hard copy audit.docx

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AUDIT ASSIGNMENT

TOPIC-REVISED SCHEDULE VI

ROOM-34GROUP MEMBERSHarshita Ajitsaria 135)Nehal Mehta 136)Richa Goyal 137)Pragati Mahansaria 138)

Nidhi Chaudhary 139)Sakshi Agarwal 140)


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Shantanu Modi 141)

Introduction

With the emergence of multinational corporations and rapid increase in cross

border transactions, it is essential that our financial statements speak the global

language for attracting foreign funds into India. Internationally, the observance of

universally accepted reporting norms is perceived as an important measure of

good corporate governance, ensuring financial transparency to the stakeholders

of the company. The transparency in financial statements of a company has a

significant bearing on the decision of a stakeholder to invest, as well as the

quantum of his investment.

The THREE major reasons for revision-:

The classification under the old Schedule VI was, however, not in line withthe international practices followed by many developed countries, making

investors reluctant to invest in the Indian companies. The Indian companies

were required to prepare another set of financial statements to makeforeign investors understand the performance and position of their

companies, which not only resulted in higher costs, but also consumed

considerable time and effort.

With India moving towards convergence to IFRS, there was an urgent call torevise the old Schedule VI, as it was not compatible to meet either the

disclosure requirements or the provisions of the upcoming accounting

standards. Though the revised Schedule VI has been framed as per the

existing non-converged Indian Accounting Standards notified under the

Companies (Accounting Standards), Rules, 2006 and has nothing to do withthe converged Indian Accounting Standards, still, it has taken into

consideration the classification accepted internationally.

Government of India had constituted an Expert Committee on CompanyLaw in 2005. The Committee in its report admitted the right of shareholders

to be informed through simple disclosure which should not be in


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excessively technical format.The Committee was also of the view that Small

Companies need not be subject to the costs of a regime suited to large

companies with a wide stakeholder base.

Significant Aspects of Schedule vi

Some of the significant aspects of the revised Schedule include:

The revised Schedule to apply to all companies following Indian GAAP

until such companies are required to follow International Financial Reporting

Standards (IFRS) converged Indian accounting standards (Ind AS)

Accounting standards and requirements of the Companies Act, 1956 (Act)

to override the requirements of the revised Schedule, wherever the two are

inconsistent

Information to be mandatorily presented on the face of financial

statements limited to only broad and significant itemsdetails by way of notes

Part IV of the pre-revised Schedule (containing balance sheet abstract and

general business profile) dispensed with

Format of cash flow statement not prescribedhence companies which

are required to present this statement (i.e., other than small and medium sized

companies) to continue to prepare it as per AS 3, Cash Flow Statements

Disclosure requirements of various accounting standards also need to be

complied with.

Old Schedule VI: Drawbacks Necessitating Revision

1. Classification in old Schedule VI not in line with the disclosurerequirements under AS-After introduction of Accounting Standards onLeases, Consolidated Financial Statements ,Accounting for Taxes,

Discontinuing Operations, Impairments of Assets, Provisions etc., the

disclosure requirements of old Schedule VI on the face of balance sheet

were felt to be insufficient. Further, appropriate heads, under which

disclosures prescribed in the accounting standards have to be made, were

missing in the Balance Sheet under old Schedule VI. For instance,


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Accounting Standard 22 requires that deferred tax assets (DTA) and

deferred tax liabilities (DTL) should be disclosed under a separate heading

in the balance sheet of the enterprise, separately from current assets and

current liabilities.

2. No place for industry specific requirements-Old Schedule VI had a fixedformat in which every industry has to present its financial statements.

However, the industry specific requirements could not always fit into such

format. The old schedule VI did not address such problems which made it

difficult for a preparer of financial statements to identify the appropriate

head for their industry specific items.

3. No specific format for Profit and Loss Account-One of the shortcomings ofold Schedule VI was that it did not contain any specific format for Profit

and loss account as it had for the Balance Sheet though the requirements

for preparing profit and loss account were detailed in Part II of ScheduleVI. However, it was felt that a specific format for presentation of the profit

and loss account would have conveyed a clear cut picture to the preparers

of financial statements.

4. Measurement principles under Schedule VI not in line with AccountingStandards-Apart from the disclosure requirements, even the

measurement principles as per old Schedule VI were different from what

was given in the accounting standards. For instance, AS 11 requires that

any exchange difference in foreign currency translation is to be charged /

recognized in the Profit and loss account. However, as per old schedule VI,such exchange difference in foreign currency translation should be

capitalised. On account of such differences in the measurement principles,

it can be said that the old schedule VI was not in conformity with the

mandatory requirements of the accounting standards.


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OBJECTIVES For Revising Schedule VI

In November, 2008, the Ministry of Corporate Affairs issued an

Explanatory Memorandum for revising Schedule VI to the Companies Act, 1956

which clearly stated its objectives as follows:

(a)To have a readable, useful, transparent and user friendly form ofSchedule VI.

(b)To set out minimum disclosure requirements which are consideredessential to ensure true and fair presentation of the financial positionand financial performance of the company and comparability both with

the companys previous periods andwith other companies.(c)The Balance Sheet and the Statement of Profit and Loss should not be

burdened with too many disclosure requirements

(d)To remove the requirements of disclosures no longerconsidered relevant in view of the changed socio-economic structure

and level of development of the economy.

