REVISED SCHEDULE VI

CA. Mahendra Mehta

CA Mahendra Mehta 1

DISCLAIMER

These are personal views of the author and shall neither be considered as professional advise nor be constructed to be the views of ICAI, any of its Region / Branch / Study Circle.

CA Mahendra Mehta 2

QUOTE FROM SWAMI VIVEKANANDA

Perfection does not come from belief or faith. Perfection comes through selfless work.

CA Mahendra Mehta 3

NECESSITY FOR REVISION

 Globally corporate Balance Sheets are classified balance sheets. Assets and Liabilities are presented based on current and non current classification. Where as In India Balance Sheets till date were unstructured.

 India Moved from controlled economy to a growing economy and to make Indian companies competitive and globally recognisable and to harmonizing and synchronizing Schedule VI with the notified Accounting Standards.

 Earlier Schedule VI did not provide any format for presentation of Statement of Profit & Loss leading to development of variety of dissimilar presentation.

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SALIENT FEATURES

 All assets and liabilities are classified into current and non-current categories which are at par with the requirements of Ind AS 1.

 The alternative and rarely used horizontal form of Balance Sheet is deleted.

 “Schedules” are now replaced by “Notes To Accounts”.

 Disclosure of shareholder holding more than 5% shares specifying the number of share held.

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SALIENT FEATURES

 Debit balance of Profit & Loss Account is to be presented in the Reserves & Surplus within bracket as a negative figure.

 Standardization of Statement of Profit & Loss.

 Separate Presentation of performance of Discontinuing Operations.

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SIMPLIFICATION OF DISCLOSURE REQUIREMENTS BY SCRAPPING THE FOLLOWINGS BALANCE SHEET ITEMS

 Relief from disclosing 5 years old details pertaining to aggregate number and class of shares allotted for consideration other than cash, bonus shares and shares bought back.

 Special reserve for repayment of capital and loans.

 Disclosure of debts regarding trade receivables from same management is omitted.

 Heading “Miscellaneous Expenditure (to the extent not written off or adjusted)” CA Mahendra Mehta 7

SIMPLIFICATION OF DISCLOSURE REQUIREMENTS BY SCRAPPING THE FOLLOWINGS PROFIT & LOSS ITEMS

 Item-wise quantitative details of purchases, opening and closing stock of goods traded.

 Status of completion of work in progress.

 Brokerage & Commission on sales.

 Payment to directors and detailed calculations under section 198 computation of profit u/s 349 with details of calculation of commission by percentage of profits.

as also  Special disclosures of information regarding licensed capacity, installed capacity and actual production for each class of goods.

 Item-wise quantitative details of raw material consumed.

 Item-wise quantitative details or value of opening and closing stock of goods purchased for manufacturing.

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OTHER DISCLOSURE REQUIREMENTS

 Disclosures as per notified Accounting Standards.

 Disclosures under Companies Act, 1956  Disclosures under statutes MSMED Act, 2006.

 Disclosures as per others ICAI pronouncements.

 In case of Listed Companies , disclosure under clause 32 of the Listing Agreement.

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OTHER PRESENTATION REQUIREMENTS

 Presentation of figures: Where Turnover:   < ` 100 crores = Figures to be in nearest hundreds, thousands, lakhs or millions or decimals thereof.

> ` 100 crores = Figures to be in nearest lakhs or millions or crore or decimals thereof.

 Once a unit of measurement is used, it should be used uniformly in the Financial Statements.

 Any item under which income or expenses exceed 1% of revenue from operations or ` 1,00,000 whichever is higher, shall be shown separately and distinct item against an appropriate account head in Profit & Loss statement. CA Mahendra Mehta 10

Particulars

PART I – FORMAT OF BALANCE SHEET

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period I. EQUITY AND LIABILITIES (1) 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 (c) Other current liabilities (d) Short-term provisions

TOTAL

New Line Item New Line Item CA Mahendra Mehta 11

Particulars

PART I – FORMAT OF BALANCE SHEET

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period II. ASSETS (1) Non-current Assets

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

TOTAL

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Line Items for Share capital

{

FOR EACH CLASS OF SHARE CAPITAL} (DIFFERENT CLASSES OF PREFERENCE SHARES TO BE TREATED SEPARATELY) Particulars

Authorized Issued Subscribed & Fully paid up Subscribed & not Fully paid up Par value per share Calls Unpaid  By Directors  By Officers  By Others Forfeited Shares(amount originally paid-up) The rights, preferences & restrictions attaching to each class of shares including restrictions on the distribution of dividends & the repayment of capital.

