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Revised Schedule VI –Applicable to small companies
Impact Seminar
ICAI, Bangalore
April 18 2012
सुख दखु समे कृत्वा लभ अलभो जय अजयौ । तत् युद्दाय युजस्व न एवं पापं अवाप्सस्यसस
Treating alike pain & pleasure, gain & loss, victory & defeat, engage yourself in battle. Thus you will incur no sin.
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Approach to Schedule VI
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Saral Schedule VI – 2008 Turnover< Rs 50 crores Debt < Rs 10 crores Not a bank or financial institution Not listed Not a holding or subsidiary of a company which is not a
small company Level II and Level III companies SMC as per Companies ( Accounting Standards) Rules
2006
Small company?
Simple and user-friendly
Not be burdened with too many disclosure requirements
Minimum disclosure requirements
Compatibility and convergence with international accounting standards and practices
Saral Schedule VI..Concepts
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Generally assumed that
will not have particularly complex transactions;
do not have public accountability
do not hold assets in a fiduciary capacity for a broad group of outsider
accountability is limited to owners and government authorities/agencies
Users and their information needs are limited
Saral Schedule VI
AS 3
AS 17 encouraged to follow
AS 21
AS 23
AS 27
Exempt Accounting Standards SMC
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Short-term compensated absences to the extent they deal with accumulating compensated absences which are non-vesting
Not required to discount amounts due > 12 months from reporting date
Defined benefit plans- Projected unit credit method, discounts rate and actuarial method used
Long term liability- same as above
Disclosure relaxationsAS 15- Employee Benefits
Reconciliation between minimum lease payments and PV
Other disclosures on MLP
General description of lessees significant leasing arrangements
AS 19 –LeasesDisclosures not required
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Diluted EPS not needed- AS 20
AS 28- Impairment of Assets- reasonable estimated of value-in-use instead of PV
AS 29 –Provisions- reconciliation statement for each class of provision.
Other relaxations
Requirements of the Act/Accounting standards will prevail over the Schedule
Minimum requirements- line-items, sub-line items, sub-totals at discretion of entity
- EBDITA- Current Assets/Liabilities- Provisions made by NBFC No Schedules! Only notes on accounts Terms used shall be as per Accounting Standards Comparatives ( including notes on accounts)
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Main Principles
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Notes on accounts
- narrative descriptions or disaggregations of items recognised in those statements;
information about items that do not qualify for recognition in those statements
Cross-referencing
Only vertical form
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Main Principles
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.
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Main Principles
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Turnover Rounding Off
< Rs 100 crores To the nearest hundreds, thousands, lakhs or millions, or decimals thereof
> Rs 100 crores To the nearest lakhs, millions or crores, or decimals thereof.
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Rounding Off
Rounding off opted for shall be used consistently
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Schedule VI
Major Changes Cosmetic Changes
Disclosure Changes
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Current Assets, Current Liabilities and Investments
Current and non-current
Only vertical form
Debit Balance in Profit and Loss Account- no longer on Assets side
Related party disclosures
No Balance-Sheet extract and general business profile
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Major changes
Criteria ( Any)
it is expected to be realised 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 realised 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
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Current Asset
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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. Terms of a
liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not
affect its classification
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Current Liability
If does not meet the definition, non-current
Default operating cycle= 12 months
Trade Receivable/Trade Payable= goods or services received/sold
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Current Assets/Liabilities
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Operating Cycle
Held for trading
12-month criteria
Key words
Operating Cycle ( OC) XYZ Limited
Criteria
365 day year Credit period of creditors= 16 days Average debtors o/s= Rs 480,000 Raw materials consumed= Rs
44,00,000 Total Production Cost= Rs
100,00,000 Total Cost of sales= Rs 105,00,000 Sales= Rs 160,00,000 Inventory: Raw Materials= 320,000 WIP = 350,000 Finished Goods = 260,000
OC
Age of RM= 27 days
WIP = 13 days
FG = 9 days
Debtors = 11 days
----------
Total 60 days
Less: Creditors 16 days
--------------
OC 44 days
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In the previous example, as on 31st March 2012, XYZ Limited has a Debtor of Rs 5 lakhs who is expected to pay in 75 days time.
