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Study Circle Meeting on: Revised Schedule VI under Companies Act, 1956 Organised by: PUNE Study Circle Meeting on: Revised Schedule VI under Companies Act, 1956 Organised by: PUNE WEST CPE STUDY CIRCLE OF WIRC OF ICAI April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 1

Structure of Presentation » Setting the Context » Structure of Revised Schedule VI » Structure of Presentation » Setting the Context » Structure of Revised Schedule VI » Key Changes » Brain Storming on Issues » Key Takeaways April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 2

Setting the Context April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 3 Setting the Context April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 3

Setting the Context Applicability » Applicable to all companies (except Banking and Insurance Companies Setting the Context Applicability » Applicable to all companies (except Banking and Insurance Companies but applies to Electricity Companies) » Applicability date: Financial years commencing on or after 1 April 2011 Can a company apply Revised Schedule VI early, say from 1 January 2011? Ind-AS/ IFRS » Harmonize and synchronize the disclosure requirements with International formats and in the direction of Ind–AS (IFRS converged AS) E. g. Certain concepts like Current/ Non-current classification of assets and liabilities, Elimination of concept of Schedule and such information will now be provided in the Notes to Accounts April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 4

Setting the Context Fundamental Change AS/ Act to override Revised Schedule VI Format » Setting the Context Fundamental Change AS/ Act to override Revised Schedule VI Format » No option to use horizontal format for presentation of Balance Sheet(“BS”) » Format of Statement of Profit and Loss(“P&L”) also now included in Schedule VI » No option to use Functional Classification of Expenses » Each item of the face of the BS and P&L shall be cross referenced to any related information in notes to accounts (concept of Schedules dropped) » Revised Schedule VI has flexibility – Addition, deletion, amendment, substitution, modification of line/ sub–line items – The disclosure requirements are in addition to those required by AS and not in place of such AS requirements – Balance between providing excessive detail or excessive aggregation April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 5

Setting the Context Format The terms used will carry the meaning defined in applicable Setting the Context Format The terms used will carry the meaning defined in applicable AS Materiality threshold for disclosure in Revised schedule VI: » Items of income or expense (earlier only expenses) » which exceeds 1% of the revenue from operations (earlier total revenue) or » Rs 100, 000 (earlier Rs. 5, 000) whichever is higher Rounding-off options have been changed Ø Revised Schedule VI states that the figures “May be rounded off” as per specific rules. Is it mandatory or optional to apply rounding off? Ø Revised Schedule VI states that option once selected should be used uniformly through entire set of Financial Statements April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 6

Effect of rounding off q If turnover exceeds Rs. 100 Crore, figures in terms Effect of rounding off q If turnover exceeds Rs. 100 Crore, figures in terms of hundreds and thousands cannot be given; earlier, figures in hundreds and thousands was permitted for any amount of turnover q If turnover is less than Rs. 100 Crore, figures can be presented in terms of lakhs or millions (but not in crores) q Even if turnover is less than Rs. 500 Crore but exceed Rs. 100 Crore, figures can be presented in terms of crores (earlier it was only for companies with turnover of Rs. 500 Crore or more) April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 7

Structure of Revised Schedule VI April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK Structure of Revised Schedule VI April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 8

Structure of Revised Schedule VI » General Instructions » Part I – Form of Structure of Revised Schedule VI » General Instructions » Part I – Form of Balance Sheet » General Instructions for preparation of Balance Sheet » Part II – Form of Statement of Profit and Loss » General Instructions for preparation of statement of Profit and Loss Structure of Exisitng Schedule VI » Part I – Form of Balance Sheet » General Instructions for preparation of Balance Sheet » Part II – Requirements as to Profit and Loss » Part III – Interpretation – for the purpose of Parts I and II of Schedule VI unless the context otherwise requires » Part IV – BS abstract and Company’s general business profile April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 9

