GUIDANCE NOTE ON DIVISION II - IND AS SCHEDULE III TO …

1 GUIDANCE NOTE ON DIVISION II - IND AS SCHEDULE III TO THE COMPANIES ACT, 2013 (Revised July 2019 Edition) Corporate Laws & Corporate Governance Committee 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. First Edition : May 2017 Second Edition : July 2019 Committee/Department : Corporate Laws & Corporate Governance Committee E-mail : Website : Price : Rs.

2 200/- ISBN No. : 978-81-8441-868-2 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, India. Printed by : Sahitya Bhawan Publications, Hospital Road, Agra 282 003 July/2019/1,000 Foreword to the Second Edition The Government is bringing out several changes in the Companies Act, 2013 from time to time to enhance transparency by way of mandating additional disclosures. Towards the same, the Ministry for Corporate Affairs has issued a Notification dated wherein amendments have been brought in to the SCHEDULE III to the Companies Act, 2013.

3 The amendments are related to additional disclosures for trade receivables, loan receivables, trade payables and to comply with the disclosure requirements under the Micro, Small and Medium Enterprises Development Act, 2006. Keeping this in mind, a need was felt by ICAI for providing appropriate GUIDANCE to the members in view of the amendments that have been brought in by the Government so that the requirements of SCHEDULE III can be complied with by the companies that are required to prepare their financial statements as per Ind AS in letter and spirit. I am happy to note that Corporate Laws & Corporate Governance Committee has undertaken the task of revision of GUIDANCE Note on the DIVISION II Ind AS SCHEDULE III to the Companies Act 2013.

4 The GUIDANCE Note was initially issued by same the Committee in July, 2017 for GUIDANCE to the companies that are required to comply with Ind AS. In revised GUIDANCE note, detailed GUIDANCE has been provided on the various items of SCHEDULE III and various issues and intricacies involved therein. I wish to compliment CA. (Dr.) Debashis Mitra, Chairman, Corporate Laws & Corporate Governance Committee, CA. Chandrashekhar V. Chitale, Vice-Chairman and all the members of the Corporate Laws & Corporate Governance Committee who have made invaluable contribution in the revision of this GUIDANCE Note.

5 I am sure that the members and other stakeholders at large would find the GUIDANCE Note immensely useful. New Delhi CA Prafulla P. Chhajed President ICAI Preface to the Second Edition The Corporate Laws & Corporate Governance Committee issued the GUIDANCE Note on SCHEDULE III to the Companies Act, 2013 (the Act ) in July, 2017 after considering the newly introduced DIVISION II to SCHEDULE III to the Act. The Ministry of Corporate Affairs vide Notification dated made amendments to SCHEDULE III to the Act. Therefore, there was a need to revise the aforesaid GUIDANCE Note. Major revisions have been made in the existing DIVISION II of SCHEDULE III.

6 In the case of Trade Receivables and Loan Receivables, it has been provided that the total amount needs to be segregated into categories and disclosed viz., considered good, having significant increase in credit risk and credit impaired. GUIDANCE has been provided regarding the disclosure of impairment on trade receivables in cases where significant financing component exists and in cases where it does not exist. Trade payables are now required to be segregated into dues of micro enterprises and small enterprises and other than micro enterprises and small enterprises, MSME.

7 Specific details mandated as per the MSMED Act, 2006 require disclosure. Changes required as per Ind AS 109 have been incorporated. Further, disclosure requirements as per Ind AS 115 and Ind AS 116 have been incorporated in relevant parts. We would like to convey our sincere gratitude to the President ICAI CA. Prafulla P. Chhajed, and the Vice President ICAI CA. Atul Kumar Gupta for supporting us in bringing out the publication. We also wish to place on record our sincere thanks to all the Committee members & Special Invitees for their suggestions, support and GUIDANCE in finalizing this GUIDANCE Note.

8 Our thanks to the Study Group members CA Dhinal Shah (Convenor), CA. Himanshu Kishnadwala, CA. Vijay Maniar, CA. Suresh Yadav, CA. Sandeep Shah, Sh Vignesh Poojari, Sh Shriraj Bhandari, CA. Keyur Dave and CA. Pratik Haria for their contribution in Revising the GUIDANCE Note We would also like to thank Secretary to the Committee CA. Sarika Singhal and Ms Seema Jangid for their technical and administrative support. We sincerely believe that the members of the profession, industry & other stakeholders would find the publication immensely useful. CA. (Dr.) Debashis Mitra CA. Chandrashekhar V.

9 Chitale Chairman, Vice Chairman, Corporate Laws & Corporate Corporate Laws & Corporate Governance Committee Governance Committee to the First Edition The Companies Act, 2013 has been undergoing changes from time to time through various amendments to the Act, Rules and through notifications and circulars of the Ministry of Corporate Affairs which are issued to keep the law at par with various developments in the economic environment, regulatory requirement, policies of the country and globalization. Further, the Government of India decided to converge Indian Accounting Standards with certain carve outs from International Financial Reporting Standards, in a phased manner to accomplish its commitment in G-20 summit with the objective of achieving high quality global accounting standards.

10 At this backdrop, the Ministry of Corporate Affairs vide its notification dated 6th April, 2016 notified amendments to SCHEDULE III of the Companies Act, 2013 thereby inserting DIVISION II to SCHEDULE III for preparation of financial statements by those entities who have to comply with Indian Accounting Standards (Ind AS). In the light of the notification of DIVISION II to SCHEDULE III, the Corporate Laws & Corporate Governance Committee (CL&CGC) of The Institute of Chartered Accountants of India (ICAI) has taken an initiative of bringing out a GUIDANCE Note on DIVISION II to SCHEDULE III of the Companies Act, 2013 for companies required to comply with Ind AS.