Revised Scheduled VI

RevisedScheduledVI
Dhinal Shah
Chartered Accountant
CharteredAccountant

Structure of Presentation
StructureofPresentation

SettingtheContext
Setting
the Context
StructureofRevisedScheduleVI
KeyChanges
Ch
KeyPoints

Setting
the
Context

Setting the Context

SettingtheContext
TowardsInternationalFormat:
HarmonizeandsynchronizethedisclosurerequirementswithInternatinal
formats&inthedirectionofIndAS(IFRSconvergedAS)
Fore.g.Certainconceptslikecurrent/non
For
e g Certain concepts like current/ noncurrent
currentclassificationofassets
classification of assets
andliabilities,Eliminationofconceptofscheduleandsuchinformation
willnowbeprovidedinthenotestoaccounts
Applicability
li bili
ApplicabletoallCompanies(exceptBankingandInsuranceCompanies)
Applicabilitydate:Financialyearscommencingonorafter1April2011
Can a company apply Revised Schedule VI early from 1 January 2011?
CanacompanyapplyRevisedScheduleVIearlyfrom1January2011?

Setting the Context

SettingtheContext
Format
NooptiontousehorizontalformatforpresentationofBS
Nooptiontousefunctionalclassificationofexpenses
EachitemofthefaceoftheBSandP&Lshallbecross
Each item of the face of the BS and P&L shall be cross
referencedtoanyrelatedinformationinnotestoaccounts
RevisedScheduleVIhasflexibility
Addition
Addition,deletion,amendment,substitution,modificationof
deletion amendment s bstit tion modification of
line/sublineitems
AS/ActoverrideRevisedScheduleVI
Balancebetweenprovidingexcessivedetailorexcessive
Balance between providing excessive detail or excessive
aggregation

Concept of Materiality
ConceptofMateriality
RevisedscheduleVIspecificallyrecognizesconceptofmateriality
ExistingscheduleVImaterialitythreshold
Expensesexceeding1%ofthetotalrevenueorRs.5,000,whicheverishigher,
p
shallbeshownasaseparateanddistinctitem

RevisedscheduleVImaterialitythreshold
Itemsofincomeorexpensewhichexceeds1%oftherevenuefromoperations
or Rs 100,000 whichever is higher
orRs100,000whicheverishigher

Structure
of
RevisedScheduleVI

BalanceSheet RevisedFormat
(Rupeesin)

BalanceSheet RevisedFormat
(Rupeesin)

P&L RevisedFormat

(Rupeesin)

P&L RevisedFormat

(Rupeesin)
p

EquityandLiabilityClassification

AssetsClassification

KeyChanges

New Disclosures
NewDisclosures
Current/noncurrentclassification
Ifanassetoraliabilityhasboththeportions,company
willneedtobreakthesameintocurrentandnon
current portions e.g., Current maturities of a long term
currentportionse.g.,Currentmaturitiesofalongterm
borrowingwillhavetobeseparatedandclassified
undertheheadothercurrentliabilities
WillImpactWorkingCapital,CurrentRatio&Debt
Will Impact Working Capital Current Ratio & Debt
EquityRatios
LoansandAdvancesfromRelatedParties
RevisedscheduleVIrequiresseparatedisclosurefor
loansandadvancereceivedfromandgiventorelated
p
parties

New Disclosures
NewDisclosures
Commitments
Requiresdisclosureofallcommitments(includingcommitments
otherthancapitalcommitments)
LoanDefaults
Requiresdisclosureofalldefaultsinrepaymentofloansand
d l
f ll d f l
fl
d
interest
CurrentlyCAROrequiresonlydefaultsinrepaymentofduesto
financial institutions banks and debenture holders to be specified
financialinstitutions,banksanddebentureholderstobespecified
Termsofrepaymentoftermloans&otherloanstobedisclosed
(earlieronlydebentures)
Shares of each class held by:
Sharesofeachclassheldby:
HoldingCompany
UltimateHoldingCompany
SubsidiariesorAssociatesofAbove2
Subsidiaries or Associates of Above 2

