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Amendment Notes for Financial Reporting

Revised Schedule VI: - No More Relevant


Schedule III of Companies Act 2013 is Relevant
Old Revised Schedule VI and schedule III of new companies Act 2013 are same except for a statement
on subsidiary, Associates joint Venture
Revised Schedule VI

Schedule III

1. Balance Sheet
2. Profit & Loss
3. Notes to Accounts

1.
2.
3.
4.

Balance Sheet
Profit & Loss
Notes to Accounts
Statement on Subsidiary

Following Companies is relevant


Old Revised Schedule VI of Companies Act,
1956 (Applicable up to 31-3-2013)
Balance Sheet Format
Statement of P/L
Notes to Accounts
-

Schedule III of Companies Act, 2013 (Applicable


From 1-04-2014
Same Balance Sheet Format
Same Statement of P/L
Same Notes to Accounts
Statement on Subsidiary, Associates, J.V.

2. How to prepare statement on subsidiary etc.? (Instant of report of sec 212)


Name of

% of Net Assets
%
Amount

% of Profit
%

Amount

Subsidiary
Associates
Joint Venture
Share in Minority
Interest
3 Statement prepared u/s 212 of companies act, 1956 is not relevant
Example:Balance Sheet as on 31st March 2015
Share Capital
Reserve & Surplus
Sundry Lib. (Creditors)
Fixed Assets
Investment
60 % Share in S Ltd
30 % Share in J Ltd
25 % Share in A Ltd
Cash

H Ltd
100000
90000
50000
120000

S Ltd
80000
80000
40000
50000

J Ltd
60000
70000
30000
30000

A Ltd
50000
60000
20000
60000

70000
25000
15000
10000

150000

130000

70000

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Additional Information
i.
ii.

J Ltd is a joint venture between H Ltd & K Ltd. A Ltd is Associate


When H Ltd is acquired investment in S,J,& A Than balance in Reserves were as follows

Date of Acquisition
1-4-2014 S Ltd
1-4-2013 J Ltd
1-4-2013 A Ltd
iii.
iv.

Balance of Reserve in Acquiring Co.


25000
10000
15000

Prepare Consolidated Balance sheet and statement under Schedule III for subsidiary
Balance Sheet should be as per schedule III

Solution.
W.N.1 Analysis of Profit (AOP)
S Ltd.
Particulars
Reserve & Surplus

Capital
25000

Revenue
55000

Total
80000

Holding 60%
Minority 40%

15000
10000

33000
22000

32000

Capital
10000

Revenue
60000

Total
70000

3000

18000

Capital
15000

Revenue
45000

3750

11250

J Ltd
Particulars
Reserve & Surplus
Minority 25%
A Ltd
Particulars
Reserve & Surplus
Minority 25%

Total
60000

W.N.2 Calculation of Cost of Control, Minority Interest, Investments in Associates

Cost of Control
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Investment
(-) Share Capital
(-) Pre Acquisition Profit
Goodwill/ (CR)

S Ltd
70000
48000
15000
7000

J Ltd
25000
18000
3000
4000

A Ltd
15000
12500
3750
(1250)

Minority interest in S Ltd


Share Capital
Profit of Subsidiary

32000
Pre
Post

10000
22000
62000

Total
Investment in A Ltd
Opening Balance
(+) Reserve & Surplus

15000
11250
26250

Consolidated P & L
Reserve & Surplus
(+) Post Reserve & Surplus of S Ltd
(+) Post Reserve & Surplus of J Ltd
(+) Post Reserve & Surplus of A Ltd
Total

90000
33000
18000
11250
152250

Balance Sheet as Per Schedule III


Particulars

Amount

Share Holders Fund


Share Capital
Consolidated R & S
Non Current Liabilities
Minority Interest
Current Liabilities
Trade Payables [50000 + 40000 + 9000]
Holding Sub.
Toatl Liabilities

J.V.

100000
152250
64000
99000
A.

