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Exposure Draft of Guidance Note on Division I - Non Ind AS Schedule III to the Companies Act, 2013(Comments to be received by September 10, 2021)
September, 06th 2021

Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

EXPOSURE DRAFT
OF

REVISED GUIDANCE NOTE
ON

DIVISION I – NON IND AS SCHEDULE III
TO THE COMPANIES ACT, 2013
(Revised September 2021 Edition)

(Last date for Comments: September 10, 2021)

Corporate Laws & Corporate Governance Committee

INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

(Set up by an Act of Parliament)
NEW DELHI
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

EXPOSURE DRAFT
of

Revised Guidance Note
on

Division I – Non IND AS Schedule III
To the Companies Act, 2013

(Revised September 2021 Edition)

Following is the Exposure Draft of the Revised Guidance Note on Division I-Non
IND AS Schedule III to the Companies Act, 2013 issued by the Corporate Laws
& Corporate Governance Committee of the Institute of Chartered Accountants of
India, for comments.

The Committee invites comments on any aspect of this Exposure Draft.
Comments are most helpful if they indicate the specific paragraph or group of
paragraphs to which they relate, contain a clear rationale and, where applicable,
provide a suggestion for alternative wording.

Comments can be submitted using one of the following methods, so as to be
received not later than September 10, 2021.

1. Electronically: Click on https://forms.gle/TLCES3psWoaTN2Bv6 to submit
comments online. (Preferred method):

2. Email: Comments can be sent to comments.clcgc@icai.in
3. Postal: Corporate Laws & Corporate Governance Committee, The Institute

of Chartered Accountants of India, ICAI Bhawan, A- 29, Sector- 62, Noida –
203209.

Further clarifications on any aspect of this Exposure Draft may be sought by e-
mail to comments.clcgc@icai.in.
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

Foreword to the Third Edition
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

Preface to the Third Edition
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

Foreword to the Second Edition
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

Preface to the Second Edition
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

Foreword to the First Edition
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

Preface to the First Edition
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

Index

S.No. Contents Page No.

1. Introduction 1

2. Objective and Scope 1

3. Applicability 2

4. Summary of Division I to the Schedule III 3

5. Structure of Division I to the Schedule III 4

6. General Instructions to Division I to Schedule III 4

7. General Instructions For Preparation of Balance 9

Sheet: Notes 1 to 5

8. Part I- Form of Balance Sheet and Note 6 to General 15

Instructions For Preparation of Balance Sheet

9. Part II- Statement of Profit and Loss 83

10. Other additional information to be disclosed by way of 100

Notes to Statement of Profit and Loss

11. Other Disclosures 111

12. Multiple Activity Companies 126

13. Consolidated Financial Statements 126

Annexures

Annexure A – Division I to the Schedule III to the 140

Companies Act 2013

Annexure B – Analytical Ratios 179

Annexure C – Illustrative List of Disclosures 184

required under the Companies Act,

2013

Annexure D – List of Accounting Standards notified 187

as on date
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

Annexure E – General Circular No. 39 / 2014 dated 189

14th October 2014
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

1. Introduction

1.1 Schedule III to the Companies Act, 2013 (‘the Act’) provides the
manner in which every company registered under the Act shall prepare its
Balance Sheet, Statement of Profit and Loss and notes thereto. In the light of
various economic and regulatory reforms that have taken place for
companies over the last several years, there was a need for harmonizing and
synchronizing the notified Accounting Standards as applicable
(‘AS’/‘Accounting Standard(s)’).

1.2 The relevant format of Schedule III to the Act is given in Annexure A
(Pg 140). As per the Act and Rules / Notifications thereunder, the Schedule
applies to all companies, except for those companies where Division II and
Division III of the Schedule III is applicable, for the Financial Statements to
be prepared for the financial year commencing on or after April 1, 2014. This
Guidance Note also incorporates the changes made by various MCA
Notifications upto 31 March 2021 to Division I to the Schedule III (hereinafter,
referred to as ‘Schedule III’).

1.3 The requirements of the Schedule III however, do not apply to
companies as referred to in the proviso to Section 129(1) of the Act, i.e., any
insurance or banking company, or any company engaged in the generation
or supply of electricity or to any other class of company for which a form of
financial statement has been specified in or under the Act governing such
class of company.

1.4 It may be clarified that for companies engaged in the generation and
supply of electricity, however, 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)(d) of the Companies Act,
2013 states that the provisions of the Companies Act shall apply to
companies engaged in the generation or supply of electricity, except in so far
as the said provisions are inconsistent with the provisions of the Electricity
Act, 2003. Keeping this in view, Schedule III 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 of companies in
accordance with various aspects of the Schedule III. However, it does not

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Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

provide guidance on disclosure requirements under Accounting Standards,
other pronouncements of the Institute of Chartered Accountants of India
(ICAI), other statutes, etc.

2.2. In preparing this Guidance Note, reference has been made to the
Accounting Standards notified under Section 133 of the Companies Act,
2013 read together with Paragraph 7 of the Companies (Accounts) Rules,
2014 given in Annexure D (Pg 187) and various other pronouncements of
the ICAI. The primary focus of the Guidance Note has been to lay down
broad guidelines to deal with practical issues that may arise in the
implementation of the Schedule III.

2.3. 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.”

3. Applicability

3.1. As per the Government Notification no. S.O. 902 (E) dated 26th March,
2014, the Schedule III is applicable for the Balance Sheet and Statement of
Profit and Loss to be prepared for the financial year commencing on or after
April 1, 2014. Schedule III has been 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. All companies that
prepare, either voluntarily or mandatorily, Financial Statements in compliance
with the Companies (Accounts) Rules, should consider Schedule III as well
as this Guidance Note. Additionally, preparers of financial statements should
also consider requirements of the Act as well as other Statutes, Notifications,

2
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

circulars issued by various Regulators.

3.2. The Schedule III requires that except in the case of the first Financial
Statements laid before the company after incorporation, the corresponding
amounts for the immediately preceding period are to be disclosed in the
Financial Statements including the Notes to Accounts. Accordingly,
corresponding information will have to be presented starting from the first
year of application of the Schedule III. Thus, for the Financial Statements
prepared for the year 2021-22 (1st April 2021 to 31st March 2022),
corresponding amounts need to be given for the financial year 2020-21.

3.3. Applicability of the Schedule III format to interim Financial Statements
prepared by companies in the first year of application of the Schedule:
Relevant paragraphs of AS-25 Interim Financial Reporting are quoted below:
“10. If an enterprise prepares and presents a complete set of Financial
Statements in its interim financial report, the form and content of those
statements should conform to the requirements as applicable to annual
complete set of Financial Statements.
11. If an enterprise prepares and presents a set of condensed Financial
Statements in its interim financial report, those condensed statements should
include, at a minimum, each of the headings and sub-headings that were
included in its most recent annual Financial Statements and the selected
explanatory notes as required by this Statement. Additional line items or
notes should be included if their omission would make the condensed interim
Financial Statements misleading.”
3.4. Accordingly, if a company is presenting condensed interim Financial
Statements, its format should also going forward conform to that used in the
company’s most recent annual Financial Statements, i.e., the Schedule III of
Companies Act, 2013.

4. Summary of Division I to the Schedule III

4.1. Main principles
4.1.1. The Schedule III requires that if compliance with the requirements of
the Act and/ or the notified Accounting Standards requires a change in the
treatment or disclosure in the Financial Statements as compared to that
provided in the Schedule III, the requirements of the Act and/ or the notified
Accounting Standards will prevail over the Schedule.
4.1.2. The Schedule III clarifies that the requirements mentioned therein for

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Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

disclosure on the face of the Financial Statements or in the notes are
minimum requirements. Line items, sub-line items and sub-totals can be
presented as an addition or substitution on the face of the Financial
Statements when such presentation is relevant for understanding of the
company’s financial position and/or performance.
4.1.3. The terms used in the Schedule III will carry the meaning as defined
by the applicable Accounting Standards. For example, the terms such as
‘associate’, ‘related parties’, etc. will have the same meaning as defined in
Accounting Standards notified under Companies (Accounting Standards)
Rules, 2006 (as amended from time to time).
4.1.4. In preparing the Financial Statements including the Notes to Accounts,
a balance will have to 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. However, a company shall
state the fact for not providing required disclosures pursuant to any Act or
Regulation including Ind AS Schedule III instead of simply not providing the
required disclosure basis non-applicability.
4.1.5. All items of assets and liabilities are to be bifurcated between current
and non-current portions and presented separately on the face of the
Balance Sheet.
4.1.6. There is an explicit requirement to use the same unit of measurement
uniformly throughout the Financial Statements and notes thereon.

5. Structure of Division I to the Schedule III

The Structure of Schedule III is as under:
I. General Instructions for preparation of Balance Sheet and Statement

of Profit and Loss of a company
II. Part I – Form of Balance Sheet
III. General Instructions for Preparation of Balance Sheet
IV. Part II – Form of Statement of Profit and Loss
V. General Instructions for Preparation of Statement of Profit and Loss
VI. General Instructions for the Preparation of Consolidated Financial

Statements

6. General Instructions to Division I to The Schedule III

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Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

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 the Preface to the Statements of Accounting
Standards issued by ICAI, if a particular Accounting Standard is found to be
not in conformity with the law, the provisions of the said law will prevail and
the Financial Statements should be prepared in conformity with such law.
The Schedule III gives overriding status to the requirements of the
Accounting Standards and other requirements of the Act, such principle of
law overriding the Accounting Standards is inapplicable in the context of the
Schedule III.

6.3. The Schedule III requires that if compliance with the requirements of
the Act including applicable Accounting Standards require any change in the
treatment or disclosure including addition, amendment, substitution or
deletion in the head/sub-head or any changes inter se, in the Financial
Statements or statements forming part thereof, the same shall be made and
the requirements of Schedule III shall stand modified accordingly.

6.4. Implications of all instructions mentioned above can be illustrated by
means of the following example. One of the line items to be presented on the
face of the Balance Sheet under Current assets is “Cash and cash
equivalents”. The break-up of these items required to be presented by the
Schedule III comprises of items such as Balances with banks held as margin
money or security against borrowings, guarantees, etc. and bank deposits
with more than 12 months maturity. According to AS-3 Cash Flow
Statements, 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. The Standard
further explains that an investment normally qualifies as a cash equivalent
only when it has a short maturity of three months or less from the date of
acquisition. Hence, normally, deposits with original maturity of three months
or less only should be classified as cash equivalents. Further, bank balances
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. Thus,
this is an apparent conflict between the requirements of the Schedule III and
the Accounting Standards with respect to which items should form part of
Cash and cash equivalents. As laid down in the General Instructions, Para 1
of Schedule III, requirements of the Accounting Standards would prevail over

5
Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

the Schedule III and the company should make necessary modifications in
the Financial Statements, which may include addition, amendment,
substitution or deletion in the head/sub-head or any other changes inter se.
Accordingly, the conflict should be resolved by changing the caption “Cash
and cash equivalents” to “Cash and bank balances,” which may have two
sub-headings, viz., “Cash and cash equivalents” and “Other bank balances.”
The former should include only the items that constitute Cash and cash
equivalents defined in accordance with AS 3 (and not the Schedule III), while
the remaining line-items may be included under the latter heading.

6.5. The comparatives for the previous years should be prepared on the
same lines of guidance as provided for the preparation of current schedules.

6.6. In any case where ageing is to be given under any clause of the
Schedule III; then in case of amalgamation/merger; the original date will be
considered for the purpose of giving information. If such information is not
available, the fact should be so stated.

6.7. Para 2 of the General Instructions to the Schedule III states that the
disclosure requirements of the Schedule are in addition to and not in
substitution of the disclosure requirements specified in the notified
Accounting Standards. They further clarify that the additional disclosures
specified in the Accounting Standards shall be made in the Notes to
Accounts or by way of an additional statement unless required to be
disclosed on the face of the Financial Statements. All other disclosures
required by the Act are also required to be made in the Notes to Accounts in
addition to the requirements set out in the Schedule III.

6.8. An example to illustrate the above point is the specific disclosure
required by AS-24 Discontinuing Operations on the face of the Statement of
Profit and Loss which has not been incorporated in the Schedule III. The
disclosure pertains to the amount of pre-tax gain or loss recognised on the
disposal of assets or settlement of liabilities attributable to the discontinuing
operation. Accordingly, such disclosures specifically required by the
Accounting Standard on the face of either the Statement of Profit and Loss or
Balance Sheet will have to be so made even if not forming part of the formats
prescribed under the Schedule III.

6.9. All the other disclosures required by the Accounting Standards will
continue to be made in the Financial Statements. Further, the disclosures
required by the Act will continue to be made in the Notes to Accounts. An
example of this is the separate disclosure required by Sub Section (3) of

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Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

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 C (Pg 184).

6.10. Though not specifically required by the Schedule III, disclosures may
be mandated by other Acts or legal requirements will have to be made in the
Financial Statements. For example, until amendment to Division I to
schedule II by MCA notification dated 4th September 2015, the disclosure as
required by The Micro, Small and Medium Enterprises Development
(MSMED) Act, 2006 was required to be made in the annual Financial
Statements of the buyer wherever such Financial Statements are required to
be audited under any law.

6.11. The above principle would apply to disclosures required by other legal
requirements. A further extension of the above principle also means that
specific disclosures required by various pronouncements of regulatory bodies
such as the ICAI announcement for disclosures on derivatives and unhedged
foreign currency exposures, and other disclosure requirements prescribed by
various ICAI Guidance Notes, such as Guidance Note on Employee Share-
based Payments, Guidance Note on Accounting for Derivative Contracts, etc.
should continue to be made in the Financial Statements in addition to the
disclosures specified by the Schedule III.

6.12. Para 3 of the General Instructions of the Schedule III also states that
the Notes to Accounts 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 later in this Guidance Note. Some of the other disclosures relating
to items that are not recognized in the Financial Statements also emanate
from the Accounting Standards, such as, disclosures required under AS9
Revenue Recognition on circumstances in which revenue recognition is to be
postponed pending the resolution of significant uncertainties. Contingent
Assets, however, are not to be disclosed in the Financial Statements as per
AS-29 Provisions, Contingent Liabilities and Contingent Assets.

6.13. The General Instructions also lay down the principle that in preparing
Financial Statements including Notes to Accounts, 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

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Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

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.

6.14. The 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 to Accounts should be of the same denomination.

6.15. Depending upon the total income of the company, the figures
appearing in the Financial Statements shall be rounded off as given below in
the table. It is now compulsory to apply rounding off and a company cannot
continue to disclose full figures. In order to apply the same, the rounding off
requirement should be complied with:

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

6.16. The instructions also clarify that the terms used in the Schedule III
shall be as per the applicable Accounting Standards. For example, the term
‘related parties’ used at several places in the Schedule III should be
interpreted based on the definition given in AS-18 Related Party Disclosures.
6.17. The Notes to the General Instructions re-clarify that the 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 presented as an addition or substitution on the face of the Balance Sheet
and Statement of Profit and Loss when such presentation is relevant to an
understanding of the company’s financial position or performance or to cater
to industry/sector-specific disclosure requirements, apart from, when required

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Exposure Draft of Revised Guidance Note on Division I –
Non Ind AS Schedule III to the Companies Act, 2013 by
Corporate Laws & Corporate Governance Committee ICAI

for compliance with amendments to the Act or the Accounting Standards.

The application of the above requirement is a matter of professional
judgement. The following examples illustrate this requirement. Earnings
before Interest, Tax, Depreciation and Amortization is often an important
measure of financial performance of the company relevant to the various
users of Financial Statements and stakeholders of the company. Hence, a
company may choose to present the same as an additional line item on the
face of the Statement of Profit and Loss. The method of computation adopted
by companies for presenting such measures should be followed consistently
over the years. Further, companies should also disclose the policy followed
in the measurement of such line items.

6.18. Similarly, users and stakeholders often want to know the liquidity
position of the company. To highlight the same, a company may choose to
present additional sub-totals of Current assets and Current liabilities on the
face of the Balance Sheet.

6.19. One example of addition or substitution of line items, sub-line items
and sub-totals to cater to industry-specific disclosure requirements can be
noted from Non-Banking Financial (Non-Deposit Accepting or Holding)
Companies Prudential Norms (Reserve Bank) Directions, 2007. The
Directions prescribe that every non-banking finance company is required to
separately disclose in its Balance Sheet the provisions made under the
Directions without netting them from the income or against the value of
assets. Though not specifically required by the Schedule, such addition or
substitution of line items can be made in the notes forming part of the
Financial Statements as well.

7. General Instructions For Preparation of Balance
Sheet : Notes 1 To 5

7.1. Current/Non-current assets and liabilities:

The Schedule III requires all items in the Balance Sheet to be classified as
either Current or Non-current and be reflected as such. Notes 1 to 3 of the
Schedule III define Current Asset, Operating Cycle and Current Liability as
below:

7.1.1. “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

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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

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.
All other assets shall be classified as non-current.”
7.1.2. “An operating cycle is the time between the acquisition of assets for
processing and their realization in Cash or cash equivalents. Where the
normal operating cycle cannot be identified, it is assumed to have a duration
of twelve months.”
7.1.3. “A liability shall be classified as current when it satisfies any of the
following criteria:
(a) it is expected to be settled in the company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is due to be settled within twelve months after the reporting date; or
(d) the company does not have an unconditional right to defer settlement
of the liability for at least twelve months after the reporting date. Terms
of a liability that could, at the option of the counterparty, result in its
settlement by the issue of equity instruments do not affect its
classification.
All other liabilities shall be classified as non-current.”
7.1.4. It is recommended that the disclosure about the company’s operating
cycle be given as a part of ‘Notes to the Financial Statements’.
7.1.5. The Schedule III defines “current assets” and “current liabilities”, with
the non-current category being the residual. It is therefore necessary that the
balance pertaining to each item of assets and liabilities contained in the
Balance Sheet be split into its current and non-current portions and be
classified accordingly as on the reporting date.
7.1.6. Based on the definition, current assets include assets such as raw
material and stores which are intended for consumption or sale in the course
of the company’s normal operating cycle. Items of inventory which may be
consumed or realized within the company’s normal operating cycle should be

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classified as current even if the same are not expected to be so consumed or
realized within twelve months after the reporting date. Current assets would
also include assets held primarily for the purpose of being traded such as
inventory of finished goods. They would also include trade receivables which
are expected to be realized within twelve months from the reporting date and
Cash and cash equivalents which are not under any restriction of use.

7.1.7. Similarly, current liabilities would include items such as trade
payables, employee salaries and other operating costs that are expected to
be settled in the company’s normal operating cycle or due to be settled within
twelve months from the reporting date. It is pertinent to note that such
operating liabilities are normally part of the working capital of the company
used in the company’s normal operating cycle and hence, should be
classified as current even if they are due to be settled more than twelve
months after the end of the reporting date.

7.1.8. Further, any liability, pertaining to which the company does not have
an unconditional right to defer its settlement for at least twelve months after
the Balance Sheet/reporting date, will have to be classified as current.

7.1.9. The application of this criterion could be critical to the Financial
Statements of a company and requires careful evaluation of the various
terms and conditions of a loan liability. To illustrate, let us understand how
this requirement will apply to the following example:

Company X has taken a five year loan. The loan contains certain debt
covenants, e.g., filing of quarterly information, failing which the bank can
recall the loan and demand repayment thereof. The company has not filed
such information in the last quarter; as a result of which the bank has the
right to recall the loan. However, based on the past experience and/or based
on the discussions with the bank the management believes that default is
minor and the bank will not demand the repayment of loan. According to the
definition of Current Liability, what is important is, whether a borrower has an
unconditional right at the Balance Sheet date to defer the settlement
irrespective of the nature of default and whether or not a bank can exercise
its right to recall the loan. If the borrower does not have such right, the
classification would be “current”. It is pertinent to note that as per the terms
and conditions of the aforesaid loan, the loan was not repayable on demand
from day one. The loan became repayable on demand only on default in the
debt covenant and bank has not demanded the repayment of loan upto the
date of approval of the accounts. In the Indian context, the criteria of a loan

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becoming repayable on demand on breach of a covenant, is generally added
in the terms and conditions as a matter of abundant caution. Also, banks
generally do not demand repayment of loans on such minor defaults of debt
covenants. Therefore, in such situations, the companies generally continue
to repay the loan as per its original terms and conditions. Hence, considering
that the practical implications of such minor breach are negligible in the
Indian scenario, an entity could continue to classify the loan as “non-current”
as on the Balance Sheet date since the loan is not actually demanded by the
bank at any time prior to the date on which the Financial Statements are
approved. However, in case a bank has recalled the loan before the date of
approval of the accounts on breach of a loan covenant that occurred before
the year-end, the loan will have to be classified as current. Further, the
above situation should not be confused with a loan which is repayable on
demand from day one. For such loans, even if the lender does not demand
repayment of the loan at any time, the same would have to be continued to
be classified as ”current”.

Further, where there is a breach of a material provision of a long-term loan
arrangement on or before the end of the reporting period with the effect that
the liability becomes payable on demand on the reporting date, the entity
does not classify the liability as current, if the lender has agreed, after the
reporting period and before the approval of the financial statements for issue,
not to demand payment as a consequence of the breach.

Breach of a material provision to include only substantive breaches (e.g.,
amongst other covenants, those that are financial covenants). Accordingly,
the entity has to carefully evaluate what would be construed as a “breach of
a material provision” on case-to-case basis considering the facts and the
terms and conditions of each borrowing arrangement.

7.2. The term “Operating Cycle” is defined as the time between the
acquisition of assets for processing and their realization in Cash or cash
equivalents. A company’s normal operating cycle may be longer than twelve
months e.g. companies manufacturing wines, etc. However, where the
normal operating cycle cannot be identified, it is assumed to have a duration
of twelve months.

7.2.1. Where a company is engaged in running multiple businesses, the
operating cycle could be different for each line of business. Such a company
will have to classify all the assets and liabilities of the respective businesses
into current and non-current, depending upon the operating cycles for the

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respective businesses.

Let us consider the following other examples:

1. A company has excess finished goods inventory that it does not
expect to realize within the company’s operating cycle of fifteen
months. Since such finished goods inventory is held primarily for the
purpose of being traded, the same should be classified as “current”.

2. A company has sold 10,000 tonnes of steel to its customer. The sale
contract provides for a normal credit period of three months. The
company’s operating cycle is six months. However, the company does
not expect to receive the payment within twelve months from the
reporting date. Therefore, the same should be classified as “Non-
Current” in the Balance Sheet. In case, the company expects to realize
the amount upto 12 months from the Balance Sheet date (though
beyond operating cycle), the same should be classified as “current”.

7.3. For the purpose of Schedule III, a company also needs to classify its
employee benefit obligations as current and non-current categories. While
AS-15 Employee Benefits governs the measurement of various employee
benefit obligations, their classification as current and non-current liabilities
will also be governed by the criteria laid down in Notes 1 to 3 to the General
Instructions for Preparation of Balance Sheet in the Schedule III. In
accordance with these criteria, a liability is classified as “current” if a
company does not have an unconditional right as on the Balance Sheet date
to defer its settlement for twelve months after the reporting date. Each
company will need to apply these criteria to its specific facts and
circumstances and decide an appropriate classification of its employee
benefit obligations. Given below is an illustrative example on application of
these criteria in a simple situation:

(a) Liability toward bonus, etc., payable within one year from the Balance
Sheet date is classified as “current”.

(b) In case of accumulated leave outstanding as on the reporting date, the
employees have already earned the right to avail the leave and they
are normally entitled to avail the leave at any time during the year. To
the extent, the employee has unconditional right to avail the leave, the
same needs to be classified as “current” even though the same is
measured as ‘other long-term employee benefit’ as per AS-15.
However, whether the right to defer the employee’s leave is available
unconditionally with the company needs to be evaluated on a case to
case basis – based on the terms of Employee Contract and Leave

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Policy, Employer’s right to postpone/deny the leave, restriction to avail
leave in the next year for a maximum number of days, etc. In case of
such complexities the amount of Non-current and Current portions of
leave obligation should normally be determined by a qualified Actuary.

(c) Regarding funded post-employment benefit obligations, amount due
for payment to the fund created for this purpose within twelve months
is treated as “current” liability. Regarding the unfunded post-
employment benefit obligations, a company will have settlement
obligation at the Balance Sheet date or within twelve months for
employees such as those who have already resigned or are expected
to resign (which is factored for actuarial valuation) or are due for
retirement within the next twelve months from the Balance Sheet date.
Thus, the amount of obligation attributable to these employees is a
“current” liability. The remaining amount attributable to other
employees, who are likely to continue in the services for more than a
year, is classified as “non-current” liability. Normally the actuary should
determine the amount of current &non-current liability for unfunded
post-employment benefit obligation based on the definition of Current
and Non-current assets and liabilities in the Schedule III.

7.4. The Schedule III requires Investments to be classified as Current and
Non-Current. However, AS13 ‘Accounting for Investments’ requires to
classify Investments as Current and Long-Term. As per AS 13, current
investment is an investment that is by its nature readily realisable and is
intended to be held for not more than one year from the date on which such
investment is made. A long-term investment is an investment other than a
current investment.

7.4.1. Accordingly, as per AS-13, the assessment of whether an Investment
is “Long-term” has to be made with respect to the date of Investment
whereas, as per the Schedule III, “Non-current” Investment has to be
determined with respect to the Balance Sheet date.

