Amendment to Schedule III of Companies Act 2013
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Amendment to Schedule III of Companies Act 2013

MCA has revised Schedule III of Companies Act 2013 to increase strictness in compliances and add several additional disclosures in Financial Statement. The main purpose behind these amendments is more clarity.

Financial statement of the company
The Ministry of Corporate Affairs (MCA) vides notification dated 24 Mar 2021 has revised Schedule III to the Companies Act, 2013, which shall be effective from the 1st day of April 2021. Earlier companies had to round off the figures developing in the financial statements based on “turnover”; however, based on the latest amendment, circulating off will be based on your company’s “total income”.

Schedule III divided into three parts:

  • Financial Statements for a company who’s financial Statements are required to comply with the Companies (Accounting Standards) Rules, 2006.
  • Financial Statements for a company whose financial statements are drained up in compliance of the Companies (Indian Accounting Standards) Rules, 2015.
  • Financial Statements for a Non-Banking Financial Company (NBFC) whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015.

The notification incorporates numerous extra exposure conditions while preparing an entity’s financial statements, which are protected under the three divisions of Schedule III to the Companies Act, 2013.

Purpose of amendment
In recent years, there have been significant changes in the detailed requirement by the auditors, but no such corresponding amendments were made in Schedule-III for the preparation of the financial statements. Thus, to range the company’s financial statements in accordance with the auditor’s reporting requirements, the following amendments have been considered in this write-up. majority of the amendments to Schedule III to the Companies Act, 2013 have been assumed in response to the amendments protected in the newly issued Companies (Auditors and Report Order) 2020 and the Companies (Indian Accounting Standards) Amendment Rules, 2020.

Brief on amendments to Schedule III Division I, to the Act (for Companies whose financial statements are required to observe with the Accounting Standards):

  1. General instruction for preparation of balance sheet
  • Rounding off
    It’s choice to do rounding off of figures till fiscal year ended 31.03.2021. To round off the figures appearing within the Financial Statements for the fiscal year ending 31.03.2022, the entire income of the corporate shall be considered because of the basis.
  1. Additional disclosure in notes to balance sheet
    • Shareholding of promoter
      The note on share capital in the financial statements shall mention details of the shareholding of the advances along with changes, if any, during the financial year. The format of such disclosure shall be as follows:Notes:

