Schedule VI

Revised Schedule VI :
A Practitioner's Guide
Revised Schedule VI : A Practitioner's Guide

ISBN : 978-81-8441-551-3
Committee for Capacity Building of CA Firms and Small & Medium

Committee for Capacity Building of CA Firms and
Practitioners (CCBCAF & SMP)
Small & Medium Practitioners (CCBCAF & SMP)
The Institute of Chartered Accountants of India
ICAI Bhawan, Indraprastha Marg (Set up by an Act of Parliament)
New Delhi-110002
www.icai.org New Delhi
October/2012/500 (New)
Revised Schedule VI:
A Practitioner’s Guide

Practitioners (CCBCAF & SMP)
(Set up by an Act of Parliament)
New Delhi
© The Institute of Chartered Accountants of India
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The views expressed in this book are those of author(s). The Institute of Chartered
Accountants of India may not necessarily subscribe to the views expressed by the
author(s).
The information cited in this book are drawn from various sources while every efforts
have been made to keep the information cited in this book error free, the Institute or
any office do not take the responsibility for any typographical or clerical error which
may have crept in while compiling the information provided in this book. Further the
information provided in this book are subject to the provisions contained under
different Acts and members are advised to refer to those relevant provisions also.
Edition : June, 2012
Committee/ Department : Committee for Capacity Building of

CA Firms and Small & Medium Practitioners
(CCBCAF&SMP), ICAI
Email : ccbcaf@icai.org
Website : www.icai.org, www.icai.org.in
ISBN : 978-81-8441-551-3
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Institute of Chartered Accountants of India, ICAI
Bhawan, Post Box No. 7100, Indraprastha Marg,
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Printed by : Sahitya Bhawan Publications, Hospital Road, Agra-

282 003.
October/2012/500 Copies
ii
Foreword
The accounting policies are undergoing transition across the world. There are
attempts to harmonize the accounting methodologies and principles so that the same
can be easily understood by all the stakeholders. The Ministry of Corporate Affairs,
vide its notification No. 447(E) dated 28th February, 2011, has revised the Schedule
VI of the Companies Act, 1956. The notification has come into force for the Balance
Sheet and Profit and Loss Account to be prepared for the financial year commencing
on or after 1.4.2011. In view of the same, the annual accounts from the financial year
2011-12 have to be prepared in line with the Revised Schedule VI of the Companies
Act, 1956. The revised Schedule VI, is in line with generally accepted financial
statements followed in different parts of the world. Ministry has also notified that the
new Schedule VI is to be applicable to financial year ending on 31-03-2012.
Amendments’ to the Schedule VI revised is line of simplification and understanding
by all the stakeholders, i.e., financial statements, balance sheet, profit and loss notes
to the accounts and significant account in policies followed or understood in the same
parlance.
The revised Schedule VI has eliminated the concept of schedules and such
information will now be provided in the notes to accounts. From now on, the
compliance requirements of Act and/or Accounting standards will prevail over
schedule VI. In revised Schedule VI, better presentation, disclosure is intended to
facilitate better organised data for users of financial statement.
To help the Chartered Accountants to understand the changes those have been
made through the revision in Schedule VI, the Committee for Capacity Building of CA
Firms and Small & Medium Practitioners (CCBCAF & SMP) is bringing out a book -
`Revised Schedule VI: A Practitioner’s Guide’. The book which provides a knowledge
base for the Practitioners for preparing the financial statements under the new
Schedule VI. I congratulate the Chairman CCBCAF & SMP and his team for their
efforts in bringing out this book. I hope that this publication would help the members
in enhancing their knowledge base in the practice portfolio.
CA. Jaydeep Narendra Shah

President, ICAI
iii
iv
Preface
The Ministry of Corporate Affairs (MCA) has issued revised Schedule VI which lays
down a new format for preparation and presentation of financial statements by Indian
companies for financial years commencing on or after 1st April 2011. The pre-revised
Schedule VI had been in existence for almost five decades without any major
structural overhaul. In view of the drastic changes during this long period in economic
philosophy and environment coupled with advancements in accounting principles
and in global practices relating to corporate financial reporting, a major overhaul of
the Schedule was overdue. Thus the revised Schedule VI introduces some
significant conceptual changes such as current/non-current distinction, primacy to the
requirements of the accounting standards, etc.
The existing Schedule VI does not require companies to classify their assets and
liabilities into current and non-current, the revised Schedule VI does so in order to
facilitate a fair portrayal of the financial and liquidity position of a company to the
readers of the financial statements. The revised Schedule VI, among other things,
has also prescribed a format for Statement of Profit and Loss mandating
classification of expenses by their nature as opposed to by function and added a host
of incremental disclosures. In this publication, apart from discussing the specific
implementation issues surrounding the changes brought out by the revised Schedule
VI, we have also attempted to illustrated some practical application issues current &
non current classifications, which will be very useful for the practitioners. I hope this
book on “Revised Schedule VI: A Practitioner’s Guide”, published by the Committee
for Capacity Building of CA Firms and Small & Medium Practitioners
(CCBCAF&SMP), ICAI will be a very useful support material for Practitioners.
I place on record my deep sense of gratitude to CA. Mohd. Salim for preparing the
draft of this publication thereby sharing his relevant experience and expertise
amongst members. I appreciate the efforts put in by the members of CCBCAF &
SMP, Working Group on Research & Publications & Dr. Sambit Kumar Mishra,
Secretary, CCBCAF & SMP and other officials of the Secretariat who have provided
necessary support for publishing the aforesaid book.
With warm regards

Chairman
Committee for Capacity Building of CA Firms and
Small & Medium Practitioners (CCBCAF&SMP), ICAI
v
vi
Index
Chapter No Particulars Page
No(s)
Foreword iii
Preface V
1. Introduction 1
2. Revised Schedule VI – Content Ready Reckoner 6
3. Highlights and Major Changes Introduced in Revised 13
Schedule VI
4. General Instructions 23
5. Balance Sheet 27
6. Statement of Profit and Loss 72
7. Current, Non-current classification – Practical 91
Application
8. Frequently Asked Questions issued by ICAI 105
9. Glossary of terms 121
10. Checklist for audit of financial statements prepared 140
as per Revised Schedule VI
APPENDIX A Notification on Revised Schedule VI 146
APPENDIX B Notification on Abridged Financial Statements. 166
APPENDIX C SEBI circular for amendment to Equity Listing 176
Agreement – Formats for disclosure of Financial
Results.
vii
viii
Chapter 1
Introduction
1.1 The FORM AND CONTENT of Balance Sheet and Profit and Loss Account
of companies are regulated as per Section 211 of the Companies Act, 1956.
Sub-section (1) of Section 211 of the Companies Act, 1956 requires that every
balance-sheet of a company must comply with the following three requirements:
1) It must give a true and fair view of the state of affairs of the company as at
the end of the financial year.
2) It must, subject to the provisions of this section, be in the form set out in
Part-I of Schedule-VI or as near thereto as circumstances admit or in such
other form as may be approved by the Central Government either generally or
any particular case; and
3) Due regard must be had, as far as may be, in preparing the balance sheet to
the general instructions for preparation of Balance Sheet under the
heading “Notes” at the end of that part.
Sub-section (2) of above section requires that every profit and loss account of a
company must:
1) give a true and fair view of the profit or loss of the company for the financial
year, and
2) comply, subject to the provisions of the section, with the requirements of Part
II of Schedule-VI so far as they are applicable thereto.
Accordingly all Companies whether public or private and irrespective of level of
operations are required to prepare their Balance Sheet, Profit and Loss Account and
notes thereto, in the manner provided in Schedule VI.
However the requirements of the Schedule VI, do not apply to companies as
referred to in the proviso to Section 211 (1) and Section 211 (2) of the Act, i.e., any
insurance or banking company, or any company engaged in the generation or supply
of electricity or to 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 governing such
class of company.
However currently the above exception is not applicable to companies engaged in
the generation or supply of electricity, as the act governing such companies i.e.
Electricity Act, 2003 does not prescribe any specific format for presentation of
Revised Schedule VI: A Practitioner’s Guide
Financial Statements by an electricity company. Accordingly Schedule VI is currently

not applicable only to insurance companies and banking companies. However
presentation of the financial statements of a non-banking finance companies would
be governed by Schedule VI.
1.2 Schedule VI to The Companies Act,1956
For enforcement of above sections, Schedule VI was incorporated in the Companies
Act, in the year 1956 when said Act was passed. It is pertinent to mention that in the
year 1956 no Accounting Standards were in existence. The first Accounting Standard
i.e. AS 1 was issued in the year 1979 after the formation of the Accounting Standard
Board of ICAI in the year 1977. Schedule VI was amended on several occasions
since its inception, major amendment being made in the year 1979 with insertion of
vertical format of Balance Sheet.
1.3 Revised Schedule VI - Notification
Ministry of Corporate Affairs (MCA), Government of India vide Notification No S.O.
447(E) dated 28th February,2011 in exercise of the powers conferred by sub-
section(1) of section 641 of the Companies Act,1956, has replaced the existing
Schedule VI by a Revised Schedule VI wherein several changes in the presentation
and disclosures requirements vis-à-vis the old Schedule VI have been made. The
changes are mostly inspired from the International Financial Reporting Standards
(IFRS) as the raison detre for Revised Schedule VI was to make format of Financial
Statements of Indian corporates comparable with international format. Further
another triggering point for instant revision was to align the presentation and
disclosure requirements in financial statements with the notified Accounting
Standards, considering old Schedule VI was incorporated around twenty three years
prior to issue of first Accounting Standard in India.
1.4 Revised Schedule VI – Influences From IFRS
Although the applicability of the IND. AS converged to IFRS which was earlier slated
to be implemented in a phased manner starting from 1st April, 2011 has been
deferred, however the instant revision of Schedule VI can be considered as a step
towards convergence to IFRS to some extent with regard to presentation of financial
statements as many features/ disclosures have been taken from these international
standards, some of which are stated below:-
• Accounting Standards have been given supremacy over Schedule VI. This is
in line with IFRS which mandates that no statute can override the Standards.
• The schedule sets out minimum requirements for disclosure which is in spirit
of International Accounting Standard (IAS) 1 “Presentation of Financial
2
Statements” which also mandates minimum requirements for disclosure and

provides flexibility in format of financial statements to the companies.
• Bifurcation of assets and liabilities amongst current and non-current is
required. This concept as well as definition of current / non current and
operating cycle have been inspired from IAS 1.
• Proposed dividend is not recognized and only disclosed which is also in
consonance to IAS 1.
• Cross referencing of each item of the financial statements to related
information in the notes and definition of notes to accounts, which has also
been taken from IAS1.
1.5 Revised Schedule VI – Accounting Standards.
In notification No S.O. 447(E) dated 28th February,2011 vide which Revised
Schedule VI has been notified, reference has been made to the Accounting
Standards notified under the Companies (Accounting Standards) Rules, 2006 i.e.
Accounting Standards 1 to 7 and 9 to 29 (effectively twenty eight accounting
standards). Accordingly the Revised Schedule VI has nothing to do with the thirty five
converged Indian Accounting Standards (IND AS) as uploaded on website of Ministry
of Corporate Affairs on 25th February, 2011 for which date of applicability is not yet
notified. As in India the convergence to IFRS would be in a phased manner
accordingly as and when date of implementation of IND AS is notified a separate set
of Schedule VI may be issued in respect of companies preparing their financial
statements as per IND AS, wherein additional formats like Statement of Changes in
Equity, Other Comprehensive Income would be required to be prepared apart from
several other changes.
For ready reference the list of the twenty eight Accounting Standards notified under
Companies (Accounting Standards) Rules, 2006, as amended, pursuant to Section
211 (3C) is given below:
AS 1 Disclosure of accounting policies
AS 2 Valuation of Inventories
AS 3 Cash Flow Statements
AS 4 Contingencies and Events Occurring After the Balance Sheet Date
AS 5 Net Profit or Loss for the period, Prior Period items and Changes in
Accounting Policies.
AS 6 Depreciation Accounting.
AS 7 Construction Contracts.
3
AS 9 Revenue Recognition.
AS 10 Accounting for Fixed Assets.
AS 11 The Effects of Changes In Foreign Exchange Rates.
AS 12 Accounting for Government Grants.
AS 13 Accounting for Investments.
AS 14 Accounting for Amalgamation.
AS 15 Employee Benefits.
AS 16 Borrowing Costs.
AS 17 Segment Reporting.
AS 18 Related Party Disclosures.
AS 19 Accounting for Leases.
AS 20 Earnings Per Share.
AS 21 Consolidated Financial Statements.
AS 22 Accounting for Taxes on Income.
AS 23 Accounting for Investments in Associates in Consolidated Financial
Statements.
AS 24 Discontinuing Operations.
AS 25 Interim Financial Reporting.
AS 26 Intangible Assets.
AS 27 Financial Reporting of Interests in Joint Ventures.
AS 28 Impairment of Assets.
AS 29 Provisions, Contingent liabilities and Contingent assets.
Note: AS 8 on “Accounting for Research and Development” was withdrawn by ICAI
consequent to the issuance of AS 26 on ‘Intangible Assets’ and accordingly AS 8 has
not also been notified.
1.6 Revised Schedule VI – Applicability.
As per the Government Notification no. F.No.2/6/2008-C.L-V dated 30-3-2011, the
Revised Schedule VI is applicable for the Balance Sheet and Profit and Loss Account
to be prepared for the financial year commencing on or after April 1, 2011. This
means that the financial statements of all the companies from the financial year
4
2011-12 onwards would be required to be prepared in the manner prescribed in

Revised Schedule VI.
It is important to note here that Revised Schedule VI is applicable for the financial
year commencing on or after April, 1, 2011, accordingly in respect of a company
following the calendar year i.e. having December year end, it will be required to
prepare its first financial statements as per Revised Schedule VI for statutory
purposes for the period 1st January, 2012 to 31st December 2012.
The Revised Schedule VI requires that except in the case of the first Financial
Statements laid before the company after incorporation, the corresponding amounts
for the immediately preceding period are to be disclosed in the Financial Statements
including the Notes to Accounts. Thus for the Financial Statements prepared for the
financial year (FY) 2011-12 (1st April 2011 to 31st March 2012), corresponding
amounts need to be given for the financial year 2010-11. As the financial statements
of FY 2010-11 would be in format as per old Schedule VI, its figures would be
required to be reclassified / regrouped before being used as comparables. A note to
this effect that previous year figures have been regrouped / reclassified, wherever
necessary to conform to the current year presentation may be provided in the notes
to the accounts. It is pertinent to mention here that the comparable figures needs to
be disclosed across financial statements including notes to accounts, even in cases
where current year figures are NIL.
5
Chapter 2
Revised Schedule VI –Content Ready
Reckoner
The Structure of Revised Schedule VI is as under:-
I) General Instructions.
II) Part I - Form of Balance Sheet.
III) General Instructions for preparation of Balance Sheet.
IV) Part II - Form of Statement of Profit and Loss.
V) General Instructions for preparation of Statement of Profit and Loss.
For ready reference of the members, the summary of each of above contents of
Revised Schedule VI is given as under:-
I) General Instructions
Para Brief Content
No.
1 Supremacy accorded to Accounting Standards and provisions of
Companies Act, 1956 over Revised Schedule VI.
2 Disclosure requirements of schedule are in addition to and not in
substitution of disclosure requirements specified in Accounting Standards
and Companies Act, 1956.
3 Notes to accounts defined as including disaggregation’s of items
recognized in financial statements. Consequently cross referencing
required for each item on face of the financial statements to notes to
accounts instead of schedules.
4 Rounding off rule (optional) revised. Uniform unit of measurement to be
used across financial statements.
5 Comparative year figures to be given in financial statements including
notes (except in case of new company).
6 Terms used in Revised Schedule VI shall be as per applicable Accounting
Standards.
II) Part I- Form of Balance Sheet

The form of Balance Sheet is preceded by a note which states that
minimum requirements of disclosure on face of Balance Sheet and
Statement of Profit and Loss has been prescribed in Revised Schedule
VI and same can be changed when:-
• It is relevant to an understanding of company’s financial position or
performance or;
• To cater to industry / sector-specific disclosure requirements; or
• When required for compliance with amendments to the Companies
Act or under the Accounting Standards.
The major highlights of form of Balance Sheet are:-
a) Under Revised Schedule VI, all the assets and liabilities are to be
classified into current and non-current, accordingly line items for both
current and non-current have been inserted for items like trade
receivables, trade payables, investments, provisions, loan and
advances etc which were not provided earlier under Old Schedule
VI.
b) Only vertical format has been provided whereas earlier option of
horizontal format (customary T shape format) was also allowed.
c) Current Liabilities to be shown on liability side (upper part) of
balance sheet instead of deduction from current assets.
Consequently the upper part named as Equity & Liabilities and later
part named as Assets as against Sources of Funds and Application
of Funds under Old Schedule.
d) New line items inserted on face of Balance Sheet
i. Money received against share warrants under Shareholders’
funds.
ii. Share application money pending allotment between
Shareholders’ funds and Non-current liabilities.
iii. Tangible Assets under Fixed Assets.
iv. Intangible Assets under Fixed Assets.
v. Intangible assets under development under Fixed Assets.
7
8
Other changes in the format with discussions of each of the disclosure requirement
has been discussed in Chapter-5.
III) General Instructions For Preparation Of Balance Sheet
Para Particulars
No.
1 Definition of current and non-current asset.
2 Definition of operating cycle.
3 Definition of current and non-current liability.
4 Definition of trade receivables.
5 Definition of trade payables.
6 Prescribes the disclosures required to be made in the Notes to accounts
for following:
A. Share capital
B. Reserves and Surplus
C. Long-term borrowings.
D. Other Long-term liabilities.
E. Long-term provisions.
F. Short-term borrowing.
G. Other current liabilities.
H. Short-term provisions.
I. Tangible assets.
J. Intangible assets.
K. Non-current investments.
L. Other long term loans and advances.
M. Other non-current assets.
N. Current Investments.
O. Inventories.
P. Trade receivables.
Q. Cash and cash equivalents.
R. Short-term loans and advances.
S. Other current assets.
T. Contingent liabilities and commitments.
U. Proposed dividend including arrears of fixed cumulative dividend on
preference shares.
V. Details in respect use / investment of unutilized amounts out of issue of
securities made for specific purpose.
9
W. Board opinion regarding carrying amount not less than realization value of
current assets.
The detailed disclosure requirements with analysis thereof has been discussed in
Chapter-5.
IV) Part II- Form of Statement of Profit and Loss
The major highlights of form of Statement of Profit and Loss are:-
a) Name changed from Profit and Loss Account to Statement of Profit and
Loss.
b) Under Old Schedule VI, there was no form of Statement of Profit and Loss,
but same has now been provided.
c) In the format there is no mention for any appropriation item like transfers to
reserves etc, which need to be presented under “Reserves & Surplus” in the
Balance Sheet. Accordingly it ends with Profit after Tax and disclosure of
Earning per share. The disclosure regarding the appropriations like transfers
to reserves, proposed dividend, tax on dividend etc is shown under subhead
“Surplus” in head “Reserves and Surplus” in the Balance Sheet.
d) The expenses are to be classified by nature earlier even function based
classification was permissible.
e) Requires separate presentation of extraordinary and exceptional items.
f) Requires separate disclosure of profit before tax, tax expense and profit after
tax from discontinuing operations.
Other highlights, changes with discussions of each of the item have been discussed
in detail in Chapter-6.
V) General Instructions for Preparation of Statement of Profit and Loss.
Para Particulars
No.
1 Provisions also applicable to Income and Expenditure account
prepared by non for profit companies.
2(A) Disclosure requirement of revenue from operations for company other
than finance company.
2 (B) Disclosure requirement of revenue from operations for finance
company.
3 Disclosure requirement of Finance Costs.
4 Disclosure requirement of Other income.
10
5 Additional information regarding aggregate expenditure and

income on the following items to be disclosed by way of notes;-
(i) (a) Employee Benefits Expense.
(i) (b) Depreciation and amortization expense
(i) (c) Any item of income or expenditure which exceeds one per cent of the
revenue from operations or Rs.1,00,000, whichever is higher;
(i) (d) Interest Income;
(i) (e) Interest Expense;
(i) (f) Dividend Income;
(i) (g) Net gain/ loss on sale of investments;
(i) (h) Adjustments to carrying amount of investments;
(i) (i) Net gain/ loss on foreign currency translation and translation(other
than considered as finance cost);
(i) (j) Payments to the auditor.
(i) (k) Details of items of exceptional and extraordinary nature.
(i) (l) Prior period items;
(ii) (a) Raw materials and goods purchased under broad heads in case of
manufacturing companies.
(ii) (b) Purchases of goods traded under broad heads in case of trading
companies.
(ii) (c) Gross income derived from services rendered or supplied under broad
heads in case of service company.
(ii) (d) Purchases, sales, consumption of raw material and gross income from
services rendered under broad heads in case of companies engaged
in trading, manufacturing and / or service rendering.
(ii) (e) Gross income derived under broad heads in case of other companies.
(iii) Work-in-progress under broad heads.
(iv) (a) Aggregate, if material of amounts set aside or proposed to be set
aside, to reserve.
(iv) (b) Aggregate, if material of amounts withdrawn from reserve.
(v) (a) Aggregate, if material of amounts set aside, to provisions.
(v) (b) Aggregate, if material of amounts withdrawn from provisions, as no
longer required.
(vi) Expenditure incurred on each of the following items, separately for
each item:-
(a) Consumption of stores and spare parts.
(b) Power and fuel.
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(c) Rent.
(d) Repairs to buildings.
(e) / (f) Repairs to machinery.
(g) Insurance.
(h) Rates and taxes, excluding, taxes on income.
(i) Miscellaneous expenses
(vii) (a) Dividends from subsidiary companies.
(b) Provisions for losses of subsidiary companies.
(viii) The profit and loss account shall also contain by way of a note the
following information, namely:-
a) Value of imports calculated on C.I.F basis by the company during the
financial year for specific items.
b) Expenditure in foreign currency during the financial year on specified
items.
c) Total value if all imported raw materials, spare parts and components
consumed during the financial year and the total value of all
indigenous raw materials, spare parts and components similarly
consumed and the percentage of each to the total consumption;
d) The amount remitted during the year in foreign currencies.
e) Earnings in foreign exchange from specified items.
The detailed disclosure requirements with analysis thereof has been discussed in
Chapter-6.
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Chapter 3
Highlights and Major Changes
Introduced in Revised Schedule VI
3.1 As the Revised Schedule VI has been issued as a replacement and not as
an amendment to Old Schedule VI, accordingly lot of new disclosure requirements
have been introduced / changed in the Revised Schedule VI. Also some disclosure
requirements under Old Schedule VI have been dropped.
For ready reference of the members the highlights and major changes introduced in
Revised Schedule VI are briefly explained in this chapter.
3.2 Highlights and Major Changes Introduced in Revised Schedule VI;
1) Classification of Assets and Liabilities into Current and Non-Current:-
Concept of classified balance sheet has been introduced, according to which all
assets and liabilities are classified into current and non-current categories applying
the definitions of Current / Non-current asset / liability and operating cycle provided in
the Schedule itself. The relevant definitions given in Revised Schedule VI are
inspired from para 66, para 68 and para 69 of IAS 1 ‘Presentation of Financial
Statements’. This will require lot of reclassifications i.e. asset / liability shown as
Current earlier in Old Schedule VI may be required to be shown as Non-current and
vice versa under Revised Schedule VI. For example current maturities (repayments)
of long-term debt which were earlier included in loan funds would now be shown
separately as Current Liabilities. For further discussion and practical application of
classification refer to Chapter-7.
2) Overriding effect of Accounting Standards and Flexibility:
The general instructions of Revised Schedule VI specifically provide that where
compliance with the requirements of the Act including Accounting Standards require
any change in treatment of disclosure including any change in head / subhead or any
changes interse, the financial statements or statements forming part thereof, the
same shall be made and the requirements of the Schedule-VI shall stand modified
accordingly.
Even it has been stated that the format of the Balance Sheet and Statement of Profit
and Loss as given in schedule sets out minimum requirements for disclosure and can
be changed when such presentation is relevant to an understanding of the
company’s financial position or performance or to cater industry/sector-specific
disclosure requirements or when required for compliance with the amendments to

the Companies Act or under the Accounting Standards.
Accordingly all companies need to comply with the requirements of Revised
Schedule VI, as well as Accounting Standards and provisions of Companies Act,
1956. However in event of any conflict, the requirements of Accounting Standards
and Companies Act will have overriding effect and the requirements of the Schedule-
VI shall stand modified accordingly. As a contrary, requirements of the Old Schedule
VI prevailed over Accounting Standards.
3) Horizontal format of Balance Sheet deleted:
Horizontal format of Balance Sheet known as conventional or customary form (T-
shaped) of Balance Sheet has been deleted accordingly now onwards only vertical
format is to be used. Under Old Schedule VI the Companies had an option to use
either of horizontal or vertical format for presentation of Balance Sheet.
4) Part III of Schedule VI omitted.
Part III of Old Schedule VI, on Interpretation which contained definition of terms like
provision, reserve etc has been omitted. The reason for same may be that most of
these terms are already defined in the Accounting Standards and consequently it has
been stated in Revised Schedule VI that for the purpose of this Schedule, the terms
used e.g. ‘associate’, ‘related parties’, etc. shall be as per the notified Accounting
Standards.
5) New definitions provided:
Definitions in respect of Current / Non-Current Asset, Current / Non Current Liability,
Operating Cycle, Trade Receivables and Trade Payables, which are relevant for
Revised Schedule VI, have been provided, considering that these terms are not
currently defined in notified Accounting Standards.
6) Balance Sheet Abstract and Company’s General Business Profile no
longer required to be given:-
Balance Sheet Abstract and Company’s General Business Profile as provided in
Part-IV of Old Schedule VI has been removed which is a welcome move as this
statement was of no real purpose and meant for statistical purposes.
7) Change in titles of upper and lower half of Balance Sheet
Under Revised Schedule VI the upper half is referred to as Equity and Liabilities and
lower half is shown as Assets whereas in Old Schedule VI the same were referred as
Sources of Funds and Application of Funds respectively. This change is made as the
current liabilities (including short term provisions) are now required to be shown in
14
upper half of balance-sheet under Equity and Liabilities as against deduction from
current assets, loans and advances ( Asset Side) as prescribed in Old Schedule VI
(vertical form). Due to this the Balance Sheets totals would increase to the extent of
the current liabilities.
8) Proposed Dividend:
Part I of Old Schedule VI requires ‘proposed dividends’ to be shown under
“Provisions” and paragraph 3 (xiv) of Part II of the same requires the “proposed
dividends” to be disclosed in the Profit and Loss Account. Para 14 of the Accounting
Standard 4 “Contingent and Events Occurring After the Balance Sheet Date” also
requires that dividends in respect of period covered by financial statements which are
proposed or declared after balance sheet date but before date of approval should be
adjusted in accounts.
However now para 6(U) of the General Instructions for preparation of Balance Sheet
of Part I of Revised Schedule VI does not require the provision for proposed dividend
to be made and only desires disclosure of same in notes to accounts which has been
inspired from para 12 and 13 of IAS 10 “Events after the reporting period” wherein it
is specifically stipulated that such dividends do not meet the criteria of a present
obligation as per IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
Further IAS 1 “Presentation of Financial statements” stipulates that such dividends
are disclosed in the notes.
Although Revised Schedule VI does not require provision for proposed dividend,
however as the Accounting Standards have an overriding effect over Revised
Schedule VI, accordingly companies will have to account for the same alongwith
Dividend Distribution Tax thereon, until revision to this effect is made in AS 4.
Till revision of AS 4,the appropriation amount towards the proposed dividend along
with tax on same would be shown as appropriation under sub-head “Surplus” under
head “Reserves and Surplus” in the notes to accounts and provisions towards these
items would be shown under head ‘Short Term Provisions’ under Current liabilities.
9) Rounding off rule (optional) revised:
The limit of turnover and the extent of rounding off has been revised, which now
stipulates that financial statements of companies having turnover less than one
hundred crores can be rounded off upto millions, whereas under Old Schedule VI the
rounding off could be made upto thousands only. Further for companies having
turnover above hundred and less than five hundred crores the rounding off can now
be made upto crores, whereas in old schedule VI the same was allowed upto
millions. Further option to present figures in hundreds and thousands if turnover
equals or exceeds 100 cr. has been curtailed.
15
Also explicit requirement to use the same unit of measurement (i.e. figures in lacs /
crores ) uniformly throughout the financial statements (including notes to accounts)
has been introduced.
10) Concept of Schedules eliminated:
As per Old Schedule VI disaggregations (i.e. break up) of items recognized in
financial statements were disclosed by way of Schedules. Revised Schedule VI
states that the same should be provided in the Notes to Accounts.
Consequently each item on the face of the Balance Sheet and Statement of Profit
and Loss shall be cross-referenced to any related information in the Notes to
Accounts. Earlier such cross referencing was made to Schedules. Due to above,
Column of Schedule No. on face of Balance Sheet has been changed to Note No. in
Revised Schedule VI and Column of Note No. is there in newly introduced format of
Statement of Profit and Loss.
11) Notes to Accounts defined:
Revised Schedule VI states that Notes to Accounts shall contain information in
addition to that presented in the Financial Statements and shall provide where
required (a) narrative descriptions or disaggregations of items recognized in those
statements and (b) information about items that do not qualify for recognition in those
statements. This definition is as per IAS 1 ‘Presentation of Financial Statements’.
12) Relief from disclosing more than 5 years old issue of shares for
consideration other than cash/ Bonus Shares:-
Share-based payments for acquisition of goods or services including tangible and
intangible assets and issue of Bonus Shares were earlier required to be reported on
continuous basis but in Revised Schedule VI the same need to be disclosed for
transactions of period of five years immediately preceding the relevant Balance
Sheet Date.
13) Disclosure of shareholding pattern:
Two new disclosures regarding disclosures of share holding pattern for each class
of share capital have been introduced in revised Schedule VI.
i) shares in the company held by its holding company or its ultimate holding
company including shares held by or by subsidiaries or associates of the
holding company or the ultimate holding company in aggregate.
ii) shares in the company held by each shareholder holding more than 5
percent shares (as on Balance Sheet date) specifying the number of shares
held.
16
14) Disclosure of reconciliation of the number of shares:

Revised Schedule VI has introduced new disclosure of reconciliation of the number
of shares outstanding at the beginning and at the end of the reporting period. It is
pertinent to mention here that under IAS 1 “Presentation of Financial Statements”,
Statement of Changes in Equity is part of IFRS financial statements. As an inspiration
disclosure of reconciliation of the number of shares in notes to accounts has been
introduced.
15) Disclosure of Shares reserved :
New requirement for disclosure of Shares reserved for issue under options (e.g
ESOPs) and contracts/commitments for the sale of shares/disinvestment, including
the terms and amounts, has been introduced.
16) Disclosure of Reserves & Surplus:
New line items for Debenture Redemption Reserve, Revaluation Reserve, Share
Option Outstanding Account have been inserted under Reserves & Surplus. Further
additional requirement of specifying purpose of reserves falling under residual head
of other reserves has been introduced.
17) Disclosure of Accumulated Losses.
Debit balance of profit and loss shall be shown as a negative figure under the head
‘Surplus’. Similarly, the balance of ‘Reserve and Surplus’ after adjusting negative
balance of surplus,if any shall be shown under the head ‘Reserve and Surplus’ even
if the figure is in the negative. Earlier, any debit balance in Profit and Loss Account
carried forward after deduction from uncommitted reserves was required to be shown
as the last item on the Assets side of the Balance Sheet as Profit and Loss Account
after Miscellaneous Expenditure. It is pertinent to mention here that the line item of
Miscellaneous expenditure on Asset side of Old Schedule VI has been omitted.
18) Money received against Share Warrants:
Revised Schedule VI has inserted a new line item under Shareholders’ funds
towards Money received against Share Warrants after Share Capital and Reserves
and Surplus.
19) Share Application Money:
Revised Schedule VI has inserted a new line item Share Application Money pending
allotment under Equity & Liabilities (upper part of balance sheet) between
Shareholder funds and Non-current liabilities. Share application money not
exceeding the issued capital and to the extent not refundable is to be disclosed here.
17
Share application money to the extent refundable should be shown separately under
the head “Other Current Liabilities”.
20) Disclosure of Borrowing:
The portion of borrowing which is not due within 12 months after the reporting date
(i.e Balance Sheet date) is only required to be shown as Long term borrowing.
Further for disclosure by the lessee of finance lease obligations not due within 12
months a new line item of “Long term maturities of finance lease obligations” has
been inserted by Revised Schedule VI, under Long-term Borrowings.
Any installment of the long term borrowings / finance lease obligations that are due
for payment within 12 months after the reporting date is classified as “other current
liabilities” and shown against newly inserted line items of current maturities of long
term debt / current maturities of finance lease obligations.
Further borrowings repayable on demand or whose original tenure is less than twelve
months or period of operating cycle (in case of loans for operations) are shown as
short term borrowing under current liabilities.
Other new disclosure requirements in respect of borrowing under Revised Schedule
VI are:-
i) Long term Loans from Directors and Managers to be shown separately.
ii) Bonds / Debentures (along with rate of interest and particulars of redemption
or shall be stated in descending order of maturity or conversion,
iii) Terms of repayment of long term terms loans to be stated.
iv) Period of continuing default / default (no practical difference) in case of long
term borrowing / short term borrowing as on Balance Sheet Date in
repayment of loans and interest to be specified separately in each case.
Earlier, no such disclosure was required in the Financial Statements.
21) Disclosure of Provisions:
Under Old Schedule VI all the provisions were shown as Current Liabilities, but now
all provisions for which the related claim is expected to be settled beyond 12 months
after the reporting date are classified as non-current liabilities and shown under new
line item of Long-term provisions. The provisions which will be settled within 12
months after the reporting period are classified as a current liability and shown under
line item of Short-term provisions. The above provisions (long term as well as short
term) need to further classified as provision for employees benefits and others
(nature to be specified)
18
22) Disclosure of Interest accrued and due on borrowing:

Revised Schedule VI, requires Interest accrued and due on borrowing to be shown
under Other current liabilities. In Old Schedule VI these were shown as part of Loan
Funds.
23) Trade Receivables and Trade Payables
The terms of Debtors and Creditors have been scrapped and replaced with Trade
Receivables and Trade Payables.
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.
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.
Hence, amounts due / payable on account of other contractual obligations can no
longer be included in the trade receivables / payables. Further their classification into
non current and current is now required and accordingly corresponding line items
have been inserted in non-current assets / liabilities.
Further separate disclosure of trade receivables outstanding for a period exceeding 6
months from the date they become due for payment as against the billing /
accounting date is required now.
24) Fixed Assets:
The amount of tangible, intangible assets and intangible assets under development
(new line item) are required to be depicted on face of balance sheet separately.
Further only the net block is required to be disclosed on face of balance sheet
whereas under Old Schedule VI the amount of Gross Block and accumulated
depreciation were also shown.
25) Tangible Assets:
Tangible assets under lease are required to be separately specified under each class
of asset. The said disclosure is in respect of assets given on operating lease in the
case of lessor and assets held under finance lease in the case of lessee.
26) Intangible Assets:
New line items of Computer Software, mastheads and publishing rights, Mining
Rights, Recipes, formulae, models, designs and prototypes, Licenses & Franchise
introduced.
19
27) Disclosure of Capital Advances:

Capital Advances are required to be presented separately under the head “Long term
loans and advances”. Presently they were being shown as part of fixed assets /
capital work in progress in absence of any heading available in existing Schedule VI
for such advances.
28) Cash and cash equivalents:
Name changed from cash & bank balances. The bifurcation of bank deposits
amongst scheduled and non scheduled banks has been dispensed with. Bank
deposits with more than 12 months maturity to be disclosed separately however in
view of definition of current assets, corroborated by FAQ of ICAI (refer Chapter-8)
such FDRs cannot be shown as cash and cash equivalents and would be shown as
non-current assets. Further as per Guidance Note on Revised Schedule VI, instead
of using the head cash and cash equivalents we may use the old head on face of
balance sheet i.e. cash and bank balances which may be bifurcated between cash
and cash equivalents and other bank balances. The bank balances which are cash
and cash equivalents as per AS 3 “Cash Flow Statements” be included in relevant
head and others should be shown as other bank balances.
29) Inventories:
A new line item of Finished Goods has been inserted. Earlier such goods were
shown as Stock-in-trade, which has now been restricted for goods acquired for
trading. Further Goods in Transit should be separately disclosed under the relevant
sub-head of inventories.
30) Format of Statement of Profit and Loss prescribed:
The nomenclature of Profit and Loss Account has been changed to Statement of
Profit and Loss under Revised Schedule VI. Further Part II of Revised Schedule VI
prescribes the format of Statement of Profit and Loss which was not there in Old
Schedule VI. This will facilitate standardization and comparability.
The format of Statement of Profit and Loss ends with depiction of Profit after tax and
Earning Per Share accordingly it does not depict any appropriation item on its face,
as the below the line adjustments i.e. dividend, bonus shares and transfer to / from
reserves etc are to be disclosed under sub-head “Surplus” in head “Reserve and
Surplus” in the Notes to accounts referenced to Balance Sheet.
31) Disclosure of revenue- other than a finance company:
In respect of a company other than a finance company revenue from operations shall
disclose separately in notes revenue from a) sale of products b) sale of services
(c) other operating revenues less:- (d) Excise Duty.
20
As per AS-9 “Revenue Recognition”, the disclosure in respect of Excise Duty needs
to be shown on the face of the Statement of Profit and Loss. Since Accounting
Standards override Revised Schedule VI, the presentation in respect of excise duty
will have to be made on the face of the Statement of Profit and Loss. As per the
Guidance Note in doing so, a company may choose to present the elements of
revenue from sale of products, sale of services and other operating revenues also on
the face of the Statement of Profit and Loss instead of the Notes.
32) Disclosure of revenue- finance company:
In case of finance company, revenue from operations shall include revenue from (a)
Interest and (b) Other financial services. It has further been stated that revenue from
each of the above heads shall be disclosed separately by way of notes to accounts to
the extent applicable. The above disclosure is more detailed than old schedule VI.
33) As per the format provided the expenses are to be classified by nature.
Earlier even function based classification was permissible. Under the ‘function of
expense method, expenses are classified according to their function as part of cost of
sales, distribution or administrative expenses i.e. the costs directly associated with
generating revenues should be included in cost of sales which should include indirect
costs also like depreciation on assets used in production etc. It is pertinent to mention
here that under IAS 1 “Presentation of Financial Statements” both nature based as
well as function based classification is allowed, however in Ind. AS 1 which is the
converged standard only nature based classification is permissible.
34) Raising of limit for non-inclusion in miscellaneous expenditure:
Additional information regarding aggregate income or expenditure exceeding 1% of
the revenue from operations or Rs 1,00,000/-, whichever is higher, need to be
disclosed now by way of notes. Under Old Schedule VI, any expense exceeding 1%
of total revenue or Rs 5000/- whichever is higher was to be shown as a separate
head in P&L Account and should not have been combined under head
“miscellaneous expenditure”.
35) Recognition of dividend income.
The Old Schedule VI required the parent company to recognize dividends 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 has been abolished in the Revised Schedule VI. Accordingly, as per AS-
9 Revenue Recognition, dividends should be recognized as income only when the
right to receive dividends is established as on the Balance Sheet date i.e. dividend
has been approved by shareholders of investee company at the Annual general
Meeting.
21
36) Break-up in terms of quantitative disclosures for significant items of

Statement of Profit and Loss, such as raw material consumption, stocks, purchases
and sales have been simplified and replaced with the disclosure of “broad heads”
only.
37) Gain / Loss on foreign currency transactions and translations to be
separated into finance costs ( to the extent of adjustment to interest cost) and other
expenses.
38) Separate disclosure of Exceptional and Extraordinary items on face of
39) Requires separate disclosure of profit before tax, tax expense and profit after
tax from discontinuing operations.
40) Disclosures dispensed with;
The Revised Schedule VI has removed a number of disclosure requirements in Part
II, Examples include:
(a) Disclosures relating to managerial remuneration and computation of net
profits for calculation of commission;
(b) Information relating to licensed capacity, installed capacity and actual
production;
(c) Information on investments purchased and sold during the year;
(d) Investments, sundry debtors and loans & advances pertaining to companies
under the same management;
(e) Maximum amounts due on account of loans and advances from directors or
officers of the company;
(f) Commission, brokerage and non-trade discounts.
22
Chapter 4
General Instructions
This is the starting point of Revised Schedule VI and prescribes the general
instructions for preparation of financial statements out of which some are landmark
changes. These instructions are being reproduced along with its analysis in this
Chapter:-
General Instructions Analysis
1. Where compliance with the This is a landmark change in the history
requirements of the Act including of Financial Reporting System prevalent
Accounting Standards as applicable to in India as Revised Schedule VI gives
the companies require any change in supremacy to the provisions of the
treatment or disclosure including Companies Act and Accounting
addition, amendment, substitution or Standards over the Revised Schedule
deletion in the head/sub-head or any VI, whereas earlier Old Schedule VI
changes inter se, in the Financial requirements were supreme and were
Statements or statements forming part overriding the Accounting Standards.
thereof, the same shall be made and the
requirements of the Schedule VI shall Now whenever accounting standards
stand modified accordingly. are changed, the resultant accounting
treatment, presentation and disclosures
will not be in conflict with the
requirements of Revised Schedule VI
as same shall stand modified
accordingly.
2. The disclosure requirements specified Here also importance of Accounting
in Part I and Part II of this Schedule are in Standards is again reiterated as all the
addition to and not in substitution of disclosure requirements specified in the
the disclosure requirements specified in Accounting Standards need to be
the Accounting Standards prescribed complied with in the Notes to Accounts /
under the Companies Act, 1956. additional statement / on the face of the
Additional disclosures specified in the Financial Statements, besides
Accounting Standards shall be made in compliance with Revised Schedule VI.
the Notes to Accounts or by way of Also all other disclosures as required by
additional statement unless required to be the Companies Act shall be made in the
disclosed on the face of the Financial Notes to Accounts.
Statements. Similarly, all other
disclosures as required by the Companies Companies need to comply with the

Act shall be made in the Notes to disclosure requirements of all three i.e.
Accounts in addition to the requirements Revised Schedule VI, Accounting
set out in this Schedule. Standards and Companies Act, 1956.
However in event of any conflict
between Schedule and AS or
Companies Act, the later will prevail and
Schedule will take a back seat.
3. Notes to Accounts shall contain For the first time, Notes to accounts
information in addition to that presented in have been defined and disaggregations
the Financial Statements and shall (break up) which earlier were disclosed
provide where required (a) narrative in Schedules will also be part of Notes.
descriptions or disaggregations of items Consequently each item on the face of
recognized in those statements and (b) the Balance Sheet and Statement of
information about items that do not qualify Profit and Loss shall be cross-
for recognition in those statements. referenced to any related information in
the Notes to Accounts (as against
Each item on the face of the Balance Schedules in old Schedule VI). Due to
Sheet and Statement of Profit and Loss above, Column of Schedule No. on face
shall be cross-referenced to any related of Balance Sheet has been changed to
information in the Notes to Accounts. In Note No. in Revised Schedule VI and
preparing the Financial Statements similarly Column of Note No. has been
including the Notes to Accounts, a specified in newly introduced format of
balance shall be maintained between Statement of Profit and Loss.
providing excessive detail that may not
assist users of Financial Statements and
not providing important information as a
result of too much aggregation.
4. Depending upon the turnover of the The rounding off is optional and not
company, the figures appearing in the mandatory. However if rounding off is
Financial Statements MAY BE rounded opted then said rule needs to be
off as below: complied with.
Turnover Rounding off The limit of turnover and the extent of

Less than one To nearest rounding off has been revised.
hundred Hundreds,
thousands, lakhs For ready reference the limits provided
or millions or in Old Schedule VI are given below:
decimal thereof.
24
One hundred To nearest lakhs, Turnover Rounding off

crores or more millions or crores, Less than one To nearest
or decimal thereof. hundred Hundreds,
thousands or
Once a unit of measurement is used, it decimal thereof.
should be used uniformly in the Financial One hundred To nearest
Statements. crores to five Hundreds,
hundred thousands, lakhs,
crores or millions, or
decimal thereof.
More than five To nearest
hundred Hundreds,
crores thousands, lakhs,
or millions, or
crores, or decimal
thereof.
Further new requirement of using the

same unit of measurement uniformly
across the financial statements has
been introduced. This implies that if a
company has opted to round off in
millions, then it need to apply it
uniformly in Balance Sheet, Statement
of Profit and Loss and Notes to
Accounts
5. Except in the case of the first Financial There is no change here as under Old
Statements laid before the Company Schedule VI also previous years figures
(after its incorporation) the corresponding were required to be given. However as
amounts (comparatives) for the the Revised Schedule VI is applicable
immediately preceding reporting period from FY 2011-12, the financial
for all items shown in the Financial statements of FY 2010-11 will be
Statements including notes shall also be required to be reclassified / regrouped in
given. accordance to Revised Schedule VI,
before being used as comparatives.
A note to this effect may also be given
in the notes to accounts.
6. For the purpose of this Schedule, the This is also a new insertion and has led
terms used herein shall be as per the to deletion of Part III which existed in
25
applicable Accounting Standards. Old Schedule VI. The terms used such
as ‘associate’, ‘related parties’, etc. shall
be as per the notified Accounting
Standards. For glossary of terms refer
to chapter-9.
26
Chapter 5
Balance Sheet
The major changes that have been introduced in Revised Schedule VI pertain to
Balance Sheet. The form of Balance Sheet has been prescribed under Part I of
Revised Schedule VI. The form of balance sheet is preceded by a Note, stating that
this form sets out minimum requirements and can be changed, if required.
The note alongwith the form of balance sheet and general instructions for preparation
of balance sheet has been discussed in this chapter. The members are requested to
refer Chapter -9 also wherein glossary of terms has been given.
A. Note
The Note is being reproduced below alongwith analysis thereof:-
Notes Analysis including comparison
with Old Schedule VI
This part of Schedule sets out the Revised Schedule VI sets out
minimum requirements for disclosure on minimum requirements for disclosure
the face of the Balance Sheet, and the and offers presentation flexibility. This
Statement of Profit and Loss (hereinafter approach is a landmark change as
referred to as “Financial Statements” for the compared to Old Schedule VI where
purpose of this Schedule) and Notes. Line such flexibility was not there. This
items, sub-line items and sub-totals shall be change is in line with the IAS 1
presented as an addition or substitution on “Presentation of Financial
the face of the Financial Statements when Statements”.
such presentation is relevant to an
understanding of the company’s financial An entity should be guided by the
position or performance or to cater to qualitative characteristics of financial
industry/ sector specific disclosure statements – ‘relevance’ and
requirements or when required for ‘understandability’ in selection of the
compliance with the amendments to the line items.
Companies Act or under the Accounting
Standards. It is pertinent to mention here that this
note has not been incorporated
before Part II that contains form of
However considering that the
Statement of Profit and Loss has also

been referred here and the spirit of
the flexibility inherent in the Revised
Schedule VI, same logic is applicable
to Part II as well.
B. Form of Balance Sheet

As stated earlier the form of Balance Sheet has been provided in Part I of the
Revised Schedule VI. The format is being reproduced as under along with analysis
including comparison with old Schedule VI:-
PART I
FORM OF BALANCE SHEET
Name of Company……………
Balance Sheet as at …………
(Rupees in………..)
Analysis including
comparision with
Old Schedule VI
Particulars Note Figures Figures
No. as at end as at end
of current of
reporting previous
period reporting
period
1 2 3 4
I. EQUITY & Change in name from
LIABILITIES Sources of funds to
Equity & Liabilities as
current liabilities will
now be shown on
liability side and not as
deduction from
Current Assets on the
asset side.
(1) Shareholders’ The term capital used
Funds earlier has been rightly
(a) Share Capital changed to Share
28
(b) Reserves & Surplus capital as this term is

(c) Money received more relevant for
against Companies.
share warrants
A new line item of
Money received
against Share
Warrants has been
inserted. Share
warrants give the
holder the right to
acquire equity shares.
However till the shares
are allotted against the
same, these cannot
form part of Share
Capital and therefore
is to be shown as a
separate line item.
(2) Share This is a new line item.
application Earlier there was no
money pending uniformity in its
allotment presentation as some
companies were
showing the share
application money as
part of share capital
with separate
disclosure in the
schedule. Also some
companies were
showing it separately.
Share application
money not exceeding
the issued capital and
to the extent not
refundable is to be
disclosed here. Share
29
application money to
the extent refundable
should be shown
under the head “Other
Current Liabilities”.
(3) Non-current As discussed earlier
Liabilities the borrowing need to
(a) Long-term be trifurcated and the
borrowings non-current portion of
(b) Deferred tax borrowing need to be
liabilities included as Long-term
(Net) borrowings.
(c) Other long term
liabilities Earlier Deferred tax
(d) Long-term Liabilities (Net) were
provisions shown separately after
Loan Funds, now they
are required to be
shown under Non-
current liabilities.
Further earlier as
break up of deferred
tax liabilities / assets
was provided in notes
and not in schedules
this item had no cross
referencing on face of
balance sheet. But
now as all
disaggregations are to
be given in notes, this
item will also be cross
referenced to the
related note.
This classification is as
per IAS 12 “Income
taxes” which states
that Deferred taxes
assets / liabilities are
30
always Non-Current.
Further due to advent

of current, non-current
classification, the
provisions need to be
bifurcated into Long-
term and short-term
provisions,
consequently new line
item of Long-term
provisions has been
inserted. Earlier all the
provisions were
shown under current
liabilities and
provisions.
(4) Current Earlier the Current
Liabilities liabilities were shown
(a) Short-term on Asset side
borrowings (Application of funds)
(b) Trade payables as reduction from the
(c) Other current current assets. But
liabilities now they need to be
(d) Short-term disclosed on the
provisions Liability side.
Further earlier only
total of current liability
was shown on face of
balance sheet,
whereas now break up
of same between
Short-term borrowing,
Trade payables and
Short-term provisions
is required to be
disclosed.
Also the name of
31
provision has been

changed to Short-term
provisions due to
presentation of
classified balance
sheet.
TOTAL
II. ASSETS Change in name from
Application of funds to
Assets as current
liabilities will now be
shown on liability side
and not as deduction
from Current Assets.
(1) Non-Current The amount of
Assets tangible, intangible
(a) Fixed Assets assets are required to
(i) Tangible Assets be depicted on face of
(ii) Intangible Assets balance sheet
(iii) Capital Work-in separately which was
Progress not required earlier.
(iv) Intangible Assets
under New line items of
development intangible assets
(b) Non-current under development,
Investments Long Term loans and
(c) Deferred tax Advances inserted.
assets (net) Further only the net
(d) Long-term loans block is required to be
and advances disclosed on face of
(e) Other non-current balance sheet
assets whereas earlier the
amount of Gross
Block and
accumulated
depreciation were also
shown.
Earlier Deferred tax
assets (Net) were
32
shown separately
between Investments
and Current Assets,
Loans and Advances
are now required to be
shown under Non-
current Assets.
Further now cross
referencing of same
would be required, as
discussed earlier.
(2) Current Assets New Line items of
(a) Current Current Investments
Investments inserted and name of
(b) Inventories Sundry Debtors. Cash
(c) Trade and bank balances
Receivables and Loans &
(d) Cash and cash Advances changed to
equivalents Trade Receivables,
(e) Short-term loans cash & cash
and advances equivalents and short-
(f) Other current term loans and
assets advances respectively.
TOTAL
The companies can either show the aggregate balances of each of the sub heads in
inner column and the totals of main heads i.e. Non-current assets, Current assets etc
in the main column, in which case two columns of amounts for each year would be
required. As an alternative we can also show all the balances in single column with
sub-totals of each head.
C. General Instructions for Preparation of Balance Sheet
Para 1 to 5 of general instructions for preparation of Balance Sheet provides
definitions of terms current asset, non-current asset, operating cycle, current liability,
non-current liability, trade receivables and trade payables. It is pertinent to mention
here that definitions of these terms were not there in Old Schedule VI. The relevant
paras 1 to 5 are reproduced below along with analysis of the same.
Definitions Analysis
1. An asset shall be classified as This newly inserted definition is inspired from
current when it satisfies any of the IAS 1 “Presentation of Financial Statements”
33
following criteria: Due to this insertion lot of reclassifications

(a) it is expected to be realized in, would be required in the Balance Sheet.
or is intended for sale or
consumption in, the company’s The detailed analysis of the definition with its
normal operating cycle; practical application is given in Chapter 7.
(b) it is held primarily for the
purpose of being traded;
(c) it is expected to be realized
within twelve months after the
reporting date; or
(d) 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.
All other assets shall be classified as
non-current.
2. An operating cycle is the time This newly inserted definition is important
between the acquisition of assets for during classification of assets and liabilities in
processing and their realization in current and non -current.
Cash or cash equivalents. Where the
normal operating cycle cannot be The definition is as per IAS 1 “Presentation
identified, it is assumed to have a of Financial Statements”
duration of 12 months.
The detailed analysis of the definition with its
practical application is given in Chapter 7.
3. A liability shall be classified as This newly inserted definition is inspired from
current when it satisfies any of the IAS 1 “Presentation of Financial Statements”
following criteria: Due to this insertion lot of reclassifications
(a) it is expected to be settled in would again be required in the Balance
the company’s normal Sheet.
operating cycle;
(b) it is held primarily for the The detailed analysis of the definition with its
purpose of being traded; practical application is given in Chapter 7.
(c) it is due to be settled within
reporting date;
34
or
(d) 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.
All other liabilities shall be classified
as non-current.
4. A receivable shall be classified The term of debtors has been replaced with
as a ‘trade receivable’ if it is in trade receivable and same has also for first
respect of the amount due on time been defined. As per definition,
account of goods sold or services amounts due on account of contractual
rendered in the normal course of obligations (except towards goods sold or
business. services rendered in the normal course of
business) can no longer be included in the
trade receivables.
Example; Interest on overdue amount of
Trade Receivables.
5. A payable shall be classified The term of creditors has also been replaced
as a ‘trade payable’ if it is in respect with trade payable and same has been
of the amount due on account of defined. As per definition, amounts payable
goods purchased or services on account of contractual obligations (except
received in the normal course of towards goods purchased or services
business. received in the normal course of business)
can no longer be included in the trade
payables.
Example: Amount due towards purchase of
fixed assets.
As discussed earlier that under Revised Schedule VI the concept of Schedules has
been eliminated and all the disaggregation’s also are required to be made in the
Notes to accounts.
35
Consequently Para 6 A to 6 S of General Instructions for Preparation of Balance