New Disclosures
NewDisclosures
ShareholdersFunds AdditionalDisclosures
Reconciliationofno.ofsharesoutstandingatbeginningandendof
reportingperiod
Rights,preferencesandrestrictionsofeachclassofsharesincluding
p y
p
restrictionsondistributionofdividendsandrepaymentofcapital
Detailsofshareholdersholdingmorethan5%shares
Detailsofsharesissuableunderoptionsandcontracts/commitments
Unpaidcallsbydirectorsandofficersshallbeshownseparately
For5yearsimmediatelyprecedingthedateofBSdiscloseaggregatenumber
&classofshares:
pursuanttocontract(s)withoutpaymentbeingreceivedincash(presently
to be given throughout the life of the Company)
tobegiventhroughoutthelifeoftheCompany)
bonusshares(presentlytobegiventhroughoutthelifeoftheCompany)
boughtback(presentlynotrequired)

New Disclosures
NewDisclosures
ShareApplicationmoneypendingallotment
Notexceedingissuedcapitalandnotrefundable
N t
di i
d
it l d t f d bl disclosureaftershareholders
di l
ft h h ld
fundandbeforeliability
Ifrefundable othercurrentliability
AdditionalDisclosuresofShareApplicationMoney
Terms&Conditions
Numberofsharestobeissued
Amountofpremium
periodbeforewhichshareswillbeallotted
period before which shares will be allotted
Whethercompanyhassufficientauthorizedcapitaltoallotthesharesoutof
applicationmoney
Periodforwhichitispendingbeyondthedateofallotmentmentionedin
offerdocumentwithreasons
offer document with reasons
Investments
WithrespecttoInvestments,separatedisclosurerequiredforinvestmentin
controlledspecialpurposeentitiesWhatismeantbycontrolledspecialpurpose
entities

Disclosures No Longer Required

DisclosuresNoLongerRequired
ProfitandLossAccount
Commission,brokerageandnontradediscounts
BalanceSheet
Investmentspurchasedandsoldduringtheyear
Investments,sundrydebtorsandloans&advancespertainingto
Investments sundry debtors and loans & advances pertaining to
companiesunderthesamemanagement
BreakupofBankBalancesbetweenScheduled&OtherBanks,Breakup
betweencurrentaccount,callaccount&depositaccounts,Detailsof
names,amount,maximumamountswithnonscheduledbanks
h
h d l db k
Notes
Managerialremunerationandcomputationofnetprofitsforcalculationof
commission
Licensedcapacity,installedcapacityandactualproduction
BalancesheetAbstract&CompanysGeneralProfileunderPartIV

Accounting No Longer Required

AccountingNoLongerRequired
Dividend
ExistingScheduleVIrequiredtheparentcompanyto
recognizedividenddeclaredbysubsidiarycompanieseven
afterthedateofthebalancesheetiftheywerepertaining
totheperiodendingonorbeforethebalancesheetdate.
SuchrequirementnolongerexistsinRevisedScheduleVI
Whetherthedividendrecognizedinthepreviousyear
needstobederecognizedandthepreviousyearfinancial
statementtoberestated?
ByvirtueofAS4,SubsidiaryCowillprovideforproposed
y
y
p
p p
dividendandifholdingCo.,wouldnotrecognise same,how
todealwithitinConsolidatedAccounts?

