A PROJECT REPORT ON REVISED SCHEDULE VIFOR AMD & COMPANYMASTER OF MANAGEMENT STUDIES (MMS) UNIVERSITY OF MUMBAI SUBMITTED TO MARATHA MANDIRS BABASAHEB GAWDE INSTITUTE OF MANAGEMENT STUDIES MUMBAI CENTRAL

SUBMITTED BY:NIRAV JASWANT DARJIBATCH: 2011-13ROLL NO: 09

DECLARATION

I, Nirav Jaswant Darji student of Masters of Management Studies (Semester III) of Babasaheb Gawde Institute of Management Studies (BGIMS), hereby declare that I have successfully completed this project on REVISED SCHEDULE VI as a part of my Summer Internship. The information incorporated in this project is true and original to the best of my knowledge.

____________________________________ Signature

ACKNOWLEDGEMENT

I would like to acknowledge extremely valuable assistance provided by all the Officers and other staff members for their great cooperation. They provide the proper guidance and support time to time which helps me a lot to work in such competitive environment and the timely completion of assignments. The office working environment is very good. First of all I would like to thank Mr .Arvind Darji (Partner) for giving me an opportunity to work as summer trainee in AMD & Company and also I would like to thank to all the staff members for their cooperation & help given by them.Their experiences & feedback kept me on track and helped me produce much better results.

INDEX

ChapterTopicsPage No.

1.Executive Summary5

2.Company Profile 6-16

2.1About Firm6

2.2Clients7

2.3 Range Of Services Provided by AMD Group8-16

3.Introduction of Revised Schedule VI17

4.Objectives of study18

5.Literature Review19-44

5.1Major principles as per Revised Schedule VI19-22

5.2Liabilities New disclosure requirements 23-26

5.3Assets New disclosure requirements27-32

5.4Major changes in the format of Balance Sheet33-42

5.5Major changes in the format of Statement of Profit and Loss43-48

6.Observation 49-50

7.Data Analysis51-54

8.Interpretation 55-59

9.Limitations60-79

9.1Issues relating to balance sheet60-72

9.2Issues relating to P&L account73-79

10.Conclusions80

11.Bibliography81

CHAPTER -1 EXECUTIVE SUMMARYThe Ministry of Corporate Affairs of the Government of India has been taking many initiatives for overhauling the Companies Act, 1956 through major amendments, circulars and notifications. To make Indian business and companies competitive and globally recognisable, a need was felt that format of Financial Statements of Indian corporate should be comparable with international format. Since most of the Indian Accounting Standards are being made at par with the international Accounting Standards, the changes to format of Financial Statements to align with the Accounting Standards will make Indian companies competitive on the global financial world. Taking cognizance of imperative situation and need, the Ministry of Corporate Affairs revised the existing Schedule VI to the Companies Act, 1956 and made it applicable to all companies for the Financial Statements to be prepared for the financial year commencing on or after April 1, 2011.

CHAPTER 2 COMPANY PROFILE2.1 About FirmAMD & CO (previously known as Arvind Darji Associates) is a Chartered Accountancy Firm based in Mumbai, India. The firm was started by Mr. Arvind M Darji in 1988 and now is being supported by team of qualified professionals under his leadership.We were also selected by Honourable Special Court of India to conduct Investigation audit of M/s. Abhay D. Narottam. In India, a large Security Scam had taken place in the year 1992-93 in which public fund to the tune of US $ 3 Billion was siphoned off. We were chosen by the Court to audit the accounts of one of the important scam player M/s. Abhay D Narottam. We successfully completed the assignment to the satisfaction of Honourable Special Court.We, AMD & CO, focus at providing tailor made solutions to challenging problems of our clients, and perform high quality and timely service.AMD & CO, a professional firm, offers its clients a full range of services, including financial, business advisory, tax regulatory services, etc.Our clients include listed and non-listed companies and cover a broad spectrum of industries ranging from Construction, Iron and Steel , Dairy and Food Products, Healthcare, Gems and Diamond , Film production, Forgings, Automotive, Power and Information Technology. With India poised for playing a major role in the growth of the world economy, we are well positioned to take on the rising demand for audit and allied services from the domestic as well as the overseas companies.2.2 Clients

We offer a wide range of financial and consultancy services to Corporate, Firms and other entities. Over time, we have acquired experience of servicing diverse industries as follows:

FMCG Real estate and Construction Drugs and Pharmaceuticals Welding and fabricator Gems and jewellers Manufacturing and supplying mechanical spares to thermal & gas power plants Milk, Ghee, Dairy and other food products Iron and Steel financial and Investment sector Entertainment Trust Professionals

2.3 Range Of Services Provided by AMD Group

1. Corporate Advisory & Compliance Assistance in incorporation of Company which includes obtaining the name approval, drafting of the Memorandum and Articles of Association of the Company, liaising with the Registrar of Company for obtaining the Certificate of Incorporation etc. Assistance in registering with STPI, FIPB and RBI where applicable.

Advice on various matters under the Companies Act, 1956. Identification of issues related to Companies Act, 1956 and providing suitable guidance and solution. Drafting and maintenance of minutes of Board and Shareholders meeting, Maintenance of statutory records and registers. Business Advisory for promoters & senior management in respect to long term strategy Brand Building, Growth Plans and Related Matters. Assistance in preparation and filing of various Forms and Returns with the Registrar of Companies.

2. Audit and AssuranceAuditing & Assurance Services are vital for any Financial Management setup. It ensures proper working of the organization according to laid down internal controls and also the efficiency and effectiveness of the controls itself, to identify deficiency in the system, if any and suggest corrective measures. At AMD & CO, we offer a complete range of Assurance Solutions to help improve your financial efficiency, accuracy and stability.Our Audit & Assurance Services include:- Statutory Audit Internal/operational/Management/system Audit Tax Audit Special purpose Audit Pre-Audit Compilations Due Diligence Corporate Compliance Opinions on Indian Accounting Standards and International Financial Reporting Standards (IFRS) Conversion from Indian GAAPs to IFRS3. Tax Planning Tax Planning, Tax Management, Corporate Taxation. Representing before tax authorities including Tax Appellate Tribunals for assessment proceedings, appeal and petitions. Representation for Search and Seizure cases, Representation before the Ministry of Finance for approvals/exemptions under Tax Statute. Advising business entities on tax implications consequent to acquisition or succession. Advising of tax strategies for reconstruction of entities, acquisitions, amalgamations, liquidation and mergers. Making applications to Specified Authorities for tax rebate/exemptions under Income Tax Act. Taxation of NGO.

4. FEMA / International TaxationWe provide advisory and compliance services encompassing the entire gamut of foreign exchange law as detailed below: Compliance of the procedure including chartered Accountants Certification for repatriation of income / assets from India Residential status Investment in Business in India directly and by floating offshore companies Setting up a branch/liaison/project office in India Portfolio investments in India Banking and remittances Formation of Company and Setting up a branch outside India Advising on Double Taxation Avoidance Agreement (DTAA) treaty with various countries. Any specific advice required in relation to FEMA / RBI matters Transfer pricing procedural compliances and audit. International taxation

5. Start-up VenturesWe act as business advisors and financial consultants to strategize and overseas the implementation of business initiation plans. We support start-up ventures at all stages of the business cycle - from identifying appropriate entry routes to assisting in deal structuring and providing post set-up services.

Entry strategyWe suggest, plan and implement entry strategy in India for your business by doing an analysis of various factors i.e. Compliance with applicable Statutes, Taxation, Designing and structuring of suitable entity, etc.

Financial modellingWe enable creation of dynamic financial models for your business, incorporating all possible factors that would impact the return and risk associated with the venture.

Location studiesWe offer various location studies by evaluating the relative advantage of different Location based on well-defined multi-perspective geographic, economic, political and International taxation factors.

Joint Ventures/ Partner search and evaluationThis includes identifying potential partners, evaluating their strengths, weaknesses and synergistic capabilities besides recommending appropriate Joint Venture structures.