(e)To remove disclosure requirements which are meant for statisticalpurposes only e.g. Part IV Of Schedule VI.

(f) To have inherent flexibility for amendments and industry/sector

specific improvements from time to time and to cater to industry/sector specific

disclosure requirements.

(g) To harmonize and synchronize the general disclosure requirements

with those prescribed in the Accounting Standards by removing the existing

inherent anomalies.

(h) The specific disclosure requirements prescribed in the Accounting

Standards are not incorporated here so that amendment in the AccountingStandard does not necessitate an amendment in the Schedule VI.

( i)To attain compatibility and convergence with the International

Accounting Standards and practice.

Salient Features


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Applicability-This revised Schedule VI is applicable to all companies to which

existing non-converged notified Accounting Standards are applicable.

Flexibility-_

As and when there will be any change in the requirements of the Act includingnotified .Accounting Standards in the treatment or disclosure includingaddition, amendment, substitution or deletion in the head, sub-head or any

changes inter se in the financial statements, the revised Schedule VI will be

modified accordingly leaving no scope for any divergence or disagreement

with the Accounting Standards.

The disclosure requirements of revised Schedule VI are in addition to thedisclosure requirements specified in the notified Accounting Standards.

Additional disclosures (other than specified in the revised Schedule VI)

required by the notified accounting standards may be made either in the notes

to account or through additional statement or on. The face of the financialstatements. In no way, the disclosure requirements of revised Schedule VI will

substitute the disclosure requirements specified in the Accounting Standards.

Any other disclosure required by the Companies Act, 1956 (in addition to therequirements of revised Schedule VI) shall be made in the Notes to Accounts.

Revised Schedule VI sets out the minimum requirements for disclosure on theface of the Financial Statements and Notes to Accounts. Any addition of line or

sub-line items or subtotals shall be presented as addition / substitution to it

only when it is required under specific disclosure requirements ofindustry/sector or for compliance with the amendments to the Companies Act,

1956 or Accounting standards.

Notes to Accounts-

Notes to accounts, wherever necessary, should include narrative descriptionsor disaggregations of items recognized on the face of the financial statements

and information about items that do not qualify for recognition in the financial

statements. Cross-reference of each item of the Balance Sheet and Statement of Profit and

Loss shall be made to related information in the Notes to Accounts.


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Unit of Measurement-

For companies having a turnover of less than one hundred crore rupees, thefigures appearing in the Financial Statements may be rounded off to the

nearest hundreds, thousands, lakhs or millions, or decimals thereof.

For companies having a turnover of more than one hundred crore rupees, thefigures appearing in the Financial Statements may be rounded off to thenearest lakhs, millions, or crores or decimals thereof.

Once a unit of measurement is used, it should be used uniformly in theFinancial Statements.

Corresponding amounts (comparatives) for the immediately precedingreporting period for all items shown in the Financial Statements including

notes shall be given.

Assets and liabilities All the assets and liabilities are classified into current and non-current.

Classification of liabilities into secured and unsecured heading as given in the

old Schedule VI is now to be given in the Notes to Accounts as a line item.

Current assets and current liabilities are defined in accordance with thedefinition given in Ind AS 1 / IAS 1.

The term Sundry creditors used in the old Schedule VI has been replaced bythe word Trade Payables. Similarly, the term Sundry debtors used in the oldschedule VI has been replaced by the word Trade Receivables.

Trade payables, trade receivables and provisions are further classified as longterm (non-current) item and short term (current) item. Trade receivable will

include only the amount due on account of goods sold or services rendered in

the normal course of business. Other receivables will be shown under the

heading Other current assets.

Trade payable will include only the amount due on account of goodspurchased or services received in the normal course of business. Other

payables will be shown under the heading Other current liabilities.

Equity

All the details regarding share capital to be shown in the notes to accounts. Additions and deductions to every item/head under reserve and surplus, since

last balance sheet, are required to be shown.

Loss from Profit and Loss account will be shown under the head surplus as anegative figure.


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Balance of reserves and surplus may be in negative (i.e. after adjustingnegative balance of surplus).

Profit and Loss Account Expenses are grouped on the basis of their nature. Any item of income or expenditure which exceeds one per cent of the revenue

from operations or Rs.1,00,000 (against Rs.5,000 given in the old schedule VI),

whichever is higher; is to be disclosed separately.

Net gain or loss on foreign currency transactions/ translation related to financecost

and net gain or loss on others should be separately disclosed.

The requirements of disclosures in respect of quantity of inventories dispensedwith.Other General features

List of shareholders having more than 5% share holding to be given in financialreport

Terms & Conditions for Share Application money are to be mentioned Loss will be shown in Liability side of balance sheet under the head Surplus.

Thus it will be a negative figure, in case of loss.

Current Liabilities will be shown in the liabilities side of balance sheet. Up toprevious year, it happened to be deducted from Current assets in the assetsside of balance sheet.

Borrowings are to be bifurcated into Long Term & Short term borrowings.These will be shown under the head Non current liabilities & Current liabilities

respectively.

Period and amount of continuing default as on Balance Sheet date inrepayment of loan & interest to be separately specified.

