PRESENTATION ON

REVISED SCHEDULE VI
AT
DEHRADUN BRANCH OF CIRC OF ICAI
BY

CA. Verendra Kalra, FCA,GRAD.CWA,DISA

August 25, 2012 Dehradun

Revised Schedule VI

An Introduction
Applicability
As per notification [F. NO. 2/6/2008-C.L-V], dated 30-3-2011, the Schedule applies to all
companies for the Financial Statements to be prepared for the financial year commencing
on or after April 1, 2011. The schedule does not apply to:
Insurance or banking company
company engaged in the generation or supply of electricity (no format prescribedhence may follow revised Schedule VI till such time a format is prescribed)
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.

Interim Financial Statements ( complete set) (as required by AS-25, Interim Financial
reporting) to be prepared by companies as per revised

Schedule VI.For presentation of

Condensed interim Financial Statements, its format should conform to that used in the
companys most recent annual Financial Statements, i.e., the Old Schedule VI. However,
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Revised Schedule VI
if it presents a Complete set of Financial Statements, it should use the Revised Schedule
VI.

For balance sheet to be submitted to stock exchanges as prescribed under Clause 41

to the Listing Agreement of the Securities and Exchange Board of India
For half yearly results: Clause 41 of the listing agreement prescribes separate format for
presentation of half yearly results, Guidance note of ICAI mentioned that till the time a
new format is prescribed by the Securities and Exchange Board of India (SEBI) under
Clause 41, companies will have to continue to present their half-yearly Balance Sheets
based on the format currently specified by the SEBI. However, SEBI vide its circular
CIR/CFD/DIL/4/2012 dated 16th April 2012 have made changes in the format and
therefore the companies should accordingly present their balance sheet in the new
format.
For Annual audited yearly results: Format of Revised Schedule VI should be used.

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Revised Schedule VI
Balance Sheet and Statement of Profit and Loss prescribed under the SEBI (Issue of
Capital & Disclosure Requirements) Regulations 2009 (ICDR Regulations)
The formats of Balance Sheet and Statement of Profit and Loss under ICDR Regulations are
illustrative formats. Accordingly, to make the data comparable and meaningful for users,
companies should use the Revised Schedule VI format to present the restated financial
information for inclusion in the offer document.
Further also as per circular no. 62/2011 dated 5 th September 20111, issued by Ministry of
companies affairs,

the presentation of Financial Statements for the limited purpose of

IPO/FPO during the financial year 2011-12 may be made in the format of the pre-revised
Schedule VI under the Companies Act, 1956. However, for period beyond 31st March 2012,
they would prepare only in the new format as prescribed by the present Schedule VI.

Consolidated Financial Statements as per the requirements of AS-21

AS 21, Consolidated Financial Statements, requires that consolidated financial statements

should be presented, to the extent possible, in the same format as adopted for the

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parents standalone financial statements and therefore Revised schedule VI to apply
equally on consolidated financial statements of parent company.

Highlights of Revised Schedule VI

Revised Schedule VI has been framed as per the existing non-converged Indian
Accounting Standards and has nothing to do with the converged Indian Accounting
Standards.
Revised schedule VI is not in convergence to IFRS. In fact, the changes made are more
towards convergence with IAS 1.
The Revised Schedule VI requires that if compliance with the requirements of the Act
and / or the notified Accounting Standards requires a change in the treatment or
disclosure in the Financial Statements as compared to that provided in the Revised
Schedule VI, the requirements of the Act and / or the notified Accounting Standards will
prevail over the Schedule.
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Revised Schedule VI
The Revised Schedule VI clarifies that the requirements mentioned therein for disclosure
on the face of the Financial Statements or in the notes are minimum requirements. Line
items, sub-line items and sub-totals can be presented as an addition or substitution on
the face of the Financial Statements when such presentation is relevant for
understanding of the companys financial position and /or performance.
Few instances are given below:
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) is often an
important measure of financial performance of the company. Hence, a company may
choose to present the same as an additional line item on the face of the Statement of

Profit and Loss.

Users and stakeholders often want to know the liquidity position of the company. To
highlight the same, a company may choose to present additional sub-totals of Current

assets and Current liabilities on the face of the Balance Sheet.

Rounding off rule amended as compared to old schedule VI.
Turnover <Rs 100 crores:

Nearest hundreds, thousands, lakhs or millions or decimals

thereof.
Turnover >Rs 100 crores:

Nearest lakhs or millions or decimals thereof.

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Revised Schedule VI

Any Item of income or expenditure exceeding Rs 1 lakh or 1% from revenue from

operations (earlier Rs 5000 or 1% of total revenue) will need to be separately disclosed

in the notes to the statement of profit and loss .

The Revised Schedule VI has eliminated the concept of Schedules and such information
is now to be furnished in the Notes to Accounts.
The terms used in the Revised Schedule VI will carry the meaning as defined by the
applicable Accounting Standards.
There is an explicit requirement to use the same unit of measurement uniformly
throughout the Financial Statements including notes to accounts, even for disclosing
value of imports.
Only vertical format of Balance Sheet prescribed.
Statement of Profit and Loss does not mention any appropriation item on its face as
against the old schedule VI. Below the line adjustments to be shown under reserves and
surplus.
Disclosure requirements of the revised schedule VI are in addition to and not in
substitution to the notified Accounting Standards. For instance specific disclosure

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required by AS-24 Discontinuing Operations on the face of the Statement of Profit and
Loss account which is not required by Revised Schedule VI.
Disclosures required by the Acts will continue to be made in the Notes to Accounts. For
instance:
Separate disclosure required by Section 293A of the Act for donations made to
political parties.
Disclosures required under the Micro, Small and Medium Enterprises Development