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

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Line Items for Share capital

{

FOR EACH CLASS OF SHARE CAPITAL} (DIFFERENT CLASSES OF PREFERENCE SHARES TO BE TREATED SEPARATELY) Particulars

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.

Shares in the company held by each shareholder holding more than 5% shares specifying the number of shares held Shares reserved for issue under options and contracts/commitment for the sale of shares/disinvestment, including the terms & amounts For the periods of 5 years immediately preceding the date as at which the Balance Sheet is Prepared - Aggregate number & class of shares allotted as fully paid up pursuant to contract(s) without payment being received in cash.

- Aggregate number & class of shares allotted as fully paid up by way of bonus shares

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

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Line Items for Share capital

{

FOR EACH CLASS OF SHARE CAPITAL} (DIFFERENT CLASSES OF PREFERENCE SHARES TO BE TREATED SEPARATELY) Particulars

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.

a reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period.

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

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LINE ITEMS FOR RESERVES & SURPLUS

Particulars

Capital Reserves Capital Redemption Reserves Securities Premium Reserves Debenture Redemption Reserves Revaluation Reserves Share Option Outstanding Account Other Reserves(Net of debit balance of Profit & Loss Account) Surplus Total

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

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SHARE APPLICATION MONEY PENDING ALLOTMENT

 Share application money not exceeding the issued capital and to the extent not refundable is to be disclosed under this line item.  However, the following should be shown under the head “Other Current Liabilities:  The amount of share application money received over and above the authorised capital,   The amount of excess of subscription or If the requirement of minimum subscription are not met ,”.

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CLASSIFICATION OF 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) c) d) It is held primarily for the purpose of being traded; It is due to be settled within 12 months after the reporting date; or The company does not have an unconditional right to defer settlement of the liability for at least 12 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

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OPERATING CYCLE

 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

have a duration of 12 months.

assumed to

 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 business into current and non current, depending upon the operating cycle for the respective business.

LINE ITEMS FOR LONG TERM BORROWINGS

Particulars Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Bonds/Debentures Term loans i.

From Banks ii.

From other parties Deferred payment liabilities Deposits Loans and advances from related parties Long-term maturities of finance lease obligations Other loans and advances(specify nature) Borrowings shall further be sub-classified as secured & unsecured. Nature of security shall be specified separately in each case.

Where loans have been guaranteed by directors or others, the aggregate amount of such loans under each head shall be disclosed CA Mahendra Mehta 20

LINE ITEMS FOR OTHER LONG TERM LIABILITIES

Particulars

Trade payables – 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 rendered in the normal course of business.

Others Example: long term operating lease, retention money from contractor’s bill, etc.

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

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LINE ITEMS FOR SHORT TERM BORROWINGS

Particulars

Loans repayable on demand I.

From Bank II.

From Others Loans and advances on related parties Deposits Other loans and advances(Specify nature)

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

 Borrowings shall further be sub-classified as secured & unsecured. Nature of security shall be specified separately in each case.

