Comprehensive Guide to Schedule III & Disclosure Requirements

Table of Contents

1. Applicability
2. Composition of Financial Statements
3. General Principles
4. Classification into Current & Non Current
5. Balance Sheet

1. Applicability

• Companies Complying with Accounting StandardsDivision 1
• Companies Complying with IND AS- Division 2
• NBFC- Division 3

2. Composition of Financial Statements

• Balance Sheet
• Statement of Profit and Loss
• Cash Flow Statement
• Notes to Financial Statements containing significant accounting policies

3. General Principles

• Schedule III disclosures are additional and not substitute to disclosures as stated in AS
• Rounding off – turnover based criteria; to be used uniformly across the financial statements
• < Rs. 100 crores : hundreds, thousands, lakhs, millions or decimals thereof
• > Rs. 100 crores : lakhs, millions, crores or decimals thereof
• Corresponding Previous year’s numbers to be included except for the first financial statements
• Current/Non – current classification – operating cycle considerations

4. Classification into Current & Non Current

An entity shall classify an asset as current when fulfils any 1 condition out of the 4 conditions

Condition 1

It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle

Example 1: Operating Cycle is 15 Months

• An item of RM which is intended to consume within 8 months
• An item of RM which is intended to consume within 14 months
• An item of RM which is intended to consume within 18 months

Example 2: Suppose operating cycle is 9 Months

• An item of RM which is intended to consume within 4 months
• An item of RM which is intended to consume within 10 months

Condition 2

It expects to realise the asset within twelve months after the reporting period

Example 3: (normal Operating Cycle-14 Months)

• A Debtors is expected to pay in 3 months
• A Debtors is expected to pay in 15 months
• A Debtors to whom Machinery is sold is expected to pay in 3 months
• A Debtors to whom Machinery is sold is expected to pay in 13 months
• A Debtors to whom Machinery is sold is expected to pay in 16 months
• An Item of Finished goods is expected to be sold within 9 Months
• An Item of Finished goods is expected to be sold within 15 Months

Condition 3

• It holds the asset primarily for the purpose of trading
• Condition 3 Applies to derivative Instruments also

Condition 4

The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

5. Balance Sheet

5.1 Share Capital

• For each class of shares – authorised, issued, subscribed and paid up capital,
• Number of shares of current year and corresponding year/period.
• Reconciliation of number of shares – movement from the beginning of year to the end of the year
• Shares held by holding company and subsidiary of holding company
• Details of shares held by shareholders holding more than 5% of the aggregate shares
• Aggregate number of shares allotted as fully paid up by way of bonus shares/shares allotted as fully paid pursuant to a contract(s) without payment being received in cash

5.2 Long/Short term borrowings

• Category wise : Debentures, term loans – party [banks/financial institutions/related parties]
• Nature wise [rupee/foreign currency]
• Nature of security (if secured),
• Significant terms – interest (rate and payment terms),
• Re payment terms, any change in terms during the current year,
• Specific disclosure if guarantee given by Directors

5.3 Other Long Term/Current Liabilities

• Trade payables – dues on account of goods purchased or services received and includes ‘Acceptances’ ; contractual obligations (eg: interest accrued, PF payable etc.) not be included under ‘Trade Payables’
• Other current liabilities – interest accrued and due/but not due on borrowings, advance from customers, employee benefits payable, statutory dues including PF and TDS , unpaid dividend [to specifically state as to whether there are any amount to be transferred to IEPF) etc.

5.4 Tangible/Intangible Assets

• Movement for gross block and accumulated depreciation for each class of assets
• Own assets, assets taken on finance lease and assets given on operating lease to be clearly
  distinguished
• Any acquisition through amalgamation to be specifically stated
• Revaluation – disclosures to include effective date of revaluation, involvement of independent actuary, method and significant assumption,
• Disclosure of any impairment provision made
• Borrowing costs capitalised on qualifying assets to be disclosed
• Fixed Assets held for sale/retired from active use – to be stated as lower of NBV or NRV, to be shown separately
• Intangible assets – remaining unamortised
• Useful life for significant intangible assets

5.5 Non-current/Current Investments

• Investment in property (cost model) and related depreciation to be disclosed separately
• Trade investments and Other investments to be shown separately,
• Details to be disclosed include Whether quoted or un quoted
• Each category (eg: equity shares, bonds, debentures, investment in partnership, MF etc.)
• Related entities – Subsidiary, JV
• Quantity and face value/paid up value
• Aggregate value of quoted investments
• Market value of quoted investments

5.6 Inventories

• Board classification to include – RM, WIP, FG, Traded goods, Stores and spares, loose tools
• Within each classification composition of major category to be included, quantity not mandated only suggestive
• Value of ‘In transit’ stock to be stated
• Any lien on inventories held to be disclosed

5.7 Trade receivables

• Secured and unsecured to be clearly stated
• Time based segregation – outstanding for a period of more than 6 months from the due date of payment to be disclosed
• Recoverability – whether considered good or otherwise to be stated, if provision created toward recoverability disclosure = gross – provision
• Dues from related parties to be disclosed separately

5.8 Cash and Bank balances: Classification

• Cash on hand
• Cheques on hand
• Bank balances In current accounts
• Demand deposits (less than 3 months maturity)
• Short term, highly liquid investments
• Other bank balances
• Deposits with maturity more than 3 months but less than 12 months
• Overdraft – cannot be offset against bank balance unless there is legal right with the company to do so ; appropriate to present under current liabilities

5.9 Contingent liabilities

• Claims against the Company not acknowledged as debts
• Description and nature to be disclosed
• In case of disputes, if deposits made under protest the same should not be netted off for
  presentation of contingent liability
• Capital and Other commitments