7.4.2. Though the Schedule III clarifies that the Accounting Standards would
prevail over itself in case of any inconsistency between the two, it is pertinent
to note that AS-13 does not lay down presentation norms, though it requires
disclosures to be made for Current and Long-term Investments. Accordingly,
presentation of all investments in the Balance Sheet should be made based
on Current/Non-current classification as defined in the Schedule III. The
portion of long-term investment as per AS13 which is expected to be realized
within twelve months from the Balance Sheet date needs to be shown as

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Current investment under the Schedule III.

7.5. Settlement of a liability by issuing of equity

7.5.1. The Schedule III clarifies that, “the terms of a liability that could, at the
option of the counterparty, result in its settlement by the issue of equity
instruments do not affect its classification”. A consequence of this is that if
the conversion option in convertible debt is exercisable by the holder at any
time, the liability cannot be classified as “current” if the maturity for cash
settlement is greater than one year. A question therefore arises for the
aforesaid requirement of classifying items as, a) convertible debt where the
conversion option lies with the issuer, or b) mandatorily convertible debt
instrument.

7.5.2. Based on the specific exemption granted only to those cases where
the conversion option is with the counterparty, the same should not be
extended to other cases where such option lies with the issuer or is a
mandatorily convertible instrument. For all such cases, conversion of a
liability into equity should be considered as a means of settlement of the
liability as defined in the Framework for the Preparation and Presentation of
Financial Statements issued by ICAI. Accordingly, the timing of such
settlement would also decide the classification of such liability in terms of
Current or Non-current as defined in the Schedule III.

7.6 As per the classification in the Schedule III and in line with the ICAI’s
earlier announcement with regard to the presentation and classification of net
Deferred Tax asset or liability, the same should always be classified as “non-
current”.

8. Part I: Form of Balance Sheet and Note 6 to General
Instructions for Preparation of Balance Sheet

As per the Framework for The Preparation and Presentation of Financial
Statements, asset, liability and equity are defined as follows:

An asset is a resource controlled by the enterprise as a result of past events
from which future economic benefits are expected to flow to the enterprise.

A liability is a present obligation of the enterprise arising from past events,
the settlement of which is expected to result in an outflow from the enterprise
of resources embodying economic benefits.

Equity is the residual interest in the assets of the enterprise after deducting
all its liabilities.

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I. Equity and Liabilities

8.1. Shareholders’ Funds

Under this head, following line items are to be disclosed:

 Share Capital;

 Reserves and Surplus;

 Money received against share warrants.

8.1.1. Share capital

8.1.1.1. Notes to the General Instructions require a company to disclose in
the Notes to Accounts line items/sub-line items referred to in Notes 6A to 6Q.
Clauses (a) to (m) of Note 6 A deal with disclosures for Share Capital and
such disclosures are required for each class of share capital (different
classes of preference shares to be treated separately).

8.1.1.2. As per ICAI Guidance Note on Terms Used in Financial Statements,
‘Capital’ refers “to the amount invested in an enterprise by its owners e.g.
paid-up share capital in a corporate enterprise. It is also used to refer to the
interest of owners in the assets of an enterprise.”

8.1.1.3. ‘Share Capital’ refers to “aggregate amount of money paid or
credited as paid on the shares and/or stocks of a corporate enterprise.”

8.1.1.4. Application of AS 30 Financial Instruments: Recognition and
Measurement, AS 31 and AS 32 Financial Instruments: Disclosures is no
longer appropriate as ICAI has withdrawn, by of an announcement, the
recommendatory as well as mandatory status in March 2011 and also
specified that the accounting treatments covered by any of the existing
notified Accounting Standards (e.g., AS 11, AS 13, etc.) and specific
regulatory requirements given by a regulatory authority (e.g., loan
impairment, investment classification or accounting for securitisations by the
RBI, etc.) would continue to apply.

8.1.1.5. Presently, in the Indian context, generally, there are two kinds of
share capital namely - Equity and Preference. Within Equity/Preference
Share Capital, there could be different classes of shares, say, Equity Shares
with or without voting rights, Compulsorily Convertible Preference Shares,
Optionally Convertible Preference Shares, etc. If the preference shares are
to be disclosed under the head ‘Share Capital’, until the same are actually
redeemed / converted, they should continue to be shown under the head
‘Share Capital’. Preference shares of which redemption is overdue should

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continue to be disclosed under the head ‘Share Capital’.

8.1.1.6. Clause (a) of Note 6A - the number and amount of shares
authorized :

As per the Guidance Note on Terms Used in Financial Statements
‘Authorised Share Capital’ means “the number and par value, of each class
of shares that an enterprise may issue in accordance with its instrument of
incorporation. This is sometimes referred to as nominal share capital.”

8.1.1.7. Clause (b) of Note 6A - the number of shares issued, subscribed
and fully paid, and subscribed but not fully paid :

The disclosure is for shares:

 Issued;

 Subscribed and fully paid;

 Subscribed but not fully paid.

Though the disclosure is only for the number of shares, to make the
disclosure relevant to understanding the company’s share capital, even the
amount for each category 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 Guidance Note on Terms Used in Financial
Statements, the expression ‘Subscribed Share Capital’ is “that portion of the
issued share capital which has actually been subscribed and allotted. This
includes any bonus shares issued to the shareholders.”

Though there is no requirement to disclose the amount per share called, if
shares are not fully called, it would be appropriate to state the amount per
share called. As per the definition contained in the Guidance Note on Terms
Used in Financial Statements, the expression ‘Paid-up Share Capital’ is “that
part of the subscribed share capital for which consideration in cash or
otherwise has been received. This includes bonus shares allotted by the
corporate enterprise.” As required by Clause (k) of Note 6A of the Schedule
III, calls unpaid are to be disclosed separately as per the Schedule III.

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.

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8.1.1.8. Clause (c) of Note 6A – 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 (a)
to the sub-section (4) of section 13 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
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.

8.1.1.9. Clause (d) of Note 6A- a reconciliation of the number of shares
outstanding at the beginning and at the end of the reporting period :

As per the 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 6A]
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
both Equity and Preference Shares and for each class of share capital within
Equity and Preference Shares.

8.1.1.10. Clause (e) of Note 6A - 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 Guidance Note on Terms Used in Financial Statement, the
expression ‘Preference Share Capital’ means “that part of the share capital of
a corporate enterprise which enjoys preferential rights in respect of payments
of fixed dividend and repayment of capital. Preference shares may also have
full or partial participating rights in surplus profits or surplus capital.” The

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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 (Issue of Share Capital with Differential Voting Rights) Rules,
2001. In respect of Preference shares, the rights include (a) as respects
dividend, a preferential right to be paid a fixed amount or at a fixed rate and,
(b) as respects capital, a preferential right of repayment of amount of capital
on winding up. Further, Preference shares can be cumulative, non-
cumulative, redeemable, convertible, non-convertible etc. All such rights,
preferences and restrictions attached to each class of preference shares,
terms of redemption, etc. have to be disclosed separately.

8.1.1.11. Clause (f) of Note 6A - 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 :

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;

 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’, ‘holding company’ and ‘associate’ should be
understood as defined under AS-21, Consolidated Financial Statements and
AS-18, Related Party Disclosures. Based on 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 ending
right upto the ultimate holding company would have to be disclosed. Further,
all the above disclosures need to be made separately for each class of
shares, both within Equity and Preference Shares.

8.1.1.12. Clause (g) of Note 6A - shares in the company held by each
shareholder holding more than 5 percent shares specifying the number

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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 class of shares, both within Equity and Preference
Shares. Accordingly, such percentage should be computed separately for
each class of shares outstanding within Equity and Preference Shares. This
information should also be given for the comparative previous period.

8.1.1.13. Clause (h) of Note 6A - shares reserved for issue under
options and contracts/commitments for the sale of
shares/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.

8.1.1.14. Clause (i) of Note 6A– 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 allotments 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

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repayment.

(b) Aggregate number and class of shares allotted as fully paid up by way
of bonus shares.

As per the Guidance Note on Terms Used in Financial Statements
‘Bonus shares’ are defined as shares allotted by capitalisation of the
reserves or surplus of a corporate enterprise.

(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.

8.1.1.15. Clause (j) of Note 6A- 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:

This disclosure would cover securities, such as Convertible Preference
Shares, Convertible Debentures/bonds, etc. – optionally or otherwise into
equity.

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 Long-term borrowings where these are required to be classified in
the Balance Sheet, rather than disclosing the same again under this clause.

8.1.1.16. Clause (k) of Note 6(A) - Calls unpaid (showing aggregate
value of calls unpaid by directors and officers):

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A separate disclosure is required for the aggregate value of calls unpaid by
directors and also officers of the company. The total calls unpaid should be
disclosed. The terms ‘director’ and ‘officer’ should be interpreted based on
the definitions in the Act.

8.1.1.17. Clause (m) of Note 6(A) – Disclosure of Shareholding of
Promoters:

Every company is required to make a separate disclosure of shareholding of
its promoters* as below:

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

S.No. Promoter name No. of % of total
shares** shares**

Total

* Promoter here means promoter as defined in the Act

** 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.

For the purpose of this 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”.

This disclosure shall be made separately for each class of shares
outstanding within Equity and Preference Shares, similar to the disclosure
made for shareholders under other clauses (for e.g., clause (g) of Note 6A).

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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.

8.1.2. Reserves and Surplus

Note 6(B) of the General Instructions deals with the disclosures of “Reserves
and Surplus” in the Notes to Accounts and the classification thereof under
the various types of reserves.

8.1.2.1. Reserve:

The Guidance Note on Terms Used in Financial Statements defines the term
‘Reserve’ as “the portion of earnings, receipts or other surplus of an
enterprise (whether capital or revenue) appropriated by the management for
a general or a specific purpose other than a provision for depreciation or
diminution in the value of assets or for a known liability.” ‘Reserves’ should
be distinguished from ‘provisions’. For this purpose, reference may be made
to the definition of the expression `provision’ in AS-29 Provisions, Contingent
Liabilities and Contingent Assets.

As per AS-29, a `provision’ is “a liability which can be measured only by
using a substantial degree of estimation”. A ‘liability’ is “a present obligation
of the enterprise arising from past events, the settlement of which is
expected to result in an outflow from the enterprise of resources embodying
economic benefits.” Present obligation’ – “an obligation is a present
obligation if, based on the evidence available, its existence at the Balance
Sheet date is considered probable, i.e., more likely than not.”

8.1.2.2. 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 the
Schedule III. However, as per the Guidance Note on 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 the 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 profit of a capital
nature and, hence, it should be credited to capital reserve.

8.1.2.3. Capital Redemption Reserve :

Under the Act, Capital Redemption Reserve is required to be created in the

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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.

8.1.2.4. Securities Premium:

The Guidance Note of Terms Used in Financial Statements defines ‘Share
Premium’ as “the excess of the issue price of shares over their face value.”
The terminology used in the Schedule III is “Securities Premium” while the
nomenclature as per the Act is “Securities Premium Account”. Accordingly,
the terminology of the Act should be used.

8.1.2.5. 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 adequate amounts, from
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 General Reserve.

8.1.2.6. Revaluation Reserve :

As per the Guidance Note of Terms Used in Financial Statements,
‘Revaluation reserve’ is ‘a reserve created on the revaluation of assets or net
assets of an enterprise represented by the surplus of the estimated
replacement cost or estimated market values over the book values thereof.’
Accordingly, if a company has carried out revaluation of its assets, the
corresponding amount would be disclosed as “Revaluation Reserve”

8.1.2.7. Share Options Outstanding Account :

Presently, as per the Guidance Note on Accounting for Employee Share-
based Payments, Stock Options Outstanding Account is shown as a separate
line-item. The Schedule III requires this item to be shown as a part of
‘Reserve and Surplus’.

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8.1.2.8. Other Reserves (specify the nature and purpose of reserve and
the amount in respect thereof) :

Every other reserve which is not covered in the paragraphs 8.1.2.2 to 8.1.2.7
is to be reflected as `Other Reserves’. However, since the nature, purpose
and the amount are to be shown, each reserve is to be shown separately.
This would include reserves to be created under other statutes like Tonnage
Tax Reserve to be created under the Income Tax Act, 1961, Special Reserve
to be created under Section 45(IC) of the Reserve Bank of India Act,
1934,'Special Economic Zone Reinvestment Reserve Account’ created under
section 10AA of Income Tax Act 1961 etc.

8.1.2.9. Surplus i.e. balance in Statement of Profit and Loss disclosing
allocations and appropriations such as dividend, bonus shares and
transfer to/from reserves, etc.

Appropriations to the profit for the year (including carried forward balance)
are to be presented under the main head ’Reserves and Surplus’. Under the
Schedule III, the Statement of Profit and Loss will no longer reflect any
appropriations.

Please also refer to the discussion in Para 10.9 below.

8.1.2.10. 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.

Please refer to Para 10.9 of this Guidance Note.

8.1.2.11 As per Schedule III, a reserve specifically represented by earmarked
investments shall be termed as a ‘fund’.

8.1.2.12 Debit balance in the Statement of Profit and Loss and in
Reserves and Surplus:

Debit balance in the Statement of Profit and Loss which would arise in case
of accumulated losses, is to be shown as a negative figure under the head
‘Surplus’. The aggregate amount of the balance of ‘Reserves and Surplus’, is
to be shown after adjusting negative balance of surplus, if any. If the net
result is negative, the negative figure is to be shown under the head
‘Reserves and Surplus’.

8.1.3. Money received against Share Warrants

Share warrants may be issued to promoters and others by a company. AS 20

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Earning Per Share notified under the Companies (Accounting Standards)
Rules, 2006 defines ‘share warrants’ as “financial instruments which give the
holder the right to acquire equity shares”. Thus, effectively, share 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. Share Application Money pending allotment

8.2.1. Share Application money pending allotment is to be disclosed as a
separate line item on the face of Balance Sheet between “Shareholders’
Funds” and “Non-current Liabilities”. Share application money not exceeding
the issued capital and to the extent not refundable is to be disclosed under
this line item. If the company’s issued capital is more than the authorized
capital and approval of increase in authorized capital is pending, the amount
of share application money received over and above the authorized capital
should be shown under the head “Other Current Liabilities”.

8.2.2. Clause (g) of Note 6G of General Instructions for preparation of
Balance sheet lists various circumstances and specifies the information to be
disclosed in respect of share application money. However, amount shown as
‘share application money pending allotment’ will not include share application
money to the extent refundable. For example, the amount in excess of issued
capital, or where minimum subscription requirement is not met. Such amount
will have to be shown separately under ‘Other Current Liabilities’.

8.2.3. Various disclosure requirements pertaining to Share Application
Money are as follows:

 terms and conditions;

 number of shares proposed to be issued;

 the amount of premium, if any;

 the period before which shares are to be allotted;

 whether the company has sufficient authorized share capital to cover
the share capital amount on allotment of shares out of share
application money;

 Interest accrued on amount due for refund;

 The period for which the share application money has been pending
beyond the period for allotment as mentioned in the share application

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form along with the reasons for such share application money being
pending.

The above disclosures should be made in respect of amounts classified
under both Equity as well as Current Liabilities, wherever applicable.

8.2.4. As per power given under section 50 of the Act, a company, if so
authorized by its Articles, may accept from any member the whole or a part
of the amount remaining unpaid on any shares held by him, although no part
of that amount has been called up. The shareholder who has paid the money
in advance is not a creditor for the amount so paid as advance, as the same
cannot be demanded for repayment and the company cannot pay him back
unless Articles so provide. The amount of calls paid in advance does not
form part of the paid-up capital. The Department of Company Affairs has
clarified that it is better to show “Calls in Advance” under the head “Current
Liabilities and Provisions” (Letter No. 8/16(1)/61-PR, dated 9.5.1961). Thus,
under the Schedule III, calls paid in advance are to be reflected under “Other
Current Liabilities”. The amount of interest which may accrue on such
advance should also is to be reflected as a liability.

8.2.5. “Share application money pending allotment” is required to be shown
as a separate line item on the face of the Balance Sheet after Shareholders’
Funds. However, under “Other current liabilities” there is a statement that
Share application money not exceeding the issued capital and to the extent
not refundable shall be shown under the head Equity. The two requirements
appear to be conflicting. However, from the format as set out in the
Schedule, it appears that the Regulator’s intention is to specifically highlight
the amount of Share application money pending allotment, though they may
be, in substance, in nature of Equity. Accordingly, the equity element should
continue to be disclosed on the face of the Balance Sheet as a separate line
item, rather than as a component of Shareholders’ Funds.

8.3. Non-current liabilities

A liability shall be classified as current when it satisfies any of the following
criteria:

(a) it is expected to be settled in the company’s normal operating cycle;

(b) it is held primarily for the purpose of being traded;

(c) it is due to be settled within twelve months after the reporting date; or

(d) the company does not have an unconditional right to defer settlement
of the liability for at least twelve months after the reporting date. Terms

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of a liability that could, at the option of the counterparty, result in its
settlement by the issue of equity instruments do not affect its
classification.
All other liabilities shall be classified as non-current.
Based on the above definitions, on the face of the Balance Sheet, the
following items shall be disclosed under non-current liabilities.
 Long-term borrowings;
 Deferred tax liabilities (Net);
 Other Long-term liabilities;
 Long-term provisions.
8.3.1. Long-term borrowings:
8.3.1.1. Long-term borrowings shall be classified as:
(a) Bonds/debentures;
(b) Term loans;
 from banks;
 from other parties;
(c) Deferred payment liabilities;
(d) Deposits;
(e) Loans and advances from related parties;
(f) Long term maturities of finance lease obligations;
(g) Other loans and advances (specify nature).
8.3.1.2. Borrowings shall further be sub-classified as secured and
unsecured. Nature of security shall be specified separately in each case.
8.3.1.3. Where loans have been guaranteed by directors or others, the
aggregate amount of such loans 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 related parties. However, in the normal course, a person or entity
guaranteeing a loan of a company will generally be associated with the
company in some manner.
8.3.1.4. Bonds/debentures (along with the rate of interest and particulars of

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redemption or conversion, as the case may be) shall be stated in descending
order of maturity or conversion, starting from farthest redemption or
conversion date, as the case may be. Where bonds/debentures are
redeemable by installments, the date of maturity for this purpose must be
reckoned as the date on which the first installment becomes due.

8.3.1.5. Particulars of any redeemed bonds/ debentures which the company
has power to reissue shall be disclosed.

8.3.1.6. Terms of repayment of term loans and other loans shall be stated.

8.3.1.7. Period and amount of continuing default as on the Balance Sheet
date in repayment of loans and interest shall be specified separately in each
case.

8.3.1.8. The phrase "long-term" has not been defined. However, the
definition of ‘non-current liability’ in the Schedule III may be used as long-
term liability for the above disclosure. Also, the phrase "term loan" has not
been defined in the Schedule III. Term loans normally have a fixed or pre-
determined maturity period or a repayment schedule.

8.3.1.9. As referred to in para 45(i) of the 2016 edition of the Guidance Note
on Companies (Auditor’s Report) Order, 2016 (CARO) in the banking
industry, for example, loans with repayment period beyond thirty six months
are usually known as “term loans”. Cash credit, overdraft and call money
accounts / deposit are, therefore, not covered by the expression “term loans”.
Term loans are generally provided by banks and financial institutions for
acquisition of capital assets which then become the security for the loan, i.e.,
end use of funds is normally fixed.

8.3.1.9 Deferred payment liabilities would include any liability for which
payment is to be made on deferred credit terms. E.g. deferred VAT / GST
liability, deferred payment for acquisition of Property, Plant and Equipment,
Intangible Assets, etc.

8.3.1.10 The current maturities of all long-term borrowings will be disclosed
under ‘short-term borrowings’ and not under long-term borrowings and other
current liabilities. Hence, it is possible that the same bonds / debentures /
term loans may be bifurcated under both long-term borrowings as well as
under short-term borrowings. Further, long-term borrowings are to be sub-
classified as secured and unsecured giving the nature of the security for the
secured position.

8.3.1.11 The Schedule III also stipulates that the nature of security shall be

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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.

8.3.1.12 The disclosure about the nature of security should also cover the
type of asset given as security e.g. inventories, property, plant and
equipment, intangible assets, etc. This is because the extent to which loan is
secured may vary with the nature of asset against which it is secured.

8.3.1.13 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.

8.3.1.14 The Schedule III requires that under the head “Borrowings,” period
and amount of “continuing default (in case of long-term borrowing) and
default (in case of short-term borrowing) as on the Balance Sheet date in
repayment of loans and interest shall be specified separately in each case".
The word “loan” has been used in a more generic sense. Hence, the
disclosures relating to default should be made for all items listed under the
category of borrowings such as bonds/ debentures, deposits, deferred
payment liabilities, finance lease obligations, etc. and not only to items
classified as “loans” such as term loans, or loans and advances etc.

8.3.1.15 Also, a company need not disclose information for defaults other
than in respect of repayment of loan and interest, e.g., compliance with debt
covenants. The Schedule III requires specific disclosures only for default in
repayment of loans and interest and not for other defaults.

8.3.1.16 Though two different terms, viz., continuing default (in case of long-
term borrowing) and default (in case of short-term borrowing) have been
used, the requirement should be taken to disclose default “as on the Balance
Sheet date” in both the cases. Pursuant to this requirement, details of any
default in repayment of loan and interest existing as on the Balance Sheet
date needs to be separately disclosed. Any default that had occurred during
the year and was subsequently made good before the end of the year does
not need to be disclosed.

8.3.1.17 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 ‘Long-term

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borrowings’ as per Schedule III. Disclosure of terms of repayment should be
made preferably for each loan unless the repayment terms of individual loans
within a category are similar, in which case, they may be aggregated.

8.3.1.18 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 and other significant relevant terms if any.

8.3.1.19 Deposits classified under Borrowings would include deposits
accepted from public and inter corporate deposits which are in the nature of
borrowings.

8.3.1.20 Loans and advances from related parties are required to be
disclosed. Advances under this head should include those advances which
are in the nature of loans.
8.4. Other Long-term liabilities

This should be classified into:

a) Trade payables; and

b) Others.

8.4.1 A payable shall be classified as 'trade payable' if it is in respect of
amount due on account of goods purchased or services received in the
normal course of business. The amounts due under contractual obligations
cannot be included within Trade payables. Such contractual obligations may
include dues payables in respect of statutory obligations like contribution to
provident fund, purchase of Property, Plant and Equipment, Intangible
Assets, etc., contractually reimbursable expenses, interest accrued on trade
payables, etc. Such payables should be classified as "others" and each such
item should be disclosed nature-wise. However, Acceptances should be
disclosed as part of trade payables in terms of the Schedule III.

8.4.2 By virtue of MCA notification dated 4th September 2015, disclosure
relating to dues to suppliers registered under The Micro, Small and Medium
Enterprises Development (MSMED) Act, 2006 was made. Though the
amendment was made under ‘Trade payables’ under ‘Current Liabilities’, the
principle would equally be applicable for disclosure of trade payables under
‘other long term liabilities’.

8.4.3 The following disclosures are required by the said notification (similar
to Sec 22 of MSMED Act 2006 under the Chapter on Delayed Payments to
Micro and Small Enterprises):

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(a) the principal amount and the interest due thereon (to be shown
separately) remaining unpaid to any supplier as at the end of
accounting year;

(b) the amount of interest paid by the buyer under MSMED Act, 2006
along with the amounts 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 (where the
principal has been paid but interest under the MSMED Act, 2006 not
paid);

(d) The amount of interest accrued and remaining unpaid at the end of
accounting year; and

(e) The amount of further interest due and payable even in the succeeding
year, until such date when the interest dues as above are actually paid
to the small enterprise, for the purpose of disallowance as a deductible
expenditure under section 23.

The terms ''appointed day'', ''buyer'', ''enterprise'', ''micro 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.

8.4.4 The following disclosure of ageing schedule for ‘trade payables due for
payment’ shall be given as below:

Trade Payables ageing schedule

(Amount in Rs.)

Particulars Outstanding for following periods from due
date of payment#

Less than 1-2 2-3 More than Total

1 year years years 3 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

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in that case disclosure shall be from the date of the transaction.

Unbilled dues shall be disclosed separately.

Ageing of long-term trade payables outstanding

This disclosure requires the company to provide ageing of trade payables
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
payables and the amount of trade payables which are not due, respectively.

AS 29 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 AS 29.

AS 29 describes a provision as a liability which can be measured only by
using a substantial degree of estimation with regard to 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 re-negotiated or the invoice is revised, due date
shall be considered from the original due date or revised due date basis the
agreed terms between buyer and seller, as the case may be.

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 recognised in the books of accounts
as per the requirement of applicable standards.

8.4.5 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
8.5. Long-Term Provisions

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8.5.1 This should be classified into provision for employee benefits and
others specifying the nature. Provision for employee benefits should be
bifurcated into long-term (non-current) and other current and the long-term
portion is disclosed under this para. All long-term provisions, other than
those related to employee benefits should be disclosed separately based on
their nature. Such items would include Provision for warranties etc. While
AS-15 Employee Benefits governs the measurement of various employee
benefit obligations, their classification as current and non-current liability will
also be governed by the criteria laid down in Notes 1 to 3 to the General
Instructions for Preparation of Balance Sheet in the Schedule III.
Accordingly, a liability is classified as current if a company does not have an
unconditional right as on the Balance Sheet date to defer its settlement for
12 months after the reporting date. Each company will need to apply these
criteria to its specific facts and circumstances and decide an appropriate
classification for its employee benefit obligations.
8.6. Current Liabilities
This should be classified on the face of the Balance Sheet as follows:
 Short-term borrowings;
 Trade payables;

(A) total outstanding dues of micro enterprises and small enterprises;
and

(B) total outstanding dues of creditors other than micro enterprises
and small enterprises.