Due diligence reviewsWe conduct in-depth transaction scrutiny on credentials of Indian/ foreign companies/ groups prior to entering into business venture.

Regulatory approvalsWe arrange for the complete set of regulatory approvals required from Foreign Investment Promotion Board (FIPB)/ Secretarial of Industrial Approvals (SIA), Reserve Bank of India (RBI), Registrar of Companies (ROC) and other concerned authorities.

Representative office facilityWe organize the office infrastructure and manpower during the 'in transit period' of a start up when it is in the process of setting up office in India.

6. Corporate law compliance Give you complete peace of mind by carrying out your corporate law compliances. Company formations. Preparation and filing of statutory returns. Preparation of all documentation related to minutes and resolutions. Maintenance of statutory books. Advice related to Stock Exchange Compliances. General advice on company law/SEBI issues. 7. NRI ServicesWe have creditable experience of providing multitude of services to a diverse client profile. Where can we help ? Compliances regarding repatriation of assets to/from India. Procedure for redesignation of all Indian bank accounts. Opening of Resident foreign currency (RFC) account. Information to all companies, funds, etc., of whom shares and securities are held by the non-resident, regarding the change of residential status/relocation to India. Compliance in respect of the Indian income-tax Act, 1961 e.g. application for PAN in case you do not have a PAN. Compliances in respect of Wealth-tax Act, in case required e.g. filing of wealth-tax return. Repatriation of legacies/inherited assets and taxability in India thereon Facilitate clearance required under FEMA from RBI to continue to hold assets outside India. Facilitate re-investment of sale proceeds of assets acquired outside India. Plan residential status under FEMA and Income Tax Services. Plan tax liability in India. Make fresh investments in business outside India. Investment and business consultancy in India.

8. Project and Trade Finance, PE Funding, OTS and DRTFinance is the life blood of any organization, having too less of blood leads to anemia in human beings, similarly paucity of finance leads to decrease in activities or shelving of future expansion plans of any organization and may even lead to failure of business. We offer services for arranging finance for businesses to meet its various needs. Our services include PE (Private Equity) Funding, Project Financing through banks and other financial institutions etc. Brief details of our services are provided below.Project and Trade FinanceWe provide funding advisory services for various requirements of our clients like Project Financing, Term Loan, Working Capital Limits, CC Limits, Packing Credit, Overdraft etc. We provide end to end services starting from assessment of client requirements, preparation of project reports / financial statements till finalization of funding and disbursement. We have liaison with various banks, financial institutions and other funding agencies and have expertise in the procedures adopted by them for the funding process.

Private Equity FundingPrivate Equity funding is one of the least cost funding available (as compared to debt) for high growth prospect companies. PE Funding do not require any fixed commitment of returns and are looking for medium term capital appreciation of their investments. These funding options are mostly viable for high growth prospect companies requiring financial resources for future expansion. We provide end to end services for obtaining PE Funding and are currently dealing with most of major PE Funding companies in India.

9. Business Process Outsourcing(BPO)Large and Small firms, Businesses and individuals are now getting into outsourcing of various parts of their accounting, taxation, auditing work. It is more affordable to let a dedicated group of specialists do the work for you. The firm offers outsourcing services in the areas of accountancy and book keeping. This includes maintenance of books and records as well as the preparation and finalization of accounts. The firm also helps its clients in recruitment of personnel in fields of accounting and finance.

CHAPTER-3 INTRODUCTION OF REVISED SCHEDULE VISchedule VI to the Companies Act, 1956 (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 enhancing the disclosure requirements under the Old Schedule VI to the Act and harmonizing and synchronizing them with the notified Accounting Standards as applicable (AS/Accounting Standard(s)). Accordingly, the Ministry of Corporate Affairs (MCA) has issued a revised form of Schedule VI on February 28, 2011.The Schedule applies to all companies for the Financial Statements to be prepared for the financial year commencing on or after April 1, 2011. The requirements of the Revised Schedule VI however, do not apply to companies as referred to in the proviso to Section 211 (1) and Section 211 (2) 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 Balance Sheet and Profit and Loss account has been specified in or under any other Act governing such class of company. 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 there under, prescribe any specific format for presentation of Financial Statements by an electricity company. Section 616(c) of the Companies Act states that the Companies Act will apply to electricity companies, to the extent it is not contrary to the requirements of the Electricity Act. Keeping this in view, Revised Schedule VI may be followed by such companies till the time any other format is prescribed by the relevant statute.

CHAPTER-4 OBJECTIVE OF STUDY Learnt how to make balance sheet and profit & loss account as per Revised Schedule VI. To understand procedure of such amendment. To learn the impact of change in the Revised Schedule VI towards the company.

CHAPTER-5 LITERATURE REVIEW5.1 Major principles as per Revised Schedule VIRevised Schedule VI has eliminated the concept of Schedules. Such information will now have to be provided in the Notes to accounts. Accordingly, the manner of cross-referencing to various other information contained in financial statements will also be changed to Note number as against Schedule number in pre-revised Schedule VI.As per general instructions contained in the Revised Schedule VI, the terms used shall carry the meanings as per the applicable Accounting Standards (AS).As per the ICAI GN, the applicable AS for this purpose shall mean the AS notified by the Companies (Accounting Standards) Rules, 2006.Revised Schedule VI requires that if compliance with the requirements of the Companies Act, 1956 (Act) and/or AS requires a change in the treatment or disclosure in the financial statements, the requirements of the Act and/or AS will prevail over Revised Schedule VI.As per preface to the AS issued by ICAI, if a particular AS is not in conformity with law, the provisions of the said law or statute will prevail. Using this principle, disclosure requirements of existing Schedule VI were considered to prevail over AS. However, since the Revised Schedule VI gives specific overriding status to the requirements of AS notified by the Companies (Accounting Standards) Rules, 2006, the same would prevail over the Revised Schedule VI.There are several instances of conflict between provisions of the Revised Schedule VI and the notified AS e.g., definition of Current Investments as per the Revised Schedule VI and AS-11, definition of Cash and Cash Equivalents as per the Revised Schedule VI and AS-3, treatment of proposed dividend as per the Revised Schedule VI and AS-4, etc. In all such cases, provisions of the AS will prevail over the Revised Schedule VI.The nomenclature for the Profit and Loss account is now changed to Statement of Profit and Loss. Also, only the vertical format is prescribed for both Balance Sheet and the Statement of Profit and Loss.The format of the Statement of Profit and Loss as per the Revised Schedule VI does not contain disclosure of appropriations like transfer to reserves, proposed dividend, etc. These are now to be disclosed in the Balance Sheet as part of adjustments in Surplus in Statement of Profit and Loss contained in Reserves and Surplus. Further, debit balance of profit and loss account, if any, is to be disclosed as a reduction from Reserves and Surplus (even if the final figure of Reserves and Surplus becomes negative).It is clarified by the Revised Schedule VI that the requirements mentioned therein are minimum requirements. Thus, additional line items, sub-line items and sub-totals can be presented as an addition or substitution on the face of the financial statements if the company finds them necessary or relevant for understanding of the companys financial position. Also, in preparing the financial statements, a balance will have to be maintained between providing excessive detail that may not assist users of the financial statements and not providing important information as a result of too much aggregation.Revised Schedule VI requires use of the same unit of measurement uniformly throughout the financial statements and Notes to Accounts. Rounding off requirements, if opted, are to be followed uniformly throughout the financial statements and Notes to Accounts. The rounding off requirements as per prerevised Schedule VI and as per the Revised Schedule VI are summarised in the following table:Pre-revised Schedule VIRevised Schedule VI

Turnover less than Rs.100 croreRound off to the nearest hundreds, thousands ordecimal thereofTurnover < Rs.100 crore

Round off to the nearest hundreds, thousands, lakhs or millions or decimal thereof.

Turnover Rs.100 to 500 croreRound off to the nearest hundreds, thousands, lakhs or millions or decimal thereofTurnover over Rs.100 croreRound off to the nearest lakhs, millions or crores, or decimal thereof.

