Revised Schedule VI of Companies Act, 1956

Ministry of Corporate Affairs (MCA) had revised Schedule VI of Companies Act, 1956 and notified the same on March 1, 2011. The revised Schedule VI is applicable to all the  companies from April 1, 2011 except the following:

  • Insurance companies
  • Banking companies
  • Companies engaged in the generation or supply of electricity
  • Any other class of company for which a form of Balance Sheet and Profit and Loss account has been specified in or under any other Act

The revised Schedule VI introduces many new concepts and disclosure requirements and does away with several statutory disclosure requirements of the previous Schedule VI. Revised Schedule VI allows a considerable amount of flexibility compared to its predecessor, it also casts a greater responsibility on the management to exercise judgment in balancing the extent of information presented. In preparing the Financial Statements including the notes to accounts, the Revised Schedule VI, requires that a balance should 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.

Key changes related to disclosure requirements of Balance sheet:

  1. The revised Schedule VI lays down a format for the presentation of P&L account. This format of P&L account does not list any appropriation item on its face. The classification of expenses is based on their nature and not on their function.
  2. In addition to specific disclosures prescribed in the P&L account, any item of income or expense which exceeds 1% of the revenue from operations or Rs.100,000, whichever is higher, needs to be disclosed separately.
  3. Net exchange gain/loss on foreign currency borrowings to the extent considered as an adjustment to interest cost needs to be disclosed separately as a finance cost.
  4. Details pertaining to aggregate number and class of shares allotted for consideration other than cash, bonus shares and shares bought back will be disclosed only if such an event has occurred during a period of 5 years immediately preceding the balance sheet date.
  5. Any debit balance in P&L account will be disclosed under the head “Reserves and surplus.” Earlier, any P&L debit balance carried forward after deduction from uncommitted reserves was required to be shown on the asset side of the balance sheet.
  6. Specific disclosures have been prescribed for the share application money. The application money not exceeding the issued capital and to the extent not refundable has to be shown separately on the face of the balance sheet. The amount in excess of subscription, or if the requirements of minimum subscription are not met, will be shown under “Other current liabilities”.
  7. Capital advances are now required to be presented separately under the head “Loans &
    advances” rather than as part of “capital work-in-progress” or “fixed assets”.
  8. Tangible assets under lease are required to be separately specified under each class of asset.
  9. In the earlier Schedule VI, details of capital commitments were required to be disclosed. Under the revised Schedule VI, all commitments need to be disclosed.
  10. The revised Schedule VI requires all defaults in repayment of loans and interest to be specified in each case.
  11. The revised Schedule VI introduces a number of other additional disclosures. Key examples are:
    1. Rights, preferences and restrictions attaching to each class of shares including restrictions on the distribution of dividends and the repayment of capital.
    2. Terms of repayment of loans and period.
    3. In each class of investment, details regarding 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 made in each such body corporate (showing separately partly-paid investments).
    4. Regarding 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. Aggregate provision for diminution in value of investments (separately for current and long-term investments).

Key changes related to disclosure requirements of Profit &Loss account:

  1. The revised Schedule VI lays down a format for the presentation of P&L account. This format of P&L account does not list any appropriation item on its face. The classification of expenses is based on their nature and not on their function.
  2. In addition to specific disclosures prescribed in the P&L account, any item of income or expense which exceeds 1% of the revenue from operations or Rs.100,000, whichever is higher, needs to be disclosed separately.
  3. Net exchange gain/loss on foreign currency borrowings to the extent considered as an adjustment to interest cost needs to be disclosed separately as a finance cost.

Balance Sheet Format for Illustration

S.No. Particulars Note No. 2012 2011
I EQUITY AND LIABILITIES
 1 Shareholder’s Fund
(a) Share Capital XX XX
(b) Reserves and Surplus XX XX
(c) Money received against share warrants XX XX
 2 Share application money pending allotment XX XX
 3 Non-current liabilities
(a) Long-term borrowings XX XX
(b) Deferred tax liabilities (Net) XX XX
(c) Other Long term liabilities
(d) Long-term provisions XX XX
 4 Current liabilities
(a) Short-term borrowings XX XX
(b) Trade payables XX XX
(c) Other current liabilities XX XX
(d) Short-term provisions XX XX
XX XX
S.No. Particulars Note No. 2012 2011
II ASSETS
 1 Non Current Assets
(a) Fixed Assets XX XX
Tangible assets XX XX
Intangible assets XX XX
Capital Work in Progress XX XX
Intangible assets under development XX XX
(b) Non Current Investments XX XX
(c) Deferred Tax assets (Net) XX XX
(d) Long term loans & advances XX XX
(e) Other current Assets XX XX
 2 Current Assets
(a) Current Investments XX XX
(b) Inventories XX XX
(c) Trade receivables XX XX
(d) Cash & cash equivalents XX XX
(e) Short term loans & advances XX XX
(f) Other current assets XX XX
XX XX

Profit and Loss Account Format for Illustration

 Particulars Note No. 2012 2011
 Revenue from operations
 Other Income
 Total Revenue
 Expenses:
 Cost of material consumed
 Purchase of stock in trade
 Changes in FG, WIP and stock in trade
 Employee benefits expenses
 Depreciation and amortization expense
 Other expense
 Total Expenses
 Profit before exceptional and extraordinary items and tax
 Less: Exceptional and extraordinary items
 Profit Before Tax
 Tax expense : Current Tax
Deferred Tax
 Profit/(Loss) for the period
 Earnings per equity share
(1) Basic
(2) Diluted

 

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