 Other current liabilities;
 Short-term provisions.
8.6.1. Short-term borrowings
8.6.1.1. (i) Short-term borrowings shall be classified as:

(a) Loans repayable on demand
 from banks;
 from other parties.

(b) Loans and advances from related parties;
(c) Deposits;
(d) Other loans and advances (specify nature).

(ii) Borrowings shall further be sub-classified as secured and unsecured.

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Nature of security shall be specified separately in each case.
(iii) Where loans have been guaranteed by directors or others, the

aggregate amount of such loans under each head shall be disclosed.
(iv) Period and amount of default as on the Balance Sheet date in

repayment of loans and interest shall be specified separately in each
case.
(v) Current maturities of long-term borrowings shall be disclosed
separately
8.6.1.2 Loans payable on demand should be treated as part of short-term
borrowings. Short-term borrowings will include all loans within a period of 12
months from the date of the loan. In the case of short-term borrowings, all
defaults existing as at the date of the Balance Sheet should be disclosed
(item-wise). Current maturity of long-term borrowings should be classified as
short-term borrowings and presented as a separate line item. Guidance on
disclosure on various matters under this Para should also be drawn, to the
extent possible, from the guidance given under Long-term borrowings.
To provide relevant information to the users of the financial statements
regarding total amount of liability under the respective category of non-
current borrowings, Companies shall provide the amount of non-current as
well as current portion for each of the respective category of non-current
borrowings either by way of a note or a schedule or a cross-reference, as
appropriate. This shall be in addition to Schedule III requirements for
presenting ‘current maturities of long-term borrowings’ under current
borrowings.
8.6.2. Trade payables
Guidance on disclosure under this clause should be drawn from the guidance
given under Other Long-term borrowings to the extent applicable.
8.6.3. Other current liabilities
The amounts shall be classified as:
(a) Current maturities of finance lease obligations;
(b) Interest accrued but not due on borrowings;
(c) Interest accrued and due on borrowings;
(d) Income received in advance;
(e) Unpaid dividends;

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(f) Application money received for allotment of securities and due for
refund and interest accrued thereon;

(g) Unpaid matured deposits and interest accrued thereon;
(h) Unpaid matured debentures and interest accrued thereon;
(i) Other payables (specify nature).
The portion of finance lease obligations, which is due for payments within
twelve months of the reporting date is required to be classified under “Other
current liabilities” while the balance amount should be classified under Long-
term borrowings.
Trade Deposits and Security Deposits which are not in the nature of
borrowings should be classified separately under ‘Other Non-current/Current
liabilities’. Other Payables may be in the nature of statutory dues such as
Withholding taxes, Excise Duty, GST, employer and employee contribution to
PF / ESI / LWF, etc.
8.6.4. Short-term provisions
The amounts 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 dividend, Provision for taxation, Provision for
warranties, etc. These amounts should be disclosed separately specifying
nature thereof.

II. Assets

8.7. Non-current assets
Definition and Presentation
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

date; or
(d) it is Cash or cash equivalent unless it is restricted from being

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exchanged or used to settle a liability for at least twelve months after
the reporting date.
All other assets shall be classified as ‘non-current’.
Based on the above definition, on the face of the Balance Sheet, the
following items shall be disclosed under non-current assets: -
(a) Property, Plant and Equipment
(b) Intangible assets;
(c) Capital work-in-progress;
(d) Intangible assets under development
(e) Non-current investments
(f) Deferred tax assets (net)
(g) Long-term loans and advances
(h) Other non-current assets

Sr. Particulars Relevant Accounting Standards as
No.
notified under Companies

(Accounting Standards) Rules, 2006

(as amended from time to time)

1. Property, Plant and AS 10 (Revised 2016)
Equipment

2. Intangible assets AS 26

3. Capital work-in-progress AS 10 (Revised 2016)

4. Intangible assets under AS 26
development

8.7.1 Property, Plant and Equipment

The company shall disclose the following in the Notes to Accounts as per 6(I)
of Part I of the Schedule III.

(i) Classification shall be given as:

(a) Land;
(b) Buildings;
(c) Plant and Equipment;

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(d) Furniture and Fixtures;

(e) Vehicles;

(f) Office equipment;

(g) Others (specify nature).

(ii) Assets under lease shall be separately specified under each class of
asset.

The term “under lease” should be taken to mean assets given on operating
lease in the case of lessor and assets held under finance lease in the case of
lessee. Further, leasehold improvements should continue to be shown as a
separate asset class.

(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/reversals
shall be disclosed separately.

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 & Equipment 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.

The term “business combination” has not been defined in the Act or the
Accounting Standards as notified under the Companies (Accounting
Standards) Rules, 2006 as amended from time to time. However, related
concepts have been enumerated in AS14 (Revised 2016) Accounting for
Amalgamations and AS10 (Revised 2016) Property, Plant and Equipment.
Accordingly, such terminology should be interpreted to mean an
amalgamation or acquisition or any other mode of restructuring of a set of
assets and/or a group of assets and liabilities constituting a business.

Other adjustments should include items such as capitalization of exchange
differences where such option has been exercised by the Company as per
AS11 The Effects of Changes in Foreign Exchange Rates and/or adjustments
on account of exchange fluctuations for Property, Plant and Equipment in

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case of non-integral operations as per AS11 and/or borrowing costs
capitalised in accordance with AS 16 Borrowing Costs. Such adjustments
should be disclosed separately for each class of assets. The disclosure as
required by the notification under para 46A of AS 11 should also be made.

Since reconciliation of gross and net carrying amounts of Property, Plant and
Equipment is required, the corresponding depreciation/amortization for each
class of asset should be disclosed in terms of Opening Accumulated
Depreciation, Depreciation for the year, Deductions/Other adjustments and
Closing Accumulated Depreciation. Similar disclosures should also be made
for Impairment, if any, as applicable.

(iv) Where any amounts have been written-off on a reduction of capital or
revaluation of assets or where sums have been added on revaluation of
assets, every Balance Sheet subsequent to date of such write-off or addition
shall show the reduced or increased figures, as applicable. Disclosure by
way of a note would also be required to show the amount of the reduction or
increase, as applicable, together with the date thereof for the first five years
subsequent to the date of such reduction or increase.

The Schedule III has introduced office equipment as a separate line item
while dropping items like livestock, railway sidings, etc. However, if the said
items exist, the same should be disclosed separate asset class specifying
nature thereof.

The Schedule III does not prescribe any particular classification/presentation
for leasehold land. AS 19 Leases, excludes land leases from its scope. The
accounting treatment for leasehold land should be continued with as is being
currently followed under the prevailing Indian generally accepted accounting
principles and practices. Accordingly, Leasehold land should also continue to
be presented as a separate asset class under Tangible Assets. Also,
Freehold land should continue to be presented as a separate asset class.

With respect to revaluation of Property, Plant and Equipment, AS10 (Revised
2016) Property, Plant and Equipment requires a company to disclose details
such as effective date of the revaluation, whether an independent valuer was
involved, the methods and significant assumptions applied in estimating fair
value of the items, the extent to which fair values of items were determined
directly by reference to observable prices in an active market or recent
market transactions on arm’s length terms or were estimated using other
valuation techniques, and the revaluation surplus, indicating the change for
the period and any restrictions on the distribution of the balance of

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shareholders.
The 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 81 of AS 10 (Revised) 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 of whether such a change is
10% or more, in order to comply with a broader presentation requirement of
AS 10 (Revised) such presentation needs to be followed consistently.

The Schedule III is clear that the disclosure requirements of the Accounting
Standards are in addition to disclosures required under the Schedule. Also,
in case of any conflict, the Accounting Standards will prevail over the
Schedule. Keeping this in view, companies should make disclosures required
by the Schedule III only for five years. However, details required by AS10
(Revised 2016) will have to be given as long as the asset is held by the
company.
However, it may be noted that AS 26 Intangible Assets does not permit
revaluation of intangible assets.

8.7.2 Intangible assets
The company shall disclose the following in the Notes to Accounts as per
6(J) of Part I of the Schedule III.
(i) Classification shall be given as:

(a) Goodwill;
(b) Brands /trademarks;
(c) Computer software;
(d) Mastheads and publishing titles;
(e) Mining rights;
(f) Copyrights, and patents and other intellectual property rights,

services and operating rights;
(g) Recipes, formulae, models, designs and prototypes;
(h) Licenses and franchise;

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(i) 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/reversals shall be disclosed separately.
(iii) Where sums have been written-off on a reduction of capital or
revaluation of assets or where sums have been added on revaluation
of assets, every Balance Sheet subsequent to date of such write-off,
or addition shall show the reduced or increased figures as applicable
and shall by way of a note also show the amount of the reduction or
increase, as applicable, together with the date thereof for the first five
years subsequent to the date of such reduction or increase.
Classification of intangible assets (as listed above) has been introduced
under the Schedule III, which did not exist earlier.
The guidance given above on Property, Plant and Equipment, to the extent
applicable, is also to be used for Intangible Assets.
8.7.3 Capital work-in-progress

As per the Schedule III, capital advances should be included under Long-
term loans and advances and hence, cannot be included under capital work-
in-progress.

8.7.4 Intangible assets under development

Intangible assets under development should be disclosed under this head
provided they can be recognised based on the criteria laid down in AS 26
Intangible Assets.

8.7.5 Non-current investments

(i) Non-current investments shall be classified as trade investments and
other investments and further classified as:

(a) Investment property;

(b) Investments in Equity Instruments;

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(c) Investments in preference shares;
(d) Investments in Government or trust securities;
(e) Investments in debentures or bonds;
(f) Investments in Mutual Funds;
(g) Investments in partnership firms;
(h) Other non-current investments (specify nature).
Under each classification, details shall be given of names of the
bodies corporate (indicating separately whether such bodies are (i)
subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled
special purpose entities) in whom investments have been made and
the nature and extent of the investment so made in each such body
corporate (showing separately investments which are partly-paid). In
regard to investments in the capital of partnership firms, the names of
the firms (with the names of all their partners, total capital and the
shares of each partner) shall be given.
(ii) Investments carried at other than at cost should be separately stated
specifying the basis for valuation thereof.
(iii) The following shall also be disclosed:
(a) Aggregate amount of quoted investments and market value thereof;
(b) Aggregate amount of unquoted investments;
(c) Aggregate provision for diminution in value of investments
If a debenture is to be redeemed partly within 12 months and balance after
12 months, the amount to be redeemed within 12 months should be
disclosed as current and balance should be shown as non-current.
8.7.5.1 Trade Investment
Note 6(K)(i) of Part I requires that non-current investments shall be classified
as "trade investment" and "other investments". The term “trade investments”
is defined neither in Schedule III nor in Accounting Standards.
The term "trade investment" is, however, normally understood as an
investment made by a company in shares or debentures of another company,
to promote the trade or business of the first company.

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8.7.5.2 Investment property

As per AS 13 Accounting for Investments, an investment property is an
investment in land or buildings that are not intended to be occupied
substantially for use by, or in the operations of, the investing enterprise.

8.7.5.3 Aggregate provision for diminution in value

As per the Schedule III, this amount should be disclosed separately in the
notes. However, as per AS-13 all long-term (non-current) investments are
required to be carried at cost. However, when there is a decline, other than
temporary, in the value of a long-term investment, the carrying amount is
reduced to recognize the decline. Accordingly, the value of each long-term
investment should be carried at cost less provision for other than temporary
diminution in the value thereof. It is recommended to disclose the amount of
provision netted-off for each long-term investment.

However, the aggregate amount of provision made in respect of all non-
current investments should also be separately disclosed to comply with the
specific disclosure requirement in Schedule III.

8.7.5.4 Controlled special purpose entities

Under investments, there is also a requirement to disclose the names of
bodies corporate, including separate disclosure of investments in “controlled
special purpose entities” in addition to subsidiaries, etc. The expression
“controlled special purpose entities” however, has not been defined either in
the Act or in the Schedule III or in the Accounting Standards. Accordingly, no
disclosures would be additionally required to be made under this caption. If
and when such terminology is explained/ introduced in the applicable
Accounting Standards, the disclosure requirement would become applicable.

8.7.5.5 Basis of valuation

The Schedule III requires disclosure of the “basis of valuation” of non-current
investments which are carried at other than cost. However, what should be
understood by such terminology has not been clarified. The same may be
interpreted in the following ways:

One view is that the basis of valuation would mean the market value, or
valuation by independent valuers, valuation based on the investee’s assets
and results, or valuation based on expected cash flows from the investment,
or management estimate, etc. Hence, for all investments carried at other
than cost, the basis of valuation for each individual investment should be

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disclosed.

The other view is that disclosure for basis of valuation should be either of:

 At cost;

 At cost less provision for other than temporary diminution;

 Lower of cost and fair value.

However, making disclosures in line with the latter view would be sufficient
compliance with the disclosure requirements.

8.7.5.6 Quoted investments

The term quoted investments has not been defined in the Schedule III. The
expression “quoted investment”, means an investment as respects which
there has been granted a quotation or permission to deal on a recognized
stock exchange, and the expression “unquoted investment” shall be
construed accordingly.

In case of investments in Mutual Fund which are not quoted on a market, but
for which the NAV is published on a regular basis, the company should
continue to disclose it as unquoted investments and may present its market
value in the financial statements as an additional disclosure based on such
NAV.

8.7.5.7 Under each sub-classification of Investments, there is a requirement
to disclose details of investments including names of the bodies corporate
and the nature and extent of the investment in each such boy corporate. The
term “nature and extent” should be interpreted to mean the number and face
value of shares. There is also a requirement to disclose partly-paid shares.
However, it is advisable to clearly disclose whether investments are fully paid
or partly paid.

8.7.5.8 Disclosure relating to partnership firms in which the company
has invested, etc. (under Current and Non-current Investments in the
Balance Sheet)

A company, as a juridical person, can enter into partnership. The Schedule
III provides for certain disclosures where the company is a partner in
partnership firms.

In the Balance Sheet, under the sub-heading “Current Investments” and
“Non-current Investments”, separate disclosure is to be made of any
investment in the capital of partnership firm by the company. In addition, in
the Notes to Accounts separate disclosure is required with regard to the

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names of the firms, along with the names of all their partners, total capital
and the shares of each partner.

The disclosure in the Balance Sheet relating to the value of the investment in
the capital of a partnership firm as the amount to be disclosed as on the date
of the Balance Sheet can give rise to certain issues, the same are discussed
in the following paragraphs.

(a) In case of a change in the constitution of the firm during the year, the
names of the other partners should be disclosed by reference to the
position existing as on the date of the company’s Balance Sheet.

(b) The total capital of the firm to be disclosed should be with reference to
the amount of the capital on the date of the company’s Balance Sheet.

If it is not practicable to draw up the Financial Statements of the
partnership upto such date and, are drawn up to different reporting
dates, drawing analogy from AS-21 and AS-27, adjustments should be
made for the effects of significant transactions or other events that
occur between those dates and the date of the parent’s Financial
Statements. In any case, the difference between reporting dates
should not be more than six months. In such cases, the difference in
reporting dates should be disclosed.

(c) For disclosure of the share of each partner it is suggested to disclose
share of each partner in the profits of the firm rather than the share in
the capital since, ordinarily, the expression “share of each partner” is
understood in this sense. Moreover, disclosure is already required of
the total capital of the firm as well as of the company’s share in that
capital. The share of each partner should be disclosed as at the date
of the company’s Balance Sheet

(d) The Statement of investments attached to the Balance Sheet is
required to disclose, inter alia, the total capital of the partnership firm
in which the company is a partner. Where such a partnership firm has
separate accounts for partner’s capital, drawings or current, loans to or
from partners, etc., disclosure must be made with regard to the total of
the capital accounts alone, since this is what constitutes the capital of
the partnership firm. Where, however, such accounts have not been
segregated, or where the partnership deed provides that the capital of
each partner is to be calculated by reference to the net amount at his
credit after merging all the accounts, the disclosure relating to the
partnership capital must be made on the basis of the total effect of

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such accounts taken together.

Separate disclosure is required by reference to each partnership firm in
which the company is a partner. The disclosure must be made along with the
name of each such firm and must then indicate the total capital of each firm,
the names of all the partners in each firm and the respective shares of each
partner in the respective firm.

8.7.5.9 A limited liability partnership is a body corporate and not a
partnership firm as envisaged under the Partnership Act, 1932. Hence,
disclosures pertaining to Investments in partnership firms will not include
investments in limited liability partnerships. The investments in limited liability
partnerships will be disclosed separately under other investments. Also,
other disclosures prescribed for Investment in partnership firms, need not be
made for investments in limited liability partnerships.

8.7.5.10 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
line item. If the amount is material, details about the allotment since made or
when the allotment is expected to be completed may also be disclosed.

In case the investment is of current investment in nature, such share
application money shall be accordingly, disclosed under current investments.
8.7.6 Long-term loans & advances
(i) Long-term loans and advances shall be classified as:

(a) Capital Advances;
(b) Loans and advances to related parties (giving details thereof);
(c) Other loans and advances (specify nature).
(ii) The above shall also be separately sub-classified as:
(a) Secured, considered good;
(b) Unsecured, considered good;
(c) Doubtful.
(iii) Allowance for bad and doubtful loans and advances shall be disclosed
under the relevant heads separately.
(iv) Loans and advances due by directors or other officers of the company

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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.

Under the Schedule III, Capital Advances are not be classified under Capital
Work in Progress, since they are specifically to be disclosed under this para.

Capital advances are advances given for procurement of Property, Plant and
Equipment and intangible assets which are non-current assets. Typically,
companies do not expect to realize them in cash. Rather, over the period,
these get converted into Property, Plant and Equipment and intangible
assets which, by nature, are non-current assets. Hence, capital advances
should be treated as non-current assets irrespective of when the Property,
Plant and Equipment and intangible assets are expected to be received and
should not be classified as Short-Term/Current.

Details of loans and advances to related parties need to be disclosed. Since
the Schedule III states that the terms used therein should be interpreted
based on applicable the Accounting Standards, the term “details” should be
interpreted to understand the disclosure requirements contained in AS 18
Related Party Disclosure. Accordingly, making disclosures beyond the
requirements of AS-18 would not be necessary.

However, the company, in accordance with requirements of section 186(4) of
the Act, shall disclose 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.

Other loans and advances should include all other items in the nature of
advances recoverable in cash or kind such as Prepaid expenses, Advance
tax, CENVAT / VAT / Service tax / GST credit receivable, goods and service
tax input receivable, etc. which are not expected to be realized within the
next twelve months or operating cycle whichever is longer, from the Balance
Sheet date.

Each item of loans and advances should be further sub-classified as a)
Secured, considered good, b) Unsecured, considered good and c) Doubtful.
Further, the amount of allowance for bad and doubtful loans and advances is
required to be disclosed separately under the “relevant heads”. Therefore,
the amount of such allowance also should be disclosed separately for each

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category of loans and advances.

8.7.7 Other non-current assets

Other non-current assets shall be classified as:

(i) Long term Trade Receivables (including trade receivables on deferred
credit terms);

(ia) Security Deposits

(ii) Others (specify nature)

Long term Trade Receivables, shall be sub-classified as:

(i) (a) Secured, considered good;

(b) Unsecured considered good;

(c) Doubtful

(ii) Allowance for bad and doubtful debts shall be disclosed under the
relevant heads separately.

(iii) 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.

(iv) For trade receivables outstanding, following ageing schedule shall be
given:

Trade Receivables ageing schedule

(Amount in Rs.)

Particulars Outstanding for following periods from due date
of payment#

Less 6 1-2 2-3 More Total

than 6 months years years than 3

months - 1 year years

(i) Undisputed
Trade
Receivables –
considered
good

(ii)

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Undisputed
Trade
Receivables –
considered
doubtful

(iii) Disputed
Trade
Receivables –
considered
good

(iv) Disputed
Trade
Receivables –
considered
doubtful

# similar information shall be given where no due date of payment is specified
in that case disclosure shall be from the date of the transaction.

Unbilled dues shall be disclosed separately.

A receivable shall 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. The amounts due under contractual obligations cannot
be included within Trade Receivables. Such contractual obligations may
include dues in respect of insurance claims, sale of Property, Plant and
Equipment, contractually reimbursable expenses, interest accrued on trade
receivables, etc. Such receivables should be classified as "others" and each
such item should be disclosed nature-wise.

Guidance in respect of the above items may also be drawn from the
guidance given in respect of Long-term loans & advances to the extent
applicable.

As per AS 16 Borrowing Costs ancillary borrowing costs and discount or
premium relating to borrowings could be amortized over the loan period.
Further, share issue expenses, discount on shares, ancillary costs-discount-
premium on borrowing, etc., being special nature items are excluded from
the scope of AS 26 Intangible Assets (Para 5). Keeping this in view, certain
companies have taken a view that it is an acceptable practice to amortize
these expenses over the period of benefit, i.e., normally 3 to 5 years. The
Schedule III does not deal with any accounting treatment and the same

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continues to be governed by the respective Accounting Standards/practices.
Further, the Schedule III is clear that additional line items can be added on
the face or in the notes. Keeping this in view, entity can disclose the
unamortized portion of such expenses as “Unamortized expenses”, under the
head “other current/ non-current assets”, depending on whether the amount
will be amortized in the next 12 months or thereafter.

Ageing of long-term trade receivables outstanding

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.

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.
Transaction date is the date on which the entity’s right to consideration is
unconditional (that is, when payment is due only on the passage of time).

Schedule III requires split of trade receivables between ‘disputed’ and
‘undisputed’. These terms have not been defined in Schedule III. A dispute is
a matter of facts and circumstances of the case; However, dispute means a

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disagreement between two parties demonstrated by some positive evidence
which supports or corroborates the fact of disagreement. 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.

8.8 Current assets
As per the Schedule III, all items of assets and liabilities are to be bifurcated
between current and non-current portions. In some cases, the items
presented under the “non-current” head of the Balance Sheet do not have a
corresponding “current” head especially for Assets. For example: Security
Deposits have been shown under “Long-term loans & advances”, however,
the same is not reflected under the “short-term loans & advances”. Since
Schedule III permits the use of additional line items, in such cases the
current portion should be classified under the Short-term category of the
respective balance as a separate line item and other relevant disclosures
e.g. doubtful amount, related provision etc. should be made.
8.8.1 Current investments
(i) Current investments shall be classified as:

(a) Investments in Equity Instruments;
(b) Investment in Preference Shares
(c) Investments in government or trust securities;
(d) Investments in debentures or bonds;
(e) Investments in Mutual Funds;
(f) Investments in partnership firms
(g) Other investments (specify nature).
Under each classification, details shall be given of names of the
bodies corporate(indicating separately whether such bodies are
(i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled
special purpose entities) in whom investments have been made and
the nature and extent of the investment so made in each such body
corporate (showing separately investments which are partly-paid). In
regard to investments in the capital of partnership firms, the names of
the firms (with the names of all their partners, total capital and the
shares of each partner) shall be given.

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(ii) The following shall also be disclosed:
(a) The basis of valuation of individual investments
(b) Aggregate amount of quoted investments and market value
thereof;
(c) Aggregate amount of unquoted investments;
(d) Aggregate provision made for diminution in value of investments.

Guidance in respect of above items may be drawn from the guidance given in
respect of Non-current investments to the extent applicable.
Based on these criteria, if a debenture is to be redeemed partly within twelve
months and balance after twelve months, the amount to be redeemed within
twelve months should be disclosed as current and balance should be shown
as non-current.
Additionally, the Schedule III also require basis of valuation of individual
investment. It is pertinent to note that there is no requirement to classify
investments into trade & non-trade in respect of current investments.
The aggregate provision for diminution in the value of current investments
that needs to be separately disclosed is the amount written down based on
the measurement principles of Current Investments as per AS-13 on a
cumulative basis.
8.8.2 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 the 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.

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The heading Finished goods should comprise of all finished goods other than
those acquired for trading purposes.

8.8.3 Trade Receivables (current)

(i) For trade receivables outstanding, the following ageing schedule shall
be given:

Trade Receivables ageing schedule

(Amount in Rs.)

Particulars Outstanding for following periods from due date
of payment#

Less 6 1-2 2-3 More Total

than 6 months years years than 3

months - 1 year years

(i) Undisputed
Trade
Receivables –
considered
good

(ii)
Undisputed
Trade
Receivables –
considered
doubtful

(iii) Disputed
Trade
Receivables –
considered
good

(iv) Disputed
Trade
Receivables –
considered
doubtful

# similar information shall be given where no due date of payment is specified
in that case disclosure shall be from the date of the transaction.

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Unbilled dues shall be disclosed separately.
(ii) Trade receivables shall be sub-classified as:

(a) Secured, considered good;
(b) Unsecured considered good;
(c) Doubtful.
(iii) Allowance for bad and doubtful debts shall be disclosed under the
relevant heads separately.
(iv) 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.
A trade receivable will be treated as current, if it is likely to be realized within
twelve months from the date of Balance Sheet or operating cycle of the
business.
Non-Ind AS Schedule III requires separate disclosure of the ageing schedule
of “Trade Receivables outstanding” for both viz., the Long-term and the
current portion of trade receivables. Extensive guidance has been given
under Long-term Trade Receivables and should be leveraged here also, to
the extent applicable.
Where no due date is specifically agreed upon, normal credit period allowed
by the company should be taken into consideration for computing the due
date which may vary depending upon the nature of goods or services sold
and the type of customers, etc.
All other guidance given under Long-term Trade Receivables to the extent
applicable are applicable here also.
8.8.4 Cash and cash equivalents
(i) Cash and cash equivalents shall be classified as:
(a) Balances with banks;
(b) Cheques, drafts on hand;
(c) Cash on hand;
(d) Others (specify nature).
(ii) Earmarked balances with banks (for example, for unpaid dividend)
shall be separately stated.