(MSMED) Act, 2006

Classification of assets and liabilities into current and non-current.
Balance between too much aggregation and too much information should be maintained
while making disclosures. Principles of aggregation in lAS1 are as under:
Dissimilar items must be presented separately.
If an individual item is not 'sufficiently material', it may be aggregated.
What is not sufficiently material on the face of financial statements may be sufficiently material for
the purpose of Notes.
(Presentation on revised schedule VI by Pooja Gupta)

A company needs to present comparative information for disclosures required under

Revised Schedule VI even if their current period amount is Nil. (FAQs on revised schedule VI) For
any clarification on issues, reference should be made to such material, which is official
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and recognized i.e Companies Act, Accounting Standards, Revised Schedule VI and ICAI
publications. (FAQs on revised schedule VI)

Disclosures dispensed off

Information regarding licensed capacity, installed capacity and actual production

Quantitative details of items purchased and consumed by manufacturing company

Quantitative details of items by trading company
Disclosure of brokerage and commission on sales including commission paid to selling

agents
Disclosure regarding managerial remuneration and computation of net profit for

calculation of commission
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Information on investments purchased and sold during the year

Disclosure of Investments, sundry debtors and loans & advances pertaining to

companies under the same management

Maximum amounts due on account of loans and advances from directors or officers of

the company

Classification into current and non current

Current and Non Current asset
An asset shall be classified as current when it satisfies any of the following criteria:
(a) it is expected to be realized in, or is intended for sale or consumption in, the companys
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

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(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.

Current and Non Current liability

A liability shall be classified as current when it satisfies any of the following criteria:
(a) it is expected to be settled in the companys normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(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.

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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 twelve months.

Operating cycle refers to Gross operating cycle. Payment period of trade payables is not

deducted.(#)
Any specific inventory purchased, special production lot or special sale contract should
not be taken into account while calculating the normal operating cycle of an enterprise.

(#)
Disclosure regarding operating cycle
Though not specifically required, a company should disclose its operating cycle,
especially if it is beyond 12 months.
Operating cycles might be different for different class of enterprises and for separate
lines of business. For example, in case of distillery, winer; wines in the process of
maturing will be current assets even if it takes several years to mature. (*)
Sample disclosures for a real estate industry published
Oberoi Realty limited

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The Companys normal operating cycle in respect of operations relating to under
construction real estate projects may vary from project to project depending upon the
size of the project, type of development, project complexities and related approvals.
Operating Cycle for all completed projects and hospitality business is based on 12
months period. Assets & Liabilities have been classified into Current and Non Current
based on Operating Cycle of respective businesses.
Mahindra Life space developers limited
Based on the nature of activity carried out by the company and the period between
the procurement and realisation in cash and cash equivalents, the Company has
ascertained its operating cycle as 5 years for the purpose of Current Non Current
classification of assets & liabilities.
How to compute operating cycle (#)
Carry out the item wise average inventory holding period.
Find out weighted average inventory holding period
Review credit policy with respect to different kinds of receivables (for this purpose
advance from same customer is an offset against receivables)
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Find out weighted average collection period
Lead-time for procuring raw material (time taken by the supplier from the order to
delivery) should be included in the operating cycle.
Example for calculation of operating cycle
Given:
Holding period of raw material

5 months

Holding period of finished goods

4 months

Production cycle

month

Collection period of trade receivables

3 months

Payment period of trade payables

3 months

Calculation of operating cycle

Gross operating cycle would be 12 months (sum of all the above) trade payables are
not to be deducted.

Practical Issues on Current and Non Current classification

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Inventories (#)
How to determine inventories as current/non-current?
Firstly, apply the operating cycle criteria using age analysis from the date of
acquisition.
Date of acquisition is as under:
Particulars
Raw material inventories
Work in progress
Finished stock
Stock in trade
Spares and consumables

Date of acquisition
Date of purchase
Date of commencement of process
Date on which production completed
Date of purchase
Date of purchase

If the inventory holding period falls within the operating cycle, then the inventory is
current. For inventory having holding period beyond op. cycle, go to the second test
as mentioned here.

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Secondly, inventories which by age analysis are classified as non current are tested
for consumption/realisability within 12 months after reporting date. If it is realized
within 12 months, it is current. Otherwise, we go to the third stage test.
Thirdly, assets held primarily for the purpose of being traded are to be classified as
current assets. However, if the inventories are not sold within the normal operating
cycle or after 12 months of reporting date, held for trade status becomes doubtful
Illustrations: Stock taking and age analysis carried out for a company reflects the
following.
S.No.

1.a
1.b
2.a
2.b
2.c

Item

Spares
Finished goods
Raw materials

Amount

Age analysis

Planned

(Rs in

upto

sales/

millions)

reporting

consumpti

date

on

100
100
100
200
200

(in months)
39
15
9

1.07.12
1.02.13
1.11.12
1.07.13
1.05.12

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2.d

100

1.03.12

Operating cycle of the company -6 months

Reporting date-31.03.12
Analyse the same for current/non-current classification
Solution:
On the basis of first step for checking operating cycle criteria all the above are non
current
On the basis of second step for checking the realisabilty/consumption within 12
months of operating cycle- Items under 2.b i.e finished goods are not expected to be
realized by 31.3.13 and hence classiy as non current
On the basis of third step for checking the condition of primarily held for trading- Since
the inventories are held for trading, they are classified as Current.
Hence all the inventories are considered as current.
Y ltd purchased raw material but the product line is temporarily discontinued because
of legal dispute. Reporting date of the company is 31.3.12. The board estimates the
expected date of consumption of raw material within 6 months i.e 30.06.2012. In case
dispute not settled the raw materials will be sold to other manufacturer.
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Classification: Inventories should be classified as current on the reporting date.
Basis for classification: Though the raw material are slow moving, the company
expects to consume/realize the same till 30.06.12 which is within 12 months of the
reporting date.
Conclusion: Generally, the inventories of raw material, work in progress and finished
goods are classified as non current in very abnormal cases. But inventories of spares
should be analysed for current and non current classification.