Turnover over Rs.500 croreRound off to the nearest hundreds, thousands, lakhs, millions or crores, or decimal thereof.

Some disclosures no longer required in the Revised Schedule VIThe disclosure requirements as per the Revised Schedule VI do not contain several disclosures which were required by pre-revised Schedule VI. Some of these are:(a) Disclosures relating to managerial remuneration and computation of net profits for calculation of commission;(b) Information relating to licensed capacity, installed capacity and production;(c) Information on investments purchased and sold during the year;(d) Investments, sundry debtors and loans & advances pertaining to companies under the same management;(e) Maximum amounts due on account of loans and advances from directors or officers of the company;(f) Commission, brokerage and non-trade discounts; and(g) Information as required under Part IV of pre-revised Schedule VI.

5.2 Liabilities New disclosure requirements 1. Share Capital a. Reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period b. The rights, preferences and restrictions attached to each class of shares including restrictions on the distribution of dividends and the repayment of capital c. Shares of each class 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. d. Shares in the company held by each shareholder holding more than 5 percent shares specifying the number of shares held. This clause requires number of shareholders holding more than 5 % shareholding and total number of shares hold by those shareholders. e. Shares reserved for issue under options and contracts/commitments for the sale of shares/disinvestment, including the terms and amounts 2. Shares Application money pending Allotment (including advance against share application money) a. Exhaustive disclosure requirement in case of above now prescribed. For e.g. 1. Terms and conditions for issuance of shares 2. Amount of premium and period before which new shares need to be issued 3. Period of pendency of such allotment and reasons for such 4. That the company is having sufficient authorized capital to cover the share capital amount resulting from allotment of shares out of Share application money. 3. Reserves & Surplus a. The balance of Reserves and Surplus, after adjusting negative balance of surplus (profit & loss account), if any, shall be shown under the head Reserves and Surplus even if the resulting figure is in the negative. 4. Non-current Liabilities a. Format 1. Long-term borrowings 2. Deferred tax liabilities (Net) 3. Other long term liabilities 4. Long-term provisions b. Significant new disclosure requirements in case of: 1. Long term borrowings (i) Related parties transactions in case of long term loans and advances as a sub line item of long term borrowings. (ii) Terms of repayment of all loans now need to be stated (iii) Period and amount of continuing default as on the balance sheet date in repayment of loans and interest, to be specified separately in each case. 2. Other Long term liabilities (i) Trade payables now need to be bifurcated into current and non-current. Non-current part to appear here.

3. Long term provisions (i) Provision for employee benefits now to be classified under current and non-current. Non-current part to appear here. This calls for realignment of earlier years reporting figure also. 5. Current Liabilities a. Format 1. Short-term borrowings 2. Trade payables 3. Other current liabilities 4. Short-term provisions b. Significant additional requirements in case of 1. Short term borrowings (i) Related parties transactions in case of short term loans and advances as a sub line item of short term borrowings. (ii) Period and amount of continuing default as on the balance sheet date in repayment of loans and interest, to be specified separately in each case. 2. Other current liabilities (i) Interest accrued but not due on borrowings. It should be applicable for interest payable within 12 months after the end of the reporting period. In other cases same should form part of non-current liability. (ii) Application money received for allotment of securities and due for refund.

3. Short term provisions (i) Provision for employee benefits now to be classified under current and non-current. Current part to appear here. This calls for realignment of earlier years reporting figure also.

5.3 Assets New disclosure requirements Assets are now required to be reported under current and non-current. 1. Non-current assets a. Format 1. Fixed Assets a. Tangible Assets b. Intangible Assets c. Capital Work in progress Related to Tangible assets d. Intangible assets under development 2. Non-current investments 3. Deferred Tax assets (net) 4. Long term loans and advances 5. Other non-current assets b. Significant disclosure requirements in case of 1. Tangible assets a. Assets under lease shall be separately identified under each class of asset. b. Any acquisitions through business combinations and other adjustments and the related depreciation and impairment losses/reversal shall be disclosed separately. The term Business combination however has not been defined under The Companies Act or any of the notified Accounting standards. The definition of business combination as defined under Ind AS 103 on Business Combinations can be referred here as; A transaction or other event in which an acquirer obtains control of one or more businesses. Transactions sometimes referred to as 'true mergers' or 'mergers of equals' are also business combinations as that term is used in this IFRS. The above seems having no significant impact under existing scenario where the term has not been used by the existing notified Accounting Standards except the separate disclosure of addition/deduction in case of Amalgamation as defined under Accounting standard -14 on Accounting for Amalgamations. c. The Conflict of Schedule VI and existing notified Accounting Standard relating to accounting treatment of forex loss/gain of long term loans, especially in case of capitalization, has been removed under revised guidelines by way of not prescribing any guidelines for such treatment under revised schedule VI. Now the accounting treatment of foreign exchange fluctuation will be governed by Accounting standard 11 The effects of changes in foreign exchange Rates together with effect of notification no. GSR 225(E) dated 31.3.2009 d. Now separate disclosure requirements for office equipment under tangibles Assets. However the requirement of disclosing Railways sidings, development of properties and live stocks has been removed and now can be merged with suitable sub headings or can be shown separately under other 2. Intangible assets a. Intangible assets are to be classified as:

i. Goodwill ii. Brands/trademarks iii. Computer software iv. Mastheads and publishing titles v. Mining rights vi. Copyrights, and patents and other intellectual property rights, services, and operating rights vii. Recipes, formulae, models, designs and prototypes viii. Others (Specify nature) 3. Non-current Investments a. Non-current investments to be further classified into trade investments and other investments and further classified as: i. Investment property ii. Investments in Equity Instruments iii. Investments in preference shares iv. Investments in Government or trust securities v. Investments in debentures and bonds vi. Investments in Mutual funds vii. Investments in partnership firms Note: There was no separate disclosure requirement for investment property earlier. Investment property has been defined under AS- 13 Accounting for Investments as an investment in land or building that are not intended to be occupied substantially for use by , or in the operations of , investing enterprise. Now under the revised guidelines, investment property needs to be disclosed separately under the head non-current investments and guidelines of AS-13 shall be applied. b. 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). c. The Requirement of investment purchased and sold during the year and disclosure of investment in Companies under same management has been done away with. 4. Long term Loans and advances a. Long-term loans and advances shall be classified as: i. Capital advances ii. Security deposits iii. Investments Loans and advances to related parties (giving details thereof) iv. Other loans and advances Note: 1. Wherever the above (except capital advances) are realized or adjusted within 12 months from the end of the reporting period should fall under the sub head category of current assets. 2. The requirement of loans and advances to companies under same management has been done away with.

5. Other non-current assets Trade receivable realizable beyond 12 months from end of the reporting period or trade receivables on deferral credit terms which are receivable beyond 12 months from the end of reporting period should be disclosed here. and balance should be disclosed under current assets category. 2. Current assets a. Format a. Current Investments b. Inventories c. Trade Receivables d. Cash and Cash equivalents e. Short term loans and advances f. Other current assets b. Significant changes i. The term sundry debtors has been substituted with the term trade receivables. Trade receivables are defined as dues arising only from goods sold or services rendered in the normal course of business. Therefore, amounts due on account of other contractual obligations, which were earlier included in the sundry debtors, can no longer be included in the trade receivables. ii. Previous Schedule VI required separate disclosure of debtors (i) outstanding for a period exceeding 6 months (i.e., based on billing date) and (ii) other debtors, in a Schedule to the balance sheet. However, the revised Schedule VI requires separate disclosure of trade receivables outstanding for a period exceeding 6 months from the date they became due for payment. iii. No needs to mention bank balance with schedule banks and other banks. All the banks are now falls under the same category. Further the requirements of giving maximum balances in non schedules banks have also been removed. iv. Revised schedule VI now talks about Cash Equivalents- Cash Equivalent as per AS- 3 are short terms, highly liquid investments that are readily convertible into known amount of cash and which are subject to an insignificant risk of change in values. The revised schedule VI under dis- aggregations of cash & cash equivalent is however silent about the same. v. Earmarked balances with banks (for example, for unpaid dividend) shall be separately stated. vi. Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments shall be disclosed separately. vii. Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated. viii. Bank deposits with more than 12 months maturity shall be disclosed separately. ix. Good s in transit to be reported for each class of inventory.