Balance Sheet – Revised Format (Rupees in…………) Particulars I. Equity And Liabilities 1) Shareholders’ Balance Sheet – Revised Format (Rupees in…………) Particulars I. Equity And Liabilities 1) Shareholders’ Funds A) Share Capital B) Reserves And Surplus C) Money Received Against Share Warrants 2) Share Application Money Pending Allotment 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 April 1, 2012 Note No. Current Reporting Period Previous Reporting Period XX XX XX XX XX XX XX NILESH S. VIKAMSEY PARESH H. CLERK 10

Balance Sheet – Revised Format Particulars II. Assets 1) Non–current Assets A) Fixed Assets Balance Sheet – Revised Format Particulars 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 Equivalent E) Short–term Loans And Advances F) Other Current Assets Note Current Reporting No. Period XX XX NILESH S. VIKAMSEY PARESH H. CLERK XX XX TOTAL See Accompanying Notes To The Financial Statements April 1, 2012 (Rupees in…………) Previous Reporting Period XX XX XX XX XX 11

P&L – Revised Format (Rupees in…………) Particulars I. Revenue From Operations Ii. Other Income P&L – Revised Format (Rupees in…………) Particulars I. Revenue From Operations Ii. Other Income Iii. Total Revenue (I+II) Iv. Expenses: - Cost Of Raw Materials Consumed - Purchases Of Stock–in–trade - Changes In Inventories Of Finished Goods Work–in–progress And Stock–in- Trade - Employee Benefits Expense - Finance Costs - Depreciation And Amortization Expense - Other Expenses Total Expenses V. Profit Before Exceptional And Extraordinary Items And Tax (III–IV) Vi. Exceptional Items Vii. Profit Before Extraordinary Items And Tax (V– VI) April 1, 2012 Note No. Current reporting period XX XX XX previous reporting period XX XX XX XX XX XX XX NILESH S. VIKAMSEY PARESH H. CLERK 12

P&L – Revised Format (Rupees in…………) Particulars Note Current Reporting No. Period XX Vii. P&L – Revised Format (Rupees in…………) Particulars Note Current Reporting No. Period XX 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) For The Period From Continuing Operations (IX–X) Xii. Profit/(Loss) From Discontinuing Operations Xiii. Tax Expense Of Discontinuing Operations Xiv. Profit/(Loss) From Discontinuing Operations (After Tax) (XII–XIII) Xv. Profit/(Loss) For The Period Xvi. Earnings Per Equity Share: 1) Basic 2) Diluted See Accompanying Notes To The Financial Statements April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK Previous Reporting Period XX XX XX XX XX XX XX 13

Assets Classification Assets Non-current Assets Current Assets Fixed Assets Current Investments Non- Current Investments Assets Classification Assets Non-current Assets Current Assets Fixed Assets Current Investments Non- Current Investments Inventories Deferred Tax Assets (Net) Trade Receivables LT Loans and Advances Cash and Cash Equivalents Other Non-current Assets ST Loans and Advances Other Current Assets April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 14

Equity and Liability Classification Equity and Liabilities Shareholders’ Fund Share Application Money Pending Allotment Equity and Liability Classification Equity and Liabilities Shareholders’ Fund Share Application Money Pending Allotment Non–Current Liabilities Share Capital Long-Term Borrowings Short-Term Borrowings Reserve and Surplus Deferred Tax Liabilities (Net) Trade Payables Money received against Share Warrants Other LT Liabilities Other Current Liabilities Long –term Provisions Short–Term Provisions April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 15

Key Changes April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 16 Key Changes April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 16

Disclosures No Longer Required Balance Sheet » Loans and Advances from Subsidiary – Now Disclosures No Longer Required Balance Sheet » Loans and Advances from Subsidiary – Now covered under `Loans and Advances from Related Parties’ – Loans from Managers » Investments purchased and sold during the year » Investments, sundry debtors and loans and advances pertaining to companies under the same management » Break up of Bank Balances between Scheduled and Other Banks, Break up between Current account, Call account and Deposit accounts, Details of names, amount, maximum amounts with Non-scheduled banks » Maximum amounts due on account of loans and advances from directors or officers of the company » Dues from companies under the same management » Livestock and Railway sidings » Miscellaneous Expenditure (to the extent not written off or adjusted) April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 17