Disclosures Modified
DisclosuresModified
Debtors
Currently,debtorsOutstandingforaperiodexceeding6monthsbasedonbilling
C
tl d bt O t t di f
i d
di 6
th b d
billi
date
RevisedscheduleVIrequiresdebtorsoutstandingforaperiodexceeding6months
fromthedatetheybecamedueforpayment
C i l d
Capitaladvances
Currently,capitaladvancescanbepresentedaspartofCapitalWorkinProgress/
FixedAssets
RevisedScheduleVIrequiresthesametobepresentedseparatelyunderthe
headLoans&Advances
Profit&LossAccountAppropriation/Reserves&Surplus
AppropriationofProfit&LosstobepresentedunderReserves&Surplus
DebitBalanceofProfit&Losstobeshownasa
Debit Balance of Profit & Loss to be shown as a negative
negative figureunderSurplus
figure under Surplus
Reserves&SurplusbalancewillbeshownafteradjustingnegativebalanceofP&L,
evenifnegative

KeyPoints

Important Definitions
ImportantDefinitions
Current/NonCurrentasset Anassetisclassifiedascurrentwhenitsatisfiesanyof
the following criteria:
thefollowingcriteria:
Itisexpectedtoberealizedin,orisintendedforsaleorconsumptionin,the
companysnormaloperatingcycle;
Itisheldprimarilyforthepurposeofbeingtraded;
Itisexpectedtoberealizedwithintwelvemonthsafterthereportingdate;or
I i
d b
li d i hi
l
h f
h
i d
Itiscashorcashequivalentunlessitisrestrictedfrombeingexchangedorusedto
settlealiabilityforatleasttwelvemonthsafterthereportingdate.
Current/NonCurrentliability Aliabilityshallbeclassifiedascurrentwhenit
satisfiesanyofthefollowingcriteria:
Itisexpectedtobesettledinthecompanysnormaloperatingcycle;
p
y
p p
g
;
Itisheldprimarilyforthepurposeofbeingtraded;
Itisduetobesettledwithintwelvemonthsafterthereportingdate;or
Thecompanydoesnothaveanunconditionalrighttodefersettlementofthe
liabilityforatleasttwelvemonthsafterthereportingdate.

Important Definitions
ImportantDefinitions
OperatingCycle
Itisthetimebetweentheacquisitionofassetsforprocessingandtheir
realizationincashorcashequivalents.Wherethenormaloperatingcycle
cannotbeidentified,itisassumedtohaveadurationof12month
TradeReceivable
AreceivableshallbeclassifiedasaTradeReceivableifitisinrespectof
theamountdueonaccountofgoodssoldorservicesrenderedinthe
normal course of business
normalcourseofbusiness
TradePayable
Apayableshallbeclassifiedasa
A payable shall be classified as a Trade
TradePayable
Payableifitisinrespectofthe
if it is in respect of the
amountdueonaccountofgoodspurchasedorservicesreceivedinthe
normalcourseofbusiness

Key Points
KeyPoints
Commitments
EarlierScheduleVIonlycapitalcommitments.RevisedScheduleVI
requiresthedisclosureofallcommitments,i.e.,includingother
commitments.Whatisthenatureofcommitmentsthatwillgetcovered
underthisdisclosurerequirement?
TradeReceivable/Payableclassification
Liabilityforpurchaseoffixedassets/receivableforsaleofFixedAssetsnot
to be classified as Trade Payable/ Trade Receivable
tobeclassifiedasTradePayable/TradeReceivable
Investment
Investments
Investments Basisofvaluation(Revised)VsModeofValuation(earlier)
Basis of valuation (Revised) Vs Mode of Valuation (earlier)
LongTerminvestmentscarriedatotherthancost
CurrentInvestment(individualinvestments)

Key Points
KeyPoints
CurrentandNonCurrentClassification
DeferredTaxshouldalwaysbeclassifiedasNonCurrent
Capitaladvancestobeclassifiedasnoncurrentassets
Unconditionalrighttodefersettlementofliability
Noncomplianceofdebtcovenantse.g.quarterlyinformation,non
paymentofmonthlyinterest.
Mostloanagreementshaveaclausethatincaseofnoncomplianceof
any clause the loan will be payable on demand
anyclausetheloanwillbepayableondemand.