Sheet, prescribes the disaggregation’s / disclosures required to be made in the
Notes to accounts in respect of following items of Equity & Liability / Assets
appearing in the Balance Sheet.
A. Share capital:
C. Long term borrowings.
D. Other Long term liabilities.
E. Long term provisions.
F. Short-term borrowing.
G. Other current liabilities.
H. Short-term provisions.
I. Tangible assets.
J. Intangible assets.
K. Non-current investments.
L. Other long term loans and advances.
M. Other non-current assets.
N. Current investments.
O. Inventories.
P. Trade receivables.
Q. Cash and cash equivalents.
R. Short-term loans and advances.
S. Other current assets.
Further para 6 T to 6 U prescribes disclosure requirements in respect of Contingent
liabilities and commitments and proposed dividend, which are not recognized in the
accounts. Para 6 V and 6W requires details in respect of use of unutilized amounts
out of issue of securities and note regarding carrying amount not less than realization
value of current assets.
The above stated paras are reproduced below along with analysis:
36
A. Share capital
It is the first line item under the Shareholders’ funds, the amount towards issued /
subscribed / paid up capital would be shown against this item on the face of the
balance sheet. However as per para 6A of the General Instructions for Preparation of
Balance Sheet a company shall disclose the following in respect of Share capital, in
the Notes to Accounts:
Disclosure Requirement as per Analysis
Revised Schedule VI
Preference shares is to be classified as
for each class of share capital (different
Share capital. AS 32 “Financial
classes of preference shares to be
treated separately): Instruments: Presentation and Ind-AS 32
Financial Instruments : Presentation
require to classify redeemable preference
shares as a liability. However as these
standards are not notified and considering
Sec 85(1) of Companies Act which refers
to Preference Shares as a kind of share
capital these will have to be classified as
share capital.
(a) the number and amount of This is in line with the disclosure
shares authorized; requirement in Old Schedule VI.
(b) the number of shares issued, Same disclosure was required except that
subscribed and fully paid, and as against disclosure of only subscribed
subscribed but not fully paid; capital, the break up of same between
subscribed and fully paid up and
subscribed but not fully paid is now
required.
Though the disclosure of only number of

shares is required, for better
understanding, even the amount for each
category should be disclosed.
The gross amounts should be discussed

in the capital portion first and then the
calls unpaid (required to be disclosed
separately as per (k) below) should be
reflected as a deduction.
37
(c) par value per share; Same disclosure was required in Old
Schedule VI.
(d) a reconciliation of the number This is a new disclosure requirement
of shares outstanding at the and is inspired from Statement of
beginning and at the end of the Changes of Equity required to be
reporting period; prepared under IAS 1 “Presentation of
Financial Statements”.
Reconciliation of opening number of

shares outstanding, shares issued,
shares bought back, other movements
etc during the year and closing number of
outstanding shares may be given with
their corresponding amounts, for better
understanding.
Reconciliation for the comparative

previous period is also to be given.
Further, the reconciliation should be

disclosed separately for both Equity and
Preference Shares and for each class of
share capital within Equity and
Preference Shares.
(e) the rights, preferences and Not required in old Schedule VI, but
restrictions attaching to each class required now.
of shares including restrictions on
the distribution of dividends and the Rights, preferences and restrictions for
repayment of capital; Equity Shares like “with voting rights” or
‘with differential voting rights’ as to
dividend, voting or otherwise. In respect
of Preference shares, the rights include
preferential right to be paid a fixed
amount or at a fixed rate of dividend and
a preferential right of repayment of
amount of capital on winding up. Also
Preference shares can be cumulative,
non cumulative, redeemable, convertible,
non-convertible etc.
38
All such rights, preferences and

restrictions attached to each class of
preference shares, terms of redemption,
etc. have to be disclosed separately. If a
company has only one class of equity
shares, it is still required to make this
disclosure.
(f) shares in respect of each class Same disclosure was required.
in the company held by its holding
company or its ultimate holding Aggregation should be done for each of
company including shares held by or the above categories.
by subsidiaries or associates of the
holding company or the ultimate holding For this disclosures, shares held by the
company in aggregate; entire chain of subsidiaries and
associates starting from the holding
company and ending right up to the
ultimate holding company would have to
be disclosed.
Further, all the above disclosures need to

be made separately for each class of
shares, both within Equity and Preference
Shares.
(g) shares in the company held by New disclosure requirement.
each shareholder holding more than
5 percent shares specifying the In the absence of any specific indication
number of shares held; of the date of holding, the date for
computing such percentage should be
taken as the Balance Sheet date as per
the Guidance Note of ICAI. Such
percentage should be computed
separately for each class of shares
outstanding within Equity and Preference
Shares.
Herein the name of shareholder, No. of
shares held and % thereof needs to be
disclosed. Further the disclosure is to be
39
on the basis of legal ownership, except

where beneficial ownership is clearly
available from the depositories.
This information should also be given for
the comparative previous period.
(h) shares reserved for issue Not required in old Schedule VI, but
under options and contracts/ required now.
commitments for the sale of shares/
disinvestment, including the terms Shares under options generally arise
and amounts; under promoters or collaboration
agreements, loan agreements or
debenture deeds (including convertible
debentures), agreement to convert
preference shares into equity shares,
ESOPs or contracts for supply of capital
goods, etc. The disclosure would be
required for the number of shares,
amounts and other terms for shares so
reserved. Such options are in respect of
unissued portion of share capital.
(i) For the period of five years Same disclosure was required except that
immediately preceding the date as at old schedule VI required continued
which the Balance Sheet is prepared: disclosure whereas Revised Schedule VI
¾ Aggregate number and class of requires disclosures of the transactions
shares allotted as fully paid up upto immediately preceding 5 years from
pursuant to contract(s) without the current reporting date. Since
payment being received in cash. disclosure is for the aggregate number of
¾ Aggregate number and class of shares, it is not necessary to give the
shares allotted as fully paid up year-wise break-up of the shares allotted
by way of bonus shares. or bought back, but the aggregate
¾ Aggregate number and class number for the last five financial years
of shares bought back. needs to be disclosed.
Here previous year figure also needs to

be given which needs to be recomputed
as now 5 years limit for disclosure is
there, accordingly if in earlier year
disclosure transactions for more than 5
years have been reported the same need
40
to adjusted and the transactions prior to 5

years as on previous years balance sheet
date, be removed for purpose of
disclosure.
The requirement of disclosing the source

of bonus shares is omitted in the Revised
Schedule VI.
However additional disclosure of

Aggregate number and class of shares
bought back is now required.
(j) Terms of any securities Same disclosure was required.
convertible into equity/ preference
shares issued along with the earliest Under this Clause, disclosure is required
date of conversion in descending order for any security i.e. Convertible
starting from the farthest such date. Preference Shares, Convertible
Debentures / bonds, etc., when it is either
convertible into equity or preference
shares. In this case, terms of such
securities and the earliest date of
conversion are required to be disclosed.
Terms of convertible securities are also

required to be disclosed under this
Clause.
(k) Calls unpaid (showing Under Old Schedule VI, debit balance on
aggregate value of calls unpaid by the allotment or call account was
directors and officers) presented in the Balance Sheet by way of
deduction from Called-up Capital.
However, now calls unpaid are to be
disclosed separately.
A separate disclosure is required for the

aggregate value of calls unpaid by
directors and also officers of the
company.
41
The gross amounts should be discussed

in the capital portion first (required to be
disclosed separately as per (b) above)
and then the calls unpaid should be
reflected as a deduction.
(l) Forfeited shares (amount Same disclosure was required. However
originally paid up) as per Old Schedule VI “Any Capital profit
on reissue of Forfeited shares should be
transferred to Capital Reserve.” No such
direction is there in Revised Schedule VI.
However since it is profit of capital nature
it should still be credited to capital
reserve.
This is the second line item under the Shareholders’ funds, the aggregate of which is
depicted on the face of the balance sheet. However, as per para 6B of the General
Instructions for Preparation of Balance Sheet a company shall give dis-aggregation’s
and other disclosures the following in respect of Reserves and Surplus in the Notes
to Accounts:
Revised Schedule VI
(i) Reserves and Surplus shall be
classified as:
(a) Capital Reserves; Same disclosure was required.
(b) Capital Redemption Reserve; Same disclosure was required.
As per Act, Capital Redemption Reserve
is required to be created in the following
two situations:
a) Under the provisions of Section 80 of
the Act, where the redemption of
preference shares is out of profits, an
amount equal to nominal value of
shares redeemed is to be transferred
to ‘capital redemption reserve’.
b) Under Section 77AA of the Act, if the
buy-back of shares is out of free
reserves, the nominal value of the
42
shares so purchased is required to be

transferred to capital redemption
reserve from distributable profit.
(c) Securities Premium Reserve; Name changed from Share Premium
Account to Securities Premium Reserve.
However the nomenclature as per the Act
is “Securities Premium Account”.
Accordingly, the terminology of the Act
should be used as per Guidance Note.
Under Old Schedule VI details of utilization

in accordance to section 78 of the
Companies Act was required which has
now been dispensed with.
(d) Debenture Redemption New line item inserted. However were
Reserve; earlier also disclosed by companies
maintaining this reserve.
According to Section 117C of the Act
where a company issues debentures, it is
required to create a debenture redemption
reserve for the redemption of such
debentures. The company is required to
credit adequate amounts, from out of its
profits every year to debenture redemption
reserve, until such debentures are
redeemed.
On redemption of the debentures for
which the reserve is created, the amounts
no longer necessary to be retained in this
account need to be transferred to the
General Reserve.
(e) Revaluation Reserve; New line item inserted. However were
earlier also disclosed by companies
maintaining this reserve.
Revaluation Reserve is created out of
revaluation of fixed assets both tangible
and intangible.
Depreciation and amortization on the
43
amount added to fixed assets on

revaluation is transferred (reduced) from
revaluation reserve and only net
depreciation on original cost is charged to
statement of profit and loss.
(f) Share Options Outstanding New line item inserted.
Account; This account represents share option
outstanding on account of goods or
services acquired in exchange of share
options like ESOP. In case of ESOP, the
entity create Share Option over the vesting
period debiting Employee Benefits.
(g) Other Reserves – (specify the Every other reserve which is not covered
nature and purpose of each reserve above is to be reflected as `Other
and the amount in respect thereof); Reserves’. However, since the nature,
purpose and the amount are to be shown,
each reserve is to be shown separately.
This would include reserves to be created
under other statutes like Special Reserve
u/s 36(1) (viii) created under the Income
Tax Act, 1961.
(h) Surplus i.e. balance in Statement Under Old Schedule VI, the balance in the
of Profit and Loss disclosing allocations Profit and Loss Account after providing for
and appropriations such as dividend, proposed allocation, viz. Dividend, Bonus
bonus shares and transfer to/from or Reserves was required to be disclosed
reserves etc. (Additions and deductions and accordingly the balance of surplus for
since last Balance Sheet to be shown year with accumulated surplus was
under each of the specified heads) directly taken from P&L to Reserve and
Surplus. However in Revised Schedule VI
the allocations and appropriations are
required to be disclosed under head of
Surplus and consequently in the format of
Statement of Profit and Loss,
appropriations are not mentioned.
44
Accordingly the Profit and Loss Account

(Surplus) under head Reserve and
Surplus would now start with balance as
per last balance sheet date, profit / loss
(after tax) for the year would be added /
reduced from this and then appropriations
would be reduced / added to arrive at
closing balance of the same.
(Additions and Deductions since the This requires the company to disclose the
last Balance Sheet to be shown under movement in each of the reserves and
each of the specified heads) surplus since the last Balance Sheet.
Accordingly for each reserve the balance
as per last balance sheet date, additions
like transferred from Statement of Profit
and Loss e.g. tfd to general reserve,
Transferred / Write back to Statement to
P&L e.g. transfer of Revaluation reserve to
P&L etc and closing balance shall be
shown.
(ii) A reserve specifically Almost same definition was there in Old
represented by earmarked investments Schedule VI.
shall be termed as a ‘fund’.
(iii) Debit balance of statement of As per Old Schedule VI, debit balance in
profit and loss shall be shown as a the Profit & Loss Account was shown as a
negative figure under the head deduction from the uncommitted reserves,
‘Surplus’. Similarly, the balance of if any. If debit balance of Profit & Loss is in
‘Reserves and Surplus’, after adjusting excess of uncommitted reserves, the
negative balance of surplus, if any, same shall be shown under “ASSETS” as
shall be shown under the head Profit & Loss, whereas now the
‘Reserves and Surplus’ even if the accumulated losses will always be shown
resulting figure is in the negative. on Equity and liability side even if total of
Reserve and Surplus including
accumulated loss turns negative.
C. Long-term borrowings
This is the first line item below the head Non-current liabilities. Earlier the entire
borrowings were shown as Loan Funds. But now due to introduction of classified
balance sheet, the borrowing which was shown as loan funds earlier need to be
trifurcated amongst long-term borrowing (Non-current liability), short-term borrowing
45
(current liability) and current maturities to long term debt (current liabilities).Also the
finance lease obligations in books of lessee which was entirely shown as current
liability earlier also needs to be bifurcated into Long term maturities of finance lease
obligations which are classified as Long-term borrowing under non-current liability
and Current maturities of finance lease obligations classified as other current
liabilities under current liabilities.
As per para 6C of the General Instructions for Preparation of Balance Sheet a
company shall provide the disaggregation’s and following disclosures in respect of
Long-term borrowings in the Notes to Accounts:
Revised Schedule VI
(i) Long-term borrowings shall be The phrase "long-term" has not been
classified as: defined. However, the definition of ‘non-
current liability’ in the Revised Schedule
VI may be used for ascertaining long-term
liability.
(a) Bonds/debentures. The word “bonds” has been added with
debentures.
(b) Term loans As per Guidance Note, the phrase "term
• From banks loan" has not been defined in the Revised
• From other parties Schedule VI. Term loans are generally
provided by banks and financial
institutions having fixed or pre determined
maturity period or a repayment schedule,
for acquisition of capital assets which
then become the security for the loan, i.e.,
end use of funds is normally fixed. Cash
credit, overdraft and call money accounts/
deposit are, therefore, not covered by the
expression “terms loans”.
(c) Deferred payment liabilities. These would include any liability for which
payment is to be made on deferred credit
terms. e.g. deferred sales tax liability,
deferred payment for acquisition of fixed
assets etc.
(d) Deposits. These would include deposits accepted
from public and inter corporate deposits
which are in the nature of borrowings.
(e) Loans and advances from related Advances under this head should include
46
parties. those advances which are in the nature of

loans. Earlier such disclosure was
required to be given for loans and
advances from subsidiaries, accordingly
disclosure requirement has been
broadened.
(f) Long term maturities of finance New line item inserted, to include Long
lease obligations term maturities of finance lease
obligations in the books of the lessee.
Earlier all the finance lease obligations
were included under Current Liabilities.
(g) Other loans and advances Nature to be specified.
(specify nature).
(ii) Borrowings shall further be sub- Secured loan refers to a loan which is
classified as secured and unsecured. secured against a tangible asset. All other
Nature of security shall be specified loans are unsecured.
separately in each case. Nature of security is to be specified
separately in each case, therefore blanket
disclosure like ‘All Term loans from
banks’ are secured will not suffice.
However, where one security is given for
multiple loans, the same may be clubbed
together for disclosure purposes with
adequate details or cross referencing.
The type of asset given as security e.g.
land and building, inventories and plant
and machinery etc. should also be
disclosed.
(iii) Where loans have been Earlier such disclosure was required in
guaranteed by directors or others, the respect of loan guaranteed by directors or
aggregate amount of such loans under manager, now extended to directors or
each head shall be disclosed. others. Further separate disclosure of
loans from directors and Managers is no
longer required.
(iv) Bonds/debentures (along with the Rate of interest was earlier not required to
rate of interest and particulars of be disclosed. Further under Old Schedule
redemption or conversion, as the case VI, the disclosure was of earliest date of
may be) shall be stated in descending redemption or conversion, now the
order of maturity or conversion, starting disclosure is required in descending order
from farthest redemption or conversion of maturity or conversion, starting from
47
date, as the case may be. Where farthest redemption or conversion date.
bonds/debentures are redeemable by
installments, the date of maturity for this
purpose must be reckoned as the date
on which the first installment becomes
due.
(v) Particulars of any redeemed Same disclosure was required.
bonds/ debentures which the company
has power to reissue shall be disclosed.
(vi) Terms of repayment of term loans Disclosure of terms of repayment should
and other loans shall be stated. be made preferably for each loan unless
the repayment terms of individual loans
within a category are similar, in which
case, they may be aggregated. For said
disclosure loan includes all categories
listed under the heading ‘Long-term
borrowings’.
Disclosure of repayment terms should
include the period of maturity with respect
to the Balance Sheet date, number and
amount of instalments due, the applicable
rate of interest and other significant
relevant terms if any.
(vii) Period and amount of continuing New Disclosure requirement.
default as on the Balance Sheet date in Details of any default in repayment of
repayment of loans and interest, shall loan and interest (only) existing as on the
be specified separately in each case. Balance Sheet date needs to be
separately disclosed. Any default that had
occurred during the year and was
subsequently made good before the end
of the year does not need to be disclosed.
However any default persisting on
Balance Sheet date which has been
made good afterwards before
authorization of the financial statements
should be disclosed.
As per Guidance Note, a company need
not disclose information for defaults other
than in respect of repayment of loan and
interest, e.g., compliance with debt
48
covenants. The word “loan” has been

used in a more generic sense. Hence, the
disclosures relating to default should be
made for all items listed under the
category of borrowings and not only to
items classified as “loans”.
D. Other Long term Liabilities
This is the third line item under head Non-current liabilities. As per para 6D of the
General Instructions for Preparation of Balance Sheet a company shall disclose the
following in respect of other long term liabilities in the Notes to Accounts:
Revised Schedule VI
Other Long term Liabilities shall be Disaggregation’s of the aggregate amount
classified as: shown on face of balance sheet as Other
Long term Liabilities is to be given as
under:
(a) Trade payables Here the non-current portion of trade are to
be disclosed. It includes only the amount
due in respect of goods purchased or
services received in normal course of
business but excludes amount due under
contractual obligations like PF contribution,
purchase of fixed assets interest accrued
on trade payables etc.
Specified disclosures under Micro, Small
and Medium Enterprises Development
(MSMED) Act, 2006, though not
specifically required in Revised Schedule
VI should be continued to be made in the
annual Financial Statements of the buyer.
(b) Others Such items may include dues payables in
respect of statutory obligations. Such
payables should be classified as "others"
and each such item should be disclosed
nature-wise. However, Acceptances should
be disclosed as part of trade payables in
terms of the Revised Schedule VI.
49
E. Long-term provisions
It is the fourth line item under the head Non-current liabilities. Earlier all the provisions
were shown as Current liabilities and Provisions in Old Schedule VI, however with
advent of current non-current classification in Revised Schedule VI, a new line item of
Long-term provisions has been inserted under Non-current liabilities on the face of
the Balance sheet.
As per para 6E of the General Instructions for Preparation of Balance Sheet a
company shall disclose the following with respect to Long-term provisions in the
Notes to Accounts:
Disclosure Requirement as per Revised Analysis
Schedule VI
The amounts shall be classified as: Disaggregation’s of the aggregate
amount shown on face of balance
sheet as long term provisions is to be
given as under:
(a) Provision for employee benefits. Provision for employee benefits
should be bifurcated into long-term
(non-current) and short-term (current)
and the long-term portion is disclosed
under this para.
This bifurcation may be based on the
actuarial valuer’s report.
b) Others (specify nature). All long-term provisions, other than
those related to employee benefits
should be disclosed separately based
on their nature. e.g. Provision for
warranties etc.
F. Short-term borrowings
This is the first line item under head current liabilities. Under Old Schedule VI, all the
borrowings including short term borrowing were included under Loan Funds as
Secured / Unsecured Loans. However under Revised Schedule VI, the Short-term
borrowings has been inserted under current liabilities on the face of the Balance
Sheet.
As per para 6F of the General Instructions for Preparation of Balance Sheet a
company shall disclose the following with respect to Short-term borrowing in the
Notes to Accounts:
50

Revised Schedule VI
(i) Short-term borrowings shall be Short-term borrowings will include all
classified as: loans repayable on demand / within a
period of 12 months from the date of the
loan. Current maturity of long-term
borrowings should not be classified as
short-term borrowing. They have to be
classified under Other current liabilities.
(a) Loans repayable on demand Loans repayable on demand are always
• From banks considered as short-term borrowing.
• From other parties
(b) Loans and advances from related For definition of related parties refer to
parties. Chapter -9.
(c) Deposits. These would include deposits accepted
from public and inter corporate deposits
which are in the nature of borrowings.
(d) Other loans and advances (specify Advances under this head should include
nature). those advances which are in the nature
of loans.
(ii) Borrowings shall further be sub- Same disclosure was required earlier.
classified as secured and unsecured.
Nature of security shall be specified
separately in each case.
(iii) Where loans have been guaranteed Earlier disclosure was for loans
by directors or others, the aggregate guaranteed by directors or managers,
amount of such loans under each head now it has been extended to directors or
shall be disclosed. others i.e. not necessarily related person,
however in normal course only an
associated person can provide
guarantee for a loan taken by company.
(iv) Period and amount of default as on New disclosure requirement.
the Balance Sheet date in repayment of All defaults existing as at the date of the
loans and interest, shall be specified Balance Sheet should be disclosed
separately in each case. (item-wise).
Also refer to discussion made at point (c)
(vii) earlier.
51
G. Other current liabilities

This is the third line item under current liabilities. As per para 6G of the General
Instructions for Preparation of Balance Sheet a company shall disclose the following
in the Notes to Accounts:
Revised Schedule VI
amount shown on face of balance sheet
as other current liabilities is to be given
as under:
(a) Current maturities of long-term debt; New line item inserted, to include
Current maturities of long-term debt,
earlier it was included under loan funds
itself.
(b) Current maturities of finance lease New line item inserted, to include
obligations; Current maturities of finance lease
obligations in the books of the lessee.
Earlier entire amount of finance lease
obligations was disclosed as current
liabilities.
(c) Interest accrued but not due on Earlier also was shown as current
borrowings; liability.
(d) Interest accrued and due on Earlier was shown as part of loan, now
borrowings; is required to be shown under other
(e) Income received in advance; The current portion of Income received
in advance only is to be shown here.
(f) Unpaid dividends Earlier also was shown as current
liability.
(g) Application money received for New line item inserted.
allotment of securities and due for refund
and interest accrued thereon. Share Share application money to the extent
application money includes advances refundable should be shown under the
towards allotment of share capital. The head “Other Current Liabilities”.
terms and conditions including the However Share application money not
number of shares proposed to be issued, exceeding the issued capital and to the
the amount of premium, if any, and the extent not refundable is to be disclosed
52
period before which shares shall be on face of balance sheet between

allotted shall be disclosed. It shall also be shareholder funds and non-current
disclosed whether the company has liabilities.
sufficient authorized capital to cover the
share capital amount resulting from
allotment of shares out of such share
application money. Further, the period for
which the share application money has
been pending beyond the period for
allotment as mentioned in the document
inviting application for shares along with
the reason for such share application
money being pending shall be disclosed.
Share application money not exceeding
the issued capital and to the extent not
refundable shall be shown under the
head Equity and share application money
to the extent refundable i.e., the amount
in excess of subscription or in case the
requirements of minimum subscription
are not met, shall be separately shown
under ‘Other current liabilities’
(h) Unpaid matured deposits and interest
New line item inserted, however earlier
accrued thereon also this item was shown as current
liability.
(i) Unpaid matured debentures and New line item inserted, however earlier
interest accrued thereon also this item was shown as current
liability.
(j) Other payables (specify nature);
Other Payables may be in the nature of
statutory dues such as Withholding
taxes, Service Tax, VAT, Excise Duty
etc.
H. Short-term provisions
This is the fourth and last line item under head current liabilities and eventually the
last line item on the Equity and Liability part of Balance Sheet. As discussed earlier
provisions also are required to be bifurcated into long-term (non-current) and short-
53
term (current) on the basis of the definitions of current / non-current liability given in
As per para 6H of the General Instructions for Preparation of Balance Sheet a
company shall disclose the following in the Notes to Accounts:
Revised Schedule VI
amount shown on face of balance sheet
as Short-term provisions is to be given
as under:
(a) Provision for employee benefits. Provision for leave encashment /
superannuation / gratuity to be settled
within 12 months after the reporting date
shall be shown here.
(b) Others (specify nature). Others would include all provisions other
than provisions for employee benefits
such as Provision for dividend, Provision
for taxation, etc. These amounts should
be disclosed separately specifying nature
thereof.
I. Tangible assets
Earlier only the term fixed assets was used and its total comprising of tangible as well
as intangible assets was depicted on face of balance sheet, however now under
head fixed assets the aggregate amount of tangible and intangible assets need to be
provided separately on the face of the Balance Sheet.
As per para 6G of the General Instructions for Preparation of Balance Sheet a
company shall disclose the following in respect of Tangible Assets in the Notes to
Accounts:
Revised Schedule VI
(i) Classification shall be given as: Name of Plant & Machinery changed to
(a) Land. Plant & Equipment (inspired from IFRS),
(b) Buildings. Furniture & Fitting changed to Furniture
(c) Plant and Equipment. & Fixtures. Further new line item of
(d) Furniture and Fixtures “Office Equipment” and “others”
(e) Vehicles. included. Livestock, railway siding,
54
(f) Office equipment. development property have been

(g) Others (specify nature). deleted. However, if they exist, the same
should be disclosed as a separate asset
class, specifying nature thereof.
Leasehold land and freehold land to be
(ii) Assets under lease shall be Means assets given on operating lease
separately specified under each class of in case of lessor and assets held under
asset. finance lease in case of lease. Further
leasehold improvements should
continue to be shown as a separate
asset class.
(iii) A reconciliation of the gross and Here new requirement of disclosure of
net carrying amounts of each class of acquisitions through business
assets at the beginning and end of the combinations and other adjustments and
reporting period showing additions, impairment losses / reversals in the
disposals, acquisitions through reconciliation of opening and closing
business combinations and other gross and net carrying amounts of
adjustments and the related Tangible Assets, has been inserted.
depreciation and impairment losses/ Examples of other adjustments are
reversals shall be disclosed separately. capitalization of exchange differences
where such option has been exercised
by the Company and/or adjustments on
account of exchange fluctuations for
fixed assets in case of non-integral
operations as per AS 11 and/or
borrowing costs capitalised in
accordance with AS 16. Such
adjustments should be disclosed
separately for each class of assets.
It is pertinent to mention that such
disclosures are not required for capital
work in progress and intangible assets
under development as for these items
no disclosure requirements in notes to
accounts have been prescribed.
(iv) Where sums have been written Similar disclosure requirement was there
off on a reduction of capital or revaluation in Old Schedule VI.
of assets or where sums have been However disclosure regarding revalued
55
added on revaluation of assets, every assets as required by AS 10 i.e. gross