Disclosures No Longer Required Profit and Loss Account » Commission, brokerage and non-trade discounts Disclosures No Longer Required Profit and Loss Account » Commission, brokerage and non-trade discounts » Quantitative information relating to turnover, raw material, purchases etc » Interest on Company’s debentures and other fixed period loan » Amount reserved for repayment of capital and repayment of loan Notes » Managerial remuneration and computation of net profits for calculation of commission » Licensed capacity, installed capacity and actual production » Balance sheet Abstract and Company’s General Profile under Part IV April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 18

New Disclosures “Current”/ “Non–current” classification » If an asset or a liability has both New Disclosures “Current”/ “Non–current” classification » If an asset or a liability has both the portions, company will need to break the same into Current and Non-current portions e. g. , Current maturities of a Long Term Borrowing will have to be separated and classified under the head “Other Current Liabilities” » Will Impact Working Capital, Current Ratio and Debt Equity Ratios Revised schedule VI requires separate disclosure for Loans and Advances received from and given to Related Parties » Earlier this disclosures was required only for Subsidiary Companies » Related parties as per AS 18 Loans guaranteed by directors or others need to be disclosed separately » Others? ? April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 19

New Disclosures Commitments » Requires disclosure of all commitments (including commitments other than Capital New Disclosures Commitments » Requires disclosure of all commitments (including commitments other than Capital Commitments) Loan Defaults » Requires disclosure of all defaults in repayment of loans and interest » Currently, CARO requires only defaults in repayment of dues to financial institutions, banks and debenture holders to be specified » Terms of repayment of Term Loans and Other Loans to be disclosed (earlier required only debentures) Shares of each class held by: » Holding Company » Ultimate Holding Company » Subsidiaries or Associates of both Above April 1, 2012 (earlier Associate of Parent was not there) NILESH S. VIKAMSEY PARESH H. CLERK 20

New Disclosures Shareholder’s Funds – Additional Disclosures » Reconciliation of no. of shares outstanding New Disclosures Shareholder’s Funds – Additional Disclosures » Reconciliation of no. of shares outstanding at beginning and end of reporting period » Rights, preferences and restrictions of each class of shares including restrictions on distribution of dividends and repayment of capital » Details of shareholders holding more than 5% shares (lifting corporate veil? ) » Details of shares issuable under options and contracts/ commitments » Unpaid calls by directors and officers shall be shown separately For 5 years immediately preceding the date of BS disclose Aggregate Number and Class of Shares : » pursuant to contract(s) without payment being received in cash (presently to be given throughout the life of the Company) » bonus shares (presently to be given throughout the life of the Company) » bought back (presently no such requirement) April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 21

New Disclosures Share Application Money Pending Allotment » Not exceeding issued capital and not New Disclosures Share Application Money Pending Allotment » Not exceeding issued capital and not refundable – disclosure after Shareholders’ Funds and before Non-current Liability » If refundable or sum in excess of issued capital – disclosures under Other Current Liability Additional Disclosures of Share Application Money (whether classified after Shareholders’ Funds or under Other Current Liabilities) » Terms and Conditions » Number of shares to be issued » Amount of premium » period before which shares will be allotted » Period for which it is pending beyond the date of allotmentioned in offer document with reasons » Whether company has sufficient authorised capital to allot the shares out of application money Is this only a disclosure requirement? Is it to be reflected always as Other Current Liabilities ? April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 22