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(iii) Balances with banks to the extent held as margin money or security
against the borrowings, guarantees, other commitments shall be
disclosed separately.

(iv) Repatriation restrictions, if any, in respect of cash and bank balances
shall be separately stated.

(v) Bank deposits with more than twelve months maturity shall be
disclosed separately.

Please also refer to the earlier discussion under the section on General
Instructions in para 6.4 for classification of items under this head.
“Other bank balances” would comprise of items such as balances with banks
to the extent of held as margin money or security against borrowings etc.,
and bank deposits with more than three months maturity. Banks deposits
with more than twelve months maturity will also need to be separately
disclosed under the sub-head ‘Other bank balances’. The non-current portion
of each of the above balances will have to be classified under the head
“Other Non-current assets” with separate disclosure thereof.
8.8.5 Short-term loans & advances
(i) Short-term loans and advances shall be classified as:

(a) Loans and advances to related parties (giving details thereof);
(b) Others (specify nature).
(ii) The above shall also be sub-classified as:
(a) Secured, considered good;
(b) Unsecured, considered good;
(c) Doubtful.
(iii) Allowance for bad and doubtful loans and advances shall be disclosed
under the relevant heads separately.
(iv) Loans and advances due by directors or other officers of the company
or any of them either severally or jointly with any other person or
amounts due by firms or private companies respectively in which any
director is a partner or a director or a member shall be separately
stated.
The guidance for disclosures under this head should be drawn from guidance
given for items comprised within Long-term Loans and Advances.
8.8.6 Other current assets (specify nature)

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This is an all-inclusive heading, which incorporates current assets that do not
fit into any other asset categories e.g. unbilled Revenue, unamortized
premium on forward contracts etc.

In case any amount classified under this category is doubtful, it is advisable
that such doubtful amount as well as any provision made there against
should be separately disclosed.

8.8.7 Contingent liabilities and commitments

(i) Contingent liabilities shall be classified as:

(a) Claims against the company not acknowledged as debt;

(b) Guarantees;

(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).

8.8.7.1 The provisions of AS-29 Provisions, Contingent Liabilities and
Contingent Assets, will be applied for determining contingent liabilities.

8.8.7.2 A contingent liability in respect of guarantees arises when a
company issues guarantees to another person on behalf of a third party e.g.
when it undertakes to guarantee the loan given to a subsidiary or to another
company or gives a guarantee that another company will perform its
contractual obligations. However, 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 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 "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.

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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.

8.8.7.4 The word ‘commitment’ has not been defined in the Schedule III. The
Guidance Note on 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
such definition, the term ‘commitment’ would simply imply future liability for
contractual expenditure. Accordingly, the term ‘Other commitments’ would
include all expenditure related contractual commitments apart from capital
commitments such as commitments arising from long-term contracts for
purchase of raw material, employee contracts, lease commitments, etc. The
scope of such terminology is very wide and may include contractual
commitments for purchase of inventory, services, investments, sales,
employee contracts, etc. However, to give disclosure of all contractual
commitments would be contrary to the overarching principle under General
Instructions 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.”

8.8.7.5 Disclosures relating to lease commitments for non-cancellable leases
are required to be disclosed by AS-19 Leases.

8.8.7.6 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 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.

8.8.7.7 The 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 in the
notes. It also requires separate disclosure of the arrears of fixed cumulative
dividends on preference shares.

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8.8.7.8 The 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, there shall
be indicated by way of note how such unutilized amounts have been used or
invested.

8.8.7.9 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 and such borrowings are outstanding 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
borrowings and its utilisation. It is quite often found that the amount of
borrowings 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.

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.

8.8.7.10 The Schedule III also states that if, in the opinion of the Board, any
of the assets other than Property, Plant and Equipment, intangible assets
and non-current investments do not have a value on realization in the
ordinary course of business at least equal to the amount at which they are
stated, the fact that the Board is of that opinion, shall be stated. It is difficult
to contemplate a situation where any asset other than Property, Plant and
Equipment, intangible assets and non-current investments has a realizable
value that is lower than its carrying value, and the same is not given effect to
in the books of account, since Accounting Standards do not permit the same.
AS13 Accounting for Investments requires current investments to be valued
at lower of cost and fair value. AS2 Valuation of Inventories also requires
inventories to be valued at the lower of cost and net realizable value. Further,
Allowance for bad and doubtful debts is required to be shown as a deduction
from both Long-term loans & advances and Other Non-current assets as well
as Trade Receivables and Short-term loans and advances as per Schedule
III.

Hence, if the requirements of Accounting Standards and Schedule III are
followed, there may not be any need for making additional disclosures in this
regard.

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8.9 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:

8.9.1 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 for
line item in of item of carrying deeds held since not being
the property value held in deed holder is a which held in the
Balance the name date name of the
Sheet of promoter, director company**

or relative# of

promoter* /

director or

employee of

promoter /

director

PPE Land - - - - ** also

Building indicate if in

dispute

Investment Land
property Building

PPE Land
retired Building
from
active use
and held
for
disposal

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Others

# Relative here means relative as defined in the Act.

* Promoter here means promoter as defined in the Act.

8.9.1.1 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 absence of any
specific guidance, the immovable properties presented under ‘property, plant
and equipment’, ‘investment property’ or classified as ‘PPE retired from
active use and held for disposal’ 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.

8.9.1.2 The Act does not define ‘title deeds’. In general, title deeds mean a
legal deed or document constituting evidence of a right (e.g., 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.

8.9.1.3 The prescribed format requires disclosure of ‘relevant line item in the
Balance Sheet’ and ‘description of item of property’. The prescribed format
covers 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 e.g., plant and machinery items or equipments, bearer plants, any other
item of PPE that would be covered witihin the meaning of ‘immovable
property’.

8.9.1.4 While making this disclosure in the financial statements, the company
should disclose the following information:

(i) Gross carrying value – the company shall disclose the gross

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carrying 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 is
not being held in the name of the company due to a dispute, the
company shall state the nature of dispute..

8.9.1.5 The term ‘relative’ and ‘promoter’ as referred to while making this
disclosure should be as defined in the Companies Act, 2013.

8.9.2 Revaluation of Property, Plant and Equipment

Where the Company has revalued its Property, Plant and Equipment, the
company shall disclose as to whether the revaluation is based on the
valuation by a registered valuer as defined under rule 2 of the Companies
(Registered Valuers and Valuation) Rules, 2017.

8.9.2.1 This clause requires a Company to disclose whether the revaluation
of its Property, Plant and Equipment during the year is based on the
valuation by a registered valuer as defined under the aforementioned Rules.
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.

8.9.3 Loans or Advances - additional disclosures

Following disclosures shall be made where Loans or Advances in the nature
of loans are granted to promoters, directors, KMPs and the related parties
(as defined under Companies Act, 2013,) either severally or jointly with any

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other person, that are:

(a) repayable on demand; or

(b) without specifying any terms or period of repayment

Type of Borrower Amount of loan or Percentage to the total

advance in the nature Loans and Advances in

of loan outstanding the nature of loans

Promoters

Directors

KMPs

Related Parties

8.9.3.1 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 the Companies Act, 2013).

8.9.3.2. 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 order, in accordance with the normal trade practice would not be
an advance in the nature of a 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.

8.9.3.3 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.

8.9.3.4 The prescribed format has been modified to provide similar

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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
Borrower outstanding* Total^
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.

8.9.4 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*

Less 1-2 years 2-3 years More
than 1 than 3
year years

Projects in
progress

Projects
temporarily

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suspended

* Total shall tally with CWIP amount in the balance sheet.

8.9.4.1 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:

Period 1 Amount CWIP
balance at
the year-end

Year 1 100 100

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 than 1-2 2-3 More than
1 year years years 3 years

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Projects in 50 250 150 100 550
progress

Projects

temporarily - - - - -

suspended

8.9.4.2 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’.

8.9.4.3 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
the ageing of its related CWIP amounts will be presented under ‘Projects
temporarily suspended’.

8.9.4.4 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 the 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’.

8.9.4.5 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**:

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CWIP Less than 1 (Amount in Rs.)
Project 1 year To be completed in

1-2 years 2-3 years More than
3 years

Project 2

** Details of projects where activity has been suspended shall be given
separately.

8.9.4.6 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). When plans are subsequently
revisited and revised, same should not be considered for determining variation
when making above disclosures.

8.9.4.7 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’. The
prescribed disclosure may be slightly modified as below:

CWIP To be completed in

Less than 1-2 years 2-3 years More than

1 year 3 years

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Projects in
progress
Project 1
Project 2

Projects
temporarily
suspended
Project 1
Project 2

8.9.4.8 The prescribed format of disclosure seems to require a disclosure for
both categories (exceeded cost or timelines) on a combined basis instead of
separately disclosing for each trigger viz., projects which are overdue and
projects where costs have exceeded. However, the company may choose to
provide disclosure for each trigger separately.
8.9.4.9 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 completion schedule as at end of current period will show
the asset/project as part of the category ‘projects in progress’ while the
completion schedule as at the end of previous period will continue to present the
asset/project as part of the category ‘project temporarily suspended’.
8.9.4.10 Neither Schedule III not 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.
8.9.5 Intangible assets under development ageing schedule /
completion schedule
(a) For intangible assets under development, the following ageing

schedule shall be given:

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Intangible assets under development ageing schedule

(Amount in Rs.)

Intangible Amount in intangible assets under Total*
assets under development for a period of
development
Less 1-2 years 2-3 years More
than 1 than 3
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**:

(Amount in Rs.)

Intangible assets Less than To be completed in More than
under development 1 year 1-2 years 2-3 years 3 years

Project 1

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.
8.9.6 Details of Benami Property held
Where any proceedings have been initiated or pending against the company

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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.
8.9.6.1 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 purpose of disclosures, reference shall be made to
Prohibition of Benami Property Transactions Act, 1988 (as amended from
time to time).
8.9.6.2 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

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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 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

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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.

8.9.6.3 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.

8.9.6.4 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.

8.9.6.5 With the above background and guidance from the Prohibition of

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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 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, registered 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 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.

8.9.7 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:

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(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.

8.9.7.1 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 security of current assets.

8.9.7.2 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
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.

8.9.7.3 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 company's assets other than

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current assets.

8.9.7.4. Moreover, 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.

8.9.7.5 Such returns/statements may include stock statements, book debt
statements, credit monitoring arrangement reports, statements on ageing
analysis of the debtors/other receivables, and other financial information to
be submitted in stipulated format on a periodic basis to lenders.

8.9.7.6 The Statement as submitted to the Banks/Financial Institutions
should be compared to the Books of Accounts of the Company.

8.9.7.7 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 value of stock,
amount of debtors/creditors, ageing analysis of debtors, etc., between the
books of account and the returns/statements submitted to banks/financial
institutions.

8.9.7.8 The disclosure required under this clause should also be made 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:

Quarter Name of Particulars Amount as per Amount as reported Amount of Reason for
bank books of in the quarterly difference material
account return/ statement discrepancie

June Bank X Finished XX XX XX

20XX Goods

8.9.8 Wilful Defaulter*
Where a company is declared wilful defaulter by any bank or financial
institution or other lender, following details shall be given:

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(a) Date of declaration as wilful defaulter;

(b) Details of defaults (amount and nature of defaults)

* A ‘wilful defaulter’ means a person or an issuer who or which is categorized
as a wilful defaulter by any bank or financial institution (as defined under the
Act) or consortium thereof, in accordance with the guidelines on wilful
defaulters issued by the Reserve Bank of India.

8.9.8.1 This disclosure requirement applies to any company that has been
declared as a wilful defaulter by any bank or financial institution or any other
lender at any time during the financial year or after the end of reporting
period but before the date when financial statements are approved.

8.9.8.2 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:-

(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.

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.

8.9.8.3 Reserve Bank of India has prescribed a transparent mechanism for

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identification of wilful defaulters. RBI Circular as referred above defines the
term ‘lender’ to cover 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.

8.9.8.4 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 issued. 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 i.e. adoption of the financial
statements.

8.9.9 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:

Name of the Nature of transactions with Balance Relationship with
struck off struck off company outstanding the struck off
company
company, if any,
to be disclosed

Investment in securities

Receivables

Payables

Shares held by struck off
company

Other outstanding
balances (to be specified)

8.9.9.1 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.

8.9.9.2 When making this disclosure in the financial statements, the company

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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
year, 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;

(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.

8.9.9.3 The illustrative format is as given below:

Name of Nature of Balance Relationship Balance Relationship
the transactions outstanding with the outstanding with the struck
with struck off struck off off company, if
struck off as at as at
company company current company, if previous any, to be
period any, to be period disclosed
disclosed

Investment in
securities

Receivables

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Payables
Shares held
by struck off
company
Other
outstanding
balances (to
be specified)

8.9.10 Registration of charges or satisfaction with Registrar of
Companies
Where any charges or satisfaction yet to be registered with Registrar of
Companies beyond the statutory period, details and reasons thereof shall be
disclosed.
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.
8.9.11 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.

8.9.12 Analytical Ratios
The company shall explain the financial statement line items included in
numerator and denominator for computing the following ratios:
(a) Current ratio
(b) Debt-equity ratio
(c) Debt service coverage ratio
(d) Return on equity ratio
(e) Inventory turnover ratio

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(f) Trade receivables turnover ratio
(g) Trade payables turnover ratio
(h) Net capital turnover ratio
(i) Net profit ratio
(j) Return on capital employed
(k) Return on investment
Further explanation shall be provided for any change in the ratio by more
than 25% as compared to the ratio of preceding year.

8.9.12.1 This disclosure requires the company to provide analytical ratios
along with an explanation of the items included in numerator and
denominator for computing these ratios. Further, the company shall provide a
commentary explaining any change (whether positive or negative) in the ratio
by more than 25% compared to the ratio of preceding year.

8.9.12.2 An illustrative format (Refer Annexure B) for this disclosure is given
below:

Ratio Numerator Denominator Current Previous % Reason
Period Period Variance for
variance

Current
Ratio
Debt-
equity ratio
.
.
.
Return on
capital
employed
Return on
investment

8.9.12.3 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 over time. In other words, if there is any change in

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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.

8.9.12.4 In order to determine the items to be included in numerator and in
denominator for any ratio, reference may be drawn from several sources
e.g., 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. In other words,
items included in numerator and denominator of any ratio may not be
standardized across companies as the calculation methodology would be a
matter of each company’s facts and circumstances, nature of transactions,
nature of industry/sector in which the company operations or the applicable
regulatory requirements that a company needs to comply with.

8.9.12.5 Ratios presented in the any other place in Annual Report should be
consistent with the ratios mentioned in financial statement.

8.9.13 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.

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
arrangement is in conformity with the accounting standards prescribed under
section 133.

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

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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.

8.9.14 Utilisation of Borrowed funds and share premium
(A) Where a 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.
(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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(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).

8.9.14.1 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 the 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

(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.

8.9.14.2 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 the they / it shall

(i) directly (i.e. without any further funding party) or indirectly (i.e. through

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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.

8.9.14.3 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 channeling 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.

8.9.14.4 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.

9. Part II – Statement of Profit and Loss

Part II deals with disclosures relating to the Statement of Profit and Loss.
The format prescribed is the vertical form wherein disclosure for revenues
and expenses is in various line items. Part II of the Schedule contains items I
to XVI which lists items of Revenue, Expenses and Profit / (Loss). “General
Instructions for Preparation of Statement of Profit and Loss” govern the other
disclosure and presentation.

As per the Guidance Note ‘Terms Used in Financial Statements’, the phrase
‘Profit and Loss statement’ is defined as “the Financial Statement which
presents the revenues and expenses of an enterprise for an accounting
period and shows the excess of revenues over expenses (or vice versa) It is
also known as profit and loss account.”

As per Note 1 to “General Instructions for Preparation of Statement of Profit
and Loss”, the provisions of this part also apply to the income and

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expenditure account referred to in sub clause (ii) of clause (40) of section 2
of the Companies Act, 2013 in the same manner as they apply to a
Statement of Profit and Loss.

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. Accordingly, functional classification of
expenses is prohibited.

As per the Framework for the Preparation and Presentation of Financial
Statements, Income and expenses are defined as follows:

(a) Income is increase in economic benefits during the accounting period
in the form of inflows or enhancements of assets or decreases of
liabilities that result in increases in equity, other than those relating to
contributions from equity participants.

(b) Expenses are decreases in economic benefits during the accounting
period in the form of outflows or depletions of assets or incurrences of
liabilities that result in decreases in equity, other than those relating to
distributions to equity participants.

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 2(A) to General Instructions for the Preparation of Statement of
Profit and Loss require that in respect of a company other than a finance
company, Revenue from operations is to be separately disclosed in the
notes, showing revenue from:

(a) Sale of products

(b) Sale of services

(ba) Grants or donations received (relevant in case of section 8 companies
only)

(c) Other operating revenues

(d) Less: Excise duty

9.1.2 As per AS-9 “Revenue Recognition”, the above disclosure in respect of
Excise Duty needs to be shown on the face of the Statement of Profit and
Loss. Since Accounting Standards override Schedule III, the presentation in
respect of excise duty will have to be made on the face of the Statement of

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Profit and Loss. In doing so, a company may choose to present the elements
of revenue from sale of products, sale of services and other operating
revenues also on the face of the Statement of Profit and Loss instead of the
Notes.

9.1.3 Indirect taxes such as Sales tax, Service tax, Purchase tax etc. are
generally collected from the customer on behalf of the government in majority
of the cases. However, this may not hold true in all cases and it is possible
that a company may be acting as principal rather than as an agent in
collecting these taxes. Whether revenue should be presented gross or net of
taxes should depend on whether the company is acting as a principal and
hence responsible for paying tax on its own account or, whether it is acting
as an agent i.e. simply collecting and paying tax on behalf of government
authorities. In the former case, revenue should also be grossed up for the tax
billed to the customer and the tax payable should be shown as an expense.
However, in cases, where a company collects tax only as an intermediary,
revenue should be presented net of taxes.

9.1.4 However, as per the Guidance Note on Value Added Tax, “Value
Added Tax (VAT) is collected from the customers on behalf of the VAT
authorities and, therefore, its collection from the customers is not an
economic benefit for the enterprise and it does not result in any increase in
the equity of the enterprise”. Accordingly, VAT should not be recorded as
Revenue of the enterprise. At the same time, the payment of VAT should not
be treated as an expense in the Financial Statements of the company.

9.1.5 Further, as per the definition of Revenue in the Guidance Note on
Terms Used in Financial Statement, “It excludes amounts collected on behalf
of third parties such as certain taxes”. The Guidance Note on VAT further
states, “Where the enterprise has not charged VAT separately but has made
a composite charge, it should segregate the portion of sales which is
attributable to tax and should credit the same to ‘VAT Payable Account’ at
periodic intervals”.

9.1.6 On the introduction of Goods & Services Tax from 1 July 2017
onwards, 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 should be presented net of GST
collected.

9.1.7 For non-finance companies, revenue from operations needs to be
disclosed separately as revenue from

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(a) sale of products,

(b) sale of services and

(c) other operating revenues.

It is important to understand what is meant by the term “other operating
revenues” and which items should be classified under this head vis-à-vis
under the head “Other Income”.

9.1.8 The term “other operating revenue” 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 sale of products or rendering of services. 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. The classification of income would also depend on
the purpose for which the particular asset is acquired or held. For instance, a
group engaged in manufacture and sale of industrial and consumer products
also has one real estate arm. If the real estate arm is continuously engaged
in leasing of real estate properties, the rent arising from leasing of real estate
is likely to be “other operating revenue”. On the other hand, consider a
consumer products company which owns a 10 storied building. The company
currently does not need one floor for its own use and has given the same
temporarily on rent. In that case, lease rent is not an “other operating
revenue”; rather, it should be treated as “other income”.

9.1.9 To take other examples, sale of Property, Plant and Equipment is not
an operating activity of a company, and hence, profit on sale of Property,
Plant and Equipment should be classified as other income and not as ‘other
operating revenue’. On the other hand, sale of manufacturing scrap arising
from operations for a manufacturing company should be treated as other
operating revenue since the same arises on account of the company’s main
operating activity.

9.1.10Net foreign exchange gain should be classified as Other Income. This
is because such gain or loss arises purely on account of fluctuation in
exchange rates and not on account of sale of products or services rendered,
unless the business of the company is to deal in foreign exchange.

9.1.11 As per Note 2(B) to General Instructions for Preparation of Statement
of Profit and loss, in respect of a finance company, revenue from operations
shall include revenue from

(a) Interest; and

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(b) Other financial services
Revenue under each of the above heads is to be disclosed separately by
way of Notes to Accounts to the extent applicable.
To align with Division III to Schedule III, a finance company may disclose the
following as a separate line item, as may be applicable to its line of
businesses, for example:

(i) Dividend Income

(ii) Rental Income

(iii) Fees and commission Income

9.1.12 The term finance company is not defined under the Companies Act,
2013, or Schedule III. Hence, the same should be taken to include all
companies carrying on activities which are in the nature of “business of non-
banking financial institution” as defined under section 45I(f) of the Reserve
Bank of India Act, 1935.

The relevant extract is reproduced below:

(a) ‘‘business of a non-banking financial institution’’ means carrying on of
the business of a financial institution referred to in clause (c) and includes
business of a non-banking financial company referred to in clause (f);

(c) ‘‘financial institution’’ means any non-banking institution which carries
on as its business or part of its business any of the following activities,
namely:–
(i) the financing, whether by way of making loans or advances or

otherwise, of any activity other than its own:
(ii) the acquisition of shares, stock, bonds, debentures or securities

issued by a Government or local authority or other marketable
securities of a like nature:
(iii) letting or delivering of any goods to a hirer under a hire-purchase
agreement as defined in clause (c) of section 2 of the Hire-Purchase
Act, 1972:
(iv) the carrying on of any class of insurance business;
(v) managing, conducting or supervising, as foreman, agent or in any
other capacity, of chits or kuries as defined in any law which is for the
time being in force in any State, or any business, which is similar
thereto;

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(vi) collecting, for any purpose or under any scheme or arrangement by
whatever name called, monies in lump sum or otherwise, by way of
subscriptions or by sale of units, or other instruments or in any other
manner and awarding prizes or gifts, whether in cash or kind, or
disbursing monies in any other way, to persons from whom monies are
collected or to any other person, but does not include any institution,
which carries on as its principal business,–
(a) agricultural operations; or
(aa) industrial activity; or
(b) the purchase or sale of any goods (other than securities) or the
providing of any services; or

(c) the purchase, construction or sale of immovable property, so
however, that no portion of the income of the institution is
derived from the financing of purchases, constructions or sales
of immovable property by other persons;

Explanation.– For the purposes of this clause, ‘‘industrial
activity’’ means any activity specified in sub-clauses (i) to (xviii)
of clause (c) of section 2 of the Industrial Development Bank of
India Act, 1964;

(f) ‘‘non-banking financial company’’ means–

(i) a financial institution which is a company;

(ii) a non-banking institution which is a company and which has as
its principal business the receiving of deposits, under any
scheme or arrangement or in any other manner, or lending in
any manner;

(iii) such other non-banking institution or class of such institutions,
as the bank may, with the previous approval of the Central
Government and by notification in the Official Gazette, specify;

9.1.13 Accordingly, applying the aforesaid definition, the term “finance
company” would cover all NBFCs - Asset Finance companies, Investment
companies, Leasing and Hire Purchase companies, Loan companies, Infra
Finance companies, Core Investment companies, Micro-finance companies,
etc. Further, Housing Finance Companies regulated by National Housing
Bank should also be considered as a finance company.

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9.2 Other income:

The aggregate of ‘Other income’ is to be disclosed on face of the Statement
of Profit and Loss.

9.2.1 As per Note 4 to General Instructions for the preparation of Statement
of Profit and Loss ‘Other Income’ shall be classified as:

(a) Interest Income (in case of a company other than a finance company);

(b) Dividend Income;

(c) Net gain / loss on sale of investments;

(d) Other non-operating income (net of expenses directly attributable to
such income).

9.2.2 All kinds of interest income for a company other than a finance
company should be disclosed under this head such as interest on fixed
deposits, interest from customers on amounts overdue, etc.

9.2.3 Clause (a) of Note 5 (vii) requires a separate disclosure for Dividends
from subsidiary companies.

9.2.4 Other income items such as interest income, dividend income and net
gain on sale of investments should be disclosed separately for Current as
well as Long-term Investments as required by AS13 “Accounting for
Investments”. If it is a net loss the same should be classified under
expenses.
9.2.5 For other non-operating income, income should be disclosed under
this head net off expenses directly attributable to such income. However, the
expenses so netted off should be separately disclosed.
9.3 Share of profits/losses in a Partnership firm
9.3.1 Though, there is no specific requirement in the Schedule III to disclose
profit or losses on investments in a partnership firm, the same should be
disclosed as under.
9.3.2 The accounting of return on investment (i.e. profit share from
partnership) will depend on the terms of contract between Company and
partnership firm. The share of profit in partnership firm shall be recognised as
income in the statement of profit and loss as and when the right to receive
the profit share is established. Hence, the same should be accordingly
accounted for by the company in its Standalone Financial Statements.

