Guidance Note on Division II – Ind AS Schedule III

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3 years ago

Guidance Note on Division II – Ind AS Schedule III to the Companies Act 2013 issued by CL&CGC ICAI

Introduction

1.1 Schedule III to the Companies Act, 2013 (‘the Act’) was notified along with the Act itself on 29 August, 2013 thereby providing the manner in which every company registered under the Act shall prepare its Financial Statements. Financial Statements as defined under the Act include Balance Sheet, Statement of Changes in Equity for the period if applicable, the Statement of Profit and Loss for the period, Cash flow statement for the period and Notes.

1.2 Ministry of Corporate Affairs (‘MCA’) notified Indian Accounting Standards (‘Ind AS’) on 16 February, 2015 thereby laying down the initial roadmap for all companies, except insurance companies, banking companies and non-banking finance companies, for adoption of Ind AS (‘MCA roadmap’). Further, MCA notified amendments to Schedule III to the Act on 6 April, 2016 whereby:

1.2.1 The original Schedule III was renamed as ‘Division I’ to Schedule III (‘Non-Ind AS Schedule III’) – which gives a format of Financial Statements for Non-Ind AS companies, that are required to comply with the Companies (Accounting Standards) Rules, 2006 (as amended from time to time).. In other words, Non-Ind AS companies, will be required to prepare Financial Statements as per Companies (Accounting Standards) Rules, 2006 (as amended from time to time)., as per the format of Division I to Schedule III to the Act;

1.2.2 ‘Division II’ – ‘Ind AS Schedule III’ (Refer Annexure A, Pg 152) was inserted to give a format of Financial Statements for companies that are required to comply with the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time (‘Companies Ind AS Rules’). This is newly inserted into Schedule III for companies that adopt Ind AS as per Rule 4(1)(i) or Rule 4(1)(ii) or Rule 4(1)(iii) of the Companies Ind AS Rules. Accordingly, such Companies, while preparing its first and subsequent Ind AS Financial Statements, would apply Division II to Ind AS Schedule III to the
Act.

1.3 The requirements of Ind AS Schedule III however, do not apply to companies as referred to in the proviso to Section 129(1) of the Act, i.e., any insurance or banking company or any company engaged in the generation or
supply of electricity, or to any other class of company for which a form of Balance Sheet and Statement of Profit and Loss has been specified in or GN on Division II – Ind AS Schedule III to the Companies Act 2013 under any other Act governing such class of company. Moreover, the requirements of Ind AS Schedule III do not apply to Non-Banking Finance Companies (NBFCs) that adopt Ind AS as per Rule 4(1)(iv) of Companies (Indian Accounting Standards) Rules, 2015 notified in Companies (Indian Accounting Standards) (Amendment) Rules, 2016 as amended from time to
time.

1.4 It may, however, be clarified that for companies engaged in the generation and supply of electricity, neither the Electricity Act, 2003 nor the rules framed thereunder, prescribe any specific format for presentation of Financial Statements by an electricity company. Section 1(4)(d) of the Act states that the provisions of the Act shall apply to companies engaged in the generation or supply of electricity companies, to the extent it is not inconsistent with the provisions of the Electricity Act, 2003. Keeping this in view, Ind AS Schedule III may be followed by such companies till the time any other format is prescribed by the relevant statute.

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