ACCOUNTING & AUDITING 1

Accounting & Auditing Alert - II 01 April 2021

This document is published to share recently introduced changes/amendment related to Accounting and Auditing.

What’s Changed?On 24th March 2021, Ministry of Corporate Affairs issued various notifications containing changes related to Accounting, Board Report Disclosures, Financial Reporting Disclosure (Schedule III) and Audit Reporting. While regular changes have become part and parcel of regulatory environment in India however changes proposed by authorities are significant and require action on part of management.

While most of the changes proposed in Schedule III related to disclosure and reclassification are common for companies to whom Ind AS Rules 2015 or Accounting Standards Rules 2006 are applicable, however for ease of convenience, we plan to cover the changes in three part as per following details:

This alert covers Part 2 of above.

Change in Schedule III related to Financial Statements for entities covered under Companies (Accounting Standard) Rules 2006:

Important Changes in Schedule III – Applicable from 1st April 2021.

1.Rounding off in Financials:

a. Benchmark for rounding off changed from Turnover to Total Income

b. Rounding off made mandatory from earlier optional:

PART COVERAGE

I Changes in Accounting Records, Board Report Disclosures and Audit Reporting.

II Financial Reporting changes for entities covered underAccounting standards (2006) – Schedule III

III Financial Reporting changes for entities covered under Ind AS (2015) – Schedule III

ACCOUNTING & AUDITING 2

2.Trade Payable:

Now, ageing schedule is required to be given for “Trade Payables due for payment” in the following format:

Note 1: Similar information needs to be given where no due date of payment is specified. In that case disclosure shall be from the date of transaction.

3.Trade Receivables:

Following Ageing Schedule is required to be given for Trade Receivables:

Issue No. 10/2021

Total Income (Earlier Turnover) Rounding Off

Less than 100 Crore Rupees To the nearest of hundred, thousands, lakhs, or millions, or decimal there off.

100 Crore Rupees or More To the nearest lakhs, millions or crores, or decimal thereof

Particular Outstanding for following periods from Due Date of Payment (Note 1)

Less than 1 year 1-2 years 2-3 years More than 3 years Total

Year Years(i) MSME

(ii) Others

(iii) Disputed Dues - MSME

(iv) Disputed Dues - Others

Particular Outstanding for following periods from Due Date of Payment (Note 2)Less than 6 Months

6 Months– 1 Year

1-2 Years

2-3 Years

More than 3 Years Total

(i) Undisputed Trade Receivables - Considered Good

(ii) Undisputed Trade Receivables – Considered Doubtful

(iii) Disputed Trade Receivables – Considered Good

(iv)Disputed Trade Receivables –Considered Doubtful

ACCOUNTING & AUDITING 3

Issue No. 10/2021

Note 2: Similar information needs to be given where no due date of payment is specified. In this case the disclosure shall be from the date of transaction.

4. Where the company has not used the borrowings from banks and financial institutions for the specific purpose for which it was taken, the company shall disclose the details of where they have been used.

5. Disclosure of Regulatory Information:

i. Title Deeds of Immovable Property not held in name of company.

ii. Where company has revalued its property, plant and Equipment, the company need to disclose as to whether the revaluation is based on the valuation by a Registered Valuer or not.

iii. Loans or Advances in nature of loans granted to Promoter, Director, KPMs and the related parties (as defined under Companies Act 2013), either severally or jointly with any other person, that are:

a. Repayable on Demand

b. Without specifying any terms of repayment

iv. Capital Work in Progress (CWIP)

a. For CWIP, following ageing schedule to be given:

CWIP Ageing Schedule

Total should match with amount reflected in Balance Sheet.

Type of BorrowerAmount of Loan or

Advance in nature of Loan outstanding

Percentage to the total Loans and Advances in

nature of LoanPromoter

Director

KPMs

Related Parties

CWIP Amount in CWIP for period of Total

Less than 1 Year 1-2 years 2-3 years More than 3

years

Projects inProgress

Projected Temporality suspended

Total

ACCOUNTING & AUDITING 4

Issue No. 10/2021

b. For CWIP, whose completion is overdue or has exceeded its cost compared to original plan, following CWIP completion schedule shall be given (**):

** Detail of project where activity has been suspended shall be separately given.

v. Intangible Assets under Development

a. Following ageing schedule to be given:

Intangible assets under Development Ageing Schedule

Total should match with amount reflected in Balance Sheet.

b. For Intangible assets under development, whose completion is overdue or has exceeded its cost compared to its original plan, following Intangible assets under Development completion schedule shall be given (**):

CWIP To be Completed in

Less than 1 Year 1-2 years 2-3 years More than 3 years

Project 1.

Project 2.

