Table of Contents

Division II (Ind AS)

Ministry of Corporate Affairs (MCA) has brought value-adding disclosures in Schedule III of the Companies Act, 2013 vide notification dated March 24, 2021. These will provide vital information to stakeholders which were otherwise not available to stakeholders. Amendments have been made in all three divisions i.e. Division I, Division II, and Division III. In this document, we have discussed amendments in Division II which is applicable to companies following Indian Accounting Standards (Ind AS). Even though we have discussed Division II but a requirement in Division I is more or less similar.

Disclosures in Financial Statements:

Primary sources for disclosures in Financial Statements are:

– Indian Accounting Standards (Ind AS)

– Schedule III of the Companies Act, 2013

– Provisions of Companies Act (such as 186 of the Companies Act, 2013)

– MSME Act (for MSME disclosures)

Applicability:

Changes made in Schedule III will be applicable for Financial Statements prepared for FY 2021-22 but because comparative figures for 2020-21 will be required to be disclosed in FY 2021-22, therefore, these changes should be considered while finalizing financials of the current financial year also.

Related Topic:
Changes made to Schedule III for AS & Ind AS

Purpose of Amendments:

To bring more transparency and enhanced disclosures in financial statements. These amendments have certainly added more value to financial statements. Some of the amendments have been made to align with CARO, 2020.

Schedule III prescribes format Financial Statements and various disclosures to be made in Financial Statements. These disclosures are in addition to the disclosures required of Ind AS. Ind AS does not provide a format for Financial Statements. Had there been no prescribed format of Financial Statement then every company would have chosen its own format of Financial Statements, therefore, Schedule III has provided us the format of financial statements for better presentation and comparison.

S.No	Description	Comments
1	Trade Receivables: The ageing schedule has to be given in the following bucket: – Less than 6 Months – 6 Months to 1 Year – 1 to 2 years – 2 to 3 years – More than 3 years Notes: 1. Ageing for disputed and undisputed balance to be given separately. 2. Ageing has to be computed from the due date of payment but if the due date is not prescribed then from the date of transaction. 3. Unbilled dues shall be disclosed separately which means that unbilled receivables are required to be disclosed separately.	• Ageing schedule has been added in Schedule III now but Management has always been reviewing this in its monthly/quarterly review meetings. Now stakeholders will also get to know when the amount is receivable. This is very important information for stakeholders. • Though it is not specifically mentioned where the amount is due for more than let’s say 1 year then management should provide reasons for the same. • If the amount is due for a long period but the same is not received then it raises a question of whether the transaction was genuine or whether the customer’s financial health is such that it can pay the dues. • Dispute is not defined, in our view, it may legal dispute as well as other disputes. • Stakeholders will get to know the quantum of unbilled receivables out of total receivables.
2	Trade Payables: The ageing schedule has to be given in the following bucket: – Less than 1 Year – 1 to 2 years – 2 to 3 years – More than 3 years Notes: 1. Ageing for disputed and undisputed balance to be given separately. 2. Ageing has to be computed from the due date of payment but if the due date is not prescribed then from the date of transaction. 3. Unbilled dues shall be disclosed separately which means that accrual of expenses or any other unbilled dues has to be disclosed separately.	• Ageing schedule has been added in Schedule III now but Management has always been reviewing this in its monthly/quarterly review meetings. Now stakeholders will also get to know when the amount is payable. This is very important information for stakeholders. • One thing to be noticed is that the ageing bucket for trade payable is not the same as trade receivables. • Though it is not specifically mentioned where the amount is due for more than let’s say 1 year then management should provide reasons for the same. • If the amount is due for a long period but the same is not received then it raises a question of whether the transaction was genuine. • Dispute is not defined, in our view, it may legal dispute as well as other disputes.
3	Capital Work-in-progress (CWIP) and Intangible assets under development (IAUD): The ageing schedule for CWIP and IAUD has to be given in the following bucket: – Less than 1 Year – 1 to 2 years – 2 to 3 years – More than 3 years Note: Ageing is to be given for “Projects in progress” and “Projects temporarily suspended” For CWIP / IAUD, whose completion is overdue or has exceeded its cost compared to its original plan, following CWIP /IAUD completion schedule shall be given, Project to be completed in: – Less than 1 Year – 1 to 2 years – 2 to 3 years – More than 3 years Note: Details of projects where activity has been suspended shall be given separately	• Ageing of CWIP / IAUD will give information since when the projects are running. • Capital projects may take a long period to complete even more than 5 years but here they have asked for very crucial information which is overrun in terms of cost and timing both. If the project is completed is overdue or has exceeded its cost compared to its original plan then the ageing schedule is also to be disclosed. • If the amount is lying in CWIP/IAUD then expenses (including borrowings costs) related to the project are debited to the project (CWIP/ IAUD) and depreciation is also not charged on CWIP/IAUD. • Details of suspended projects are also asked for, if the project is suspended then expenses (including borrowing costs) capitalisation is to be checked. • Suspension of projects may also trigger impairment provision which needs to be checked.

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CA Rishabh Verma

Presentation on Amendments in Schedule III