Deferred Tax Assets/Liability to be disclosed under Non CurrentAssets/Liabilities.

Creditors shall be shown under Current Liabilities as Trade payable Current maturities of Long Term debts to be disclosed under Current

Liabilities.

Fixed Assets to be bifurcated as Tangible and Non Tangible assets. Current and Non Current Investments to be shown separately.


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Loans & Advances to be broken up in Long term & Short term and to bedisclosed in Non Current assets & Current assets respectively.

Any item in P/L account of amount 1% of revenue from operation or Rs100000/ - whichever is higher- is to be shown separately.

Finance cost shall be classified as Interest, Gain/loss in foreign currency,borrowing cost, etc. Goods traded in by the company to be disclosed in broad head in Notes.

Major disclosures omitted under revised schedule VI-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.


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APPLICABLITY Date of application

As per the MCAs notification dated 30 March 2011, the revised Schedule iseffective for financial years commencing on or after 1 April 2011. Thus, the

pre-revised Schedule VI would be applicable to the financial statements for

the year ended 31 December 2011. In view of application of the revised

Schedule for financial years beginning on or after 1 April 2011, immediate

action will need to be taken to effect requisite changes in accounting systems

and procedures.

Applicable to all companiesThe revised Schedule would apply to all Indian companies till they arerequired to follow IFRS-converged Indian Accounting Standards (Ind ASs).

However, like its predecessor, the revised Schedule does not apply to banking

or insurance companies. In case of companies engaged in the generation and

supply of electricity, the revised Schedule VI may be followed by such

companies till the time a format is prescribed under the relevant statute.

Applicability to consolidated financial statementsWhile the revised Schedule has been prescribed in the context of standalone

financial statements prepared under the Act, it would apply equally toconsolidated financial statements. This is due to the requirement of AS 21,

Consolidated Financial Statements that consolidated financial statements

should be presented, to the extent possible, in the same format as adopted for

the parents standalone financial statements. However, it may be noted thatas per AS 21, certain information (e.g., CIF value of imports, foreign currency

expenditure and earnings, etc.) disclosed in standalone financial statements of

the subsidiary and/or the parent having no bearing on the true and fair view of

the consolidated financial statements need not be given therein. Thus, the

requirements of the revised Schedule will need a review to determinestatutory information which need not be given in consolidated financial

statements.

Adherence to the specified nomenclature


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The nomenclature specified in the revised Schedule VI should be followed as

far as possible. This would not only ensure uniformity in presentation of

financial statements by different companies but also ensure that there is no

perception of noncompliance with the requirements of the revised Schedule.

Applicability of general exemptionsThe notifications issued by MCA in February 2011 granting exemption fromcertain disclosure requirements of pre revised Schedule VI would not be

applicable in the context of the revised Schedule. In any case many of the

exempted disclosures are not required under the revised Schedule.

Applicability of Schedule VI to Public Issues and Rights IssuesThe SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009

(Regulations) specify the requirements for financial information for the

purpose of public issues

and rights issues. As regards public issues, the Regulations also contain anillustrative format for furnishing financial information which is largely based on

pre-revised Schedule VI.

For a rights issue, the Regulations require companies to furnish

1. a statement of assets and liabilities as per Schedule VI of the Act It follows

that the format of the applicable Schedule VI should be followed, e.g., revised

Schedule VI for companies with the financial year commencing on or after 1

April 2011

2.a statement of profit or lossIt shall be sufficient if this contains information

relating to income and expenditure required to be disclosed as per Clause 41of the Equity Listing Agreement. The format of aforesaid information is not in

line with revised Schedule VI.

To facilitate transition to the revised Schedule VI, MCA vide its circular dated 5

September 2011 has clarified that the presentation of financial statements for

the limited purpose of Initial Public Offer (IPO)/Follow on Public Offer (FPO)

during the financial year 2011-12 may be made as per the pre-revised

Schedule VI. Considering that the illustrative format for public issues is based

on pre-revised Schedule VI, in view of the above circular, the revision of

Schedule VI does not have any significant impact for companies going forpublic issues during 2011-12. However, in case a company would like to follow

the revised Schedule, it is advisable to take a clarification from SEBI whether

the revised Schedule can be followed since the format given by the regulations

is only illustrative. It seems that suitable modifications would be required in


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the SEBI Regulations before all requirements therein are in consonance with

revised Schedule VI.

Clause 41 and revised Schedule VIListed companies are required to furnish financial information as per the

requirements of Clause 41 of the Equity Listing Agreement for each quarter inthe prescribed format. The presentation and disclosure requirements of Clause

41 override the relevant requirements of AS 25, Interim Financial Reporting. A

statement of assets and liabilities is required to be included as a note to the

half-yearly results under Clause 41. Though the format for the statement of

assets and liabilities, required at the end of the half year, is drawn from the

pre-revised Schedule VI, it will have to be followed till Clause 41 is revised.

