Disclosure Requirements under Schedule VIof Companies Act 1956

Presented By :

Prabhakar Dubey ACA

Section 211. Form and contents of balance sheet and profit and loss account:

1. Every balance sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of the financial year and shall, subject to the provisions of this section, be in the form set out in Part I of Schedule VI, or as near thereto as circumstances admit or in such other form as may be approved by the Central Government either generally or in any particular case; and in preparing the balance sheet due regard shall be had, as far as may be, to the general instructions for preparation of balance sheet under the heading "Notes" at the end of that Part :

2. Every profit and loss account of a company shall give a true and fair view of the profit or loss of the company for the financial year and shall, subject as aforesaid, comply with the requirements of Part II of Schedule VI, so far as they are applicable thereto :

PARTS OF SCHEDULE VI

1. Part I & II – Form of Balance Sheet & Requirements as to Profit and Loss A/c

2. Part III – Interpretation of certain terms for the purpose of Part I & II e.g. Provision, Reserve, Capital Reserve, Liability, Quoted Investment etc.

3. Part IV - Balance Sheet Abstract and Company's General Business Profile

Section 117 of Companies Bill 2009 : Financial Statement

1. The financial statement shall give a true and fair view of the state of affairs of the company or companies as at the end of the financial year, comply with the accounting standards notified under section 119 and shall be in such form as may be prescribed.

3. Where a company has one or more subsidiaries, it shall prepare a consolidated financial statement of all the subsidiaries in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company along with the laying of its financial statement under sub-section (2).

PART I – BALANCE SHEET (A & B)

A Company shall disclose the following in the notes to accounts:

A. Share Capital - For each class of Share Capital:

(a) the number and amount of shares authorized; (b) the number of shares issued, subscribed and fully paid, and subscribed but not

fully paid; (c) par value per share; (d) a reconciliation of the number of shares outstanding at the beginning and at the end

of the period; (e) the rights, preferences and restrictions attaching to that class including restrictions

on the distribution of dividends and the repayment of capital; (f) shares in the company held by its holding company or its ultimate holding company

or by its subsidiaries or associates; (g) shares in the company held by any shareholder holding more than 5 percent

shares; (h) shares reserved for issue under options and contracts/commitments for the sale

of shares/disinvestment, including the terms and amounts; (i) Separate particulars for a period of five years following the year in which the shares

have been allotted/bought back, in respect of: Aggregate number and class of shares allotted as fully paid up pursuant to contract

(s) without payment being received in cash. Aggregate number and class of shares allotted as fully paid up by way of bonus

shares (Specify the source from which bonus shares are issued). Aggregate number and class of shares bought back. (j) Terms of any security issued along with the earliest date of conversion in descending

order starting from the farthest such date.

Some Important aspects of Share Capital:

1. The Authorised share capital should be higher than Issued, Subscribed & paid up capital.

2. The criteria of minimum paid-up capital Rs. 1 Lac and Rs. 5 lacs in case of Private and Public Co. respectively should be complied.

3. If the new shares has been issued during the year, it should be compared with the secretariate compliance report (in case paid up capital is more than Rs. 10 lacs).

4. The share application money of which allotment is pending should not be shown in share capital and should be shown separately in between capital and reserves including contracts/ commitments and the terms thereof.

5. The ‘Capital Suspense A/c’ should be shown under Share Capital with there related contracts / commitments.

B. Reserves & Surplus:

(i) Reserves and Surplus shall be classified as:

(a) Capital Reserves; (b) Capital Redemption Reserves; (c) Securities Premium Reserve; (d) Debenture Redemption Reserve; (e) Revaluation Reserve; (f) Other Reserves – (specify the nature of each reserve and the amount in respect

thereof); (g) Surplus i.e. balance in statement of Profit & Loss disclosing allocations and

appropriations such as dividend paid, bonus shares and transfer to/from reserves. (Additions and deductions since last balance sheet to be shown under each of the specified heads)

(ii) A reserve specifically represented by earmarked investments shall be termed as a ‘fund’ (basically known as ‘Reserve Fund’).

(iii) The balance of ‘Surplus’ after deducting debit balance of profit and loss account shall be shown under the head ‘Surplus’ even if the resulting figure is in the negative. Similarly, the balance of ‘Reserves and Surplus’, after adjusting negative balance of surplus, if any, shall be shown under the head ‘Reserves and Surplus’ even if the resulting figure is in the negative.

Some Important aspects of Reserves & Surplus:

1. The Reserve for Doubtful Debt is not a provision for doubtful debt, hence it should be shown in the reserves instead of deducting from ‘Sundry Debtors’ (it means it is the appropriation of profit and not the provisions).

2. No dividend should be declared out of the capital reserve.

3. The debit balance in profit & loss a/c should be deducted from free reserve only.

4. If the accumulated losses is more than 50% of its Net worth, then auditors report should be referred to.

5. If the company transfers amount of reserve for the purpose of claiming any tax benefit, then it should be shown separately.