5.4 Major changes in the format of Balance SheetEquity and LiabilitiesA new disclosure requirement regarding details of number of shares held by each shareholder holding more than 5% shares in the company is inserted by the Revised Schedule VI. The ICAI GN has clarified that in the absence of any specific indication of the date of holding, such information should be based on shares held as on the Balance Sheet date. For this disclosure, the names of the shareholders would be normally available from the Register of Members required to be maintained by every company.Details pertaining to number of shares issued as bonus shares, shares bought back and those allotted for consideration other than cash needs to be disclosed only for a period of five years immediately preceding the Balance Sheet date including the current year. Under the pre-revised Schedule VI requirement is to disclose such items at all times.In case of listed companies, share warrants are issued to promoters and others in terms of SEBI guidelines. Since such warrants are effectively and ultimately intended to become part of capital, Revised Schedule VI requires that the same be disclosed as part of the Shareholders funds as a separate line-item Money received against share warrants. In case the said warrants are forfeited, the amount already paid up would be transferred to Capital Reserve and disclosed as part of Reserves and Surplus.There are specific disclosures required by the Revised Schedule VI for Share Application money pending allotment. It has been also stated that share application money not exceeding the issued capital and only to the extent not refundable is to be included under Equity and share application money to the extent refundable is to be separately shown under Other current liabilities. Disclosures required regarding share application, whether included under Equity or under Other current liabilities are as under:(a) Terms and conditions;(b) Number of shares proposed to be issued;(c) The amount of premium, if any;(d) The period before which shares are to be allotted;(e) Whether the company has sufficient authorised share capital to cover the share capital amount on allotment of shares out of share application money;(f) Interest accrued on amount due for refund;(g) The period for which the share application money has been pending beyond the period for allotment as mentioned in the share application form along with the reasons for such share application money being pending.A major change in the format of balance sheet as per the Revised Schedule VI is the classification of all items of liabilities and assets into Current and Non-Current. The terms Current and Non-Current are defined by Revised Schedule VI as under: (a) A liability is classified as Current if it satisfies any of the following criteria:(i) It is expected to be settled in the companys normal operating cycle;(ii) It is held primarily for the purpose of being traded;(iii) It is due to be settled within 12 months after the reporting date; or,(iv) The company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.All other liabilities shall be classified as non-current.(b) An asset shall be classified as current when it satisfies any of the following criteria:(i) It is expected to be realised in, or is intended for sale or consumption in the companys normal operating cycle;(ii) It is held primarily for the purpose of being traded;(iii) It is expected to be realised within 12 months after the reporting date;or(iv) 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 reporting period date.All other assets shall be classified as non-current.(c) Operating Cycle is defined by Revised Schedule VI as An operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Where the normal operating cycle cannot be identified, it is assumed to have duration of twelve months.(d) Thus, all companies will need to bifurcate balances in respect of all liabilities and assets into current and non-current. The definitions contain four conditions out of which even if one is satisfied, the said liability or asset would be classified as current. If none of the conditions are satisfied the said liability or asset will be classified as non-current. The four conditions are quite subjective since they use phrases like expected, held primarily, due to be settled, etc.(e) As per the definition, current liabilities would include items such as trade payables, employee salaries and other operating costs that are expected to be settled in the companys normal operating cycle or due to be settled within twelve months from the reporting date. Thus, liabilities that are normally payable within the normal operating cycle of a company, are classified as current even if they are due to be settled more than twelve months after the end of the balance sheet date.(f) Similarly, as per the definition, current assets would include assets like raw materials, stores, consumable tools, etc. which are intended for consumption or sale in the course of the companys normal operating cycle. Such items of inventory are to be classified as current even if the same are not actually consumed or realised within twelve months after the balance sheet date. Current assets would also include inventory of finished goods since they are held primarily for the purpose of being traded. They would also include trade receivables which are expected to be realised within twelve months from the balance sheet date.(g) A company can have multiple operating cycles in case they are manufacturing/dealing in different products. In such cases, the bifurcation into current and non-current can become difficult.(h) Companies will also need to bifurcate all their borrowings into current and non-current. It is possible that the same borrowing will be classified into two components depending on the portion repayable within/after twelve months from the balance sheet date. Other details in respect of borrowings such as whether secured (with terms of security) or unsecured, whether guaranteed or not, details of repayment of loans, details of redemption in case of debentures, etc. are also required to be disclosed.(i) Since the format of the balance sheet mentions Deferred Tax Liability (DTL)/Deferred Tax Asset (DTA) as a non-current liability/asset, the same is to be always classified as non-current and cannot be classified as current even if the deferred tax liability/asset would become payable or receivable within twelve months of the balance sheet date. It should be also noted that such DTL/DTA is always disclosed on a net basis as required by AS-22.(j) For several items of liabilities/assets, the aforesaid classification exercise can become quite cumbersome and time-consuming for companies especially since the same is also required to be done for 2010-11.In case of loans taken by a company, Revised Schedule VI requires specific disclosure of period and amount of continuing default as on the balance sheet date in repayment of loans and interest to be specified separately in each case.Revised Schedule VI requires disclosure of loans and advances taken from related parties. Related Parties for this purpose would mean those parties as defined by AS-18.Revised Schedule VI requires disclosure of Trade Payables as part of other non-current liabilities or current liabilities. A payable can 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. As per the prerevised Schedule VI, the term used was Sundry Creditors which included amounts due in respect of goods purchased or services received as well as in respect of other contractual obligations. Since amounts due under contractual obligations can no longer be included within trade payables, items like dues payables in respect of statutory obligations like contribution to provident fund, purchase of fixed assets, contractually reimbursable expenses, interest accrued on trade payables, etc. will need to be classified as others.