Balance Sheet subsequent to date of book value of revalued assets, method
such write-off, or addition shall show the adopted to compute revalued amounts,
reduced or increased figures as nature of indices used, year of appraisal
applicable and shall by way of a note etc will have to be given as long as the
also show the amount of the reduction or asset is held by the company and not
increase as applicable together with the only for five years.
date thereof for the first five years
subsequent to the date of such reduction
or increase.
J. Intangible assets
As discussed now under head fixed assets the aggregate amount of tangible and
intangible assets need to be provided separately on the face of the Balance Sheet.
As per para 6J of the General Instructions for Preparation of Balance Sheet a
company shall disclose the following in respect of intangible Assets in the Notes to
Accounts:
Revised Schedule VI
(i) Classification shall be given as: New line items of Computer Software,
(a) Goodwill. Mast heads & publishing titles, mining
(b) Brands /trademarks rights, Recipes, Formulae, Models,
(c) Computer software Designs and Prototypes, Licenses &
(d) Mastheads and publishing Franchise. Trademarks have been
titles. renamed as Brands / Trademarks and
(e) Mining rights. Patents renamed as Copyrights & patents
and other intellectual property rights,
(f) Copyrights, and patents and
services and operating rights.
other intellectual property rights,
services and operating rights.
(g) Recipes, formulae, models,
designs and prototypes.
(h) Licenses and franchise.
(g) Others (specify nature).
(i) Others (specify nature).
(ii) A reconciliation of the gross and Here new requirement of disclosure of
net carrying amounts of each acquisitions through business
class of assets at the beginning combinations and other adjustments and
and end of the reporting period impairment losses / reversals in the
56
showing additions, disposals, reconciliation of opening and closing

acquisitions through business gross and net carrying amounts, has been
combinations and other inserted.
adjustments and the related
amortization and impairment
losses/reversals shall be
(iii) Where sums have been written It is pertinent to mention here that AS 26
off on a reduction of capital or Intangible Assets does not permit
revaluation of assets or where revaluation of intangible assets.
sums have been added on
revaluation of assets, every
Balance Sheet subsequent to
date of such write-off, or addition
shall show the reduced or
increased figures as applicable
and shall by way of a note also
show the amount of the reduction
or increase as applicable together
with the date thereof for the first
five years subsequent to the date
of such reduction or increase.
K. Non-current investments
Earlier the entire investments (current as well as non-current) were shown separately
on face of balance sheet between Fixed Assets and Current assets, loans and
advances. But under Revised Schedule VI the current and non-current investments
are to be shown separately under relevant heads. Accordingly Non-current
investments are shown under head non-current assets. As per para 6K of the
following in respect of non-current Investments in the Notes to Accounts:
Revised Schedule VI
(i) Non-current investments shall be
classified as trade investments and other
investments and further classified as:-
(a) Investment property; Earlier term Immovable property was
used. This term is taken from IFRS (IAS
40- Investment property)
57
(b) Investments in Equity Instruments; Earlier Investment in shares was

(c) Investments in preference shares required now the bifurcation of same into
Equity and preference shares needs to
be given.
(d) Investments in Government or Same disclosure was required.
trust securities;
(e) Investments in debentures or Same disclosure was required
bonds;
(f) Investments in Mutual Funds; New line item.
(g) Investments in partnership firms Same disclosure was required. This
disclosure is to be made if the company
is a partner at the date of the balance
sheet.
(h) Other non-current investments Nature to be specified for each other
(specify nature) non-current investments.
Under each classification, details shall be Earlier details were required in a
given of names of the bodies corporate separate statement in respect of all
(indicating separately whether such investments, whether existing or not,
bodies are (i) subsidiaries, (ii) made subsequent to end of previous
associates, (iii) joint ventures, or (iv) financial year. Now the details are in
controlled special purpose entities) in respect of only closing balance. Further
whom investments have been made and separate disclosure is now required for
the nature and extent of the investment (i) subsidiaries, (ii) associates, (iii) joint
so made in each such body corporate ventures, or (iv) controlled special
(showing separately investments which purpose entities, whereas earlier such
are partly-paid). disclosure was required for bodies
In regard to investments in the capital of corporate under the same management.
partnership firms, the names of the firms
(with the names of all their partners, total Same disclosure was required for
capital and the shares of each partner) investment in capital of partnership firms.
shall be given.
(ii) Investments carried at other than at As per AS 13, the long-term investments
cost should be separately stated are usually carried at cost. However
specifying the basis for valuation thereof. when there is a decline, other than
temporary, in the value of a long-term
investment, the carrying amount is to be
reduced to recognize the decline.
Accordingly the basis of valuation could
either be at cost less provision for other
58
than temporary diminution or lower of

cost and fair value.
(iii) The following shall also be disclosed: New requirement for disclosing
(a) Aggregate amount of quoted aggregate provision for diminution in
investments and market value value of investments has been inserted.
thereof; As per AS 13, the value of each long-
(b) Aggregate amount of unquoted term investment should be carried at cost
investments; less provision for other than temporary
(c) Aggregate provision for diminution dimunition in the value thereof.
in value of investments Accordingly disclosure of amount after
netting of provision is to be made for
each long-term investment.
However aggregate amount of such
provision should also be separately
disclosed to comply with the specific
disclosure requirement.
L. Long-term loans and advances.
This is one of the line items under head Non-current assets. Earlier all the loans and
advances were clubbed with current assets irrespective of their realization period. But
now the same are required to be classified into Long-term (non-current) and Short-
term loans and advances (current). As per para 6L of the General Instructions for
Preparation of Balance Sheet a company shall disclose the following in respect of
Long-term loans and advances in the Notes to Accounts:
Revised Schedule VI
(i) Long-term loans and advances shall Earlier there was no such line item.
be classified as:
(a) Capital Advances; These are advances given for
procurement of fixed assets which are
non-current assets. Typically they
cannot be realized in cash as it can
only be converted into fixed assets,
accordingly should be treated as non-
current asset and disclosed here.
Earlier no such head was there due to
which these were normally included by
companies under head Capital Work in
Progress.
59
(b) Security Deposits;

(c) Loans and advances to related The details need to be given in
parties (giving details thereof); accordance to AS 18, Related Party
Disclosures.
(d) Other loans and advances (specify Examples: Advance Tax, prepaid
nature). expenses, not expected to be realized
within next twelve months or operating
cycle whichever is longer from the
Balance Sheet date.
(ii) The above shall also be separately Same as old Schedule VI.
sub-classified as:
(a) Secured, considered good;
(b) Unsecured, considered good;
(c) Doubtful.
(iii) Allowance for bad and doubtful New requirement.
loans and advances shall be disclosed The amount of allowance should now
under the relevant heads separately. be disclosed separately for each
category of loans and advances.
(iv) Loans and advances due by Same requirement was there in Old
directors or other officers of the company Schedule VI, however additional
or any of them either severally or jointly disclosures of loans and advances due
with any other persons or amounts due by from other companies under the same
firms or private companies respectively in management and due by directors or
which any director is a partner or a other officers of the company have
director or a member should be separately been dropped.
stated.
M. Other non-current assets

This is the residual head under Non-current assets. As per para 6M of the General
Revised Schedule VI
Other non-current assets shall be
classified as:
(i) Long Term Trade Receivables New line item, earlier trade receivables
(including trade receivables on deferred (debtors) were always considered as
credit terms); current asset.
60
Only non-current portion of amount due

in respect of goods sold or services
rendered in normal course of business is
to be included here. Amount due under
other contractual obligations like dues of
insurance claims, sale of fixed assets,
interest accrued on trade receivables etc
are not shown as Trade Receivables.
It is pertinent to mention here that the
current portion of Trade receivables is
shown on face of balance sheet under
current assets, but the Long term trade
receivables is not separately shown on
face, but rather included in other non-
current assets, however disclosure is
made in the notes to accounts.
(ii) Others (specify nature) Nature to be specified for each of other
non-current asset.
(iii) Long term Trade Receivables,
shall be sub-classified as:
(i) (a) Secured, considered good; Same as old Schedule VI.
(b) Unsecured considered good;
(c) Doubtful
(ii) Allowance for bad and doubtful New requirement.
debts shall be disclosed under the
relevant heads separately. The amount of allowance should now be
disclosed separately for each category of
loans and advances.
(iii) Debts due by directors or other
officers of the company or any of them
either severally or jointly with any other
person or debts due by firms or private
companies respectively in which any
director is a partner or a director or a
member should be separately stated.
61
N. Current Investments
This is the first line item in the head current assets. Earlier the entire investments
(current as well as non-current) were shown separately on face of balance sheet
between Fixed Assets and Current assets, loans and advances. But under Revised
Schedule VI the current and non-current investments are to be shown separately
under relevant heads. Accordingly Current investments are shown under head
current assets. As per para 6N of the General Instructions for Preparation of Balance
Sheet a company shall disclose the following in respect of Current Investments in the
Notes to Accounts:

Revised Schedule VI
(i) Current investments shall be No requirement of classification between
classified as: trade and non-trade as was under Non-
current investments.
(a) Investments in Equity Instruments;

(b) Investment in Preference Shares
(c) Investments in government or trust
securities;
(d) Investments in debentures or
bonds;
(e) Investments in Mutual Funds;
(f) Investments in partnership firms Same disclosure was required. This

disclosure is to be made if the company
is a partner at the date of the balance
sheet.
(g) Other investments (specify Nature to be specified for each of the
nature). other investments.
62
Under each classification, details shall Earlier details were required in a

be given of names of the bodies separate statement in respect of all
corporate (indicating separately whether investments, whether existing or not,
such bodies are (i) subsidiaries, (ii) made subsequent to end of previous
associates, (iii) joint ventures, or (iv) financial year. Now the details are in
controlled special purpose entities) in respect of only closing balance. Further
whom investments have been made and separate disclosure is now required for (i)
the nature and extent of the investment subsidiaries, (ii) associates, (iii) joint
so made in each such body corporate ventures, or (iv) controlled special
(showing separately investments which purpose entities, whereas earlier such
are partly-paid). In regard to investments disclosure was required for bodies
in the capital of partnership firms, the corporate under the same management.
names of the firms (with the names of all Same disclosure was required for
their partners, total capital and the investment in capital of partnership firms.
shares of each partner) shall be given.
ii) The following shall also be As per AS 13 Accounting for
disclosed: Investments, the carrying amount for
(a) The basis of valuation of individual current investments is the lower of cost
investments and fair value. If an active market exists
(b) Aggregate amount of quoted as regards an item of current
investments and market value investments, the market value generally
thereof; provides the best evidence of fair value.
(c) Aggregate amount of unquoted
investments;
(d) Aggregate provision made for
diminution in value of investments.
O. Inventories
As per Revised Schedule VI Inventories are always current asset and accordingly no
line item of inventories exists under non-current assets. As per para 6O of the
following in respect of inventories in the Notes to Accounts:
Revised Schedule VI
(i) Inventories shall be classified as: Under Revised Schedule VI, there is no
specific requirement for disclosure of
63
inventory as non-current / current and its

line item is provided only under current
assets, accordingly Inventories should
always be disclosed as current.
(a) Raw materials; Same disclosure was required.
(b) Work-in-progress; Same disclosure was required.
(c) Finished goods; New line item, to be used by
manufacturing entities for disclosing the
stock of finished goods.
(d) Stock-in-trade (in respect of goods Same disclosure was required except
acquired for trading); that it is now to be used for depicting
amount of stock of goods acquired for
trading only as separate line item of
finished goods provided for disclosure of
stock of finished goods by manufacturing
companies.
(e) Stores and spares; Same disclosure was required.
(f) Loose tools; Same disclosure was required.
(g) Others (specify nature). New line item. Nature to be specified for
each of the item of inventories included
here.
(ii) Goods-in-transit shall be disclosed New disclosure requirement. Required to
under the relevant sub-head of be disclosed for each of relevant sub-
inventories. head i.e. Raw material, stock-in trade
etc.
(iii) Mode of valuation shall be stated. Same disclosure was required. As per
AS 2, valuation of Inventories,
Inventories should be valued at lower of
cost or net realizable value.
P. Trade Receivables
As discussed earlier not only the name has been changed from Sundry Debtors to
Trade Receivable, but its classification amongst current / non-current is required.
Further the term Trade receivables has been defined. The current portion of amount
due covered as per definition of trade receivables are required to be disclosed as
current assets on face of balance sheet and further as per para 6P of the General
in respect of such trade recievables in the Notes to Accounts:
64

Revised Schedule VI
(i) Aggregate amount of Trade Earlier debts outstanding (from billing
Receivables outstanding for a period date) for period exceeding six months
exceeding six months from the date they was to be disclosed separately, now
are due for payment should be separately Trade Receivables outstanding for a
stated. period exceeding six months from the
date they are due for payment (i.e.
billing date + credit period) should be
separately stated.
(ii) Trade receivables shall be sub- Similar sub-classification was required
classified as: earlier also.
(b) Unsecured considered good;
(c) Doubtful.
(iii) Allowance for bad and doubtful New requirement.
debts shall be disclosed under the The amount of allowance should now
relevant heads separately be disclosed separately for each
category of Trade Receivables i.e.
Secured, considered good etc.
(iv) Debts due by directors or other Same requirement was there in Old
officers of the company or any of them Schedule VI, however additional
either severally or jointly with any other disclosures of debts due from other
person or debts due by firms or private companies under the same
companies respectively in which any management and due by directors or
director is a partner or a director or a other officers of the company have been
member should be separately stated. dropped.
Q. Cash and cash equivalents

These are always considered as part of current assets. As per para 6Q of the
following in respect of cash and cash equivalents the Notes to Accounts:
Revised Schedule VI
(i) Cash and cash equivalents shall be Terminology changed from cash and
classified as: bank balances to cash and cash
equivalents, which is the term used in
AS 3 Cash Flow Statements.
65
(a) Balances with banks; Requirement of bifurcating the bank

balances between scheduled and
unscheduled banks dropped.
(b) Cheques, drafts on hand; New line item.
(c) Cash on hand; No change in disclosures.
(d) Others (specify nature). Nature to be specified for each of other
cash and cash equivalents.
(ii) Earmarked balances with banks New disclosure requirement.
(for example, for unpaid dividend) shall
be separately stated.
(iii) Balances with banks to the extent New disclosure requirement. However
held as margin money or security against as per AS 3 Balances with banks to the
the borrowings, guarantees, other extent held as margin money or security
commitments shall be disclosed against the borrowings, cannot be
separately. included in cash and cash equivalents
and accordingly as per Guidance Note
need to be shown disclosed under sub-
head “other bank balances”.
For this it has suggested by Guidance
Note that on face of Balance sheet
instead of depicting cash and cash
equivalents, the term cash and bank
balances as used earlier be stated,
which may be classified between cash
and cash equivalents and other bank
balances in the notes to accounts. The
former should include the bank
balances which are cash and cash
equivalents as per AS 3 and other bank
balances should form part of other bank
balances.
(iv) Repatriation restrictions, if any, in New disclosure requirement.
respect of cash and bank balances shall
be separately stated.
(v) Bank deposits with more than 12 New disclosure requirement. However
months maturity shall be disclosed as per definition of the current / non-
separately. current assets FDRs having balance
maturity period of more than 12 months
as on balance sheet date should be
66
treated as non-current asset, which view

has also been taken in FAQs of ICAI
(refer chapter 8) and accordingly cannot
be shown as other bank balances also.
It may be shown as other non-current
assets.
R. Short-term loans and advances
As discussed earlier the current portion of loans and advances are required to be
shown here. As per para 6R of the General Instructions for Preparation of Balance
Sheet a company shall disclose the following in respect of Short-term loans and
advances in the Notes to Accounts:
Revised Schedule VI
(i) Short-term loans and advances shall
be classified as:
(a) Loans and advances to related The details need to be given in
parties (giving details thereof); accordance to AS 18, Related Party
Disclosures.
(b) Others (specify nature). Examples : Advance Tax, prepaid
expenses, Cenvat Credit etc expected to
be realized within next twelve months or
operating cycle whichever is longer from
the Balance Sheet date.
(ii) The above shall also be sub-classified Same as old Schedule VI.
as:
(b) Unsecured, considered good;
(c) Doubtful.
(iii) Allowance for bad and doubtful loans New requirement.
and advances shall be disclosed under The amount of allowance should now be
the relevant heads separately. disclosed separately for each category of
loans and advances.
(iv) Loans and advances due by directors Same requirement was there in Old
or other officers of the company or any of Schedule VI, however additional
them either severally or jointly with any disclosures of loans and advances due
other person or amounts due by firms or from other companies under the same
private companies respectively in which management and due by directors or
67
any director is a partner or a director or a other officers of the company have been
member shall be separately stated. dropped.
S. Other current assets (specify nature).

This is a residual head under head current assets. As per para 6S of the General
Instructions for Preparation of Balance Sheet. A company shall disclose the following
Revised Schedule VI
This is an all-inclusive heading, which Examples unbilled revenue, unamortized
incorporates current assets that do not fit premium of forward contracts etc.
into any other asset categories. In case any amount under this category
is doubtful, it is advisable that such
doubtful amount as well as provision
made against same should be separately
disclosed.
T. Contingent liabilities and commitments (to the extent

not provided for)
As per para 6T of the General Instructions for Preparation of Balance Sheet. A
company shall disclose the following in the Notes to Accounts:
Schedule VI
(i) Contingent liabilities shall be classified For definition of Contingent liabilities
as: refer to Chapter-9.
(a) Claims against the company not Same disclosure was required.
acknowledged as debt;
(b)Guarantees; New disclosure requirement.
(c)Other money for which the company is Same disclosure was required.
contingently liable
(ii) Commitments shall be classified as: Same disclosure was required.
(a) Estimated amount of contracts remaining
to be executed on capital account and not
provided for;
(b) Uncalled liability on shares and other Same disclosure was required.
investments partly paid
68
(c) Other commitments (specify nature). New disclosure requirement and as

per Guidance Note on Revised
Schedule VI of ICAI, would include
non-cancellable revenue expenditure
contractual commitments (i.e
cancellation of which will result in
penalty disproportionate to the befits
involved) based on professional
judgment of the management which
are material and relevant in
understanding the financial
statements of the company and
impact the decision making of the
users of the financial statements.
As per para 6U,V and W of the General Instructions for Preparation of Balance
Sheet a company shall disclose the following in the Notes to Accounts:
Revised Schedule VI
U. The amount of dividends proposed to Para 14 of the Accounting Standard 4
be distributed to equity and preference “Contingent and Events Occurring After
shareholders for the period and the the Balance Sheet Date” requires that
related amount per share shall be dividends in respect of period covered
disclosed separately. Arrears of fixed by financial statements which are
cumulative dividends on preference proposed or declared after balance
shares shall also be disclosed separately. sheet date but before date of approval
should be adjusted in accounts.
Although Revised Schedule VI does not

require provision for proposed dividend,
however as the Accounting Standards
have an overriding effect over Revised
Schedule VI, accordingly companies
will have to account for the same
alongwith Dividend Distribution tax
thereon, until revision to this effect is
made in AS 4.
Till revision of AS 4,the appropriation
amount towards the proposed dividend
along with tax on same would be shown
69
as appropriation under sub-head

“Surplus” under head “Reserves and
Surplus” in the notes to accounts and
provisions towards these items would
be shown under head ‘Short Term
Provisions’ under Current liabilities.
V. Where in respect of an issue of New disclosure requirement.
securities made for a specific purpose, the
whole or part of the amount has not been
used for the specific purpose at the
Balance Sheet date, there shall be
indicated by way of note how such
unutilized amounts have been used or
invested.
W. If, in the opinion of the Board, any of Same disclosure was required.
the assets other than fixed assets and
non-current investments do not have a
value on realization in the ordinary course
of business at least equal to the amount at
which they are stated, the fact that the
Board is of that opinion, shall be stated
Other Issues
It is pertinent to mention here that under Revised Schedule VI the head of
“Miscellaneous Expenditure to the extent written off or adjusted” under old Schedule
VI has been dropped. Further it does not contain any specific disclosure requirement
for the unamortized portion of expense items such as share issue expenses, ancillary
borrowing costs and discount or premium relating to borrowings which were earlier
included under “Miscellaneous Expenditure”.
Further as per AS 16 Borrowing Costs ancillary borrowing costs and discount or
premium relating to borrowings could be amortized over the loan period. Further,
share issue expenses, discount on shares, ancillary costs-discount premium on
borrowing, etc., being special nature items are excluded from the scope of AS 26
Intangible Assets (Para 5). Keeping this in view, certain companies have taken a
view that it is an acceptable practice to amortize these expenses over the period of
benefit, i.e., normally 3 to 5 years. The Revised Schedule VI does not deal with any
accounting treatment and the same continues to be governed by the respective
Accounting Standards/practices. Further, the Revised Schedule VI is clear that
additional line items can be added on the face or in the notes. Keeping this in view as
70
per Guidance Note on Revised Schedule VI an entity can disclose the unamortized
portion of such expenses as “Unamortized expenses”, under the head “other current/
non-current assets”, depending on whether the amount will be amortized in the next
12 months or thereafter.
71
Chapter 6
Statement of Profit and Loss
The format and general instructions for preparation of the Statement of Profit and
Loss have been provided in Part II of Revised Schedule VI. It may be noted here that
under the old Schedule VI there was no format provided for the Statement of Profit
and Loss and only requirements were provided. The format has no appropriation
section attached to it as Revised Schedule VI requires for disclosure of allocations
and appropriations such as dividend, bonus shares and transfer to / from reserves
etc under subhead Surplus of head Reserves and Surplus in the Balance Sheet.
Further the name has been changed from Profit and Loss account to Statement of
Profit and Loss under Revised Schedule VI. The expenses are classified by nature
and function based classification is not permitted.
It is pertinent to mention here that the format of Statement of Profit and Loss is not
preceded by a note as in case of Balance Sheet stating that the format provides
minimum requirements of disclosure and reaffirming flexibility of format. However it is
important to note that the note preceding the form of Balance Sheet also states the
name of Statement of Profit and Loss and accordingly same flexibility should be
applicable to Statement of Profit and Loss, which view is further corroborated by the
fact that Note succeeding the General Instruction of preparation of Statement of Profit
and Loss states that the Broad heads shall be decided taking into account the
concept of materiality and presentation of true and fair view of Financial Statements.
For definition of various terms used herein, please refer Chapter 9.
The format is being reproduced as under along with analysis:-
PART II
FORM OF STATEMENT OF PROFIT AND LOSS
Name of the Company…………………….
Profit and loss statement for the year ended ………………………
(Rupees in………..)
Particulars Note Figures Figures Analysis
No. as at end as at end
of of
current previous
reporting reporting
period period
1 2 3 4
I. Revenue from Here revenue on
operations account of company’s
main operating activity
are shown. Separate
disclosure of break up
the revenue need to be
provided in the notes to
accounts as per para
2(A) of the general
instructions for
preparation of
Statement of Profit and
Loss for a company
other than finance
company and as per
para 2 (B) for a finance
company. The relevant
para with analysis
thereof has been
discussed later.
II. Other income Here other revenue not
arising out of
company’s main
operating activity are
shown. Details
73
regarding classification
of other income has
been provided in para 4
of General Instructions,
such details need to be
provided in the Notes to
accounts. The relevant
para with analysis
thereof has been
discussed later.
III. Total Revenue (I +
II)
IV. Expenses:
Cost of materials This disclosure is
consumed required to be made by
manufacturing
companies and same
would consist of
consumption of raw
material, packing
material (where
classified by company
as raw materials) and
other materials such as
purchased
intermediates and
components which are
consumed in the
manufacturing activities
of the company. It
would also include semi
finished goods
purchased for
processing and
subsequent sale.
Further disclosure of
raw materials and
goods purchased under
broad heads is also
74
required in Notes to
accounts as per para 5
(ii) (a) (1) and (2) of
general instructions for
preparation of
statement of profit and
loss. The relevant
paras with analysis
thereof has been
discussed later.
Purchases of Stock-in- This is applicable for
Trade trading companies and
would comprise of
goods purchased
normally with the
intention to resell or
trade in, without any
processing /
manufacture at their
end.
Further disclosure of
purchases in respect of
goods traded in by the
company under broad
heads is also required
in Notes to accounts as
per para 5 (ii) (b) of
preparation of
loss. The relevant para
with analysis thereof
has been discussed
later.
Changes in inventories This represents the
of finished goods difference between
work-in progress and opening and closing
Stock-in-Trade inventories of finished
goods, work-in-
75
progress and stock-in-

trade. Such differences
would be shown
separately for finished
goods, work-in-
progress and stock-in-
trade. No further
disclosure requirement
in the notes to accounts
for this item is there in
the general instructions
for preparation of
loss.
Employee benefits The aggregate amount
expense is shown here, however
the break up of same is
required to be disclosed
as per para 5 (i) (a) of
the general instructions
for preparation of
has been discussed
later.
Finance costs The aggregate amount
is shown here, however
the break up of same is
as per para 3 of the
preparation of
has been discussed
76
later.
Depreciation and The term amortization
amortization expense has been added with
the term depreciation.
The term amortization
refers to systematic
allocation of the
depreciable amount of
an intangible asset over
its useful life. Further
additional information is
as per para 5 A (b) of
preparation of
has been discussed
later.
Other expenses Expenses not covered
above are required to
be aggregated here.
Examples of other
expenses are
consumption of stores
and spare parts, power
and fuel rent, repairs,
insurance etc. Para 5
(vi) of general
instructions provides
expenditure incurred on
certain items to be
shown separately by
way of notes.
Total expenses
V. Profit before
77
exceptional and
extraordinary items
and tax (III-IV)
VI. Exceptional items Here total impact of the
exceptional items like
gain / loss on disposals
of long-term
investments, legislative
changes having
retrospective
application, litigation
settlements disposals
of items of fixed assets
and other reversals of
provisions etc are to be
shown.
VII. Profit before
extraordinary items
and tax (V - VI)
VIII. Extraordinary Here total impact of the
Items extraordinary items like
expense related to
previous periods,
arising out of long term
settlement with the
employees, loss due to
fire etc are to be
shown.
IX. Profit before tax
(VII- VIII)
X Tax expense: Disclosure of deferred
(1) Current tax tax was not specified in
(2) Deferred tax Old Schedule VI.
AS 22 “Accounting for
Taxes on Income” to be
followed.
XI. Profit (Loss) for the
period from continuing
operations (VII-VIII)
78
XII Profit/(loss) from Earlier not required to

discontinuing be disclosed
operations separately. This
XIII. Tax expense of insertion is in
discontinuing accordance to Para
operations 32(a) of AS-24
XIV. Profit/(loss) from “Discontinuing
Operations”
Discontinuing
operations
(after tax) (XII-XIII)
XV. Profit (Loss) for This represents the
the period (XI + XIV) profit after tax. As
discussed earlier the
appropriations are not
depicted on face of
loss and they need to
be shown under
Reserves and Surplus
in balance sheet.
XVI. Earnings per No such requirement
equity share: was there in Old
(1) Basic Schedule VI, however
(2) Diluted same was being
disclosed as per AS 20
“Earning per share”.
Now this requirement
has been inserted in
See accompanying
notes to the financial
statements
79
GENERAL INSTRUCTIONS FOR PREPARATION OF STATEMENT OF

PROFIT AND LOSS
Schedule VI
1. The provisions of this Part shall apply to The companies not carrying on the
the income and expenditure account business for profit, shall be preparing
referred to in sub-section (2) of Section 210 income and expenditure account as
of the Act, in like manner as they apply to a per Part II, wherein the references to
statement of profit and loss. statement of profit and loss, profit and
loss shall be construed as income and
expenditure account, the excess of
income over expenditure and excess
of expenditure over income.
There was same requirement under
old Schedule VI.
2. (A) In respect of a company other than a No such specific disclosure
finance company revenue from operations requirement was there under Old
shall disclose separately in the notes Schedule VI.
revenue from As per AS-9 “Revenue Recognition”,
(a) sale of products; the disclosure of Excise Duty needs to
(b) sale of services; be shown on the face of the Statement
(c) other operating revenues; of Profit and Loss. As Accounting
Less: Standards override the Revised
(d) Excise duty. Schedule VI, accordingly Excise Duty
needs disclosure on face of Statement
of P&L, instead of in notes.
Further amount of VAT should not be
included in Revenue. Also other
indirect taxes like service tax,
purchase tax etc shall also not be
included in revenue where the entity is
acting as an agent.
Other operating revenues are
revenues arising out of the company’s
main operating activity e.g. sale of
manufacturing scrap.
(B) In respect of a finance company, No such specific disclosure
revenue from operations shall include requirement was there under Old
revenue from Schedule VI.
80
(a) Interest; and Finance Companies are companies

