ICAI’s Exposure Draft of Guidance Note on “Division II Ind AS Schedule III to Companies Act, 2013”

ICAI’s Exposure Draft of Guidance Note on “Division II – Ind AS – Schedule III to the Companies Act, 2013”; Comments/ Suggestions invited latest by 30 Apr. 2017

The ICAI has invited comments/ suggestions latest by 30 Apr. 2017 with regard to the Exposure Draft of Guidance Note on “Division II – Ind AS – Schedule III to the Companies Act, 2013“, as under:

ICAI’s Exposure Draft of Guidance Note on Division- II Ind AS Schedule III to the CA 2013

‘Schedule III’ to the Companies Act, 2013 (‘the Act’) provides the manner in which every company registered under the Act shall prepare its Financial Statements i.e. Balance Sheet, Statement of Changes in Equity for the period, the Statement of Profit and Loss for the period and Notes.

Ministry of Corporate Affairs (‘MCA’) has notified Indian Accounting Standards (‘Ind AS’) on February 16, 2015 thereby laying down the 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 6th April 2016 whereby:

i) The existing 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. In other words, Non-Ind AS companies, will be required to prepare Financial Statements as per Companies (Accounting Standards) Rules, 2006), as per the format to Division I to Schedule III to the Act;

ii) ‘Division II’ – ‘Ind AS Schedule III’ (Refer Annexure A) 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.

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 under any other Act governing such class of company. Moreover, the requirements of Ind AS Schedule III do not apply to Non-Banking Financial 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.

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) of the Act states that the Act will apply to electricity companies, to the extent it is not inconsistent with the provisions of the Electricity Act. Keeping this in view, Schedule III as applicable may be followed by such companies till the time any other format is prescribed by the relevant statute.

The objective of this Guidance Note is to provide guidance in the preparation and presentation of Financial Statements in accordance with various aspects of Ind AS Schedule III, for companies adopting Ind AS. The disclosure requirements under Ind AS, The Companies Act, 2013, other pronouncements of the Institute of Chartered Accountants of India (ICAI), other statutes, etc., would be in addition to the guidance provided in this Guidance Note. The primary focus of the Guidance Note has been to lay down broad guidelines to deal with practical issues that may arise in the implementation of Ind AS Schedule III while preparing Financial Statements as per Ind AS.

Guidance given in ‘Guidance Note on Schedule III to the Companies Act, 2013’ published in February 2016 would continue to be applied by non-Ind AS companies which are required to prepare Financial Statements as per the format of Non Ind AS Schedule III.

The Comments/suggestions may be submitted to ICAI, as under:

By Post: The Chairman Corporate Laws & Corporate Governance Committee, ICAI ICAI Bhawan, 4th Floor, Administrative Block, Plot A/29, Sector 62, NOIDA 201 309, Gautam Budh Nagar, Uttar Pradesh

By Email: [email protected]

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