Would this Debtor be classified as Current or non-current?
Question?
Inventory held for long
Creditor has a right to demand payment due to violation of debt agreement
Employee Benefits
- bonus, leave encashment, gratuity
Multiple Businesses
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Classification
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XYZ Ltd has inventory of raw material that has not moved for more than 2 years worth Rs 10 lakh. It has classified Rs 3 lakhs as slow and non-moving inventory
XYZ Ltd has a term loan of Rs 50 lakhs from No Bank. It is to pay Rs 2 lakhs every month as repayment. As of 31 March 2012 it has not paid 3 continuous instalments. It paid all the 4 instalments in May 2012.
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Current/non-current
BA Ltd has a gratuity scheme as per which a person is entitled to 22 days pay for every completed month of service. The company has a workforce of 1000 and it has been observed that an average of 5 employees leave the company every year. An average of 10 employees join the company every year.
How would you classify into Current/Non-current?
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Current/Non-current
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AB Ltd has a leave encashment scheme as per which an employee is entitled to carry forward 10 days leave every year. 50% of this can be encashed in the next financial year. Out of a workforce of 200, it has been observed that an average of 8 employees encash the leave every year.
If the employees do not encash the leave by the end of the next financial year, the encashment lapses.
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Current/non-current
Service tax input tax credit
TDS Receivable for AY 2008-09.
Inter-corporate deposit that is overdue for payment as on 31st March 2012 by 6 months.
Income tax refund due for AY 2009-10. The Inspector has informed that he will do the needful soon.
Classify into Current/Non-current
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Investments
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Schedule VI
Current/non-current
12 months from Balance-Sheet date
Presentation norms
AS 13
Current/Long-term
One year from date of investment
No presentation norms
Schedule VI will prevail
Cash and Cash equivalents
Revised Schedule VI
Balances with Banks held as margin
Security against borrowings , guarantees etc
Bank deposits> 12 months maturity
AS- 3 – Cash Flow Statements
Short-term, highly liquid investments
Readily convertible into cash
Insignificant changes to value
3 months
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Notes on Accounts
Ind-AS 10
AS 4?
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Proposed Dividend
Sources of Funds
Application of Funds
Cash and Bank Balances
Profit and Loss Account
Sundry Debtors
Sundry Creditors
Equity and Liabilities
Assets
Cash and Cash equivalents
Statement of Profit and Loss
Trade Receivable
Trade Payable
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Cosmetic Changes
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XYZ Co LtdBalance Sheet as at Rs in crores
I. EQUITY AND LIABILITIES
1) SHAREHOLDERS FUNDS
Note No
Figures atthe end of the current reporting period
Figures at the end of the previousreporting period
a) Share Capital xxxx yyyy
b) Reserves and Surplus xxxx yyyy
c) Money received against share warrants
xxxx yyyy
2) Share Application pending allotment
xxxx yyyy
3) Non-current Liabilities xxxx yyyy
a) Long-term borrowings xxxx yyyy
b) Deferred Tax Liabilities ( Net)
xxxx yyyy
c) Other Long-term liabilities
xxxx yyyy
4) CurrentLiabilities
Note No Figures at the end of current reporting period
Figures at the end of the previousreporting period
a) Short-term borrowings
xxxx yyyy
b) Trade Payables xxxx yyyy
c) Other Current Liabilities
xxxx yyyy
d) Short-termprovisions
xxxx yyyy
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Assets
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Assets ` in crores
Non-Current Assets
1) a) Fixed Assets xxx
i) Tangible Assets xxx
ii) Intangible Assets xxx
iii) Capital work-in-progress xxx
iv) Intangible assets under development xxx
b) Non-current investments xxx
c) Deferred tax assets ( net) xxx
d) Long-term loans and advances xxx