Total

Intangible Assets under Development

Amount in CWIP for period of Total

Less than 1 Year 1-2 years 2-3 years More than 3

years

Projects inProgress

Projected Temporality suspended

Total

Intangible Assets under Development

To be Completed in

Less than 1 Year 1-2 years 2-3 years More than 3 years

Project 1

Project 2

ACCOUNTING & AUDITING 5

Issue No. 10/2021

** Detail of project where activity has been suspended shall be separately given.

vi. Details of Benami Property Held:

Certain detail needs to be disclosed where proceedings have been initiated or pending against the company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and the rules made thereunder.

vii. Disclosure for Borrowing from Banks or Financial institutions on the basis of security of current assets:

a. 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.

b. If not, summary of reconciliation and reasons of material discrepancies, if any to be adequately disclosed.

viii. Wilful Defaulter:

Following information is required to be disclosed where company is declared Will Defaulter by any bank or financial institution:

a. Date of Declaration as wilful defaulter

b. Detail of defaults (amount and nature of defaults)

ix. 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, the company shall disclose the following details:

Name of Struck

Company

Nature of Transaction with

struck off company

Balance outstanding

Relationship with

the struck off company, if any, to be disclosed

Investment insecurities

Receivables

Payables

Shared held by struck off company

Other outstandingbalances (to be specified)

ACCOUNTING & AUDITING 6

Issue No. 10/2021

x. Registration of charges or satisfaction with Registrar of Companies:

Detail of any charges/satisfaction pending beyond the statutory period, needs to be provided.

ix. Compliance with number of layers of companies:

Where the company has not complied with the number of layers prescribed under section 2(87) 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.

xii. Ratios Disclosure:

Following Ratios along with explanation for items included for calculating needs to be disclosed:

a. Current Ratio

b. Debt-Equity Ratio

c. Debt Service coverage Ratio

d. Return on Equity Ratio

e. Inventory Turnover Ratio

f. Trade Receivable Turnover Ratio

g. Trade Payable Turnover Ratio

h. Net Capital Turnover Ratio

i. Net Profit Ratio

j. Return on Capital Employed

k. Return on Investment.

Note: Explanation needs to be provided for any change in the ratio by more than 25% as compared to previous year.

xiii. Compliance with approved scheme(s) of Arrangements.

xiv. Utilisation of Borrowed Funds and Share Premium:

(A)Where company has advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall.

ACCOUNTING & AUDITING 7

Issue No. 10/2021

(i) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or

(ii) Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;

the company shall disclose the details along with declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and Companies Act has been complied with for such transactions and the transactions are not violative of the Prevention of Money-Laundering act, 2002 (15 of 2003).

(B)Where a company has received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall:

(i) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(ii) Provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

the company shall disclose the details alongwith declaration that declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and Companies Act has been complied with for such transactions and the transactions are not violative of the Prevention of Money-Laundering act, 2002 (15 of 2003).

Part II – Statement of Profit and Loss

1.Disclosure of Undisclosed Income

The Company shall give details of any 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 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961), unless there is immunity 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.

2.Corporate Social Responsibility

Where the company is covered under section 135 of the companies act, the following shall be disclosed with regard to CSR activities:

(a) Amount required to be spent by the company during the year

(b) Amount of expenditure incurred

(c) Shortfall at the end of the year

(d) Total of previous years shortfall

ACCOUNTING & AUDITING 8

Issue No. 10/2021

(e) Reason for shortfall

(f) Nature of CSR activities

(g) Details of related party transactions, e.g., contribution to a trust controlled by the company in relation to CSR expenditure as per relevant Accounting Standard

(h) Where a provision is made with respect to a liability incurred by entering into a contractual obligation, the movements in the provision during the year should be shown separately.

3. Details of Crypto currency or Virtual currency trading:

Where the Company has traded or invested in Crypto currency or Virtual Currency during the financial year, the following shall be disclosed:-

(a) Profit or loss on transactions involving Crypto currency or Virtual Currency

(b) Amount of currency held as at the reporting date

(c) Deposits or advances from any person for the purpose of trading or investing in Crypto Currency/ virtual currency.”

You may download the Original Notification suggesting changes from here.

We trust, you will find the content of this publication useful. You may connect with the following team members if you wish to have any clarification regarding above. Feedback towards further improvisation of the publication or on topics requiring guidance shall be highly appreciated. It shall be our pleasure to respond to your queries and to consider your suggestions / feedback for future releases.

Thank You,

CA Manoj Sharma

Partner – Assurance & Risk Advisory

CA Ritesh Kumar

Partner – Assurance

Delhi (Head Office)A-15, Second Floor Hauz Khas,New Delhi - 110016Phone: +91 1126856421, 41655801

Our Offices:PuneOffice no 2A, Gangotri Complex, 927, Synagague Street, Camp, Pune - 411001Phone: +91 020 30492191

BangaloreNo - 5A, Second Floor, 6th Main, KHB Colony, Basaveshwaranagar Bangalore Karnataka - 560079Phone: +91 80 42064178

Disclaimer: While every care has been taken in the preparation of this Knowledge series to ensure its accuracy at the time of publication, SNR & Company assumes no responsibility for any errors which despite all precautions, may be found therein. Neither this document nor the information contained herein constitutes a contract or will form the basis of a contract. The material contained in this document does not constitute/ substitute professional advice that may be required before acting on any matter. All logos and trademarks appearing in the newsletter are property of their respective owners. The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, re-transmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited