revised schedule vi

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.

CA Mahendra Mehta 4

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.

CA Mahendra Mehta 5

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.

CA Mahendra Mehta 6

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 as also computation of profit u/s 349 with details of calculation of commission by percentage of profits.

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.

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PART I – FORMAT OF BALANCE SHEETParticulars 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

warrantsNew Line Item

(2) Share Application Money pending allotment

New Line Item(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


PART I – FORMAT OF BALANCE SHEETParticulars Note



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


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

Particulars Note No.

Figures as at the end of the current reporting period


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.


Line Items for Share capital





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







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.



LINE ITEMS FOR RESERVES & SURPLUS




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


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 ,”.


CLASSIFICATION OF CURRENT LIABILITIESA liability shall be classified as current when it satisfies any of the following criteria:

a) It is expected to be settled in the company’s normal operating cycle ,

b) It is held primarily for the purpose of being traded;c) It is due to be settled within 12 months after the reporting

date; ord) 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 assumed to have a duration of 12 months.

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 BORROWINGSParticulars Note



Bonds/Debentures

Term loansi. 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


LINE ITEMS FOR OTHER LONG TERM LIABILITIES




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.


LINE ITEMS FOR SHORT TERM BORROWINGS




Loans repayable on demandI. From Bank II.From Others

Loans and advances on related parties

Deposits

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


LINE ITEMS FOR OTHER CURRENT LIABILITIES




Current maturities of long-term debt

Current maturities of finance lease obligationsInterest 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 thereonUnpaid matured deposits and interest accrued thereon Unpaid matured debentures and interest accrued thereonOther payables(Specify nature)


CLASSIFICATION OF CURRENT ASSETSAn 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) It is held primarily for the purpose of being traded;(c) 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


LINE ITEMS FOR TANGIBLE ASSETSParticulars Note



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.


LINE ITEMS FOR INTANGIBLE ASSETSParticulars Note



Goodwill

Computer Software

Brands/Trademarks

Mastheads and Publishing titles

Mining rights

Copyrights and patents and other intellectual property rights, services and operating rightsRecipes, formulae, models, designs, and prototypesLicenses and franchise

Others(specify nature)


CAPITAL WORK-IN-PROGRESS

Particulars RequirementConstruction stage is normally decomposed into the following three stages: Preliminary stage Pre-acquisition stage Acquisition or Construction stage

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 partiesc) 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.


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 feasibilityb) Intentionc) Abilityd) Probable future economics benefitse) Resources availabilityf) Reliable measurement of cost


LINE ITEMS FOR NON CURRENT INVESTMENTSParticulars Note



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.


LINE ITEMS FOR LONG TERM LOANS & ADVANCES




Capital Advances

Security Deposits;

Loans and advances to related parties(giving details thereof)

Other loans and advances(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


LINE ITEMS FOR CURRENT INVESTMENTSParticulars Note



Investments in Equity Instruments

Investments in preference shares

Investments in Government or trust securitiesInvestments 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.


LINE ITEMS FOR INVENTORIESParticulars Note



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


LINE ITEMS FOR TRADE RECEIVABLESParticulars Note



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


LINE ITEMS FOR CASH AND CASH EQUIVALENTS




Balance with BanksUnpaid DividendMargin MoneyBank 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


LINE ITEMS FOR SHORT TERM LOAN & ADVANCES




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


PART – II : STATEMENT OF PROFIT & LOSSParticulars Note



Revenue from OperationsOther IncomeTotal Revenue ( I + II)ExpensesCost of Materials ConsumedPurchases of Stock in TradeChanges in inventories of finished goods

Work in progress and stock in tradeEmployee Benefit expenseFinance CostsDepreciation and amortization expenseOther expenses

Profit Before Exceptional and extraordinary items and taxExceptional Items


PART – II : STATEMENT OF PROFIT & LOSSParticulars Note



Profit Before extraordinary items and tax

Extraordinary Items

Profit Before Tax

Tax Expense Current Tax Deferred Tax

Profit (loss) for the period from continuing operationsProfit (loss) from discontinuing operations

Tax expense of discontinuing operations

Profit(loss) from discontinuing operations (after tax)Profit (loss) for the period

Earnings per equity shareBasicDiluted


REVENUE FROM OPERATIONS




(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


OTHER INCOME




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)


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

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EXCEPTIONAL ITEMS & EXTRAORDINARY ITEMS

Exceptional items – Material items which derive from events or transactions that fall 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 of the reporting entity and which are not expected to recur.

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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.


NOTES TO ACCOUNTS

Notes to accounts shall disclose details of:1. Significant accounting policies2. Share Capital3. Reserves and Surplus4. Long term borrowings5. Other Long term liabilities6. Long term provisions7. Short-term borrowings8. Other current liabilities9. Short-term provisions10. Tangible assets11. Intangible assets12. Non-current investments


NOTES TO ACCOUNTS

13. Other long term loans and advances14. Other non-current assets15. Current investments16. Inventories17. Trade receivables18. Cash and cash equivalents19. Short-term loans and advances20. Other current assets21. Contingent liabilities and commitments22. Revenue from operations23. Other Income24. Cost of materials consumed25. Purchase of traded goods


NOTES TO ACCOUNTS

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

27. Employee benefits expense28. Finance cost29. Other expenses30. Exceptional items, if any31. Extraordinary items, if any32. Additional information to the financial statements.


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COMPUTATION OF OPERATING CYCLE

Particulars Months

Holding period Raw Materials 5 monthsHolding period of finished products 4.5 months

Production cycle 0.5 months

Collection period of trade receivables 3 months

Payment period of trade payables 3 months

Gross Operating Cycle 13 Months

Operating cycle means gross operating cycle. Payment period for trade payable is not deducted.


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WEIGHTED AVERAGE RAW MATERIAL HOLDING PERIOD

Raw material inventories

Holding period

Average inventory holding

Weight Weighted average raw material

holding periodRM 1 5 300 15.92% 0.80

RM 2 3 200 10.61% 0.32

RM 3 2 100 5.31% 0.11

RM 4 1 800 42.44% 0.42

RM 5 1 485 25.73% 0.26

1885 1.90


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WEIGHTED AVERAGE PRODUCTION CYCLE

Production cycle

Average production

time

Average Work-in-Progress

Weight Weighted average

production cyclePro 1 0.5 500 31.25% 0.16

Pro 2 0.75 400 25.00% 0.19

Pro 3 0.25 700 43.75% 0.11

1600 0.45


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WEIGHTED AVERAGE FINISHED GOODS HOLDING PERIOD

Finished Goods

Related Work-in-Progress

Average holding period

Average inventory

Weight Weighted average finished goods holding period

FG 1 P 1 5 1000 31.25% 1.56

FG 2 P 2 4 1200 37.50% 1.50

FG 3 P 3 3 1000 31.25% 0.94

3200 100% 4.00


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WEIGHTED AVERAGE COLLECTION PERIOD

Trade Receivables

Collection Period

Average receivables

Weight Weighted average

collection period

Wholesalers having net worth > Rs.10000

TR1 3 1100 35.48% 1.06Wholesalers having net worth < Rs.10000

TR2 4 2000 64.52% 2.58

3100 3.65


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Summary Months

Weighted average raw material holding period 1.90

Weighted average production cycle 0.45

Weighted average finished goods holding period 4.00

Weighted average collection period 3.65

Operating cycle 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.

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.


revised schedule vi

Documents

adjusted ca mahendra

india balance sheets

classified balance sheets

disclosure of debts

disclosure of shareholder

corporate balance sheets

details of calculation

computation of profit