Ny 11 0129 Word Proposal Template New-Books Pdf

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The Ministry of Corporate Affairs MCA vide notification dated 6 April 2016 amended Schedule III to the. Companies Act 2013 to incorporate the general instructions for preparation of financial statements of a company. required to comply with Ind AS Ind AS Schedule III On 27 July 2017 ICAI issued a guidance note on Ind AS. Schedule III Guidance Note to provide guidance on the preparation and presentation of financial statements for. companies required to comply with Ind AS Schedule III. This InBrief provides an overview of the key requirements of the guidance note We also share our views on certain. practical issues that may arise in the implementation of Ind AS Schedule III. Let s talk,Key requirements, i The terms used in the Ind AS Schedule III shall carry the same meaning as defined in the applicable. Ind AS For example the terms such as associate subsidiary related parties will have the same. meaning as defined in the Ind AS For any terms which are not specifically defined in Ind AS attention. may also be drawn to the framework for the preparation and presentation of financial statements in. accordance with Ind AS Where a term is not defined in Ind AS framework entities may consider. guidance for developing and applying an accounting policy in accordance with Ind AS 8 Accounting. Policies Changes in Accounting Estimates and Errors. ii In preparing the financial statements a balance should be maintained between providing excess details. that may not assist users of the financial statements and not providing important information as a. result of too much aggregation, It is necessary to strike a balance between overburdening financial statements with excessive detail. that may not assist users of financial statements and obscuring important information as a result of. too much aggregation This is a matter of professional judgement For example a company should. not obscure important information by including it among a large amount of insignificant detail or in. a way that it obscures important differences between individual transactions or associated risks. iii As per Ind AS Schedule III all items of assets and liabilities are to be bifurcated between current and. non current portions In some cases the items presented under the non current head of the balance. sheet may not have a corresponding current head under the format given in Ind AS Schedule III. Since Ind AS Schedule III permits the use of additional line items in such cases the current portion. should be classified under the current category of the respective balance as a separate line item and. other relevant disclosures should be made,Balance sheet. i Ind AS 1 Presentation of Financial Statements permits an entity to present all assets and liabilities in. order of liquidity when such presentation provides information that is reliable and more relevant. However Ind AS Schedule III does not permit presentation of asset and liabilities in the order of. liquidity Accordingly assets and liabilities should be presented using a current non current. classification Presentation of assets and liabilities in the order of liquidity may be disclosed in the. notes to the financial statements as additional information. ii Items of inventory or trade payable trade receivable that are expected to be consumed or. realised settled within the normal operating cycle of the company shall be classified as current even if. the same are not expected to be so consumed or realised within twelve months from the reporting date. iii Where a company is running multiple businesses with different operating cycles such a company shall. separately classify assets and liabilities of each of its businesses into current and non current. depending upon their respective operating cycles, iv Interests in subsidiaries associates or joint ventures that are accounted at cost in accordance with Ind. AS 27 Separate Financial Statements may be presented as a separate line item on face of the. standalone balance sheet These interests are financial instruments but are outside the scope of Ind AS. 109 Financial Instruments, Interests in subsidiaries associates or joint ventures that are accounted at cost in accordance with.