Trade payables and Trade Receivables (#)

How to classify trade receivable/payable as current/non current?
They are classified as current if:
they are expected to be settled within the companies operating cycle
expected to be realized /due to be settled within 12 months after the reporting
period.
Date of acquisition is as under:
Particulars
Trade

Date of acquisition
Date of sale

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receivables
Trade payables

Date of purchase

Illustrations:
Trade payables
Reporting date- 31.3.12
Trade payable expected to be settled -01.05.13
Operating cycle of company- 8 months
Classification -Non Current
Basis of classification-Not expected to be settled within operating cycle or upto 12
months from reporting date i.e 31.03.13.
Trade Receivables
Trade receivable recognized on 01.07.2010
Operating cycle- 12 months
Reporting date- 31.03.2011
Contract date of realization-30.06.12
Classification- Non Current
Basis for classification-Not expected to be settled within the companys operating
cycle i.e 30.06.11 and not expected to be realized within 12 months of reporting
period i.e 31.03.12
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Analysis of other assets/liabilities into current and non current

(#)
How to determine the classification into current/non-current?
To check the expected realisability and settlement within 12 months after reporting
date. The concept of operating cycle is not applied to assets and liabilities other than
inventories, trade receivables and payables.

Illustrations:
Investments

A ltd invested in equity shares of a company. It intends to sell the shares within 12
months of Reporting Date. Operating cycle of the company is 14 months.
Classification: Current, since it is expected to be sold within 12 months from the

reporting date. Operating cycle period irrelevant.

A ltd invested in GOI bonds of Rs 500 lacs maturing on 30.09.10 and Rs 1000 lacs
maturing on 30.06.11. The reporting date of the company is 31.03.10. The original
maturities of the bonds was 10 yrs.

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Classification: Bonds worth Rs 500 lacs maturing on 30.09.10 would be considered as
current.
Bonds worth Rs 1000 lacs maturing on 30.06.11 would be considered as
non-current.
It is important to note here that the original maturity has nothing to do with the

classification. It is only the remaining maturity that matters.

An entity has acquired leasehold land which has original lease period of 30 yrs and
remaining lease period as on reporting date is 6 months.
Classification: Investment property is classified as non current by nature and hence
should not be reclassified into current unless classified as held for sale within 12

months.
A company has its investment in preference shares, which are convertible into equity
shares within one year from the balance sheet date.
Classification: Since realization is not into cash and cash equivalents, it will be treated
as non-current.

Advances and deposits

Mobilization advance given to contractor for revenue purpose.

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Classification: on the basis of estimated billing schedule, the portion of advance which
is projected to be adjusted within 12 months after the reporting date is classified as

current and balance is classified as non current.

Loans and advances given to employees
Classification: should be bifurcated into current and non-current portion considering
the recovery within/after 12 months of the balance sheet date determined on the

basis of planned recovery schedule of such advances.

Security deposits
Classification: Normally classified as non-current, unless there is evidence that a
deposit shall be withdrawn within 12 months.

Loans

Entity enjoys the right for discretionary roll over of loan for at least a period of 12
months from the reporting date.
Classification: Since the company has a discretionary right to roll over the period of
loan, the same would be classified as non-current.

Breach of loan clause resulting into loan repayable on demand on call from
lender

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Classification:
As per IFRS : If such breach takes place before the balance sheet date, loan should be
classified as current. Such classification would not change even if the lender issues
letter after the balance sheet date but before the authorization of accounts stating
that the payment will not be demanded. Such a case only becomes the basis for
disclosure of a non adjusting event as per IAS 10, Events after balance sheet date.
As per ICAI guidance note on revised schedule VI: In case of minor breach in terms of
contract the loan should not be treated as payable on demand and should therefore

be considered as current/non-current on the basis of original payments terms.

However, it may be noted that schedule VI does not cover these classification issues.
An entity raised a loan from bank which it has rescheduled for pre-payment after the
reporting date but before the authorization of accounts.
Classification: As per IAS 1, the entity should classify the loan as current if it is due for
settlement within 12 months from the reporting date even if as per the original terms
the loan is payable after 12 months from the reporting date.

Provisions
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Warranty provisions
The entity should estimate the amount of expenses to be incurred within 12 months
after reporting date and should classify the same as current.
Provisions for employee benefits under defined benefit scheme
Provisions which fall due within 12 months after the reporting date should be classified
as current provisions. Segregation from actuary should be sought for such
classification while obtaining actuarial report.

Funded and unfunded post-employment benefit obligations

Amount due for payment to the fund within 12 months created for this purpose is
treated as current liability. For instance in case of contract with LIC, if the LIC
demand is known, then that portion will be reflected as a current liability. If the
actuarial valuation is higher, in that case the difference between the actuarial
valuation and the LIC demand will be treated as a long term provision. (@)
Regarding unfunded post-employment benefit obligations, amount of obligation
attributable to employees who have already resigned or are expected to resign is a
current liability. The remaining amount attributable to other employees is classified
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as non-current liability. If the management believes that the amount of current
liability is not material, the entire amount may be classified as non-current

Others

Security deposit received

The company has received security deposit from its customers / dealers. Either of 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.
Classification:

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. However, can be treated as non-current as based on
past experience, only 2-3 % of deposits have been withdrawn in the past.