ClassificationofLongterminvestmentexpectedtoberealized
within12monthsfromtheBSdateascurrentinvestment
EmployeeBenefitslikeBonus/Incentives,Postemployment
p y
/
,
p y
obligationse.g.GratuityandPension,Otherlongtermbenefitse.g.
Accumulatedcompensatedabsence

KeyissuesrelatedtoBalanceSheet
Currentandnoncurrentclassification somequestions

CompanyAhastakenaloanwhichisrepayableondemand.However,basedon
p y
p y
,
thepastexperience,itisnotexpectedthatthelenderwilldemandtherepayment
withinnext12months.

CompanyBhastakena5yearloan.Theloancontainscertaindebtcovenants,e.g.,
filingofquarterlyinformation.Thecompanydefaultedinfilingofsuchinformation
inthepreviousquarter,withtheeffectthatloanhasbecomerepayableon
demand.However,basedonthepastexperience,themanagementbelievesthat
d f l i i
defaultisminorandthebankwillnotdemandtherepaymentofloan.Ithasalso
d h b k ill
d
d h
fl
h
l
startedtheprocessofgettingwaiverforthisdefault.Afterthereportingperiod
andbeforetheapprovalofthefinancialstatementsforissue,thebankagreedto
waive the default and not to demand payment as a consequence of the default
waivethedefaultandnottodemandpaymentasaconsequenceofthedefault.

Acompanyhastakena5yeartermloan.Outofabundantcaution,thebank
includesacovenantthatithasarighttorecalltheloanondemandevenwhere
the company has not violated any of the debt covenants.
thecompanyhasnotviolatedanyofthedebtcovenants.

Key Points
KeyPoints
ShareCapital
Shareholderholdingmorethan5%shares
Classificationofpreferenceshares
Classification
of preference shares
DifferentclassesofPreferenceSharestobetreatedseparately.
Doesitmeanthatacompanyshouldcompulsorilyclassifypreference
shares based on their substance i e redeemable preference shares
sharesbasedontheirsubstance,i.e.,redeemablepreferenceshares
shouldalwaysbeclassifiedasliability?
DisclosureofPreferenceSharesforcompaniesfollowingAS30to32on
Financial Instruments
FinancialInstruments.

Key Points Disclosure

KeyPoints
Levelofdisclosurepertainingtodefault/continuingdefaultinrepaymentof
loans&interestineachcasei.e.categorywiseorloanwisewithinthe
category?
Detailsofcontinuingdefault(incaseoflongtermborrowing)anddefault(in
caseofshorttermborrowing)asonthebalancesheetdateinrepaymentof
loansandinterestshallbespecifiedseparatelyineachcase".Thewordings
giverisetofollowingissues:
DefaultpertainingtoborrowingapartfrombanksandFIsarealso
requiredforitemssuchasbonds/debentures,deposits,financelease
obligations
Defaultsotherthanrepaymentofloanandinterest,e.g.,compliancewith
debtcovenantsnotrequiredtobedisclosed

Key Points Disclosure

KeyPoints
LoansandAdvancestorelatedparties
DetailsofLoansandAdvancesgiventorelatedpartiestobedisclosed
Whatdetailsneedtobedisclosedarenotspecified?
WhetherdisclosuresrequiredtobemadeinadditiontoAS
Whether disclosures required to be made in addition to AS18
18(&ASI
(& ASI13)
13)
Disclosureforinformationaboutitemsthatdonotqualifyforrecognitionin
financial statements
financialstatements
PostponementofRevenueRecognition
DisputedCases RemoteLiability NotContingent

Key Issues ProfitandLossAccount

KeyIssues
Profit and Loss Account
QuantitativeInformation
NatureofCompany

DisclosuresRequired

Manufacturingcompanies

RawmaterialsunderbroadheadsGoods
purchasedunderbroadheads

Tradingcompanies

Purchasesofgoodstradedunderbroad
heads

Companiesrenderingor
supplyingservices
l i
i

Grossincomederivedfromservices
renderedunderbroadheads
d d d b dh d

Companythatfallsinmorethanone
category

Itwillbesufficientcompliancewiththe
requirements,ifpurchases,salesand
consumption of raw material and the
consumptionofrawmaterialandthe
grossincomefromservicesrenderedare
shownunderbroadheads

