Preparation of Financial Statements Under Companies Act 2013

PREPARATION OF
FINANCIAL
STATEMENTS
UNDER COMPANIES
ACT 2013
D.P. Shah D. Shah & Associates
1
Companies Act -1956
Companies Act 2013

2
While discussing the new provisions under
Companies Act 2013 regarding preparation of

Financial statements, we will cover
Books of accounts
Depreciation
Financial statements
Consolidated Financial Statements
Directors Report
3
Key Provisions
Books of Accounts
Companies Act 1956
Companies Act 2013
Section 2(8) provides definition

of `book and paper and `book or
paper whereas `books of
accounts have been defined in
Section 209 of the Act.
Section 2(12) defines `book

and paper and `book or paper
whereas `books of accounts
have been defined in Section
2(13) of the Act.
Section 2(17) defines Financial

year.
Section 2(41) defines financial

year.
Section 209 to Section 223

governs provisions relating to
accounts .
Section 128 to Section 137

governs provisions relating to
accounts
Revised Schedule VI provides

for general instructions for
preparation of Balance sheet and
Statement of Profit and loss.
Schedule III provides general

instructions for preparation of
Balance sheet and Statement of
profit and loss of a Company
Provisions relating to Accounts
Companies Act 1956
Companies Act 2013
Schedule XIV to the Act provides

the rates at which depreciation is
to be provided on different class
of assets ( on WDV or SLM basis)
Schedule II provides Useful

Lives to compute depreciation on
various assets and manner of
computing depreciation
Section
350
providing Section 123 (2)
ascertainment of depreciation
Companies
(Accounting Companies (Account) Rules 2014 inter
alia, provides:
Standard s) Rules 2006
a. Manner of keeping books of

accounts.
b. Maintenance and inspection of
certain financial information by
directors.
As a transitory provision Accounting
Standard rules 2006 continue to
be in force till the time new rules
are announced. (Rule 7)
Companies Act 1956
Companies Act 2013
Books
Though the Companies Act, Section 2 (12) book and
1956 does not define Books of paper and book or paper
Account , but section 209(1) include books of account,
prescribed
the
manner
of deeds,
vouchers,
writings,
keeping books of account as :
documents,
minutes
and
1) Every company shall keep at registers maintained on paper
its registered office proper
or in
books of account with respect
electronic form;
to:
Section 2(3) defining `Books of
(a) all sums of money received
accounts as books of
and expended by the company
account includes records
and the matters in respect of
maintained in respect of
which the receipt and
(i) all sums of money received
expenditure take place ;
and expended by a company
(b) all sales and purchases of
and matters in
goods by the company ;
relation to which the receipts
(c) the assets and liabilities of
and expenditure take place;
the company ; and
7
Companies Act 1956
Companies Act 2013
Books
(d) in the case of a company
pertaining to any class of
companies
engaged
in
production,
processing,
manufacturing
or
mining
activities, such particulars
relating
to
utilization
of
material or labor or to other
items of cost as may be
prescribed, if such class of
companies is required by the
Central
Government
to
include such particulars in the
books of account :
(ii) all sales and purchases of

goods and services by the
company;
(iii) the assets and liabilities of
the company; and
(iv) the items of cost as may
be prescribed under section
148 in the case of
a company which belongs to
any class of companies
specified under that section;
yet to be notified.
Changes:
Definition of book and paper and book or
paper is modified, so as to include minutes

and registers and all documents maintained in
electronics form also form part of it.
Now `books of account are specifically
defined.
Companies (Account) Rules 2014 inter alia, provides manner
of keeping books of accounts in electronic mode. It reads as;

3. Manner of books of account to be kept in
electronic mode.- (1) The books of account and other
relevant books and papers maintained in electronic
mode shall remain accessible in India so as to be
usable for subsequent reference.
(2) The books of account and other relevant books and
papers referred to in sub-rule (1) shall be retained
completely in the format in which they were originally
generated, sent or received, or in a format which shall
present accurately the information generated, sent or
received and the information contained in the electronic
records shall remain complete and unaltered.
(3) The information received from branch offices shall not
be altered and shall be kept in a manner where it shall
depict what was originally received from the branches.
10
(4) The information in the electronic record of