Ind AS 27 are outside the scope of Ind AS 109 Ind AS Schedule III requires that investments in. subsidiaries associates or joint ventures shall be disclosed as part of investments grouped under. financial assets Since these interests are out of scope of Ind AS 109 a question arose whether. such interests should be classified under investments grouped under financial assets or as a. separate line item on the face of the balance sheet The guidance note clarifies that such interest. may be presented as separate line item on face of the standalone balance sheet. v Interests in subsidiaries associates or joint ventures that are accounted in accordance with Ind AS 109. at fair value shall be presented under the head investments separately on face of the standalone balance. sheet or in the notes grouped under financial assets. vi Investments accounted using equity method i e associates and joint ventures shall be presented as a. separate line item on face of the consolidated balance sheet and presented outside financial assets. vii Non Ind AS Schedule III requires an entity to disclose names of all the bodies corporate in which it. holds any class of investments and further to indicate separately whether such bodies are i. subsidiaries ii associates iii joint ventures or iv controlled special purpose entities Ind AS. Schedule III requires an entity to disclose names of the bodies corporate that are i subsidiaries ii. associates iii joint ventures or iv structured entities However an entity may choose to disclose. names of all bodies corporates in which it holds any investment. The disclosure requirements of Ind AS Schedule III are in addition to and not in substitution of. the disclosures requirements of Ind AS Para 11A of Ind AS 107 Financial Instruments. Disclosures requires that among other matters companies disclose investments in equity. investments that have been designated to be measured at fair value through other. comprehensive income FVOCI Accordingly over and above the requirements of Ind AS. Schedule III an entity is also required to disclose names of the bodies corporate in which it holds. equity investments measured at FVOCI, viii Ind AS 12 Income Taxes defines deferred tax asset to include carry forward of unused tax credits MAT. credits are in the form of unused tax credits that are carried forward Accordingly MAT credit. entitlement should be grouped with deferred tax asset and a separate note should be provided. specifying the nature and amount of MAT credit included as a part of deferred tax asset Similarly in. the statement of profit and loss MAT credit entitlement should be grouped with the deferred tax MAT. credit entitlement should be reviewed at each balance sheet date for the reasonable certainty of its. recoverability, ix Current tax assets and current tax liabilities should be off set based on the asset or liability position. assessment year wise and not on a cumulative basis unless tax laws permit otherwise. Let us consider the below example A Ltd has the following year wise net current tax asset and. liability positions, i FY 2014 2015 2 million INR net current tax asset. ii FY 2015 2016 5 million INR net current tax asset. iii FY 2016 2017 10 million INR net current tax liability. How current tax asset and current tax liability should be presented in the balance sheet as at. 31 March 2017, Response Current tax liability amounting to 10 million INR and current tax asset of. 7 million INR should be presented separately in the balance sheet However if tax laws in an. overseas jurisdiction permit entities to offset current tax assets and current tax liabilities on a. cumulative basis then current tax liability of 3 Million INR should be presented in the balance. Excess current tax paid may not be recovered realised within one year from the balance sheet date and. if so the same shall be presented under non current assets An entity should evaluate whether current. tax assets meets the definition of current assets or not and accordingly present the same. x Where a company elects to apply previous GAAP deemed cost exemption under para D7AA of. Ind AS 101 First time Adoption of Ind AS for its property plant and equipment PP E then the. deemed cost i e net carrying value of the PP E under the previous Indian GAAP shall be new gross. block under Ind AS and accordingly presented in the PP E reconciliation statement required by Ind AS. Schedule III, If an entity intends to disclose information regarding previous GAAP gross block accumulated.
depreciation and impairment the same may only be disclosed as an additional information by. way of a note forming part of the financial statements. xi Capital advances for procurement of PP E intangibles and other non current assets shall be classified. under other non current assets instead of capital work in progress Capital advances should be treated. as non current irrespective of when the underlying non current asset is expected to be received. xii Security deposits such as rent deposit shall be classified under loans grouped under financial assets. where such deposits meet the definition of a financial asset as per Ind AS 109 Security deposits which. do not meet definition of financial asset shall be classified under other current asset other non current. asset as applicable, xiii Prepayments and indirect tax receivables such as CENVAT receivables shall be presented under other. advances grouped under other current asset other non current assets as applicable. xiv Bank deposits with more than 12 months maturity from the reporting date shall be disclosed under. non current financial asset Cash and cash equivalents and Bank balances other than cash and cash. equivalents shall be separately presented on the face of balance sheet Bank deposits with original. maturity of more than three months but less than 12 months shall be presented as part of bank. balances other than cash and cash equivalents, xv A receivable shall be classified as trade receivable if it is in respect of amount due on account of goods. sold or services rendered in the normal course of business Accordingly amounts due under contractual. rights other than that arising from sale of goods services cannot be classified as trade receivables. Such items may include dues in respect of insurance claims and sale of PP E These receivables shall. be classified as other financial assets, xvi Unlike Non Ind AS Schedule III Ind AS Schedule III does not require separate presentation of the. aggregate amount of trade receivables outstanding for a period exceeding six months from the date. they are due for payment, xvii Ind AS Schedule III requires trade receivables to be sub classified as secured considered good. unsecured considered good and doubtful The amount of trade receivables that shall be disclosed as. doubtful shall represent the amount of expected credit loss determined in accordance with Ind AS 109. Remaining balance of trade receivables shall be disclosed as good Accordingly a company shall. disclose trade receivables as highlighted below assuming the entire amount is unsecured. Trade receivable INR,Secured considered good,Unsecured considered good 125 000.
