New Disclosure Requirements for Financial Statement as per Schedule III of Companies Act, 2013

The Ministry of Corporate Affairs (MCA), vide a notification dated 24th March, 2021 has made amendment in Schedule III of the Companies Act,2013 with effect from 1st April, 2021 (Beginning from Financial Year 2021-22). Schedule III defines presentation and disclosures required for preparation of financial statements. The amendment incorporates additional disclosure requirements while preparing financial statements of an Company.

AMENDMENT RELATED TO ADDITIONAL DISCLOSURES REQUIRED IN FINANCIAL STATEMENTS

  • Shareholding of Promoters: –

Under the heading share capital, the company is now required to disclose the shareholding of promoters in the format given below: –

Shares held by the promoters at the end of the year% change during the year
S.No.Promoter NameNo. of Shares% of total shares
Total   
  • Trade Payables Ageing Schedule: –

By the virtue of this amendment, company has to disclose ageing schedule of Trade Payables as per the format given below: –

ParticularsOutstanding for following periods from due date of payment/ transaction 
Less than 1 year1-2 Year2-3 yearMore than 3 yearsTotal
(i) MSME    
(ii) Others    
(iii) Disputed Dues- MSME    
(iv) Disputed Dues- Others    
     
  • Trade Receivables Ageing Schedule: –

By the virtue of this amendment, company has to disclose ageing schedule of Trade Receivables as per the format given below: –

ParticularsOutstanding for following periods from due date of payment/ transaction 
Less than 6 Months6 months – 1 Year1-2 years2-3 yearsMore than 3 yearsTotal
(i) Undisputed Trade Receivables – Considered good     
(ii) Undisputed Trade Receivables – Considered doubtful     
(iii) Disputed Trade Receivables – Considered good     
(iv) Disputed Trade Receivables – Considered doubtful     

  • Capital work in progress (CWIP) and Intangible Assets under development: –

By the virtue of this amendment, Company has to disclose the Ageing schedule of CWIP and Intangible assets in the format given below: –

CWIP/Intangible Assets under developmentAmount in CWIP for a period ofTotal
Less than 1 year1-2 Year2-3 yearMore than 3 year
Projects in Progress   
Projects temporarily suspended   

Where, CWIP/Intangible assets under development have not been completed in given stipulated timeline or has exceeded its cost compared to its original plan, then the “Completion schedule” shall be given, along with the information regarding the expected time and future cost to complete the same.

  • Following Ratios need to be Disclosed: –

(a) Current Ratio

(b) Debt-Equity Ratio

(c) Debt Service Coverage Ratio

(d) Return on Equity Ratio

(e) Inventory turnover ratio

(f) Trade Receivables turnover ratio

(g) Trade payables turnover ratio

(h) Net capital turnover ratio

(i) Net profit ratio

(j) Return on Capital employed

(k) Return on investment.

Apart from above, the company shall explain the items included in numerator and denominator for computing above ratios and reasons need to be given for any change in the ratio by more than 25% as compared to the preceding year.

  • Specific Purpose Borrowed Funds: –

Where the company has not used the borrowings from banks and financial institutions for the specific purpose for which it was taken at the balance sheet date, the company shall disclose the details of where they have been used.

  • Title deeds of Immovable Property not held in name of the Company:

The Company shall provide the details of all immovable property, whose title deeds are not held in the name of the Company, and where such immovable property is jointly held with others, details are required to be given to the extent of Company’s share.

  • Revaluation of Property, Plant and Equipment: –

Where the Company has revalued its Property, Plant and Equipment, the company shall disclose as to whether the revaluation is based on the valuation by a registered valuer.

  • Loans and Advances granted to Related Party: –

Following disclosures shall be made where Loans or Advances in the nature of loans are granted to promoters, directors, KMPs and the related parties: –

  1. Type of Borrower
  2. Amount of Loan and Advance in the nature of loan outstanding.
  3. Percentage to the total Loans and Advances in the nature of loans.
  • Details of Benami Property Held: –

Where any proceedings have been initiated or pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988, the company shall disclose relevant details of the proceedings in financial statements.

  • Funds Borrowed on the basis of Security of Current Assets: –

Where the Company has borrowings from banks or financial institutions on the basis of security of current assets, it shall disclose the following details: –

  1. whether quarterly returns or statements of current assets filed by the Company with banks or financial institutions are in agreement with the books of accounts.
  2. if not, summary of reconciliation and reasons of material discrepancies, if any to be adequately disclosed.
  • Willful defaulter: –

Where a Company is declared as willful defaulter by any bank or financial institutions or any other lender, following details shall be given: –

  1. Date of Declaration as willful defaulter.
  2. Details of such Default.
  • Relationship with Struck off Companies: –

If the Company has any transaction with companies who are struck off under section 248 of the Companies Act,2013, then the company shall disclose the following details: –

  1. Name of Struck off Company.
  2. Nature of transactions with struck off Company.
  3. Balance outstanding from struck off Company.
  4. Relationship with the struck off Company.
  • Registration of charges or satisfaction with Registrar of Companies: –

Details and reason shall be disclosed where any Charges or satisfaction is yet to be registered with the Registrar of Companies beyond the statutory period.