(b) Other financial services carrying on activities which are in
Revenue under each of the above heads nature of “business of non-banking
shall be disclosed separately by way of financial institution” as defined under
Notes to Accounts to the extent applicable.section 45I(f) of the Reserve Bank of
India Act, 1935.
Interest is a charge on loan. Other
financial services includes incomes like
processing charges, appraisal fee,
guarantee fees, lead FI fees and other
revenues of a finance company
earned in normal course of business
other than interest.
3. Finance Costs No such classification was earlier
Finance costs shall be classified as: required. This is in consonance with
(a) Interest expense; AS 16 “Borrowing Costs”
(b Other borrowing costs; requirements.
(c) Applicable net gain/loss on foreign Other borrowing costs includes
currency transactions and translation. amortization of issue expenses and
discount as per AS 16.
The net gain/loss on foreign currency
transactions and translation to the
extent that they are regarded as an
adjustment to interest
Costs as per AS 16 need to be
separately quantified and disclosed in
the notes to accounts and cannot be
included in interest or other borrowing
costs.
4. Other income These includes such incomes which
Other income shall be classified as: are arising from activities other than
company’s main operating activity. The
disaggregation’s of the other income
as appearing on face of statement of
profit and loss needs to provided here.
(a) Interest Income Interest income of a finance company
(in case of a company other than a finance is covered under revenue from
company); operations, and therefore only interest
income of companies other than
81
finance companies are included here.

e.g. interest on fixed deposits, interest
on overdue amounts of trade
receivables etc.
Further additional information
regarding aggregate of interest income
is required to be given by way of notes
as per para 5(i)(d) of general
instructions for preparation of
statement of profit and loss. The
relevant para with analysis is
discussed later.
(b) Dividend Income; The dividend income should be
recognized once the right to receive of
same has been established i.e. when it
is approved by the shareholders at the
Annual General Meeting of the
investee company. Further as per para
5 (i) (f) additional information regarding
dividend income is required to be
disclosed by way of notes. Also as per
para 5 (vii) (a) dividend from
subsidiaries companies are also
required to disclosed separately in the
notes to accounts.
The relevant paras with analysis are
discussed later.
(c) Net gain/loss on sale of investments Net gain / loss on sale of investments
are required to be disclosed here.
Investments are assets held by an
enterprise for earning income by way
of dividends, interest, and rentals, for
capital appreciation, or for other
benefits to the investing enterprise but
excludes stock-in-trade. Additional
information regarding aggregate gain /
loss is also required to be disclosed by
way of notes as per requirement of
para 5 (i) (g).
82
(d) Other non-operating income (net of The expenses netted off to be

expenses directly attributable to such separately disclosed. While disclosing
income). this item para 5 (i) (c) is to be
considered which states that any item
of income which exceeds one percent
of revenue from operations or Rs
1,00,000/- whichever is higher should
be disclosed by way of notes.
5. Additional Information
A Company shall disclose by way of notes
additional information regarding aggregate
expenditure and income on the following
items:-
(i) (a) Employee Benefits Expense New disclosure requirement for
[showing separately (i) salaries and wages, disclosure of expense on Employee
(ii) contribution to provident and other Stock Option Scheme (ESOP) and
funds, Employee Stock Purchase Plan
(iii) Expense on Employee Stock Option (ESPP) introduced. These expenses
Scheme (ESOP) and Employee Stock should be determined for in
Purchase Plan (ESPP), (iv) staff welfare accordance with the Guidance Note on
expenses]. Accounting for Employee Share based
Payments and / or the SEBI
(Employee Stock Option Scheme and
Employee Stock Purchase Scheme)
Guidelines, 1999, as applicable.
All disclosures under said Guidance
Notes also needs to be made.
(b) Depreciation and amortization expense; As aggregate amount is shown on
face of Statement of Profit and Loss
the breakup of same between
depreciation and amortization is
required to be disclosed here by way
of notes. Normally these details are
already there in the notes regarding
fixed assets (tangible and intangible
assets) and accordingly on the face of
Statement of Profit and Loss against
this item, the relevant note number of
fixed assets may be indicated.
83
(c) Any item of income or expenditure Earlier the requirement for separate
which exceeds one per cent of the revenue disclosure was required for an item of
from operations or Rs.1,00,000, whichever expense exceeding 1% of total
is higher; revenue or Rs 5000, whichever is
higher. Now the limit has been
enhanced to Rs 1,00,000/- and same
has also been extended to incomes as
well.
(d) Interest Income; The aggregate of interest income is to
be classified as other income and
disclosed as notes. Here additional
information regarding aggregate
income is required to be disclosed by
way of notes.
(e) Interest Expense; The aggregate of interest expense is
to be classified as finance costs and
interest expense is required to be
disclosed by way of notes.
(f) Dividend Income; The aggregate of dividend income is to
be classified as other income and
dividend Income is required to be
disclosed by way of notes.
(g) Net gain/ loss on sale of investments; The aggregate of Net gain/ loss on
sale of investments is to be classified
as other income and disclosed as
notes. Here additional information
regarding its aggregate amount is
required to be disclosed by way of
notes.
(h) Adjustments to the carrying amount of As per AS 13 “Accounting for
investments; Investments” The carrying amount for
current investments is the lower of cost
and fair value. Further Long-term
investments are usually carried at cost.
However, when there is a decline,
84
other than temporary, in their value,

the carrying amount is reduced to
recognise the decline.
Although no guidance has been
provided in the Schedule regarding the
head wherein such loss would be
included but same may be shown
separately in the notes as part of head
“other expenses”.
(i) Net gain or loss on foreign currency Net gain or loss on foreign currency
transaction and translation (other than transaction and translation (other than
considered as finance cost); considered as finance cost) to the
extent charged to profit and loss
account and arrived at as per AS 16
“The Effects of Changes in Foreign
Exchange Rates” are to be disclosed
here.
Although no guidance has been
head wherein such gain / loss would
be included but generally such gains
are to be shown separately in the
notes as part of sub-head “other non-
operating income” under main other
income. The losses would be included
under head “other expenses”.
(j) Payments to the auditor as (a) The said disclosure was required
auditor,(b) for taxation matters, (c) for earlier also, however separate line
company law matters, (d) for management item of reimbursement of expenses
services, (e) for other services, (f) for has been added.
reimbursement of expenses; Although no guidance has been
head wherein such payments would
be included but same may be shown
separately in the notes as part of head
“other expenses”.
(k) Details of items of exceptional and The aggregate of exceptional and
extraordinary nature; extraordinary items are shown on the
face of Statement of Profit and Loss.
85
The additional information regarding

this aggregate amount also needs to
be disclosed by way of notes.
(l) Prior period items; No such requirement was there in Old
Schedule VI. As per para 15 of AS 5
“Net Profit or Loss for the period, Prior
Period and Extraordinary Items and
Changes in Accounting Policies”. The
nature and amount of prior period
items should be separately disclosed
in the statement of profit and loss in a
manner that their impact on the current
profit or loss can be perceived.
Under Revised Schedule VI
expenditure and income on the prior
period items is not required to be
disclosed on the face of Statement of
P&L but same needs to be disclosed
by way of notes.
Currently the companies were showing
the prior period items as a separate
head on face of Statement of Profit
and Loss, which can be continued for
better presentation instead of
disclosure in notes.
(ii) (a) In the case of manufacturing Earlier quantitative information was
companies,- specifically desired. However as per
(1) Raw materials under broad heads. Guidance Note on Revised Schedule
(2) Goods purchased under broad heads. VI, a company may disclose the
(b) In the case of trading companies, following under broad heads:-
purchases in respect of goods traded in by i) Consumption of major items of
the company under broad heads. raw materials (including other
(c) In the case of companies rendering or items classified as raw material
supplying services, gross income derived such as intermediaries /
from services rendered or supplied under components / packing material).
broad heads. ii) Goods purchased for trading (if
any).
(d) In the case of a company, which falls iii) It is suggested to disclose major
86
under more than one of the categories items of opening and closing
mentioned in (a), (b) and (c) above, it shall stock. (Not mandatory).
be sufficient compliance with the iv) Considering the requirement to
requirements herein if purchases, sales disclose gross income in case of
and consumption of raw material and the a service company and sales in
gross income from services rendered is case of a company falling in more
shown under broad heads. than one category, disclosure of
(e) In the case of other companies, gross sales of finished goods should
income derived under broad heads. also be made under broad heads.
(iii) In the case of all concerns having Normally 10% of total value of sales /
works in progress, works-in progress under services, purchase of trading goods
broad heads. and consumption of raw material is
considered as an acceptable
threshold for determination of broad
heads.
The suggested disclosure in tabular
format has also been provided at page
no 75-77 of the Guidance Note on
(iv) (a) The aggregate, if material, of any Same requirement prevailed under Old
amounts set aside or proposed to be set Schedule VI.
aside, to reserve, but not including However as per format of Statement of
provisions made to meet any specific Profit and Loss the reserves created /
liability, contingency or commitment known withdrawn are not to be reflected on
to exist at the date as to which the balance the face of Statement of Profit and
sheet is made up. Loss and they should be disclosed
(b) The aggregate, if material, of any under sub head Surplus of main head
amounts withdrawn from such reserves. Reserve and Surplus.
(v) (a) The aggregate, if material, of the The provisions made for meeting
amounts set aside to provisions made for specific liabilities, contingencies or
meeting specific liabilities, contingencies or commitments need to be included in
commitments. the relevant head to which it pertains
(b) The aggregate, if material, of the like creation of employee related
amounts withdrawn from such provisions, provisions is to be included under
as no longer required. head employee benefit expense.
(vi) Expenditure incurred on each of the Same disclosure was required under
following items, separately for each item:- old Schedule VI except that new line
(a) Consumption of stores and spare parts. item of Rates and Taxes, excluding
(b) Power and fuel. taxes on income has been inserted.
87
(c) Rent. All these expenses are to be disclosed

(d) Repairs to buildings. under head ‘other expenses’.
(e) Repairs to machinery.
(g) Insurance.
(h) Rates and taxes, excluding, taxes on
income.
(i) Miscellaneous expenses,
(vii) (a) Dividends from subsidiary The dividend from subsidiaries would
companies. be included under subhead ‘Dividend
Income’ under main head ‘Other
Income’.
Old Schedule VI specifically required
parent (holding) companies to
recognize dividend declared by
subsidiary companies even if declared
after the Balance Sheet date if they
relate to the period covered by the
financial statements. The Revised
Schedule VI does not have such
requirement, accordingly such
dividends should be recognized in
accordance to AS 9 “Revenue
Recognition” when right to receive has
been established on or before the
balance sheet date. Normally, the such
right is established on approval of
dividend by the shareholders at the
AGM of the investee company.
As per Guidance Note the above
change constitutes a change in
accounting policy and should be
recognized prospectively, however
previous year figures should not be
restated. Also the dividend recognized
earlier should not be recognized again
in first Revised Schedule VI financial
statements.
vii (b) Provisions for losses of subsidiary As per AS 13 “Accounting for
companies. Investments” a provision in respect of
88
losses made by subsidiary companies

is made only when the same results in
an other than temporary diminution in
the value of investments in the
subsidiary.
(Viii) The profit and loss account shall also
contain by way of a note the following
information, namely:-
a) Value of imports calculated on C.I.F Same disclosure was required under
basis by the company during the financial old Schedule VI.
year in respect of – The said disclosure is required to be
I. Raw materials; made in Indian Rupees on accrual
II. Components and spare parts; basis irrespective of payment.
III. Capital goods; Further it is not linked with the
consumption of the material or
utilization of capital goods.
Imports wherein entire payment has
been structured in Indian Rupees,
without involvement of foreign
currency also needs to be disclosed.
The value of imports (only direct
imports) are calculated on CIF basis
i.e. inclusive of cost, insurance, freight.
b) Expenditure in foreign currency during Same disclosure was required under
the financial year on account of royalty, old Schedule VI.
know-how, professional and consultation The said disclosure is required to be
fees, interest, and other matters; made in Indian Rupees on accrual
basis irrespective of payment.
The gross expenditure (including TDS)
may be disclosed here.
c) Total value if all imported raw materials, Same disclosure was required under
spare parts and components consumed old Schedule VI.
during the financial year and the total value This value should match with the total
of all indigenous raw materials, spare parts consumption shown in the Statement
and components similarly consumed and of Profit and Loss inclusive of figure of
the percentage of each to the total consumption charged to other heads
consumption; of account.
d) The amount remitted during the year in Same disclosure was required under
foreign currencies on account of dividends old Schedule VI.
89
with a specific mention of the total number Here the disclosure is on cash basis
of non-resident shareholders, the total instead of accrual basis.
number of shares held by them on which
the dividends were due and the year to
which the dividends related;
e) Earnings in foreign exchange classified Same disclosure was required under
under the following heads, namely:- old Schedule VI.
I. Export of goods calculated on F.O.B. The said disclosure is required to be
basis; made in Indian Rupees on accrual
II. Royalty, know-how, professional and basis irrespective of receipt.
consultation fees; The gross income (including TDS)
III. Interest and dividend; may be disclosed here.
IV. Other income, indicating the nature
thereof
Note:-Broad heads shall be decided taking No such note existed in Old Schedule
into account the concept of materiality and VI, and this note is further
presentation of true and fair view of corroborating the inherent character of
Financial Statements”. flexibility provided under Revised
Schedule VI.
90
Chapter-7
Current, Non-Current Classification–
Practical Application
The Revised Schedule VI has introduced a concept of classified balance sheet. Para
1 and 3 of General Instructions for preparation of Balance Sheet defines “current
assets” / “non-current assets” and “current liabilities” / “non-current liabilities”
respectively. In these definitions the criterion for determining a current asset / liability
has been spelled out with the non-current category being the residual. Accordingly
the balance pertaining to items of assets and liabilities contained in the Balance
Sheet need to be split into its current and non-current portions and be classified
accordingly as on the reporting date i.e. Balance Sheet date. It may be noted here
that Equity is always non-current and therefore non controlling interest (minority
interest) is also always shown as non-current.
Due to above classification the format of Revised Schedule VI provides separate
disclosures by way of line items of following items:-
Particulars Non-Current Current
Share Application Share Application Money Application Money received
Money pending allotment – for allotment of securities
separate line item on face and due for refund – under
of balance sheet between other current liabilities.
shareholder fund and non-
Borrowings Long-term borrowings – Short-term borrowings –
under Non-current under Current Liabilities.
Liabilities. Current maturities of long
term debt – under other
Provisions Long-term provisions – Short-term provisions –
under Non-current under Current liabilities.
liabilities.
Trade Payables. Trade payables - under Trade payables - under
other Long term liabilities Current liabilities.
(Non-current Liabilities)
Investments Non-current investments - Current investments - under

under Non-current assets. Current assets.
Loans and Advances . Non-current Loans and Current Loans and
Advances - under Non- Advances - under Current
current assets. assets.
Trade Receivables Long term trade Trade receivables - under
receivables - under other Current assets.
non-current assets (Non-
current Assets)
For being able to classify an asset or liability correctly amongst current / non-current,
it is of utmost importance that we understand the related definitions of these terms
provided in Revised Schedule VI.
Para 1 of general instructions for preparation of Balance Sheet defines current/ non-
current asset as under:
An ASSET shall be classified as CURRENT when it satisfies ANY OF (i.e. any one
of) the following criteria:
(a) it is expected to be realized in, or is intended for sale or consumption in, the
company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is expected to be realized within twelve months after the reporting date; or
(d) 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.
All other assets shall be classified as NON CURRENT.
Para 2 of general instructions for preparation of Balance Sheet defines operating
cycle as under:
An OPERATING CYCLE 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.
Para 3 of general instructions for preparation of Balance Sheet defines current/ non-
current liability as under:
A LIABILITY shall be classified as CURRENT when it satisfies ANY OF (i.e. any one
of) the following criteria:
(a) it is expected to be settled in the company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
92
(c) it is due to be settled within twelve months after the reporting date; or
(d) 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.
All other LIABILITIES shall be classified as NON-CURRENT.
The above definitions is almost same as that provided in IAS 1 “Presentation of
Financial statements” except that therein the definition of current asset / liability starts
with “an entity shall classify an asset / liability as current when” whereas definition
under Revised Schedule VI starts with “An Asset/ A liability shall be classified as
current when it satisfies any of the following criteria”. However all the four criterion are
the same.
From above it appears that under Revised Schedule VI effort has been made to
further ease the understanding of the definition however the practical results of both
the definitions would be the same.
Analysis of Definition - Assets

As per definition there are three criterion for classification of assets (other than cash
and cash equivalents) i.e. Operating Cycle criterion, Trading Criterion and
Realisability Criterion. Each of the criterion with its practical application is discussed
below:-
Operating Cycle Criterion
As per this criterion as asset shall be current if it is expected to be realized in, or is
intended for sale or consumption in, the company’s normal operating cycle. This
criterion is applicable for operating working capital items like Inventories and trade
receivables.
It is pertinent to mention here that operating cycle shall not be counted from the
reporting date. Rather the period of operating cycle should be added to the date of
recognition of trade receivables and then it should be seen as to whether Trade
Receivables would be realized by that date or in case of inventories of raw materials
etc, the same should be added to date of their purchase and is to be seen as to
whether they would be consumed by that date or not.
Trading Criterion
As per this criterion as asset shall be current if it is held primarily for the purpose of
being traded. This criterion is generally applicable for Inventories, derivative financial
assets, equity debt instruments etc. It may be noted that there is no limit of time
93
period for realization under this criterion. Accordingly if an asset is held for trading the
same will always be current, irrespective of expected time taken to realize the same.
As per the FAQ on Revised Schedule VI of ICAI (refer Chapter -8) the term ‘for the
purpose of being traded’ should be considered as related to the normal operating
business activity of the entity.
Realisability Criterion
As per this criterion as asset shall be current if it is expected to be realized within
twelve months after the reporting date. This criterion is applicable for all assets
including other assets like loans and advances, held to maturity financial assets
which were not covered in former two criterion etc. The realisation here should be in
the form of cash or cash equivalents, rather than through conversion of one asset
into another non-current asset like preference shares, which are convertible into
equity shares within one year from the balance sheet date shall be classified as non-
current unless such preference shares are intended to be sold.
An asset (other than cash & cash equivalents) is to be classified as CURRENT if
satisfies ANY ONE of three criterion.
It may be noted that while classification of assets all the criterion should be
considered as an asset may be non-current is one / two criterion but may become
current by applying the other criteria. Accordingly an asset can be current even if
realizable after 12 months from reporting date, if the same is held primarily for trading
or that asset is realizable within the operating cycle which is exceeding twelve
months.
However the operating cycle criterion would be practically infructuous in event the
operating cycle of business line is twelve months or less, as in such situations even if
an asset is non-current as per operating cycle criterion, it would be current by
operation of realisability criterion provided the realization is expected within 12
months from the reporting date.
Analysis of Definition – Operating Cycle

An OPERATING CYCLE has been defined as the time between the acquisition of
assets for processing and their realization in cash or cash equivalents. It has further
been provided that where the normal operating cycle cannot be identified, it is
assumed to have a duration of 12 months.
94
As per FAQs issued by ICAI, Operating cycle of a business should comprise the
normal time required to complete its processes of (i) Acquiring raw material, (ii)
Processing the same into finished goods, (iii) Making the sale, and (iv) Realising the
sale proceeds in cash. Hence the normal lead-time to acquire raw material should
also be included in determining the operating cycle. However the credit period
allowed by the supplier need not be reduced when determining the operating cycle.
A company’s normal operating cycle may be longer than twelve months e.g.
companies manufacturing wines, real estate etc. Where a company is engaged in
running multiple businesses, the operating cycle could be different for each line of
business and classification would be made accordingly for the assets and liabilities
for that business line. Operating cycle is determined for each business line and not
for each customer or for company as a whole.
95
Analysis of Definition - Liabilities

As per definition there are four criterion for classification of liabilities i.e. Operating
Cycle criterion, Trading Criterion, Settlement Criterion and Unconditional right to
defer criterion. Each of the criterion with its practical application is discussed below:-
Operating Cycle Criterion
As per this criterion a liability shall be current if it is expected to be settled in the
company’s normal operating cycle. This criterion is applicable for operating working
capital items like trade payables, loan taken for operations etc.
As discussed earlier operating cycle shall not be counted from the reporting date. It
means that the period of operating cycle should be added to the date of recognition
of trade payables and then it should be seen as to whether Trade Payables would be
settled by that date or in case of loans from operations, the same should be added to
date of obtaining loan and is to be seen as to whether they would be settled by that
date or not.
Trading Criterion
As per this criterion as asset shall be current if it is held primarily for the purpose of
being traded. This criterion is generally applicable for derivative financial liabilities
other financial liabilities held for trading (IAS 39).
It may be noted that there is no limit of time period for settlement under this criterion.
Accordingly if a liability is held for trading the same will always be current, irrespective
of expected time taken to settle the same. As per the FAQ on Revised Schedule VI
the term ‘for the purpose of being traded’ should be considered as related to the
normal operating business activity of the entity.
Settlement Criterion
As per this criterion an asset shall be current if it is expected to be settled within
twelve months after the reporting date. This criterion is applicable for all liabilities
including like dividend payable, income taxes, and other non-trade payables etc.
which were not covered in former two criterion.
Unconditional right to defer criterion
This is applicable for all liabilities. Where an entity has unconditional right to defer
settlement of liability beyond 12 months from reporting date, such liability shall be
classified as non-current. However if no such right vests with the entity then such
liability would be shown as current liability.
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A liability is to be classified as CURRENT if satisfies ANY ONE of above four

criterion.
As discussed earlier while classification of liabilities also all the criterion should be
considered as an liability may be non-current is one / two criterion but may become
current by applying the other criteria. Accordingly an liability can be current even if
realizable after twelve months from reporting date, if the same is expected to be
settled within the operating cycle which is exceeding twelve months.
However as deliberated earlier the operating cycle criterion would be practically
infructuous in event the operating cycle of business line is twelve months or less, as
in such situations even if a liability is non-current as per operating cycle criterion, it
would be current by operation of settlement criterion in situations where its settlement
is expected within 12 months from the reporting date.
Practical Application
1) The classification of assets / liabilities are to be based on the conditions
existing on the balance sheet date and events occurring after balance sheet whose
condition did not existed on balance sheet date are to be disregarded. A company is
not allowed to use hindsight in arriving at the current / non-current classification of
assets or liabilities at the end of previous year. However as FAQs issued by ICAI, the
events happening in the current period may not be new developments. Rather, they
may merely be an additional evidence of conditions existing as at the previous year
balance sheet. Obviously, these events need to be incorporated in arriving at current
/ non-current classification of assets or liabilities at the end of previous year. In many
cases, identification of the two events separately may not be straightforward and
would require exercise of significant judgment.
The practical application of above is explained in following examples:
a) A rescheduling or refinancing of debt that is at discretion of the lender and
occurs after the reporting period does not alter the liability’s condition at the
balance sheet date. Such rescheduling or refinancing is regarded as a non
adjusting post balance sheet event and is not taken into account in
determining current / non-current classification of the debt. However on the
other hand if the refinancing or rescheduling is fully at the discretion of the
borrowing entity as per agreement and the borrowing entity is able to and
intends to elect to roll over an obligation for at least a further year, the
obligation may be classified as non-current even if it would otherwise be due
in less than one year.
b) A company has classified the loan as non-current liability in the previous
year. The loan becomes a current liability in the current year’s financial
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statements. In this case the company is not required to reclassify the loan as
current liability in previous year as the classification was based on the
position existing as at the end of the previous year.
2) Operating cycle of entity is 6 months. It has trade receivables of Rs 50 lacs
towards sale of goods on 01.08.2011. Normal credit period is 3 months. The
company expects to realise it by 31.03.2013. In Balance Sheet as on 31.03.2012,
these trade receivables are whether current or non-current ?
Though, the company does not expect to receive the payment within the operating
cycle, however as the same is expected to be realized within twelve months from the
reporting date. Therefore, the same should be classified as “Current” in the Balance
Sheet.
3) Whether any change in classification if in above example the expected date
of realization was 30.06.2013.?
As, the company does not expect to receive the payment within the operating cycle
and also within twelve months from the reporting date. Therefore, the same should
be classified as “Non- Current” in the Balance Sheet.
4) A company has excess finished good inventory that it does not expect to
realize within the company's operating cycle and also does not expect to realise it
within 12 months of reporting date? Operating Cycle is 6 months. Whether current or
non-current?
Though in this case the operating cycle criterion as well as realizability criterion has
not been fulfilled, but since such finished goods inventory is held primarily for the
purpose of being traded, it satisfies the trading criterion and accordingly same should
be classified as “current”.
It is pertinent to mention here that as per FAQs issued by ICAI (refer Chapter-8), the
inventories of stores and spares are also current though strictly they may be non-
current as trading criterion may not be applicable to them. Accordingly inventories
should always be classified as current, which view is also corroborated by the fact
that there is no line item of Inventories under head non-current assets in Revised
Schedule VI.
5) As of March 31, 2012, a property developer has completed inventories of
residential units which it expects to sell in 3 years. Historically similar residential units
have been sold in 3 years. As of March 31, 2012, should the inventories of residential
units be classified as current or non current assets?
As the Inventories would be realized within the operating cycle, such residential units
would be classified as current.
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6) An entity has trade payables- 1) Rs 15 Lacs due for 3 months which are
expected to be settled by 14 months after the reporting date and 2) Rs 5 Lacs due for
7 months, expected to be realized within 12 months. Normal operating cycle of entity
is 6 months. Classify above into current / non-current.
Under first case as neither the operating cycle criterion nor realisability criterion
(within 12 months) has been fulfilled, accordingly same would be treated as non-
current. However under second case as realisability criterion is fulfilled the trade
payable would be classified as Current.
7) A primary school requires a deposit to be paid upon enrolment into the
school. Should the student leave the school, this deposit is refundable with one
school term’s notice (three months). The majority of students enroll and do not
normally leave the school and therefore receive the deposit back at the end of
schooling period. How should the deposits be classified?
Considering that the school does not have an unconditional right to defer settlement
of liability for at least twelve months after the reporting date, the same shall be
classified as current.
However under FAQs issued by ICAI, in specific cases, based on the commercial
practice, say for example electricity deposit collected by the department, though
stated on paper to be payable on demand, the company’s records would show
otherwise as these are generally not claimed in short term. Treating them as non-
current may be appropriate and may have to be considered accordingly.
8) As of March 31, 2012, Company X has breached a covenant and as per the
terms of the agreement the bank loan became immediately payable. On April 5,
2011, the bank agreed to waive the covenant. As of March 31, 2012, should the loan
be classified as current or non-current liability?.
As the borrower does not have an unconditional right to defer the settlement as on
the reporting date in the instant case, accordingly entire loan is to be shown as
current. The waiver by bank on 5th April, 2012, is a non-adjusting event as per AS 4,
Contingencies and Events Occurring after the Balance Sheet Date.
9) Would it make any difference if the agreement allows the lender to demand
immediate repayment of loan in case of default or breach of other debt covenant.
However, the lender has not demanded repayment till authorization of financial
statements for issue.
As per the Guidance Note on the Revised Schedule VI, a breach is considered to
impact the non-current nature of the loan only if the loan has been irrevocably
recalled. Hence, in the Indian context, long-term loans, which have a minor or major
breach in terms, will be considered as current only if the loans have been irrevocably
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recalled before authorization of the financial statements for issue. However, in case a
bank has recalled the loan before the date of approval of the accounts on breach of a
loan covenant that occurred before the year-end, the loan will have to be classified as
current.
10) A Ltd a manufacturing company, invested in equity shares of other
companies. It intends to sell those shares in 13 months. Should the investment in
equity shares be classified as current asset? The entity’s operating cycle is 14
months.
The investments for a manufacturing company are not operating assets and
accordingly operating cycle criterion is not applicable. Since it is expected to be
realised after 12 months of reporting date, the same are to be classified as non-
current.
11) Y Ltd purchased goods on 24 months credit but the creditor has the call
option that can be exercised after 15 months. On the reporting date such trade
payable was outstanding for 4 months. Operating cycle of company is 6 months. Is
the trade payable current or non-current?
Under instant case the call option is exercisable within 12 months of reporting date (
15 months minus 4 months ), and accordingly the company does not have an
unconditional right to defer settlement of the liability for at least twelve months after
the reporting date, and therefore same are to be classified as current trade payables.
12) An entity has acquired a leasehold land for 30 years and remaining lease
period of 6 months as on reporting date. Should the leasehold land be classified as
current asset?
All fixed assets (tangible and intangible assets) including leasehold assets remains
as fixed asset even if balance estimated useful life is below 12 months as on
reporting date. Only the fixed assets held for sale are classified as a current asset
since the intent of the company to sell is established.
13) Examine classification of following 3 different types of term deposits with
banks:
i) Rs 800 lacs having original maturity of 5 years and remaining maturity 3
months.
ii) What would be classification where the remaining maturity is of a) 8 months
and b) 2 years.
Considering definition of cash and cash equivalents under AS 3 “Cash Flow
Statements” deposits with original maturity of three months or less can be classified
as cash equivalents. Accordingly term deposit with remaining maturity of three
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months as on balance sheet date should be included under cash and cash
equivalents under current assets.
As per Revised Schedule VI, the bank deposits with more than 12 months maturity
are to be shown separately under cash and cash equivalents. This is in conflict with
the provisions of AS 3 as stated above. The solution in this regard has been provided
under Guidance Note on Revised Schedule VI issued by ICAI, which states that the
caption “cash and cash equivalents” should be changed to cash and bank balances
which may have two subheading viz “cash and cash equivalents” and “other bank
balances”. Accordingly in event of FDR where remaining period is 8 months should
be shown as “other bank balances” under cash and bank balances. However the
FDR whose remaining maturity period is two years should be shown as non-current
asset as same is not realizable within 12 months of the balance sheet date.
14) Where should the balances with banks to the extent held as margin money
or security against the borrowings, guarantees, other commitments be disclosed?
These are required to be disclosed under cash and cash equivalents separately in
notes to accounts under Revised schedule VI, however same is in conflict with the
requirements of AS 3 “Cash Flow Statements” as they are neither in nature of
demand deposits, nor readily available for use by the company, accordingly do-not
meet the definition of cash equivalents. Accordingly the said items should also be
included as ‘other bank balances’ under cash and bank balances alongwith FDR
having balance maturity period of more than 12 months.
15) An entity has granted mobilisation advance to the contractor amounting to
Rs 20 Lacs. How it should classify this between current and non-current?
It depends of period of contract / work expected to executed against said advance.
The advance expected to be adjusted within 12 months of the reporting date should
be shown as current and balance to be shown as non-current.
16) How should deferred tax asset and liability be classified ?
Deferred tax assets and liabilities are always considered as non-current and
accordingly has been dealt with in the format provided in Revised Schedule VI.
17) How the employee related provisions are to be classified?
As per Guidance Note on Revised Schedule VI of ICAI, Liability toward bonus, etc.,
payable within one year from the Balance Sheet date is classified as “current”. In
case of accumulated leave outstanding as on the reporting date, the employees have
already earned the right to avail the leave and they are normally entitled to avail the
leave at any time during the year. To the extent, the employee has unconditional right
to avail the leave, the same needs to be classified as “current” even though the same
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is measured as ‘other long-term employee benefit’ as per AS-15. However, whether

the right to defer the employee’s leave is available unconditionally with the company
needs to be evaluated on a case to case basis – based on the terms of Employee
Contract and Leave Policy, Employer’s right to postpone/deny the leave, restriction to
avail leave in the next year for a maximum number of days, etc. In case of such
complexities the amount of Non-current and Current portions of leave obligation
should normally be determined by a qualified Actuary.
Regarding funded post-employment benefit obligations, amount due for payment to
the fund created for this purpose within twelve months is treated as “current” liability.
Regarding the unfunded post employment benefit obligations, a company will have
settlement obligation at the Balance Sheet date or within twelve months for
employees such as those who have already resigned or are expected to resign
(which is factored for actuarial valuation) or are due for retirement within the next
twelve months from the Balance Sheet date. Thus, the amount of obligation
attributable to these employees is a “current” liability. The remaining amount
attributable to other employees, who are likely to continue in the services for more
than a year, is classified as “non-current” liability. Normally the actuary should
determine the amount of current & non-current liability for unfunded post-employment
benefit obligation based on the definition of Current and Non-current assets and
liabilities in the Revised Schedule VI.
For further issues and their solutions refer to chapter-8 wherein the FAQs on Revised
Schedule VI of ICAI, which have been uploaded on ICAI website on 22-05-2012, are
reproduced.
Head Wise Classification Concepts – At A Glance

For recapitulation the head wise classification methodology is provided below;-
1. Shareholders’ funds:
Shareholders’ funds are always non-current. Accordingly minority interest is always
non-current.
2. Share Application Money:
Share application money not exceeding the issued capital and to the extent not
refundable to be classified as non-current and to be shown on face of balance sheet
as “Share application money pending allotment”. Amount in excess of subscription or
in case requirements of minimum requirements are not met shall be separately
shown under “Other current liabilities” and amount is given in the Notes to accounts.
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3. Borrowings
The total borrowing are required to be trifurcated into long term borrowing, short-term
borrowing and current maturities to long term debt.
The loans which are repayable in a period more than twelve months or the operating
cycle in case of loans taken specifically for the purposes of business are classified as
long-term borrowing and shown on face of balance sheet.
The current maturities of long-term borrowings i.e. amount repayable within 12
months / operating cycle in respect of loans taken for purposes of business, would be
shown as current maturities to long term debt under “other current liabilities” and
amount to be given in the Notes to accounts.
The loans which are repayable on demand or whose original tenure not more than
12 months / operating cycle in respect of loans taken for purposes of business, would
be shown as short-term borrowings on the face of balance sheet.
4. Deferred Tax Assets / Liabilities
Deferred Tax Assets / Liabilities are always Non-current.
5. Trade payables
Trade payables which would be settled beyond 12 months from the balance sheet
date or beyond the operating cycle starting from the date of their recognition i.e.
purchase of goods or services in normal course of business are classified under
“Other Long term liabilities” and amount is shown in Notes to Accounts.
The balance Trade payables are classified as current liabilities and shown on the
face of the balance sheet.
6. Provisions
The amount of provision which would be settled within 12 months from the balance
sheet date or within operating cycle period from date of its recognition, in case of
provision related to business, would be classified as short-term provisions to be
shown under current liabilities on face of balance sheet. Provisions other than these
are shown as long-term provisions under Non-current liabilities to be depicted on
face of balance sheet.
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7. Fixed Assets
Fixed Assets, both tangible as well as intangible assets would always be non-
current, even if its balance useful life is less than 12 months, unless same are retired
from use and are held for sale/ disposal which shall then be shown under other
current assets.
8. Investments
Investments which are expected to be realized within 12 months from after the
balance sheet date are considered as current investments under current assets.
Other investments are classified as Non-current investments and shown under Non-
current assets. Both of these are depicted on the face of the balance sheet.
9. All Inventories are always current.
10. Trade Receivables
Trade receivables which would be realized beyond 12 months from the balance
sheet date or beyond the operating cycle starting from the date of their recognition
i.e. sale of goods or rendering of services in normal course of business, are classified
under “other non-current assets” under head Non-current assets and amount is
shown in Notes to accounts.
The balance Trade receivables are classified as current assets and shown on the
face of the balance sheet.
11. Cash and Cash Equivalents
It is always current, however only the amount which qualifies as cash and cash
equivalent as per AS 3 should be shown here.
If the companies are having items which are not cash equivalents but are current in
nature i.e. realizable within 12 months e.g. bank deposits (FDRs) having balance
maturity more than 3 months but within 12 months as on balance sheet date, then
on face of balance sheet the name of cash and cash equivalents be replaced with
cash and bank balances, and it may be bifurcated between “cash and cash
equivalents” (as per AS 3) and “Other bank balances” (other bank balances not
qualifying as cash and cash equivalent but current in nature) and amount of same be
given in notes to accounts.
The bank deposits who have more than 12 months balance maturity period as on
balance sheet date are to be shown other “other non-current assets” under head
“non-current assets” and amount shown in notes to accounts.
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Chapter 8
Frequently Asked Questions (FAQS) on
Revised Schedule VI Issued By ICAI
For benefit of members the FAQs on Revised Schedule VI, which was uploaded in
the Institute’s website www.icai.org on 22.05.2012 are reproduced below:
General
1. If the requirements of Company Act and/or Accounting
Standards are different from that of Revised Schedule VI, what is the
treatment to be given? If requirements of a regulatory authority like RBI
are different from that of Revised Schedule VI, what treatment should
be given?
Para 4.1.1 of the Revised Schedule VI necessitates that if compliance with
the requirements of the Act and/or accounting standards requires a change
in the treatment or disclosure in the financial statements, the requirements of
the Act and/or accounting standards will prevail over the Schedule VI.
As per the general instruction for preparation of the balance sheet, the
regulatory authority requirements that override Schedule VI and Schedule VI
shall automatically stand modified to that extent.
2. A company is preparing its financial statements in accordance
with the Revised Schedule VI for the first time. For certain information
required to be disclosed in the notes, the current year amounts are nil.
For example, let us assume that there is no default in repayment of loan
and interest existing as at the end of current year. Is the company
required to present previous year figures for such notes? Alternatively,
can it omit the previous year information since no disclosure is
required in the current year?
Revised Schedule VI requires that “Except in the case of the first financial
statements laid before the company (after its incorporation), the
corresponding amounts (comparatives) for the immediately preceding
reporting period for all items shown in the financial statements including
notes shall also be given.”
The objective of presenting comparative information is to help users of
financial statements in understanding the trends and key changes vis -à-vis
the previous period financial statements. The inter-period comparability of

information assists users in taking their economic decisions. Hence, a
company needs to present comparative information for disclosures required
under Revised Schedule VI even if their current period amount is nil.
3. Can a company prepare abridged financial statements (AFS) in
accordance with the Revised Schedule VI?
Companies, where they are permitted / allowed to publish abridged financial
statements, are not precluded from doing so using the format recently
prescribed for this purpose.
4. A company having a December year-end will prepare its first
Revised Schedule VI financial statements for statutory purposes for the
period 1 January to 31 December 2012. Should such a company prepare
its tax financial statements for the period from 1 April 2011 to 31 March
2012 in accordance with Revised Schedule VI or pre-Revised Schedule
VI?
It is only proper that accounts for tax filing purposes are also prepared in the
Revised Schedule VI format for the year ended 31 March 2012.
5. According to the MCA circular, presentation of financial
statements for the limited purpose of IPO / FPO during the financial
year 2011–12 may be made in the pre-Revised Schedule VI format.
However, for periods beyond 31 March 2012, they need to present
financial statements only in the Revised Schedule VI format. This gives
rise to the following questions:
(a) A company having 31 March year-end is going for IPO/FPO in
May 2012. In the offer document, it will include restated financial
information for the period ending 31 January 2012. Can it
prepare the said financial information using pre-Revised
Schedule VI format?
(b) A company having 31 December year-end is going for IPO/FPO in
September 2012 and its IPO process is expected to close by 30
November 2012. In the offer document, it will include restated
financial information for the stub-period ending 30 June 2012.
Can it prepare the said financial information using the pre-
Revised Schedule VI format?
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(c) Also, for inclusion in Qualified Institutional Placement (QIP)

document, is a company required to prepare its financial
statements in accordance with Revised Schedule VI?
As explained in the Circular dated 5 September 2011, the one-time
exemption is available only if the IPO / FPO gets closed before 31 March
2012. For any IPO/ FPO, which will get closed after 31 March 2012, the
company will prepare its restated financial information in accordance with
Revised Schedule VI, irrespective of the period for which the information is
being included in the offer document.
6. Revised Schedule VI requires a balance to be maintained
between excessive detail and too much aggregation. Can a company
use this principle to avoid giving disclosures specifically required by
Revised Schedule VI / Guidance Note on the Revised Schedule VI, say,
security details for each loan?
A company should not use this principle to avoid making material
disclosures, which are specifically required under Revised Schedule VI,
accounting standards, guidance notes and so on. Since disclosure regarding
security for each loan is required by Revised Schedule VI and Guidance Note
on the Revised Schedule VI, a company cannot avoid making this disclosure.
7. Any clarification, which is not covered or sufficiently covered in
Accounting Standards or Revised Schedule VI, can it be referred to as
in IND AS?
Reference can be made only to such material, which is official and
recognised. Thus, clarification may have to be sought in this regard within
the framework of the Companies Act, Accounting Standards, Revised
Schedule VI and ICAI publications.
Classification
8. If during the lean period, there is some activity being carried out
by the company, which is not in its normal course of business, and
there is a receivable or outstanding from such activity, is it considered
as “Trade Receivable”?
If the receivables arise out of sale of materials or rendering of services in the
normal course of business, it should be treated as trade receivables.
Otherwise, it is treated as other assets.
9. In accordance with Guidance Note on the Revised Schedule VI, a
payable is classified as “trade payable” if it pertains to amount due
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towards goods purchased or services received in the normal course of

business. Based on this principle, can a company include in trade
payables the liability towards employees, leases or other contractual
liabilities? What is the treatment for amounts due towards capital goods
purchased?
Paragraph 8.4.1 of Guidance Note on the Revised Schedule VI provides the
following information with regard to identification of trade payables:
“A payable shall be classified as trade payable if it is in respect of amount
due on account of goods purchased or services received in the normal
course of business. As per the old Schedule VI, the term sundry creditors
included amounts due in respect of goods purchased or services received or
in respect of other contractual obligations as well. Hence, amounts due under
contractual obligations can no longer be included within trade payables and
only commercial dues can be included under trade payables.
Amounts due towards purchase of capital goods should also not be included
in trade payables. They must be disclosed under other current liabilities with
a suitable description.
10. What is the meaning of "for the purpose of being traded"? Does
it mean those directly related to the operating activity?
It should be considered as related to the normal operating business activity
of the entity.
11. Should a company classify the following items as other
operating revenue or other income?
• Liability written back (net)
• Insurance claim
• Bad debts recovery (net)
If a company needs to classify one or more of these line items as “other
income,” should these items be included under the line “other non-
operating Income” or presented as a separate line item in the “other
income” note?
Whether an item should be classified as “other operating revenue” or “other
income” is a matter of judgment and requires consideration of specific facts.
In a number of cases, the dividing line between these two items may be very
blur. It requires an exercise of significant judgment.
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12. What is the definition of "Related Party"? Would the definition

from the Accounting Standard prevail as the Companies Act does not
have any definition of "Related Party" and has only “Relatives” defined
u/s 6?
As per para 4.1.1 of Guidance Note on the Revised Schedule VI, Accounting
Standards will override Schedule VI and hence, related party shall be as
defined in the Accounting Standard.
13. The Revised Schedule VI provides that in the ‘Statement of Profit
and Loss’, the head “Other Income” includes interest income under
which “Interest from customers on amounts overdue” is specifically
included. However, under AS 17 (segment reporting – refer to “FAQ”
published on AS 17), the same is treated as Operating Income and not
as Other Income. Then, should interest income from customers on
amounts overdue instead be classified under other operating income?
Accounting Standards override Schedule VI. In AS 17, segment reporting,
particularly interest income and interest expense is not treated as segment
revenue. Further, Revised Schedule VI has specifically included interest
income as operating income for finance companies. Also, in specific cases of
industries (such as power generation); interest could be part of the operating
income as this also forms the basis for tariff setting.
In case of a manufacturing company, normally, interest income is not
material and business is not done with an aim of earning interest. Practically,
it is generally difficult to enforce the interest clause even though it is normally
contained in all cases. Based on materiality and provisions in AS 17, the
interest income on overdue outstanding is not an operating income.
However, if a company, on the facts of its own case, determines that it would
be appropriate to treat is as an operating income, it would have to disclose it
as an accounting policy, if material.
14. If a third party gives a personal security for any borrowings and
creates, by means of a legal deed, a charge on the assets held by such
third party, can such borrowings be described as ‘secured’ instead of
‘unsecured’?
If the deed properly conveys a security, it can be suitably disclosed in the
terms of the loan. However, the loan itself is disclosed under unsecured loan
because the assets of the company are not provided as a security for the
loan.
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Current Vs Non-Current Classification

15. A company has classified the loan as non-current liability in the
previous year. The loan becomes a current liability in the current year’s
financial statements. Is the company required to reclassify the loan as
current liability in previous year also to match the current year
classification ?
Current / non-current classification of assets / liabilities is determined on a
particular date, viz., the balance sheet date. Thus, the company should have
determined the current / non-current classification of previous year balances
based on the position existing as at the end of the previous year. If there is
any change in the position at the end of current year resulting in different
classification of assets / liabilities in the current year, it will not impact the
classification made in the previous year. In other words, the company will
continue to classify the loan as non-current liability in the figures of the
previous period.
16. A company is preparing its financial statements in accordance
with Revised Schedule VI for the first time. When identifying current /
non-current assets / liabilities at the end of previous year, can a
company apply hindsight based on the development that happened in
the current year?
Current / non-current classification of assets / liabilities is determined on a
particular date, viz., the balance sheet date. If there is any new development
in the current period, it should not impact the classification of assets and
liabilities for the previous year. Hence, a company is not allowed to use
hindsight in arriving at the current / non-current classification of assets or
liabilities at the end of previous year.
However, in our view, it is important to distinguish from hindsight the facts
existing at the previous balance sheet date. In certain cases, the events
happening in the current period may not be new developments. Rather, they
may merely be an additional evidence of conditions existing as at the
previous year balance sheet. Obviously, these events need to be
incorporated in arriving at current / non–current classification of assets or
liabilities at the end of previous year. In many cases, identification of the two
events separately may not be straightforward and would require exercise of
significant judgment.
17. How should “fixed assets held for sale” be classified in the
balance sheet?
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They should be classified as a current asset since the intent of the company
to sell is established.
18. How will a company classify its investment in preference shares,
which are convertible into equity shares within one year from the
balance sheet date? Will it classify the investment as a current asset or
a non-current asset?
In accordance with the Revised Schedule VI, an investment realisable within
12 months from the reporting date is classified as a current asset. Such
realisation should be in the form of cash or cash equivalents, rather than
through conversion of one asset into another non-current asset. Hence, the
company must classify such an investment as a non-current asset, unless it
expects to sell the preference shares or the equity shares on conversion and
realise cash within 12 months.
19. Revised Schedule VI requires that a company present trade
receivables in the following format:
Trade receivable
Secured, considered good XX,XXX
Unsecured, considered good XX,XXX
Doubtful X,XXX
Total XX,XXX
Less: Provision for bad and doubtful debts X,XXX
Trade receivables XX,XXX
A company needs to disclose trade receivables under “current” and
“non-current” assets depending on the Revised Schedule VI criteria.
Should the company divide the “provision for bad and doubtful debts”
also on the same basis?
Yes.
20. How should a slow moving stock of stores and spares be
classified when it will neither be consumed within the normal operating
cycle nor will be sold within 12 months from the balance sheet date?
Inventory should always be categorised as a current asset.
21. There is a breach of a major debt covenant as on the balance
sheet date related to long-term borrowing. This allows the lender to
demand immediate repayment of loan. However, the lender has not
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demanded repayment till authorisation of financial statements for issue.

Can the company continue to classify the loan as non-current? Will the
classification be different if the lender has waived the breach before
authorisation of financial statements for issue?
As per the Guidance Note on the Revised Schedule VI, a breach is
considered to impact the non-current nature of the loan only if the loan has
been irrevocably recalled. Hence, in the Indian context, long-term loans,
which have a minor or major breach in terms, will be considered as current
only if the loans have been irrevocably recalled before authorization of the
financial statements for issue.
22. What will be the scenario if a long-term loan has been classified
as a non-performing asset by the bank / financial institution? Can it still
be classified as non-current?
The situation in case of a loan being classified as a non-performing asset will
also be the same as the case of a performing asset. The essential ingredient
to impair the long-term nature of the loan would be irrevocable recall of the
loan by the lender.
23. How would a rollover / refinance arrangement entered for a loan,
which was otherwise required to be repaid in six months, impact
current / non-current classification of the loan? Consider three
scenarios: (a) Rollover is with the same lender on the same terms, (b)
Rollover is with the same lender but on substantially different terms,
and (c) Rollover is with a different lender on similar / different terms.
In general, the classification of the loan will be based on the tenure of the
loan. Thus, in all the above cases, if the original term of the loan is short
term, the loan would be treated as only current, irrespective of the rollover /
refinance arrangement. However, in exceptional cases, there may be a need
to apply significant judgment on substance over form. In such cases,
categorisation could vary as appropriate.
24. A company has taken a three-year loan specifically for a
business whose operating cycle is four years. Hence, it needs to
classify the three -year loan as current liability. This gives rise to the
following issues:
(a) Should the loan be classified in the balance sheet under the
head “long-term borrowing”, “short-term borrowing” or “current
maturities of long-term debt”?
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(b) Does the company need to make all the disclosures required for
long-term borrowings for this loan also?
Any borrowing whose repayment falls within the operating cycle will be only a
current liability. Hence, it will be included under short-term borrowings.
Disclosures will also be required accordingly.
25. Fixed deposits have a maturity of more than 12 months from the
balance sheet date. Will they be classified as current or non-current?
They will be classified as non-current.
26. In case there is lien over FDs, thereby making it impossible to
convert them into cash before the agreed period, how will the FDs be
presented in the balance sheet? Moreover, will the interest accrued
over such FDs be also classified as current and non-current?
Such fixed deposits will be coterminous with the liability. Current or non-
current distinction will be applied based on the expectation to be realised
within 12 months after the reporting date. Interest accrued on such deposit
will also be treated on the same basis.
27. The company has received security deposit from its customers /
dealers. Either the company or the customer / dealer can terminate the
agreement by giving two months notice. The deposits are refundable
within one month of termination. However, based on past experience, it
is noted that deposits refunded in a year are not material, with 1% to 2%
of the amount outstanding. The intention of the company is to continue
long-term relationship with its customers / dealers. Can the company
classify such security deposits as non-current liability?
As per Revised Schedule VI, a liability is classified as current if the company
does not have an unconditional right to defer its settlement for at least 12
months after the reporting date. This will apply generally. However, in
specific cases, based on the commercial practice, say for example electricity
deposit collected by the department, though stated on paper to be payable
on demand, the company’s records would show otherwise as these are
generally not claimed in short term.
Treating them as non-current may be appropriate and may have to be
considered accordingly.
A similar criterion will apply to other deposits received, for example, under
cancellable leases.
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28. The company has taken premises on operating leases for which
it has paid a security deposit to the lessor. The lease term is five years.
However, both parties can terminate the agreement after giving a three
months’ notice. The deposits are refundable immediately on termination
of agreement. The intention of the company is to continue the lease
agreement for 5 years. Further, the company has taken electricity
connection for which it has paid security deposits. These deposits are
repayable on demand on surrender of the electricity connection. Can
the company classify these security deposits as current assets?
Classification of deposits paid depends on the expectation of its realisation.
Hence, a company will classify lease / electricity deposits given as a non-
current asset, unless it expects to recover the same within 12 months after
the reporting date, that is, by cancelling the lease contract or surrendering
the electricity connection.
29. For funded defined benefit plans, Guidance Note on the Revised
Schedule VI requires that amount due for payment to the fund within
next 12 months be treated as current liability. Since a company will also
recognise service cost in the next year, how should it determine the
component of net deficit in the fund to be classified as current liability?
For example, deficit is 500 and the LIC is expected to demand a payout
of 300 in the next year. The expected cost for the next year is 200.
Current / non-current classification will depend on the relevant provisions of
the Contract Act and Arrangement with LIC. If the LIC demand is known, then
that portion will be reflected as a current liability. If the actuarial valuation is
higher, then the difference between the actuarial valuation and the LIC
demand will be treated as a long-term provision.
30. In case of Provision for Gratuity and Leave Encashment, can
current and noncurrent portions be bifurcated on the basis of Actuarial
valuation?
The actuary should be specifically requested to indicate the current and non-
current portions, based on which the disclosure is to be made.
31. Guidance Note on the Revised Schedule VI requires deferred tax
assets / liabilities to be classified as non-current. Does it imply that the
provision for tax (net of advance tax) / advance tax (net of provision)
also be classified as noncurrent?
Current year tax provision (net of advance tax) will generally be treated as
current liability, as this will become due in the short term. Current year
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advance tax (net of provision) as well as past year’s advance tax (net of
provision) shall generally be classified as non-current as these are not likely
to arise in the short term. Advance tax against which refund orders have
been passed, and if not adjusted towards other liabilities, will only be treated
as a current asset.
32. The Reserve Bank of India (RBI), vide its notification No.
DNBS.223/CGM (US)-2011 dated 17 January 2011, has issued directions
to all NBFCs to make a provision of 0.25% on standard assets. The RBI
requires this provision to be shown as a liability and not netted from
loan balance. Will the NBFC have to split the provision into “current”
and “non-current” portions?
An NBFC creates provision on the standard assets at the rate prescribed by
RBI. In accordance with the Revised Schedule VI, it will classify these
standard assets into current and non-current portions. Since the provision is
closely linked to the underlying asset, we believe that an NBFC should split
the standard asset provision also into current and non-current portions by
using the same criterion.
33. The issue is whether NCI (Minority Interest) must be broken up
and classified as current and non-current. To the extent of the share of
provision of dividend to subsidiary, should it be current?
The non-controlling interest is not subject to current and non-current
distinction as it forms a part of the shareholders’ funds.
Operating Cycle
34. Should an operating cycle be disclosed?
Yes. As a matter of best practice, a company may disclose the same,
especially if the same is more than 12 months. This disclosure will be
particularly helpful to the users of financial statements, where determination
of the operating cycle involves significant judgment and it is more than 12
months.
35. Should the operating cycle be calculated for each item
separately, say for debtors, inventory or for the company as a whole?
Operating cycle should not be considered for each component separately
but, at the same time, it may not be so for the company as a whole. It will
have to be calculated for each business line separately.
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36. Is the operating cycle to be considered customer wise,

especially where a large customer is provided a significantly different
credit period?
The Revised Schedule VI and the Guidance Note on the Revised Schedule
VI contemplates the company to identify its operating cycle for each of its
businesses and not based on each of its customers. Hence, the operating
cycle must be defined in terms of each business.
37. What will be the basis for determining the operating cycle, where
say the private sector clients and government sector clients have a
significantly different credit period? Can the operating cycle be
determined on the basis of customer category?
The Revised Schedule VI and the Guidance Note on the Revised Schedule
VI contemplates that the company identify its operating cycle for each of its
business and not based on each customer. Hence, the operating cycle must
be defined in terms of each business and not customer category wise. The
company needs to suitably determine the normal operating cycle for the
business considering the significance of the different credit periods, among
other matters.
38. Is the lead-time for procuring raw material (time taken by the
supplier from the order to delivery) included in the operating cycle?
Operating cycle of a business should comprise the normal time required to
complete its processes of (i) Acquiring raw material, (ii) Processing the same
into finished goods, (iii) Making the sale, and (iv) Realising the sale proceeds
in cash. Hence, in the given case, the normal lead-time to acquire raw
material should be included in determining the operating cycle.
39. Is the credit period allowed by supplier reduced when
determining the operating cycle?
In accordance with the Revised Schedule VI, operating cycle is the time
between the acquisition of assets for processing and their realisation in cash
or cash equivalents. This suggests that the operating cycle should comprise
the normal time spent on various activities, starting from purchase of raw
material till realisation of cash and there is no need to reduce the credit
period allowed by supplier from the same.
Further, though the company has not paid for the raw material during the first
six months, it might have started incurring expenses on other items such as
labour and overhead costs. Hence, the credit period allowed by the supplier
need not be reduced when determining the operating cycle.
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Cash Flow Statement