Mat credit /service tax credit available

To the extent MAT credit is expected to reverse within 12 months It is current.

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Revised Schedule VI
Professional judgment is to be applied for service tax credit receivable

Presentation, Classification and Disclosure requirements

as per Revised Schedule VI- SIGNIFICANT ISSUES
Part I. Balance Sheet
I.EQUITY AND LIABILITIES
1. Shareholders fund
(a) Share Capital
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Numbers of shares held by each shareholder holding more than 5% of shares on
balance sheet date to be disclosed.
Calls unpaid on shares are to be disclosed separately as per the Revised Schedule
VI, as against shown as a deduction from called up capital in the case of old schedule
VI. However, the unpaid amount towards shares subscribed by the subscribers of the
Memorandum of Association should be considered as 'subscribed and paid-up capital'
in the Balance Sheet and the debts due from the subscriber should be appropriately
disclosed as an asset in the balance sheet.
Calls unpaid by directors and officers of the company, needs to be disclosed as
against only directors in old schedule VI.
Disclosures regarding preference shares
AS-30, 31 and 32 regarding financial instruments recognition and measurement,
disclosures are yet to be notified and section 85 of the companies act describes
preference shares as capital. Therefore, Preference Shares would be classified as
Share Capital. Preference shares of which redemption is overdue should continue to
be disclosed under the head Share Capital

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Reconciliation of the number of shares outstanding at the beginning and at the end of
the reporting period is to be disclosed separately for both Equity and Preference
Shares and for each class of share capital within Equity and Preference Shares.
The requirement of disclosing the source of bonus shares is omitted in the Revised
Schedule VI.
Proposed increase

in

share

capital

arising

out

of

agreed

conversion

of

debentures/bonds/loans need to be disclosed.

(b)

Reserves and Surplus

Revised Schedule VI does not lays down requirement of transferring capital profit on
reissue of forfeited shares to capital reserve, however since profit on re-issue of
forfeited shares is basically profit of a capital nature and, hence, it should be credited

to capital reserve.
The terminology used under revised schedule VI for excess of issue price of shares
over their face value is Securities Premium Reserve as against Securities Premium

Account referred to in the act. The terminology of the Act should be used.
The Revised Schedule VI requires Share Options outstanding account to be shown as a
part of Reserve and Surplus instead of a separate line item. It may be noted that the

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disclosure of share option outstanding under reserves and surplus would also impact
the balance of reserves and surplus to be considered for compliance with various
provisions of law. Thus the balance of share options outstanding account would now
be considered as part of the reserves to determine the applicability of Companies
(Auditors Report) Order, 2003 (CARO).

The reserves not specifically mentioned in the schedule are to be classified under
other reserves. The amount of each reserve however, needs to be shown separately.
For example reserves to be created under other statues like Tonnage tax reserve to be
created under Income tax act.

(c)

Money received against share warrants

Share warrants are financial instruments which give the holder the right to acquire
equity shares. Since shares are yet to be allotted these are not reflected as part of
Share Capital but as a separate line-item Money received against share warrants.

2. Share application money pending allotment

Share application money not exceeding the issued capital and to the extent not
refundable is to be disclosed under this line item. The amount of share application

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money received over and above the issued capital or where minimum subscription

requirement is not met should be shown under the head Other Current Liabilities
Various disclosures such as terms and conditions, no. of shares, amount of premium,
period etc need to be made in respect of amounts classified under both Equity as well

as Current Liabilities, wherever applicable.

Calls in advance is not part of the share capital and need to be reflected under other
current liabilities.
Share suspense account
Sometimes company agrees to issue shares to the vendor against purchase of assets
or in a scheme of amalgamation agrees to issue shares to discharge purchase
consideration. If the assets have been purchased but the shares against the same
have not been issued till the balance sheet date, the same should be reflected as
share suspense account as separate heading reflecting only the face value of such
shares. The amount of premium should be reflected under reserves and surplus as
share premium suspense account.
As per revised schedule VI share suspense account and share premium suspense
account should be classified under share application money pending allotment. The

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reason for the same being that consideration for the same has been received in kind
but shares have not been issued. (#)

3. Non current liabilities

(a) Long-term borrowings
Long-term borrowings shall be classified as:
(i) Bonds/debentures;
(ii) Term loans;
- from banks;
-from other parties;
(iii)Deferred payment liabilities; ($)
Deferred payment liability would include any liability for which payment is to be made
on deferred credit terms. Only those portions of deferred payment liabilities that are
non-current shall be disclosed under long-term borrowing. Examples of deferred
payment liabilities include:
deferred sales tax liability
deferred payment for acquisition of fixed assets
(iv)Deposits;
(v)Loans and advances from related parties;
(vi)Long term maturities of finance lease obligations;
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(vii)Other loans and advances (specify nature).

The phrase "long-term" and term loan has not been defined under Revised Schedule
VI, definition of non current liability may be used as a synonymic for long term
liability. Term loans would constitute a having a fixed or pre-determined maturity
period or a repayment schedule.
Long term borrowings to be classified as secured and unsecured and nature of

security to be specified in each case.

Disclosure of all defaults in repayment of loans and interest to be specified in each
case. Loan relates to all items listed under the category of borrowings such as
bonds/ debentures, deposits, deferred payment liabilities, finance lease obligations,
etc. and not only to items classified as loans such as term loans, or loans and
advances ,etc.
Earlier no such disclosure was required in the financial statements and such defaults
were to be reported under Companies auditors report order. The disclosures under
CARO still continues.