the document shall be capable of being
displayed in a legible form.
(5) There shall be a proper system for storage,
retrieval, display or printout of the electronic
records as the Audit Committee, if any, or the
Board may deem appropriate and such records
shall not be disposed of or rendered unusable,
unless permitted by law:
Provided that the back-up of the books of
account and other books and papers of the
company maintained in electronic mode,
including at a place outside India, if any, shall be
kept in servers
physically located in India on a11
(6) The company shall intimate to the Registrar on

an annual basis at the time of filing of financial
statement(a) the name of the service provider;
(b) the internet protocol address of service provider;
(c) the location of the service provider (wherever
applicable);
(d) where the books of account and other books and
papers are maintained on cloud, such address as
provided by the service provider.
Explanation.- For the purposes of this rule, the
expression "electronic mode" includes electronic
form as defined in clause (r) of sub-section (1) of
section 2 of Information Technology Act, 2000 (21 of
2000) and also includes an electronic record as
defined in clause
(t) of sub-section (1) of section 2 of
12
Unlike The Companies Act 1956, now manner

of maintenance of books of accounts under
electronic mode have prescribed along with
filling of the details of the service providers with
its IP Address, Location of servers etc.
It is also provided that vouchers be maintained
in legible form.
Audit committee or board is required to evolved
a system for storage, retrieval and display of
print out of electronic records and disposal there
of.
In case of accounts being maintained in
electronic mode out side India it is required that
the back ups there of be kept in servers
13
If the managing director, the whole-time director in charge of

finance, the Chief Financial Officer or any other person of a
company charged by the Board with the duty of complying with
the provisions of this section, contravenes such provisions, such
managing director, whole-time director in charge of finance,
Chief Financial officer or such other person of the company
shall be punishable with imprisonment for a term which may
extend to one year or with fine which shall not be less than fifty
thousand rupees but which may extend to five lakh rupees or
with both.
It may be interesting to note that in view of representations
various Chamber
of Commerce, Standing committee on
finance had made following suggestion on the issue of penalty
in case of default:
The Committee are of the view that the Ministry may consider
a less harsh position on the question of default not committed
willfully with respect to books of accounts etc., to be kept by
the company, particularly in the context to the existing position
in law, which provides
for non-willful cases. However
D.P. Shah defenses
D. Shah & Associates
14
Companies Act 1956, did not permit inspection of

books of accounts by any director of the company.
CA 2013 by Section 128 (3) provides that provides
that books of accounts etc shall be open for
inspection by any of the director of the company and
under Rule 4 it provides the manner and conditions
of inspection of books of accounts of company and
its subsidiary.
15
Poser:
It has been provided that a Director of the

Company can inspect books of accounts of the
company.
1. Can a director nominate a professional for
carrying out inspection of books of
accounts on his behalf ?
2. Can a director of holding company inspect
books of accounts of subsidiary ?
16
Poser
3. Maintenance of books of accounts in

electronic form has been permitted now in CA
2013, similar provision was not there in CA
1956.
Most
of
the
companies
were
maintaining accounts in SAP/ERP or Tally or
such other software. Was it illegal to maintain
accounts in electronic form under the regime
of CA 1956 ?
17
Poser
4. Section 116 (5) inter alia, provides that
books of accounts together with vouchers be

kept in good order for eight years or till the
completion of inspection if any, which ever is
later.
Now a days every company has a space
problem. Whether maintaining vouchers in
electronic form i.e. scanned copy, would be
sufficient compliance ?
18
Financial Statement
19
Companies Act, 1956

Financial Year means,
in relation to any body
corporate, the period in
respect of which any
profit and loss account of
the body corporate laid
before it in annual
general meeting is made
up, whether that period
is a year or not:
Companies Act, 2013

Financial Year means in
relation to any company
or body corporate,
means the period ending
31st day of the March
every year, and where it
has been incorporated
on or after the 1st day of
January of a year, the
period ending on 31st day
of march of the following
year, in respect where of
financial statement of
the company or body
corporate is made up. 20
Changes
1. Definition - now financial year can only be of April
to March and only a company or body corporate,
which Is a holding company or subsidiary company of
a company incorporate outside India and is required
to follow a different financial year for consolidation of
its accounts out side India, may have different
financial year subject to approval of tribunal.
2. A transition period of 2 year has been prescribed
for companies existing on the commencement of this
Act to align their financial year to April-March.
21
The definition of Financial Statement is not
provided under the Companies Act, 1956.