New Disclosures Share Warrants Money received against Share Warrants, will be shown as separate New Disclosures Share Warrants Money received against Share Warrants, will be shown as separate line item under Shareholder's Funds Investments With respect to Investments, separate disclosure required for investment in “Controlled Special Purpose Entities” What is meant by “Controlled Special Purpose Entities” April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 23

Recognition No Longer Required Dividend Existing Schedule VI required the Parent Company to recognise Recognition No Longer Required Dividend Existing Schedule VI required the Parent Company to recognise dividend declared by Subsidiary Companies even after the date of the balance sheet if they were pertaining to the period ending on or before the balance sheet date. Such requirement no longer exists in Revised Schedule VI. » Whether the dividend recognized in the previous year needs to be derecognized and the previous year financial statement to be restated? » By virtue of AS-4, Subsidiary Company will provide for proposed dividend and if holding Co. , would not recognise the same, how to deal with it in Consolidated Accounts? April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 24

Disclosures Modified Debtors Currently, debtors (now to be referred to as Trade Receivable) Outstanding Disclosures Modified Debtors Currently, debtors (now to be referred to as Trade Receivable) Outstanding for a period exceeding 6 months based on billing date. Revised Schedule VI requires Trade Receivable outstanding for a period exceeding 6 months from the date they became due for payment. Capital advances » Currently, Capital advances can be presented as part of Capital Work–in– Progress / Fixed Assets » Revised Schedule VI requires the same to be presented separately under the head “Loans and Advances” Profit and Loss Account Appropriation / Reserves and Surplus » Appropriation of Profit and Loss to be presented under Reserves and Surplus » Debit Balance of Profit and Loss to be shown as a ‘negative’ figure under Surplus » Reserves and Surplus balance will be shown after adjusting negative balance of P&L, even if negative April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 25

Important Definitions Current/ Non-current asset – An asset is classified as Current when it Important Definitions Current/ Non-current asset – An asset is classified as Current when it satisfies any of the following criteria: » It is expected to be realized in, or is intended for sale or consumption in, the company’s normal operating cycle; » It is held primarily for the purpose of being traded; » It is expected to be realized within twelve months after the reporting date; or » It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date. Otherwise it is a Non-current Asset Current/ Non-current liability – A liability shall be classified as Current when it satisfies any of the following criteria: » It is expected to be settled in the company’s normal operating cycle; » It is held primarily for the purpose of being traded; » It is due to be settled within twelve months after the reporting date; or » The company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. » Otherwise it is a Non-current Liability April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 26

Important Definitions Operating Cycle It is the time between the acquisition of assets for Important Definitions Operating Cycle It 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. Trade Receivable A receivable shall be classified as a ‘Trade Receivable’ if it is in respect of the amount due on account of goods sold or services rendered in the normal course of business. Trade Payable 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 received in the normal course of business. April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 27

Challenges for F. Y. 2010 -11 » Classification of Current or Non-current » Compile Challenges for F. Y. 2010 -11 » Classification of Current or Non-current » Compile additional disclosure requirements » Balances will have to be segregated, reclassified, regrouped » The figures may be required to be audited » For the purpose of Comparative Statement of Cash Flow for the year 2010 -11, even the Balance Sheet as at March 31, 2010 will have to be prepared April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 28

Brain Storming on Issues April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 29 Brain Storming on Issues April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 29

General Issues Comparative Information Whether required in the first year of its application? Half-yearly General Issues Comparative Information Whether required in the first year of its application? Half-yearly or Interim Financial Statements Whether to use the existing or the Revised Schedule VI in the preparation of its half yearly financial statements? Format of financial statements as per SEBI ICDR Regulations Whether to use the existing or the Revised Schedule VI in the preparation Restated Financial Information? Commitments Earlier Schedule VI - only “Capital Commitments”. Revised Schedule VI requires the disclosure of all commitments, i. e. , including “Other Commitments. ” What is the nature of “commitments” that will get covered under this disclosure requirement? April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 30