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9.3.3 Separate disclosure of profits or losses from partnership firms should
be made. In a case where the company was a partner during the year but is
not a partner at the end of the year, the disclosure should be made for the
period during which the company was a partner.

9.3.4 The company's share of the profits or losses of the partnership firm
should be calculated by reference to the company's own accounting year.
The Financial Statements of the partnership for computing the share of
profits and losses should be drawn up to the same reporting date. If it is not
practicable to draw up the Financial Statements of the partnership upto such
date and, are drawn up to a different reporting date, drawing analogy from
AS-21 and AS-27, adjustments should be made for the effects of significant
transactions or other events that occur between that date and the date of the
parent’s Financial Statements. In such cases, the difference in reporting
dates should be disclosed.

9.3.5 In case the year ending of the company and of the firm fall on different
dates, the Financial Statements of the company should also contain a note to
indicate that the accounting period of the partnership firm in respect of which
the profits or losses have been accounted for in the company's books.

9.3.6 If however, a partnership firm happens to be in the nature of a Jointly
Controlled Operation as defined in AS-27, the share of incomes, expenses,
assets or liabilities will have to be accounted for in the Standalone Financial
Statements as prescribed in AS-27.

9.3.7 In case the partnership firm is a Subsidiary under AS-21, Associate
under AS-23 or Jointly Controlled Entity/Jointly Controlled Operation under
AS-27, in the Consolidated Financial Statements, the share of profit/loss from
the firm should be accounted for in terms of the applicable Accounting
Standard as stated above.

9.3.8 The aforesaid principles should also be applied to accounting for the
share of profits and losses in an Association of Persons (AOP).

9.4 Share of profits/losses in a Limited Liability Partnership (LLP)

9.4.1 A Limited Liability Partnership, as per the LLP Act, is a body corporate.
The accounting of return on investment in LLP (i.e. profit share from LLP) will
depend on the terms of contract between Company and LLP. The share of
profit in LLP shall be recognised as income in the statement of profit and loss
as and when the right to receive its profit share is established by the
company.

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9.4.2 Depending upon the terms of agreement between the Partners, the
LLP may be a Subsidiary under AS-21, Associate under AS-23 or Jointly
Controlled Entity under AS-27. Hence, accounting in respect of the same in
the Consolidated Financial Statements would be governed by the applicable
Accounting Standards.
9.4.3 Additionally, principles of para 9.3.4 and 9.3.5 above will apply to an
LLP as well.
9.5 Expenses
The aggregate of the following expenses are to be disclosed on the face
of the Statement of Profit and Loss:
 Cost of materials consumed
 Purchases of Stock-in-Trade
 Changes in inventories of finished goods, work in progress and stock

in trade
 Employee benefits expense
 Finance costs
 Depreciation and amortization expense
 Other expenses
9.5.1 Cost of materials consumed
9.5.1.1 This disclosure is applicable for manufacturing companies. Materials
consumed would consist of raw materials, packing materials (where
classified by the company as raw materials) and other materials such as
purchased intermediates and components which are ‘consumed’ in the
manufacturing activities of the company. Where packing materials are not
classified as raw materials the consumption thereof should be disclosed
separately. However, intermediates and components which are internally
manufactured are to be excluded from the classification:
9.5.1.2For purpose of classification of inventories, internally manufactured
components may be disclosed as below:
i. where such components are sold without further processing they are

to be disclosed as 'finished products'.
ii. where such components are sold only after further processing, the

better course is to disclose them as 'work-in-progress' but they may
also be disclosed as 'manufactured components’ subject to further

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processing or with such other suitable description as 'semi-finished
products' or 'intermediate products'.

iii. where such components are sometimes sold without further
processing and sometimes after further processing it is better to
disclose them as 'manufactured components'.

9.5.1.3 For the purpose of interpreting the requirement to classify the raw
materials, some guidance may be necessary with regard to the question as
to what constitutes raw materials. According to the strict dictionary
connotation of this term, raw materials would include only materials obtained
in the state of nature. Such a definition would, however, be unrealistic in
context of this requirement because it would exclude even a basic material
such as steel. Generally speaking, the term “raw materials” would include
materials which physically enter into the composition of the finished product.
Materials, such as stores, fuel, spare parts etc., which do not enter physically
into the composition of the finished product, would therefore, be excluded
from the purview of the term “raw materials”.

9.5.1.4 The requirement is silent with regard to containers and packaging
materials. It is, therefore, open to question whether such materials constitute
a category of “raw materials” for the purpose of the classification. The matter
should be decided in the light of the facts and circumstances of each case,
the nature of the containers and packaging materials, their relative value in
comparison to the raw materials consumed, and other similar considerations.
Where, however, packaging materials, because of their nature are included
in raw materials it is preferable to show the description as “raw materials
including packaging materials consumed”.

9.5.1.5 Since in case of a company which falls under the category of
manufacturing or manufacturing and trading company, disclosure is required
with regard to raw materials consumed, care should be taken to ensure that
the figures relate to actual consumption rather than “derived consumption”.
The latter figure is ordinarily obtained by deducting the closing inventory from
the total of the opening inventory and purchases, but this figure may not
always represent a fair indication of actual consumption because it might
conceal losses and wastages. On the other hand, if the figure of actual
consumption can be compiled from issue records or other similar data, it is
likely to be more accurate. Where this is not possible, the derived figure of
consumption may be shown and it is left to the company, according to the
circumstances of each case, to determine whether any footnote is required to
indicate that the consumption disclosed is on the basis of derived figures

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rather than actual records of issue.

9.5.1.6 Where the consumption is disclosed on the basis of actual records
of issue, a further question arises with regard to the treatment of shortages,
losses and wastages. In most manufacturing companies, these are
inevitable. It is, therefore, suggested that the company should itself establish
reasonable norms of acceptable margins. Any shortages, losses or wastages
which are within these norms may be regarded as an ordinary incidence of
the manufacturing process and may, therefore, be included in the figure of
consumption. On the other hand, any shortages, losses or wastages which
are beyond the permitted margin or when they are known to have occurred
otherwise than in the manufacturing process, should not be included in the
consumption figures. Whether or not such abnormal variations need to be
separately disclosed in the accounts would depend upon the facts and
circumstances of each case. The General Instructions for Preparation of
Statement of Profit and Loss does not require any specific disclosures.

9.5.1.7 In the case of industries where there are several processes,
materials may move from process to process, so that the finished product of
one department constitutes the raw materials of the next. Since the
disclosure requirement provides only for disclosure of raw material under
broad heads and goods purchased under broad heads and also having
regard to the fact that the consumption of raw materials for production of
such intermediates would have to be accounted as raw materials consumed,
it follows that internal transfers from one department to another should be
disregarded in determining the consumption figures to be disclosed. .

9.5.2 Purchases of Stock in Trade

Stock-in-trade refers to goods purchased normally with the intention to resell
or trade in. In case, any semi-finished goods/materials are purchased with an
intention of doing further processing activities on the same, the same should
be included in ‘cost of materials consumed’ rather than under this item.

9.5.3 Changes in inventories of finished goods, work-in-progress and
stock-in-trade

This requires disclosure of difference between opening and closing
inventories of finished goods, work-in-progress and stock-in-trade. The
difference should be disclosed separately for finished goods, work in
progress and stock in trade.

9.5.4 Employee benefits expense [Note 5(i)(a)]

This requires disclosure of the following details:

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9.5.4.1 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.
The term employee should be deemed to include directors who are either in
whole-time or part-time employment of the company. It will exclude those
directors who attend only Board meetings and are not under a contract of
service with the company. Those who act as consultants or advisers without
involving the relationship of master and servant with the company should
also be excluded. A distinction should be made between persons engaged
under a contract of service and those engaged under a contract for services.
Only the former are to be included in the computation. Whether part-time
employees are to be included would depend on the facts and circumstances
of each case - the basic criterion being whether they are employed under a
contract of service or a contract for services.
9.5.4.2 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 Gratuity fund,
Superannuation fund, ESI, Labour Welfare Fund etc. are to be disclosed
here.

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.

9.5.4.3 Expense on Employee Stock Option Scheme (ESOP) and
Employee Stock Purchase Plan (ESPP)

The amount of expense under this head and all disclosures should be
determined in accordance with the Guidance Note on Accounting for
Employee Share based Payments.

9.5.4.4 Staff welfare expense

The total expenditure on Staff welfare is to be disclosed herein.

9.5.5 As per Note 3 of to the General Instructions for the Preparation of
the Statement of Profit and Loss, disclosure of Finance costs is to be

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bifurcated under the following:
(A) Interest expense
(B) Other borrowing costs
(C) Applicable net gain/loss on foreign currency transactions and

translation
A) Interest expense
This would cover interest paid on borrowings from banks and others, on
debentures, bonds or similar instruments etc. Finance charges on finance
leases are in the nature of interest expense and hence should also be
classified as interest expense.
B) Other borrowing costs

Other borrowing costs would include commitment charges, loan processing
charges, guarantee charges, loan facilitation charges, discounts/premium on
borrowings, other ancillary costs incurred in connection with borrowings, or
amortization of such costs, etc.

C) Applicable net gain/loss on foreign currency transactions and
translation

AS 11 and AS 16 deal with foreign exchange differences arising on foreign
currency transactions included in the financial statements of an entity.

All exchange differences within the purview of AS 11 are recognized as
exchange differences and presented accordingly. However, all exchange
differences arising from foreign currency borrowings are within the purview of
AS 16 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 AS 16 – ‘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 difference eligible for capitalization are determined in accordance
with para 4(e) of AS 16.

Accordingly, in case a company has utilized its foreign currency borrowings
for the purpose of acquisition or construction of a qualifying asset, it would

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capitalize certain portion of foreign exchange difference in accordance with
para 4(e) of AS 16. All other borrowing costs are recognized as an expense.

For presenting foreign exchange differences arising on foreign currency
borrowings in statement of profit and loss, there is no specific requirement to
apply the limit prescribed in paragraphs 4(e) of AS 16 since the nature of the
exchange difference on foreign currency borrowing 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
AS 16 can be presented under the head ‘finance costs’.

9.5.6 Depreciation and amortization expense [Note 5(i)(b)]

A company has to disclose depreciation provided on Property, Plant and
Equipment and amortization of intangible assets under this head.

9.5.7 Other Expenses
All other expenses not classified under other heads will be classified here.
For this purpose, any item of expenditure which exceeds one percent of the
revenue from operations or `Rs. 1,00,000, whichever is higher, needs to be
disclosed separately.
Further Note 5(vi) requires a separate disclosure of each of the following
items, which will also be classified under ‘Other expenses’
 Consumption of stores and spare parts;
 Power and fuel;
 Rent;
 Repairs to buildings;
 Repairs to machinery;
 Insurance;
 Rates and taxes, excluding taxes on income;
 Miscellaneous expenses.
9.6 Exceptional items
The term ‘Exceptional items’ is not defined in Schedule III. However, AS-5
“Net Profit or Loss for the period, Prior period items and changes in
Accounting Policies” has a reference to such items in Paras 12, 13 and 14.
“Para 12: When items of income and expense within profit or loss from
ordinary activities are of such size, nature or incidence that their disclosure is

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relevant to explain the performance of the enterprise for the period, the
nature and amount of such items should be disclosed separately.

Para 13: Although the items of income and expense described in paragraph
12 are not extraordinary items, the nature and amount of such items may be
relevant to users of Financial Statements in understanding the financial
position and performance of an enterprise and in making projections about
financial position and performance. Disclosure of such information is
sometimes made in the notes to the Financial Statements.

Para 14: Circumstances which may give rise to the separate disclosure of
items of income and expense in accordance with paragraph 12 include: the
write-down of inventories to net realisable value as well as the reversal of
such write-downs; a restructuring of the activities of an enterprise and the
reversal of any provisions for the costs of restructuring;”

 disposals of items of Property, Plant and Equipment;
 disposals of long-term investments;
 legislative changes having retrospective application;
 litigation settlements; and
 other reversals of provisions.
In case the company has more than one such item of income / expense of
the above nature, the aggregate of such items should be disclosed on the
face of the Statement of Profit and Loss. Details of the all individual items
should be disclosed in the Notes.[Note 5 (i) (l) to the General Instructions for
preparation of the Statement of Profit and Loss]

9.7 Extraordinary items

The term ‘Extraordinary items’ is not defined in Schedule III. However, AS 5
“Net Profit or Loss for the period, Prior period items and changes in
Accounting Policies” at para 4.2 defines ‘extraordinary items’ as:
‘Extraordinary items are income or expenses that arise from events or
transactions that are clearly distinct from the ordinary activities of the
enterprise and, therefore, are not expected to recur frequently or regularly.
Further para 8 of AS-5 discusses about the disclosure of extraordinary items
as below:

Extraordinary items should be disclosed in the Statement of Profit and Loss
as a part of net profit or loss for the period. The nature and the amount of
each extraordinary item should be separately disclosed in the Statement of
Profit and Loss in a manner that its impact on current profit or loss can be

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perceived.”

In case the company has more than one such item of income / expense of
the above nature, the aggregate of such items should be disclosed on the
face of the Statement of Profit and Loss. Details of the all individual items
should be disclosed in the Notes. [Note 5 (i) (l) to the General Instructions for
Preparation of the Statement of Profit and Loss].

9.8 Tax expense:

This is to be disclosed on the face of the Statement to Profit and Loss and
bifurcated into:

(1) Current tax and

(2) Deferred tax

9.8.1 Current tax

9.8.1.1 The term ‘Current tax’ has been defined under AS-22 “Accounting
for Taxes” on Income as the amount of income tax determined to be payable
(recoverable) in respect of the taxable income (tax loss) for a period. Hence,
details of all taxes on income payable under the applicable taxation laws
should be disclosed here.

9.8.1.2 Presentation for Minimum Alternate Tax (MAT) credit should be
made as prescribed by the ICAI Guidance Note on “Accounting for Credit
Available in Respect of Minimum Alternative tax under the Income-tax Act,
1961’. The relevant portion is as under:

“Profit and Loss Account:

15. According to paragraph 6 of Accounting Standards Interpretation (ASI) 6,
‘Accounting for Taxes on Income in the context of Section 115JB of the
Income-tax Act, 1961’, issued by the Institute of Chartered Accountants of
India, MAT is the current tax. Accordingly, the tax expense arising on
account of payment of MAT should be charged at the gross amount, in the
normal way, to the profit and loss account in the year of payment of MAT. In
the year in which the MAT credit becomes eligible to be recognised as an
asset in accordance with the recommendations contained in this Guidance
Note, the said asset should be created by way of a credit to the profit and
loss account and presented as a separate line item therein.”

The Disclosure in this regard should be made as under:

Current tax (MAT) XX

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Less : MAT credit entitlement (XX)

Net Current tax XX

9.8.1.3 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.

9.8.1.4 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.

9.8.1.5 Excess/Short provision of tax relating to earlier years should be
separately disclosed.

9.8.2 Deferred tax

9.8.2.1 Any charge / credit for deferred taxes needs to be disclosed
separately on the face of the Statement of Profit and Loss.

9.8.2.2 AS 22 “Accounting for Taxes on Income” defines ‘Deferred tax’ as
the tax effect of timing differences.

Timing differences are defined as “differences between taxable income and
accounting income for a period that originate in one period and are capable
of reversal in one or more subsequent periods.”
9.9 Profit / (loss) for the period from Discontinuing operations
9.9.1 The term ’Discontinuing operations’ is defined in AS 24 “Discontinuing
operations” as a component of an enterprise:

(a) that the enterprise, pursuant to a single plan, is:

(i) disposing of substantially in its entirety, such as by selling the
component in a single transaction or by demerger or spin-off of
ownership of the component to the enterprise's shareholders; or

(ii) disposing of piecemeal, such as by selling off the component's
assets and settling its liabilities individually; or

(iii) terminating through abandonment; and

(b) that represents a separate major line of business or geographical area
of operations; and

(c) that can be distinguished operationally and for financial reporting

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purposes.
9.9.2 Profit or loss from Discontinuing 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 AS-24 Para 32(a) which requires the
amount of pre-tax profit or loss from ordinary activities attributable to the
discontinuing operation during the current financial reporting period, and the
income tax expense related thereto to be disclosed on the face of the
Statement of Profit and Loss.
9.9.3 Further, AS-24 Para 32(b) requires the following disclosure to be made
on the face of the Statement of Profit and Loss as well:
“(b) the amount of the pre-tax gain or loss recognised on the disposal of
assets or settlement of liabilities attributable to the discontinuing operation.”
Accordingly, such disclosures for discontinuing operations should be made
wherever applicable.
9.10 Tax expense of discontinuing operations
In case there are any taxes payable / tax credits available on profits / losses
of discontinuing operations, the same needs to be disclosed as a separate
line item on the Statement of Profit and Loss.
9.11 Earnings per equity share
Computation of Basic and Diluted Earnings Per Share should be made in
accordance with AS20 Earnings Per Share. It is pertinent to note that the
nominal value of equity shares should be disclosed along with the Earnings
Per Share figures as required by AS20.

10 Other additional information to be disclosed by way
of Notes to Statement of Profit and Loss

Besides the above disclosures, Para 5 of the General instructions for
Preparation of Statement of Profit and Loss also require disclosure on the
following items:

10.1 Adjustments to the carrying amount of investments [Clause
(h) of Note 5(i)]

In case there are any adjustments to carrying amount of investments
pursuant to diminution in value of the investment (or reversal thereof) in
conformity with AS 13 “Accounting for Investments”, the same should be
disclosed here.

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10.2 Net gain or loss on foreign currency translation (other than
considered as finance cost) Clause (i) of Note 5(i)

Any gains / losses on account of foreign exchange fluctuations are to be
disclosed separately as per AS11. Thus net exchange loss should be
classified under ‘other expenses’ and the amount so included should be
separately disclosed. Under this head, exchange differences to the extent
classified as borrowing costs as per Para 4(e) of AS-16 should not be
disclosed. Refer para 9.5.5 [Note 3(c) of Schedule III].

10.3 Payments to the auditor [Clause (j) of Note 5(i)]

Payments covered here should be for payments made to the firm of
auditor(s). Expenses incurred towards such auditor’s remuneration should be
disclosed under each of the following sub-heads as follows:

As:

(a) Auditor,

(b) For taxation matters,
(c) For company law matters,
(d) For management services,
(e) For other services,

(f) For reimbursement of expenses;

10.4 Prior period items [Clause (m) of Note 5 (i) ]

The term ‘Prior period Items’ is not defined in Schedule III. AS 5 “Net Profit
or Loss for the period, Prior period items and changes in Accounting
Policies”, in para 4.3 defines ‘Prior period items’ as “Prior period items are
income or expenses which arise in the current period as a result of errors or
omissions in the preparation of the Financial Statements of one or more prior
periods”.

10.5 The Schedule III requires the following additional
information to be given by way of notes:

Nature of company Disclosures required

Manufacturing companies Raw materials under broad heads
Goods purchased under broad heads

Trading companies Purchases of goods traded under

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broad heads

Companies rendering or supplying Gross income derived from services

services rendered under broad heads

Company that falls under more It will be sufficient compliance with the
than one category requirements, if purchases, sales and
consumption of raw material and the
gross income from services rendered
are shown under broad heads.

10.6 The disclosure requirements to be made for the above in the
Financial Statements are discussed as under:

The disclosures required as above are not very clear and give rise to the
following questions:

(a) Whether a company is required to disclose quantitative details or not?

(b) Whether a manufacturing company will disclose purchase, sale or
consumption of raw materials?

(c) What is meant by “good purchased” in case of manufacturing
companies?

(d) While there is a requirement to disclose gross income in case of a
service company and sales in case of a company falling under more
than one category, there is no clear requirement to disclose sales for a
manufacturing or a trading company.

(e) With regard to a company falling under more than one category
different interpretations seem possible. One interpretation is that it
should disclose purchase, sale and consumption for raw material. The
other interpretation is that purchase relates to traded goods, sale
relates to all goods sold (both manufactured goods and traded goods)
and for raw material, only consumption needs to be disclosed.

10.7 Since the Schedule III gives a note stating that “Broad heads shall be
decided taking into account the concept of materiality and presentation of
true and fair view of Financial Statements”, a company may consider the
following in deciding the disclosures required:

(a) Apparently, there is no need to give quantitative details for any of the
items.

(b) Considering the ambiguity and on a conservative interpretation, a

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manufacturing company may disclose the following under broad
heads:

(i) Consumption of major items of raw materials (including other
items classified as raw material such as intermediates/
components/packing material)

(ii) Goods purchased for trading (if any)

(iii) Though the Schedule III does not specifically require, it is also
suggested to disclose major items of opening and closing stock.
However, it is not mandatory.

(iv) Considering the requirement to disclose gross income in case of
a service company and sales in case of a company falling in
more than one category, disclosure of sales of finished goods
should also be made under broad heads.

(c) The term “broad heads” may be interpreted to mean broad categories
of raw materials, goods purchased, etc. These categories should be
decided based on the nature of each business and other facts and
circumstances. Normally, 10 percent of total value of sales/services,
purchases of trading goods and consumption of raw material is
considered as an acceptable threshold for determination of broad
heads. Any other threshold can also be considered taking into account
the concept of materiality and presentation of true and fair view of
Financial Statements.

(d) Similar principle may be followed to decide disclosure requirement in
other cases.

10.8 Based on the above perspectives, given below is a suggested format
for making this disclosure:

10.8.1Manufacturing company

(Amount in `)

Particulars Consumption
Raw materials

Raw material A XX

(YY)

Raw material B XX

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Others (YY)
Total XX
(YY)
Particulars XX
Goods purchased (YY)
Traded item A
Traded item B Purchases
Others
Total XX
(YY)
XX
(YY)
XX
(YY)
XX
(YY)

Particulars Sales values Closing Opening
Manufactured goods Inventory Inventory
Finished goods A XX
XX XX XX
Finished goods B XX
Others (YY) XX

Total XX XX XX
Traded goods
Traded goods A (YY)

XX XX

(YY)

XX XX

(YY)

XX XX

(YY)

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Traded goods B XX XX XX

(YY)

Others XX XX XX

(YY)

Total XX XX XX

(YY)

Particulars WIP
Work in Progress
Goods A WIP XX
(YY)
Goods B WIP XX
(YY)
Others XX
(YY)
Total XX
(YY)
10.8.2Trading company
Particulars Purchase Sales
Traded goods
Traded goods A XX XX
(YY) (YY)
Traded goods B XX XX
(YY) (YY)
Others XX XX
(YY) (YY)
Total XX XX
(YY) (YY)
10.8.3Service Company
Particulars Amount
Services rendered

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Service A XX

(YY)

Service B XX

(YY)

Others XX

(YY)

Total XX

(YY)

Note: Figures in brackets represent previous year figures.

A company falling under more than one category will make the above
disclosures, to the extent relevant.

10.9 The aggregate, if material, of any amounts set aside or
proposed to be set aside, to reserve [Clause (a) of Note 5(iv)]

10.9.1Disclosure is required for amounts set aside or proposed to be set
aside to reserves out of the profits for the period. The said transfers can be
in terms of the applicable statute under which the Financial Statements are
prepared i.e., the Companies Act, 2013 or any other applicable statute e.g.
Income Tax Act, 1961, or RBI Act, 1934, etc. Further, profits may also be
appropriated to free reserves as deemed appropriate by the management.

10.9.2The transfer to reserves as above should, however, not include
provisions made to meet any specific liability, contingency or commitment
known to exist at the date as on which the Balance Sheet is made up.

10.10 The aggregate, if material, of any amounts withdrawn from
such reserves [Clause (b) of Note 5 (iv):

In case the company has made any withdrawals from any reserves created in
terms of Clause (a) of Note5 (iv) above, the same is to be disclosed
separately.

It may be noted that such setting aside as well as withdrawal from reserves is
to be disclosed under applicable Line item of Reserves and Surplus, and not
under the Statement of Profit and Loss since the same is an appropriation of
profits and not a charge against revenue.

10.11 The aggregate, if material, of the amounts set aside to
provisions made for meeting specific liabilities, contingencies or

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commitments and amounts withdrawn from such provisions, as
no longer required [Clause (a) of Note5(v) and Clause (b) of
Note5(v)]

The amounts in respect of the items under this requirement should be
separately disclosed as a charge to the Statement of Profit and Loss.
Provisions no longer required should be credited to the Statement of Profit
and Loss.

10.12 Clause (b) of Note 5(vii) requires disclosure for ‘Provisions
for losses of subsidiary companies’.

However, as per AS-13, a provision in respect of losses made by subsidiary
companies is made only when the same results in a ‘other than temporary’
diminution in the value of investments in the subsidiary. Accordingly, the
aforesaid disclosure should be made separately only where such a provision
has been made in respect of the investment in such loss-making subsidiary.

10.13 Clause (k) and clause (x) of Note 5(i) requires disclosure
pertaining to ‘corporate social responsibility activities’.

This new requirement introduced by the Companies Act 2013 is that the
companies which are covered under Section 135 are required to disclose the
amount of expenditure incurred on corporate social responsibility
activities. The Guidance Note on Accounting for Expenditure on Corporate
Social Responsibility Activities issued 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:

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Paid in Yet to be Total
cash paid in cash
(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 Accounting Standard
(AS) 18, Related Party Disclosures.

(d) Where a provision is made in accordance with paragraph 8 above
the same should be presented as per the requirements of Schedule III
to the Companies Act, 2013. 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 (j) of Note 7 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;

(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.