Considered doubtful 25 000,Total 150 000,Less Allowance for doubtful debts 25 000. The above requirement would equally apply to loans. Equity and Liabilities, xviii Instruments other than equity share capital which are entirely equity in nature from the issuer s. perspective such as compulsory convertible preference shares compulsory convertible debentures may. be presented as a separate line item on the face of balance sheet under equity after equity share capital. but before other equity, xix Any liability for which the entity does not have an unconditional right to defer its settlement for at least. 12 months after the reporting date shall be classified as current. xx Terms of a liability that could at the option of the counterparty result in settlement by the issue of. equity shares do not affect classification of liability as current or non current This provision does not. extend to other cases where the conversion option is with the issuer. The liability component of financial instruments should be classified as current or non. current depending on the terms of the contract A question arises whether the liability. component of a convertible financial instrument should be presented as current or non. current where the instrument is convertible to equity at any time within the next 12 months. but if not converted is repayable in cash only beyond 12 months Such instruments would. have an equity component being the holder s right to convert the instrument into a fixed. number of equity instruments of the issuer any time before the maturity date and a. liability component being the entity s obligation to deliver cash to the holder at the maturity. date which is more than one year after the balance sheet date. The liability component of the convertible instrument should be classified as non current. because it is not repayable in cash within the next 12 months The holder s conversion. option shall be ignored for the purpose of current non current classification. xxi Trade payables should present separately the portion representing outstanding dues to micro and small. enterprises from the portion representing other trade payables. xxii A payable shall be classified trade payable if it is in respect of amount due on account of goods. purchased or services received in the normal course of business Accordingly amounts due under. contractual obligations or statutory payables can no longer be included within trade payables Such. items may include payable in respect of statutory obligations such as contribution to provident fund. and amounts due towards purchase of capital goods, xxiii A loan which is not repayable on demand shall not be classified as current if the breach of covenant is. considered as minor and it is expected that lenders will not demand repayment of loan However if the. lenders have demanded repayment at any time before the approval of the financial statements loan. shall be classified as current, In the Indian context the criteria of a loan becoming repayable on demand on breach of covenants.
is generally added as a matter of abundant caution Banks generally do not demand repayment of. loans for minor defaults such as non filing of quarterly returns as these covenants are more in the. nature of a protective right which is exercised in exceptional situations Considering the practical. implications of a minor default is negligible an entity may continue to classify the loan as non. current if the loan is not actually demanded by the lender at any time prior to the date of the. approval of the financial statements, xxiv Where there is a material breach of the terms of a loan agreement such as those related to financial. covenants with the effect that the loan become repayable on demand then such loan shall be classified. as current unless the lender has agreed not to demand repayment at any time before the financial. statements are approved for issue What constitutes a material breach of the terms needs to be. evaluated on case to case basis considering the facts and terms and conditions of each borrowing. arrangement, xxv Classification of liability towards long term compensated absences into current or non current shall. depend on whether the employees have an unconditional right to avail the leave earned by them In. such case the liability shall be classified as current. Classification of long term leave liability into current and non current depends upon terms of. employee contract and the leave policy employer s right to postpone deny leave and restriction. to avail leave in the next year for a maximum number of days If the employees have earned leave. which can be availed any time and the entity does not have right to defer the leave the liability. shall be classified as current even though the same is measured as other long term employee. benefit as per Ind AS 19 Employee Benefits, xxvi Unfunded post employment benefit obligations shall be classified into current and non current. Current portion shall represent the company s obligation for employees resigned retiring or expected. to resign within next twelve months from reporting date The remaining portion shall be classified. non current Normally the amount of current and non current liability would be determined by an. xxvii Deposits from public and inter corporate deposits shall be classified as deposits under borrowings. Deferred payment liabilities such as acquisition of PP E on deferred payment terms shall be classified. as deferred payment liabilities under borrowings, xxviii Current maturities of long term debt shall be presented under other financial liabilities grouped under. current liabilities, Although current maturities of long term debt are of the nature of a borrowings but since Ind AS.