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Disclosures as to period and amount of continuing default in case of long-term
borrowing and default in case of short-term borrowing as on the Balance Sheet date is
required.
If the default has been made good after the balance sheet date but before the
approval of the financial statements, it is advisable that this fact is mentioned
Defaults pertaining to non compliance with debt covenants need not be reported.
Current maturities of all long term borrowings will be disclosed under other current
liabilities.
Personal security given by promoters, other shareholders or any third party for any
borrowing, would not constitute borrowing as secured. However, disclosure is
required.

(b) Deferred tax liabilities (Net)

(c) Other Long term liabilities
(d) Long-term provisions
Provision

for warranties to be included here.

Employee benefits
Leave encashment:

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o

To the extent, the employee has unconditional right to avail the leave, the same

needs to be classified as current even though the same is measured as other

long-term employee benefit as per AS-15.
o In case of complexities as to the term of employee contract and leave policy, the
amount of Non-current and Current portions of leave obligation should normally be
determined by a qualified Actuary.

4. Current liabilities
(a) Short-term borrowings

Short-term borrowings will include all loans repayable within a period of 12 months

from the date of the loan.

In case of loans guaranteed by directors or others, disclosure required. Others will
include non-related parties also.
Current maturity of long-term borrowings should not be classified as short-term
borrowing. They have to be classified under Other current liabilities.

(b) Trade payables

Amounts due under contractual obligations not to be included within Trade payables
unlike the old schedule VI which included the same under sundry creditors.
Contractual obligations include:

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dues payables in respect of statutory obligations like contribution to provident
fund,
purchase of fixed assets
interest accrued on trade payables

(c) Other current liabilities

Current maturities of long term debts to be shown under this head.
Trade Deposits and Security Deposits to be classified here.
Statutory dues such as Withholding taxes, Service Tax, VAT, Excise Duty etc to be
disclosed here.
Unclaimed dividend is payable on demand and is therefore to be classified as current
liability.
Bonus payable within 12 months of balance sheet date
Accumulated leaves outstanding
Funded post benefit employee contributions to the extent of current portion
Deferred revenue is to be disclosed under this head even if the related service is not
expected to be performed within 12 months of the reporting date.
Interest accrued and due on borrowings to be disclosed here
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Interest accrued but not due on borrowings to be disclosed here to the extent of
current portion. Non current portion to be disclosed under other non current liabilities.

(e) Short-term provisions

Provision for dividend, Provision for taxation (unless it relates to disputed tax case not
expected to be settled within 12 months). Provision for warranties, etc. would be
disclosed here.
Provision for proposed dividend needs to be disclosed only in the notes as per the
revised schedule. However, to comply with the requirements of AS-4 and Events
Occurring after the Balance Sheet date the same needs to be adjusted in the balance
sheet. Hence, the same needs to be disclosed under provisions in the balance sheet in
addition to the requirements of the notes.

Contingent Liabilities

The meaning of Contingent Liabilities has to be construed from AS-29 Provisions,

contingent liabilities and contingent asset.

Contingent liability would include:
Claims against the company not acknowledged as debts.
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Guarantees
When a company undertakes to perform its own obligations, and for this purpose issues
a "guarantee", it does not represent a contingent liability. For instance performance
guarantees and counter guarantees given by the company to its bankers does not
constitute guarantee.

Commitments
The word commitment has not been defined in the Revised Schedule VI. The Guidance
Note on Terms Used in Financial Statements issued by ICAI defines Capital Commitment
as future liability for capital expenditure in respect of which contracts have been made.
Hence, drawing inference from such definition commitment would imply future liability for
contractual expenditure.
Commitments would include:
Estimated amounts of contracts remaining to be executed.
Uncalled liability on partly paid shares/other investments
Amount of dividends proposed to be distributed to equity/preference shareholders
Commitments for non-cancellable leases, are required by AS 19, Leases

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Employee contracts related to commitment ESOPS or pre mature termination
compensation
Purchase or sale commitments
Commitments under construction contract by the contractor
Commitment to fund subsidiaries, associates and joint ventures
Commitments of inter corporate loans or guarantees
The management should disclose non cancellable contractual commitments (i.e
cancellation of which would result in penalty disproportionate to the penalty
involved) which are material in understanding the financials of the company. To
illustrate a few buy-back arrangements, commitments to fund subsidiaries and
associates, non-disposal of investments in subsidiaries and undertakings, derivative
related commitments, etc

II. ASSETS
(1) Non-current assets
(a) Fixed assets
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(i) Tangible assets

Office equipment has been introduced as a separate line item while dropping items
like live stock, railway sidings, etc. However, if the said items exist, the same should
be disclosed as a separate asset class.

A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and
end of the reporting period showing additions, disposals, acquisitions through business

combinations and other adjustments and the related depreciation and impairment
losses/reversals shall be disclosed.
Asset disposals through demergers may also be disclosed separately for each class of
asset.
Capitalization of exchange differences to be shown as other adjustments separately
for each class of asset.
Reconciliation of opening and closing impairment also needs to be made like
depreciation.
Amounts written-off on reduction of capital or revaluation of assets or where 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. Disclosure
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specifying the amount and date should be given by way of note for the first 5 yrs
subsequent after such reduction or increase. However, details required by AS 10 will
have to be given as long as the asset is held by the company.
Assets under lease are required to be separately specified under each class of asset. In the
absence of any further clarification, the termunder lease should be taken to mean assets
given on operating lease in the case of lessor and assets held under finance lease in the
case of lessee.
Leasehold improvements should continue to be shown as a separate asset class.
Assets belonging to discontinuing operation should be classified as current since they
are expected to be realized within 12 months.