e) Other non-current assets xxx
2) Current Assets
a) Current Investments xxx
b) Inventories xxx
c) Trade Receivables xxx
d) Cash and cash equivalents xxx
e) Short-term loans and advances xxx
f) Other current assets xxx
TOTAL xxx
See accompanying notes to financial statements
Authorised, Issued, Subscribed and paid-up
Reco statement
Rights, preferences and restrictions attaching to each class of shares
Terms of conversion along with earliest date of conversion in descending order starting from farthest such date
Shareholding> 5%
Shares reserved for issue under options
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The Shares story
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For a period of five years
- Shares issued pursuant to contracts without cash consideration
- Number and class of bonus shares
- Number and class of shares bought back
Source of bonus shares- removed
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The Shares story
Additions Deletions
Debenture Redemption Reserve, Revaluation Reserve, Share Options outstanding
After providing for proposed allocation eg:
Disclosing Allocations such as dividends, bonus shares and transfer to and from Reserves
If debit balance of profit and loss account is in excess of uncommitted reserves, the same shall be shown as Assets
Debit Balance of Profit and Loss Account Sinking Fund
Share Application pending allotment Proposed additions to Reserves
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Reserves and Surplus
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Capital Reserve
Capital Redemption Reserve
Securities Premium Reserve
Debenture Redemption Reserve
Revaluation Reserve
Share Options outstanding account
Other Reserves ( specify)
Surplus i.e., balance in Statement of Profit and Loss disclosing allocations and appropriations such as dividend, bonus shares and transfer to/ from reserves, etc.;(Additions and deductions since last balance sheet to be shown under each of the specified heads);
A reserve specifically represented by earmarked investments shall be termedas a “fund”.
Debit balance of statement of profit and loss shall be shown as a negativefigure under the head “Surplus”. Similarly, the balance of “Reserves and Surplus”,after adjusting negative balance of surplus, if any, shall be shown under the head“Reserves and Surplus” even if the resulting figure is in the negative
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Reserves and Surplus
Long term borrowings
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Presentation Bonds/Debentures Term Loans
- from Banks- from other parties
Deferred payment liabilities Deposits Loans and Advances from
related parties Long term maturities of
finance leases Other loans and advances (
nature to be specified)
Disclosure Loans guaranteed by directors
and others Bonds/Debentures in
descending order of maturity or conversion starting from farthest date
Terms of repayment Period and amount of
continuing default as on the Balance Sheet date in repayment of loans and interest, shall be specified separately in each case
Classify into Secured/Unsecured with nature of security for each loan
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Other Long-term Liabilities
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Other LT Liabilities
Trade Payables
Others
Delayed payment as per MSMED Act – to be disclosed
Other LT provisions
Provision for employee benefits
Others
Application money not exceeding capital offered
To the extent not refundable
Amount in excess of subscription
Requirements of minimum subscription are not met-Other current liabilities
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Share application money disclosure
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Current Liabilities
Short-term borrowings
Trade Payables
Other current
liabilities
Short term provisions
1. Loans repayable on demand-Banks
-0ther parties2. Loans and
Advances from related parties
3. Deposits4. Other loans and
advancesSecured/Unsecured
1. Employee Benefits
2. Others
(a) Current maturities of long-term debt
(b) Current maturities of finance lease obligations;
(c) Interest accrued but not due on borrowings;
(d) Interest accrued and due on borrowings;
(e) Income received in advance;
(f) Other payables (specify nature).