But the manner of keeping books of account
is provided in section 209 of the Companies
Act, 1956
22
MEANING OF FINANCIAL STATEMENT

[Sec. 2(40)]
In relation to company, includes:
a) Balance Sheet at the end of financial year.
b) statement of Profit & Loss for the financial
year
c) Cash Flow statement (not mandatory for
small companies, OPCs & Dormant companies)
for the financial year.
d) Statement of Changes in equity, if applicable
e)Explanatory statement Note annexed to &
forming part of Financial statements.
23
Changes
The Companies Act, 2013 provides that books
of accounts may be kept in electronic form also.
Every Company shall now be required to
prepare and keep financial statements, other
relevant books, minutes and registers at its
registered office.
The term Balance Sheet, Profit & Loss Account,
has been define collectively as Financial
Statement under the Act, cash flow statement
and statement showing change in equity (if
applicable) of the company also forms part of
the same.
24
Small Company :
Small Company is not defined under the
Companies act, 1956.
As per section 2(85) of the Companies Act,
2013, small company means a company,
other than a public companyi. Paid up share capital does not exceed Rs.50
lakh or such higher amount as may be
prescribed which shall not be more than Rs.
5 crore or
ii. Turn over as per its last statement of profit
and loss does not exceed Rs. 2 crore or such
higher amount as may be prescribed which
shall not D.P.
beShah
more
than Rs. 20 crore.
D. Shah & Associates
25
Small Company (Contd..)

This clause shall not apply to
a. A holding company or subsidiary company
b. A company registered under section 8
(formation for charitable objects)
c. A company or body corporate governed by
any special Act.
26
Requirements of Financial Statement

(Sec. 129)
The FS shall give a true and fair view and comply
with the AS & shall be in the form as provided in

Schedule III.
The FS shall be laid in the AGM within six months
form the end of the financial year.

The holding company shall in addition, prepare a
Consolidated Financial Statement of the Company
along with its all subsidiaries, associates & joint
ventures and lay before the AGM.
27
Consolidated
(CFS)
Financial
Statement
Neither the Companies Act, 1956 nor AS 21

requires
the
Companies
to
prepare
Consolidated Accounts. At present, Clause
32 of the Listing Agreement mandates listed
Companies to publish its Consolidated
Accounts which is neither required to be laid
before the AGM nor to be filed with ROC.
28
Under the Companies Act, 2013 where a company
has one or more subsidiaries, it shall, in addition to

financial statements, prepare consolidated financial
statement of the company and laid before the
annual general meeting of the company.
All subsidiaries, associates and joint ventures will
be covered under CFS.
Company shall prepared the Consolidated Financial
Statements according to Schedule III of the
Companies Act, 2013 which is in line with revised
schedule VI.
All Companies including unlisted and private
companies, with subsidiaries will need to prepare
CFS.
29
General Instructions for preparation of CFS

Where a company is required to prepare CFS, the
company will mutatis mutandis follow the

requirements of this Schedule.
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.
A company will disclose the list of subsidiaries or
associates or joint ventures, which have not
been consolidated along with the reasons for non
consolidation.
30
Re-opening of accounts on Courts

or Tribunals orders (Sec. 130)
Re opening of accounts is not provided under
the Companies Act, 1956.
This new Section provides for provisions
relating to re-opening or re-casting of the books
of accounts of Company pursuant to order of
Court or Tribunal on application made by CG,
any Statutory Authority or any person
concerned if it was found that earlier accounts
were prepared in fraudulent manner or financial
statements
are
not
reliable
due
to
mismanagement of affairs of the company. The
accounts so revised
or&re-cast
shall be final.
D.P. Shah D. Shah
Associates
31
Voluntary revision of FS or Boards

report
(Sec. 131)
The directors to prepare revised financial
statement or a revised Boards report of any of
the 3 preceding financial years only once in a FY,
if it appears to them that they did not comply
with the requirement of Section 129 or
Section134 after obtaining approval of the
Tribunal.
Tribunal
shall
take
into
account
the
representations if any, of the CG and of the IT
Department.
32
Form
9.2 provided in draft rules requires