 Where loans have been guaranteed by directors or others, the aggregate amount of such loans under each head shall be disclosed CA Mahendra Mehta 22

LINE ITEMS FOR OTHER CURRENT LIABILITIES

Particulars Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Current maturities of long-term debt Current maturities of finance lease obligations Interest accrued but not due on borrowings Interest accrued and due on borrowings Income received in advance Unpaid dividend Application money received for allotment of securities and due refund interest accrued thereon Unpaid matured deposits and interest accrued thereon Unpaid matured debentures and interest accrued thereon Other payables(Specify nature) CA Mahendra Mehta 23

CLASSIFICATION OF CURRENT ASSETS

An asset shall be classified as current when it satisfies

any

of the following criteria:

(a) It is expected to be realised in, or is intended for sale or consumption in, the company’s normal operating cycle; (b) (c) It is held primarily for the purpose of being traded; It is expected to be realised within 12 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 12 months after the reporting date

All other assets shall be classified as non-current

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Particulars

LINE ITEMS FOR TANGIBLE ASSETS

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Land Buildings Plant and Equipment Furniture and Fixtures Vehicles Office equipment Others(specify nature)  The revised Schedule VI requires that leasehold assets shall be separately presented.

 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, acquisition, through business combinations and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed.

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Particulars

LINE ITEMS FOR INTANGIBLE ASSETS

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Goodwill Computer Software Brands/Trademarks Mastheads and Publishing titles Mining rights Copyrights and patents and other intellectual property rights, services and operating rights Recipes, formulae, models, designs, and prototypes Licenses and franchise Others(specify nature) CA Mahendra Mehta 26

CAPITAL WORK-IN-PROGRESS

Particulars Construction stage is normally decomposed into the following three stages:  Preliminary stage  Pre-acquisition stage  Acquisition or Construction stage Requirement The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if: a) It is probable that future economics benefits associated with the item will flow to the entity; and b) The cost of the item can be measured reliably.

Following are the type of the cost that cab be capitalized: a) Costs of options to purchase the asset.

b) Incremental direct costs with independent third parties c) Directly related employees benefit costs.

d) Depreciation and incremental costs of directly related equipment.

e) Cost of inventories consumed.

f) Property taxes.

g) Cost of site preparation and development.

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INTANGIBLE ASSETS UNDER DEVELOPMENT

An internally generated intangible assets has to undergo through two important phases – Research and Development Phases.

Research Phases Development Phases

An intangible asset is not recognized out of activities carried out in the research phase. This is because an entity cannot demonstrate probable flow of economic benefits arising out of the intangible asset which is just in the research phase.

Conditions for recognition of development phase activities as intangible asset a) Technical feasibility b) Intention c) Ability d) Probable future economics benefits e) Resources availability f) Reliable measurement of cost CA Mahendra Mehta 28

LINE ITEMS FOR NON CURRENT INVESTMENTS

Particulars Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Investment property Investments in Equity Instruments Investments in preference shares Investments in Government or trust securities Investments in debentures or bonds Investments in Mutual Funds Investments in partnership firms Other non-current investments(Specify nature)   Disclose market value of quoted investments.

Aggregate provisions made for diminution in value of investments.

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LINE ITEMS FOR LONG TERM LOANS & ADVANCES

Particulars

Capital Advances Security Deposits; Loans and advances to related parties(giving details thereof) Other loans and advances(Specify nature)

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period It will further classified as:

 Secured, considered good     Unsecured, considered good Doubtful Provision for doubtful debts due from directors Amount due from partnership firms and private companies in which one of the directors are partners or directors CA Mahendra Mehta 30

LINE ITEMS FOR CURRENT INVESTMENTS

Particulars Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Investments in Equity Instruments Investments in preference shares Investments in Government or trust securities Investments in debentures or bonds Investments in Mutual Funds Investments in partnership firms Other non-current investments(Specify nature)    As per AS 13 current investments are measured at lower of the cost or fair value.

Disclose market value of quoted investments.

Aggregate provisions made for diminution in value of investments.

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LINE ITEMS FOR INVENTORIES

Particulars Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Raw materials Work-in-progress; Finished goods Stock-in-trade(in respect of goods acquired for trading) Stores and spares Loose tools Others(specify nature);   Goods-in-transit shall be disclosed under the relevant sub-head of inventories Mode of valuation shall be stated CA Mahendra Mehta 32

Particulars

LINE ITEMS FOR TRADE RECEIVABLES

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Due for a period of six months from the due date of payment Allowance for doubtful debts Debts due  By directors  By other officers of the company  By any of them either severally    By jointly with any other person By firms By private companies respectively in which any director is a partner or director or member.