This is because Clause 41(V) specifically requires that disclosure of balance

sheet items in half-yearly results shall be in the format specified in Annexure

IX drawn from Schedule VI of the Companies Act MAJOR DIFFERENCES BETWEEN OLD SCHEDULE VI & NEW SCHEDULE VI

Particulars Old Schedule VI Revised Schedule VI

Form of Balance Sheet Both horizontal and vertical form

were allowed

Only vertical form of Balance Sheet has

been specified in the revised Schedule V

Form of Profit and Loss Account No format specified for Profit

and Loss Account

Form of Profit and Loss Account specified

under Part II

Profit and Loss Appropriation Account Opening surplus, proposed

dividend and transfer to/ from

reserves were shown in Profit

and Loss Appropriation Account

Transfer from/ to reserves to be shown

under the heading Reserves & Surplus on

No requirement of separate Profit and Lo

Appropriation Account.

Name of the Company.Balance Sheet as at

(Rupees

in)

Particulars

Note

No

Figures as at

the end of

current

reporting

period

Figures as at

the end of the

previous

reporting

period

EQUITY AND LIABILITIES


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Shareholders funds

(a) Share capital

(b) Reserves and surplus

(c) Money received against share warrants

Share application money pendingallotment

Non-current liabilities

(a) Long-term borrowings

(b) Deferred tax liabilities (Net)

(c) Other Long term liabilities

(d) Long-term provisions

Current liabilities

(a) Short-term borrowings

(b) Trade payables(c) Other current liabilities

(d) Short-term provisions

TOTAL

II.

ASSETS

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 assetsCurrent assets

(a) Current investments

(b) Inventories

(c) Trade receivables

(d) Cash and cash equivalents


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(e) Short-term loans and advances

(f) Other current assets

TOTAL

GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET

1. An asset shall be classified as current when it satisfies any of the following

criteria:

(a) it is expected to be realized in, or is intended for sale or consumption in, the

companys normal operating cycle;

(b) it is held primarily for the purpose of being traded;

(c) it is expected to be realized within twelve months after the reporting date; or

(d) it is cash or cash equivalent unless it is restricted from being exchanged orused to

settle a liability for at least twelve months after the reporting date.

All other assets shall be classified as non-current.

2. 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.

3. A liability shall be classified as current when it satisfies any of the followingcriteria:

(a) it is expected to be settled in the companys normal operating cycle;

(b) it is held primarily for the purpose of being traded;

(c) it is due to be settled within twelve months after the reporting date; or

(d) the company does not have an unconditional right to defer settlement of the

liability

for at least twelve 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 equityinstruments do not affect its classification.

All other liabilities shall be classified as non-current.

4. A receivable shall be classified as a trade receivableif it is in respect of theamount

due on account of goods sold or services rendered in the normal course of


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business.

5. A payable shall be classified as a trade payable if it is in respect of theamount due

on account of goods purchased or services received in the normal course of

business.6. A company shall disclose the following in the notes to accounts:

A. Share Capital

for each class of share capital (different classes of preference shares to be

treated

separately):

(a) the number and amount of shares authorized;

(b) the number of shares issued, subscribed and fully paid, and subscribed but

notfully paid;

(c) par value per share;

(d) a reconciliation of the number of shares outstanding at the beginning and at

the

end of the reporting period;

(e) the rights, preferences and restrictions attaching to each class of shares

including restrictions on the distribution of dividends and the repayment of

capital;

(f) shares in respect of each class in the company held by its holding company orits ultimate holding company including shares held by or by subsidiaries or

associates of the holding company or the ultimate holding company in

aggregate;

(g) shares in the company held by each shareholder holding more than 5

percent

shares specifying the number of shares held;

(h) shares reserved for issue under options and contracts/commitments for the

sale of shares/disinvestment, including the terms and amounts;

(i) For the period of five years immediately preceding the date as at which theBalance Sheet is prepared:

Aggregate number and class of shares allotted as fully paid up pursuant to

contract(s) without payment being received in cash.

Aggregate number and class of shares allotted as fully paid up by way of

bonus shares.


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Aggregate number and class of shares bought back.

(j) 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.(k) Calls unpaid (showing aggregate value of calls unpaid by directors and

officers)

(l) Forfeited shares (amount originally paid up)

B. Reserves and Surplus

(i) Reserves and Surplus shall be classified as:

(a) Capital Reserves ;

(b) Capital Redemption Reserve;

(c) Securities Premium Reserve;

(d) Debenture Redemption Reserve;(e) Revaluation Reserve;

(f) Share Options Outstanding Account;

(g) Other Reserves(specify the nature and purpose of each reserve andthe

amount in respect thereof);

(h) Surplus i.e. balance in Statement of Profit & Loss disclosing allocations

and appropriations such as dividend, bonus shares and transfer to/from

reserves etc.

(Additions and deductions since last balance sheet to be shown under each ofthe specified heads)

(ii) A reserve specifically represented by earmarked investments shall be

termed

as a fund.(iii) Debit balance of statement of profit and loss shall be shown as a negative

figure under the head Surplus. Similarly, the balance of Reserves and

Surplus, after adjusting negative balance of surplus, if any, shall be shown

under the head Reserves and Surpluseven if the resulting figure is in the

negative.C. Long-term borrowings

(i) Long-term borrowings shall be classified as:

(a) Bonds/debentures.

(b) Term loans

from banks.


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from other parties.

(c) Deferred payment liabilities.

(d) Deposits.

(e) Loans and advances from related parties.