disclosure of effect of revision on
1. Assets
2. Liabilities (including contingent liabilities)
3. Revenue
4. Profit/loss before taxes
5. Net profit after tax/loss
6. Earning per share
7. Dividend
8. Any other item (specify in detail)
33
The revised account along with boards report
there on is required to be approved by board and

to be placed before the AGM along with report of
the auditors there on.
However if the original financial statement was
audited by different auditor, than, the revised
financials shall accompanied by the consent letter
from the auditor who reported upon the financial
statements sought to be revised.
In case such auditor does not agree or the
company is unable to procure the consent letter,
reasons for such different opinion or inability to
procure consents shall be explained.
Such revised financials are required to be filed
with ROC and in case of listed company with stock
34
exchange.
Constitution of National Financial

Reporting Authority (Sec. 132)
This Section provides that the CG may by
notification constitute the NFRA
to advice on Accounting Standards (AS) &
Auditing Standards(SA),
to monitor, enforce, compliance and
overseeing the quality of service of associated
professionals.
Contd..
35
Constitution of National Financial

Reporting Authority (Sec. 132)
The authority shall have power to investigate
the matters of misconduct committed by any
member of ICAI or any other prescribed
profession and pass order which may be
appealed to Appellate Authority to be
constituted by CG.
Qualifications,
terms
and
conditions
of
appointment of the chairperson and members
of the Appellate Authority have also been
36
provided.
CG to prescribe AS (Sec. 133)

This Section provides that the CG may, after
consultation
with
NFRA,
prescribe
the
Accounting Standards as recommended by the
ICAI for adoption by companies.
As per Rule 7 of Companies (Account) rules
2014, Accounting standards prescribed under
Companies Act 1956 shall be deemed to be the
accounting
standards
until
accounting
standards are notified under Section 133.
37
A. Following AS are applicable to all
companies, without exception:

AS-1 Disclosure of Accounting Policies
AS-2 Valuation of Inventory
AS-4 Contingencies and Events occuring after
Balance sheet date
AS-5 Net Profit or Loss for the period. Prior
period items and changes in Accounting
policies
AS-6 Depreciation Accounting
38
AS-7 Construction Contracts

AS-9 Revenue Recognition
AS-10 Accounting for Fixed Assets
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 Amalgamations
As-16 Borrowing costs
AS-18 Related Party Transactions
39
As-22 Accounting for taxes on Income

As-24 Discontinuing operations
As-26 Intangible Assets
40
B. At present, following AS are applicable to
companies only if, the preparation of

consolidated FS/Interim FS are either mandatory
or these companies voluntary chooses to do so.
However, till the time IND AS are notified,
companies required to prepare consolidated FS
would have to follow;
AS- 21ConsolidatedFinancial Statements
As-23 Accounting for investments in Associates
AS-27 Financial Reporting of Interest in Joint
Ventures
AS-25 Interim Financial Reporting
41
Following standards are not applicable to
SMCs in its entirety:

AS-3 Cash Flow
AS-17 Segment Reporting
SMC as per Accounting Standard Rules 2006
are the companies:
a. Whose equity or debt securities are not
listed on any stock exchange or are not in
process of listing.
b. which is not a bank, financial institution or
an insurance company.
42
c. Whose turnover excluding other income
does not exceed Rs.50 Crore in immidiately

preceding previous year.
d. which does not have borrowings including
public deposits in excess of Rs.10 Crore
e. which is not a holding or subsidiary of a
company which is not SMC
43
D. Following Standards are applicable to SMCs
with certain exemptions

Accounting
Standard
Exemption
paragraphs
AS-15 Employee
Benefits
Para
Para
Para
Para
Para
11 t0 16
46 and 130
50 to 116
117 to 123
129 to 131
AS-19 Leases
Para
Para
Para
Para
22, (e) and (f)

25(a),(b) and (e)
37(a) and (f)
46(b) and (d)
AS -20 Earnings per

share
Disclosure of Diluted
earning
44
D. Following Standards are applicable to SMCs
with certain exemptions

Accounting
Standard
Exemption
paragraphs
AS-28 Impairment of
Asset
Certain provisions
relating to
measurement of
`Value in Use and
para121(g)
AS-29 Provisions,
Contingent Liabilities
and Contingent
Assets
Para 66and 67
45
Though MCA has issued 35 Ind AS in February
2011 yet they are not notified.