40. How will the Revised Schedule VI impact presentation of the
cash flow statement?
The following key issues need to be specifically considered for this:
(i) Revised Schedule VI requires presentation of lines items, either
on face or in the notes, which are different vis-à-vis those
required under pre-Revised Schedule VI. For example, Revised
Schedule VI requires presentation of trade receivables as
against sundry debtors required by pre-Revised Schedule VI. Is
it mandatory for a company to present revised line items in the
cash flow statement also?
(ii) As part of working capital movement, is it mandatory to present
a separate movement for current and non -current components?
For example, a company has segregated trade receivables into
current and non-current components based on the Revised
Schedule VI criteria. Is it mandatory for the company to disclose
movement in current and non-current trade receivables
separately?
(iii) As part of investing and financing activities, is a company
required to present cash inflows and outflows separately for
current and non–current items? For example, a company has
taken a loan of 10,00,000. Out of this, 8,00,000 is classified as
non-current liability and 2,00,000 is current liability. Is it
mandatory for the company to disclose inflow from the current
and non-current component of loan separately?
The line items / headings used in cash flow statement should be in sync with
those used in other parts of the financial statements. In accordance with
Guidance Note on the Revised Schedule VI, the terms “trade receivables”
and “sundry debtors” can have different meanings. Hence, a company cannot
present trade receivables in the balance sheet and show movement in
“sundry debtors” in cash flow statement. The cash flow statement should also
refer to them as trade receivables.
With respect to the issues (ii) and (iii), AS 3 Cash Flow Statements does not
mandate such presentation. Nor is such presentation required in Revised
Schedule VI or Guidance Note on the Revised Schedule VI. Hence, it is not
mandatory for a company to present separate movement / inflows and
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outflows from current and noncurrent components of various line items

separately.
Other Disclosures
41. A company has a single class of equity shares. Is the company
still required to disclose rights, restrictions and preferences with
respect to the same?
Revised Schedule VI requires disclosures of rights, preferences and
restrictions attached to each class of shares. If a company has only one
class of equity shares, it is still required to make this disclosure.
42. Revised Schedule VI requires disclosures of rights, preferences
and restrictions attached to each class of shares. Is a company
required to make this disclosure separately for the ADR / GDR issued?
In case of ADR / GDR, a company typically issues its shares to a bank in a
foreign country.
Against such shares, the foreign bank issues depository receipts to investors
in the foreign country. Hence, from the perspective of the company, it has
issued shares for which disclosure of rights, preferences, restrictions and so
on are already disclosed. If there are any additional rights / restrictions
attached to ADR / GDR, those rights and restrictions need to be disclosed. If
there are no additional rights / restrictions attached to ADR / GDR, it will not
be required to make a separate disclosure for rights, preferences and
restrictions attached to the ADR / GDR. In any case, it will disclose the fact
of ADR / GDR issued by way of an appropriate note.
43. Is a company required to make disclosure regarding
shareholders holding more than 5% shares based on legal or beneficial
ownership? Can a company include information regarding beneficial
ownership on a selective basis?
Disclosure is to be on the basis of legal ownership, except where beneficial
ownership is clearly available from the depositories. For instance, beneficial
ownership of GDR / ADR may not be available.
44. Revised Schedule VI requires that a company disclose for a
period of five years immediately preceding the balance sheet date
information such as, aggregate number and class of shares (a) Allotted
as fully paid up pursuant to contract(s) without payment being received
in cash, (b) Allotted as fully paid up by way of bonus shares, and (c)
Bought back. In accordance with Guidance Note on the Revised
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Schedule VI, a company is not required to give year-wise break-up of

the shares allotted or bought back. Rather, the aggregate number for
the last five financial years needs to be disclosed. Is a company
required to give comparative information for this disclosure? If yes,
how will the comparative information be presented?
Revised Schedule VI is clear that except for the first financial statements laid
before a company (after its incorporation), it will disclose the corresponding
(comparative) amounts for the immediately preceding reporting period for all
items shown in the financial statements, including notes. The application of
this principle requires the company to disclose corresponding figures for
information related to shares allotted / bought back during the period of five
years.
Typically, the comparative information disclosed in the current period
financial statements is the figure disclosed in the previous period financial
statements. Hence, the same information will be disclosed as the
comparative number in the current period. Thus, the current year figure will
be for the current year and previous four years while the previous year figure
will be for the previous five financial years.
45. Should calls unpaid be shown as a reduction in new Schedule
VI?
As per Revised Schedule VI of para 6.A.b of General Instructions, details of
shares subscribed and fully paid up and details of shares subscribed, but not
fully paid up, should be shown separately. The shares subscribed but not
fully paid up should indicate the amount not paid up. Further, as per General
Instructions 6.A.k, calls unpaid (showing aggregate value of calls unpaid by
directors and officials) should be given by way of note under share capital. In
view of this, the gross amounts should be discussed in the capital portion
first and then the calls unpaid should be reflected as a deduction.
46. In accordance with the Revised Schedule VI read with Guidance
Note on the Revised Schedule VI, a company needs to disclose
repayment terms of loan liabilities. These terms, among other matters,
include period of maturity with respect to the balance sheet date,
number and amount of instalments due, applicable interest rate and
other significant relevant terms. Can a company make these
disclosures under appropriate buckets / range? For example, can it
state that all ECB loans carry interest rate in the range of LIBOR + 1% to
LIBOR + 3%”?
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With regard to repayment terms, paragraph 8.3.1.17 of Guidance Note on the

Revised Schedule VI states: “Disclosure of terms of repayment should be
made preferably for each loan unless the repayment terms of individual loans
within a category are similar, in which case, they may be aggregated.”
From this, it is clear that aggregation is permissible for similar items (similar
need not be exactly matching – it could be broadly within a range of
closeness, which is reasonable for the given case and circumstance). Also,
the intent is not to have all the interest terms explicitly stated because there
could be operational sensitivities for companies to explicitly disclose such
items. It is adequate in such cases to provide a range or an average as may
be suitably appropriate in each case and circumstance.
47. Revised Schedule VI requires disclosure of the period and
amount of continuing default / default as on the balance sheet date in
the repayment of loans and interest. Will a company be required to
make this disclosure if the default has been made good after the
reporting date?
Revised Schedule VI requires disclosure of default in the repayment of loan
and interest existing on the balance sheet date. We believe that a company
needs to make this disclosure even if the default has been made good after
the reporting date. However, it may choose to also disclose the fact that
default has been made good after the reporting date.
48. Where investment in LLP should be disclosed?
It is noted that a LLP is a body corporate and not a partnership firm as
envisaged under the Partnership Act, 1932. Hence, disclosures pertaining to
investment in partnership firms will not include the investment in LLP. The
investment in LLP should therefore be disclosed separately under ‘Other
Investments’. Other disclosures prescribed for investment in a partnership
firm need not be made for investment in an LLP.
49. Will arrear depreciation require separate disclosure?
Where material, arrears of depreciation, if any, provide needs disclosure in
terms of Para 19 of AS 6. In case it is not provided, it requires a disclosure,
as the accrual basis has not been complied with.
50. What are the additional disclosures to be made in case of special
purpose entities?
No additional disclosures are necessary except normal disclosure
requirements as per the provisions of the applicable accounting standards.
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Chapter 9
Glossary of Terms
A per para 6 of the General Instructions, for the purpose of this Schedule, the terms
used herein shall be as per the applicable Accounting Standards. However many
terms used in the Revised Schedule VI are not defined in the notified Accounting
Standards. In such cases references are to be made to the Guidance Note on Terms
Used in Financial Statements or Companies Act, 1956.
For ready reference of the members the glossary of terms used in Revised Schedule
VI is being given below:-
S.no Term Meaning Source
1. Share Capital ‘Share Capital’ is the “aggregate Guidance Note on
amount of money paid or Terms Used in
credited as paid on the shares Financial
and/or stocks of a corporate Statements
enterprise.”
2. Authorised Authorised Share Capital means Guidance Note on
Share capital. “the number and par value, of Terms Used in
each class of shares that an Financial
enterprise may issue in Statements
accordance with its instrument of
incorporation. This is sometimes
referred to as nominal share
capital.”
3. Subscribed ‘Subscribed Share Capital’ is Guidance Note on
share capital. “that portion of the issued share Terms Used in
capital which has actually been Financial
subscribed and allotted. This Statements
includes any bonus shares
issued to the shareholders.”
4. Paid up share ‘Paid-up Share Capital’ is “that Guidance Note on
capital part of the subscribed share Terms Used in
capital for which consideration in Financial
cash or otherwise has been Statements
received. This includes bonus
shares allotted by the corporate
enterprise.”

5. Preference share Preference Share Capital means Guidance Note on
capital “that part of the share capital of a Terms Used in
corporate enterprise which Financial
enjoys preferential rights in Statements
respect of payments of fixed
dividend and repayment of
capital. Preference shares may
also have full or partial
participating rights in surplus
profits or surplus capital.”
6. Authorised Authorised Share Capital means Guidance Note on
Share capital. “the number and par value, of Terms Used in
each class of shares that an Financial
enterprise may issue in Statements
accordance with its instrument of
incorporation. This is sometimes
referred to as nominal share
capital.”
7. Subscribed ‘Subscribed Share Capital’ is Guidance Note on
share capital. “that portion of the issued share Terms Used in
capital which has actually been Financial
subscribed and allotted. This Statements
includes any bonus shares
issued to the shareholders.”
8. Subsidiary A subsidiary is an enterprise that AS-21 “Consolidated
is controlled by another Financial
enterprise(known as the parent). Statements”
Control has been defined as
(a) the ownership, directly or
indirectly through subsidiary(ies),
of more than one-half of the
voting power of an enterprise; or
(b) control of the composition of
the board of directors in the case
of a company or of the
composition of the corresponding
governing body in case of any
other enterprise so as to obtain
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economic benefits from its
activities.
9. Parent (Holding A parent is an enterprise that has AS-21 “Consolidated
company) one or more subsidiaries. Financial
Statements”
10. Associate An Associate is an enterprise in AS 18 “Related
which an investing reporting Party Disclosures.”
party has significant influence
and which is neither a subsidiary
nor a joint venture of that party.
Significant influence is
participation in the financial
and/or operating policy decisions
of an enterprise, but not control
of those policies.
11. Bonus shares Bonus shares are defined as Guidance Note on
shares allotted by capitalisation Terms Used in
of the reserves or surplus of a Financial
corporate enterprise. Statements
12. Director Director includes any person Section 2(13) of the
occupying the position of Companies Act,
director, by whatever name 1956.
called.
13. Officer Officer includes any director, Section 2(30) of the
manager or secretary or any Companies Act,
person in accordance with 1956.
whose directions or instructions
the Board of directors or any one
or more of the directors is or are
accustomed to act.
14. Reserve ‘Reserve’ is “the portion of Guidance Note on
earnings, receipts or other Terms Used in
surplus of an enterprise (whether Financial
capital or revenue) appropriated Statements
by the management for a
general or a specific purpose
other than a provision for
depreciation or diminution in the
123

value of assets or for a known
liability.”
15. Capital Reserve. ‘Capital reserve’ is defined as “a Guidance Note on
reserve of a corporate enterprise Terms Used in
which is not available for Financial
distribution as dividend”. Statements
16. Share Premium It is the excess of the issue price Guidance Note on
(Securities of shares over their face value. Terms Used in
Premium) Financial
Statements
17. Revaluation Revaluation reserve is ‘a reserve Guidance Note of
Reserve. created on the revaluation of Terms Used in
assets or net assets of an Financial
enterprise represented by the Statements
surplus of the estimated
replacement cost or estimated
market values over the book
values thereof.’
18. Revenue A revenue reserve is a reserve Guidance Note of
Reserve which is available for distribution Terms Used in
through the Statement of Profit Financial
and Loss. Statements
19. Share Warrants ‘Share warrants’ are “financial AS 20 “Earning Per
instruments which give the Share”.
holder the right to acquire equity
shares”.
20. Current and A liability shall be classified as General Instructions
Non-current current when it satisfies any of for preparation of
liabilities. the following criteria: Balance Sheet in
(a) it is expected to be settled in Revised Schedule
the company’s normal VI.
operating cycle;
(c) it is due to be settled within
reporting date; or
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(d) 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.
All other liabilities shall be
classified as Non-Current.
21. Operating cycle. An operating cycle is the time General Instructions
between the acquisition of assets for preparation of
for processing and their Balance Sheet in
realization in Cash or cash Revised Schedule
equivalents. Where the normal VI.
operating cycle cannot be
identified, it is assumed to have a
duration of 12 months.
22. Liability Liability is a present obligation of AS-29 Provisions,
the enterprise arising from past Contingent Liabilities
events, the settlement of which is and Contingent
expected to result in an outflow Assets.
from the enterprise of resources
embodying economic benefits.
An obligation is a present
obligation if, based on the
evidence available, its existence
at the Balance Sheet date is
considered probable, i.e., more
likely than not.”
23. Long-term The phrase ‘long-term’ has not Guidance Note on
been defined. However, the Revised Schedule
definition of ‘non-current’ liability VI.
in the Revised Schedule VI may
be used as long-term liability for
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disclosures.
24. Term Loans Term Loans normally have a Guidance Note on
fixed or pre-determined maturity Revised Schedule
period or a repayment schedule. VI.
Cash credit, overdraft and call
money accounts / deposits are
not included. Term Loans are
generally provided by banks and
financial institutions for
acquisition of capital assets
which then become the security
for the loan i.e. end use of funds
is normally fixed.
25. Secured Loan It refers to a loan which is Statement of
secured against a tangible asset. Auditing Practices.
Where the value of the security
falls below the amount of loan, it
should be classified as secured
only to the extent of the market
value of the security.
26. Related parties. Parties are considered to be AS 18 “Related
related if at any time during the Party Disclosures”.
reporting period one party has
the ability to control the other
party or exercise significant
influence over the other party in
making financial and/or operating
decisions.
Control – (a) ownership, directly
or indirectly, of more than one
half of the voting power of an
enterprise, or
(b) control of the composition of
the board of directors in the case
of a company or of the
composition of the corresponding
governing body in case of any
other enterprise, or
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(c) a substantial interest in voting
power and the power to direct,
by statute or agreement, the
financial and/or operating
policies of the enterprise.
Significant influence -
participation in the financial
and/or operating policy decisions
of an enterprise, but not control
of those policies.
27. Finance lease A finance lease is a lease that AS 19 “Leases”
transfers substantially all the
risks and rewards incident to
ownership of an asset.
A lease is an agreement
whereby the lessor conveys to
the lessee in return for a
payment or series of payments
the right to use an asset for an
agreed period of time.
28. Trade payables A payable shall be classified as a General Instructions
‘trade payable’ if it is in respect of for preparation of
the amount due on account of Balance Sheet in
goods purchased or services Revised Schedule
received in the normal course of VI.
business.
29. Provisions Provision is a liability which can AS-29 “Provisions,
be measured only by using a Contingent Liabilities
substantial degree of estimation. and Contingent
Assets.”
The term liability has been stated
earlier.
30. Employee Employee benefits are all forms AS 15 “Employee
benefits. of consideration given by an Benefits”.
enterprise in exchange for
service rendered by employees.
31. Asset An asset is a resource: AS 26 “Intangible
(a) controlled by an enterprise as Assets”.
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a result of past events; and
(b) from which future economic
benefits are expected to flow to
the enterprise.
32. Current & Non- 1. An asset shall be classified as General Instructions
current Asset current when it satisfies any of for preparation of
the following criteria: Balance Sheet in
(a) it is expected to be Revised Schedule
realized in, or is intended VI.
for sale or consumption in,
the company’s normal
operating cycle;
(c) it is expected to be
realized within twelve
months after the reporting
date; or
(d) it is Cash or cash
equivalent unless it is
restricted from being
exchanged or used to
settle a liability for at least
reporting date.
2. All other assets shall be
classified as non-current.
33. Fixed asset Fixed asset is an asset held with AS 10 “Accounting
the intention of being used for for Fixed Assets”.
the purpose of producing or
providing goods or services and
is not held for sale in the
normal course of business.
34. Intangible An intangible asset is an AS 26 “Intangible
Assets. identifiable non-monetary asset, Assets”.
without physical substance, held
for use in the production or
supply of goods or services, for
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rental to others, or for
administrative purposes.
35. Investment. Investments are assets held by AS 13 “Accounting
an enterprise for earning income for Investments”
by way of dividends, interest, and
rentals, for capital appreciation,
or for other benefits to the
investing enterprise. Assets held
as stock-in-trade are not
‘investments’.
36. Current A current investment is an AS 13 “Accounting
Investment. investment that is by its nature for Investments”
readily realisable and is intended
to be held for not more than one
year from the date on which such
investment is made.
37. Investment An investment property is an AS 13 “Accounting
property investment in land or buildings for Investments”
that are not intended to be
occupied substantially for use by,
or in the operations of, the
investing enterprise.
38. Long-term A long term investment is an AS 13 “Accounting
Investment.(Non- investment other than a current for Investments”
current investment.
Investment).
39. Inventories. Inventories are assets: AS 2 “Valuation of
(a) held for sale in the Inventories”.
ordinary course of
business;
(b) in the process of
production for such sale;
or
(c) in the form of materials or
supplies to be consumed
in the production process
or in the rendering of
services.
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40. Trade A receivable shall be classified General Instructions
Receivables as a ‘trade receivable’ if it is in for preparation of
respect of the amount due on Balance Sheet of
account of goods sold or Revised Schedule
services rendered in the normal VI.
course of business.
41. Cash and cash Cash comprises cash on hand AS 3 “Cash flow
equivalents. and demand deposits with Statements”
banks.
Cash equivalents are short term,
highly liquid investments that are
readily convertible into known
amounts of cash and which are
subject to an insignificant risk of
changes in value.
Cash equivalents are held for the
purpose of meeting short-term
cash commitments rather than
for investment or other purposes.
For an investment to qualify as a
cash equivalent, it must be
readily convertible to a known
amount of cash and be subject to
an insignificant risk of changes in
value.
Therefore, an investment
normally qualifies as a cash
equivalent only when it has a
short maturity of, say, three
months or less from the date of
acquisition.
42. Contingent A contingent liability is: AS 29 “Provisions,
liabilities. (a) a possible obligation that Contingent liabilities
arises from past events and Contingent
and the existence of which assets.”
will be confirmed only by
the occurrence or non-
occurrence of one or more
130

uncertain future events not
wholly within the control of
the enterprise; or
(b) a present obligation that
arises from past events
but is not recognised
because:
(i) it is not probable that an
outflow of resources
embodying economic
benefits will be required to
settle the obligation; or
(ii) a reliable estimate of the
amount of the obligation
cannot be made.
Present obligation - an obligation
is a present obligation if, based
on the evidence available, its
existence at the balance sheet
date is considered probable, i.e.,
more likely than not.
Possible obligation - an
obligation is a possible obligation
if, based on the evidence
available, its existence at the
balance sheet date is considered
not probable.
43. Capital ‘Capital Commitment’ as future Guidance Note on
Commitment liability for capital expenditure in Terms Used in
respect of which contracts have Financial
been made. Statements
44. Profit and Loss Profit and Loss statement is Guidance Note
Statement defined as “the Financial ‘Terms Used in
Statement which presents the Financial
revenues and expenses of an Statements’
enterprise for an accounting
period and shows the excess of
revenues over expenses (or vice
131

versa) It is also known as profit
and loss account.”
45. Income Income is increase in economic Framework for the
benefits during the accounting Preparation and
period in the form of inflows or Presentation of
enhancements of assets or Financial
decreases of liabilities that result Statements, Income
in increases in equity, other than and expenses.
those relating to contributions
from equity participants.
46. Expenses Expenses are decreases in Framework for the
economic benefits during the Preparation and
accounting period in the form of Presentation of
outflows or depletions of assets Financial
or incurrences of liabilities that Statements, Income
result in decreases in equity, and expenses.
other than those relating to
distributions to equity
participants.
47. Other operating This would include Revenue Guidance Note on
revenue arising from a company’s Revised Schedule
operating activities, i.e., either its VI.
principal or ancillary revenue-
generating activities, but which is
not revenue arising from the sale
of products or rendering of
services.
48. Finance The term finance company is not Guidance Note on
Company. defined under the Companies Revised Schedule
Act, 1956, or Revised Schedule VI.
VI. Hence, the same should be
taken to include all companies
carrying on activities which are in
the nature of “business of non-
banking financial institution” as
defined under section 45I(f) of
the Reserve Bank of India Act,
1935.
132

The relevant extract is
reproduced below:
(a) ‘‘business of a non-banking
financial institution’’ means
carrying on of the business of a
financial institution referred to in
clause (c) and includes business
of a non-banking financial
company referred to in clause (f);
(c) ‘‘financial institution’’ means
any non-banking institution which
carries on as its business or part
of its business any of the
following activities, namely:–
(i) the financing, whether by way
of making loans or advances or
otherwise, of any activity other
than its own:
(ii) the acquisition of shares,
stock, bonds, debentures or
securities issued by a
Government or local authority or
other marketable securities of a
like nature:
(iii) letting or delivering of any
goods to a hirer under a hire-
purchase agreement as defined
in clause (c) of section 2 of the
Hire-Purchase Act, 1972:
(iv) the carrying on of any class
of insurance business;
(v) managing, conducting or
supervising, as foreman, agent
or in any other capacity, of chits
or kuries as defined in any law
which is for the time being in
force in any State, or any
business, which is similar
133

thereto;
(vi) collecting, for any purpose or
under any scheme or
arrangement by whatever name
called, monies in lumpsum or
otherwise, by way of
subscriptions or by sale of units,
or other instruments or in any
other manner and awarding
prizes or gifts, whether in cash or
kind, or disbursing monies in any
other way, to persons from
whom monies are collected or to
any other person, but does not
include any institution, which
carries on as its principal
business,–
(a) agricultural operations; or
(aa) industrial activity; or
(b) the purchase or sale of any
goods (other than securities) or
the providing of any services; or
(c) the purchase, construction or
sale of immovable property, so
however, that no portion of the
income of the institution is
derived from the financing of
purchases, constructions or
sales of immovable property by
other persons;
Explanation.– For the purposes
of this clause, ‘‘industrial activity’’
means any activity specified in
sub-clauses (i) to (xviii) of clause
(c) of section 2 of the Industrial
Development Bank of India Act,
1964;
(f) ‘‘non-banking financial
134

company’’ means–
(i) a financial institution which is a
company;
(ii) a non-banking institution
which is a company and which
has as its principal business the
receiving of deposits, under any
scheme or arrangement or in
any other manner, or lending in
any manner;
(iii) such other non-banking
institution or class of such
institutions, as the bank may,
with the previous approval of the
Central Government and by
notification in the Official
Gazette, specify;
Accordingly, applying the
aforesaid definition, the term
“finance company” would cover
all NBFCs - Asset Finance
companies, Investment
companies, Leasing and Hire
Purchase companies, Loan
companies, Infra Finance
companies, Core Investment
companies, Micro-finance
companies, etc. Further, Housing
Finance Companies regulated by
National Housing Bank should
also be considered as a finance
company.
49. Depreciation Depreciation is a measure of the AS 6 “Depreciation

wearing out, consumption or Accounting”
other loss of value of a
depreciable asset arising from
use, effluxion of time or
135

obsolescence through
technology and market changes.
Depreciation is allocated so as to
charge a fair proportion of the
depreciable amount in each
accounting period during the
expected useful life of the asset.
Depreciation includes
amortisation of assets whose
useful life is predetermined.
50. Amortization Amortisation is the systematic AS 26 “Intangible
allocation of the depreciable Assets”
amount of an intangible asset
over its useful life.
51. Exceptional The term ‘Exceptional items’ is AS-5 “Net Profit or
items not defined in Revised Schedule Loss for the period,
VI. However, AS-5 has a Prior period items
reference to such items in Paras and changes in
12, 13 and 14. Accounting Policies”
“Para 12: When items of income
and expense within profit or loss
from ordinary activities are of
such size, nature or incidence
that their disclosure is relevant to
explain the performance of the
enterprise for the period, the
nature and amount of such items
should be disclosed separately.
Para 13: Although the items of
income and expense described
in paragraph 12 are not
extraordinary items, the nature
and amount of such items may
be relevant to users of Financial
Statements in understanding the
financial position and
performance of an enterprise
and in making projections about
136

financial position and
performance. Disclosure of such
information is sometimes made
in the notes to the Financial
Statements.
Para 14: Circumstances which
may give rise to the separate
disclosure of items of income
and expense in accordance with
paragraph 12 include: the write-
down of inventories to net
realisable value as well as the
reversal of such write-downs; a
restructuring of the activities of
an enterprise and the reversal of
any provisions for the costs of
restructuring;”
Examples:-
• disposals of items of fixed
assets;
• disposals of long-term
investments;
• legislative changes having
retrospective application;
• litigation settlements; and
• other reversals of
provisions.
52. Extraordinary Extraordinary items are income AS 5 “Net Profit or
items or expenses that arise from Loss for the period,
events or transactions that are Prior period items
clearly distinct from the ordinary and changes in
activities of the enterprise and, Accounting Policies”
therefore, are not expected to
recur frequently or regularly.
53. Current tax Current tax is the amount of AS 22 “Accounting
income tax determined to be for Taxes on
payable (recoverable) in respect Income”.
of the taxable income (tax loss)
137

for a period.
54. Deferred Tax Deferred tax is the tax effect of AS 22 “Accounting
timing differences. for Taxes on
Timing differences are the Income”.
differences between taxable
income and accounting income
for a period that originate in one
period and are capable of
reversal in one or more
subsequent periods.
55. Discontinuing A discontinuing operation is a AS 24
operations. component of an enterprise: “Discontinuing
(a) that the enterprise, Operations”.
pursuant to a single plan,
is:
(i) disposing of substantially
in its entirety, such as by
selling the component in a
single transaction or by
demerger or spin-off of
ownership of the
component to the
enterprise's shareholders;
or
(ii) disposing of piecemeal,
such as by selling off the
component's assets and
settling its liabilities
individually; or
(iii) terminating through
abandonment; and
(b) that represents a separate
major line of business or
geographical area of
operations; and
(c) that can be distinguished
operationally and for
financial reporting
138

purposes.
56. Basic Earnings Basic earnings per share should AS 20 “Earnings Per
Per Share. be calculated by dividing the net Share”.
profit or loss for the period
attributable to equity
shareholders by the weighted
average number of equity shares
outstanding during the period.
57. Diluted Earnings For the purpose of calculating AS 20 “Earnings Per
Per Share diluted earnings per share, the Share”.
net profit or loss for the period
attributable to equity
shareholders and the weighted
average number of shares
outstanding during the period
should be adjusted for the effects
of all dilutive potential equity
shares.
A potential equity share is a

financial instrument or other
contract that entitles, or may
entitle, its holder to equity
shares.
139
Chapter 10
Check List of Audit of Financial
Statements Prepared as Per Revised
Schedule VI
Although all the presentation and disclosure requirements of Revised Schedule VI
have been discussed in previous Chapters whose compliances need to be ensuring
while conducting audit. However for ready reference of the members the checklist of
some important broad requirements to be checked while auditing the financial
statements prepared as per Revised Schedule VI are provided below in form of
checklist.
S.NO Particulars Yes No N/A W.P
Ref No
1. Whether all the items appearing on the
face of Balance sheet and statement of
Profit and Loss are as per Part I and II of
2. If any changes in line items etc are noticed
ensure whether such presentation:-
9 is relevant to an understanding of the
company’s financial position or
performance or
9 to cater to industry/ sector specific
disclosure requirements or
9 when required for compliance with
the amendments to the Companies
Act or under the Accounting
Standards
3. Whether the disaggregation’s (break up)
of the items recognized in the financial
statements have been disclosed in the
notes to accounts and not in Schedules as
was done earlier.
4. Whether each item on the face of the
Balance Sheet and Statement of Profit