(f) Long term maturities of finance lease obligations(g) Other loans and advances (specify nature).

(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature

of

security shall be specified separately in each case.

(iii) Where loans have been guaranteed by directors or others, the aggregate

amount

of such loans under each head shall be disclosed.

(iv) Bonds/debentures (along with the rate of interest and particulars of

redemptionor conversion, as the case may be) shall be stated in descending order of

maturity

or conversion, starting from farthest redemption or conversion date, as the case

may be. Where bonds/debentures are redeemable by installments, the date of

maturity for this purpose must be reckoned as the date on which the first

installment becomes due.

(v) Particulars of any redeemed bonds/ debentures which the company has

power to

reissue shall be disclosed.(vi) Terms of repayment of term loans and other loans shall be stated.

(vii) Period and amount of continuing default as on the balance sheet date in

repayment of loans and interest, shall be specified separately in each case.

D. Other Long Term Liabilities

Other Long term Liabilities shall be classified as:

(a) Trade payables

(b) Others

E. Long-term provisions

The amounts shall be classified as:(a) Provision for employee benefits.

(b) Others (specify nature).

F. Short-term borrowings

(i) Short-term borrowings shall be classified as:

(a) Loans repayable on demand


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from banks.

from other parties.

(b) Loans and advances from related parties.

(c) Deposits.

(d) Other loans and advances (specify nature).(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature

of

security shall be specified separately in each case.

(iii) Where loans have been guaranteed by directors or others, the aggregate

amount of

such loans under each head shall be disclosed.

(iv) Period and amount of default as on the balance sheet date in repayment of

loans and

interest, shall be specified separately in each case.G. Other current liabilities

The amounts shall be classified as:

(a) Current maturities of long-term debt;

(b) Current maturities of finance lease obligations;

(c) Interest accrued but not due on borrowings;

(d) Interest accrued and due on borrowings;

(e) Income received in advance;

(f) Unpaid dividends

(g) Application money received for allotment of securities and due for refundand interest accrued thereon. Share application money includes advances

towards allotment of share capital. The terms and conditions including the

number of shares proposed to be issued, the amount of premium ,if any,

and the period before which shares shall be allotted shall be disclosed. It

shall also be disclosed whether the company has sufficient authorized

capital to cover the share capital amount resulting from allotment of shares

out of such share application money. Further, the period for which the share

application money has been pending beyond the period for allotment as

mentioned in the document inviting application for shares along with thereason for such share application money being pending shall be disclosed.

Share application money not exceeding the issued capital and to the extent

not refundable shall be shown under the head Equity and share application

money to the extent refundable i.e., the amount in excess of subscription or

in case the requirements of minimum subscription are not met, shall be


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separately shown under ther current liabilities(h) Unpaid matured deposits and interest accrued thereon

(i) Unpaid matured debentures and interest accrued thereon

(j) Other payables (specify nature);

H. Short-term provisionsThe amounts shall be classified as:

(a) Provision for employee benefits.


I. Tangible assets

(i) Classification shall be given as:

(a) Land.

(b) Buildings.

(c) Plant and Equipment.(d) Furniture and Fixtures.

(e) Vehicles.

(f) Office equipment.

(g) Others (specify nature).

(ii) Assets under lease shall be separately specified under each class of asset.

(iii) 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,

acquisitionsthrough business combinations and other adjustments and the related

depreciation

and impairment losses/reversals shall be disclosed separately.

(iv) Where sums have been written off on a reduction of capital or revaluation

of assets or

where sums have been added on revaluation of assets, every balance sheet

subsequent

to date of such write-off, or addition shall show the reduced or increased figures

asapplicable and shall by way of a note also show the amount of the reduction or

increase as applicable together with the date thereof for the first five years

subsequent

to the date of such reduction or increase.

J. Intangible assets


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(i) Classification shall be given as:

(a) Goodwill.

(b) Brands /trademarks.

(c) Computer software.

(d) Mastheads and publishing titles.(e) Mining rights.

(f) Copyrights, and patents and other intellectual property rights, services and

operating rights.

(g) Recipes, formulae, models, designs and prototypes.

(h) Licenses and franchise.

(i) Others (specify nature).

(ii) 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 and other adjustments and the related

amortization

and impairment losses/reversals shall be disclosed separately.

(iii) Where sums have been written off on a reduction of capital or revaluation

of assets or

where sums have been added on revaluation of assets, every balance sheet

subsequent to date of such write-off, or addition shall show the reduced or

increasedfigures as applicable and shall by way of a note also show the amount of the

reduction or increase as applicable together with the date thereof for the first

five

years subsequent to the date of such reduction or increase.

K. Non-current investments

(i) Non-current investments shall be classified as trade investments and other

investments and further classified as:

(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


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(h) Other non-current investments (specify nature)

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). 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) shall

be given.(ii) Investments carried at other than at cost should be separately stated

specifying

the basis for valuation thereof.

(iii) The following shall also be disclosed:

(a) Aggregate amount of quoted investments and market value thereof;

(b) Aggregate amount of unquoted investments;

(c) Aggregate provision for diminution in value of investments

L. Long-term loans and advances

(i) Long-term loans and advances shall be classified as:(a) Capital Advances;

(b) Security Deposits;

(c) Loans and advances to related parties (giving details thereof);

(d) Other loans and advances (specify nature).

