The Schedule III to the Companies Act, 2013 (2013 Act) provides general instructions for preparation of the balance sheet and the statement of profit and loss of a company.
Background
The Schedule III to the Companies Act, 2013 (2013 Act) provides general instructions for preparation of the balance sheet and the statement of profit and loss of a company.
The Ministry of Corporate Affairs (MCA) issued a road map for implementation of the Indian Accounting Standards (Ind AS) converged with the International Financial Reporting Standards (IFRS):
New development
The MCA on 6 April 2016, amended Schedule III to include general instructions for preparation of financial statements of a company whose financial statements are required to comply with Ind AS. The amendment divides Schedule III into two parts i.e. Division I and II
Overview of the revised Schedule III – Division II
Division II of the Schedule III provides instructions for preparation of
financial statements and additional disclosure requirements for companies
required to comply with Ind AS. The following is an overview of the Division II of the Schedule III:
Applicability
Balance sheet
Statement of profit and loss
Statement of changes in equity
Statement of cash flows
Notes
Compliance with Ind AS and 2013 Act
Materiality
Other key points
Next steps
Companies in India should start evaluating the potential impact of the revised Schedule III and assessing the detailed requirements made available for presentation of financial statements.
Our comments
The notification of the revised Schedule III, incorporating the requirements relating to the Ind AS financial statements is an important and a much awaited step from MCA as several companies in India are in the process of implementing Ind AS from 1 April 2016. The presentation of financial statements is one of the key impact areas on implementation of Ind AS when compared to the reporting under current Indian GAAP.
The requirements under Schedule III (relating to Ind AS financial statements) are to a large extent similar to those of the IFRS financial statements except for the fact that it specifies a bright-line to disclose a note for any item of income or expenditure which exceeds 1 per cent of the revenue from operations or INR10,00,000, whichever is higher, and also eliminates certain options on the presentation of the statement of profit and loss and the balance sheet.
The revised Schedule III also provides flexibility in presentation of the financial statements as it states that the prescribed disclosure requirements are in addition to and not in substitution of the disclosure requirements specified in Ind AS. Further, where compliance with Ind AS requires any change in treatment or disclosure, including any addition, amendment, substitution or deletion, in the format of the financial statements, a company is permitted to make such changes and the requirements of Schedule III would stand modified accordingly. This is an important provision, as it clarifies that in situations where an accounting treatment or disclosure in an Ind AS is in conflict with the requirements of Schedule III, companies are required to comply with the relevant Ind AS.
To access the text of the MCA notification, please click here.
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