(g) Unpaid matured debentures and interest accrued thereon;
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Other Current Liabilities
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Fixed Assets
Non-current investments
Deferred tax assets ( net)
Long-terms loans and advances
Other non-current assets
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Non-Current Assets
Fixed Assets
Tangible Assets
Intangible Assets
Capital work in
progress
Intangible Assets under Development
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Non-Current Assets
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Goodwill; Brands /trademarks; Computer software; Mastheads and publishing titles; Mining rights; Copyrights, and patents and other intellectual property rights,
services and operating rights; Recipes, formulae, models, designs and prototypes; Licences and franchise; Others (specify nature)
Reconciliation StatementSums written off
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Intangible Assets
Assets
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Tangible Assets
Railway Sidings, Development Property, Livestock and Leasehold Assets
Disclosure
Assets under Lease
Assets acquired in Business Combinations
Reco statement
Intangible Assets
Computer software;
Mastheads and publishing titles;
Mining rights
Recipes, formulae, models, designs and prototypes;
Licenses and franchise
Disclosure
Reco Statement
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Trade Investments
- Investment Property, Investment in mutual funds, shares, debentures etc
- Investment in controlled SPE’s
- Amount of quoted investments, market value, provision for diminution in value
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Non-Current Investments
Capital Advances
Security Deposits
Loans and advances to related parties (giving details thereof);
Other loans and advances (specify nature).
Classified into secured and unsecured ( considered good)and doubtful
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Long-term loans and advances
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Long-term Trade Receivables
Others
Classification into secured, unsecured and doubtful
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Other non-current assets
Investments in Equity Instruments;
Investment in Preference Shares;
Investments in Government or trust securities;
Investments in debentures or bonds;
Investments in Mutual Funds;
Investments in partnership firms;
Other investments (specify nature)
Bodies corporate
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Current Investments
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The basis of valuation of individual investments;
Aggregate amount of quoted investments and market value thereof;
Aggregate amount of unquoted investments;
Aggregate provision made for diminution in value of investments.
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Current Investments
Raw materials
Work-in-progress
Finished goods
Stock-in-trade (in respect of goods acquired for trading)
Stores and spares
Loose tools
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Inventories
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Outstanding for a period of six months from the date they are due for payment
Secured, considered good
Unsecured, considered good
Doubtful
Allowance for bad and doubtful debts
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Trade Receivables
Goods in transit under relevant head in Inventory
Trade Receivables outstanding for a period exceeding six months from the date they are due for payment
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Other provisions
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Cash and Cash equivalents
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Presentation
Balances with banks
Cheques, drafts on hand
Cash on hand
Others (specify nature).
Disclosure
Earmarked balances with banks
held as margin money or security against the borrowings, guarantees, other commitments
Repatriation restrictions
Bank deposits with more than twelve months maturity
To related parties
Others ( specify nature)
Secured, considered good
Unsecured, considered good
Doubtful
Allowance for bad and doubtful debts
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Short-term loans and advances
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Claims against the company not acknowledged as debt Guarantees Other money for which the company is contingently liable. Estimated amount of contracts remaining to be executed
on capital account and not provided for; Uncalled liability on shares and other investments partly
paid Other commitments (specify nature). Are performance guarantees/counter-guarantees
contingent liabilities?
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Contingent Liabilities
Statement of Profit and Loss
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Particulars Note No Figures at the end of the current reporting period
Figures at the end of the previous reporting period
I. Revenue from Operations
II. Other Income
TOTAL REVENUE
Expenses:•Cost of 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 amortisationexpense•Other expenses
Total expenses
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Format
Profit before exceptional and extraordinary items and tax
Exceptional items
Profit before extraordinary itemsand tax
Extraordinary items
Profit before tax
Tax expense:(1) Current tax (2) Deferred tax
Profit (Loss) for the period fromcontinuing operations
Profit/(loss) from discontinuing operations
Profit/(loss) from Discontinuing operations (after tax)
Profit (Loss) for the period
Earnings per Share-Basic-Diluted
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Profit and Loss Account
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AS 24- Profit before tax ( including continuing and discontinuing operations)
Schedule VI- Profit from continuing operations only
----------------------------------------------------------------------------------------- Profit (Loss) for the period from continuing operations Profit/(loss) from discontinuing operations Profit/(loss) from Discontinuing operations (after tax)
AS 24 vs Schedule VI?
