Standards
Companies Ind AS Companies Ind AS Rules, 2015 as amended from
Rules time to time
Ind AS Framework Conceptual Framework for Financial Reporting
under Indian Accounting Standards
Non Ind AS Accounting Standards
Companies AS Rules Companies Accounting Standards Rules, 2006 as
amended from time to time
FVTPL Fair Value through Profit or Loss
FVOCI Fair Value through other Comprehensive Income
SEBI Securities and Exchange Board of India
SEBI (LODR) SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015
GAAP Generally Accepted Accounting Principles
MSMED The Micro, Small and Medium Enterprises
Development Act, 2006
CENVAT Central Value Added Tax
GST Goods and Services Tax
MAT Minimum Alternate Tax
CFS / SFS Consolidated Financial Statements / Standalone
Financial Statements
|