Upon its Notification, companies would be
required to follow Ind AS issued by MCA.
46
BOD shall approve FS (Sec. 134)

This Section provides that the Financial
Statements, including CFS should be approved
by the BOD before they are signed and
submitted to auditor. The Boards Report &
Auditors Report are to be attached with every
FS before it is issued.
47
Board Report (Sec. 134)

Financial Statement shall be signed by at least the chairperson if
authorized by board or by at least 2 directors one of whom shall be

managing director and CEO if he is a director in the company and
CFO and Company Secretary where ever they are appointed. In
case of OPC only by one director.
Board report to contain following information:
Extract of the Annual Return as prescribed under section 92 in

Form MGT - 9
No. of Board Meeting held.
Directors Responsibility Statement.
Declaration
by
Independent
Directors
regarding
their
appointment
Co.s policy on Directors appt. & remuneration if required to

constitute Nomination
and Remuneration Committee.
48
Explanation/Comments
qualification,
by
reservation
the
or
disclaimer made by Auditor
Board
adverse
on
every
remark
or
in his Audit Report and
Company Secretary in his Secretarial Audit Report
Particulars of loans, guarantees or investments under

section 186.
Particulars of contracts or arrangements with related

parties in Form AOC - 2 pursuant to Rule 8(2)
The state of the company s affairs.
The amounts, if any, which it propose to carry to any

reserves.
The amount, if any, which it recommends should be paid

49
Material
changes & commitments affecting

companys financial position between previous
year and current year & date of the report.
Statement
indicating
development
and
implementation of risk management policy
Details of policy developed and implemented
on CSR applicable to companies having net
worth of Rs. 500 crore or more or turnover of
Rs. 1000 crore or more or net profit of Rs. 5
crore or more during the financial year.
For listed companies & prescribed companies ,
a statement of manner of annual evaluation of
its own performance, its committees and
individual directors.
50
Directors Responsibility Statement to
contain following additional statement: Laying down of Internal Financial Control in case of
listed company.
Devising proper system to ensure compliance of all
applicable laws.
Company no longer required to disclose the following
in the Directors Report: Reasons for non-completion of buy back within time
period specified in the Bill.
Details of employees in receipt of remuneration not
less than the prescribed rate of remuneration.
51
Section 136 of the Act provides for circulation
of financial statements and in case of listed

companies preparation and
manner of
circulation of abridged financial statements.
52
Copy of FS to be filed with Registrar

(Sec. 137)
This Section provides that a copy of FS,
auditors report etc shall be filled with the
Registrar within 30 days.
In case a company does not hold an AGM or the
AGM has been adjourned in any year, a
statement of facts and reasons along with FS
and attachment has to be filed with the
Registrar.
In case the accounts are not adopted at AGM or
adjourned meeting, the unadopted accounts
shall be filed with ROC who shall take them in
53
Copy of FS to be filed with Registrar

(Contd..)
One Person Co. (OPC) is required to file the FS
with the Registrar within 180 days from the

date of meeting.
Now every company at the time of filling their
FS with registrar shall also attach the accounts
of
its
subsidiaries
which
have
been
incorporated o/s India.
54
Depreciation
55
Companies Act, 1956

As per Section 350 of the Act
the amount of depreciation to
be deducted in pursuance of
clause (k) of sub-section (4) of
section 349 shall be the amount
of depreciation on assets as
shown by the books of the
company at the end of the
financial year expiring at the
commencement of this Act or
immediately thereafter and at
the end of each subsequent
financial year at the rate
specified in Schedule XIV:
Companies Act, 2013
Section 123(2) provides that

the depreciation shall be
calculated
as
per
the
provisions of schedule II.
Schedule II introduced:
Depreciation to be based on
useful life & residual value
Useful
lives
of
various
tangible assets prescribed
Residual Value not more

than 5% of the original cost
of the asset
From the date Schedule II

becomes effective carrying
amount of the asset shall be
depreciated
over
the
remaining useful life of the
asset
56
SCHEDULE II (See section 123)

