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New Schedule VI (In the Offing) By: CA Kamal Garg.

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Presentation on theme: "New Schedule VI (In the Offing) By: CA Kamal Garg."— Presentation transcript:

1 New Schedule VI (In the Offing) By: CA Kamal Garg

2 Introduction Government of India had constituted an Expert Committee on Company Law in 2005; The Committee in its report admitted the right of shareholders to be informed through simple disclosure which should not be in excessively technical format; The Committee was also of the view that Small Companies need not be subject to the costs of a regime suited to large companies with a wide stakeholder base

3 ICAI’s Role Ministry of Corporate Affairs had requested the ICAI to review Schedule VI in order to simplify the same; The ICAI was also requested to prescribe a SARAL Schedule VI for small and medium sized companies; To carry out the exercise, the Institute had constituted a Study Group: 1.To formulate the suggestions on Schedule VI; and 2.For prescribing SARAL Schedule VI for small and medium sized companies.

4 Objectives Simplification of presentation; Evaluate existing format with respect to unwanted and outdated disclosures; Harmonize and converge with global disclosure requirements; To minimize disclosure requirements for Small and Micro Companies

5 Updates Now The study group recommended the drafts of “Simplified Schedule VI” and “SARAL Schedule VI” considering IFRS and Other reporting practices; The Corporate Laws Committee of the Institute considered the drafts of both the Schedules and finalized the same; The drafts are being sent to the Ministry of Corporate Affairs and other Specified Bodies for comments

6 Structure of New Schedule VI Saral Schedule VI for SMCs: Divided into Parts I & II Simplified Schedule VI for Non-SMCs: Divided into Parts I, II & III

7 SMC Conditions

8 Key Changes Formats prescribed for Profit and Loss account and Cash flow Statement; However, Cash Flow Statement not required for SMCs

9 Key Changes: Rounding of figures appearing in Financial statements (appears to be mandatory)

10 Key Changes Schedule VI and Accounting Standards flexibility; The disclosure requirements specified in Schedule are in addition to and not in substitution of the disclosure requirements specified in the Accounting Standards prescribed under the Companies Act, 1956

11 Key Changes Removal of accounting treatment for exchange gain or loss relating to fixed assets acquired from outside India; Separate head introduced for “Share Application Money”

12 Key Changes Schedules to the financial statements to form part of notes accounts;

13 Key Changes Presentation changes in balance sheet almost on the same lines as of IAS 1;

14 Key Changes Additional Disclosure in respect of Share Capital; For Instance: –Reconciliation of number of shares outstanding at the beginning of shares with shares at the end of period. –Shares in the company held by any share holder holding more than 5 %

15 Key Changes Reserves and surplus: Debit balance of profit and loss account should be shown under surplus; and Negative balance of surplus after adjusting against reserve should be shown under reserve and surplus, even if resultant figure is negative.

16 Key Changes Presentation changes in profit and loss account: 1.Specific format for P & L A/c suggested; 2.It has mandated classification of expenses based on function of expense method; 3.Also, various disclosure requirements of existing Schedule VI like quantitative details, income from trade and non-trade investments, amount of income- tax deducted from gross income etc. is not required.

17 Materiality Any item for which the expense exceed 1% of the revenues from operations of the Company or Rs. 50,000 (for SMCs) or Rs. 1,00,000 (for Non SMCs), whichever is higher, shall be shown as a separate and distinct item; Result from discontinued operations to be disclosed separately in line with AS 24.

18 Key Changes Significant reduction in redundant and irrelevant information: 1.capacity details, 2.expenditure/ income in foreign currency, 3.details of debts/advances due from companies under same management etc.

19 Part I for SMC

20 Part II for SMC

21 Part I for Non-SMCs

22 Part II for Non-SMCs

23 Part III for Non-SMCs Cash Flow Statement: Almost on the same lines as AS 3


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