Key Issues ProfitandLossAccount

KeyIssues
Profit and Loss Account
QuantitativeInformation
IsaCompanyrequiredtodisclosequantitativedetailsornot?
Willamanufacturingcompanydisclosepurchase,saleorconsumptionof
rawmaterial?
Whatismeantbygoodpurchasedincaseofmanufacturingcompanies?
Doesamanufacturingoratradingcompanyrequiredtodisclosesales?
HowshouldbroadheadsforWorkinProgressbedisclosed?
How should broad heads for Work in Progress be disclosed?
WhetherbroadheadsofOpeningandClosingInventoryshouldalsobe
disclosed?

Key Issues ProfitandLossAccount

KeyIssues
Profit and Loss Account
ExciseDuty,SalesTaxandVAT
RevisedScheduleVIrequiresexcisedutytobepresentedasdeduction
fromrevenueofanonfinancecompanyinthenotes
NospecificrequirementforpresentationofVATandSalesTax
p
q
p
Issues
AS9RevenueRecognitionrequiresexcisedutytobeshownasdeductionfromsaleson
thefaceofP&LAccount(andnotinnotes)
NonotifiedASdealswithaccountingforVAT.However,theICAIGNrequiresthat
revenuerecognizedshouldbenetofVAT
ServiceTax??

Key Issues ProfitandLossAccount

KeyIssues
Profit and Loss Account

Accountinganddisclosureofshareofprofit/lossinPartnershipFirms
WhetherdisclosuresforNamesofallPartners,TotalCapitalandShare
(Profit/LossSharingRatio)ofEachPartnershouldbedisclosedforLLP
also?
Proposeddividend accountinganddisclosure
Whetherdividendincomeforfinancecompaniesshouldbetakentomain
revenueorOtherIncome?

Key Issues Disclosure

KeyIssues

Meaningofotheroperatingrevenuesfornonfinancecompanies
WhereshouldProfitonSaleofFixedAssetsbeclassified Other
OperatingRevenue/OtherIncome?
Shouldthenetgainsarisingonforeignexchangefluctuationsbeincluded
g
g
g
g
undertheheadOtherOperatingRevenuesorOtherIncome?
Disclosureofvalueofimportsandexpenditureinforeigncurrency
whetheraccrualorcash?
DoesSmallandMediumCompanyasdefinedunderCompanies
(AccountingStandards)Rules,2006needtodiscloseDilutedEPS?

Key Issues Takeaways

KeyIssues

ComparativeNumbers Tocommenceexerciseofvalidatingpreviousyear
numbersinRevisedScheduleVIFormat
ChangestobemadeMIS/ITsystemstocollateinformationofcurrent/
noncurrentportionsofeachassetandliabilities
BreakupofEmployeeBenefitLiabilitiesinCurrentandNonCurrenttobe
obtainedfromIndependentActuary.
ReviewLoanAgreementstoavoidbecomingcurrentliabilityincaseofnon
g
g
y
complianceofminorclauses
AdditionaltimeandeffortsfortheCompaniesandAuditorstounderstand
andimplementchanges
p
g
Useofjudgmenttomaintainbalancebetweenexcessiveinformationand
overaggregation

Differential Comparison
DifferentialComparison
SN

Particular

Existing

Revised

NetWorking
Capital

CurrentassetsandLiabilitiesareshown
togetherunderapplicationoffunds.Net
WorkingCapitalappearsonbalance
sheet

Assets&Liabilitiesaretobebifurcated
intocurrent&Noncurrentandshown
separately.Hence,NetWorkingCapital
willnotbeappearinginBalancesheet

FixedAssets

Nobifurcationrequiredinto
Tangible&Intangibleassets

Fixedassetstobeshownundernon
currentassetsandithastobebifurcated
intoTangible&Intangibleassets

Borrowings

Shortterm&longterm
borrowingsaregroupedtogetherunder
theheadLoanfundssubheadSecured/
Unsecured

