The MCA has amended the Schedule III to the Companies Act, 2013 to incorporate the general instructions for preparation of the balance sheet and the profit and loss account of an Ind AS compliant company along with additional disclosure requirements. In fact the MCA has divided the Schedule III into two parts, namely Division I (Applicable to AS compliant companies) and Division II (Applicable to Ind AS compliant companies).
a) MCA Notifies Amendments in Schedule III to the Companies Act 2013 (7 Apr 2016)
The MCA vide Notification dt 6th April, 2016 has notified amendments in Schedule III to the Companies Act, 2013. These amendments indicates the revised instructions for preparation of financial statements (i.e. Balance Sheet, P&L A/c, Notes to Accounts, etc.) by the entities those who have to comply with Accounting Standards (AS) or Indian Accounting Standards (Ind AS), as under:
In exercise of the powers conferred by sub section (1) of section 467 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following amendments to Schedule III of the said Act with effect from the date of publication of this notification in the Official Gazette, namely:-
2. In the Companies Act, 2013 (hereinafter referred to as the principal Act) in Schedule III, for the heading “General instructions for preparation of Balance Sheet and Statements of Profit and Loss of a Company” the following shall be substituted, namely:-
Financial Statements for a company whose Financial Statements are required to comply with the Companies (Accounting Standards) Rules, 2006.
GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET AND STATEMENT OF PROFIT AND LOSS OF A COMPANY”.
3. In the principal Act, in Schedule III , at the end, the following shall be inserted, namely:-
Financial Statements for a company whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015.
GENERAL INSTRUCTIONS FOR PREPARATION OF FINANCIAL STATEMENTS OF A COMPANY REQUIRED TO COMPLY WITH Ind AS
1. Every company to which Indian Accounting Standards apply, shall prepare its financial statements in accordance with this Schedule or with such modification as may be required under certain circumstances.
2. Where compliance with the requirements of the Act including Indian Accounting Standards (except the option of presenting assets and liabilities in the order of liquidity as provided by the relevant Ind AS) as applicable to the companies require any change in treatment or disclosure including addition, amendment, substitution or deletion in the head or sub-head or any changes inter se, in the financial statements or statements forming part thereof, the same shall be made and the requirements under this Schedule shall stand modified accordingly.
3. The disclosure requirements specified in this Schedule are in addition to and not in substitution of the disclosure requirements specified in the Indian Accounting Standards. Additional disclosures specified in the Indian Accounting Standards shall be made in the Notes or by way of additional statement or statements unless required to be disclosed on the face of the Financial Statements. Similarly, all other disclosures as required by the Companies Act, 2013 shall be made in the Notes in addition to the requirements set out in this Schedule.
4. (i) Notes shall contain information in addition to that presented in the Financial Statements and shall provide where required-
(a) narrative descriptions or disaggregations of items recognised in those statements; and
(b) information about items that do not qualify for recognition in those statements.
(ii) Each item on the face of the Balance Sheet, Statement of Changes in Equity and Statement of Profit and Loss shall be cross-referenced to any related information in the Notes. In preparing the Financial Statements including the Notes, a balance shall be maintained between providing excessive detail that may not assist users of Financial Statements and not providing important information as a result of too much aggregation.
5. Depending upon the turnover of the company, the figures appearing in the Financial Statements shall be rounded off as below:
|(i) less than one hundred crore rupees||To the nearest hundreds, thousands, lakhs or millions, or decimals thereof.|
|(ii) one hundred crore rupees or more||To the nearest, lakhs, millions or crores, or decimals thereof.|
Once a unit of measurement is used, it should be used uniformly in the Financial Statements.
6. Financial Statements shall contain the corresponding amounts (comparatives) for the immediately preceding reporting period for all items shown in the Financial Statements including Notes except in the case of first Financial Statements laid before the company after incorporation.
7. Financial Statements shall disclose all ‘material’ items, i.e., the items if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size or nature of the item or a combination of both, to be judged in the particular circumstances.
8. For the purpose of this Schedule, the terms used herein shall have the same meanings assigned to them in Indian Accounting Standards.
9. Where any Act or Regulation requires specific disclosures to be made in the standalone financial statements of a company, the said disclosures shall be made in addition to those required under this Schedule.
This Schedule sets out the minimum requirements for disclosure on the face of the Financial Statements, i.e., Balance Sheet, Statement of Changes in Equity for the period, the Statement of Profit and Loss for the period (The term ‘Statement of Profit and Loss’ has the same meaning as ‘Profit and Loss Account’) and Notes. Cash flow statement shall be prepared, where applicable, in accordance with the requirements of the relevant Indian Accounting Standard.
Line items, sub-line items and sub-totals shall be presented as an addition or substitution on the face of the Financial Statements when such presentation is relevant to an understanding of the company’s financial position or performance or to cater to industry or sector-specific disclosure requirements or when required for compliance with the amendments to the Companies Act, 2013 or under the Indian Accounting Standards.
PART I –BALANCE SHEET
GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET *
PART II – STATEMENT OF PROFIT AND LOSS
GENERAL INSTRUCTIONS FOR PREPARATION OF STATEMENT OF PROFIT AND LOSS *
GENERAL INSTRUCTIONS FOR THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS *
Note: Schedule III of the Companies Act, 2013 came into force with effect from the 1st April, 2014 vide Notification S.O. 902(E), dated 26-3-2014.
* Please refer above Notification of MCA for detailed format/ instructions.
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