(ii) The above shall also be separately sub-classified as:

(a) Secured, considered good;

(b) Unsecured, considered good;

(c) Doubtful.

(iii) Allowance for bad and doubtful loans and advances shall be disclosedunder the relevant heads separately.

(iv) Loans and advances due by directors or other officers of the company or

any of them either severally or jointly with any other persons or amounts

due by firms or private companies respectively in which any director is a

partner or a director or a member should be separately stated.


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M. Other non-current assets

Other non-current assets shall be classified as:

(i) Long Term Trade Receivables (including trade receivables on deferred credit

terms);

(ii) Others (specify nature)(iii) Long term Trade Receivables, shall be sub-classified as:

(i) (a) Secured, considered good;

(b) Unsecured considered good;

(c) Doubtful

(ii) Allowance for bad and doubtful debts shall be disclosed under the relevant

heads

separately.

(iii) Debts due by directors or other officers of the company or any of them

eitherseverally or jointly with any other person or debts due by firms or private

companies respectively in which any director is a partner or a director or a

member

should be separately stated.

N. Current Investments

(i) Current investments shall be classified as:

(a) Investments in Equity Instruments;

(b) Investment in Preference Shares

(c) Investments in government or trust securities;(d) Investments in debentures or bonds;

(e) Investments in Mutual Funds;

(f) Investments in partnership firms

(g) Other investments (specify nature).

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 andthe nature and

extent of the investment so made in each such body corporate (showing

separately investments

which are partly-paid). In regard to investments in the capital of partnership

firms, the names of


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the firms (with the names of all their partners, total capital and the shares of

each partner) shall

be given.

(ii) The following shall also be disclosed:

(a) The basis of valuation of individual investments(b) Aggregate amount of quoted investments and market value thereof;

(c) Aggregate amount of unquoted investments;

(d) Aggregate provision made for diminution in value of investments.

O. Inventories

(i) Inventories shall be classified as:

(a) Raw materials;

(b) Work-in-progress;

(c) Finished goods;

(d) Stock-in-trade (in respect of goods acquired for trading);(e) Stores and spares;

(f) Loose tools;

(g) Others (specify nature).

(ii) Goods-in-transit shall be disclosed under the relevant sub-head of

inventories.

(iii) Mode of valuation shall be stated.

P. Trade Receivables

(i) Aggregate amount of Trade Receivables outstanding for a period exceeding

six monthsfrom the date they are due for payment should be separately stated.

(ii) Trade receivables shall be sub-classified as:


(b) Unsecured considered good;

(c) Doubtful.

(iii) Allowance for bad and doubtful debts shall be disclosed under the relevant

heads

separately.

(iv) Debts due by directors or other officers of the company or any of themeither severally or

jointly with any other person or debts due by firms or private companies

respectively in

which any director is a partner or a director or a member should be separately

stated.


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Q. Cash and cash equivalents

(i) Cash and cash equivalents shall be classified as:

(a) Balances with banks;

(b) Cheques, drafts on hand;

(c) Cash on hand;(d) Others (specify nature).

(ii) Earmarked balances with banks (for example, for unpaid dividend) shall be

separately stated.

(iii) Balances with banks to the extent held as margin money or security against

the

borrowings, guarantees, other commitments shall be disclosed separately.

(iv) Repatriation restrictions, if any, in respect of cash and bank balances shall be

separately stated.

(v) Bank deposits with more than 12 months maturity shall be disclosedseparately.

R. Short-term loans and advances

(i) Short-term loans and advances shall be classified as:

(a) Loans and advances to related parties (giving details thereof);


(ii) The above shall also be sub-classified as:


(b) Unsecured, considered good;

(c) Doubtful.(iii) Allowance for bad and doubtful loans and advances shall be disclosed under

the

relevant heads separately.

(iv) Loans and advances due by directors or other officers of the company or any

of

them either severally or jointly with any other person or amounts due by firms

or

private companies respectively in which any director is a partner or a director or

amember shall be separately stated.

S. Other current assets (specify nature).

This is an all-inclusive heading, which incorporates current assets that do not fit

into any other asset categories.

T. Contingent liabilities and commitments


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(to the extent not provided for)

(i) Contingent liabilities shall be classified as:

(a) Claims against the company not acknowledged as debt;

(b) Guarantees;

(c) Other money for which the company is contingently liable(ii) Commitments shall be classified as:

(a) Estimated amount of contracts remaining to be executed on capital account

and not provided for;

(b) Uncalled liability on shares and other investments partly paid

(c) Other commitments (specify nature).

U. The amount of dividends proposed to be distributed to equity and preference

shareholders for the period and the related amount per share shall be disclosed

separately. Arrears of fixed cumulative dividends on preference shares shall also

bedisclosed separately.

V. Where in respect of an issue of securities made for a specific purpose, the

whole or

part of the amount has not been used for the specific purpose at the balance

sheet

date, there shall be indicated by way of note how such unutilized amounts have

been

used or invested.

W. If, in the opinion of the Board, any of the assets other than fixed assets andnoncurrent 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.