Schedule III specifically provides a separate line item for current maturities of long term debt. under other financial liabilities the guidance note recommends that companies follow the. requirements of Ind AS Schedule III, xxix Current borrowings shall include all loans payable within a period of 12 months from the date of the. xxx An entity is not required to present accrued interest separately from the related financial liability under. other financial liabilities Accordingly interest accrued shall form part of the carrying value of. financial liability measured at amortised cost or fair value. xxxi Bank overdrafts can be offset against cash and cash equivalents only if the offsetting conditions of. Ind AS 32 Financial Instruments Presentation i e legal enforceable right to offset and intention to. net settle are met This does not preclude companies from presenting bank overdrafts as a component. of cash and cash equivalents in the statement of cash flows where bank overdrafts form integral part of. an entity s cash management system, xxxii Trade and security deposits that do not meet the definition of financial liability shall be classified as. other current liabilities non current liabilities as applicable. Statement of profit and loss, i Revenue shall be presented net of goods and service tax GST since GST is collected by an entity on. government s behalf and not on its own account, ii Manufacturing companies are required to disclose costs of material consumed on the face of the. statement of profit and loss Material consumed would consist of raw materials packing materials. where classified by the company as raw materials and other materials such as purchased. intermediates and components which are consumed in the manufacturing activities of the company. However intermediates and components which are internally manufactured are to be excluded from. the classification, iii Internally manufactured components may be classified as follows.
a where components are sold without further processing they are to be disclosed as finished goods. b where components are sold only after further processing they are to be disclosed as work in. progress but they may also be disclosed as manufactured components subject to further. processing or with such other suitable description as semi finished products or intermediate. c where such components are sometimes sold without further processing and sometimes after. further processing it is better to disclose them as manufactured components. iv The term raw material would generally mean to include materials which physically enter into the. composition of the finished product Materials such as stores fuel spare parts which do not enter. physically into the composition of the finished product would therefore be excluded from the purview. of the term raw materials, v Whether packaging material constitute a category of raw material for the purpose of classification. depends upon the facts and circumstances of each case the nature of the containers and packaging. materials their relative value in comparison to the raw materials consumed and other similar. considerations Where however packaging materials because of their nature are included in raw. materials it is preferable to show the description as raw materials including packaging materials. vi The guidance note recommends that disclosure related to raw materials consumed should relate to. actual consumption rather than derived consumption The latter figure is ordinarily obtained by. deducting the closing inventory from the total of the opening inventory and purchases but this figure. may not always represent a fair indication of actual consumption because it might conceal losses and. wastages On the other hand if the figure of actual consumption can be compiled from issue records or. other similar data it is likely to be more accurate. Where it is not possible to accurately determine actual consumption the derived figure of. consumption may be shown and it is left to the company according to the circumstances of each. case to determine whether any footnote is required to indicate that the consumption disclosed. is on the basis of derived figures rather than actual records of issue. vii Ind AS Schedule III requires purchases of stock in trade to be presented separately on the face of the. statement of profit and loss Stock in trade refers to goods purchased normally with the intention to. resell or trade in In case any semi finished goods materials are purchased with an intention of doing. further processing activities on the same the same should be included in cost of materials consumed. rather than under this item, viii Ind AS Schedule III states that changes in inventories finished goods work in progress and. stock in trade should be presented on the face of the statement of profit and loss Disclosure is required. of difference between opening and closing inventories of finished goods work in progress and stock. in trade The difference should be disclosed separately for finished goods work in progress and stock. ix Presentation of income as other operating revenue or other income depends upon facts of each case. and detailed understanding of the company s business For instance a company engaged in. manufacture and sale of consumer goods also has a real estate arm which is continuously engaged in. leasing of real estate properties the rent income from such leasing activity is likely to be classified as. other operating revenue On the other hand consider a consumer products company which owns 10. storied building The Company currently does not need one floor for its own use and has given the same. temporarily on rent In such case the lease rent shall be classified as other income. x Fair value gains or losses on financial assets which are measured at fair value through profit or loss. FVTPL such as derivatives investments designated or classified at FVTPL etc should be disclosed in. the notes under net gains losses on fair value changes grouped under other non operating income. Current year Comparative,Investments classified at FVTPL. Investments designated at FVTPL,Derivatives at FVTPL. Other financial instruments designated at FVTPL,Other financial instruments classified at FVTPL.
