New Schedule VI
Parveen Kumar II Director II
Corporate Catalyst India Pvt Ltd (www.cci.in )
1
Agenda
• Background • Key Changes
• Issues
• Challenges
2
FINANCIAL STATEMENTS…
Financial
Fi
i l
Position
OBJECTIVE
Performance
Changes in
Financial
Position
3
FINANCIAL STATEMENTS…
Understandability
Relevance
Reliability
Qualitative
Q
lit ti
Characteristics
Substance Over
Form
Comparability
Prudence
Completeness
Concepts,
p
Principles
p
and Conventions
Going G
i
Concern
Accrual
Consistency
Materiality
CASE I
Whether unrealized loss on outstanding interest rates Wh
th
li d l
t t di i t
t t
swaps would be allowable as business deduction
CBDT internal guidelines
(I t ti
(Instructions no. 03/10 dt. 23 March 2010)
03/10 dt 23 M h 2010)
 In case derivative contract is not settled , position held in the
financial instruments are marked to market
 As regards MTM losses, if the same is debited to P&L by the tax
payer, CBDT has taken a view that such notional losses would be
contingent in nature and hence can not be set off against income
JP Morgan Chase Bank v. ADIT
JP Morgan Chase Bank v. ADIT (2010‐TII‐185‐ITAT‐DEL‐INTL)
Facts
 Debited to P&L amount as loss incurred on revaluation of interest rate swap transactions
 It marked to market the entire outstanding trading swap g
g
p
by comparing present value of floating interest cash flows on fixed rates
flows on fixed rates
 Difference recorded in P&L account
 ITO disallowed the claim for deduction Assessee arguments
 Profit on revaluation of interest rate swaps arrived at in
the same manner was taxed in earlier years and the
method of accounting system followed was in terms of
the guidelines on interest rates swap issued by RBI
 CIT (A) relied on the decision in the case of United
commercial Bank v CIT (1999) 240 ITR 355 (SC)
and held that
premium is a cost of the swap transaction to the
Assessee. Therefore the loss for the period up to the
year end was allowed by CIT (A)
 Revenue filed an appeal against the CIT (A)
(A)’ss order
Issue
Whether unrealized loss on outstanding interest rate swaps at the year end would be allowed as business deduction
Tribunal Ruling..
 The Assessee was following consistent method of
accounting for interest rate swaps in terms of guidelines
of RBI
 As per rule of consistency the method adopted by the
Assessee had to be accepted and expenses would be
allowed
India works on a multi-regulator model
R
Reserve
B k (RBI)
Bank
MCA
State Registrar
Of Chit Funds
National
Housing IRDA
Bank
RBI regulates deposit
taking activity
NBFCs
HFC
…FC
AAA.C
..C
XX co.
SEBI
XXX
LC
YY
Infrastructure
XXX
Nidhi
ZZZZ
Chit Fund C.
CCCC SBC
General
Insurance
MF
ABC
The Companies Act
Section 211 (1) –
Every balance sheet of a company shall give a true and fair
view of the state of affairs of the company as at end of the
financial year and shall, subject to the provisions of this
section,
ti
b in
be
i the
th form
f
sett outt in
i Part
P t I off Schedule
S h d l VI,
VI ………..,
……. and in preparing the balance sheet due regard shall be
had, as far as may be, to the general instructions for
preparation of balance sheet under the heading “ notes” at
the end of that part.
1
5
The Companies Act
Section 211 (2) –
Every profit and loss account of a company shall give a true
and fair view of the profit and loss of the company for the
financial year and shall, subject as aforesaid, comply with the
requirements of Part II of Schedule VI,…….
1
6
Revision…….
The Ministry of Corporate Affairs (MCA) has hosted on its
website a Revised Schedule VI to the Companies Act, 1956,
laying down a new format for preparation and presentation of
the financial statements by Indian companies.
17
A p p lic a b ilit y
…….
‐ Notification no S.O. 447 (E) dated 28th Feb 2011
‐Notification
Notification no.
no S.O.
S O 653 (E) dated 30th March 2011
'The notification shall come into force for the
balance Sheet and Profit and Loss Account to be
prepared for the financial year commencing on or
after
f 1‐4‐2011.”
18
Guidance Note – ICAI
To make Indian business and companies competitive and
globally recognisable, a need was felt that format of
Fi
Financial
i l Statements
St t
t off Indian
I di
corporates
t
should
h ld be
b
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 ….
1
9
Previous Schedule VI
Part I
Part II
Part III
Part IV
• Format of F
t f
Balance Sheet
• Requirement Requirement
of Profit and Loss Account
• Interpretation Interpretation
for part I & II
• Abstract and Abstract and
Company Profile
2
0
STRUCTURE OF REVISED SCHEDULE VI
General Instructions
• Basic Info
• Concept
C
t
Balance Sheet
• Vertical form
• Instructions
Part II
Statement of f
Profit and Loss
• Format
• Instructions
Part I 2
1
What’s New in it …
2
2
Formats …
2
3
Part 1 – Form of Balance Sheet
Name of the Company……….
Balance Sheet as at ……………
Particulars
(Rupees in………...)
Note no.
Figures as at the end of current reporting period
Figures as at the end of previous reporting period
24
I. Equity and Liabilities
(1) Share Holders Fund
• Share capital
• Reserves and surplus
• Money received against share warrants
Money received against share warrants
(2) Share application money pending allotment
(3) Non –Current Liabilities
•
•
•
•
Long term borrowings
Long
term borrowings
Deferred tax liabilities (Net)
Other Long term liabilities
Long term provisions
(4) Current Liabilities
C
Li bili i
•
•
•
•
Deferred Tax ‐
Non Current
Short term borrowings
Trade payable
Other current liabilities
Other current liabilities
Short term provisions
25
II. Assets
N C
Non Current Assets
tA t
a. Fixed Assets
•
•
•
•
b.
c
c.
d.
e
e.