General Issues Finance Companies Which companies should be considered as “Finance Companies”? Disclosure of General Issues Finance Companies Which companies should be considered as “Finance Companies”? Disclosure of Unamortized Expenses Disclosure of Unamortized portion of expense items such as share issue expenses, ancillary borrowing cost and discount or premium relating to borrowings? April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 31

Key Issues – Balance Sheet Current and Non-Current Classification » Whether Deferred Tax should Key Issues – Balance Sheet Current and Non-Current Classification » Whether Deferred Tax should always be classified as Non–Current ? » Whether Capital advances also need to be bifurcated between Non-current and Current categories? If yes, on what basis? » Unconditional right to defer settlement of liability » Non compliance of debt covenants e. g. quarterly information, non payment of monthly interest » Most loan agreements have a clause that in case of non compliance of any clause the loan will be payable on demand April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 32

Key Issues – Balance Sheet Current and Non-current Classification » Whether total loan will Key Issues – Balance Sheet Current and Non-current Classification » Whether total loan will become Current or Non-current? » Classification of Long–term Investment expected to be realized within 12 months from the BS date » Employee Benefits like Bonus/ Incentives, Post employment obligations e. g. Gratuity and Pension, Other long–term benefits e. g. Accumulated compensated absence » Whether Cash credit will be classified as Current or Non-current ? » Whether the provision for tax to be classifies as Current or Non-current ? April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 33

Key Issues – Balance Sheet Trade Receivable/ Payable classification Whether liability for purchase of Key Issues – Balance Sheet Trade Receivable/ Payable classification Whether liability for purchase of fixed assets/ receivable for sale of Fixed Assets should be classified as Trade Payable/ Trade Receivable? Investments– Basis of valuation (Revised) Vs Mode of Valuation (earlier) » Long–Term investments carried at other than cost » Current Investment (individual investments) April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 34

Key Issues – Balance Sheet Share Capital Shareholder holding more than 5% shares » Key Issues – Balance Sheet Share Capital Shareholder holding more than 5% shares » Will disclosure apply if a shareholder was holding more than 5% shares during the year; but not at year–end ? » Disclosure in case of ADR/ GDR Shares held by holding/ ultimate holding company, including shares held by their subsidiaries/ associates » Whether applicable to preference shares classified as liability » Purpose of requiring disclosures held by associates » No need to disclose shares held by joint ventures April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 35

Key Issues – Balance Sheet Redeemable Preference Shares – whether Capital OR Liability? The Key Issues – Balance Sheet Redeemable Preference Shares – whether Capital OR Liability? The Revised Schedule VI mentions that different classes of Preference Share Capital to be treated separately. (Note 6 A of General Instructions for preparing Balance Sheet); Does this imply that a company needs to decide whether redeemable preference shares are liability or equity based on its economic substance April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 36

Key Issues – Profit and Loss Account Quantitative Information Nature of Company Manufacturing companies Key Issues – Profit and Loss Account Quantitative Information Nature of Company Manufacturing companies Trading companies Disclosures Required Raw materials under broad heads Goods purchased under broad heads Purchases of goods traded under broad heads Companies rendering or supplying services Gross income derived from services rendered under broad heads Company that falls in more than one category It will be sufficient compliance with the requirements, if purchases, sales and consumption of raw material and the gross income from services rendered are shown under broad heads April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 37

Key Issues – Profit and Loss Account Quantitative and other Information » Is a Key Issues – Profit and Loss Account Quantitative and other Information » Is a Company required to disclose quantitative details or not? » Will a manufacturing company disclose purchase, sale or consumption of raw material? » What is meant by “good purchased” in case of manufacturing companies? » Does a manufacturing or a trading company required to disclose sales? » How should broad heads for Work–in–Progress be disclosed? » Whether broad heads of Opening and Closing Inventory should also be disclosed? April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 38