(ii) Intangible assets

Classification of intangible assets introduced.

Revaluation of intangible assets is not permitted by AS 26.
Other disclosures mentioned above for Tangible assets are also applicable to
Intangible assets.

(iii) Capital work-in-progress

Capital advances should be included under Long-term loans and advances and not
under capital work-in-progress.

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(iv) Intangible assets under development

(b) Non-current investments
Definition of current (and consequently non-current) investment as per the revised
Schedule does not exactly correspond to AS 13,

Accounting for Investments which

defines current investment as an investment that is by its nature readily realizable

and is intended to be held for not more than one year from the date on which such
investment is made. As per the definition of current asset in the revised Schedule, the
period of realization is within 12 months after the reporting date.
Applying both AS 13 and requirements of revised Schedule VI:
Generally, an investment that qualifies as a current investment under AS 13 would also
fall under the current category under the revised schedule.
Investments that qualify as long-term investments under AS 13 may be bifurcated into
current and non-current categories of the revised Schedule as follows:
those which are expected to be realized within twelve months after the reporting date
may be presented in the current category as current portion of long-term investments
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under relevant sub-heads. Other long-term investments may be presented under non
current category.

Partly paid investments to be separately disclosed.

Investment carried at other than cost to be disclosed separately specifying the

method of valuation.
Part redemption of debenture held as investment to be bifurcated into current and non

current.
Trade investments has not been defined under Revised Schedule VI or in Accounting

Standards. In general parlance, it would mean investment made by a company in

shares or debentures of another company, to promote the trade or business of the

first company.
Diminution of value of investment
The amount of provision for diminution (other than temporary diminution) in value
netted-off for each long-term investment, should be disclosed separately. Further, the
aggregate amount of provision made in respect of all noncurrent investments should
also be separately disclosed to comply with the specific disclosure requirement in
Revised Schedule VI.

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Till the time the term Controlled special purpose entities is defined by the revised
schedule VI, accounting standard or the act, no separate disclosure under this head
required.
Nature and extent i.e number and face value of shares to be disclosed separately in
each body corporate. Further disclosure as to fully paid or partly paid investments
need to be disclosed.
Investment in Partnership firms requires disclosure as to the name of the partners,
total capital and share of each partner in the profit. Such information to be given as at
the companies balance sheet date. In case of difference in the date of balance sheet
of firm and company necessary adjustments should be made to give effect to
necessary transactions. In case of difference in reporting dates of more than 6 months
separate disclosure required.
Investments in partnership firms will not include investments in limited liability
partnerships(LLPs) since as per LLP Act, LLP is a body corporate.Investment property
required to be disclosed here. However IFRS requires its presentation as a separate
line item.
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AS 13 Accounting for Investments, defines an investment property is an investment in
land or buildings that are not intended to be occupied substantially for use by or in the
operations of the investing enterprise.

(c) Deferred tax assets (net)

(d) Long-term loans and advances
Capital advances are to be reflected here as against capital work in progress as per
old schedule VI. Further, bifurcation of capital advances into current and non current
not required irrespective of when the fixed asset is expected to be received.
Allowance for bad and doubtful loans and advances shall be disclosed under the
relevant heads separately.
Disclosures for loans and advances to related parties beyond the requirements of AS18 related party disclosures not required.
Advance tax, CENVAT credit receivable, VAT credit receivable, Service tax credit
receivable, etc. which are not expected to be realized within 12 months or operating
cycle whichever is longer is to be disclosed here.
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(e)Other non-current assets

Long term Trade Receivables to be disclosed under this head.

Requirement of disclosure of trade receivable exceeding 6 months from the date they
become due for payment is not required in case of non current portion of trade
receivables.

(2) Current assets

(a) Current investments
The disclosure requirements mentioned above to non-current investments to the
extent applicable, will also apply to current investments.
No requirement to classify investments into trade & non-trade in respect of current
investments.

(b) Inventories
(c) Trade receivables
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Term sundry debtors has been replaced with trade receivables. Trade receivables
are defined as dues arising only from goods sold or services rendered in the normal
course of business. Hence, amounts due on account of other contractual obligations
can no longer be included in the trade receivables.
Separate disclosure of trade receivables (only current portion) outstanding for a
period exceeding six months from the date the bill/invoice is due for payment as
against the date the bill/invoice is raised.
Determining of due date for payment
Companies having large number of customers need to define credit terms for all
customers
In absence of due date specifically agreed upon, normal credit period allowed by the
company should be considered, depending upon the nature of goods and services
sold and type of customers
In cases where due date for payment is not agreed upon, normal credit period
allowed by the company would be taken for computing the due date depending
upon nature of goods sold and type of customers.
(d)

Cash and cash equivalents

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AS-3 cash flow statement, states that deposits with maturity of three months or less
from the date of acquisition is considered as cash equivalent. Therefore, deposits with
original maturity of less than 3 months would form part of cash equivalents.
To comply with the requirements of Accounting Standard-3 on cash flow statements
and to resolve the conflict with revised schedule VI, the caption cash and cash
equivalent would be changed to cash and bank balances which may have two sub
headings namely cash and cash equivalent and other bank balances. The former
would include cash and cash equivalent in accordance with AS-3 and the remaining
items would be covered under other bank balances. Accordingly only deposits with
original maturity of three months or less only should be classified as cash equivalents.
Bank deposits with original maturity of more than 12 months needs to be disclosed
separately.
This presentation is due to the following reasons:
Earmarked bank balances example for unpaid dividend to be disclosed separately.
Repatriation restrictions in respect of cash and bank balances shall be separately
stated here.