It will further classified as:

 Secured, considered good   Unsecured, considered good Doubtful CA Mahendra Mehta 33

LINE ITEMS FOR CASH AND CASH EQUIVALENTS

Particulars Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Balance with Banks  Unpaid Dividend  Margin Money  Bank deposits Cheques, Drafts on hand Cash-on -Hand Others(Specify) Other examples :   Preference shares having remaining maturity of 3 months and insignificant risks.

Investment in T-Bills and bonds issued by central and state Government , etc.   and which are having remaining maturity 3 months or less as on the reporting date.

Money market funds permitting withdrawal by cheque. Cheque from customers awaiting deposits CA Mahendra Mehta 34

LINE ITEMS FOR SHORT TERM LOAN & ADVANCES Particulars Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Loans and advances to related parties(giving details thereof) Others(specify nature)

It will further classified as:

 Secured, considered good     Unsecured, considered good Doubtful Provision for doubtful debts due from directors Amount due from partnership firms and private companies in which one of the directors are partners or directors CA Mahendra Mehta 35

PART – II : STATEMENT OF PROFIT & LOSS

Particulars Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Revenue from Operations Other Income Total Revenue ( I + II) Expenses Cost of Materials Consumed Purchases of Stock in Trade Changes in inventories of finished goods Work in progress and stock in trade Employee Benefit expense Finance Costs Depreciation and amortization expense Other expenses Profit Before Exceptional and extraordinary items and tax Exceptional Items CA Mahendra Mehta 36

PART – II : STATEMENT OF PROFIT & LOSS

Particulars Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

Profit Before extraordinary items and tax Extraordinary Items Profit Before Tax Tax Expense Current Tax Deferred Tax Profit (loss) for the period from continuing operations Profit (loss) from discontinuing operations Tax expense of discontinuing operations Profit(loss) from discontinuing operations (after tax) Profit (loss) for the period Earnings per equity share Basic Diluted CA Mahendra Mehta 37

REVENUE FROM OPERATIONS

Particulars

(i) Revenue from operations in respect of non finance company (a) Sale of Products (b) Sale of Services (c) Other Operating Revenues Less: Excise Duties (ii) Revenue from operations in respect to Finance company: (a) Interest (b) Other Financial Services

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

CA Mahendra Mehta 38

OTHER INCOME

Particulars

a) Interest Income (other than a finance company) b) i) Dividend from Subsidiary companies ii) Dividend c) Net Gain/Loss on sale of investments.

d) Other non-operating income (net of expense directly attributable to such income) e) Adjustment to the carrying value of investment (Write-back) f) Net gain/loss on foreign currency translation and transaction(other than considered as finance cost)

Note No.

Figures as at the end of the current reporting period Figures as at the end of the previous reporting period

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PRIOR PERIOD ITEMS

The Revised Schedule VI does not require separate presentation of prior period items on the face of the Statement of Profit or Loss. It requires separate disclosures under Clause 5(i)(l) of part II of the Revised Schedule VI.

However, Paragraph 15 of AS 5 Net profit or Loss for the period, Prior Period Items and Changes in Accounting policies requires: “ The nature and amount of prior period items should be separately disclosed in the Statement of Profit and loss in a manner that their impact on the current profit or loss can be perceived” The words “in the Statement of profit and loss” would mean on the face of the profit and loss. The best approach to explain the impact would be to add a separate line item before “V. Profit Before Exceptional and Extraordinary Item” on the face of the Statement of Profit or Loss CA Mahendra Mechta 40cc

EXCEPTIONAL ITEMS & EXTRAORDINARY ITEMS  Exceptional items transactions that fall – Material items which derive from events or within the ordinary activities of the reporting entity and which individually or if of a similar type, in aggregate, need to be disclosed by virtue of their size or incidence if the financial statements are to give a true and fair view.

 Extraordinary items – Material items possessing a high degree of abnormality which arise from events or transaction that fall outside the ordinary activities recur.

of the reporting entity and which are not expected to CA Mahendra Mechta 41

FEATURES OF NOTES TO ACCOUNTS

 “Schedules” are now replaced by “Notes to Accounts”.