Reclassification adjustments, Realised gain on debt instrument classified as FVOCI. Others specify nature,Total net gains losses on fair value changes. total net gains losses on fair value changes included Rs XXX previous year Rs XXX as net. gain or loss on sale of investments, xi Interest income from financial assets that are measured at amortised cost and that measured at fair. value through other comprehensive income FVOCI shall be disclosed separately in the notes to the. financial statements grouped under interest income. xii With respect to financial assets at FVTPL a company shall disclose whether the interest income on the. financial assets shall form part of fair value changes or shall be presented as interest income This is an. accounting policy choice, xiii Share of profits losses in a partnership firm or a limited liability partnership LLP shall be recognised. in separate financial statements as income as and when right to receive the profit share is established. except where the partnership is identified as joint operation Where a partnership is identified as a. joint operation the share of income expenses assets or liabilities will have to be accounted by the. company in its separate financial statements as per Ind AS 111 Joint Arrangements. Whereas as per the guidance note issued by ICAI on Non Ind AS schedule III share of profit or. loss in a partnership firm is accrued the moment the same is computed and credited or debited. to the capital current account of the company in the books of partnership firm Under Ind AS. recognition of profit or loss shall be based on the principles discussed above. xiv Exchange differences arising on foreign currency borrowings which is considered as an adjustment to. borrowing costs in accordance with para 6 e of Ind AS 23 Borrowing Costs and which does not. qualify for capitalisation shall be presented under finance costs As per para 6 e of Ind AS 23. exchange loss on foreign currency borrowings to the extent of the difference between cost of borrowing. in functional currency and cost of borrowing in foreign currency shall be considered as borrowing cost. Exchange loss over and above that considered as an adjustment to borrowing costs shall be presented. under other expenses, xv Entities have a choice in presenting net interest on defined benefit liability Net interest on.
defined benefit liability may be presented under interest expense or as part of employee benefit. xvi Dividend on preference shares whether redeemable or convertible is of the nature of interest. expense only where there is no discretion of the issuer over the payment of such dividends In such. case the portion of dividend as determined by applying the effective interest method should be. presented as interest expense under finance cost Accordingly the corresponding dividend. distribution tax DDT on such portion of non discretionary dividends should also be presented in the. statement of profit and loss under interest expense. xvii Where there is a discretion of issuer over the payments of dividend on preference shares whether. redeemable or convertible the dividend is in the nature of distribution of profit and accordingly shall. be presented in statement of changes in equity The corresponding DDT on such dividend should also. be presented in statement of changes in equity, xviii Additional line items may be presented on face of financial statements where such presentation is. relevant to the understanding of the company s position or performance or to cater to industry sector. specific disclosure, Earnings before interest tax depreciation and amortisation EBITDA is often an important. measure of financial performance of the company relevant to various users of financial. statements and stakeholders of the company A company may choose to present the same as an. additional line item on the face of statement of profit and loss Companies should disclose the. policy followed in the measurement of such items Method of computation should be. consistently followed, xix Presentation of any items of income or expense as extraordinary items is prohibited. xx Ind AS Schedule III requires exceptional items to be presented on the face of the statement of profit. and loss The term exceptional item is neither defined in Ind AS Schedule III or in Ind AS Ind AS 1. states that when items of income or expenses are material an entity shall disclose their nature and. amount separately Para 98 of Ind AS 1 gives example of circumstances that would give rise to the. separate disclosure of items of income and expenditure. These include, a write downs of inventories to net realisable value or of PP E to recoverable amount as. well as reversals of such write downs, b restructurings of the activities of an entity and reversals of any provisions for the costs.
of restructuring,c disposals of items of PP E investments. d discontinued operations,e litigation settlements and. f other reversals of provisions, In case the company has more than one such item of income expense of the above nature which is. exceptional then such items should be disclosed on face of the statement of profit and loss with. disclosure of the details in the notes, We believe that an entity presenting exceptional item in the statement of profit or loss should. also disclose the definition of the term in the accounting policy note The presentation and. definition of exceptional item must be applied consistently from year to year. xxi Interest on shortfall in the payment of advance income tax is in the nature of finance cost and. accordingly should not be clubbed with the current tax Such interest should be classified as interest. expenses under finance costs, xxii Penalties levied under income tax law should not be classified as current tax Penalties which are.