Ref No
and Loss is cross-referenced to related
information in the notes to accounts.
5. Please check whether rounding off of the
figures of the financial statements has
been made. If made then ensure
compliance with the rounding off rule as
provided in para 4 of the General
Instructions.
6. In case rounding off has been made,
ensure that a uniform unit of measurement
i.e. (crores / lacs etc) is used across
financial statements including notes to
accounts.
7. Check whether in case of first revised
Schedule VI financial statements for FY
2011-12, the financial statements for FY
2010-11 to be used as comparatives have
been reclassified as per Revised
Schedule VI and a note to this effect has
been given.
8. Whether the corresponding amounts
(comparatives) for the immediately
preceding reporting period for all items
shown in the financial statements
including notes have been given even if
the current amount is nil.
9. Whether all the disclosure requirements in
respect of Balance Sheet provided in
General Instructions for preparation of
Balance Sheet have been complied with.
10. Whether in case of deviations in
compliance(s) with General Instructions
for preparation of Balance Sheet the
reasons and impact thereof has been
analyzed.
11. Whether all the disclosure requirements in
respect of Statement of Profit and Loss
141

Ref No
provided in General Instructions for
preparation of Statement of Profit and
Loss have been complied with.
12. Whether in case of deviations in
compliance(s) with General Instructions
for preparation of Statement of Profit and
Loss the reasons and impact thereof has
been analyzed.
13. Whether all disclosure requirements as
mandated in the notified Accounting
Standards and Companies Act, 1956 have
been complied with even if requirements
of Revised Schedule VI are conflicting.
14. In case of deviations in compliance(s) with
notified Accounting Standards, whether
the deviation, reason for deviation and
financial impact thereof have been
disclosed in the financial statements.
15. Whether all the assets and liabilities have
been classified as current and non-current
strictly based on definition provided in
Para 1 of General Instructions of
preparations of Balance Sheet.
16. Whether the classifications of assets and
liabilities amongst current and non-current
is based on the position existing on the
balance sheet date and any non-adjusting
event as per AS 4 has not been
considered.
17. Whether events occurring after the
balance sheet date, in respect of adjusting
events i.e. events of which conditions
existed on the balance sheet date, as per
AS 4, has been considered for
classification.
18. Whether suggestions of the Guidance
Note on revised Schedule VI of ICAI have
142

Ref No
been complied with. If not complied with,
whether keeping in view of circumstances
of case, a disclosure in report is
necessary.
19. Whether provision for bad and doubtful
debts has been bifurcated between
current and non-current Trade
Receivables.
20. Whether the FDRs having balance
maturity period of > three months to =
twelve months from balance sheet date
has not been included in cash and cash
equivalents and has been included in
other bank balances under the head cash
and bank balances. Also check whether
FDRs having balance maturity period of >
12 months has been shown under other
non-current assets.
21. Whether balances with banks to the extent
held as margin money or security against
the borrowings, guarantees being not
readily realizable have also been shown
as other bank balances.
22. Whether all Inventories has been
classified as current.
23. Whether operating cycle if exceeding 12
months, has been checked in light of para
2 of general Instructions for preparation of
Balance Sheet.
24. Whether operating cycle has been worked
out for each business line (not customer
wise or company as a whole) as per
definition provided in para 2 of general
instruction for preparation of balance
sheet.
25. In event of operating cycle exceeding 12
months whether its computation has been
checked and the same has been
143

Ref No
disclosed in notes to accounts.
26. Whether amount due on account of other
contractual obligations have not been
included in Trade Receivables / Trade
payables.
27. Whether revenue from operations
includes only the revenues from
company’s main operating activity.
28. Identify the exceptional and extraordinary
items and check whether they have been
disclosed separately on the face of the
29. Identify any discontinued operations of the
company as per AS 24 and check whether
the Profit (loss) from discontinuing
operations has been shown separately on
the face of the Statement of Profit and
Loss.
30. Check whether the disclosure of raw
materials, finished goods, stock in trade,
work-in-progress, services rendered in
broad heads has been disclosed in format
suggested by the Guidance Note on
Revised Schedule VI issued by ICAI.
(Para 10.8, page 75- 77).
31. Whether any item of income or
expenditure which exceeds one per cent
of the revenue from operations or
Rs.1,00,000, whichever is higher has
been disclosed separately in the notes to
accounts.
32. Check whether the Net gain or loss on
foreign currency translation related to
finance cost is aggregated to finance cost
and amount shown separately in notes to
accounts. Further check whether other
Net gain or loss on foreign currency
144

Ref No
translation have been disclosed
separately as other income or other
expense.
33. Whether the expense on Employee Stock
Option Scheme (ESOP) and Employee
Stock Purchase Plan (ESPP) has been
disclosed separately under Employee
benefits expense in the notes to accounts.
34. Check whether line items / heading used
in cash flow statement are in sync with
those used in other part of financial
statements like term Sundry Debtors,
Turnover, Depreciation and interest and
finance charges have been substituted by
words Trade Receivables, Revenue from
operations, Finance Costs and
Depreciation and amortization expense in
the Cash Flow Statement ?
35. Check whether separate movements /
inflows and outflows from current and non-
current movements of various line items
have not been given, as AS 3 does not
mandate the same.
It may be noted that above checklist covers principal requirements and some major
issues and is not exhaustive. During audit the complete text and analysis as
discussed in earlier chapter of this book, Accounting Standards and Guidance Note
on Revised Schedule VI issued by ICAI may be referred to.
145
Appendix-A
Notification on Revised Schedule VI
Ministry of Corporate Affairs
Notification
New Delhi, the 28th February, 2011
S.O. 447(E). Whereas the Central Government in consultation with the National
Advisory Committee on Accounting Standards framed the Companies (Accounting
Standards), Rules, 2006 vide G.S.R. No. 739(E) dated the 7th December 2006 and
was subsequently amended vide notification numbering (i) G.S.R. 212(E), dated the
27th March, 2008 (ii) G.S.R. 225(E), dated the 31st March 2009, in exercise of the
powers conferred by clause(a) of sub-section(1) of section 642 read with sub-
section(1) of section 210 A and sub-section 3C) of section 211 of Companies Act,
1956, (1 of 1956).
Now, therefore, in exercise of the powers conferred by sub-section (1) of section 641
of the Companies Act, 1956 (1 of 1956), the Central Government hereby replace the
existing Schedule VI to the said Act by the following Schedule VI, namely:
Appendix A
147
148
Appendix A
149
150
Appendix A
151
152
Appendix A
153
154
Appendix A
155
156
Appendix A
157
158
Appendix A
159
160
Appendix A
161
162
Appendix A
163
164
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY,
PART II, SECTION3, SUB-SECTION (ii)]
GOVERNMENT OF INDIA
Ministry of Corporate Affairs
NOTIFICATION
New Delhi, dated the 2011
G.S.R (E)- In exercise of the powers conferred by clause(a) of sub-section(1)

of section 642 read with sub-section(1) of section 210A and sub-section (3C)
of section 211 of the Companies Act,1956, (1 of 1956), the Central
Government hereby makes the following amendment to paragraph 2 of the
notification No.447(E) dated the 28th February,2011.:-
“The notification shall come into force for the Balance Sheet and Profit and
Loss Account to be prepared for the financial year commencing on or after
1.4.2011”.
[F. No. 2/6/2008-C.L-V]
Avinash K. Srivastava
Joint Secretary
Note: - The principal notification was published in the Gazette of India,

Extraordinary, vide G.S.R. No.414, dated the 21st March, 1961 last amended
vide S.O. No.447 (E) dated the 28th February, 2011.
Appendix-B
Notification on Abridged Financial
Statements
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY,
PART – II, SECTION 3, SUB-SECTION (i)]
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION
New Delhi, dated the 31st May, 2012.
G.S.R. ______ (E). – In exercise of the powers conferred by sub-section

(1) of section 642 of the Companies Act, 1956 (1 of 1956), the Central
Government hereby makes the following rules further to amend the
Companies (Central Government’s) General Rules and Forms, 1956,
namely:–
1. (1) These rules may be called the Companies (Central Government’s)
General Rules and Forms (Amendment) Rules, 2012.
(2) They shall come into force on the date of their publication in the
Official Gazette.
2. In the Companies (Central Government’s) General Rules and Forms,
1956, in Annexure ‘A’, for Form 23AB, the following Form shall be
substituted, namely:-
Appendix B
“FORM NO. 23AB

[See Rule 7A]
Statement containing salient features of Balance Sheet and Profit and Loss
Account as per section 219(1) (b) (iv)
Form of Abridged Financial Statements
Name of the Company_______________
Abridged Balance Sheet as at………………… (Rupees in…)
Sr Particulars Figures as the end of
No. Current reporting Previous
Period Reporting period
(DD/MM/YY) (DD/MM/YY)
I EQUITY AND LIABILITIES
(1) Shareholders’ funds
(a) Paid-up Share Capital
(i) Equity
(ii) Preference
(b) Reserves and surplus
(i) Capital Reserves (including
Revaluation Reserve, if any)
(ii) Revenue Reserves;
(iii) 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 Payable
(c) Other Current Liabilities
(d) Short-term provisions
Total of (1) to (4)
II ASSETS
(5) Non-current assets
(a) Fixed assets
(i) Tangible Assets (Original cost less
depreciation)
(ii) Intangible Assets (Original cost
less depreciation/amortization)
(iiii) Capital work-in-progress
167
(iv) Intangible assets under

development
(b) Non-current investments
(c) Deferred tax assets (net)
(d) Long-term loan and advances
(e) Other Non-Current Assets
(6) Current assets
(a) Current investments
(b) Inventories
(c) Trade Receivables
(d) Cash and cash equivalents
(e) Short-term loans and advances
(f) Other current assets
Total of (5) to (6)
Note: Complete Balance Sheet, Statement of Profit and Loss, other statements and
notes thereto prepared as per the requirements of Schedule VI to the Companies
Act, 1956 are available at the Company’s website at link _____________________
Abridged Profit and Loss Account for the year ended on

(Rupees in….)
S.No. Particulars Figures for the Figures for the
Current Previous
reporting Period Reporting period
(DD/MM/YY) (DD/MM/YY)
I INCOME
Revenue from Operations (Details to be

given as per*)
Less: Excise duty
Net Revenue from Operations
II Other Income (See Note 5)
III Total Income (I + II)
IV Expenditure
(a) Cost of materials consumed
(b) Purchase of stock-in-trade
(c) Changes in inventories of finished goods,
work-in-progress and stock-in-trade
(d) Employee benefits expense
(e) Finance costs
(f) Depreciation and amortization expense
(g) Other expenses (See Note 5)
Total of (a to g)
168
Appendix B
V Profit before exceptional and

extraordinary items and tax (III-IV)
VI Exceptional items
VII Profit before extraordinary items and
tax (V+VI)
VIII Extraordinary items
IX Profit/ (loss) before tax (VII+VIII)
X 1. Tax expense
2. Deferred tax
XI Profit/(loss) after tax for the year from
continuing operations (IX-X)
XII Profit/(loss) from discontinued operations
XIII Tax expenses of discontinued operations
XIV Profit/(loss) from discontinued operations
(after tax) (XII-XIII)
XV Profit/(loss) for the year (XI-XIV)
XVI Earnings per equity share:
(a) Basic
(b) Diluted
* Details of Revenue from Operations:

(a) In respect of a company other than a finance company revenue from
operations shall be disclosed as under:
(Rupees in….)
S.No. Particulars Figures for the Figures for the
current financial previous financial
reporting period reporting period
(DD/MM/YY)
(DD/MM/YY)
I Sale of products manufactured
II. Sale of good traded
III Revenue from services provided
IV Other Operational Revenue
(b) In respect of a finance company, revenue from operations shall be

disclosed as under:
(i) Revenue from interest; and
(ii) Revenue from Other financial services
169
NOTES TO THE ABRIDGED BALANCE SHEET AND THE ABRIDGED

PROFIT AND LOSS ACCOUNT
1. The amounts to be shown here should be the same as shown in the
corresponding aggregated heads in the financial statements as per
Schedule VI or as near thereto as possible.
2. The total amount of contingent liabilities and that of commitments
should be shown separately.
3. All notes forming part of the financial statements as per Schedule VI to
which specific attention has been drawn by the auditors or which form
a subject matter of qualification by the auditor should be reproduced.
4. If fixed assets are revalued, the amount of revaluation to be shown
separately for the first five years subsequent to the date of revaluation.
5. Any item which constitutes 20% or more of the total income or
expenditure (including provisions) should be shown separately.
6. Amount, if material, by which any item shown in the profit and loss
Account are affected by any change in the accounting policy, should
be disclosed separately.
7. Notes shall include the notes, if any, contained in the complete
financial statements pertaining to the following:
(a) Period and amount of defaults on the balance sheet date in
repayment of loans and interest.
(b) Amalgamations, acquisitions, restructurings and demergers
during the reporting period.
(c) Material events affecting the going concern assumption.
(d) Investigation and inspection conducted or ordered under the
provisions of Companies Act, 1956.
(e) Non-compliance with any law during the reporting period.
(f) Any other note considered significant by the management.
8. Book Value and Market value of Quoted Investments (both for current
year as also previous year) be mentioned.
9. Notes in the abridged balance sheet should be given the same number
as in the main balance sheet.
10. Disclosure of Related Party Transaction shall be made in terms of the
requirements of Accounting Standard (AS) 18, Related Party
Disclosures, notified under Companies (Accounting Standards) Rules,
2006.
170
Appendix B
11. Details of Cash and Cash Equivalents shall be disclosed as

follows:
(a) Balances with banks;
(b) Cheques, drafts on hand;
(c) Cash in hand;
(d) Others (specify nature)
12. In terms of Accounting Standard (AS) 3, Cash Flow Statement,
wherever required, as notified under Companies (Accounting
Standards) Rules 2006, the following abridged Cash Flow Statement
shall be included:
Abridged Cash Flow Statement
Figures for Figures for
the current the previous
reporting reporting
period period
1. Cash flows from operating activities
2. Cash flows from investing activites
3. Cash flows from financing activities
4. Net increase/(decrease) in cash and
cash equivalents
5. Cash and cash equivalents at beginning
of period
6. Cash and cash equivalents at end of
period
13. Segment revenue, segment capital employed (segment assets minus

segment liabilities) and segment result for business segments or
geographical segments, whichever is the enterprise's primary basis of
segment reporting (disclosure of segment information shall be
presented) only if the company is required, in terms of Accounting
Standards (AS) 17, Segment Reporting, as notified under Companies
(Accounting Standards) Rules 2006 to disclose segment information in
its annual financial statements;
14. Level of rounding off should be the same as in the main balance sheet
and the profit and loss account.
171
15. Where compliance with the requirements of the Act including

Accounting Standards as applicable to the companies require any
change in treatment or disclosure including addition, amendment,
substitution or deletion in the head/subhead or any changes inter se,
in the financial statements or statements forming part thereof, the
same shall be made.
The above stated salient features of the Balance Sheet and the Profit and
Loss Account should be authenticated in the same manner as the Main
financial statements.
AUDITOR'S REPORT
- Auditor's Report shall be submitted by the statutory auditors in
accordance with the Standard on Auditing (SA) 810, Engagements to
Report on Summary Financial Statements, issued by the Institute of
Chartered Accountants of India. Auditor's report on unabridged
financial statements shall also be given.
DIRECTORS' REPORT
- Salient features of Director's Report shall be disclosed.
Subsidiary Company / companies: Every holding company shall attach a
statement relating to its subsidiary company / companies to be furnished in
pursuance of clauses (e), (f) and (g) of sub-section (1) of section 212.
(Signed by Directors/Secretary)
in the manner prescribed in section 215(1).".
[F No 17/51/2012- CL V]
Renuka Kumar,
Joint Secretary
Note:- The principal notification was published in the Gazette of India, Part II,
Section 3, Sub-section (i) vide number G.S.R. 432(E) dated the 18th
January, 1956 and subsequently amended vide the following notifications:-
Serial Notification Notification
Number Number Date
1. SRO 2535 1.11.1956
2. SRO 3135 21.12.1956
172
Appendix B
3. SRO 237 19.1.1957

4. SRO 2105 29.1.1957
5. SRO 3038 28.9.1957
6. SRO 3867 7.12.1957
7. GSR 48 22.2.1958
8. GSR 723 23.8.1958
9. GSR 750 30.8.1958
10. GSR 1026 1.11.1958
11. GSR 14 3.1.1959
12. GSR 548 9.5.1959
13. GSR 1140 17.10.1959
14. GSR 1224 7.11.1959
15. GSR 1364 12.12.1959
16. GSR 220 27.2.1960
17. GSR 595 28.5.1960
18. GSR 195 18.2.1961
19. GSR 814 24.6.1961
20. GSR 1105 09.09.1961
21. GSR 1408 25.11.1961
22. GSR 653 12.05.1962
23. GSR 344 02.03.1963
24. GSR 628 13.4.1963
25. GSR 97 16.1.1965
26. GSR 822 12.6.1965
27. GSR 1570 30.10.1965
28. GSR 368 19.3.1966
29. GSR 421 18.3.1966
30. GSR 499 9.4.1966
31. GSR 743 21.5.1966
32. GSR 847 4.6.1966
33. GSR 1266 13.8.1966
34. GSR 130 20.1.1968
35. GSR 667 30.6.1973
36. GSR 327(E) 10.6.1975
37. GSR 414(E) 16.7.1975
38. GSR 2596 1.11.1975
39. GSR 2828 13.12.1975
40. GSR 154 31.1.1976
173
41. GSR 248(E) 24.3.1976

42. GSR 627 14.5.1977
43. GSR 24(E) 9.1.1979
44. GSR 1256 6.10.1979
45. GSR 555(E) 4.9.1982
46. GSR 479(E) 22.4.1988
47. GSR 694(E) 10.6.1988
48. GSR 782(E) 13.7.1988
49. GSR 908(E) 7.9.1988
50. GSR 1032(E) 26.10.1988
51. GSR 449 (E) 17.4.1989
52. GSR 510(E) 24.5.1990
53. GSR 795(E) 18.9.1990
54. GSR 289(E) 31.5.1991
55. GSR 614(E) 3.10.1991
56. GSR 754(E) 26.12.1991
57. GSR 312(E) 6.3.1992
58. GSR 353(E) 26.3.1992
59. GSR 484(E) 11.5.1992
60. GSR 581 (E) 27.8.1993
61. GSR 621 (E) 24.9.1993
62. GSR 286(E) 1.3.1994
63. GSR 598(E) 28.7.1994
64. GSR 697(E) 20.9.1994
65. GSR 283(E) 21.3.1995
66. GSR 424(E) 26.5.1995
67. GSR 251(E) 21.6.1996
68. GSR 97(E) 28.2.1997
69. GSR 126(E) 1.3.1997
70. GSR 16(E) 6.1.1999
71. GSR 23(E) 12.1.1999
72. GSR 130(E) 23.2.1999
73. GSR 788(E) 29.11.1999
74. GSR 58(E) 17.1.2000
75. GSR 363 (E) 27.4.2000
76. GSR 638(E) 26.7.2000
77. GSR 836(E) 24.10.2000
78. GSR 24(E) 15.01.2001
174
Appendix B
79. GSR 35(E) 24.01.2001

80. GSR 51(E) 31.01.2001
81. GSR 96(E) 14.02.2001
82. GSR 330(E) 07.05.2002
83. GSR 5(E) 03.01.2003
84. GSR 479(E) 12.06.2003
85. GSR 580(E) 24.07.2003
86. GSR 56(E) 10-02-2006
87. GSR 555(E) 14-09-2006
88. GSR 399 (E) 30-05-2007
89. GSR 500 (E) 24-07-2007
90. GSR 720(E) 16-11-2007
91. GSR 655(E) 12-09-2008
92. GSR 788(E) 114-11-2008
93. GSR 824(E) 28-11-2008
94. GSR 835(E) 04-12-2008
95. GSR 868(E) 22-12-2008
96. GSR 872(E) 23-12-2008
97. GSR 876(E) 24-12-2008
98. GSR 183(E) 20-03-2009
99. GSR 257(E) 17-04-2009
100. GSR 284(E) 24-04-2009
101. GSR 643(E) 07-09-2010
102. GSR 649(E) 08-09-2010
103. GSR 78 (E) 10-02-2011
104. GSR 259(E) 26-03-2011
105. GSR 351(E) 29-04-2011
106. GSR 407(E) 26-05-2011
107. GSR 408(E) 26-05-2011
108. GSR 514(E) 07-07-2011
109. GSR 533(E) 14-07-2011
110. GSR 618(E) 10-08-2011
111. GSR 716(E) 23-09-2011
112. GSR 749(E) 05-10-2011
113. GSR 313(E) 24-04-2012
175
Appendix-C
SEBI Circular for amendment to Equity
listing Agreement Formats for disclosure
of Financial Reports
CIRCULAR
CIR/CFD/DIL/4/2012 April 16, 2012
To
All Stock Exchanges
Dear Sir/Madam,
Sub: Amendments to the Equity Listing Agreement – Formats for Disclosure
of Financial Results
1. Ministry of Corporate Affairs vide Notification dated February 28, 2011 has
revised the format for disclosure of Balance Sheet under Schedule VI of the
Companies Act, 1956.
2. Pursuant to the same, it has been decided to carry out consequential
amendments to Clause 41 of the Listing Agreement regarding interim disclosure
of financial results by listed entities to the stock exchanges, which has been
drawn from the format under Schedule VI of the Companies Act, 1956.
Accordingly, the format for the said disclosure has been given in Annexure.
3. The above shall be applicable for financial year ended on March 31, 2012 for all
filings made after the date of this circular.
4. The above listing conditions are specified in exercise of the powers conferred
under Section 11 read with Section 11A of the Securities and Exchange Board
of India Act, 1992. The said listing conditions should form part of the existing
Listing Agreement of the stock exchange.
5. All stock exchanges are advised to ensure compliance with this circular and
carry out the amendments in their Listing Agreement as per the Annexure to
this circular.
6. This circular is available on SEBI website at www.sebi.gov.in under the
categories “Legal Framework” and “Issues and Listing”.
Yours faithfully,
Sunil Kadam
General Manager
+91-22-26449630
sunilk@sebi.gov.in
Enclosures:
Annexure-1: Amendments
Appendix C
177
178
Appendix C
179
180
Appendix C
181
Feedback Page
This is the first edition of the Guide by the Committee, and, obviously,
therefore there is scope for improvement. We intend to make it as useful as
possible in its present format. The Committee, therefore, hopes to keep
updating this Guide on a regular basis in order to make it more functional.
We solicit comments and suggestions from practitioners and others to
improve the usefulness of the Guide. In particular, we will welcome the views
of the practitioners on enhancement of their knowledgebase.
Your valuable inputs may be sent to ccbcaf@icai.org.
We are thankful to CA. Mohd. Salim for preparing the draft of this book on
Revised Schedule VI: A Practitioner’s Guide.
Dr. Sambit Kumar Mishra

Secretary
Practitioners, (CCBCAF & SMP)
Indraprastha Marg,
New Delhi-110002
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Revised Schedule VI :

Revised Schedule VI : A Practitioner's Guide

Committee for Capacity Building of CA Firms and Small & Medium

Committee for Capacity Building of CA Firms and Small & Medium

Edition : June, 2012

Committee/ Department : Committee for Capacity Building of

Website : www.icai.org, www.icai.org.in

Published by : The Publication Department on behalf of the

Printed by : Sahitya Bhawan Publications, Hospital Road, Agra-

CA. Jaydeep Narendra Shah

With warm regards

Financial Statements by an electricity company. Accordingly Schedule VI is currently

Statements” which also mandates minimum requirements for disclosure and

2011-12 onwards would be required to be prepared in the manner prescribed in

II) Part I- Form of Balance Sheet

5 Additional information regarding aggregate expenditure and

disclosure requirements or when required for compliance with the amendments to

14) Disclosure of reconciliation of the number of shares:

22) Disclosure of Interest accrued and due on borrowing:

27) Disclosure of Capital Advances:

36) Break-up in terms of quantitative disclosures for significant items of

disclosures as required by the Companies Companies need to comply with the

Turnover Rounding off The limit of turnover and the extent of

One hundred To nearest lakhs, Turnover Rounding off

Further new requirement of using the

Statement of Profit and Loss has also

B. Form of Balance Sheet

(b) Reserves & Surplus capital as this term is

Further due to advent

Also the name of

provision has been

following criteria: Due to this insertion lot of reclassifications

Consequently Para 6 A to 6 S of General Instructions for Preparation of Balance

Though the disclosure of only number of

The gross amounts should be discussed

Reconciliation of opening number of

Reconciliation for the comparative

Further, the reconciliation should be

All such rights, preferences and

Further, all the above disclosures need to

on the basis of legal ownership, except

Here previous year figure also needs to

to adjusted and the transactions prior to 5

The requirement of disclosing the source

However additional disclosure of

Terms of convertible securities are also

A separate disclosure is required for the

The gross amounts should be discussed

shares so purchased is required to be

Under Old Schedule VI details of utilization

amount added to fixed assets on

Accordingly the Profit and Loss Account

parties. those advances which are in the nature of

covenants. The word “loan” has been

Disclosure Requirement as per Analysis

G. Other current liabilities

period before which shares shall be on face of balance sheet between

(f) Office equipment. development property have been

added on revaluation of assets, every assets as required by AS 10 i.e. gross

showing additions, disposals, reconciliation of opening and closing