Longtermborrowingstobe
shownundernoncurrent
liabilitiesandshortterm
borrowingstobeshownunder
currentliabilitieswithseparate
disclosureofsecured/unsecured
loans.
Periodandamountofcontinuing
defaultasonthebalancesheet
p y
dateinrepaymentofloansand
interesttobeseparatelyspecified

Differential Comparison
DifferentialComparison
SN

Particular

Existing

Revised

Financelease
obligation

Financeleaseobligationsare
includedincurrentliabilities

Financeleaseobligationsaretobe
groupedundertheheadnoncurrent
Liabilities

Deposits

Leasedepositsarepartofloans&
advances

Leasedepositstobedisclosedaslong
termloans&advancesunderthehead
noncurrentassets

Investments

Bothcurrent&noncurrent
investmentstobedisclosed
under the head investments
undertheheadinvestments

Currentandnoncurrentinvestments
aretobedisclosedseparatelyunder
current assets & noncurrent assets
currentassets&noncurrentassets
respectively

Loans&Advances

Loans&Advancesaredisclosedalong
withcurrentassetsLoans&Advanceto
subsidiaries & others to be disclosed
subsidiaries&otherstobedisclosed
separately

Loans&Advancestobebrokenupin
longterm&shorttermandtobe
disclosed under noncurrent
disclosedundernon
current&current
& current
assetsrespectively.Loans&Advance
fromrelatedparties&otherstobe
disclosedseparately.

Differential Comparison
DifferentialComparison
SN

Particular

Existing

Revised

DTA/
DTL

DeferredTaxassets/liabilitiestobe
disclosedseparately

DTA/DTLtobedisclosedundernon
currentassets/liabilitiesasapplicable

Cash&Bank
Balances

Bankbalancetobebifurcatedin
scheduledbanks&others

Bankbalancesinrelationtoearmarked
,
g
y,
balances,heldasmarginmoney,
depositswithmorethan12months
maturity,eachtobeshownSeparately.

10

Profit&Loss
(DrBalance)

P&Ldebitbalancetobeshownunder
theheadMiscellaneousexpenditure&
l
losses

DebitbalanceofProfitandLossAccount
tobeshownasnegativefigureunderthe
h d
headSurplus.Therefore,reserve&
l
h f
&
surplusbalancecanbenegative

11

Format

Acompanyhasanoptiontouse
horizontalformatforpresentationof
financialstatements.

Acompanywillnothaveoptiontouse
horizontalformatforpresentationof
financialstatements.

Differential Comparison
DifferentialComparison
SN

Particular

Existing

Revised

13

Othercurrent
liabilities

p
NoseparatedisclosureofCurrent
maturitiesoflongtermdebt.No
separatedisclosureofCurrentmaturities
offinancelease
Obligation

Currentmaturitiesoflongtermdebtto
g
bedisclosedunderothercurrent
Liabilities.Currentmaturitiesoffinance
leaseobligationtobedisclosed

14

P h
Purchases

Purchases,Opening&closingstock,
P
h
O
i & l i
t k
givingbreakupinrespectofeachclass
ofgoodstradedinindicatingthe
quantitiesthereof

Goodstradedinbythecompanytobe
G
d t d d i b th
t b
disclosedinbroadheadsnotes.
Disclosureofquantitativedetailsof
goodsismuchdiluted.

15

Expense
ClassificationinP&L
A/c.

Function wise & Nature wise

Functionwise&Naturewise

Classificationbasedonnatureof
Classification
based on nature of
expenses

16

FinanceCost

Tobeclassifiedinfixedloans&other
loans

Tobeclassifiedasinterestexpense,
otherborrowingcosts&Gain/Losson
forex transactions/translations.

17

Foreignexchange
gain/loss

Gain/Lossonforeigncurrency
transactiontobeshownunderfinance
cost

Gain/Lossonforeigncurrency
transactiontobeseparatedintofinance
costsandotherexpenses

THANKS