STATEMENT OF PROFIT AND LOSS

Profit and Loss statement for the year ended 31st March, 2011

ParticularsNote

No

Figures as

at the end

of current

reporting

period

Figures as

at theend of

previous

reporting

period

I. Revenue from operations


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26

II. Other Income

III. Total Revenue (I +II)

IV. Expenses:

Cost of materials consumed

Purchase of Stock-in-TradeChanges in inventories of finished goods,

work-in-progress and Stock-in-Trade

Employee benefit expense

Financial costs

Depreciation and amortization expense

Other expenses

Total Expenses

V. Profit before exceptional andextraordinary items and tax

(III -IV)

VI. Exceptional Items

VII. Profit before extraordinary items and tax

(V - VI)

VIII. Extraordinary Items

IX. Profit before tax (VII - VIII)

X. Tax expense:

(1) Current tax

(2) Deferred tax

XI. Profit(Loss) from the perid from

continuing operations

(VII-

VIII)

XII. Profit/(Loss) from discontinuing

operations

XIII. Tax expense of discounting operations


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XIV. Profit/(Loss) from Discontinuing

operations (XII - XIII)

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

XVI. Earning per equity share:

(1) Basic

(2) Diluted

GENERAL INSTRUCTIONS FOR PREPARATION OF STATEMENT OF PROFIT

AND LOSS

1. The provisions of this Part shall apply to the income and expenditure

account referred toin sub-section (2) of Section 210 of the Act, in like manner as they apply to a

statement of

profit and loss.

2. (A) In respect of a company other than a finance company revenue from

operations shall

disclose separately in the notes revenue from

(a) sale of products;

(b) sale of services;

(c) other operating revenues;Less:

(d) Excise duty.

(B) In respect of a finance company, revenue from operations shall include

revenue from

(a) Interest; and

(b) Other financial services

Revenue under each of the above heads shall be disclosed separately by way

of

notes to accounts to the extent applicable.3. Finance Costs

Finance costs shall be classified as:

(a) Interest expense;

(b) Other borrowing costs;

(c) Applicable net gain/loss on foreign currency transactions and translation.


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4. Other income

Other income shall 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).

5. Additional Information

A Company shall disclose by way of notes additional information regarding

aggregate

expenditure and income on the following items:-

(i) (a)Employee Benefits Expense [showing separately (i) salaries and wages, (ii)

contribution to provident and other funds, (iii) expense on Employee Stock

OptionScheme (ESOP) and Employee Stock Purchase Plan (ESPP), (iv) staff welfare

expenses].

(b) Depreciation and amortization expense;

(c) Any item of income or expenditure which exceeds one per cent of the

revenue

from operations or Rs.1,00,000, whichever is higher;

(d) Interest Income;

(e) Interest Expense;(f) Dividend Income;

(g) Net gain/ loss on sale of investments;

(h) Adjustments to the carrying amount of investments;

(i) Net gain or loss on foreign currency transaction and translation (other than

considered as finance cost);

(j) Payments to the auditor as (a0 auditor,(b0 for taxation matters, (c) for

company

law matters, (d) for management services, (e) for other services, (f) for

reimbursement of expenses;(k) Details of items of exceptional and extraordinary nature;

(l) Prior period items;

(ii) (a) In the case of manufacturing companies,-

(1) Raw materials under broad heads.

(2) goods purchased under broad heads.


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29

(b)In the case of trading companies, purchases in respect of goods traded in by

the company under broad heads.

(c)In the case of companies rendering or supplying services, gross income

derived form services rendered or supplied under broad heads.

(d)In the case of a company, which falls under more than one of the categoriesmentioned in (a), (b) and (c) above, it shall be sufficient compliance with the

requirements herein if purchases, sales and consumption of raw material and

the

gross income from services rendered is shown under broad heads.

(e)In the case of other companies, gross income derived under broad heads.

(iii) In the case of all concerns having works in progress, works-in-progress

under

broad heads.

(iv) (a) The aggregate, if material, of any amounts set aside or proposed to beset

aside, to reserve, but not including provisions made to meet any specific

liability,

contingency or commitment known to exist at the date as to which the

balancesheet is made up.

(b) The aggregate, if material, of any amounts withdrawn from such reserves.

(v) (a) The aggregate, if material, of the amounts set aside to provisions made

for

meeting specific liabilities, contingencies or commitments.

(b) The aggregate, if material, of the amounts withdrawn from such provisions,

as no longer required.

(vi) 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.

(g) Insurance .

(h) Rates and taxes, excluding, taxes on income.

(i) Miscellaneous expenses,

(vii) (a) Dividends from subsidiary companies.


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(b) Provisions for losses of subsidiary companies.

(viii) The profit and loss account shall also contain by way of a note the

following

information, namely:-

a) Value of imports calculated on C.I.F basis by the company during thefinancial year

in respect ofI. 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 and consultation fees, interest, and other matters;

c) Total value if all imported raw materials, spare parts and componentsconsumed

during the financial year and the total 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 total number of non-resident shareholders, thetotal

number of shares held by them on which the dividends were due and the year

to

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 thereofNote:-Broad heads shall be decided taking into account the concept of

materiality and

presentation of true and fair view of financial statements,.