While MCA notification does not specifically require disclosure of subsequent
action taken by the Company for the amount of shortfall at the end of the
year, in order to provide information pertaining to compliance of section 135
of the Act, the Company should also disclose the following:

a) the shortfall amount (i.e. unspent amount), in respect of other than
ongoing projects, transferred to a Fund specified in Schedule VII to
the Act, as per section 135(5) of the Act;

b) the shortfall amount (i.e. unspent amount), pursuant to any ongoing
project, transferred to special account as per section 135(6) of the
Act.

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10.14 Clause (ix) of Note 5(i) requires disclosure pertaining 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.

10.14.1 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.

10.14.2 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.

10.14.3 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, 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.

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The details that are required to be provided by the company as part of this
disclosure are prescribed below:

Sr. Assessment Section Amount Transaction Assessment Whether FY in which

No. Year of the disclosed description status transaction transaction

Act in tax along with recorded in is recorded

return value books of

treated as accounts?

income

10.14.4 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.

10.14.5 In case the company has not recorded / disclosed in the books of
accounts – reason for not recording / disclosing.

10.15 Clause (xi) of Note 5(i) requires disclosure pertaining to
‘details of crypto currency or virtual currency’.
This new requirement is introduced vide MCA Notification dated 24th March
2021 under which the company shall give details of crypto currency or virtual
currency.
Where the company has traded or invested in Crypto Currency or Virtual
Currency during the financial year, the following shall be disclosed:
(a) profit or loss on transactions involving Crypto Currency or Virtual

Currency;
(b) amount of currency held as at the reporting date;
(c) deposits or advances from any person for the purpose of trading or

investing in Crypto Currency / Virtual Currency.
10.15.1 Virtual currency is a digital representation of value, other than a

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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.
10.15.2 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.

11 Other Disclosures

The Statement of Profit and Loss shall also contain by way of a note the
following information, namely:-
(a) Value of imports calculated on C.I.F basis by the company during the

financial year in respect of –
I. Raw materials;
II. Components and spare parts;
III. Capital goods;
(b) Expenditure in foreign currency during the financial year on account of
royalty, know-how, professional and consultation fees, interest, and
other matters;
(c) Total value if all imported raw materials, spare parts and components
consumed during the financial year and the total value of all
indigenous raw materials, spare parts and components similarly
consumed and the percentage of each to the total consumption;
(d) The amount remitted during the year in foreign currencies on account
of dividends with a specific mention of the total number of non-resident
shareholders, the total number of shares held by them on which the
dividends were due and the year to which the dividends related;
(e) Earnings in foreign exchange classified under the following heads,
namely:-
 Export of goods calculated on F.O.B. basis;
 Royalty, know-how, professional and consultation fees;
 Interest and dividend;

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 Other income, indicating the nature thereof

11.1 Value of imports calculated on C.I.F. basis by the company during
the financial year [Clause (a) of Note 5(viii)]

The above disclosure is to be given in respect of –

Raw materials;

Components and spare parts;

Capital goods.

11.1.1 One of the requirements of disclosure as a note to the Statement of
Profit and Loss is the value of imports of raw materials calculated on C.I.F.
basis. The manner in which the term “raw materials” should be interpreted for
this purpose, is as discussed in para 9.5.1.3 of this Guidance Note.

11.1.2 Disclosure is also required to be made as to the value of imports of
components and spare parts and capital goods respectively. The term
“components” may be interpreted in the same manner as the term
“intermediates or components” in connection with the requirement, discussed
earlier in para 9.5.1.2 of this Guidance Note, to disclose the consumption of
purchased components or intermediates. The term “spare parts” would
ordinarily relate to spare parts for plant and machinery and other capital
equipment. The total value of imports of components and spare parts may be
disclosed in the aggregate. It may be appropriate to sub-classify the value of
imports between components and spare parts respectively since the nature
of these two items is not entirely similar. Such separate classification
however, is not a mandatory requirement of the Schedule III. However,
wherever the records for raw materials and components are maintained
together, the information required under this clause pertaining to components
can be presented collectively with raw materials.

11.1.3 As regards “capital goods”, disclosure would be involved in respect
of imported plant and machinery, furniture and fixtures, transport equipment,
intangible assets and other types of expenditure which is treated as capital
expenditure in the books of account. It is undoubtedly anomalous to disclose
the value of imports of capital goods by way of a note on the Statement of
Profit and Loss, since by the very definition, capital assets do not form part of
the Statement of Profit and Loss. However, since this is the specific
requirement of the Schedule III, it would have to be complied as such. Since
this disclosure is required for the Statement of Profit and Loss, it would not
be advisable to disclose the imports of capital goods by way of a note on

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Property, Plant and Equipment or Capital work-in-progress, even though it
would be more appropriate to do so.

11.1.4 It is significant that this requirement covers only imported spare
parts. It apparently does not apply to goods imported for sale, imported
stores, etc. However, the practice followed by most companies is that
imported stores are being clubbed with imported spare parts for the purposes
of this disclosure. This is probably due to the practical difficulty involved in
separating stores from spare parts. Hence, where it is not possible to
segregate the two owing to practical difficulties, the total value of imports of
stores and spare parts may be shown against a caption which clearly
indicates that the value shown relates to both the stores as well as the spare
parts.

11.1.5 The disclosure in respect of imports of the foregoing items is to be
made on accrual basis. This is because disclosure is required in respect of
the value of imports “during the financial year”. Consequently, if the particular
item has been imported during the accounting year, it should be disclosed as
such, even though the payment is not made in that year.

11.1.6 It is also to be noted that the disclosure under this requirement
relates to the imports as such. It is not linked with the consumption of the
material or utilization of capital goods.

11.1.7 While a subsequent requirement relates to expenditure in foreign
currency for designated items, the requirement presently under discussion is
not linked with any particular expenditure in foreign currency or local
currency. Consequently, the value of imports of raw materials, components
and spare parts and capital goods is to be disclosed irrespective of whether
or not such imports have resulted in expenditure in foreign currency. It is
possible that imports may have been arranged on Rupee payment terms
without involving any foreign currency expenditure but even so, the value of
the imports would have to be suitably disclosed.

11.1.8 Disclosure should be made in Indian currency. Where the imports
involve foreign currency expenditure, the amount be disclosed would be the
corresponding Rupee value of the imports as translated in the books of
account on normal principles relating to the translation of foreign currencies.

11.1.9 The value of the imports is to be calculated on C.I.F. basis – that is
inclusive of cost, insurance and freight. It is possible that the imported
materials may have been shipped by an Indian carrier and the insurance may
have been arranged with an Indian insurer, so that, really, there is no

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element of import of services with regard to the insurance and freight. Even
so, the Schedule III requires the value of the imports to be disclosed on a
C.I.F. basis, and while this may be anomalous in the types of situations
indicated above, the requirement should ordinarily be complied with. If for
any reason, there is some practical difficulty in disclosing the value of the
imports on C.I.F. basis, a footnote should be appended to the statement
indicating the precise method by which the value of imports has been arrived
at. For example, it may be stated that, because of practical difficulties in
disclosing the value of imports on C.I.F. basis, such disclosure has been
made on F.O.B. basis. Without attempting to particularize the various
circumstances under which it may be difficult to disclose the value of imports
on a C.I.F. basis, one example may be cited. A company may have standing
arrangements with a shipping line or with an insurer so that all imports are
covered through such a standing arrangement, In that case, it may be
difficult to allocate the insurance or freight to each specific shipment.
Similarly, if a company is a self-insurer, or if it owns its own fleet of ships,
disclosure of the value of imports cannot be made on a C.I.F. basis. In
situations of this kind the matter should be covered by a suitable explanatory
note but otherwise, wherever possible, the value of imports should be
disclosed on a C.I.F. basis. It may be noted that the requirement to disclose
the value on a C.I.F. basis relates to the method of computation of the value,
rather than the terms of the import contract. It is not to be implied that this
method of valuation is restricted to a case where the import contract is itself
on a C.I.F. basis.

11.1.10 Disclosure is required with regard to the value of imports “by the
company”. This implies that only direct imports by the company are involved
in the disclosure. If the company purchases imported materials in the open
market, no disclosure would be necessary under this requirement. Similarly,
if the company canalized its imports through another agency such as the
State Trading Corporation, no disclosure would be required, since it is the
latter agency which is the importing entity. On the other hand, if a company
purchases import entitlements and thereafter imports materials on the basis
of those entitlements, the value of such imports would need to be disclosed,
since they are the imports of the company, irrespective of the manner in
which the company procured the import entitlements. Within this rather broad
statement of the case, it is apprehended that practical difficulties may arise in
determining whether or not a particular import has been made “by the
company”.

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11.1.11 For the purpose of this requirement, only direct imports are to be
taken into consideration. Imported materials purchased locally, and imports
canalized through other sources, need not be disclosed. While this distinction
may be clear in the large majority of cases, problems may arise in individual
cases. In particular, in the case of indirect imports, care should be taken to
determine whether the source from which the imports have been obtained
represent an agency or an independent principal. If a company has
appointed a person or a company as its agent for the purpose of securing the
import of raw materials, etc., the imports through such agent must be
regarded as the company’s imports, and the value of such imports should be
disclosed pursuant to the requirement under this Note. On the other hand, if
another person or company has already imported the materials and the
company in question merely purchases such imported materials, on a
principal to principal basis, (except in cases where importing the materials is
done under specific requisition resulting in substance agent-principal
relationship) the value of such imports should be ignored by the latter
company, and included by the former.

11.1.12 The value of imports should also include goods which are in transit
on the Balance Sheet date, provided significant risks and rewards of
ownership in those goods have already passed to the purchasing company.
For the purpose of determining whether or not the property has passed,
reference may be made to the terms of the import contract, and recognized
legal principles, relating to this matter. Conversely, goods-in-transit at the
beginning of the year should be excluded on a similar basis so that they do
not form part of the value of the current year’s imports or succeeding years
for the purpose of the same disclosure relating to the value of imports.

11.1.13 Since the requirement is to disclose the value of imports during the
accounting year, it may be necessary to determine when the significant risks
and rewards of ownership to the goods has passed from the overseas
exporter to the Indian importer in accordance with the well-recognized legal
principles relating to this matter, irrespective of the fact whether or not the
goods have been physically received.

11.1.14 A particular problem may, however, arise in the case of import of
capital goods where delivery is to be made in installments through part
shipments from time to time. The contract may provide for the total value of
the entire shipment and it may, therefore, be difficult to determine the
separate value of the part shipments received during the accounting year.

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Since the disclosure which is required is in respect of imports during the
accounting year, it may be necessary to estimate, on a reasonable basis, the
separate value of part shipments. If such estimates are reasonable, no
objection needs be taken thereto.

11.1.15 It follows from this that, in appropriate cases, the disclosure would
include the value of goods in transit at the end of the year if the significant
risks and rewards of ownership in such goods has already passed to the
Indian importer. Conversely, it may be necessary to exclude the value of the
opening inventory in transit if the title to such inventory had already passed
to the Indian importer prior to the end of the previous year.

11.1.16 For the purpose of working out the C.I.F. value of imports, it may be
necessary to make approximations in suitable cases. For example, a
company may be actually importing materials on the basis of F.O.B.
contracts so that the values directly available from its records would be those
relating to F.O.B. terms. In such cases, a standard formula may be applied in
order to convert the F.O.B. values to C.I.F. For example, the company’s
accountant may calculate that a loading of, say, eleven per cent on the
F.O.B. values is ordinarily adequate and correct in order to convert the
F.O.B. values to C.I.F. If such approximations are reasonable, no objection
should ordinarily be taken thereto.

11.2 Expenditure in foreign currency during the financial year [Clause
(b) of Note 5 (viii)]

The above is to be disclosed for expenditure incurred on account of royalty,
know-how, professional and consultation fees, interest and other matters;

11.2.1 In addition to the requirement discussed earlier relating to the
disclosure of the value imported materials, and the disclosure relating to the
consumption of imported materials as compared to indigenous materials,
there is also a further requirement to disclose expenditure in foreign currency
on account of royalty, know-how, professional consultation fees, interest, and
other matters.

11.2.2 In this particular case, the disclosure is to be made with regard to
the expenditure in foreign currency. Consequently, if no foreign currency
expenditure is involved, no disclosure would be required, even though the
specific services covered by this requirement have been imported free of
cost or against Rupee payment or against any other method of payment or
adjustment not involving the expenditure of foreign currency. Although the
disclosure is required to be made with regard to items involving expenditure

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in foreign currency, the amount to be disclosed would be the Indian Rupee
amount. It should be noted that every company is required to follow accrual
system of accounting and the requirement refers to ‘expenditure’, the
disclosure should be on the basis of the expenditure incurred and recorded in
the books of account and not on the basis of remittance. The appropriate
Rupee figure can be obtained by converting the foreign exchange figure
through the application of a rate of exchange which is suitable for that
purpose, having regard to normal principles of foreign currency
translation/conversion in accounts. If so desired, the foreign currency figure
may also be given as additional information but this cannot be regarded as
mandatory.

11.2.3 While the requirement relating to the disclosure of imports clearly
specifies the different heads under which the disclosure is to be made, and
while the requirement relating to foreign exchange earnings also similarly
indicates the specific heads under which the disclosure is to be classified,
there is no such requirement with regard to the disclosure of expenditure in
foreign currency. It is true that the specific items in respect of which such
disclosure is to be made have been indicated, but this does not by itself
imply that the disclosure is to be classified with reference to those items. At
the same time, since such classification should not be difficult, it is advisable
to classify the foreign currency expenditure between royalty, know-how,
professional consultation fess, interest and other matters. In other words, the
classification as between these items is certainly desirable but is probably
not mandatory, having regard to the precise terms of the Schedule III. It may
also be noted that under old Schedule VI of Companies Act, 1956, for the
same requirement, the practice has been to classify between different heads
and disclose.

11.2.4 The various items specified above do not call for any particular
comments since they are expressed through well understood terms. The
residual item relating to “other matters” appears to be sufficiently exhaustive
so as to cover any items for which foreign currency expenditure is involved. It
is necessary to point out that disclosure is required with regard to “other
matters” rather than with regard to “other similar matters”. Consequently, it
would not be reasonable to infer that disclosure is limited to items of a nature
similar to royalty, know-how, professional consultation fees and interest. At
the same time, however, it would be unreasonable to suggest that disclosure
should be made once again with regard to the expenditure involved in foreign
currency for an item whose import value has already been disclosed in
response to the earlier requirement. Ordinarily, the requirement presently

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under discussion relates to expenditure on intangible items rather than on the
import of tangible goods. However, if any foreign currency expenditure on the
import of tangible goods has not been disclosed pursuant to the earlier
requirements, it would need to be disclosed under this requirement. For
example, foreign currency expenditure on the import of stores may not have
been disclosed on the basis that the earlier requirement necessitates
disclosure only with regard to the value of imports of “components and spare
parts”. In that case, the foreign currency expenditure involved in the import of
stores would need to be disclosed under the requirement presently under
discussion since this requirement covers “expenditure in foreign currency” on
account of royalty, know-how, professional consultation fees, interest and
other matters. Disclosure would also be involved under this requirement of
any foreign currency expenditure in the payment of taxes in an overseas
country on income earned in that country in a case where the payment of such
taxes involves actual remittance from India. Where, however, the payment of
taxes in the overseas country is made through deduction at source rather than
by actual remittance from India, the method of disclosure has been suggested
in a subsequent paragraph of this Note dealing with foreign exchange
earnings where it has been recommended that foreign exchange earnings
received subject to deduction of tax at source should be disclosed both gross
and net.

11.2.5 The disclosure of expenditure in foreign currency is to be made on
accrual basis since all the items in the Statement of Profit and Loss are
stated on an accrual basis.

11.2.6 A further question which needs to be resolved is whether the
disclosure is to be made of the gross amount of the expenditure, or of the
net amount after tax deduction at source, in a case where such deduction is
involved. So far as the company in concerned the gross expenditure is the
amount of expenditure incurred in foreign currency even though a part of it
may have been paid in Rupees to the Government to meet the statutory
obligation of deducting tax at source. Deduction of tax at source by itself is
not the finality of the matter and is merely a preliminary stage towards
settlement of tax liability of the non-resident. Ultimately, on assessment of
the non-resident, the full amount of tax deducted at source may have to be
refunded. In view of this, the preferable course seems to be to disclose the
gross expenditure that has been incurred by the company.

11.2.7 Disclosure is to be limited only to those cases where the company
itself incurs foreign currency expenditure. Where expenditure involves

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foreign currency but the original payment by the company itself is in Rupees,
no disclosure is necessary. For instance, if a company has borrowed a loan
from a Government agency and incurs expenditure in payment of interest on
that loan, the company may be aware that the interest paid by it to the
Government agency in Rupees will ultimately be remitted by the Government
agency to a foreign lender. However, since the company itself does not incur
any foreign currency expenditure, no disclosure is required in its accounts.

11.3 Total value of all imported raw materials, spare parts and
components consumed during the financial year and the total value of
all indigenous raw materials, spare parts and components similarly
consumed and the percentage of each to the total consumption;
[Clause (c) of Note 5(viii)]

11.3.1Apart from the disclosure relating to the C.I.F. value of imports,
separate disclosure is also required with reference to the value of imported
raw materials, spare parts and components consumed during the accounting
year. There is no guidance, for the purpose of this requirement, as to the
manner in which the imported materials are to be evaluated i.e., C.I.F. basis
or F.O.B. basis or any other basis. Even though the value of materials
imported by the company itself is required to be stated on a C.I.F. basis, it
does not follow that this basis is necessarily appropriate to the disclosure of
the value of imported materials consumed. In the latter case, it would be
more appropriate to make the disclosure on the basis of the actual cost to
the company of the imported materials which have been consumed, since it
is this cost which enters into the company’s accounts. Consequently, the
value of imported materials consumed should include not only their cost but
also incidental expenses directly related to the purchase of such materials.
There is another reason for this suggestion and that is based on the fact that
the value imported materials consumed is required to be compared with the
value of indigenous materials consumed. Moreover, in the company’s
accounts, the total figure shown for consumption of materials (inclusive of
indigenous and imported materials) would ordinarily be based on the value
inclusive of the cost of such materials and various incidental charges.
Therefore, in order to facilitate correlation with the total amount shown for
consumption of materials in the Statement of Profit and Loss account as well
as in order to facilitate comparison between the value of indigenous
consumption and imported consumption, it is desirable that the value of
imported materials consumed should be stated on a similar and consistent
basis by including the cost of such materials and various incidental charges.

11.3.2On the face of it, it would appear that this requirement duplicates the

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earlier requirement relating to the disclosure of the value of imports of raw
materials, components and spare parts. However, there is a difference. The
earlier requirement relates to the disclosure of the value of imports per se
irrespective of whether or not the materials imported have been consumed in
the company’s operations. The latter requirement, on the other hand relates
only to the value of the imported materials consumed in the company’s
operation.

11.3.3As in the case of earlier requirement, it is not relevant to consider
whether or not the imported materials which have been consumed have
necessitated expenditure in foreign currency. Even if no foreign currency
expenditure is involved, the value of consumption of imported materials is
still required to be disclosed.

11.3.4The disclosure is to be made in Indian currency by applying normal
methods for the translation of foreign currencies where the original
expenditure was incurred in a foreign currency.

11.3.5A question may arise whether to include the consumption of locally
purchased materials of foreign origin. Apart from the difficulties of
ascertaining which locally purchased materials are of imported origin, it is
logical to interpret this requirement as requiring disclosure only of materials
imported directly or indirectly by the company. This would include materials
imported directly by the company as well as indirect imports made to be
company’s knowledge or at its request through canalizing agents such as the
State Trading Corporation.

11.3.6 It is not entirely clear whether the requirement herein implies that the
value of imported raw materials, spare parts and components should be
separately disclosed for each of these three items, or whether a composite
disclosure for all the three items taken together is sufficient. The latter part of
this clause states that “the percentage of each to the total consumption” is
also to be disclosed. This may be taken to imply that the consumption is to
be shown separately for raw materials, spare parts and components
respectively. However, wherever the records for raw materials and
components are maintained together, the information required under this
clause can be presented collectively.

11.3.7While raw materials are undoubtedly consumed in the course of
operations, this term is hardly appropriate to spare parts and components.
Spare parts may be utilized for repairs and maintenance or for other similar
purposes, and components may be assembled into the finished product. In
either case, the spare parts and components can hardly be said to have been

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“consumed”. However, without going into the semantics relating to the word
“consumed”, the intention appears to be reasonably clear and disclosure
may, therefore, be made on the basis of indicating the value of imported
spare parts and components utilized in the company’s operations.

11.3.8In addition to disclosing the value of imported raw materials spare
parts and components consumed during the accounting year, disclosure is
also required with regard to the value of indigenous raw materials, spare
parts and components similarly consumed during that year. In both cases,
the value of the consumption should be determined on the same identical
basis, so that like is compared with like. Thereafter, it is also required that
the relative percentages of consumption value in respect of imported items
and indigenous items should be stated as a percentage of total consumption
for each of the categories of raw materials, spare parts and components
respectively.

11.3.9Care should be taken to ensure that the total consumption agrees with
the figures in the Statement of Profit and Loss. In the case of consumption of
raw materials, the separate figures for such consumption is generally
disclosed in one figure in the Statement of Profit and Loss, in which case, the
total consumption classified as between imported and indigenous should
agree with this figure. Sometimes, however, the total consumption of raw
materials is not shown as one figure in the Statement of Profit and Loss.
Instead, a note is given indicating the consumption of raw materials shown
under more than one head of account. In that case, care should be taken to
ensure that the total figure for consumption of raw materials analysed as
between imported and indigenous agrees with the total consumption shown
in the Statement of Profit and Loss inclusive of the figure of consumption
charged to other heads of account.

11.3.10 The term “spare parts” for the purpose of the foregoing requirements
would refer to spares for plant and machinery and other items of a similar
nature or intended for a similar purpose. This term would not ordinarily
include stores. The term “stores” refers to materials and supplies which
assist the manufacturing process but which do not directly enter into the
furnished product. It is a term of wider import than “spare parts” and
ordinarily, the term “stores” would include “spare parts”. Since the present
requirement is limited to spare parts, it would appear to be unnecessary to
disclose the separate figures relating to the consumption of stores – imported
and indigenous. It is somewhat curious that disclosure should be required

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with regard to spare parts and not with regard to stores, but this is
nevertheless, the logical interpretation of the words used in the relevant
clause. Where the segregation between stores and spare parts is not
possible owing to practical difficulties, the value of consumption of imported
and indigenous stores and spare parts may be shown against a caption
which clearly indicates that the value shown relates to both stores and spare
parts.

11.3.11 As regards spare parts, the substantive requirement of Schedule III
(Other expenses para 9.5.7) requires a composite figure to be disclosed in
respect of consumption of stores and spare parts, whereas the analysis here
is required only in respect of consumption of spare parts. Consequently, the
total figure analysed for consumption of spare parts may not agree directly
with the figure disclosed in the Statement of Profit and Loss for consumption
of stores and spare parts, unless in the Statement of Profit and Loss, these
two figures are separately itemized. In any case, however, a reconciliation
statement should be kept on the company’s working paper files to indicate
that the figures have been agreed.

11.3.12 As regards components, the clause does not indicate clearly
whether the classification of imported and indigenous components is to be
restricted to purchased components, or whether it would also include
components manufactured internally. Normally, imported components would
in any case be restricted to those which are purchased, with the possible
exception of a rare case in which components are fabricated outside India by
a branch or department of the same company and are then shipped to India
for incorporation into the finished product. Ignoring such an exception, it
would appear that if imported components are to be restricted to those which
are purchased, indigenous components would also have to be similarly
restricted, otherwise the comparison would be vitiated. Consequently, it is
suggested that this requirement may be interpreted in a manner whereby the
classification of components between imported and indigenous would be
limited to purchased components, ignoring any components which are
manufactured internally.

11.3.13 Under some systems accounting, the consumption is originally
charged in the accounts on the basis of standard or pre-determined rates.
Periodically, an adjustment is made in the total consumption account in order
to accord with the actual rates at which relevant materials may have been

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purchased. A problem may arise with reference to the classification of the
total net debit or credit for such price adjustment as between imported and
indigenous consumption. The most obvious method of solving this difficulty –
which should be acceptable in most cases – is to allot the total debit or credit
adjustment between imported and indigenous consumption, in the same ratio
as the figure for imported and indigenous consumption prior to such debit or
credit adjustment. A similar procedure may also be followed in the case of
any other special debit or credit adjustments which are entered in the
consumption accounts to reflect adjustments to the total consumption figure.
On a slightly different context, a similar problem arises where the same item
is partly purchased locally and partly imported and stocks are not physically
kept separately. In such cases, it appears to be permissible to assume that
consumption is on a pro-rata basis, e.g., in the ratio of opening stock plus
purchase.

11.4 Total amount remitted during the year in foreign currencies on
account of dividends with a specific mention of the total number of non-
resident shareholders, the total number of shares held by them on
which the dividends were due and the year to which the dividends
related [Clause (d) of Note 5(viii)];

11.4.1The requirement is to the disclosure with regard to the amount
remitted to non-resident shareholders on account of dividends. This
disclosure is to be made with reference to the amount remitted during the
accounting year in foreign currencies. Consequently, if the dividend has been
paid to a non-resident shareholder in Indian Rupees, disclosure would not
appear to be necessary. Also, if a non-resident shareholder has indicated
that all dividends payable to him are to be deposited in a Rupee account with
his bankers in India, and if such deposit is actually made on the basis of the
necessary sanctions from the Reserve Bank of India, no disclosure would be
required because such a deposit does not constitute any payment in foreign
currency. It is possible that the non-resident shareholder may ultimately
arrange for foreign currency remittances out of his Rupee bank account but
this would be no concern of the company which pays the dividends into his
Rupee bank account. However, by way of additional information, deposits
regarding such dividends paid in the bank account may be given, indicating
the fact.