6. As per the NBFC norms, 20% of net profit should be transfer to ‘special reserve A/c’ before making the distribution to shareholders as a dividend or bonus shares.

C. Secured & Unsecured Loans:

(i) Long-term borrowings shall be classified as: (a) Bonds/debentures. (b) Term loans from banks. from other parties. (c) Deferred payment liabilities. (d) Public deposits. (e) Loans and advances from subsidiaries/holding company/associates/business ventures. (f) Other loans and advances (specify nature). (ii) Borrowings shall further be sub-classified as secured and unsecured. Nature of security

shall be specified separately in each case. (iii) Where loans have been guaranteed by directors or others, a mention thereof shall be made

and also the aggregate amount of such loans under each head. (iv) Bonds/debentures (along with the rate of interest and particulars of redemption or conversion,

as the case may be) stated in descending order of maturity or conversion, starting from farthest redemption or conversion date, as the case may be. Where bonds/debentures are redeemable by installments, the date of maturity for this purpose must be reckoned as the date on which the first installment becomes due.

(v) Particulars of any redeemed bonds/ debentures which the company has power to reissue. (vi) Terms of repayment of term loans and other loans. (vii) Period and amount of default in repayment of dues, providing break-up of principal and

interest shall be specified separately in each case.

Long-term provisions The amounts shall be classified as: (a) Provision for employee benefits. (b) Others (specify nature).

Some Important aspects of Secured Loans :

1. The nature of security should be specified in each and every case.

2. The secured loans should be matched with the entries in the Register of charge u/s 125.

3. Interest accrued and due should be indicated under appropriate sub-heads. The interest accrued but not due should be shown in current liability.

D. Current Liabilities and Provisions:

1. Short-term borrowings (Due for less than 1 year)

(i) Short-term borrowings shall be classified as:

(a) Loans repayable on demand

from banks.

from other parties (in case of MSMEs, if the due is exceeding 3 months, then amount including interest as per the act should be shown separately).

(b) Loans and advances from subsidiaries/holding company/associates/business ventures.

(c) Demand deposits.

(d) Other loans and advances (specify nature).

(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in each case.

(iii) Where loans have been guaranteed by directors or others, a mention thereof shall be made and also the aggregate amount of loans under each head.

(iv) Period and amount of default in repayment of dues, providing break-up of principal and interest shall be specified separately in each case.

2. Other current liabilities

The amounts shall be classified as: (a) Current maturities of long-term debt; (b) Current maturities of finance lease obligations; (c) Other payables (specify nature); (d) Interest accrued but not due on borrowings; (e) Interest accrued and due on borrowings; (f) Unearned revenue; (g) The following amounts shall be shown separately: Unpaid dividends* Unpaid application money received for allotment of securities and due for refund* Unpaid matured deposits* Unpaid matured debentures* Interest accrued on above* *In the above cases, any amount is transferred to Investor Education and Protection

fund as per the companies act should be verified and check whether the same is paid within the prescribed limit.

3. Short-term provisions

The amounts shall be classified as: (a) Provision for employee benefits. (b) Others (specify nature) e.g . Provision for expenses, proposed dividend etc. etc..

E. FIXED ASSETS:

(Least Liquidity Asset to be arrange first & vice versa)

1. Tangible assets

(i) Classification shall be given as: (a) Land. (b) Buildings. (c) Plant and Equipment. (d) Furniture and Fixtures. (e) Vehicles. (f) Office equipment. (g) Others (specify nature).

(ii) Assets under lease shall be separately specified under each class of asset.

(iii) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, acquisitions and other movements and the related depreciation and impairment losses/reversals shall be disclosed separately.

2. Intangible assets

(i) Classification shall be given as: (a) Goodwill. (b) Brands /trademarks. (c) Computer software. (d) Mastheads and publishing titles. (e) Mining rights. (f) Copyrights, and patents and other intellectual property rights, services and operating rights. (g) Recipes, formulae, models, designs and prototypes. (h) Licenses and franchise. (i) Others (specify nature).

(ii) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, acquisitions and other movements and the related amortization and impairment losses/reversals shall be disclosed separately.

Some Important aspects of Fixed Assets :

1. In case of land, whether it is freehold or leasehold should be indicated.

2. The original cost and accumulated depreciation should be correctly displayed.

3. If the assets are purchased on foreign currency, the exchange difference should be transfer to profit and loss A/c and not to capitalise with the fixed assets (As per the AS-11 & amendment in Companies Accounting Standard rule).

4. If the fixed assets have been revalued or reduce on re-structuring of the company during the year, the same should be disclosed by way of note for a period of 5 years in notes to accounts forming part of balance sheet.

5. If the company sales the fixed assets, to check the auditor’s report whether it affects the going concern of the company.

E. Investments (Also termed as Non-Current Investment):

Non-current investments shall be classified as: (a) Investment property; (b) Investments in Government or trust securities; (c) Investments in units, debentures or bonds; (d) Other non-current investments (specify nature)

The investments held-to-maturity shall be stated separately.