AssetsAs per Revised Schedule VI, the disclosure for fixed assets is to be segregated into:(a) Tangible assets;(b) Intangible assets;(c) Capital work-in-progress; and(d) Intangible assets under developmentThe classification of tangible assets is similar to the one under pre-revised Schedule VI, but has a separate item for Office Equipment. Besides, Plant and Machinery is now renamed as Plant and Equipment.Classification of intangible assets as a separate item of Fixed Assets is introduced by Revised Schedule VI. It is also required to classify Computer Software separately within Intangible Assets.It is also necessary to separately disclose, 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 (i.e., on account of amalgamations/demergers, etc.) and other adjustments (like capitalisation of borrowing costs as per AS-16) and the related depreciation/amortisation and impairment losses/reversals.Since Revised Schedule VI specifically requires capital advances to be included under long-term loans and advances, the same cannot be included under capital work-in-progress. The same also cannot be therefore included within current assets. There is also a specific requirement to include assets given/taken on lease, both tangible and intangible under each of the items of fixed assets.As per Revised Schedule VI, all Investments are to be bifurcated into current and non-current. They also further need to be classified (as in the pre-revised Schedule VI) into trade/non-trade and quoted/unquoted.The classification of investments is to be done as under:(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; and(h) Other investments (specifying nature thereof).Revised Schedule VI also requires that under each classification, details need to be given of names of bodies corporate indicating separately whether they are:(a) Subsidiaries,(b) Associates,(c) Joint ventures, or(d) Controlled special purpose entities.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) need to be given. It is possible that the partnership firm maintains both capital and current accounts of its partners. In that case, the balance in capital account will be classified as a non-current investment in the balance sheet of the company, whereas the balance in current account is classified as current' investment.In case the company has an investment in a Limited Liability Partnership (LLP), the disclosure norms of partnership firm (as discussed in para 41 above) will not apply since an LLP is considered as a body corporate.As per Revised Schedule VI, all loans and deposits, deposits, etc. given by a company are to be classified into current and non-current.Revised Schedule VI requires disclosure of loans and advances given to related parties. Related Parties for this purpose would mean those parties as defined by AS-18.Revised Schedule VI requires disclosure of Trade Receivables as part of other non-current assets or current assets. 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. As per the pre revised Schedule VI, the term sundry debtors included amounts due in respect of goods sold or services rendered or in respect of other contractual obligations as well. Since, amounts due under contractual obligations cannot be included within Trade Receivables, items like dues in respect of insurance claims, sale of fixed assets, contractually reimbursable expenses, interest accrued on trade receivables, etc. will need to be classified within others.The pre-revised Schedule VI required separate presentation of debtors for those outstanding for a period exceeding six months (based on billing date) and other debtors. However, for the current portion of Trade Receivables, the Revised Schedule VI requires separate disclosure of Trade Receivables outstanding for a period exceeding six months from the date they became due for payment. This requirement can result in a lot of work for companies since it would mean modifying their accounting systems to compile the amounts exceeding six months based on the due date. Giving corresponding data for 2010-11 would also result in added work for most companies.The requirement for classifying loans and advances and trade receivables into secured/unsecured and good/doubtful also continues in Revised Schedule VI.The Revised Schedule VI does not contain any specific disclosure requirement for the unamortised portion of expense items such as share issue expenses, ancillary borrowing costs and discount or premium relating to borrowings. These items were included under the head Miscellaneous Expenditure as per the pre-revised Schedule VI. Though, Revised Schedule VI does not mention disclosure of any such item, since additional line items can be added on the face or in the notes, unamortised portion of such items can be disclosed (both current as well as non-current portion), under the head other current/non-current assets depending on whether the amount will be amortised in the next 12 months or thereafter.The term cash and bank balances existing in the pre-revised Schedule VI is replaced under Revised Schedule VI by Cash and Cash Equivalents. These are to be classified into:(a) Balances with banks;(b) Cheques, drafts on hand;(c) Cash on hand; and(d) Others (specify nature).For Cash and Cash Equivalents, disclosure is also separately required as per Revised Schedule VI for:(a) Earmarked balances with banks (for example, for unpaid dividend);(b) Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments;(c) Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated;(d) Bank deposits with more than twelve months maturity shall be disclosed separately.

5.5 Major changes in the format of Statement of Profit and LossRevised Schedule VI requires disclosure of Revenue from Operations on the face of the statement of profit and loss. In the case of a company other than a finance company, such Revenue from Operations is to be disclosed as:(a) Sale of products(b) Sale of services(c) Other operating revenues(d) Less: Excise dutyThough Revised Schedule VI specifically requires disclosure of Sale of Products on gross of excise basis, there is no mention of whether Sales Tax/VAT and Service Tax is also to be included or not in sale of products or sale of services, respectively. Though not entirely free of doubt, the ICAI GN has stated that 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. (Also refer BCAJ February 2012 Gaps in GAAP for a discussion on whether taxes should be disclosed gross or net).In addition to Revenue from Operations, Revised Schedule VI also requires disclosure of Other Operating Revenue as well as Other Income. The term Other Operating Revenue is not defined by Revised Schedule VI. The ICAI GN has however clarified that this would include revenue arising from a companys 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 companys activities. The classification of income would also depend on the purpose for which the particular asset is acquired or held.In respect of a finance company, Revised Schedule VI requires Revenue from Operations to include revenue from:(a) Interest and(b) Other financial services.Though the term finance company is not defined by Revised Schedule VI, the ICAI GN states that 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 in section 45I(f) of the Reserve Bank of India Act, 1935. In case of all companies, Revised Schedule VI requires Other income to be disclosed on the face of the statement of profit and loss. For this purpose Other Income is to 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).As can be seen from the above, in the case of all company (including a finance company) Dividend income and Net gain/loss on sale on investments will be always classified as Other Income.Other Income will also include share of profits/ losses in a partnership firm. Though there is no specific requirement mentioned for the same in the Revised Schedule VI, the ICAI GN mentions that the same should be separately disclosed. The ICAI GN also requires that in case the financial statements of the partnership firm are not drawn up to the same date as that of the company, adjustments should be made for effects of significant transactions and events that occur between the two dates and in any case, the difference between the two reporting dates should not be more than six months.Revised Schedule VI requires the aggregate of the following expenses to be disclosed on the face of the Statement of Profit and Loss:(a) Cost of materials consumed(b) Purchases of stock-in-trade(c) Changes in inventories of finished goods, work in progress and stock in trade(d) Employee benefits expense(e) Finance costs(f) Depreciation and amortisation expense(g) Other expenses.The ICAI GN mentions that for the purpose of disclosure, Cost of materials consumed, should be based on actual consumption rather than derived consumption. In such a case, excesses/ shortages should be separately disclosed rather than included in the amount of cost of materials consumed. This requirement was also contained in the ICAI pronouncements on the pre-revised Schedule VI.As per Revised Schedule VI separate disclosure is also required for the following items which are classified under Other Expenses:(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.The threshold for disclosure of Miscellaneous Expenses is changed to those that exceed 1% of revenue from operations or Rs.100,000 whichever is higher as against the requirement of pre-revised Schedule VI of 1% of total revenue or Rs.5,000 whichever is higher.The format of Statement of Profit and Loss in Revised Schedule VI also requires specific disclosures of Exceptional, Extraordinary, items and Discontinuing Operations. These terms are defined by AS-4, AS-5 and AS-24, respectively and disclosures should be done in accordance with these definitions.

Disclosures by way of NotesBesides the above disclosures, Revised Schedule VI also requires disclosures by way of Notes attached to the financial statements. Some of the major requirements are as under:(a) For manufacturing companies: raw materials consumed and goods purchased under broad heads;(b) For trading companies: purchases of goods traded under broad heads;(c) For companies rendering services: gross income derived from services rendered under broad heads.Revised Schedule VI does not require disclosure of quantitative details for any of the above categories of companies. The same is also clearly mentioned in para 10.7 of the ICAI GN.The ICAI GN also mentions that broad heads for the purpose of the disclosure in para 62 above are to be decided taking into account the concept of materiality and presentation of True and Fair view of financial statements. The said GN also mentions that normally 10% of the total value of sales/services, purchases of trading goods and consumption of raw materials is considered as an acceptable threshold for determination of broad heads.Revised Schedule VI requires disclosures of Contingent liabilities and commitments. For this purpose, besides others, other commitments are also to be disclosed. Such disclosure of other commitments was not required as per pre-revised Schedule VI. There is no explanation of what would be covered as part of other commitments in Revised Schedule VI. The ICAI GN has however clarified that disclosures required to be made for other commitments should include only those non-cancellable contractual commitments (cancellation of which will result in a penalty disproportionate to the benefits involved) based on the professional judgment 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 buyback arrangements, commitments to fund subsidiaries and associates, non-disposal of investments in subsidiaries and undertakings, derivative related commitments, etc.Most of the other disclosure requirements as per Revised Schedule VI in Notes are similar to the requirements of pre-revised Schedule VI.

CHAPTER-6 OBSERVATION Structural Changes- Balance Sheet Particulars Note No.Current Year FiguresPrevious Year Figures

I.EQUITY AND LIABILITIES

1Shareholders funds

(a) Share capital XXXX

(b) Share Application Money Received XX XX

(c)Share PremiumXX XX

(d) Reserves and surplusXXXX

2Non-current liabilities

(a) Long-term borrowingsXXXX

(b) Deferred tax liabilities (Net)XXXX

3Current liabilities

(a) Short-term borrowingsXXXX

(b) Trade payablesXXXX

(c) Other current liabilitiesXXXX

(d) Short-term provisionsXXXX

TOTALXXXX

II.ASSETS

Non-current assets

1(a) Fixed assets

Tangible assetsXXXX

Gross blockXXXX

Less: DepreciationXXXX

Net blockXXXX

(b) Non-current investmentsXXXX

2Current assets

(a) Inventories

XXXX

(b) Trade receivablesXXXX

(c) Cash and cash equivalentsXXXX

(d) Short-term loans and advancesXXXX

(e) Miscellaneous ExpenditureXXXX

TOTALXXXX

Structural Changes- Profit & Loss Account ParticularsNote NoCurrent Year Previous Year

I. Revenue from operationsXXXX

II. Other IncomeXXXX

III. Total Revenue (I +II)XXXX

IV. Expenses:

Cost of materials consumedXXXX

Purchase of Stock-in-TradeXXXX

Changes in inventories of finished goods, work-in-progress and Stock-in-TradeXXXX

Employee benefit expenseXXXX

Financial costsXXXX

Depreciation and amortization expenseXXXX

Other expensesXXXX

Total ExpensesXXXX

V. Profit before exceptional and extraordinary items and tax(III - IV)XXXX

VI. Exceptional ItemsXXXX

VII. Profit before extraordinary items and tax (V - VI)XXXX

VIII. Extraordinary ItemsXXXX

IX. Profit before tax (VII - VIII)XXXX

X. Tax expense:

(1) Current taxXXXX

(2) Deferred taxXXXX

XI. Profit(Loss) from the period from continuing operations (VII- VIII)XXXX

XII. Profit/(Loss) from discontinuing operationsXXXX

XIII. Tax expense of discounting operationsXXXX

XIV. Profit/(Loss) from Discontinuing operations (XII - XIII)XXXX

XV. Profit/(Loss) for the period (XI + XIV)XXXX

XVI. Earning per equity share:

(1) BasicXXXX

(2) DilutedXXXX

CHAPTER -7 DATA ANALYSISPRIYA GEMS EXPORTS PRIVATE LIMITED

Balance Sheet as at 31ST MARCH 2012

( in Rs)

Particulars Note No. 31/03/2012 31/03/2011

I.EQUITY AND LIABILITIES

1Shareholders funds

(a) Share capital 3,27,00,900 3,00,00,000

(b) Share Application Money Received 3,50,92,408 8,10,76,000

(c)Share Premium 13,23,45,100 -

(d) Reserves and surplus 1,10,12,767 21,78,365

2Non-current liabilities

(a) Long-term borrowings 3,67,14,281 5,83,48,980

(b) Deferred tax liabilities (Net) 38,202 3,635

3Current liabilities

(a) Short-term borrowings 21,63,50,024 22,80,43,774

(b) Trade payables 97,48,36,280 57,64,40,966

(c) Other current liabilities 75,38,512 23,36,630

(d) Short-term provisions 63,50,000 20,50,000

TOTAL 1,45,29,78,474 98,04,78,351

( in Rs)

Particulars Note No.31/03/201231/03/2011

II.ASSETS

Non-current assets

1(a) Fixed assets

Tangible assets

Gross block 97,85,540 83,01,240

Less: Depreciation 14,16,700 2,79,343

Net block 83,68,840 80,21,897

(b) Non-current investments - 56,68,082

2Current assets

(a) Inventories 41,69,55,977 31,90,76,566

(b) Trade receivables 99,03,02,654 58,72,09,888

(c) Cash and cash equivalents 43,28,211 20,49,055

(d) Short-term loans and advances 3,27,22,792 5,80,52,864

(e) Miscellaneous Expenditure 3,00,000 4,00,000

TOTAL 1,45,29,78,474 98,04,78,351

Profit and loss statement for the year ended 31/03/2012( ` in Rs)

ParticularsNote No. 2011-12 01/01/2011 to 31/03/2011

I.Revenue from operations 1,66,32,54,553 63,89,07,541

II.Other income 3,10,82,914 83,78,355

III.Total Revenue 1,69,43,37,467 64,72,85,896

IV.Expenses:

Cost of materials consumed 1,60,79,40,524 62,82,13,636

Employee benefits expense 83,98,202 26,61,365

Finance costs 1,27,83,250 26,37,075

Administrative & Other Expenses 5,07,52,799 69,62,476

Depreciation and amortization expense 11,37,357 2,79,343

Other expenses - Preliminary Expenses written off 1,00,000 1,00,000

Loss on sale of Mutual Fund 56,366 -

Total expenses 1,68,11,68,499 64,08,53,895

V.

Profit before exceptional and extraordinary items and tax 1,31,68,968 64,32,001

VI.Exceptional items - -

VII.Profit before extraordinary items and tax 1,31,68,968 64,32,001

VIII.Extraordinary Items - -

IX.Profit before tax 1,31,68,968 64,32,001

ParticularsNote No. 2011-12 01/01/2011 to 31/03/2011

XTax expense:

(1) Provision for Taxation 43,00,000 20,50,000

(2) Deferred tax 34,566 3,635

XI

Profit (Loss) for the period from continuing operations 88,34,401 43,78,365

XIIProfit/(loss) from discontinuing operations

XIIIShort Provision of Income Tax before Conversion - 22,00,000

XIV

Profit/(loss) from Discontinuing operations (after tax) 88,34,401 21,78,365

XVProfit (Loss) for the period 88,34,401 21,78,365

XVIEarnings per equity share:

(1) Basic2.700.73

(2) Diluted 2.76 0.73

CHAPTER-8 INTERPRETATION Major disclosures omitted under REVISED SCHEDULE VI (Balance Sheet)1. Various disclosure under Micro, small and medium enterprises development Act 2006 2. Separate disclosures to dues to subsidiaries 3. Specific mention of amount dues to be credited to Investors education and protection fund in case of dues for more than seven years. However disclosure requirement of dues under specific heads still exists. 4. Specific mention of disclosure of provision for proposed dividends is missing in the revised schedule VI. The disclosure requirements related to proposed dividend has been dealt elaborately in later part of this analysis.

Major disclosure requirements retained under REVISEDSCHDULE VI (Balance Sheet) a. Authorized, Issued, Subscribed and fully paid and subscribed but not fully paid. b. Calls unpaid (showing aggregate value of calls unpaid by directors and officers) c. Forfeited shares (amount originally paid up) d. Where loans have been guaranteed by directors or others, the aggregate amount of such loans under each head shall be disclosed. e. Aggregate amount of quoted investments and market value thereof f. Aggregate amount of unquoted investments. g. Aggregate provision made for diminution in value of investments. h. Sundry Debtors to be now called Trade receivable. Disclosures are the same as earlier Schedule VI. i. Contingent liabilities and commitments such as: (a)Claims against the company not acknowledged as debt; (b)Guarantees; (c)Other money for which the company is contingently liable (d)Estimated amount of contracts remaining to be executed on capital account and not provided for; (e) Uncalled liability on shares and other investments partly paid up. j. The opinion of the Board, any of the assets other than fixed 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.

Major disclosures omitted under REVISED SCHEDULE VI(Profit & Loss)a. Details of amount and quantity of turnover for each class of goods. b. Details pertaining to licensed /installed and production quantity. c. Details of opening and closing stock of goods d. Quantity related information related to raw material consumption e. Commission paid to sole selling agent and other selling agents. f. Cash discount separately. g. Details of arrear depreciation. h. Separation of investment income from trade investment and other income. i. Disclosure of TDS in respect of Interest income and investment income. j. Director remuneration disclosure under section 198. k. Computation of Net profit under section 349/350 of the Companies Act.

Major disclosure requirements retained under REVISED SCHEDULE VI (profit & loss)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, consultation fees, interest, and other matters; c. Value of all imported raw materials, spare parts and components consumed during the financial year and the 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 number of non-resident shareholders, the number of shares held by them on which the dividends related; 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.

f. 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: g. Dividends from subsidiary companies and Provisions for losses of subsidiary companies h (a)The aggregate, if material, of any amounts set aside or proposed to be set aside, to reserves, but not including provisions made to meet any specific liability, contingency or commitment known to exist at the date as at which the balance-sheet is made up. (b) The aggregate, if material, of any amounts withdrawn from such reserves. i. The aggregate, if material, of the amounts to set aside to provisions made for meeting specific liabilities, contingencies or commitments. ii. The aggregate, if material, of the amounts withdrawn from such provisions, as no longer required.

CHAPTER-9 LIMITATIONS9.1 Issues relating to balance sheetThe revised Schedule VI requires different classes of preference shares to be treated separately. Does it mean that a company compulsorily needs to decide whether its preference shares are liability or equity based on their economic substance using AS 31 Financial Instruments: Presentation principles and present the same accordingly? If yes, will all companies disclose the redeemable preference shares as liability?The revised Schedule VI deals only with presentation and disclosure requirements. Accounting for various items will be governed by the applicable standards. Keeping this in view, we believe that the following position will apply:1. If a company early adopts AS 30 Financial Instruments: Recognition and Measurement, AS 31 and AS 32 Financial Instruments: Disclosures, it will decide the liability and equity classification of preference shares based on the principles laid in AS 31. If the application of these principles results in all or part of preference shares being classified as liability, it will use the same classification, for presentation in the balance sheet2. However, if a company has not applied AS 30, AS 31 and AS 32, it can continue to classify the preference shares as part of share capital. This is based on the argument that there is no standard dealing with accounting for preference shares and therefore past practice should prevail. Incidentally, the Companies Act also refers to the preference shares as a kind of share capital.The revised Schedule VI requires aggregate amount of both long-term and short-term loans guaranteed by directors or others under each head to be disclosed. What is meant by the term others?

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 or promoters. 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.The revised Schedule VI requires that under the head Borrowings, details 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 wordings give rise to following issues:(a) Are the disclosures relating to default pertain to borrowing from banks and financial institutions or are also required for items such as bonds/debentures, deposits, finance lease obligations?(b) Does a company need to disclose information for defaults other than repayment of loan and interest, e.g., compliance with debt covenants?(c) How should the terms default/ continuing default as on the balance sheet date be interpreted?Issues are as below(a) In the above clause, the word loan has been used more in a more generic sense and is not restricted like in CARO to borrowings from banks and financial institutions. Hence, details of default in repayment of loans and interest need to be disclosed for each of the items such as bonds/ debentures, deferred payment liability, deposit, finance lease obligation, covered under the head Borrowings.(b) The revised schedule VI requires specific disclosures only for default in repayment of loans and interest. The revised Schedule VI does not require separate disclosure for other defaults, e.g., default in compliance with debt covenants. However, a company should consider the impact of such default on current and non-current classification and going concern implications.(c) Though the MCA has used two different terms, viz., continuing default (in case of long-term borrowing) and default (in case of short-term borrowing), the requirement is to disclose default as on the balance sheet date in both the cases. Pursuant to this requirement, the details of any default in repayment of loan and interest existing as on the balance sheet needs to be separately disclosed. Any default that had occurred during the year and was subsequently made good before the end of the year is not required to be disclosed.The revised Schedule VI requires a liability to be classified as current if the company does not have an unconditional right to defer its settlement for at least twelve months after the reporting date. How this requirement will apply to the following two cases:(a) A company has taken a loan which is repayable on demand. However, based on the past experience, it is not expected that the lender will demand the repayment within next 12 months.(b) Company B has taken a 5 year loan. The loan contains certain debt covenants, e.g., filing of quarterly information. The company defaulted in filing of such information in the previous quarter, with the effect that loan has become repayable on demand. However, based on the past experience, the management believes that default is minor and the bank will not demand the repayment of loan. It has also started the process of getting waiver for this default. After the reporting period and before the approval of the financial statements for issue, the bank agreed to waive the default and not to demand payment as a consequence of the default.