11.4.2As in the case of other disclosure relating to imports, exports, foreign
exchange expenditure and earnings, etc. the amount to be disclosed in

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respect of foreign currency dividends is to be stated in Indian Rupees. If so
desired, additional information may be furnished with regard to the foreign
currency equivalent to the dividend, which has been remitted, but the basic
requirement is to disclose the rupee amount. Disclosure of the foreign
currency equivalent is not mandatory.

11.4.3Since disclosure is required with regard to the “amount remitted during
the year”, it would appear that the information is to be furnished in the year of
actual payment of dividend rather than in the year in which the dividend is
proposed or declared. In other words, the disclosure should be made on a
cash basis, contrary to the fact that the other disclosures are to be made on
accrual basis.

11.4.4 In addition to the disclosure relating to the amount of dividends
remitted in foreign currency, further disclosure is also required with regard to
the number of non-resident shareholders to whom the dividends were
remitted, the number of shares held by them, and the year to which the
dividends relate. These requirements should not be difficult to comply with
and no particular problem in likely to be encountered.

11.4.5 A question may arise as to whether or not any information is to be
furnished with regard to the number of non-resident shareholders and the
number of shares held by them, in particular year in which no dividend has
been remitted to the non-resident shareholders. The answer is in negative,
since, as already indicated earlier, the information relating to the number of
non-resident shareholders and the number of shares held by them is
intended to be linked to the basic information relating to the dividends
remitted to non-resident shareholders.

11.5 Earnings in Foreign exchange [Clause (e) of Note 5 (viii)]
11.5.1Foreign exchange earnings have to be classified under the following
heads:-
(i) export of goods calculated on F.O.B. basis;
(ii) royalty, know-how, professional and consultation fees;
(iii) interest and dividends; and
(iv) other income (indicating the nature thereof).

11.5.2In this case also, as in the case of disclosure relating to foreign
currency expenditure, the question arises as to whether foreign currency

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earnings have to be disclosed on a cash basis or on an accrual basis. The
considerations relating to this aspect of the matter are similar to those
discussed earlier in connection with the requirement relating to the disclosure
of foreign currency expenditure. Since the Statement of Profit and Loss is
prepared on an accrual basis, it may be suggested that foreign currency
earnings should also be disclosed on a similar basis.

11.5.3 Since, foreign exchange earnings are to be disclosed on an accrual
basis, the subsequent receipt of foreign exchange in a later year should be
ignored, as otherwise the same earnings would be disclosed twice.

11.5.4A further question which arises is whether the foreign exchange
earnings should be disclosed gross of tax or whether they should be
disclosed net of any tax deducted at source in the overseas country in which
earnings have arisen. One way of looking at the matter is that the actual
amount of earnings is the amount received after deduction of overseas tax at
source, where such deduction is involved. On the other hand, the tax which
is deducted at source in the overseas country is available by way of credit
against the tax payable in that country. But for this credit, actual or
constructive remittance may be involved from India to the overseas country
for the purpose of meeting the tax liability in that country. It is, therefore,
suggested that the more appropriate basis of disclosure would be gross of
tax with a mention of the net of tax earnings and tax deducted at source. A
further advantage of this method of disclosure is that the amount which is so
disclosed would agree with the financial accounts, since, in the books of
accounts kept in India, the gross amount of the foreign exchange earnings
would be credited to revenue, while the tax deducted at source would be
debited to an appropriate account relating to payment of taxes.

11.5.5 While the requirement relating to the disclosure of imports requires
the “value of imports” to be disclosed, the disclosure of exports requires the
“earnings from export of goods” to be disclosed. It would probably have been
more consistent if the relevant clause had required the value of exports to be
disclosed, rather than the earnings.

11.5.6Considerations that apply in determining whether a purchase is an
import by the company will also apply in determining whether sales is an
export by the company. Any sales made direct by the company through an
agent to any overseas buyer is an export by the company. However, goods
sold to any canalizing agent like the State Trading Corporation for export is
not the company’s export.

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12 Multiple Activity Companies

Where a company has multiple activities e.g. both manufacturing and trading
i.e. it falls under more than one category, it should comply with the various
disclosure requirements relating to each of its classified activities. For
instance, in respect of its manufacturing activities, such a company should
comply with the requirements relating to a manufacturing company, whereas
in respect of its trading or service activities, it should comply with the
requirements relating to those categories of companies. However, in case of
complexities in segregating the required information it would be sufficient
compliance if the information is disclosed with respect to main activities with
a suitable disclosure explaining the reasons thereof.

13 Consolidated Financial Statements

The Companies Act 2013 has mandated that the companies which have one
or more subsidiaries / associates (which as per the Act includes joint
ventures) are required to prepare Consolidated Financial Statements, except
under certain circumstances exempted under the Act and Rules.

The companies are expected to prepare the standalone financial statements
and in addition prepare the consolidated financial statements also.

Schedule III provides for general instructions in regard to the preparation of
consolidated financial statements. This is a new addition brought in under
Companies Act 2013.

13.1. General requirement

Where the company is required to prepare consolidated financial statements,
the company shall mutatis mutandis follow the requirements of Schedule III
for the standalone 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.

This would also indicate the need to obtain such information for all the
subsidiaries / associates of the consolidated financial statements, including
where such subsidiaries / associates are not audited under the Companies
Act 2013.

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
to a consolidated financial statement. MCA has also clarified vide General
Circular No. 39 / 2014 dated 14th October 2014 that Schedule III to the Act
[Refer Annexure E (Pg 189)] read with the applicable Accounting Standards

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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 Schedule III shall apply to a CFS, subject
to the following exemptions / modifications based on the relevance to the
CFS:

Schedule III Requirement Applicability to CFS (if left blank,
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.

Capital reserve or goodwill arising on Needs to be shown as a separate
consolidation line item on the face of the Balance
Sheet

Note: IFRS / Ind AS does not require
this to be stated separately.
However, as per AS, differing
treatment is given to goodwill arising
on amalgamation and goodwill
arising on consolidation and even
SEBI format requires this to be
separately disclosed.

(a) Period and amount of continuing On all these items, disclosure can be
default as on the Balance Sheet limited to those which are material to
date in repayment of loans and the CFS; materiality could be
interest, shall be specified considered at 10% of the respective
separately in each case. balance sheet item

(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

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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

Note: This item is required to be
disclosed even if it is exempted
as per AS- 21 by keeping it here,
as it is only reinforcing the
regulatory requirement for
reporting – what is required by
AS 21 cannot override regulatory
requirements

Application money received for Separate notes should be given for
allotment of securities and due for such monies due outside the group
refund and interest accrued thereon. in respect of entities which are
Share application money includes consolidated.
advances towards allotment of share
capital. The terms and conditions
including the number of shares

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proposed to be issued, the amount of
premium, if any, and the period
before which shares shall be allotted
shall be disclosed. It shall also be
disclosed whether the company has
sufficient authorized capital to cover
the share capital amount resulting
from allotment of shares out of such
share application money. Further,
the period for which the share
application money has been pending
beyond the period for allotment as
mentioned in the document inviting
application for shares along with the
reason for such share application
money being pending shall be
disclosed. Share application money
not exceeding the issued capital and
to the extent not refundable shall be
shown under the head Equity and
share application money to the
extent refundable i.e., the amount in
excess of subscription or in case the
requirements of minimum
subscription are not met, shall be
separately shown under ‘Other
current liabilities’

Requirement to disclose excise duty To be disclosed where such
separately information is available for the
entities consolidated.

Note: Though AS 9 states excise to
be shown separately, where
subsidiaries are not disclosing it, it
would not be practical and also no
benefit is derived by disclosure of
this.

(a) Payments to the auditor as (a) Not relevant at CFS level and hence,

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auditor,(b) for taxation matters, may be dispensed with
(c) for company law matters, (d)
for management services, (e) for
other services, (f) for
reimbursement of expenses

(b) In case of Companies covered
under section 135, amount of
expenditure incurred on
corporate social responsibility
activities

(c) Raw materials under broad
heads

(d) goods purchased under broad
heads

(e) In the case of trading
companies, purchases in respect
of goods traded in by the
company under broad heads

(f) In the case of companies
rendering or supplying services,
gross income derived form
services rendered or supplied
under broad heads

(g) In the case of a company, which
falls under more than one of the
categories mentioned in (a), (b)
and (c) above, it shall be
sufficient compliance with the
requirements herein if
purchases, sales and
consumption of raw material and
the gross income from services
rendered is shown under broad
heads

(h) In the case of other companies, Not relevant at CFS level and hence,
gross income derived under may be dispensed with
broad heads

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(i) In the case of all concerns
having works in progress, works-
in-progress under broad heads

(j) Value of imports calculated on
C.I.F basis by the company
during the financial year in
respect of

(i) Raw materials

(ii) Components and spare
parts

(iii) Capital goods

(k) Expenditure in foreign currency
during the financial year on
account of royalty, know-how,
professional and consultation
fees, interest, and other matters

(l) Total value if all imported raw
materials, spare parts and
components consumed during
the financial year and the total
value of all indigenous raw
materials, spare parts and
components similarly consumed
and the percentage of each to
the total consumption

(m) The amount remitted during the Not relevant at CFS level and hence,
year in foreign currencies on may be dispensed with
account of dividends with a
specific mention of the total
number of non-resident
shareholders, the total number
of shares held by them on which
the dividends were due and the
year to which the dividends
related

(n) Earnings in foreign exchange
classified under the following

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heads, namely:

(i) Export of goods calculated
on F.O.B. basis

(ii) Royalty, know-how,

professional and

consultation fees

(iii) Interest and dividend

(iv) Other income, indicating the
nature thereof

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 of Company should disclose the
Promoters promoter shareholding at the CFS
level.
Trade Payables ageing schedule
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.

Trade Receivables ageing schedule Trade receivables ageing schedule
Revaluation of Property, Plant and should be prepared at the CFS level
after applying the principles of
consolidation.

In case revaluation of property is done

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Equipment 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 the

disclosures 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
may decide to 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

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providing the name of each subsidiary
/ group entity that is 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 Companies Company should disclose the 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 required
income’ 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

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income is material to the group.

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 given
ageing schedule / completion schedule at CFS level if it is material to 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 CFS
ageing schedule / completion schedule level if it is material to the group 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 Scheme(s) This disclosure shall be provided at
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 share This disclosure shall be provided at
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

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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.

Not relevant at CFS level and hence, may be dispensed with

Schedule III Requirement Description

Title deeds of Immovable Property not This requirement is not relevant at

held in the name of the Company the CFS level and hence company

need not disclose in the CFS.

Registration of charges or satisfaction This requirement is not relevant at

with Registrar of Companies the CFS level and hence company

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.

13.2. Accounting Standards
The Consolidated Financial Statements shall also disclose the information as
required under the various accounting standards applicable.
13.3. Minority Interest
Profit or loss attributable to “minority interest” shall be shown as an allocation
for the period in the statement of profit and loss.
In the Balance Sheet, “minority interest” shall be presented within equity
separately from equity of the owners of the parent.
13.4. Additional information on the entities included in the
consolidated financial statements
Schedule III requires specific disclosure of additional information on the
entities which are included in the consolidated financial statement in the

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following format.

Name of the Net Assets i.e., total assets Share in profit or loss
entity in minus total liabilities

As % of Amount As % of Amount
Consolidated Consolidated
profit or loss
net assets

1 2 3 4 5

Parent
Subsidiaries
Indian

1

2
3


…..
Foreign

1
2

3

…..

Minority
interest in all
subsidiaries
Associates
(Investment
as per equity
method)

Indian

1
2

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3


Foreign
1
2
3

…..
Joint
Ventures (as
per
proportionate
consolidation/
Investment
as per equity
method)
1
2
3

…..
Foreign
1
2
3

…..
TOTAL

In this context, it needs to be considered that in order to ensure that the total
can be matched with the reported profits and net assets in the consolidated

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financial statements, the inter-company eliminations need to be adjusted to
the respective entities which are part of the consolidated financial
statements. This would require management to take judgements as to which
entity the profit element and inter-company balances are to be adjusted from
in providing for an entity wise break up of net profits and net assets.
13.5. Entities not consolidated
Entities which are not covered in the consolidated financial statement,
whether subsidiaries, associates or joint ventures are to be listed in the
consolidated financial statement along with the reasons for not consolidating
such entities. This requirement is also in line with the requirements of the
accounting standard on consolidated financial statements.
13.6 Comparative figures
Schedule III states that except for the first financial statements prepared by a
company after incorporation, presentation of comparative amounts is
mandatory. Schedule III however, clarifies that in case of any conflict
between Accounting Standards and Schedule III, Accounting Standards will
prevail over the requirements of Schedule III. The transitional provisions of
AS 21 exempt presentation of comparative numbers in the first set of
consolidated financial statements prepared, even by an existing group.
Hence, an existing group preparing consolidated financial statements for the
first time under AS 21, need not present comparative information.
13.7 Definition of terms relevant for consolidation
The terms “Control”, “Subsidiary” and “Associate” are defined very differently
in the Companies Act as compared to definition in Accounting Standards.
Rule 6 of the Companies (Accounts) Rules however states that consolidated
financial statements shall be prepared in accordance with the provisions of
Schedule III of the Act and the applicable accounting standards. Accordingly,
for removal of all doubts it is hereby clarified that for the purposes of
preparing consolidated financial statements, the definitions of the above
terms as given in Accounting Standards should be followed.

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Annexure A

SCHEDULE III
(See section 129)

GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET
AND STATEMENT OF PROFIT AND LOSS OF A COMPANY

Division I

Financial Statements for a company whose Financial Statements are
required to comply with the Companies (Accounting Standards) Rules,
2006

GENERAL INSTRUCTIONS

1. Where compliance with the requirements of the Act including Accounting
Standards as applicable to the companies 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 of this
Schedule shall stand modified accordingly.

2. The disclosure requirements specified in this Schedule are in addition to and
not in substitution of the disclosure requirements specified in the Accounting
Standards prescribed under the Companies Act, 2013. Additional disclosures
specified in the Accounting Standards shall be made in the notes to accounts or
by way of additional statement unless required to be disclosed on the face of the
Financial Statements. Similarly, all other disclosures as required by the
Companies Act shall be made in the notes to accounts in addition to the
requirements set out in this Schedule.

3. (i) Notes to accounts shall contain information in addition to that presented in
the Financial Statements and shall provide where required (a) narrative
descriptions or disaggregations 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 and Statement of Profit and Loss
shall be cross-referenced to any related information in the notes to accounts. In
preparing the Financial Statements including the notes to accounts, a balance

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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.

4. (i) Depending upon the 11[Total Income] of the company, the figures appearing
in the Financial Statements 10[shall] be rounded off as given below:—

11[Total Income] Rounding off

(a) less than one hundred To the nearest hundreds, thousands, lakhs or

crore rupees millions, or decimals thereof.

(b) one hundred crore To the nearest lakhs, millions or crores, or decimals

rupees or more thereof.

(ii) Once a unit of measurement is used, it 6[should] be used uniformly in the
Financial Statements.

5. Except in the case of the first Financial Statements laid before the Company
(after its incorporation) the corresponding amounts (comparatives) for the
immediately preceding reporting period for all items shown in the Financial
Statements including notes shall also be given.

6. For the purpose of this Schedule, the terms used herein shall be as per the
applicable Accounting Standards.

Note:— This part of Schedule sets out the minimum requirements for disclosure
on the face of the Balance Sheet, and the Statement of Profit and Loss
(hereinafter referred to as “Financial Statements” for the purpose of this
Schedule) and Notes. 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 company’s
financial position or performance or to cater to industry/sector-specific disclosure
requirements or when required for compliance with the amendments to the
Companies Act or under the Accounting Standards.

PART I – Form of BALANCE SHEET

Name of the Company…………….

Balance Sheet as at ………………

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(Rupees in…………)

Particulars Note Figures as at Figures as at

No the end of the end of

(Current (Previous

reporting reporting

period) (in Rs.) period) (in Rs.)

__________ __________

(DD/MM/YYYY) (DD/MM/YYYY)

1 2 3 4

I. EQUITY AND

LIABILITIES

Shareholders’ funds

(a) Share capital

(b) Reserves and
surplus

(c)Money received

against share

warrants

(2) Share application

money pending

allotment

(3) Non-current liabilities

(a) Long-term

borrowings

(b) Deferred tax
liabilities (Net)

(c) Other Long term
liabilities

(d) Long-term

provisions

(4) Current liabilities

(a) Short-term

borrowings

[(b) Trade payables:-

(A) total outstanding
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dues of micro
enterprises and small
enterprises; and

(B) total outstanding
dues of creditors other
than micro enterprises
and small enterprises.]

(c) Other current
liabilities

(d) Short-term

provisions

TOTAL

II. ASSETS

(1) Non Current Assets

(a) Property, Plant and

Equipment and

Intangible assets

(i) Property, Plant and
Equipment

(ii) Intangible assets

(iii) Capital work-in-
progress

(iv) Intangible assets
under development

(b) Non-current

investments

(c) Deferred tax assets
(net)

(d) Long-term loans and
advances

(e) Other non-current
assets

(2) Current assets

(a) Current investments

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(b) Inventories
(c) Trade receivables
(d) Cash and cash
equivalents
(e) Short-term loans
and advances
(f) Other current assets
TOTAL

See accompanying notes to the financial statements
Notes

GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET

1. 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 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.

All other assets shall be classified as non-current.

2. An operating cycle is the time between the acquisition of assets for
processing and their realization in Cash or cash equivalents. Where
the normal operating cycle cannot be identified, it is assumed to have
a duration of 12 months.

3. A liability shall be classified as current when it satisfies any of the
following criteria:
(a) it is expected to be settled in the company’s normal operating
cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is due to be settled within twelve months after the reporting
date; or

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(d) the company does not have an unconditional right to defer
settlement of the liability for at least twelve months after the
reporting date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.

All other liabilities shall be classified as non-current.

4. A receivable shall be classified as a ‘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.

5. A payable shall be classified as a ‘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.

6. A company shall disclose the following in the Notes to Accounts:

A. Share Capital

For each class of share capital (different classes of preference shares to be
treated separately):

(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 reporting period;

(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 5
percent shares specifying the number of shares held;

(h) shares reserved for issue under options and contracts/commitments
for the sale of shares/disinvestment, including the terms and amounts;

(i) For the period of five years immediately preceding the date as at
which the Balance Sheet is prepared:

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(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. (j) 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.

(j) 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;

(k) Calls unpaid (showing aggregate value of calls unpaid by directors and
officers)

(l) Forfeited shares (amount originally paid up)

(m) A company shall disclose Shareholding of Promoters* as below:

Shares held by % Change

promoters at the during the

end of the year year***

S. No Promoter name No. of Shares** %of total

shares**

Total

*Promoter here means promoter as defined in the Companies Act, 2013.
** Details shall be given separately for each class of shares
*** percentage change shall be computed with respect to the number at the

beginning of the year or if issued during the year for the first time then
with respect to the date of issue.]
B. Reserves and Surplus
(i) Reserves and Surplus shall be classified as:
(a) Capital Reserves;
(b) Capital Redemption Reserve;

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(c) Securities Premium1;

(d) Debenture Redemption Reserve;
(e) Revaluation Reserve;
(f) Share Options Outstanding Account;
(g) Other Reserves – (specify the nature and purpose of each

reserve and the amount in respect thereof);
(h) Surplus i.e. balance in Statement of Profit and Loss disclosing

allocations and appropriations such as dividend, bonus shares
and transfer to/from reserves etc.
(Additions and deductions since last Balance Sheet to be shown under
each of the specified heads)
(ii) A reserve specifically represented by earmarked investments shall be
termed as a ‘fund’.
(iii) Debit balance of statement of profit and loss shall be shown as a
negative figure under the head ‘Surplus’. Similarly, the balance of
‘Reserves and Surplus’, after adjusting negative balance of surplus, if
any, shall be shown under the head ‘Reserves and Surplus’ even if the
resulting figure is in the negative.
C. Long-Term Borrowings
(i) Long-term borrowings shall be classified as:
(a) Bonds/debentures.
(b) Term loans
 From banks
 From other parties
(c) Deferred payment liabilities.
(d) Deposits.
(e) Loans and advances from related parties.
(f) Long term maturities of finance lease obligations
(g) Other loans and advances (specify nature).
(ii) Borrowings shall further be sub-classified as secured and unsecured.
Nature of security shall be specified separately in each case.
(iii) Where loans have been guaranteed by directors or others, the

1 Word “Reserve” omitted pursuant to MCA Notification G.S.R. 1022 (E), dated 11th October, 2018

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aggregate amount of such loans under each head shall be disclosed.

(iv) Bonds/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 farthest
redemption or conversion date, as the case may be. Where
bonds/debentures are redeemable by installments, the date of maturity
for this purpose must be reckoned as the date on which the first
installment becomes due.

(v) Particulars of any redeemed bonds/ debentures which the company
has power to reissue shall be disclosed.

(vi) Terms of repayment of term loans and other loans shall be stated.
(vii) Period and amount of continuing default as on the Balance Sheet date

in repayment of loans and interest, shall be specified separately in
each case.
D. Other Long term Liabilities
Other Long term Liabilities shall be classified as:
(a) Trade payables
(b) Others
E. Long-term provisions
The amounts shall be classified as:
(a) Provision for employee benefits.
(b) Others (specify nature).
F. Short-term borrowings
(i) Short-term borrowings shall be classified as:
(a) Loans repayable on demand

 From banks
 From other parties
(b) Loans and advances from related parties.
(c) Deposits.
(d) Other loans and advances (specify nature).
(ii) Borrowings shall further be sub-classified as secured and unsecured.
Nature of security shall be specified separately in each case.

(iii) Where loans have been guaranteed by directors or others, the

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aggregate amount of such loans under each head shall be disclosed.

(iv) Period and amount of default as on the Balance Sheet date in
repayment of loans and interest, shall be specified separately in each
case.

14[(v) current maturities of Long term borrowings shall be disclosed
separately.]

FA. Trade Payables2

The following details relating to Micro, Small and Medium Enterprises shall
be disclosed in the notes:-

(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 detay 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
accountang 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.]

14[FB. Trade payables due for payment

The following ageing schedule shall be given for Trade payables due for

2 Inserted pursuant to MCA Notification G.S.R. 679(E) dated 4th September, 2015

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payment:-

Trade Payables ageing schedule

(Amount in Rs.)

Particulars Outstanding for following periods from due date of
payment#

Less than 1-2 years 2-3 years More than 3 Total
1 year 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;]
G. Other current liabilities
The amounts shall be classified as:
(a) 15[Omitted];
(b) Current maturities of finance lease obligations;
(c) Interest accrued but not due on borrowings;
(d) Interest accrued and due on borrowings;
(e) Income received in advance;
(f) Unpaid dividends
(g) Application money received for allotment of securities and due for

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refund and interest accrued thereon. Share application money includes
advances towards allotment of share capital. The terms and conditions
including the number of shares proposed to be issued, the amount of
premium, if any, and the period before which shares shall be allotted
shall be disclosed. It shall also be disclosed whether the company has
sufficient authorized capital to cover the share capital amount resulting
from allotment of shares out of such share application money. Further,
the period for which the share application money has been pending
beyond the period for allotment as mentioned in the document inviting
application for shares along with the reason for such share application
money being pending shall be disclosed. Share application money not
exceeding the issued capital and to the extent not refundable shall be
shown under the head Equity and share application money to the
extent refundable i.e., the amount in excess of subscription or in case
the requirements of minimum subscription are not met, shall be
separately shown under ‘Other current liabilities’

(h) Unpaid matured deposits and interest accrued thereon

(i) Unpaid matured debentures and interest accrued thereon

(j) Other payables (specify nature);

H. Short-term provisions

The amounts shall be classified as:

(a) Provision for employee benefits.

(b) Others (specify nature).

I. 16[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) Others (specify nature).

(ii) Assets under lease shall be separately specified under each class of
asset.

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17[(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/reversals shall be disclosed separately.]

(iv) Where sums have been written off on a reduction of capital or
revaluation of assets or where sums have been added on revaluation
of assets, every Balance Sheet subsequent to date of such write-off,
or addition shall show the reduced or increased figures as applicable
and shall by way of a note also show the amount of the reduction or
increase as applicable together with the date thereof for the first five
years subsequent to the date of such reduction or increase.

J. Intangible assets

(i) Classification shall be given as:

(a) Goodwill.

(b) Brands /trademarks.

(c) Computer software.

(d) Mastheads and publishing titles.

(e) Mining rights.

(f) Copyrights, and patents and other intellectual property rights,
services and operating rights.

(g) Recipes, formulae, models, designs and prototypes.

(h) Licenses and franchise.

(i) Others (specify nature).

18[(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 depreciation and impairment
losses or reversals shall be disclosed separately.]

(iii) Where sums have been written off on a reduction of capital or
revaluation of assets or where sums have been added on revaluation
of assets, every Balance Sheet subsequent to date of such write-off,
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or addition shall show the reduced or increased figures as applicable
and shall by way of a note also show the amount of the reduction or
increase as applicable together with the date thereof for the first five
years subsequent to the date of such reduction or increase.