Key Issues – Profit and Loss Account Excise Duty, Sales Tax and VAT » Key Issues – Profit and Loss Account Excise Duty, Sales Tax and VAT » Revised Schedule VI requires excise duty to be presented as deduction from revenue of a non–finance company in the notes » No specific requirement for presentation of VAT and Sales Tax » Issues – AS 9 Revenue Recognition requires excise duty to be shown as deduction from sales on the face of P&L Account (and not in notes) – No notified AS deals with accounting for VAT. However, the ICAI GN requires that revenue recognized should be net of VAT – Service Tax–? ? April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 39

Key Issues – Profit and Loss Account » Accounting and disclosure of share of Key Issues – Profit and Loss Account » Accounting and disclosure of share of profit/ loss in Partnership Firms » Whether disclosures for Names of all Partners, Total Capital and Share (Profit/ Loss Sharing Ratio) of Each Partner should be disclosed for LLP also ? » Proposed dividend – accounting and disclosure » Whether dividend income for finance companies should be taken to main revenue or Other Income ? April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 40

Key Issues – Disclosure Level of disclosure pertaining to default/continuing default in repayment of Key Issues – Disclosure Level of disclosure pertaining to default/continuing default in repayment of loans and interest in each case i. e. category–wise or loan–wise within the category? Details of “continuing default (in case of long–term borrowing) and default (in case of short–term borrowing) as on the balance sheet date in repayment of loans and interest shall be specified separately in each case". The wordings give rise to following issues: » Default pertain to borrowing from banks and FI’s or are also required for items such as bonds/ debentures, deposits, finance lease obligations? » Defaults other than repayment of loan and interest, e. g. , compliance with debt covenants? » Interpretation of terms “default/ continuing default” as on the balance sheet date April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 41

Key Issues – Disclosure Loans and Advances to related parties » “Details” of Loans Key Issues – Disclosure Loans and Advances to related parties » “Details” of Loans and Advances given to Related Parties to be disclosed » What details need to be disclosed are not specified? » Whether disclosures required to be made in addition to AS– 18 Cash and Cash Equivalent definition » Disclosures required under the head “Cash and Cash Equivalents” are not as per the definition of the said term in AS 3 Cash Flow Statement Information about items that do not qualify for recognition in financial statements – what could be these items? » Postponement of Revenue Recognition » Disputed Cases – Remote Liability – Not Contingent April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 42

Key Issues – Disclosure » Meaning of “Other Operating Revenues” for Non-finance Companies » Key Issues – Disclosure » Meaning of “Other Operating Revenues” for Non-finance Companies » Where should the following be classified – Other Operating Revenue/ Other Income? - Profit on Sale of Fixed Assets - Sale of Manufacturing Scrap » Should the net gains arising on foreign exchange fluctuations be included under the head “Other Operating Revenues” or “Other Income”? » No specific guidance on disclosure of value of imports and expenditure in foreign currency whether accrual or cash » Does Small and Medium Company as defined under Companies (Accounting Standards) Rules, 2006 need to disclose Diluted EPS? April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 43

Key Issues – Disclosure Tangible and Intangible Assets To disclose the amount of reduction Key Issues – Disclosure Tangible and Intangible Assets To disclose the amount of reduction or increase (due to reduction of capital or revaluation of assets etc) together with the date thereof for the first 5 years subsequent to the date of such reduction or increase, can a company avoid making disclosures required under AS 10 beyond 5 years? April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 44

Key Takeaways » Comparative Numbers – To commence exercise of validating previous year numbers Key Takeaways » Comparative Numbers – To commence exercise of validating previous year numbers in Revised Schedule VI Format » Changes to be made MIS/ IT systems to collate information of Current/ Non-current portions of each asset and liabilities » Break-up of Employee Benefit Liabilities in Current and Non-current to be obtained from Independent Actuary » Review Loan Agreements to avoid becoming Current liability in case of non compliance of minor clauses » Additional time and efforts for the Companies and Auditors to understand implement changes » Use of judgment to maintain balance between excessive information and over aggregation April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 45