Non Current Assets


Fixed Assets Tangible Assets (120000+50000+9000)
- Intangible Assets (G/w) (7000+4000)
Investment In Associate (Including Capital Reserve 1250)
Current Assets
Cash & Cash Equivalents [10000(H) + 150000(S) + 39000 (J)
Total Assets

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415250
179000
11000
26250
199000
415250

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Statement under Schedule III for Subsidiary (Instant of Sec 212 statement)
Name
Net Assets
Reserve & Surplus
%
Amount
%
Amount
Subsidiary
52.81
167000
21.67
33000
S Ltd.
(167000/316250*100)
(33000/152250*100)
Share in M. Intt.

20.33
(64000/316250*100)

64000

14.41

22000

Joint Venture
J Ltd

13.60

43000

11.32

18000

Associates
A Ltd.

8.30

2625

7.39

11250

Note:Net Assets
Overall Balance Sheet = 316250
Sub. Part
= 167000
% of Sub.
= 167000/316250*100 = 52.81%

(4) As Per Section 129 of New Act, Consolidation of A/cs is Mandatory. Earlier Clause 32 of SEBI
listing requirements was reason for consolidation but now consolidation is required as per
companies Act, 2013
(5) As per Accounting Standard 21 Subsidiary which is temporary in nature is not required to be
consolidation
Rules notified by MCA state that Form No AOC I should be submitted to ROC, for non
consolidation of temporary subsidiaries
(6) Example
H Ltd (+) S Ltd
H Ltd (+) S Ltd (+) J Ltd
H Ltd (+) J Ltd
H Ltd (+) A Ltd

[Will You Consolidate]


Old Law
Yes
Yes
No
No

New Law
Yes
Yes
Yes
Yes

Reason of change in section 2(87) & sec 129


Basic Objection is to increase scope of consolidation
(7) Para 6, Explanation of AS -21 is Not Relevant Now
Explanation was for Report U/S 212 Which has now been deleted
(8) All Companies whose year ending is other than 31st March, Should make financial statement at
par by 31-03-2016

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(9) AS of ICAI will remain as it is


As of MCA (Notified) will change section 132 of new law not yet notified, hence all AS will
remain same
(10) Control Definition changed
2(87): - Control can be due to
Power to compose governing body of another entity.
Ownership of more than of total share capital (Share Capital = Equity SC, Pref. SC)
Example
S Ltd
H Ltd
E Share Cap.
Pref. Sh. Cap. E Share Cap. Pref. Sh. Cap.
10,00,000
0
6,00,000
0
10,00,000
10,00,000
6,00,000
6,00,000
10,00,000
10,00,000
6,00,000
10,00,000
4,00,000
0
30,00,000

Consolidation Yes/No (New Law)


60%
60%
30%
60%

Yes
Yes
No
Yes

(11) Ind As are still not applicable as per ICAI press Release in March, 14 Ind AS should apply from
1/04/2016. Hence its effects can be seen in 2016-17. ICAI has asked the comparatives will not be as
per IND AS but as per AS of MCA.

Share Capital
R&S
NCL
CL

2016-17

2015-16

AS Per IND - AS

As Per AS of NACAS

AS Per IND - AS

As Per AS of NACAS

NCA
CA

Note: - Best Chance for IND AS in exam can be Nov. Or after that
(12) AS 30, 31, 32 are still not mandatory (But ICAI asked questions from these chapter)
(13) Level II Entities of framework had following Points
Entities whose turnover in previous year was Rs 40 Lakh = 1 Crore
Entities Whose borrowings in Previous year were 1 crore
(14) AS- 15 Allowed Entities to purchase own shares through trust.
Generally these shares were used for ESOPS
SEBI Has issued one order, Which Prohibits such purchase of shares through trusts

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(15) Corporate Social Responsibility (CSR) (Sec 135)


Certain Selected Companies are require to expend 2% of avg. profits for last 3 year on
purpose specified in schedule - VII

Example
A Ltd Has Following Profits
2012-13
201314
2014-15

100 Cr.
120 Cr.
160 Cr.

During the year 2014-15, Company has incurred expenses on CSR for Rs 1.5 Cr. What should be its
accounting treatment?
Solution
Calculation of Avg. Profits
100+120+160
3
Expenses to be incurred @ 2% of Profits
Less: - Expenses Incurred
Short Fall

=
=

122.67

2.5333 Cr
1.5000 Cr.
1.0333 Cr

Company should make provision for CSR expenses for Rs 1.03333 Cr.
Expenses of Rs. 2.5333 will be shown in P &L as Expenses
(16) Assets worth Rs 5000 or less were earlier written off as expenses
But Schedule II of new companies act does not require such written off. Hence as per new
law companies can show assets whose is Rs 5000 or Low in Books of Accounts
[Both Options Are available (we written off and we show)]
(17) Depreciation will be charged as per schedule II and Schedule XIV of old Act is not relevant
(18) Depreciation Charged on revalued assets will always be adjusted against P & L account
Revaluation Reserve will not be used for adjusting Depreciation
Example
Building Book Value
(+) Upward Revaluation

=
=

1000000
200000
1200000

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Solution
i.

ii.

iii.