(c) Short-term loans and advances

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Allowance for bad and doubtful loans and advances shall be disclosed under the
relevant heads separately.

(d) Other current assets

This is an all inclusive heading, which incorporates items which does not classify

under any other asset category.

Unbilled Revenue, unamortized premium on forward contracts etc to be included
under this head. Miscellaneous expenditure class of asset has been deleted from

revised Schedule VI
Revised Schedule VI does not mention any disclosure for the unamortized portion of
expense items such as share issue expenses, ancillary borrowing costs and discount
or premium relating to borrowings. Therefore, they would be disclosed under the head
other current/ non-current assets, depending on whether the amount will be
amortized in the next 12 months or thereafter.

Part II. Statement of Profit and Loss

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I.

Revenue from operations

Revenue includes only the gross inflows of economic benefits received/receivable by

the entity. Amounts collected on behalf of third parties is such as sales tax, value added
tax etc are not economic benefits which flow to the entity and should be excluded from
revenue

Revenue from operations in case of company other than finance company shall

include:
a.Sale of products
b.Sale of services
c. Other operating revenue
To comply with the disclosure requirements of AS-9 Revenue recognition, excise duty
has to be disclosed on the face of Statement of Profit and Loss. 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.

Other Operating revenue is revenue arising from the principal or ancillary revenuegenerating activities, but which is not revenue arising from the sale of products or

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rendering of services. For instance sale of manufacturing scrap arising from operations

for a manufacturing company.

Revenue from operations in case of finance company shall include revenue from:
a.Interest
b.Other financial services
The term finance company has would be construed to include companies carrying
business of Non banking financial institution as defined under the Reserve bank of
India act.

II.

Other Income

Other Income shall be classified as :

(a) Interest Income
(b) Dividend Income
(c) Net gain/(loss) from investment
Losses and gains are netted off, however if resulting is a loss the same should be

disclosed under other expenses.

(d) Other non operating Income
The aggregate of other Income to be disclosed on the face of the Profit and loss

account.
Net foreign exchange gain should be classified as other income.

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As per old Schedule VI, parent company was 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. As per revised schedule VI,
dividends should be recognized as income only when the right to receive dividends is
established as on the Balance Sheet date. Further, necessary disclosures as per AS-5
should be given in the notes to accounts of the subsidiary company.
As required by AS 13 Accounting for Investments, other income items such as
interest income, dividend income and net gain on sale of investments should be
disclosed separately for Current as well as Long-term Investments.

I. Expenses

(a) Cost of materials consumed

If the company classifies packing material as raw material, its consumption will be
shown here. Further, it would be better to show the description as raw material
including packing material in this case.
Internally manufactured Intermediates and components are to be excluded. They
are to be disclosed as under:

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Such components if sold without further processing should be classified as
finished products and if further processed should be classified as manufactured
components. In case of hybrid, the same should be classified as manufactured
components.
The consumption of raw material should be on actual basis rather than on derived
figure (i.e deducting the closing inventory from the total of the opening inventory
and purchases) as this would conceal the figures of losses and wastage. Where the
actual figure could not be determined, it is on the circumstances of the case to
mention that the consumption is on derived figures.
Shortages, losses and wastage which are within the norms and margins
established by the company, should be included in the consumption. On the other
hands shortages beyond the margins should not be included here.
Stores, fuel, spare parts etc, which do not enter physically into the composition of
the finished product, would not constitute raw materials.
Internal transfers from one department to another should be disregarded in
determining the consumption figures to be disclosed.

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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. The
broad heads need to be decided based on considerations of materiality and
presentation of true and fair view of the Financial Statements.
Broad head would be determined as per the nature and circumstances of the
business. Ordinarily broad heads would constitute items covering 10% of total
sale/services value.

(b) Purchases of Stock-in-Trade

(c) Changes in inventories of finished goods work-in progress and
Stock-in-Trade
(d) Employee benefits expense
Where a separate fund is maintained for Gratuity payouts, contribution to Gratuity
fund should be disclosed under the sub-head Contribution to provident and other
funds.
Salaries of persons engaged under a contract of service should be included and
those engaged under a contract for services should not be reflected here.
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Contribution to funds to be disclosed under the head contribution to provident and
other funds. Penalties and other similar amounts paid to the statutory authorities
not to be disclosed here. They are to be disclosed under other expenses.

(e) Finance costs

Finance cost to be bifurcated into
(i)
Interest cost
Finance charges on finance lease to be included under interest cost.
Interest on shortfall in payment of advance tax should be classified under finance
cost.
Penalties under income tax act which are compensatory in nature should be treated
as interest cost.
Net exchange gain/loss on foreign currency borrowings to the extent considered as
an adjustment to
interest cost needs to be disclosed separately as finance cost
(ii)
Borrowing cost
Amortization of issue expenses and discounts as per AS-16 are to be included here.
Commitment charges, loan processing charges, guarantee charges, loan facilitation
charges, discounts/premium on borrowings, other ancillary costs incurred in

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connection with borrowings, or amortization of such costs to be included under
Borrowing costs.
(iii) Net gain/loss on foreign currency transactions

(f)
(g)

Depreciation and amortization expense

Other expenses
Wealth tax paid is not tax on income and should be included in Rates and taxes
under other expenses.