compensatory in nature should be classified as interest expenses under finance costs Other tax. penalties should be classified under other expenses. Other disclosures, i Disclosures mandated by other Acts or legal requirements or pronouncements of regulatory bodies. such as ICAI shall be made in the financial statements For instance disclosures required by the Micro. Small and Medium Enterprises Development MSMED Act 2006 shall be made in the separate. financial statements of an entity, ii Ind AS Schedule III requires disclosures of the details of the loans given to related parties The term. details shall mean disclosure requirements of Ind AS 24 Related Party Disclosures. iii Ind AS Schedule III requires that nature of security of borrowings shall be specified separately in each. case A blanket disclosure of different securities covering all loans classified under the same head such. as All term loans from banks will not suffice However where one security is given for multiple loans. the same may be clubbed together for disclosures purposes. iv Disclosure of nature of security should also cover the type of asset given e g inventories PP E and. land and building, v Ind AS Schedule III requires the disclosure of repayment terms of borrowings This includes the period. of maturity with respect to the balance sheet date number and amount of instalments dues the. applicable rate of interest and other significant relevant terms if any. vi The amount of borrowings guaranteed by directors or others shall be disclosed separately for each. category of borrowing,Frequently Asked Questions FAQs. 1 Are all disclosures of Ind AS Schedule III presented in the separate financial statements required to be. repeated or reproduced in the consolidated financial statements CFS. Like Non Ind AS Schedule III Ind AS Schedule III requires that provisions of the Schedule shall mutatis. mutandis apply to consolidated financial statements The MCA vide general circular no 39 dated 14. October 2014 had clarified that Schedule III to the Companies Act 2013 does not envisage that a company. while preparing its CFS merely repeats the disclosures made by it under separate financial statements. Accordingly a company would need to give the disclosures relevant to CFS only As per the guidance note. the requirements of Ind AS Schedule III shall apply to CFS subject to the following. exemptions modifications based on the relevance to CFS. Ind AS Schedule III requirements Applicability to CFS. Share capital authorised issued subscribed It is adequate to present the paid up capital. and paid up and any calls in arrears, Sources from which bonus shares are issued Not relevant at CFS level and may be.
dispensed with, Disclosures of all unutilised monies out of issue Not relevant at CFS level and may be. of securities indicating the form in which such dispensed with. unutilised funds have been invested, Period and amount of continuing default as on Disclosure may be limited to items which. balance sheet date in repayment of borrowings are material to the CFS Materiality could. and interest be considered at 10 of the respective. balance sheet item, Loans and advances Debt due by directors or Disclosure may be limited to items which. other officers of the company or any of them are material to the CFS Materiality could. either severally or jointly with any other be considered at 10 of the respective. persons or amounts due by firms or private balance sheet item. companies respectively in which any director is,a partner or a director or a member should be. separately stated, Disclosure towards payments to auditors Not relevant at CFS level and may be.
amount of expenditure incurred on corporate dispensed with. social responsibility activities and disclosures,under MSMED Act 2006. 2 Where should gain or loss arising on changes in the proportion of equity held by non controlling interest be. Ind AS 110 Consolidated Financial Statements para B96 requires than an entity shall recognise directly in. equity any difference between the amount by which the non controlling interests are adjusted and the fair. value of the consideration paid or received and attribute it to the owners of the parent Ind AS does not. specify where such gain loss should be presented within other equity An entity may present such. gain loss separately as non controlling interest reserve shown under other reserve by specifying its. 3 Can land and building be presented as a single class of PP E under Ind AS Schedule III. Para 37 of Ind AS 16 Property Plant and Equipment gives an example of grouping land and building. under the same class for revaluation purposes The para states that a class of PP E is a grouping of assets. of a similar nature and use in an entity s operations However Ind AS Schedule III requires presentation of. land and building as separate class of PP E Accordingly companies should follow the presentation. requirement of Ind AS Schedule III, 4 Is a company required to disclose the aggregate carrying amount of quoted investments and market value. thereof under Ind AS Schedule III, Ind AS Schedule III requires disclosure of the aggregate carrying amount of quoted investments and market. value thereof and the aggregate carrying amount of the unquoted investments This disclosure is required. separately for non current investments and current investments The market value of quoted investments. would generally mean fair value of investments Where investments are measured at either fair value. through profit or loss or fair value through other comprehensive income the market value and the carrying. value of the investments is generally expected to be same. Ind AS 113 Fair Value Measurement defines fair value and also states that the fair value of assets. might be affected when there has been a significant decrease in the volume or level of activity for that. asset in relation to normal market activity for that asset A decrease in the volume or activity on its. own may not indicate that a quoted price does not represent fair value However if a company. determines that a quoted price does not represent fair value then market value of the investment. would be different than its fair value, 5 Ind AS Schedule III requires disclosure of aggregate value of impairment in the value of investments which. investments are covered within the scope of this disclosure. As per Ind AS 109 an entity is required to recognise a loss allowance i e impairment for expected credit. losses on investments measured at amortised cost Further with respect to debt instruments measured at. fair value through other comprehensive income an entity is required to estimate the portion of fair value. changes attributable to a change in credit risk by applying the impairment requirements of Ind AS 109 and. recognise the loss allowance in the statement of profit and loss with a corresponding adjustment to other. comprehensive income Accordingly investments at amortised cost and debt instruments at fair value. through comprehensive income would be covered within the scope of the disclosure The disclosure do not. apply to equity instruments measured at fair value and all other investments measured at fair value through. profit or loss, 6 Ind AS Schedule III requires nature and extent of investment in each body corporate to be disclosed What.
does term nature and extent mean, Ind AS Schedule III requires disclosure of the nature and extent of the investment made Ordinarily the. nature and extent of investment would imply the number of such instruments held and the face value of. such instrument However in case of a structured entity rights are mainly established by way of. contractual arrangements and therefore as a part of nature and extent a brief description of the nature of. contracts may be provided along with the rights held in such entities as evidenced by such contracts. Structured entity is an entity that has been designed so that voting power or similar rights are not. dominant factor in deciding who controls the entity such as when any voting rights are related to. administrative tasks only and the relevant activities are directed by means of contractual agreements. 7 How should investments be disclosed in the financial statements. As per Ind AS 107 carrying amounts of each investments under the scope of Ind AS 109 shall be disclosed. either in the balance sheet or in the notes under the following categories. i Measured at amortised cost,ii Mandatorily measured at FVTPL. iii Designated at FVTPL,iv Measured at FVOCI,v Designated at FVOCI. Ind AS Schedule III further requires investments to be classified as per the nature e g investment in equity. instruments preference shares debentures or bonds etc Accordingly companies may disclose. investments by grouping them in the following manner. i Broad categories of Ind AS 107 discussed above, ii Under each broad category nature wise classification as per Ind AS Schedule III. iii Under each nature based classification grouping based on the relationship of bodies. corporate i e subsidiaries associates joint ventures and structured entities. iv Under each grouping of bodies corporate details of names of body corporate and. nature and extent of investments in body corporate These details are required for. investments in subsidiaries associates joint ventures structured entities and equity. investments measured at FVOCI, An entity is permitted to present the information in other ways by changing the order of grouping.
8 An entity has invested in a partnership firm Are there any specific disclosures under Ind AS Schedule III. for the investment in a partnership firm, Schedule III provides certain disclosures where company is a partner in partnership firm Investment in. capital of partnership firm should be separately disclosed from other investments In addition in the notes. to accounts separate disclosure is required with regards to the names of the firms in which the company is. a partner along with the names of their partners total capital and the shares of each partner Separate. disclosure is required by reference to each partnership firm in which the company is a partner. Specific disclosures pertaining to investments in partnership firms do not extend to limited liability. partnerships As per the guidance note, i In case of a change in the constitution of the firm during the year the names of the other. partners should be disclosed by reference to the position as on the Company s balance sheet. ii The total capital of the firm to be disclosed should be with reference to the amount of capital. on date of the company s balance sheet If it not practicable to draw up the financial. statements of the partnership firm up to such date adjustments should be made for the. effects of significant transactions or other events till the date of the company s balance sheet. In any case the difference between reporting dates should not be more than three months. iii For disclosure of the share of each partner share of each partner in profits should be. 9 How should application money paid towards securities not yet allotted be presented in the balance sheet. Any application money paid towards securities where security has not been allotted on the date of balance. sheet shall be disclosed as a separate line item under other non current financial assets In case the. investment is of current in nature such share application money shall be accordingly disclosed under. other current financial assets If the amount is material details about the date of allotment or when the. allotment is expected to be completed may also be disclosed. 10 How should finance lease receivables be classified under Ind AS Schedule III. Ind AS Schedule III does not specify the presentation of finance lease receivables unlike finance lease. obligations which are to be grouped under Financial Liabilities The scope paragraph of Ind AS 32 Ind AS. 109 and Ind AS 107 acknowledges that rights and obligations under leases to which Ind AS 17 Leases. applies are financial instruments but their measurement is excluded from the scope of these standards. Accordingly the non current portion of a finance lease receivable shall be presented here under Other non. current financial assets while its current portion shall be presented under Other current financial assets. 