Asset under lease Asset
under lease
to be shown separately
TTangible assets
ibl
Intangible assets
Capital work in progress
I
Intangible assets under development
ibl
d d l
Non Current Investments
Deferred Tax Assets (Net)
Deferred Tax Assets (Net)
Long Term Loan and Advances
Other Non Current Assets
Other Non Current Assets
26
II. Assets
C
Current Assets
tA t
a.
b.
c.
d.
e.
f
f.
Current Investments
Inventories
Trade receivables
Cash and cash equivalents
Short‐term loans and advances
Oh C
Other Current Assets
A
27
General instructions for p
preparation
p
of Balance Sheet
®
Copyright Reserved
Share Capital
S.N
a
b
c
d
e
f
g
Share Capital
For each class of share capital (different classes of preference shares to
be treated separately):
the number and amount of shares authorized;
the number of shares issued, subscribed and fully paid, and subscribed but
not fully paid;
par value per share;
a reconciliation of the number of shares outstanding at the beginning
and
d att the
th end
d off the
th reporting
ti g period;
i d;
the rights, preferences and restrictions attaching to each class of shares
including restrictions on the distribution of dividends and the repayment
of capital;
p
;
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
percent shares specifying the number of shares held
Disclosure
E i i
Existing
New
I
Insertion
ti
New
Insertion
Existing
New
Insertion
29
S.N
Share Capital
Disclosure
h
shares reserved for issue under options and contracts/commitments for
the sale of shares/disinvestment, including the terms and amounts;
New
Insertion
i
For the period of five years immediately preceding the date as at which
the Balance Sheet is prepared:
a) Aggregate number and class of shares allotted as fully paid up
pursuant to contract(s) without payment being received in cash.
b) Agg
Aggregate
g t number
b and
d class
l
off shares
h
allotted
ll tt d as ffully
ll paid
id up b
by way
of bonus shares.
c) Aggregate number and class of shares bought back.
Terms of any securities convertible into equity/preference shares issued
along
g with the earliest date of conversion in descending
g order starting
g from
the farthest such date.
Calls unpaid (showing aggregate value of calls unpaid by directors and
officers)
Forfeited shares (amount originally paid up)
New
Insertion
j
k
l
Existing
Existing
Existing
30
Reserves and Surplus
S.N.
Reserves and Surplus
Disclosure
(i)
a
b
c
d
Reserves and Surplus shall be classified as:
Capital Reserves
Capital Redemption Reserve
Securities Premium Reserve
Debenture Redemption Reserve
Existing
Existing
Existing
New Insertion
e
f
Revaluation Reserve
Share Options Outstanding Account
New Insertion
New Insertion
g
Other Reserves – (specify the nature and purpose of each reserve and the
amount in respect thereof)
h Surplus i.e. balance in Statement of Profit & Loss disclosing allocations
and appropriations such as dividend, bonus shares
(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
Reserves and Surplus
Surplus’,, after adjusting negative balance of surplus, if
any, shall be shown under the head ‘Reserves and Surplus’ even if the
resulting figure is in the negative.
Existing
Existing
Existing
New Insertion
31
Assets and Liabilities are shown separately –
Assets and Liabilities are shown separately –
Current and Non Current
W ki C it l ill t
Working Capital will not appear on the face th f
of Balance Sheet
®
Copyright Reserved
32
Receivables and Payables
‐
Receivable shall be classified as Trade Receivables ‐ if in respect of the amount due on account of if i
f h
d
f
goods sold …in normal course of business
‐
Payable shall be classified as Trade Payable – if it is in respect of the amount due on account of goods p
g
purchased….in the normal course of business.
33
Part II – Form of Statement of Profit and Loss
Name of the Company
Profit and Loss Statement for the year ended……
(Rupees in …….)
Particulars
Note no.
Figures for current reporting
reporting period
Figures for previous reporting
reporting period
34
Particulars
I
Revenue from operations
II
Other income
III
Total Revenue
IV
Expenses
Cost of Material
Purchases of Stock
Changes in inventories
Employee benefits exp
Finance cost
Depreciation
Other Exp
Total Exp
Note no.
Figures for current
current reporting period
Figures for previous
previous reporting period
Classification is based on nature
based on nature and not on Function
> 1% of revenue or > R 1L kh b h
Rs. 1Lakh to be shown separately 35
Particulars
V
Profit before exceptional and extra ordinary items
VI
Exceptional items
VII
Profit before extra ordinary items and taxes
VIII
Extra ordinary items
IX
Profit before tax
X
Tax (Current and Deferred)
XI
Profit (Loss) from continuing
Profit
(Loss) from continuing
operations
Note no.
Figures for current
current reporting period
Figures for previous
previous reporting period
36
Particulars
XI
Profit (Loss) from continuing
operations
XII
Profit (Loss) from discontinuing operations
XIII
Tax expense of discontinuing operations
XIV
Profit (Loss) from DO (after tax)
XV
Profit (Loss) for the period Note no.
Figures for current
current reporting period
Figures for previous
previous reporting period
(XI+XIV)
XVI
Earnings per share
(1) Basic
(2) Diluted
37
Digging Deep …
3
8
Your Challenges …
39
Collecting Evidence …… Audit was
File Recording significant items for future Law
As per regulatory requirements
According to g
Standards
Basis for conclusion
Assistingg engageme
ent team
Planned
40
Thank You
parveen.kumar@cci.in
parveen kumar@cci in
# 9810101790