(h) Exceptional Items

As per AS-5, Net Profit or Loss for the period, Prior period items and changes in
Accounting Policies Exceptional items are 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.
Few instances of the same are:
Written down of inventories to net realizable value
Disposal of items of fixed assets
Disposal of long term investments
Litigation settlement

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Other reversals of provisions

(i) Extraordinary Items

Extraordinary items are items of income or expenses that arise from events or
transactions that are clearly distinct from the ordinary activities of the enterprise
and, therefore, are not expected to recur frequently or regularly.
Few instances of the same are:
Earthquake
Profit/loss arising on disposal of brand
Reversal of provision against advance and diminution in value of investment
in a subsidiary consequent to amalgamation.

(j) Prior period items (net)

Revised schedule VI does not require separate disclosure of prior period items on
the face of the profit and loss account. However, to comply with the requirements of
AS-5, the same should be disclosed on the face of the profit and loss account.

(k) Tax Expense

Excess/Short provision of tax relating to earlier years should be separately
disclosed.

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Other disclosures
Value of imports calculated on C.I.F. basis by the company needs to be
disclosed in respect of :
(a)
Raw materials;
(b)
Components and spare parts;
(c)
Capital goods.
Disclosure is required in respect of imported capital goods in the statement of profit
and loss account.
It is undoubtedly anomalous to disclose the value of imports of capital goods by way
of a note on the Statement of Profit and Loss, since by the very definition, capital
assets do not form part of the Statement of Profit and Loss. However, since this is a
specific requirement of revised schedule VI, the same has to be met with.Disclosure
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under this requirement relates to the imports as such. It is not linked with the
consumption of the material or utilization of capital goods.
The value of imports of raw materials, components and spare parts and capital goods
is to be disclosed irrespective of whether or not such imports have resulted in an
expenditure in foreign currency.
If for any reason, there is some practical difficulty in disclosing the value of the
imports on C.I.F. basis, a footnote should be appended to the statement indicating the
precise method by which the value of imports has been arrived at. For example, it
may be stated that, because of practical difficulties in disclosing the value of imports
on C.I.F. basis, such disclosure has been made on F.O.B. basis.
If the values directly available from its records would be those relating to F.O.B. terms,
then In such cases, a standard formula may be applied in order to convert the F.O.B.
values to C.I.F. For example, the companys accountant may calculate that a loading
of, say, eleven per cent on the F.O.B. values is ordinarily adequate and correct in order
to convert the F.O.B. values to C.I.F.
If a company purchases import entitlements and thereafter imports materials on the
basis of those entitlements, the value of such imports would need to be disclosed.
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Value of imports should include goods which are in transit on the balance sheet date
provided risk and rewards of ownership has passed to the purchasing company.

Expenditure in foreign currency during the year

Expenditure incurred in foreign currency on account of royalty, know-how, professional
and consultation fees, interest and other matters needs to be disclosed.
Amount to be disclosed on the basis of expense booked and not on the basis of
remittance. It would be disclosed in Indian Rupee
In cases where taxes at source have been deducted while making payments, it is

preferable to disclose the gross amount of payment.

Total value of 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
need to be separately disclosed.
Spare parts would not include stores.
This disclosure is in addition to the disclosure pursuant to import of raw material etc,
mentioned above.

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Imports should be construed as direct imports as well as indirect imports (i.e imports
made by an independent principal) made to the companys knowledge.
Classification of imported and indigenous components is to be restricted to purchased

components only ignoring any components manufactured internally.

Total amount remitted during the year in foreign currencies on account of dividends
needs to be disclosed.
Total number of nonresident shareholders, the total number of shares held by them on
which the dividends were due and the year to which the dividends relates needs to be
separately disclosed.
If dividend is paid to non resident in Indian rupee disclosure not required.
Information is to be furnished in the year of actual payment of dividend i.e on cash
basis rather than accrual basis.
In case no dividend in foreign currency is remitted during the year, no need to disclose

information in respect of non resident shareholders.

Earning in foreign exchange need to be disclosed bifurcated into:
(a)
export of goods calculated on F.O.B. basis;
(b)
royalty, know-how, professional and consultation fees;
(c)
interest and dividends; and
(d)
other income (indicating the nature thereof).

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Disclosure to be made on accrual basis.
In case of earnings received net off tax, the gross amount needs to be disclosed.
Synchronization of Cash flow with revised schedule VI format

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 outflows from current and noncurrent components of various line items separately.

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Implementation challenges
Number of implementation challenges would be faced by companies in the first year of
application of the revised Schedule. While some of these challenges are general in nature,
there would be many specific issues faced by companies from different sectors with
completely diverse operating environments in bringing the presentation of their financial
information

in the

revised

universal

format.

Increased

onus

is

also placed

on

managements judgement in determining the presentation of assets and liabilities.

To name a few the under mentioned areas would require concern of the management
Significant conceptual changes specially with respect to classification of assets and
liabilities into current and non-current and operating cycle of a company.

Breach of loan covenants.

Contingent liabilities and commitments

Ratio analysis and its impact on financial position of company

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Documentation and collection of evidence to support classification

Interpretation vis a vis varying requirements in AS, Ind AS, IFRS, CARO and other laws

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Note: The source of information wherever so used for making this presentation has
been mentioned in brackets at the relevant sections. In cases where not specifically
mentioned, the same should be understood to be taken from the Guidance note on
Revised Schedule VI issue by the Institute of chartered accountants of India. Other
credits are from as under:
*Presentation on revised schedule VI by Pooja Gupta
@ FAQs issued by ICAI
# Illustrated guide to revised schedule VI by Dr T.P Ghosh
($) Accounting and audit update by KPMG on Revised Schedule VI

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Thank you for your participation.Your queries or suggestions for improvement are always
welcome and can be submitted via e-mail to [email protected]

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