3 minute read 6 Sep 2021
Schedule III of the Companies Act, 2013

Demystifying enhanced financial reporting disclosures – amendments in Schedule III (Division II)

EY India
By EY India

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3 minute read 6 Sep 2021
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  • Demystifying enhanced financial reporting disclosures — amendment to Schedule III (Division II)

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We look at some of the key amendments in Schedule III (Division II) of the Companies Act, 2013.

The Ministry of Corporate Affairs (MCA) has amended Schedule III of Companies Act 2013 (“Act”) on 24 March 2021 with an objective to increase transparency and provide additional disclosures to users of financial statements. These amendments are effective from 1 April 2021 onwards. Companies need to gear up to provide significant information about the new clauses in financial statements. Companies many need to realign their Financial Statements Close Process (FSCP) and internal control over financial reporting to ensure that information and data relating to new clauses are compiled appropriately and on timely basis to avoid last minutes hassles in preparation of financial statements.

Earlier, MCA had issued the Companies (Auditor’s Report) Order, 2020 (CARO 2020), which is also applicable for audit reports to be issued on or after 1 April 1, 2021. Some of changes in Schedule III are in line with changes in CARO 2020, so companies can provide required information in financial statements for Auditors to report in CARO 2020. 

In this publication, financial accounting advisory services team have tried to highlight what are the new requirement in Division II (Applicable to Companies following Indian Accounting Standards “Ind AS”) of Schedule III (here in referred to as “Schedule III amendment” or “amendment”), corresponding implication in CARO 2020 (if any) and our viewpoints on those changes. It should be noted that there are also changes in division I and III, however same are not covered in this publication. Further, it does not attempt to provide an in-depth analysis or conclusive views on the new changes. Rather, it aims to highlight key consideration which companies should be aware of while implementing these changes. Reference should be made to the text of the pronouncements before taking any decisions or actions.

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In this publication, we have categorized all the new disclosures presentation requirements in different categories as:

a)  Applicability

  • Interim financial information
  • Consolidated financial statements
  • Applicability to companies following 31 December as year-end for financial reporting

b)  Balance Sheet items related disclosures

  • Promoter’s shareholding
  • Statement of changes in equity
  • Trade receivables
  • Other financial assets
  • Fair value of investment property
  • Loans and advances
  • Trade payables
  • Details of Benami property held
  • Relationship with struck off companies
  • Current maturities of long-term borrowings
  • Borrowings obtained on the basis of security of current assets
  • Lease liabilities
  • Revaluation of property, plant and equipment and intangible assets
  • Capital Work-in-progress (CWIP) and intangible assets under development
  • Discrepancy in utilization of borrowings
  • Title deeds of immovable properties not held in name of the company
  • Utilization of borrowed funds and share premium

c)  Profit and loss items related disclosures

  • Undisclosed income
  • Grants or donation received
  • Corporate Social Responsibility (CSR)
  • Details of crypto currency or virtual currency

d)  Other additional disclosures

  • Wilful defaulters
  • Registration of charges or satisfaction with Registrar of Companies
  • Compliance with number of layers of companies
  • Disclosure of ratios
  • Compliance with approved scheme(s) of Arrangements
  • Rounding off

e)  Overview of CARO 2020

As compared to CARO 2016, reporting requirements have increased manifold in CARO 2020. The clauses (including sub-clauses) have been bifurcated into the following:

Overview of CARO 2020

The disclosures/presentation requirements discussed are by no means exhaustive and the views expressed herein are more directional and not necessarily conclusive. The views expressed in the publication need to be evaluated in light of the facts and circumstances of each company.

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Summary

Amendments in Schedule III are effective from 1 April 2021. Companies need to gear up to provide significant information about the new clauses in financial statements. Companies may need to realign their Financial Statements Close Process (FSCP) and internal control over financial reporting to ensure that information and data relating to new clauses are compiled appropriately and on timely basis to avoid last minutes hassles in preparation of financial statements.

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EY India
By EY India

Multidisciplinary professional services organization

Related topics Financial accounting advisory services
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