Building A/c
Dr.
To Revaluation Reserve
(Being Building Revalued)

200000

Depreciation A/c
Dr.
To Building
(Being Depreciation Charged)

120000

SPL A/c
Dr.
Revaluation Reserve A/c Dr.
To Depreciation
(Being Depreciation Written Off)

120000

200000

120000

120000

(19) Para 46: Inserted an AS of ICAI in March, ICAI has Inserted Para in AS - 11 of ICAI
As Per Para 46 - :
i.

Exchange Difference on Long Term foreign Currency Monetary Item (LTFCMI)


will be dealt as follows.

Exchange Difference on LTFCMI relating to depreciable asset will be capitalised


to asset and depreciated over life of assets
Exchange Difference on LTFCMI not relating to depreciable asset will be shown
as FCMIT Difference Account in reserve and surplus, It will be Written off
over life of LTFCMI.

ii.

31-03-2020 is not relevant in para 46 of ICAI standards.

iii.

Para 46 is optional for entities and open ended.

Example
A Partnership (AS of ICAI Apply) firm gives following information.
1. Long Term loan 1st (Repayable After 3 Year) Rs 10,00,000 , Exchange Loss Rs 50,000
2. Long Term loan 2nd (Repayable After 5 Year) Rs 20,00,000 , Exchange Loss Rs 80,000
3. Long Term loan 3rd (Repayable After 7 Year) Rs 15,00,000 , Exchange Loss Rs 90,000

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4. Long Term loan Taken For Machine (Repayable After 6 Year) Rs 20,00,000 , Exchange Loss
Rs 1,00,000
5. Short Term Loan Rs 10,00,000 , Exchange Loss Rs 50000
Additional Information: Life of machine is 20 year
Book Value of Machine is Rs 25,00,000
(Opening Balance)
Suggest Accounting Treatment
Solution
AS of NACAS are not applicable on Partnership firm, Earlier AS 11 of ICAI had accounting
treatment under Para 13, which required Exchange Loss / Gain to be transferred to SPL. Now also
option to para 13 exists
Hence partnership firm can transferred total Exchange loss to SPL Rs
3, 70,000
OR
2nd Choice is newly introduced para 46
Loan No
Covered By Para 46

1
Yes

2
Yes

3
Yes

4
Yes

5
No

Hence Exchange Difference on Loan 5 will be covered under Para 13 only

Para 46
Particulars
To Exchange Loss

FCMIT Difference A/c (Loan No 1)


Amount
Particulars
50000
By SPL (50000/3)
By Balance c/d

Amount
16667
33333

Particulars
To Exchange Loss

FCMIT Difference A/c (Loan No 2)


Amount
Particulars
80000
By SPL (80000/5)
By Balance c/d

Amount
16000
64000

Particulars
To Exchange Loss

FCMIT Difference A/c (Loan No3)


Amount
Particulars
90000
By SPL (90000/7)
By Balance c/d

Amount
12857
77143

Particulars
To Balance B/d
To Exchange Loss

Machine A/c (For Loan No 4)


Amount
Particulars
2500000
By SPL (20,00,000/20)
100000
By Balance c/d

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Amount
130000
24,70,000

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Balance Sheet
Particulars

Amount

Share Holders Fund


Share Capital
Reserve & Surplus
MIT Diff ( 33333+64000+77143)

(174476)

(20) As per notification of MCA, FCMIT difference A/c should be shown in Balance Sheet under head
reserve and surplus.
(21) In Case Exchange Difference is treated under Para 46, than such Exchange difference cannot be
classified Borrowing cost, hence AS- 16 will not be applied on Such Exchange Difference

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