K. Non-current investments

(i) Non-current investments shall be classified as trade investments and
other investments and further classified as:

(a) Investment property;

(b) Investments in Equity Instruments;

(c) Investments in preference shares

(d) Investments in Government or trust securities;

(e) Investments in debentures or bonds;
(f) Investments in Mutual Funds;

(g) Investments in partnership firms

(h) Other non-current investments (specify nature)

Under each classification, details shall be given of names of the
bodies corporate (indicating separately whether such bodies are (i)
subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled
special purpose entities) in whom investments have been made and
the nature and extent of the investment so made in each such body
corporate (showing separately investments which are partly-paid). In
regard to investments in the capital of partnership firms, the names of
the firms (with the names of all their partners, total capital and the
shares of each partner) shall be given.

(ii) Investments carried at other than at cost should be separately stated
specifying the basis for valuation thereof.

(iii) The following shall also be disclosed:
(a) Aggregate amount of quoted investments and market value
thereof;
(b) Aggregate amount of unquoted investments;

(c) Aggregate provision for diminution in value of investments

L. Long-term loans and advances

(i) Long-term loans and advances shall be classified as:

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(a) Capital Advances;
(b) 19[Omitted];
(c) Loans and advances to related parties (giving details thereof);
(d) Other loans and advances (specify nature).
(ii) The above shall also be separately sub-classified as:
(a) Secured, considered good;
(b) Unsecured, considered good;
(c) Doubtful.
(iii) Allowance for bad and doubtful loans and advances shall be disclosed
under the relevant heads separately.
(iv) 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.
M. Other non-current assets
Other non-current assets shall be classified as:
(i) Long Term Trade Receivables (including trade receivables on deferred
credit terms);
[(ia)14 Security Deposits]
(ii) Others (specify nature)
(iii) Long term Trade Receivables, shall be sub-classified as:
(a) Secured, considered good;
(b) Unsecured considered good;
(c) Doubtful
14[(iv) For trade receivables outstanding, following ageing schedule shall be
given:
Trade Receivables ageing schedule

(Amount
in Rs.)
Particulars Outstanding for following periods from due date of

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payment#

Less 6 1-2 2-3 More Total

than 6 months years years than 3

months -1 year years

(i)
Undisputed
Trade
receivables

considered
good

(ii)
Undisputed
Trade
Receivables

considered
doubtful

(iii) Disputed
Trade
Receivables
considered
good

(iv) Disputed
Trade
Receivables
considered
doubtful

# similar information shall be given where no due date of payment is
specified, in that case disclosure shall be from the date of the
transaction.

Unbilled dues shall be disclosed separately.]

(A) (a) Secured, considered good;

(B) Unsecured, considered good;

(C) Doubtful.

(b) Allowance for bad and doubtful debts shall be disclosed under the
relevant heads separately.

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(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.

N. Current Investments

(i) Current investments shall be classified as:

(a) Investments in Equity Instruments;

(b) Investment in Preference Shares

(c) Investments in government or trust securities;

(d) Investments in debentures or bonds;
(e) Investments in Mutual Funds;

(f) Investments in partnership firms

(g) Other investments (specify nature).

Under each classification, details shall be given of names of the
bodies corporate (indicating separately whether such bodies are (i)
subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled
special purpose entities) in whom investments have been made and
the nature and extent of the investment so made in each such body
corporate (showing separately investments which are partly-paid). In
regard to investments in the capital of partnership firms, the names of
the firms (with the names of all their partners, total capital and the
shares of each partner) shall be given.
(ii) The following shall also be disclosed:

(a) The basis of valuation of individual investments

(b) Aggregate amount of quoted investments and market value
thereof;

(c) Aggregate amount of unquoted investments;

(d) Aggregate provision made for diminution in value of
investments.

O. Inventories

(i) Inventories shall be classified as:

(a) Raw materials;

(b) Work-in-progress;

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(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.

P. Trade Receivables

20[(i) Trade Receivables ageing 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

considered
doubtful

(iii) Disputed
Trade
Receivables
considered

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good

(iv) Disputed
Trade
Receivables
considered
doubtful

# similar information shall be given where no due date of payment is
specified, in that case disclosure shall be from the date of the
transaction.

Unbilled dues shall be disclosed separately.]

(i) omitted

(ii) Trade receivables shall be sub-classified as:

(a) Secured, considered good;

(b) Unsecured considered good;

(c) Doubtful.

(iii) Allowance for bad and doubtful debts shall be disclosed under the
relevant heads separately.

(iv) 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.

Q. Cash and cash equivalents
(i) Cash and cash equivalents shall be classified as:

(a) Balances with banks;
(b) Cheques, drafts on hand;
(c) Cash on hand;
(d) Others (specify nature).
(ii) Earmarked balances with banks (for example, for unpaid dividend)
shall be separately stated.
(iii) Balances with banks to the extent held as margin money or security
against the borrowings, guarantees, other commitments shall be
disclosed separately.
(iv) Repatriation restrictions, if any, in respect of cash and bank balances
shall be separately stated.

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(v) Bank deposits with more than 12 months maturity shall be disclosed
separately.

R. Short-term loans and advances
(i) Short-term loans and advances shall be classified as:

(a) Loans and advances to related parties (giving details thereof);
(b) Others (specify nature).
(ii) The above shall also be sub-classified as:
(a) Secured, considered good;
(b) Unsecured, considered good;
(c) Doubtful.
(iii) Allowance for bad and doubtful loans and advances shall be disclosed
under the relevant heads separately.
(iv) Loans and advances due by directors or other officers of the company
or any of them either severally or jointly with any other person or
amounts due by firms or private companies respectively in which any
director is a partner or a director or a member shall be separately
stated.
S. Other current assets (specify nature).
This is an all-inclusive heading, which incorporates current assets that do not
fit into any other asset categories.
T. 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;
(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).
U. The amount of dividends proposed to be distributed to equity and

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preference shareholders for the period and the related amount per
share shall be disclosed separately. Arrears of fixed cumulative
dividends on preference shares shall also be disclosed separately.

V. 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.

14[ VA. 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.]

W. If, in the opinion of the Board, any of the assets other than Property,
Plant and Equipment3 and non-current investments do not have a
value on realization in the ordinary course of business at least equal to
the amount at which they are stated, the fact that the Board is of that
opinion, shall be stated

X. Omitted

14[ Y. Additional Regulatory Information

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

The company shall provide the details of all the immovable property (other
than properties where the Company is the lessee and the lease agreements
are duly executed in favour of the lessee) whose title deeds are not held in
the name of the company in format given below and where such immovable
property is jointly held with others, details are required to be given to the
extent of the company‘s share.

Relevant Descripti Gross Title Whether title Propert Reason

line item on of carryin deed deed holder is y 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

3 Amended pursuant to MCA Notification G.S.R 1022(E), dated 11th October, 2018

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nam tor or employee company
e of of **

promoter/direct
or

PPE Land **also

- Building - - - - indicate
if in

dispute

Investme
nt
property

- Land

Building

PPE
retired
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.

(ii) Where the Company has revalued its Property, Plant and Equipment, the
company shall disclose as to whether the revaluation is based on the
valuation by a registered valuer as defined under rule 2 of the Companies
(Registered Valuers and Valuation) Rules, 2017.

(iii) Following disclosures shall be made where Loans or Advances in the
nature of loans are granted to promoters, Directors, KMPs and the related
parties (as defined under Companies Act, 2013,) either severally or jointly
with any other person, that are:

(a) repayable on demand or

(b) without specifying any terms or period of repayment

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Type of Borrower Amount of loan or Percentage to the total

Promoters advance in the nature of Loans and Advances in
Directors
KMPs loan outstanding the nature of loans
Related Parties

(iv) Capital-Work-in Progress (CWIP)

(a) For Capital-work-in progress, following ageing schedule shall be given:

CWIP aging schedule

(Amount
in Rs.)

Amount in CWIP for a period of Total*

CWIP Less 1-2 2-3 More
than 1 years years than 3
year 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**:

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(Amount in Rs.)

To be completed in

CWIP Less 1-2 2-3 More than 3 years
than 1 years years
year

Projects 1

Project 2

**Details of projects where activity has been suspended shall be given
separately.

(v) Intangible assets under development:

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

Intangible assets under development aging schedule

(Amount
in Rs.)

Amount in CWIP for a period of Total*

Intangible Less 1-2 2-3 More
assets under than 1 years years than 3
development year years

Projects in
progress

Projects
temporarily
suspended

* Total shall tally with the amount of Intangible assets under development in
the balance sheet.

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(b) For Intangible assets under development, whose completion is overdue or
has exceeded its cost compared to its original plan, following Intangible
assets under development completion schedule shall be given**:

(Amount in Rs.)

To be completed in

Intangible Less 1-2 2-3 More than 3 years
years
assets under than 1 years

development year

Projects 1

Project 2

**Details of projects where activity has been suspended shall be given
separately.

(vi) Details of Benami Property held

Where any proceedings have been initiated or pending against the company
for holding any benami property under the Benami Transactions (Prohibition)
Act, 1988 (45 of 1988) and the rules made thereunder, the company shall
disclose the following:

(a) Details of such property, including year of acquisition,

(b) Amount thereof,

(c) Details of Beneficiaries,

(d) If property is in the books, then reference to the item in the Balance
Sheet,

(e) If property is not in the books, then the fact shall be stated with reasons,

(f) Where there are proceedings against the company under this law as an
abetter of the transaction or as the transferor then the details shall be
provided,

(g) Nature of proceedings, status of same and company‘s view on same.

(vii) Where the Company has borrowings from banks or financial institutions
on the basis of security of current assets, it shall disclose the following:-

(a) whether quarterly returns or statements of current assets filed by the
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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.

(viii) Wilful Defaulter*

Where a company is a declared wilful defaulter by any bank or financial
institution or other lender, following details shall be given:

(a) Date of declaration as wilful defaulter,

(b) Details of defaults (amount and nature of defaults),

*wilful defaulter” here means a person or an issuer who or which is
categorized as a wilful defaulter by any bank or financial institution (as
defined under the Act) or consortium thereof, in accordance with the
guidelines on wilful defaulters issued by the Reserve Bank of India.

(ix) Relationship with Struck off Companies

Where the company has any transactions with companies struck off under
section 248 of the Companies Act, 2013 or section 560 of Companies Act,
1956, the Company shall disclose the following details:-

Name of struck Nature of Balance Relationship with
off Company outstanding the Struck off
transactions with company, if any,
to be disclosed
struckoff

Company

Investments in
securities

Receivables

Payables

Shares held by
stuck off company

Other outstanding
balances (to be
specified)

(x) Registration of charges or satisfaction with Registrar of Companies

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Where any charges or satisfaction yet to be registered with Registrar of
Companies beyond the statutory period, details and reasons thereof shall be
disclosed.
(xi) Compliance with number of layers of companies
Where the company has not complied with the number of layers prescribed
under clause (87) of section 2 of the Act read with Companies (Restriction on
number of Layers) Rules, 2017, the name and CIN of the companies beyond
the specified layers and the relationship/extent of holding of the company in
such downstream companies shall be disclosed.
(xii) Following Ratios to be disclosed:-

(a) Current Ratio,

(c) Debt-Equity Ratio,

(c) Debt Service Coverage Ratio,

(d) Return on Equity Ratio,

(e) Inventory turnover ratio,

(f) Trade Receivables turnover ratio,

(g) Trade payables turnover ratio,

(h) Net capital turnover ratio,

(i) Net profit ratio,

(j) Return on Capital employed,

(k) Return on investment.

The company shall explain the items included in numerator and denominator
for computing the above ratios. Further explanation shall be provided for any
change in the ratio by more than 25% as compared to the preceding year.

(xiii) Compliance with approved Scheme(s) of Arrangements

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Where any Scheme of Arrangements has been approved by the Competent
Authority in terms of sections 230 to 237 of the Companies Act, 2013, the
Company shall disclose that the effect of such Scheme of Arrangements
have been accounted for in the books of account of the Company in
accordance with the Scheme‘ and in accordance with accounting standards‘
and deviation in this regard shall be explained.

(xiv) Utilisation of Borrowed funds and share premium:

(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 alongwith
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

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(i) directly or indirectly lend or invest in other persons or entities identified in
any manner whatsoever by or on behalf of the Funding Party (Ultimate
Beneficiaries) or

(ii) provide any guarantee, security or the like on behalf of the Ultimate
Beneficiaries, the company shall disclose the following:-

(I) date and amount of fund received from Funding parties with complete
details of each Funding party.

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

PART II – Form of STATEMENT OF PROFIT AND LOSS
Name of the Company…………………….

Profit and loss statement for the year ended ………………………
(Rupees in…………)

Particulars Note Figures for the Figures for the

current previous

reporting reporting period

period (in) (in)

From ________ From__________

(DD/MM/YYYY) (DD/MM/YYYY)

To __________ To____________

(DD/MM/YYYY) (DD/MM/YYYY)

1 2 3 4

I. Revenue from xxx xxx

operations

II. Other income xxx xxx

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III. Total Income (I + II) xxx xxx

IV. Expenses

Cost of materials
consumed

Purchases of
Stock-in-Trade

Changes in xxx xxx

inventories of

finished goods

Work-in-progress xxx xxx
and Stock-in-
Trade

Employee xxx xxx
benefits expense

Depreciation and xxx xxx
amortization
expense

Other expenses xxx xxx

Total expenses xxx xxx

V Profit before xxx xxx

exceptional and

extraordinary items

and tax (III-IV)

VI Exceptional items xxx xxx

VII Profit before xxx xxx

extraordinary items

and tax (V - VI)

VIII Extraordinary Items xxx xxx

IX Profit before tax (VII- xxx xxx
VIII)

X Tax expense:

(1) Current tax xxx xxx

(2) Deferred tax xxx xxx

XI Profit (Loss) for the xxx xxx
period from continuing
operations (VII-VIII)

XII Profit/(loss) from xxx xxx

discontinuing

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operations

XIII Tax expense of xxx xxx
discontinuing
operations

XIV Profit/(loss) from xxx xxx

Discontinuing

operations (after tax)

(XII-XIII)

XV Profit/ (Loss) (XI + xxx xxx
XIV)

XVI Earnings per equity xxx xxx
share

(1) Basic xxx xxx

(2) Diluted xxx xxx

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
referred to in subclause (ii) of clause (40) of section 2 in like manner as they
apply to a statement of profit and loss.
2. (A) In respect of a company other than a finance company revenue from
operations shall disclose separately in the notes revenue from—
(a) Sale of products;
(b) Sale of services;
—23(ba) Grants or donations received (relevant in case of section 8 companies
only),]
(c) Other operating revenues;
Less:
(d) Excise duty.
(B) In respect of a finance company, revenue from operations shall include
revenue from—
(a) Interest; and

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(b) Other financial services.
Revenue under each of the above heads shall be disclosed separately by way of
notes to accounts to the extent applicable.
3. Finance Costs
Finance costs shall be classified as:
(a) Interest expense;
(b) Other borrowing costs;
(c) Applicable net gain/loss on foreign currency transactions and translation.
4. Other income
Other income shall be classified as:
(a) Interest Income (in case of a company other than a finance company);
(b) Dividend Income;
(c) Net gain/loss on sale of investments;
(d) Other non-operating income (net of expenses directly attributable to such
income).
5. Additional Information
A Company shall disclose by way of notes additional information regarding
aggregate expenditure and income on the following items:—
(i) (a) Employee Benefits Expense [showing separately (i) salaries and wages,
(ii) contribution to provident and other funds, (iii) expense on Employee Stock
Option Scheme (ESOP) and Employee Stock Purchase Plan (ESPP), (iv) staff
welfare expenses].
(b) Depreciation and amortisation expense;
(c) Any item of income or expenditure which exceeds one per cent. of the
revenue from operations or Rs.1,00,000, whichever is higher;
(d) Interest Income;
(e) Interest expense;
(f) Dividend income;

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(g) Net gain/loss on sale of investments;
(h) Adjustments to the carrying amount of investments;
(i) Net gain or loss on foreign currency transaction and translation (other than
considered as finance cost);
(j) Payments to the auditor as (a) auditor; (b) for taxation matters; (c) for
company law matters; (d) for management services; (e) for other services; and (f)
for reimbursement of expenses;
(k) In case of Companies covered under section 135, amount of expenditure
incurred on corporate social responsibility activities;
(l) Details of items of exceptional and extraordinary nature;
(m) Prior period items;
(ii) (a) In the case of manufacturing companies,—
4[(1) Raw materials under broad heads.
(2) goods purchased under broad heads.
(b) In the case of trading companies, purchases in respect of goods traded in by
the company under broad heads.
(c) In the case of companies rendering or supplying services, gross income
derived from services rendered or supplied under broad heads.
(d) In the case of a company, which falls under more than one of the categories
mentioned in (a), (b) and (c) above, it shall be sufficient compliance with the
requirements herein if purchases, sales and consumption of raw material and the
gross income from services rendered is shown under broad heads.
5[(e) In the case of other companies, gross income derived under broad heads.
(iii) In the case of all concerns having works in progress, works-in-progress under
broad heads.
(iv) (a) The aggregate, if material, of any amounts set aside or proposed to be
set aside, to reserve, but not including provisions made to meet any specific

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liability, contingency or commitment known to exist at the date as to which the
balance sheet is made up.
(b) The aggregate, if material, of any amounts withdrawn from such reserves.
(v) (a) The aggregate, if material, of the amounts set aside to provisions made
for meeting specific liabilities, contingencies or commitments.
(b) The aggregate, if material, of the amounts withdrawn from such provisions, as
no longer required.
(vi) Expenditure incurred on each of the following items, separately for
each item:—
(a) Consumption of stores and spare parts;
(b) Power and fuel;
(c) Rent;
(d) Repairs to buildings;
(e) Repairs to machinery;
(f) Insurance;
(g) Rates and taxes, excluding, taxes on income;
(h) Miscellaneous expenses,
(vii) (a) Dividends from subsidiary companies.
(b) Provisions for losses of subsidiary companies.
(viii) The profit and loss account shall also contain by way of a note the
following information, namely: —
5[(a) Value of imports calculated on C.I.F basis by the company during the
financial year in respect of—
I. Raw materials;
II. Components and spare parts;
III. Capital goods;

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(b) Expenditure in foreign currency during the financial year on account of
royalty, know-how, professional and consultation fees, interest, and other
matters;
(c) Total value if all imported raw materials, spare parts and components
consumed during the financial year and the total value of all indigenous raw
materials, spare parts and components similarly consumed and the percentage
of each to the total consumption;
(d) The amount remitted during the year in foreign currencies on account of
dividends with a specific mention of the total number of non-resident
shareholders, the total number of shares held by them on which the dividends
were due and the year to which the dividends related;
5[(e) Earnings in foreign exchange classified under the following heads,
namely:—
I. Export of goods calculated on F.O.B. basis;
II. Royalty, know-how, professional and consultation fees;
III. Interest and dividend;
IV. Other income, indicating the nature thereof.]
Note:— Broad heads shall be decided taking into account the concept of
materiality and presentation of true and fair view of financial statements.
14[ (ix) Undisclosed income
The Company shall give details of any transaction not recorded in the books of
accounts that has been surrendered or disclosed as income during the year in
the tax assessments under the Income Tax Act, 1961 (such as, search or survey
or any other relevant provisions of the Income Tax Act, 1961), unless there is
immunity for disclosure under any scheme and also shall state whether the
previously unrecorded income and related assets have been properly recorded in
the books of account during the year.;
(x) Corporate Social Responsibility (CSR)

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Where the company covered under section 135 of the companies act, the
following shall be disclosed with regard to CSR activities:-
(a) amount required to be spent by the company during the year,
(b) amount of expenditure incurred,
(c) shortfall at the end of the year,
(d) total of previous years shortfall,
(e) reason for shortfall,
(f) nature of CSR activities,
(g) details of related party transactions, e.g., contribution to a trust controlled by
the company
in relation to CSR expenditure as per relevant Accounting Standard,
(h) where a provision is made with respect to a liability incurred by entering into a
contractual obligation, the movements in the provision during the year should be
shown separately.
(xi) Details of Crypto Currency or Virtual Currency
Where the Company has traded or invested in Crypto currency or Virtual
Currency during the financial year, the following shall be disclosed:-
(a) profit or loss on transactions involving Crypto currency or Virtual Currency
(b) amount of currency held as at the reporting date,
(c) deposits or advances from any person for the purpose of trading or investing
in Crypto Currency/ virtual currency.]

General Instructions for the Preparation of Consolidated Financial
Statements

1. Where a company is required to prepare Consolidated Financial Statements,
i.e., consolidated balance sheet and consolidated statement of profit and loss,
the company shall mutatis mutandis follow the requirements of this Schedule as
applicable to a company in the preparation of balance sheet and statement of
profit and loss. In addition, the consolidated financial statements shall disclose

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the information as per the requirements specified in the applicable Accounting
Standards including the following:

(i) Profit or loss attributable to “minority interest” and to owners of the parent in
the statement of profit and loss shall be presented as allocation for the period.

(ii) “Minority interests” in the balance sheet within equity shall be presented
separately from the equity of the owners of the parent.

2. In Consolidated Financial Statements, the following shall be disclosed by way
of additional information:

Name of the entity in the Net Assets, i.e., total Share in profit or loss
assets minus total
1 liabilities
Parent Subsidiaries Indian
1. As % of As % of Amount
2. consolidated Amount consolidated
3. net assets
. profit or loss
.
Foreign 2 3 4 5
1.
2.

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3.

.

.
Minority Interest in all
subsidiaries Associates
(Investment as per the equity
method)
1.

2.
3.

.

.

Foreign

1.

2.

3.
.

.

Joint Ventures (as per
proportionate
consolidation/investment as
per the equity method)

Indian
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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.

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Annexure B

Analytical Ratios

1. Current Ratio

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

Current Assets

Current Ratio = __________________________

Current Liabilities

2. Debt – Equity Ratio

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

Total Debt

Debt – Equity Ratio = ____________________

Shareholder’s Equity

3. Debt Service Coverage Ratio

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

Debt Service Coverage Ratio = Earnings available for debt service
_______________________

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Debt Service
Earning for Debt Service = Net Profit after taxes + Non-cash operating
expenses like depreciation and other amortizations + Interest + other
adjustments like loss on sale of Fixed assets etc.
Debt service = Interest & Lease Payments + Principal Repayments

4. Return on Equity (ROE):

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

Net Profits after taxes – Preference Dividend (if any)
ROE =

______________________________________________

Average Shareholder’s Equity

5. Inventory Turnover Ratio
This ratio also known as stock turnover ratio and it establishes the
relationship between
the cost of goods sold during the period or sales during the period and
average inventory held during the period. It measures the efficiency
with which a Company utilizes or manages its inventory.

Inventory Turnover ratio = Cost of goods sold OR sales
_________________________

Average Inventory

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Average inventory is (Opening + Closing balance / 2)

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

6. Trade receivables turnover ratio

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

Trade receivables turnover ratio = Net Credit Sales
___________________

Average Accounts Receivable

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

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

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

7. Trade payables turnover ratio

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

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

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Net credit purchases consist of gross credit purchases minus purchase
return

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

8. Net capital turnover ratio
It indicates a company's effectiveness in using its working capital.

The working capital turnover ratio is calculated as follows: net sales
divided by the average amount of working capital during the same
period.

Net capital turnover ratio = Net Sales
____________________

Working Capital

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

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

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

Net Profit Ratio = Net Profit
______________________

Net Sales

Net profit shall be after tax.

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

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

ROCE = Earning before interest and taxes
___________________________________________

Capital Employed

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

11. Return on investment

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

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Annexure C

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 Statement
(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 statement 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
statement 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 statement or report shall
not be prepared or filed more than once in a financial year:

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Provided also that the detailed reasons for revision of such financial
statement or report shall also be disclosed in the Board's report in the
relevant financial year in which such revision is being made.
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 any amount
or amounts contributed by it to any political party during the financial
year to which that account relates, giving particulars of the total
amount contributed and the name of the party to which such amount
has been contributed.

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
statement 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

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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.

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Annexure D

List of Accounting Standards notified as on date:

AS 1 Disclosure of accounting policies:
AS 2 Valuation of Inventories
AS 3 Cash Flow Statements
AS 4 Contingencies and Events Occurring After the Balance sheet Date
AS 5 Net Profit or Loss for the period, Prior Period items and Changes in

Accounting Policies.
AS 7 Construction Contracts.
AS 9 Revenue Recognition.
AS 10 Property, Plant and Equipment.
AS 11 The Effects of Changes In Foreign Exchange Rates.
AS 12 Accounting for Government Grants.
AS 13 Accounting for Investments.
AS 14 Accounting for Amalgamation.
AS 15 Employee Benefits.
AS 16 Borrowing Costs.
AS 17 Segment Reporting.
AS 18 Related Party Disclosures.
AS 19 Accounting for Leases.
AS 20 Earnings Per Share.
AS 21 Consolidated Financial Statements.
AS 22 Accounting for Taxes on Income.
AS 23 Accounting for Investments in Associates in Consolidated Financial

Statements.
AS 24 Discontinuing Operations.
AS 25 Interim Financial Reporting.
AS 26 Intangible Assets.

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AS 27 Financial Reporting of Interests in Joint Ventures.
AS 28 Impairment of Assets.
AS 29 Provisions, Contingent liabilities and Contingent assets.

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Annexure E

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
Statement.
Sir,
Government has received representations from stakeholders seeking
clarifications on the manner of presentation of notes in Consolidated
Financial Statement (CFS) to be prepared under Schedule III to the
Companies Act, 2013(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.

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