MAJOR DISCLOSURE REQUIREMENTS RETAINED UNDER REVISED SCHDULE VI


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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;

f. Expenditure incurred on each of the following items, separately for each item:-


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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. (a) The aggregate, if material, of the amounts to set aside to provisions made for

meeting specific

liabilities, contingencies or commitments.

(b) The aggregate, if material, of the amounts withdrawn from such provisions, asno longer

required.

GOING FORWARD AND MAJOR CHALLENGES


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The revised schedule is a major revamp of the existing one. The focus has been

put primarily on the

liquidity aspect of balance sheet items. The revised guidelines are a stepping

stone towards IFRS

convergence and will assist at the time of IFRS convergence.

Accounting standards are now more important than ever. Not only have the

prescribed definitions of

accounting standards are to be referred to in relation to Schedule VI but now they

have gained dominance

over the schedule VI requirement.

The revised guidelines calls for additional task for the gathering new information

mainly in the areas of

1. Previous year figures based on revised schedule VI guidelines.

2. All assets and liability needs to be bifurcated between current and non-current.

This requires

accumulation of several additional informations in relation to each assets and

liabilities.

3. The provision for Employee benefits needs to be sliced between current and

non-current involving

the role of actuary valuation for earlier year also.

4. Separate disclosure of Investment property.

5. Various new disclosures in relation to share holding pattern of the Company.

Some Issues Emanating From Revised Schedule VI

Though the revised Schedule VI has reduced the burden in terms of disclosure

requirements and made the presentation of Financial Statements more

meaningful, yet there are certain issues which need to be addressed by the


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Ministry. For instance, revised Schedule VI requires the comparative information

in respect of the immediately preceding reporting period for all items given in the

financial statements. The same has been exempted only in the case of the first

financial statements of a company prepared after its incorporation. Therefore, in

the case of other companies, the financial statements prepared as per revisedSchedule VI for the first time, have to disclose comparative information in respect

of the immediately preceding reporting period. This requires the figures of the

immediately preceding reporting period to be reinstated as per revised Schedule

VI, which no doubt, is a cumbersome process. Also, companies whose accounting

periods end on 30th September or 30th June, 2011 may face a dilemma on

whether to prepare their interim financial statements on the basis of old Schedule

VI or revised Schedule VI. Further, the application of the revised Schedule VI may

cast an additional burden, both in terms of cost and consumption of time. It may

also require customizing of IT/MIS systems of a company within a short period toprepare its financial statements within the set time.

Overview on Revised Schedule VI AT A GLANCE

1. The privilege of having a balance sheet under horizontal or vertical format has

been done away with. Option of only one format i.e vertical format is now

available for preparation of the Balance Sheet.

2. Introduction of a new format for publishing profit & loss account.

3. Part III and part IV of the existing schedule VI has been done away with.

4. The disaggregation of information given in the Balance sheet and Profit Loss

account now shall be disclosed in the notes to accounts instead of the schedule

format as per existing schedule VI.

5. Various new disclosures have been added and few existing requirements have

been removed. The additional disclosure requirements are more pertinent in case

of balance sheet. The disclosure requirements in respect to Profit & Loss have

been significantly reduced.

6. Under the new framework revised schedule VI will act as an additional

requirement of disclosures along with the disclosure required by the Companies

Act and the Accounting Standards. In other words the disclosure requirements of


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Notified Accounting Standards will prevail on the revised schedule VI disclosures

where-ever there are conflicts.

7. Revised schedule VI gives the liberty of application of judgment in maintaining

a balance between excessive details that may not assist the users of the financialstatements and not providing too much important information as a result of too

much aggregation.

8. Revised schedule VI disclosures are a major step towards convergence of

International Financial Reporting Standard.

9. Revised schedule VI strives for a more transparent presentation of the

Companys Financial. Focus more on the liquidity aspect of the assets and

liabilities of the company.

10. Current and non-current classification has been brought into for presentation

of assets and liabilities in the balance sheet which is largely in line with the

fundamental of used under Ind-AS/ IFRS. The same would require classification of

assets and liabilities to be segregated into their current and noncurrent portions.

11. Previous years figures need to be given in the revised format along with the

current financials.

12. The definitions prescribed under Notified Accounting standard shall be used

for the purpose of terms used in the revised schedule VI.

13. The limits of rounding off (on the basis of turnover) have been increased and

the revised limits are as follows Turnover Rounding off (i) Less than one hundred

crores To the nearest hundreds, thousands, lakhs or millions, or decimals thereof.

(ii) More than one hundred crores To the nearest lakhs, millions or crores, or dec

There may be certain other issues as well which may come up while preparing the

financial statements imals thereof.

CONCLUSION


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as per revised Schedule VI. No doubt, in course of time, these issues will be

resolved by the Ministry. The need of the hour is to overcome the resistance to

change, especially, since we now function in a Knowledge Economy, which is quite

different from a traditional economy. The game in the Knowledge Economy is

How fast one can learn. Therefore, to sustain in a Knowledge Economy, wherechange is inevitable, adaptation and constant learning are essential prerequisites.With the convergence towards IFRS and the proposed introduction of new

legislations like Direct Taxes Code and Goods and Services Tax, one has no option

but to learn, unlearn and relearn.

Documents

hard copy audit.docx