Interest Income
Dividend Income
Net gain/loss from investments
Other non-operating income
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Other Income
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Any item of expenditure which exceeds one percent of the revenue from operations or Rs 1,00,000, whichever is higher- separate line or sub-line item
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Expenses
Interest expense;
Other borrowing costs;
Applicable net gain/loss on foreign currency transactions and translation
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Finance Costs
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Employee Benefits Expense
(i) salaries and wages,
(ii) contribution to provident and other funds,
(iii) expense on Employee Stock Option Scheme (ESOP) and Employee Stock Purchase Plan (ESPP)
(iv) staff welfare expenses.
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Additional Disclosures
Sale of products
Sale of services
Other operating revenues
Less: Excise Duty
VAT, Service tax not part of Revenue
Forex gains- other operating revenue?
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Revenue from operations
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Amounts set aside to reserves
Amounts withdrawn from Reserves
Amounts set aside/withdrawn from specific provisions
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Aggregate (if material) disclosures
Consumption of stores and spare parts
Power and fuel
Rent
Repairs to buildings
Repairs to machinery
Insurance
Rates and taxes, excluding, taxes on income
Miscellaneous expenses
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Disclosures ( even if not material)
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Exceptional vs Extraordinary items
Prior Period items
Ordinary activities of the business- Exceptional items
Not ordinary activities of the business- Extraordinary
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Profit and Loss
Profit and Loss
Taxation impact
Profit and Loss after Tax
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Discontinuing operations
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Net worth > Rs 500 crore/ Turnover > Rs 1000 crore/ Net Profit of > Rs 5 crore
At least 2% of the average net profits made during the three immediately preceding three years
Schedule VII
Disclosure
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CSR
Share in profits/losses of partnership firm- separately disclosed
Share in profits/losses of LLP- disclosed when declared
Share in profits/losses of AOP
Standards on Consolidation, Associates, joint ventures
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Profit and Loss Account
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Schedule VI applicable
Details of minority interest within equity
Disclosure of details of investments in subsidiaries, associates and joint ventures- net assets and share in profit and loss
Disclosure of reasons for not consolidating
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Consolidation
As : Auditor,
For taxation matters
For company law matters
For management services
For other services
For reimbursement of expenses
: In any other capacity
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Payment to Auditors
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Disclosures relating to managerial remuneration and computation of net profits for calculation of commission;
Information relating to licensed capacity, installed capacity and actual production
Information on investments purchased and sold during the year
Investments, sundry debtors and loans & advances pertaining to companies under the same management
Maximum amounts due on account of loans and
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Disclosures removed
Nature of company Disclosure required
Manufacturing companies •Raw materials under broad heads•Goods purchased under broad heads
Trading companies Purchases of goods traded underbroad heads
Companies rendering orsupplying services
Gross income derived from servicesrendered under broad heads
Company that falls in morethan one category
purchases, sales and consumption of raw material and the gross income from services rendered are shown under broadheads
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Additional information
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‘broad heads shall be decided taking into account the concept of materiality and presentation of true and fair view of financial statements ‘
The 10% rule?
So, what are broad heads?
CIF Value of imports made by the company
foreign exchange earnings and expenditure
Total value of all imported/indigenous raw material, spare parts and components
Capital and other commitments?
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Notes
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Ratios?
Costs?
Benefits?
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Impact
Financial statements are responsibility of management
Advise of auditor
Fair interpretation without being overly technical
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ICAI Guidance Note
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Walk-through Schedule VI Balance-Sheet
Test run
Specific items requiring attention
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The way forward
Finally, Thank you for a patient hearing!
[email protected]+ 91 97313 01958
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