11 How should advances paid be classified under Ind AS Schedule III. Capital advances paid are classified under other non current assets Classification of other advances. depends on whether the advance meets the definition of financial asset as per Ind AS 32 Advance which. meets the definition of financial asset e g where the advance will be settled in cash shall be classified. under other non current financial asset other current financial assets depending upon whether the. settlement is within 12 months from the reporting date Advances that do not meet definition of financial. asset shall be classified under other current assets non current assets as applicable. 12 What disclosures apply to instruments that are entirely equity in nature from issuer s perspective such as. compulsory convertible preference shares, Instruments which are entirely equity in nature such as compulsory convertible preference shares and. compulsory convertible debentures shall be presented as a separate line item on face of balance sheet under. equity after equity share capital but before other equity Statement of changes in equity shall present. movement in each such instrument separately All disclosure required by Ind AS Schedule III for equity. share capital for e g number of shares issued and subscribed number and amount of shares authorised. par value of share shares held by each shareholder holding more than 5 shares shares held by holding. company or the ultimate holding company including shares held by subsidiary or associate of holding or. ultimate holding company etc shall be provided for such instruments to the extent applicable. 13 What disclosures apply to compound instruments which have both equity and liability components. Ind AS Schedule III highlights that the disclosure and presentation requirements as applicable to the. relevant class of Equity or Liability shall be applicable mutatis mutandis to the instruments including. their components classified and presented under the relevant heads in Equity and Liabilities. Accordingly the guidance note recommends that the companies provide all the relevant disclosures for. Equity component of a compound financial instrument as applicable to Equity Share Capital to the. extent applicable An example could be to disclose for equity component of compound financial. instrument terms of any securities convertible into equity shares issued along with the earliest date of. conversion in descending order starting from the farthest such date etc For the liability component of. compound financial instruments all the disclosures applicable to Borrowings shall be made to the extent. applicable An example could be to disclose the rate of interest particulars of redemption or conversion. stated in descending order of maturity or conversion etc. 14 Ind AS Schedule III requires disclosure of the number of shares in the company held by each shareholder. holding more than 5 shares Does the disclosure apply to a shareholder whose shareholding was more. than 5 during the year but as at the balance sheet falls below 5. As per the guidance note the date for computing such percentage should be taken as the balance sheet. date Accordingly if during the year any shareholder held more than 5 equity shares but does not hold. more than 5 at the balance sheet date the disclosure is not required. 15 How should re measurements of defined benefit plans be presented under equity. A company shall present accumulated re measurements of defined benefit plans as a part of the retained. earnings with separate disclosure of such item with relevant amounts in the notes. 16 Ind AS Schedule III requires borrowings to be sub classified as secured and unsecured Which loans can be. presented as secured loans, A loan which is secured on the assets of the company shall be classified as secured When promoters or. other shareholders or any third party have given any personal security for the loan then such security does. not result in the classification of the loan as secured. 17 What are the disclosures required for default in repayment of borrowings. Ind AS Schedule III requires that period and the amount of default in repayment of borrowings and interest. as on the balance sheet date shall be specified separately in each case Even one default by a company. would create an obligation to disclose the period and amount of default This disclosure shall be provided. even if the default was remediated before the financial statements are approved for issue. Ind AS 107 para 18 requires following disclosure in respect of defaults. For loans payable recognised at the end of the reporting period an entity shall disclose. a details of any defaults during the period of principal interest sinking fund or redemption terms. of those loans payable, b the carrying amount of the loans payable in default at the end of the reporting period and.
c whether the default was remedied or the terms of the loans payable were renegotiated before. the financial statements were approved for issue, 18 What are the disclosures required for breaches of loan agreement terms e g covenants. Ind AS Schedule III does not require any disclosure of breaches of loan agreement terms However Ind AS. 107 para 19 requires an entity to disclose the same information as required for defaults if breaches of loan. agreement terms other than defaults described in Ind AS 107 para 18 made during the reporting period. permitted the lender to demand accelerated repayment and were not remediated on or before the end of the.

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