USEFUL LIVES TO COMPUTE
DEPRECIATION
PART A
1. Depreciation is the systematic allocation of the

depreciable amount of an asset over its useful life.
The depreciable amount of an asset is the cost of an
asset or other amount substituted for cost, less its
residual value. The useful life of an asset is the
period over which an asset is expected to be
available for use by an entity, or the number of
production or similar units expected to be obtained
from the asset by the entity.
57
USEFUL LIVES TO COMPUTE DEPRECIATION

(Contd.)
2. For the purpose of this Schedule, the term depreciation
includes amortisation.
3. Without prejudice to foregoing provisions of paragraph 1,
(i) In case of such class of companies, as may be prescribed

and whose financial statements comply with the
accounting standards prescribed for such class of
companies under section 133 the useful life of an asset
shall not normally be different from the useful life and the
residual value shall not be different from that as indicated
in Part C, provided that if such a company uses a useful
life or residual value which is different from the useful life
or residual value indicated therein, it shall disclose the
justification for the same.
58
USEFUL
LIVES
TO
DEPRECIATION (Contd.)
COMPUTE
(ii) In respect of other companies the useful life

of an asset
shall not be longer than the
useful life and the residual value shall not be
higher than that prescribed in Part C.
(iii) For intangible assets, the provisions of the
Accounting Standards mentioned under subpara (i) or (ii), as applicable, shall apply.
59
USEFUL
LIVES
TO
DEPRECIATION (Contd.)
COMPUTE
PART B
4. The useful life or residual value of any

specific asset, as notified for accounting
purposes
by
a
Regulatory
Authority
constituted under an Act of Parliament or by
the Central Government shall be applied in
calculating the depreciation to be provided
for
such
asset
irrespective
of
the
requirements of this Schedule.
60
Part 'C'
Depreciation (Contd.)
Componentization of assets mandated
Separate capitalization and depreciation of a
part of an asset if its cost is significant to the
total cost of the asset and its estimated life is
different from the remaining asset
Accounting for replacement costs.
Significant increase in rate of depreciation of
commonly used assets as compared to
Schedule XIV rates under the 1956 Act
61
The
Companies
Act, 2013
Nature of asset illustrative
Useful
Life
General Plant and
Machinery other than
continuous process plant
Continuous process plant
General furniture and
fittings
15
8
%
The
chang
Deem
Compan Increa
e
ed
ies Act,
se
rate
1956
6.33%
11.88
%
4.75% 1.58% 33.33%

124.91
5.28% 6.60%
%
9.50%
6.33% 3.17% 50.08%
19.00
14.25 300.00
Office equipment
5
%
4.75%
%
%
31.67 after reducing
15.46expected
Depreciable amount to be determined
Desktops,
laptops,
3
% 16.21%
% 95.35%
residual
value etc.
Electrical Installations
100.00
Equipment
value generally 10
not more
than 5%
of the
original cost
andResidual
9.50%
4.75%
4.75%
%
of the asset
10
62
Depreciation :
Depreciation on tangible fixed assets based on
estimated useful life
From a Rates regime to Useful Lives
Useful life of an asset is the period over
which the asset is expected to be
available for use by the entity or the
number of production or similar units
expected to be obtained from the asset
63
Depreciation of plant & machinery

based on industry category. Specified
industries:
Production and exhibition of

Steel (20-25 years)
motion picture films (13 years)
Glass manufacturing (8-13
years)
Non-ferrous metals (25-40

years)
Mines & quarries (8 years)
Medical & surgical

operations (13-15 years)
Telecommunication (13-18
years)
Pharmaceuticals and
Chemicals (20 years)
Exploration, production and

refining of oil & gas (8-30
years)
Civil construction (9-20

years)
Generation, transmission and Salt works (15 years)

