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REVISED SCHEDULE VI – A NEW WAY OF FINANCIAL REPORTING BY COMPANIES

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FINANCIAL STATEMENTS – COMMON UNDERSTANDING Vs FACTS

Common Understanding Financial statements are complicated

and are only meant for bankers, accountants and equity analysts.

Audited Financial statements are entirely accurate and reliable

Facts Financial statements show you

where a company’s money came from and where it went

Even the audited financial statements cannot be relied upon; case in point is Satyam scandal

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FINANCIAL STATEMENTS – COMMON UNDERSTANDING Vs FACTS

Common Understanding Profits = cash Financial statements are just history

Facts: Profits shown in financial

statements may not exactly equate to cash on account of amortisations & other adjustments

Although financial statements are prepared for periods which are completed they do provide clues to the sustainability of any business

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UNDERSTANDING FINANCIAL STATEMENTS

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FINANCIAL REPORTING STANDARDS AND SCHEDULE VI Financial reporting is regulated by Generally Accepted

Accounting principles (GAAP) comprising of accounting standards, company law, stock market regulations etc.

Globally, accounting framework is shaped by International Financial Reporting standards (IFRS)

In India, the Accounting Standards (AS) lay down the regulations for various accounting transactions (Date for the Indian Accounting Standards (IAS) is yet to be notified)

The Companies Act, 1956 mandates that all companies except companies for which separate reporting format is prescribed to present their financial statements as per Schedule VI to the Act.

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NEED FOR REVISION OF REPORTING FORMATS

The various economic and regulatory reforms that have taken place for companies, a need was felt for revision of Schedule VI

The need for harmonising and synchronising the disclosure requirements with international formats so as to achieve convergence of Indian Accounting Standards with IFRS to make Indian companies competitive globally has made the revision inevitable

KEY REVISIONS – BALANCE SHEET – OLD Vs REVISED – LIABILITIES

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SOU

RCES

OF

FUN

DSShareholders’

FundsCapitalReserve & Surplus Loan FundsSecured LoanUnsecured LoanTOTAL

EQU

ITIE

S AN

D L

IABI

LITI

ESShareholders’ FundsCapitalReserves & Surplus (Dr. balance of P & L A/c) Money Received against share warrantsShare Application moneyNon Current Liabilities Long term borrowingsDeferred Tax liability (net)Other long term liabilities Long term provisionsCurrent Liabilities Short term borrowingsTrade payablesOther short term liabilitiesShort term provisionsTOTALO

LD S

CHED

ULE

VI

REVI

SED

SCH

EDU

LE

VI

KEY REVISIONS – BALANCE SHEET – OLD Vs REVISED - ASSETS

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APPL

ICAT

ION

OF

FUN

DS

Fixed AssetsGross Block

Less : DepreciationNet Block

Capital Work in ProgressInvestmentsCurrent Assets, Loans and Advances

InventoriesSundry DebtorsCash and bank balancesLoans and advances

Less:Current Liabilities Provisions

Net Current AssetsMisc. Exp. to the extent not written offProfit and Loss AccountTOTAL

ASSE

TS

Non-Current AssetsFixed Assets

Tangible AssetsIntangible AssetsCapital Work in

ProgressIntangible assets

under developmentNon Current InvestmentsDeferred Tax Asset (Net)Long Term Loans & AdvancesOther Non-current AssetsCurrent AssetsCurrent InvestmentsInventoriesTrade ReceivablesCash and Cash EquivalentsShort Term Loans & AdvancesOther Current AssetsTOTALO

LD S

CHED

ULE

VI

REVI

SED

SCH

EDU

LE V

I

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KEY REVISIONS – BALANCE SHEET - GENERAL Only vertical form of balance sheet allowed with significant changes vis-

à-vis the structure Concept of presenting schedules to financial statements discontinued.

The schedules to the financial statements now called “notes to accounts“

Additional disclosures pertaining about shareholders holding more than 5% of any class of shares and share application money with terms and conditions, expected date of allotment, no. of shares to be issued, amount of premium, etc.

Disclosure of all defaults in repayment of loans and interest thereon to be specified in each case

Terms of repayment of long term loans to be disclosed……

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KEY REVISIONS – BALANCE SHEET - GENERAL Operating cycle forms the basis for classification of assets

into current and non-current. This is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. Where the cycle cannot be identified, it is assumed to have a duration of 12 months

Capital Advances specifically required to be presented separately under the head “Loans & Advances”

Separate disclosures for loans and advances received from or given to related parties

Provision for diminution in value of investments to be disclosed separately for current and long term investments

KEY REVISIONS – STATEMENT OF PROFIT & LOSS Name changed to Statement of Profit and Loss Format prescribed for Statement of Profit and Loss Any item or expense exceeding one per cent of

revenue from operations or Rs.1.00 lakh whichever is higher to be disclosed separately

For companies other than finance companies, revenue from operations to be disclosed as three categories, viz., revenue from sale of products, sale of services and other operating revenues

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ANY QUESTIONS ??

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THANK YOU

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