Financial Statements Presentation under Companies Act ...

1 Financial Statements Presentation under Companies Act, 2013: Practitioner's Perspective Committee for Capacity Building of CA Firms and Small & Medium Practitioners (CCBCAF&SMP). The Institute of Chartered Accountants of India (Set up by an Act of Parliament). New Delhi The Institute of Chartered Accountants of India All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means, electronic mechanical, photocopying, recording, or otherwise, without prior permission, in writing, from the publisher. DISCLAIMER: The views expressed in this book are those of the author(s).

2 The Institute of Chartered Accountants of India may not necessarily subscribe to the views expressed by the author(s). The Information cited in this book is drawn from various sources. While every efforts has been made to keep the information cited in this book error free, the Institute or any office do not take the responsibility for any typographical or clerical error which may have crept in while preparing the information provided in this book. Further the information provided in this book is subject to the provisions contained under different Acts and members are advised to refer to those relevant provisions also.

3 Edition : July 2014. Committee/Department : Committee for Capacity Building of CA Firms and Small & Medium Practitioners (CCBCAF&SMP), ICAI. Email : Website : , Price : ` 230/- ISBN : 978-81-8441-729-6. Published by : The Publication Department on behalf of the Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi - 110 002. Printed by : Sahitya Bhawan Publications, Hospital Road, Agra-282 003. October/2014/500 Copies Foreword In the fast changing business world, the role of Chartered Accountants is changing rapidly and gaining more importance.

4 Over a period of time, the spectrum of services rendered by the Chartered Accountants has extended beyond conventional accounting , auditing and taxation matters. Today, the breadth of the services rendered by our members reflects their expertise in multiple diverse areas. At the same time, high expectations of the government, business world and society also place huge responsibility on chartered accountants. It is important for today's professional to not only deliver quality services but also strive for excellence in their work and be updated on the latest developments on matters relating to the profession.

5 The current economic environment poses many challenges in the Financial and accounting world and Chartered Accountants always plays a pivotal role in assisting the management and other users of the Financial Statements . To help our members to understand the changes those have been made by Schedule III of the Companies Act, 2013, the Committee for Capacity Building of CA Firms and Small & Medium Practitioners (CCBCAF&SMP) of ICAI is bringing out a book titled Financial Statements Presentation under Companies Act, 2013: Practitioner's Perspective'. This book will provide a knowledge base to the Practitioners for preparing the Financial Statements as per new Schedule III of the Companies Act, 2013.

6 I congratulate CA. Anuj Goyal, Chairman CCBCAF&SMP and his team for their efforts in bringing out this book. I sincerely hope that this publication would help the members in enhancing their knowledge base in the practice portfolio. Best Wishes CA. K. Raghu President, ICAI. iii Preface The Ministry of Corporate Affairs (MCA) has issued Schedule III which lays down a format for preparation and Presentation of Financial Statements by Indian Companies for Financial years commencing on or after 1st April, 2014. This Schedule III has some significant Conceptual changes such as Current/Non-current distinction, primacy to the requirements of the accounting standards, etc.

7 The Schedule III, among other things, has also prescribed a format for Statement of Profit and Loss mandating classification of expenses by their nature as opposed to by function and added a host of incremental disclosures and Consolidate Financial Statement too. In this publication we have tried to cover the whole of Schedule III as per Companies Act, 2013. which will be very useful for the practitioners. I hope this book on Financial Statements Presentation under Companies Act, 2013: Practitioner Perspective', published by the Committee for Capacity Building of CA Firms and Small & Medium Practitioners (CCBCAF&SMP), ICAI will be very useful support material for practitioners.

8 I place on my record my deep sense of gratitude to CA. Mohammad Salim and all members of the Working Group on Research & Publications constituted by the Committee for preparing the draft of this publication thereby sharing their relevant experience and expertise amongst members. I. appreciate the efforts put in by the members of CCBCAF&SMP & Dr. Sambit Kumar Mishra, Secretary, CCBCAF&SMP and other officials of the Secretariat who have provided necessary support for publishing the aforesaid book. With Best Wishes CA. Anuj Goyal Chairman Committee for Capacity Building of CA Firms and Small & Medium Practitioners (CCBCAF&SMP),ICAI.

9 V Index Name of the Chapter Page Nos. Foreword (iii). Preface (v). 1. Financial Statements under Companies Act An Introduction. 1. 2. Schedule III to Companies Act, 2013 Content Ready Reckoner. 11. 3. Highlights and Major Changes Introduced in Schedule III. 18. 4. General Instructions for preparation of Balance Sheet and Statement of Profit and Loss. 31. 5. Balance Sheet 34. 6. Statement of Profit and Loss 77. 7. General Instructions for preparation of Consolidated Financial Statements 100. 8. Cash Flow Statements 106. 9. Statement of Changes in Equity. 110. 10. Current, Non-Current classification Practical Application.

10 117. 11. Frequently Asked Questions on Schedule III. 132. 12. Glossary of important terms used in Financial Statements 143. 13. Broad Check List of Audit of Financial Statements Prepared as per Companies Act, 2013 166. ANNEXURES. 1. Schedule II to Companies Act, 2013.(Useful lives to compute depreciation) 175. 2. Notification No. GSR 237(E) [ ], dated 31-3-2014 184. Chapter 1. Financial Statements under Companies Act, 2013 An Introduction The long-awaited Companies Bill 2013 got its assent in the Lok Sabha on 18th December 2012 and in the Rajya Sabha on 8th August 2013. After having obtained the assent of the President of India on 29 August 2013, it has now become the much awaited Companies Act, 2013 (2013 Act).