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MCA has made amendments in Schedule III to the Companies Act 2013 with effect from the 1st day of April, 2021.

Schedule III of the Companies Act 2013 contains the general instructions for preparation of the Balance Sheet and Statement of Profit and Loss of a Company.

Schedule III Amendments

In recent years, there have been substantial changes in the reporting requirement by the auditors, but no such corresponding amendments were made in Schedule-III for the preparation of the financial statements. Thus, to align the company’s financial statements in accordance with the auditor’s reporting requirements, the following amendments have been made

Part I – Amendments corresponding to General instructions for the preparation of Balance Sheet 

  1. A company must round off the figures in the financial statement. The criteria for rounding off shall now be the total ‘income’ instead of ‘turnover’. Previously, the rounding-off was optional for the companies.
  2. The balance sheet shall also include the details of the promotor’s shareholding held at the end of the year and the changes, if any, during the year.
  3. Current maturities of the long-term borrowings shall be disclosed separately under the heading of short-term borrowings.
  4. An aging schedule in respect of trade payables shall be provided for the period covering less than one year, 1-2 years, 2-3 years, and more than 3 years in respect of:

 (a)  Micro Small and Medium Enterprises (MSME);

 (b)  Others;

 (c)  Disputed Dues – MSMEs; and

 (d)  Disputed Dues – Others.

  1. An aging schedule in respect of Trade Receivables shall be provided for the period of less than 6 months, 6 month – 1 year, 1-2 year, 2-3 year, and more than 3 years in respect of:

 (a)  Undisputed Trade Receivables – Considered good

 (b)  Undisputed Trade Receivables – Considered doubtful

 (c)  Disputed Trade Receivables – Considered good

 (d)  Disputed Trade Receivables – Considered doubtful

  1. The word Tangible Assets has been replaced with Property, Plant, and Equipment (PPE).
  2. A reconciliation statement shall be provided in respect of gross and net carrying amount of each class of assets at the beginning and at the end of the reporting period showing additions, disposals, acquisitions, revaluations, and various other adjustments.
  3. The entities in addition to the above, are required to provide the details of any discrepancies of the utilization of specific borrowed funds.

Part II – Additional Reporting Requirement in respect of Regulatory disclosures 

  1. On the basis of CARO 2020, the companies will be required to provide the details of all the immovable property (other than properties wherein the entity is the lessee and the lease agreements are duly executed in favor of the lessee) the title deeds of which are not in the name of the company and where such properties are jointly held with others, disclosure should be provided to the extent of entity’s share.
  2. In case, the entity has revalued its Property, Plant and Equipment, disclosure should be provided whether the revaluation is based on the valuation done by a registered valuer as defined under Rule 2 of the Companies (Registered Valuer and Valuation) Rules, 2017.
  3. The entities shall be required to report whether any loans or advances in the nature of loans have been granted to promoters, KMPs, and other Related Parties.
  4. As a part of the additional requirement, the entities shall be required to provide an Ageing Schedule in respect of:

 (a)  Capital Work-In-Progress (CWIP);and

 (b)  Intangible Assets under developments for less than I year, 1-2 years, 2-3 years and more than 3 years.

  1. In case, any proceedings have been initiated or pending against the entity under the Benami Transactions (Prohibitions) Act, 1988, the corresponding disclosures shall be provided in the financial statements.
  2. The financials of the entity shall be covering certain disclosures in respect of the following transactions:

 (a)  Whether the entity has been declared as a wilful defaulter by any bank or financial institution;

 (b)  Whether the entity has entered into a transaction with such entities whose name has been struck off under Section 248 of the Act; and

 (c)  Whether any charge is pending to be registered with the Registrar of the Companies.

  1. As per the Clause (87) of the Companies Act, 2013, an entity has to comply with the number of layers of subsidiaries. In case, an entity has not complied with the number of layers, the name and the CIN of the companies beyond the specified layers shall be disclosed as a part of the financial statements of an entity.
  2. Additionally, the entities shall be required to disclose the certain ratios, namely:

 (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; and

 (k)  Return on investment.

  1. Details in respect of Utilization of Borrowed funds and share premium shall be provided in respect of:

 (a)  Transactions where an entity has provided any advance, loan, or invested funds to any other person (s) or entity/ entities, including foreign entities.

 (b)  Transactions where an entity has received any fund from any person (s) or entity/ entities, including foreign entity.

Part III – Amendments corresponding to General instructions for the preparation of Statement of Profit and Loss

  1. Whether the company is covered under Section 135 of the Companies Act, 2013 in respect of Corporate Social Responsibility (CSR)? If yes, the entity is required to provide certain disclosures as a part of its financial statements.
  2. In case, an entity is involved in trading or has invested in Crypto-Currency and Virtual Currency during the financial year, the disclosures in respect of profit and loss on the transaction and the amount of currency held at the reporting date shall be provided in the Notes to Accounts.

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