(c) A company has taken a 5 year term loan. Out of abundant caution the banks include a covenant that they have a right to recall the loan on demand even where the company has not violated any of the debt covenants.The requirements of the revised Schedule VI concerning current and non-current classification are peculiar to Indian companies. We suggest that companies should familiarize themselves with these requirements in detail, after going through guidance in Ind-AS 1 Presentation of Financial Statements and other related guidance. If there is any doubt, they should consult their auditors / external professional advisors. Based on the guidance given, the following position may apply in the above cases:(a) Since the company does not have an unconditional right to defer the settlement of loan for at least 12 months after the reporting date, it will classify the loan as current. This is despite the fact that based on the past experience, it is not expected that the lender will demand the repayment within the next 12 months.(b) In our view, what is important is whether a borrower has an unconditional right 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. However, it should be noted that such issues may involve legal interpretation of the loan agreement as to whether a borrower has an unconditional right to defer settlement. The legal interpretation would have to consider not only the wordings in the loan agreement, but also whether those clauses are legally enforceable as per the laws of the land, for example, the Banking Regulation Act. The revised Schedule VI does not specify whether the deferment right should be ascertained at the reporting date or events after the balance sheet date can be considered. It may be noted that as per the requirements of AS 4 Contingencies and Events Occurring after the Balance Sheet, when assessing the impact of events subsequent to the balance sheet date, one has to judge if those events confirm the conditions at the balance sheet date or arose after the balance sheet date. In the given case, at the balance sheet date, the default was not waived and hence the loan had become payable on demand and should therefore be classified as current. The subsequent waiver would change the classification from current to non-current but at the date the waiver is made. We believe that this may be an important issue for many companies and hence the MCA/ ICAI guidance is necessary.(c) Since the borrower does not have an unconditional right to defer settlement, the same should be treated as current liability.It may also be noted that while the criteria for classification of liability is based on the borrowers unconditional right to defer the payment, the classification from the lenders perspective is decided based on the expected realization. Thus, it is likely that while the borrower will classify the above loans as current liability, the same will get classified as non-current asset in the financial statements of lender.From a perusal of the revised Schedule VI, it is clear that a company also needs to classify its employee benefit obligations in current and non-current categories for disclosure purposes. What is the appropriate basis for classification of these obligations into current and non-categories? Does the application of this requirement may even require the obligations such as defined benefit post employment obligations and other long-term employee benefits to be bifurcated into current and non-current components?While AS 15 Employee Benefits governs the measurement of various employee benefit obligations, there classification as current and non-current liability will be governed by the criteria laid down in the revised Schedule VI. 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 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 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 entitled to avail the leave at any time during the year. Hence, it is disclosed as a current liability even if it is measured as other long-term employee benefit under AS 15.(c) Regarding funded post-employment benefit obligations, amount due for payment to the fund within 12 months created for this purpose is treated as current liability.(d) Regarding unfunded post-employment benefit obligations, a company will have settlement obligation at the balance sheet date or within 12 months for employees such as those who have already resigned or are expected to resign or are due for retirement within the next 12 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 the next 12 months, is classified as non-current liability. If the management believes that the amount of current liability is not material, the entire amount may be classified as non-current.In the revised Schedule VI, there is no requirement to disclose information regarding outstanding amounts and interest due to Micro, Small and Medium Enterprises or those required under Clause 32 of the Listing Agreement. Does it mean that companies can avoid making these disclosures in the financial statements?The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 requires specified disclosures to be made in the annual financial statements of the buyer wherever such financial statements are required to be audited under any law. Hence, though not required by the revised Schedule VI, such disclosures will still be required in the audited annual financial statements.We believe that the same principle will apply to the disclosures required under Clause 32 of the Listing Agreement and disclosures required by other applicable laws/ pronouncements issued by regulatory bodies, e.g., the disclosure regarding unhedged foreign currency exposures required by the ICAI announcement.In case of tangible and intangible assets, where sums have been written off on reduction of capital or revaluation of assets or where sums have been added on revaluation of assets, the revised Schedule VI requires each company to disclose the amount of reduction or increase together with the date thereof for the first five years subsequent to the date of such reduction or increase. However, paragraph 39 (iii) of AS 10 Accounting for Fixed Assets requires that a company should disclose details such as gross book value of revalued assets, method adopted to compute revalued amounts, nature of indices used, year of appraisal, involvement of external valuer as long as the concerned assets are held by the enterprise. Considering the specific requirements of the revised Schedule VI, can a company avoid making disclosures required under AS 10 beyond 5 years? Further, what is the relevance of this requirement for intangible assets?The revised Schedule VI is clear that the disclosure requirements of 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, we believe that companies will make disclosures required by the revised Schedule VI only for 5 years. However, details required by AS 10 will have to be given as long as the asset is held by the company, subject to materiality.AS 26 Intangible Assets does not permit revaluation of intangible assets. Hence, the revised Schedule VI requirement is relevant for intangible assets only in the context of reduction of capital arising from the Court schemes.Whether capital advances also need to be bifurcated between non-current and current Categories? If yes, on what basis?Capital advances are advances given for procurement of fixed assets which are non-current assets. Typically, companies do not expect to realize them in cash in the next 12 months or within their normal operating cycle. Rather, over the period, these get categorized as one or more fixed assets. Hence, we believe that capital advances should be treated as non-current assets.Though the revised Schedule VI states that the terms used therein will be as per the applicable accounting standards; however, it appears that the disclosures required under the head cash and cash equivalents are not as per the definition of the said term in AS 3 Cash Flow Statement. As per the revised Schedule, this heading will include and separately disclose amounts such as bank balances held as margin money, security against borrowings/ guarantees and bank deposits with more than 12 months maturity. How can this conflict be resolved?The revised Schedule VI not only mandates that the requirements of accounting standards will prevail over the Schedule, it also clarifies that in case compliance with an accounting standard requires any change in the treatment or disclosure including addition, amendment, substitution or deletion in the head/sub-head, the same will be made and requirements of the revised Schedule VI will stand modified accordingly. Hence, we believe that to resolve this conflict, the caption cash and cash equivalents may be changed to Cash and bank balances, which may have two sub-headings, viz., Cash and cash equivalents and Other bank balances. The former will include only the items that constitute cash and cash equivalents defined in accordance with AS 3 (and not the revised Schedule VI), while the remaining balances will be included under the latter heading.The earlier Schedule VI required the disclosure of only capital commitments. However, the revised Schedule VI requires the disclosure of all commitments, i.e., including other commitments. What is the nature of commitments that will get covered under this disclosure requirement?The word commitment is not defined in the revised Schedule VI. From a general inference perspective, this term may be interpreted to mean an unrecognized contractual commitment, e.g., non-cancelable purchase, sale or employee contracts, not recognized in the financial statements. The purchase and sale commitments extend not only to capital items, but also inventory or services or investments.However, we do not believe it is the intention of the regulator that all contractual non-cancellable commitments would require disclosure as that would be contrary to the overarching principle in the revised Schedule VI 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. However, the acceptability of this view and exact disclosures required to be made can only be clarified by an authoritative guidance from the regulators. Hence, we await MCA/ICAIs guidance on the subject.The existing Schedule VI required the proposed dividend to be disclosed under the head Provisions. In the revised Schedule VI, this needs to be disclosed in the footnotes. Does it mean that proposed dividend is not required to be provided for going forward?AS 4 still requires that dividends stated to be in respect of the period covered by the financial statements, which are proposed or declared by the enterprise after the balance sheet date but before approval of the financial statements, should be adjusted. Keeping this in view and the fact that accounting standards override revised Schedule VI, we believe that companies will have to continue to create a provision for dividends in respect of the period covered by the financial statements and disclose the same as a provision in the balance sheet.The format of the balance sheet prescribed under Clause 41 of the Listing Agreement based on the existing Schedule VI will now be inconsistent with the format of the balance sheet in the revised Schedule VI. How should companies address this issue till Clause 41 is revised in line with the revised Schedule VI?Clause 41 (I)(ea) and (eaa) of the Listing Agreement states as below for presentation balance sheet items in half-yearly and annual audit results, respectively:(ea) As a part of its audited or unaudited financial results for the half-year, the company shall also submit by way of a note, a statement of assets and liabilities as at the end of the half-year.(eaa) However, when a company opts to submit un-audited financial results for the last quarter of the financial year, it shall, submit a statement of assets and liabilities as at the end of the financial year only along with the audited financial results for the entire financial year, as soon as they are approved by the Board.Further, Clause 41(V) (h) states as below for the format of balance sheet items:(h) Disclosure of balance sheet items as per items (ea) shall be in the format specified in Annexure IX drawn from Schedule VI of the Companies Act, or its equivalent formats in other statutes, as applicable.Based on the above guidance, we are of the following views on the issues raised:(a) Half yearly results: Though the requirement in clause 41(V)(h) makes a reference to the Schedule VI for the presentation of balance sheet items in case of half-yearly results of a company, it has prescribed a specific format for this purpose. Further, from the language, it does not appear that the format will be automatically amended in case of any change in the Schedule VI format. Hence, we believe that till the time a new format is prescribed by the SEBI under the Clause 41, companies will continue to present their half-yearly balance sheet based on the existing Schedule VI.(b) Annual audited yearly results: Apparently, the Clause 41(V)(h) regarding format does not refer to annual audited balance sheet. Thus, two views seem possible on this matter. One view is that since there is no prescribed format, a company can use the format used in its annual financial statements, i.e., as per the revised Schedule VI. The other view is that a company should use the same format of balance sheet items in its half-yearly and annual audited results. Thus, it will continue to use the Clause 41 format for annual audited balance sheet. We believe that till Clause 41 is amended, either view can be accepted.We believe that this is an important matter and therefore the SEBI should provide guidance.The format of the balance sheet and P&L account prescribed under the SEBI (Issue of Capital & Disclosure Requirements) Regulations (ICDR Regulations) will also now be inconsistent with the format of the balance sheet/ P&L account in the revised Schedule VI. How should companies address this issue till the formats suggested under ICDR Regulations are revised in line with the revised Schedule VI?The formats of balance sheet and P&L account suggested under ICDR Regulations are clearly stated as illustrative formats. Thus, once the revised Schedule VI becomes effective, a company should use the format prescribed in the revised Schedule VI to present the financial information for the purposes of inclusion in offer document.Under the investments note, there is a requirement to disclose the names of bodies corporate, including separate disclosure of controlled special purpose entities in addition to subsidiaries, etc. What is meant by controlled special purpose entities?Since this term is neither defined under Indian GAAP (the applicable accounting standards) nor in the revised Schedule VI, it is not clear how this term should be interpreted. This term is defined under Ind-AS, however, it is questionable if Ind-AS definitions can be used to interpret Indian GAAP/ Schedule VI terms. Hence, we await MCA/ ICAIs guidance on the subject.The revised Schedule VI requires the amount of trade receivables to be classified as current and non-current assets, based on the prescribed criteria. However, it prescribes the following disclosure for trade receivables only under the head current assets.Aggregate amount of trade receivables outstanding for a period exceeding six months from the date they are due for payment should be separately stated.Does it mean that a company needs to make the above disclosure only for trade receivables classified as current assets?Yes, we believe that the requirement as currently drafted is applicable only in the case of current trade receivables.The revised Schedule VI does not contain any specific disclosure requirement for the unamortized portion of expense items such as share issue expenses, ancillary borrowing cost and discount or premium relating to borrowings. The existing Schedule VI required these items to be included under the head Miscellaneous Expenditure. Does it mean that such expenses will have to be charged off to the P&L immediately?AS 16 Borrowing Costs alludes that ancillary borrowing cost and discount or premium relating to borrowings could be amortized over the loan period. Further, share issue expenses, discount on shares, ancillary cost-discount-premium on borrowing, etc., being a special nature item are excluded from the scope of AS 26. 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 revised Schedule VI does not deal with any accounting treatment and the same continues to be governed by the respective accounting standards/ practices. Further, the revised Schedule VI is clear that additional line items can be added on the face or in the notes. Keeping this in view, we believe that companies 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.

9.2 Issues relating to P&L accountFor non-finance companies, revenue from operations need to be disclosed separately as revenue from (a) sale of products