  • Compliance with Approved Scheme of Arrangements: –

Where any Scheme of Arrangements has been approved by the in terms of sections 230 to 237 of the Companies Act, 2013, the Company shall disclose the effect of such Scheme that have been accounted for in the books of account of the Company ‘in accordance with the Scheme’ and ‘in accordance with accounting standards’ and if there is any deviation in this regard that should be explained separately.

  • Utilization of Borrowed Funds and Share Premium: –

Where a Company has advanced or received or invested funds (either borrowed funds or share premium), to any person or entity including foreign intermediary with the understanding that the intermediary shall directly or indirectly lend or invest or provide any guarantee or security to any other person or entity on behalf of company (ultimate beneficiary), then the company shall disclose relevant details in financial statements.

  • Undisclosed Income: –

The Company shall give additional details of any transaction not recorded in Books of Accounts, that has been disclosed as income during the year in tax assessments such as search, survey or any other provisions of Income Tax Act, 1961 and also state whether the previously unrecorded income and related assets have been properly recorded in the books of accounts during the year.

  • Corporate Social Responsibility Activities: –

Where the company covered under section 135 of the Companies Act, the following additional details to be disclosed with regard to CSR activities: –

  1. Total of previous years shortfall,
  2. Reason for shortfall,
  3. Where a provision is made with respect to a liability incurred by entering into a contractual obligation, the movements in the provision during the year should be shown separately.
  • Details of Crypto Currency or Virtual Currency: –

Where the company has traded or invested in Crypto Currency/Virtual Currency during the Financial Year, the following details shall be disclosed: –

  1. Profit or loss on transactions involving those currencies.
  2. Amount of currency held as at the reporting date.
  3. Deposits or advances from any person for the purpose of trading or investing in those currencies.
  • Compliance with number of Layers of Companies: –

Where the company has not complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017, the name and CIN of the companies beyond the specified layers and the relationship/extent of holding of the company in such downstream companies shall be disclosed.

AMENDMENTS IN EXISTING DISCLOSURES OF FINANCIAL STATEMENTS

  • Rounding Off of Financial Statements: –

The Companies now have to mandatorily round off figures of financial statements, depending upon their turnover Total Income

Prior to such amendment, company have an option to round off figures of financial statements on the basis of their turnover.

  • Amendment related to the Balance sheet Presentation: –

By the virtue of this amendment, following highlighted changes are now required to be disclosed on the face of Balance sheet: –

ParticularsNote noFigures as at the end of the current reporting periodFigures as at the end of the previous reporting period
II. ASSETS   
Non-current assets   
(1) (a) Property, Plant and Equipment and Intangible Assets   
(i) Tangible assets Property, Plant and Equipment   
(ii) Intangible assets   
(iii) Capital work-in-progress   
(iv) Intangible assets under development   
  • Amendment related to Statement of Profit and Loss Presentation: –

As per the amendment, the heading “Total Revenue” now shall be written as “Total Income”.

  • Amendment in Notes of Accounts related to Tangible and Intangible Assets: –

Under the Heading “Tangible Assets” and “Intangible Assets”, the following shall be substituted: –

A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing changes due to business combinations or amount of change due to revaluation (if change is 10% or more in the aggregate of the net carrying value of each class of Property, Plant and Equipment) shall be disclosed separately.

Previously, there is no separate disclosure requirement related to amount of change due to revaluation.

AMENDMENTS RELATING TO RECLASSIFICATION OF ITEMS IN NOTES TO FINANCIAL STATEMENTS (FOR NON-IND AS FINANCIAL STATEMENTS)

  • Under the Heading “Short Term Borrowings”, a separate disclosure is required, namely: – “Current maturities of Long-Term Borrowings”.

Previously, it was shown under the heading of “Other Current Liabilities”.

  • Security Deposits shall now be shown under the Heading of “Other Non-Current Assets” instead of “Long-term loans and advances”.

ADDITIONAL AMENDMENTS RELATED TO DIVISION II OF SCHEDULE III (FOR IND AS FINANCIAL STATEMENTS)

  • Under the Sub-Heading Liabilities”, in items “Non-Current Liabilities” as well as “Current Liabilities”, a sub-item shall be inserted, namely- “Lease Liabilities”.
  • Under the Heading of Statement of Changes in Equity, the following new format shall be substituted: –

A. Equity Share Capital

(1) Current Reporting Period

Balance at the beginning of the current reporting periodChanges in Equity share capital due to prior period errorRestated balance at the beginning of the current reporting periodChanges in Equity share capital during the current yearBalance at the end of the current reporting period
     

     (2) Previous Reporting Period

Balance at the beginning of the Previous reporting periodChanges in Equity share capital due to prior period errorRestated balance at the beginning of the previous reporting periodChanges in Equity share capital during the previous yearBalance at the end of the previous reporting period
     
  • Under the heading of “Non-Current Assets” as well as “Current Assets”, “Security Deposits” now shall be shown under the Sub-heading of “Other Financial Assets”, instead of “Loans”.
  • “Long term maturities of finance lease obligations” now shall be omitted under the heading of “Non-Current Liabilities”. Similarly, “Current maturities of finance lease obligations” now shall be omitted under the heading of “Current Liabilities”.
  • Under the heading “Current Liabilities”, Sub-heading “Borrowings”- “Current maturities of Long-term borrowings” shall be disclosed separately. Therefore, the same now shall be omitted from the sub-heading of “Other Financial Liabilities”.

Source: MCA Notification                                                                                           –

Akshay Singhal
Assistant Manager,ShineWing India