 Notes to accounts shall  contain supplementary information  mark cross reference and  maintain balance between providing relevant information and information overload.

 Notes to accounts shall contain information in addition to that presented in the Financial Statements and shall provide where required: a) narrative descriptions or disaggregation of items recognised in those statement and b) Information about items that do not qualify for recognition in those statements.

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NOTES TO ACCOUNTS

Notes to accounts shall disclose details of: 1.

Significant accounting policies 2.

Share Capital 3.

4.

5.

6.

7.

8.

9.

Reserves and Surplus Long term borrowings Other Long term liabilities Long term provisions Short-term borrowings Other current liabilities Short-term provisions 10.

11.

12.

Tangible assets Intangible assets Non-current investments CA Mahendra Mehta 43

NOTES TO ACCOUNTS

21.

22.

23.

24.

25.

13.

14.

15.

16.

17.

18.

19.

20.

Other long term loans and advances Other non-current assets Current investments Inventories Trade receivables Cash and cash equivalents Short-term loans and advances Other current assets Contingent liabilities and commitments Revenue from operations Other Income Cost of materials consumed Purchase of traded goods CA Mahendra Mehta 44

NOTES TO ACCOUNTS

26.

27.

28.

29.

30.

31.

32.

Changes in inventories of finished goods, work-in-progress and stock-in-trade Employee benefits expense Finance cost Other expenses Exceptional items, if any Extraordinary items, if any Additional information to the financial statements.

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COMPUTATION OF OPERATING CYCLE

Particulars

Months

Holding period Raw Materials Holding period of finished products Production cycle Collection period of trade receivables Payment period of trade payables 5 months 4.5 months 0.5 months 3 months 3 months

Gross Operating Cycle 13 Months Operating cycle means gross operating cycle. Payment period for trade payable is not deducted.

WEIGHTED AVERAGE RAW MATERIAL HOLDING PERIOD

Raw material inventories

RM 1

Holding period

5

Average inventory holding Weight Weighted average raw material holding period

300 15.92% 0.80

RM 2 RM 3 RM 4 RM 5 3 2 1 1 200 100 800 485 1885 10.61% 5.31% 42.44% 25.73% 0.32

0.11

0.42

0.26

1.90

WEIGHTED AVERAGE PRODUCTION CYCLE

Production cycle Average production time

Pro 1 0.5

Average Work-in Progress

500

Weight

31.25%

Weighted average production cycle

0.16

Pro 2 Pro 3 0.75

0.25

400 700 1600 25.00% 43.75% 0.19

0.11

0.45

WEIGHTED AVERAGE FINISHED GOODS HOLDING PERIOD

Finished Goods Related Work-in Progress

FG 1 P 1

Average holding period Average inventory

5 1000

Weight

31.25%

Weighted average finished goods holding period

1.56

FG 2 P 2 FG 3 P 3 4 3 1200 37.50% 1000 31.25% 3200 100% 1.50

0.94

4.00

WEIGHTED AVERAGE COLLECTION PERIOD

Trade Receivables Collection Period Average receivables Weight Weighted average collection period

Wholesalers having net worth

>

Rs.10000 Wholesalers having net worth

<

Rs.10000

TR1 TR2 3 4 1100 2000 35.48% 64.52% 1.06

2.58

3100 3.65

Summary

Weighted average raw material holding period Weighted average production cycle Weighted average finished goods holding period Weighted average collection period Operating cycle

Months

1.90

0.45

4.00

3.65

10

Any specific inventory purchased for a special purpose, a special production lot or a special sale contract are not taken into account as that will distort the normal operating cycle of an enterprise

.

QUOTE FROM SWAMI VIVEKANANDA

Knowledge can only be got in one way, the way of experience; there is no other way to know.

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Thank you

These are personal views of the author and shall neither be considered as professional advise nor be constructed to be the views of ICAI, any of its Region / Branch / Study Circle.

CA Mahendra Mehta 53