The following shall also be disclosed: (a) Aggregate amount of quoted investments and market value thereof; (b) Aggregate amount of unquoted investments; (c) Aggregate amount of partly paid-up investments; (d) The names of bodies corporate (indicating separately the names of subsidiaries, associates and other business ventures) in whose securities, investments have been made and the nature and extent of the investments so made in each such body corporate (Whether investment company or other than

investment).

In case of investment in subsidiary company, one have to check whether requirement of consolidated balance is required as per AS 21.

If there is some unutilised money towards the issues, then it should be shown separately.

E. Current Assets & Loans and Advances:

1. Long-term loans and advances

(i) Long-term loans and advances shall be classified as:

(a) Capital Advances;

(b) Security Deposits;

(c) To directors / subsidiaries / associates / business ventures loans and advances to specify separately;

(d) Others (specify nature)- loans and advances to specify

separately.

(ii) The above shall also be separately sub-classified as:

(a) To the extent secured, considered good;

(b) Others, considered good;

(c) Doubtful.

(iii) Allowance for bad and doubtful loans and advances shall be

disclosed under the relevant heads separately.

2. Other non-current assets

This is an all inclusive heading which incorporates assets that do not fitneatly into any of the other asset categories.

3. Current Investments

(i) Current investments shall be classified as: (a) Investments in government or trust securities; (b) Investments in shares, units, debentures or bonds; (c) Other investments (specify nature).

(ii) The following shall also be disclosed: (a) Aggregate amount of quoted investments and market value thereof; (b) Aggregate amount of unquoted investments; (c) Aggregate amount of partly paid-up investments.

(iii) Current investments shall be further sub-classified as: (a) Investments held for trading; (b) Other investments.

4. Inventories

(i) Classification shall be made as: (a) Raw material; (b) Work-in-progress; (c) Finished goods; (d) Stock-in-trade; (e) Stores and spares; (f) Loose tools; (g) Others (specify nature). (ii) Goods-in-transit shall be disclosed under the relevant sub-head of inventories.

5. Trade Receivables

(i) The amounts shown under ‘Trade Receivables’ shall include the amounts due in respect of goods sold or services rendered in the normal course of business. (ii) Trade receivables shall also be classified as: (a) To the extent secured, considered good; (b) Others, considered good; (c) Doubtful.

(iii) Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately.

6. Cash and cash equivalents

(i) Classification shall be made as: (a) Bank balances; (b) Cheques, drafts on hand; (c) Cash balance; (d) Cash equivalents – short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value; (e) Others (specify nature).

(ii) Earmarked bank balances (e.g. unpaid dividend) shall be separately stated.

(iii) Balance with banks to the extent held as security against the borrowings, guarantees, other commitments shall be disclosed separately.

(iv) Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated.

(v) Bank deposits with more than 12 months maturity shall be disclosed separately.

7. Short-term loans and advances

(i) Loans and advances shall be classified separately as: (a) To subsidiaries/associates/business ventures; (b) To others (specify nature).

(ii) The above shall also be sub-classified as: (a) To the extent secured, considered good; (b) Others, considered good; (c) Doubtful.

(iii) Allowance for bad and doubtful loans and advances shall be disclosed under the relevant heads separately.

8. Other current assets (specify nature).

Some Important aspects of Current Assets & Loans and advances :

1. The mode of valuation as per AS 2 should be separately stated wherever practicable.

2. Interest accrued on investments held in current assets should be separately stated

3. The maximum balance in respect of due from directors should be stated.

4. In case of unutilised monies in respect of issue made on current investment should be separately stated.

5. The types & nature of account in schedule bank should be given.

6. In case of non-scheduled banks, the name of the banks and maximum balance during the year should be stated.

7. In case loans given to the companies under same management, the maximum amount due from them should be separately stated.

8. The opinion of BOD should be obtained regarding the valuation on realisation of current assets, loans and advances should have at least the value at which they are stated.

E. MISCELLANEOUS EXPENDITURE:

1. The balance should be shown to the extent not written off or adjusted.

2. In case of debit balance in profit and loss a/c and that could not be adjusted with the earlier year’s free reserve or even if adjusted the negative value comes, then it should be shown under miscellaneous expenditure.

3. To check out whether intangible assets hitherto shown under this head is now required to be shown under the head Fixed Assets in view of AS26.

F. CONTINGENCIES AND COMMITMENTS:

1. Contingencies (to the extent not provided for):

(i) Contingencies shall be classified as:

(a) Tax contingencies and law suits (except those where the likelihood of an outflow of resources is remote); (b) Guarantees; (c) Other money for which the company is contingently liable (except those where the likelihood of an outflow of resources is remote).

2. Commitments: (i) Commitments shall be classified as: (a) Estimated amount of contracts remaining to be executed on capital account and not provided for; (b) Uncalled liability on shares and other investments partly paid; (c) Other commitments (specify nature).

3. The amount of dividends proposed to be distributed to equity holders for the period and the related amount per share shall be disclosed separately. Arrears of fixed cumulative dividends shall also be disclosed separately.