distribution of power (22-40
years)
64
Notes
1. "Factory buildings" does not include offices, godowns,
staff quarters.
2. Where, during any financial year, any addition has been
made to any asset, or where any asset has been sold,
discarded, demolished or destroyed, the depreciation
on such assets shall be calculated on a pro rata basis
from the date of such addition or, as the case may be,
up to the date on which such asset has been sold,
discarded, demolished or destroyed.
3. The following information shall also be disclosed in the
accounts, namely:
(i) depreciation methods used; and
(ii) the useful lives of the assets for computing
depreciation, if they are different from the life specified
in the Schedule.
4. Useful life specified in Part C of the Schedule is for
whole of the asset. Where cost of a part of the asset is
significant to total cost of the asset and useful life of
Shah D. Shah & Associates
that part isD.P. different
from the useful life of the65
Notes (contd.)
5. Depreciable amount is the cost of an asset, or
other amount substituted for cost, less its residual
value. Ordinarily, the residual value of an asset is
often insignificant but it should generally be not
more than 5% of the original cost of the asset.
6. The useful lives of assets working on shift basis
have been specified in the Schedule based on
their single shift working. Except for assets in
respect of which no extra shift depreciation is
permitted (indicated by NESD in Part C above), if
an asset is used for any time during the year for
double shift, the depreciation will increase by
50% for that period and in case of the triple shift
the depreciation shall be calculated on the basis
of 100% for that period.
66
Notes (contd.)
7. From the date this Schedule comes into
effect, the carrying amount of the asset as
on that date
(a) shall be depreciated over the remaining
useful life of the asset as per this Schedule;
(b) after retaining the residual value, shall be
recognised in the opening balance of
retained earnings where the remaining
useful life of an asset is nil.
8. Continuous process plant means a plant
which is required and designed to operate
for twenty-four hours a day.
67
Some examples :
1. Where the useful life of assets still persist as
compared to the useful life of asset provided
under schedule II.
2. Useful life remains.xlsx
3. Where useful life of asset is over as
compared to useful life provided under
schedule II.
4. Useful life over.xlsx
D.P. Shah D. Shah &

Associates
68
Poser
CA 1956 had Schedule XIV wherein SLM Rates and WDV
rates were prescribed for different class of assets and

companies had an option to provide depreciation and
any of these rates.
Now CA 2013 has provided that depreciation has to be
provided as per Schedule II of the Act wherein useful life
of different class of assets have been provided and
depreciation has to be provided accordingly till 95% of
the value of asset is written of.
Does this mean that depreciation has to be written off
according to SLM only or still the companies have option
to provide depreciation based upon other methods ?
69
THANK YOU
70

Preparation of Financial Statements Under Companies Act 2013

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Preparation of Financial Statements Under Companies Act 2013

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PREPARATION OF

Companies Act -1956

Companies Act 2013

While discussing the new provisions under

Companies Act 2013 regarding preparation of

Companies Act 1956

Companies Act 2013

Section 2(8) provides definition

Section 2(12) defines `book

Section 2(17) defines Financial

Section 2(41) defines financial

Section 209 to Section 223

Section 128 to Section 137

Revised Schedule VI provides

Schedule III provides general

Provisions relating to Accounts

D.P. Shah D. Shah & Associates

Companies Act 1956

Companies Act 2013

Schedule XIV to the Act provides

Schedule II provides Useful

a. Manner of keeping books of

D.P. Shah D. Shah & Associates

Companies Act 1956

Companies Act 2013

Companies Act 1956

Companies Act 2013

(ii) all sales and purchases of

D.P. Shah D. Shah & Associates

paper is modified, so as to include minutes

D.P. Shah D. Shah & Associates

Companies (Account) Rules 2014 inter alia, provides manner

of keeping books of accounts in electronic mode. It reads as;

(4) The information in the electronic record of

(6) The company shall intimate to the Registrar on

Unlike The Companies Act 1956, now manner

If the managing director, the whole-time director in charge of

Companies Act 1956, did not permit inspection of

D.P. Shah D. Shah & Associates

It has been provided that a Director of the

D.P. Shah D. Shah & Associates

3. Maintenance of books of accounts in

D.P. Shah D. Shah & Associates

books of accounts together with vouchers be

D.P. Shah D. Shah & Associates

D.P. Shah D. Shah & Associates

Companies Act, 1956

Companies Act, 2013

D.P. Shah D. Shah & Associates

The definition of Financial Statement is not

provided under the Companies Act, 1956.

D.P. Shah D. Shah & Associates

MEANING OF FINANCIAL STATEMENT

Small Company (Contd..)

D.P. Shah D. Shah & Associates

Requirements of Financial Statement

with the AS & shall be in the form as provided in

form the end of the financial year.

Neither the Companies Act, 1956 nor AS 21

D.P. Shah D. Shah & Associates

Under the Companies Act, 2013 where a company

has one or more subsidiaries, it shall, in addition to

General Instructions for preparation of CFS

company will mutatis mutandis follow the