Differential Comparison SN Particular Existing Revised 1 Net Working Capital Current assets and Liabilities Differential Comparison SN Particular Existing Revised 1 Net Working Capital Current assets and Liabilities are shown together under application of funds. Net Working Capital appears on balance sheet Assets and Liabilities are to be bifurcated into Current and Non–current and shown separately. Hence, Net Working Capital will not be appearing in Balance sheet 2 Fixed Assets No bifurcation required into Tangible and Intangible assets Fixed assets to be shown under Noncurrent assets and it has to be bifurcated in to Tangible and Intangible assets 3 Borrowings Short term and long term borrowings are grouped together under the head Loan funds sub–head Secured/ Unsecured • Long term borrowings to be shown under Non-Current liabilities and short term borrowings to be shown under Current liabilities with separate disclosure of secured/ unsecured loans. • Period and amount of continuing default as on the balance sheet date in repayment of loans and interest to be separately specified April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 46

Differential Comparison SN Particular Existing Revised 4 Finance lease obligations are included in Current Differential Comparison SN Particular Existing Revised 4 Finance lease obligations are included in Current liabilities Finance lease obligations are to be grouped under the head Non-current liabilities 5 Deposits Lease deposits are part of loans and advances Lease deposits to be disclosed as long term loans and advances under the head Non-current assets 6 Investments Both Current and Non-current investments to be disclosed under the head investments Current and Non-current investments are to be disclosed separately under Current assets and Non-current assets respectively 7 Loans and Advances Loans and Advance are disclosed along with current assets Loans and Advance to subsidiaries and others to be disclosed separately Loans and Advances to be broken up in long term and short term and to be disclosed under Non-current and Current assets respectively. Loans and Advance from related parties and others to be disclosed separately. April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 47

Differential Comparison SN Particular Existing Revised 8 DTA/ DTL Deferred Tax assets/ liabilities to Differential Comparison SN Particular Existing Revised 8 DTA/ DTL Deferred Tax assets/ liabilities to be disclosed separately DTA/ DTL to be disclosed under non– Current assets/ liabilities as applicable 9 Cash and Bank Balances Bank balance to be bifurcated in scheduled banks and others Bank balances in relation to earmarked balances, held as margin money, deposits with more than 12 months maturity, each to be shown Separately. 10 Profit and Loss (Dr Balance) P&L debit balance to be shown under the head Miscellaneous expenditure and losses Debit balance of Profit and Loss Account to be shown as negative figure under the head Surplus. Therefore, reserve and surplus balance can be negative 12 Format A company has an option to use horizontal format for presentation of financial statements. A company will not have option to use horizontal format for presentation of financial statements. April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 48

Differential Comparison SN Particular 13 Other Current liabilities No separate disclosure of Current maturities Differential Comparison SN Particular 13 Other Current liabilities No separate disclosure of Current maturities of long term debt. No separate disclosure of Current maturities of finance lease Obligation Current maturities of long term debt to be disclosed under other Current liabilities. Current maturities of finance lease obligation to be disclosed 14 Purchases, Opening and closing stock, giving break up in respect of each class of goods traded in indicating the quantities thereof Goods traded in by the company to be disclosed in broad heads in notes. Disclosure of quantitative details of goods is much diluted. 15 Expense Classification in P&L A/c Function wise and Nature wise Classification based on nature of expenses 16 Finance Cost To be classified in fixed loans and other loans To be classified as interest expense, other borrowing costs and Gain/ Loss on forex transactions/ translations. 17 Foreign exchange gain/ loss Gain/ Loss on foreign currency transaction to be shown under finance cost Gain/ Loss on foreign currency transaction to be separated into finance costs and other expenses April 1, 2012 Existing Revised NILESH S. VIKAMSEY PARESH H. CLERK 49

April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 50 April 1, 2012 NILESH S. VIKAMSEY PARESH H. CLERK 50