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?
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 pre pared 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 i n 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?
(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, irrespe ctive 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 Sch edule 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 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 wi th 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?
Ø Liability written back (net)
Ø Insurance claim
Ø 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.
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.
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 pos ition
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 previo us 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 identi fying 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 cur rent / 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?
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 a llows the lender to demand immediate repayment of
loan.
However, the lender has not 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
authorisation
of the
financial statements for issue.
22.
What will be the scenario if a long-term loan has been classified as a
nonperforming 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 w ith 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”?
(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 settleme nt 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, th e 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.
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 / ele ctricity 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 defi cit 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 re levant 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
longterm
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 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
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
noncurrent
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.
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 p roceeds 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.
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?
(ii)
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 noncurrent
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 “sun dry 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 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 an d 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 m ake 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
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%”?
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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