      1. Here management shall give details individually for each class of shares.
      2. Percentage change shall be calculated with respect to the number at the beginning of the year or if furnished during the year for the first time then with respect to the date of issue.
    • Trade Payable (creditors) ageing schedule
      Companies hereafter are essential to provide ageing schemes for trade payables due for the periodicity of 1 year, 1-2-year, 2-3 year & more than 3 years. These include trade payables to MSMEs, discoursed dues to MSMEs, and other dues and discoursed dues. Comparably, disclosures shall also be made where no due date of payment is specified. Information for unbilled dues is also required to be revealed separately.
    • Trade receivables (debtors) ageing schedule
      Companies are going to be required to reveal the ageing schedule of its trade receivables i.e. including undisputed and discoursed trade receivables considered good and doubtful with ageing classified as but 6 months, 6 months to 1 year, 1-2 years, 2-3 years and three years or more alongside disclosures discrete disclosure for information of unbilled dues. These undisputed and disputed trade receivables which are further classified into good and doubtful.
    • Title deeds of immovable property not held in the name of the company
      The company shall provide the small print of the immovable property (other than properties where the corporate is that the lessee and therefore the lease agreements are duly executed in favour of the lessee) whose title deeds aren’t held within the name of the corporate within the specified format. If such immovable property is mutually held with others, details are required to tend to the extent of the company’s share;
    • Disclosure on revaluation of assets
      Where the corporate has revalued its property, plant and equipment, the corporate shall disclose whether the revaluation is predicated on the valuation by a registered value as defined under rule 2 of the companies (Registered Values and Valuation) Rules, 2017.
    • Disclosure on Loans/ Advance to Directors/ KMP/ Related parties
      Disclosures shall be made where loans or advances within the nature of loans are granted to promoters, directors, KMPs, and therefore the related parties (as defined under Companies Act, 2013,) either severally or jointly with the other person, that are:
      1. repayable on demand or
      2. without agreeing any terms or period of repayment
    • Details of benami property held
      In case any proceedings have been started or pending against the entity under the Benami Transactions (Prohibitions) Act, 1988, the corresponding disclosures shall be furnished in the financial statements. The company shall disclose the following:
      1. Details of such property, including the year of accession,
      2. Amount thereof,
      3. Details of beneficiaries,
      4. If the property is in the books, then reference to the item in the balance sheet,
      5. If the property isn’t in the books, then the actual fact shall be stated with reasons,
      6. Where there are proceedings against the company under this law as an a letter of the transaction or as the transferor, then the elements shall be provided,
      7. Nature of proceedings, status of same and company’s view on same.
    • Details of borrowing
      Where the company has borrowings from banks or financial institutions on the basis of security of current assets, it shall reveal the following:
      1. Whether quarterly returns or statements of current assets filed by the company with banks or financial institutions are in agreement with the books of accounts.
      2. If not, a summary of reconciliation and reasons for material discrepancies will be adequately disclosed.
    • Willful defaulter
      Where a company is a revealed willful defaulter by any bank or financial Institution or other lender, following details shall be given:
      1. Date of declaration as willful defaulter,
      2. Details of defaults (amount and nature of defaults)
    • Relationship with struck off companies
      Where the company has any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.
    • Registration of charges or satisfaction with registrar of companies
      Where any charges or content yet to be registered with Registrar of Companies beyond the statutory period, details and reasons thereof shall be disclosed.
    • Compliance with number of layers of companies
      Where the company has not complied with the number of layers specified under clause (87) of section 2 of the Act read with companies (restriction on number of layers) rules, 2017, the name and CIN of the companies beyond the specified layers and the relationship/extent of holding of the company in such downstream companies shall be disclosed.
    • Disclosure of ratios
      The amendment requires the companies covered under division I and II of schedule III to disclose the following ratios:
      1. Current ratio,
      2. Debt-equity ratio,
      3. Debt service coverage ratio,
      4. Return on equity ratio,
      5. Inventory turnover ratio,
      6. Trade receivables turnover ratio,
      7. Trade payables turnover ratio,
      8. Net capital turnover ratio,
      9. Net profit ratio,
      10. Return on capital employed,
      11. Return on investment.
    • Details in respect of application of borrowed funds and share premium shall be provided in respect of:
      1. Transactions where an entity has offered any advance, loan, or invested funds to any other person (s) or entity/ entities, including foreign entities.
      2. Transactions where an entity has accepted any fund from any person (s) or entity/ entities, including foreign entity.
    • Compliance with accepted scheme(s) of arrangements:
      Where the Competent Authority has approved any Scheme of Arrangements in terms of sections 230 to 237 of the Companies Act, 2013, the company must reveal that the effect of such Scheme of Arrangements have been consideredfor in the books of account of the Company ‘in accordance with the Scheme’ and ‘in accordance with accounting standards’ and divergence in this considered shall be described of holding of the company in such downstream companies shall be disclosed.
  1. Additional disclosure in notes to profit & loss account:
    • Undisclosed Income (Reconciliation of Income Tax and Companies Act)
      The company shall give specific transaction not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961, unless there is exclusion for disclosure under any scheme and also shall state whether the previously unrecorded income and related assets have been properly recorded in the books of account during the year.
    • CSR disclosure
      Where the company covered under section 135 of the Companies Act, the following shall be published with regard to CSR activities:
      1. Amount required to be spent by the company during the year,
      2. Amount of expenditure incurred,
      3. Shortfall at the end of the year,
      4. Total of previous year’s shortfall,
      5. Reason for shortfall,
      6. Nature of CSR activities,
      7. Details of related party transactions, e.g., contribution to a trust managed by the company in reference to CSR expenditure as per relevant Accounting Standard,
      8. Where a provision is formed with reference to a liability incurred by getting into a contractual obligation, the movements within the provision during the year should be shown separately.

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