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REQUIREMENTS TO REVISE SCHEDULE-VI. Emergence of MNC’S Rapid increase in cross border transactions. To make our financial statements to speak global language for attracting foreign funds into India. REVISED SCHEDULE - VI. Old schedule VI had outlived its utility ;
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REQUIREMENTS TO REVISE SCHEDULE-VI • Emergence of MNC’S • Rapid increase in cross border transactions. • To make our financial statements to speak global language for attracting foreign funds into India.
REVISED SCHEDULE - VI Old schedule VI had outlived its utility; Revised Schedule VI effective from 1st April, 2011. Being a statutory format its early adoption is not permitted; Revised Schedule VI has been framed as per the existing non- converged Indian Accounting standards notified under the Companies (Accounting Standards) rules,2006.
UNIT OF MEASUREMENT Uniformly – Financial statement . All items shown in Financial statements including notes should be given.
CHANGES IN P & L A/C Expenses are Grouped- Nature. Income or Expenditure > 1% of Revenue from operations or Rs. 1,00,000 whichever is Higher should be disclosed. Net gain or Loss on AS-11, i.e., Accounting for foreign exchange loss or gain , should be classified as under the head of finance cost. Net gain or loss on others separately .
COMPARISION OF P & L A/C Old Schedule VI. • Cost of sales • Indirect Expenses • Staff Welfare expenses. • Profit before Tax • Profit after Tax • Surplus Revised Schedule VI • Purchases and changes in stock, direct expenses. • Indirect expenses. • Employee benefit expenses. • Profit before exceptional & extra- ordinary items & Tax. • Profit before Extraordinary and Tax. • Profit before Tax. • P/L discontinuing operation. • EPS should be shown separately. • Diluted Earning per share also shown separately.
CHANGES IN BALANCE SHEET * Current & Non – Current Items. * Secured & Unsecured- Notes to Accounts. * Sundry Creditors – Trade Payables. * Sundry Debtors – Trade Receivables. * Other Receivables – Other Current assets. * Other Payables - Other Current Liabilities.
COMPARISION OF BALANCE SHEET Old Schedule VI • Shareholders Funds. • Borrowings loan funds. • Current Liabilities & provisions. • Fixed Assets. • Investments. • Loans & advances. Revised Schedule VI • Shareholders funds – Share warranty, share Application, Pending Allotment. • Long term Borrowings & short term borrowings. • Non current & current liabilities. • Fixed assets – Tangible, Intangible, Capital work in progress, intangible under development. • Non current Investments & Fixed Investments. • Long term and Short term Loan & advances.
FORM OF BALANCE SHEET Particulars Note No Figures as in C/Y Figures as in P/Y 1. EQUITY AND LIABILITIES (1) Shareholder's Funds (a) Share Capital (2) Share application money pending allotment (3) Non-Current Liabilities (a) Long-term borrowings (b) Deferred tax liabilities (Net) (c) Other Long term liabilities
When Liability is classified as current liabilities? Condition to be satisfy the current liabilities criteria:- It is expected to be settled in the company’s normal operating cycle, It is held primarily for the purpose of being traded, It is due to be settled within 12 months after the reporting date, or; The company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. All other Liabilities shall be classified as Non- Current.
Meaning of Operating Cycle The term “Operating Cycle” is defined as the time between the acquisition of assets for processing and their realization in Cash or cash equivalents. A Company’s normal operating cycle may be longer than twelve months e.g. companies manufacturing wines, etc. However, where the normal operating cycle cannot be identified, it is assumed to have a duration of twelve months. Where a company is engaged in running multiple businesses, the operating cycle could be different for each line of business. Such a company will have to classify all the assets and liabilities of the respective businesses into current and non-current, depending upon the operating cycles for the respective businesses.
Definition of Operating Cycle. • The Operating Cycle is the amount of time it takes for a company to turn cash used to purchase inventory into cash once again. This number is calculated by adding the age of inventory ( the number of days that inventory is held prior to sale) with the collection period ( the number of days required to collect receivables). A company with a short operating cycle is able to recover its investment. A company with a long operating cycle will have less cash available to meet any short term needs, which can result in increased borrowing and interest expense.
Examples of Current and Non- current A company has excess finished goods inventory that it does not expect to realize within the company’s operating cycle of fifteen months. Since such finished goods inventory is held primarily for the purpose of being traded, the same should be classified as “current”. 2. A company has sold 10,000 tones of steel to its customer. The sale contract provides for a normal credit period of three months. The company’s operating cycle is six months. However, the company does not expect to receive the payment within twelve months from the reporting date. Therefore, the same should be classified as “Non-Current” in the Balance Sheet. In case, the company expects to realize the amount up to 12 months from the Balance Sheet date (though beyond operating cycle), the same should be classified as “current”.
Points related with current liabilities. The portion of long term debts/ lease obligations, which is due for payments within 12 months of the reporting date is required to be classified under “ Other Current Liabilities” while the balance amount should be classified under Long term Borrowings. Trade deposits & security deposits which are not in the nature of borrowings should be classified separately under Other Non-current/Current Liabilities. Other payables may be in the nature of statutory dues such as withholding taxes, Service Tax, VAT, Excise duty etc.
Short – term Provisions The amounts shall be classified as: (a) Provision for employee benefits; (b) Others (specify nature). Others would include all provisions other than provisions for employee, benefits such as Provision for dividend, Provision for taxation, Provision for warranties, etc. These amounts should be disclosed separately specifying nature thereof.
Definition of Long term debt Long term liabilities are liabilities with a due date that’s extends over a one year, such as a notes payable that matures in 2 years. Examples of long term liabilities are debentures, Bonds, mortgage Loans ad other bank loans( It should be noted that all bank loans are long term since not all paid over a period greater than one year.) It is a sign to show that the company is able to obtain long term financing.
Income received In advance "...It may occur that you receive income or a portion of an income in advance. In the financial statements all income must be shown for a period of one year or 12 consecutive months or accounting periods or reporting dates. The income account must be adjusted to reflect the correct income amounts at the end of the financial year. The amount of the income will decrease in the books of the business and a liability is created - Income received in advance. It is regarded as a liability to the business at the end of the financial year as the income is only receivable in the next financial year...." They are actually liabilities to the business as the business has still not earned the revenue because goods or services have still not been provided to the customers...."
