The format and the content, to a certain extent, of the financial statements used by companies in India is driven by the Companies Act, 1956 — specifically what is known as the Schedule VI. Schedule VI has been in place for almost as long as the Companies Act, 1956.

The Ministry of Corporate Affairs, in light of the regulatory and economic reforms, has decided that the time is right to revise the existing Schedule VI. The Revised Schedule VI has significant new presentation and disclosure requirements and is considered to be the first step towards bringing the financial statements of Indian corporate closer to that of their international counterparts.

What is the change?

Significant overhaul of Schedule VI, which drives the presentation of financial statements, for the first time since 1956.

Why this change?

Revising Schedule VI is a step forward towards taking financial statements of Indian corporate closer to the global ‘look'.

When do these changes become applicable?

Will makes its appearance for the first time for companies with an annual year ending March 31, 2012.

What are the significant overall changes?

The tussle between accounting standards and law is now resolved and accounting standards to override the requirements of Schedule VI.

Classified balance-sheet introduced with current- non-current classification of assets and liabilities with significant impact on ratios.

Format for the profit-and-loss account now prescribed.

Several redundant disclosure requirements are now no longer required, including disclosure of remuneration to managerial personnel, licensed capacity, and so on.

Disclosures such as quantitative information have been simplified.

What about the corresponding numbers — will these continue in the old format?

There is no exemption from presenting the corresponding numbers in the new format — this essentially would require companies to rework the presentation of their previous year's financial statements

Is the revised Schedule VI as rigid as its predecessor?

One of the most welcome changes is that the revised format is flexible enough within the limits of the accounting standards and other guidance.

What is current-non-current classification?

All the assets and liabilities will now be classified based on whether they are ‘current' or ‘non-current'. To illustrate, a long-term loan will now need to be classified as non-current liability but the portion of it which needs to be repaid in the next 12 months from the year end, will now appear under current liabilities as ‘current portion of long term loan'

Is there any guidance on how to comply with the new changes?

The ICAI (Institute of Chartered Accountants of India) has issued a Guidance Note on the Revised Schedule VI , which provides guidance on how the new requirements can be complied with.

For companies with subsidiaries, will the Revised Schedule VI be applicable to consolidated financial statements as well?

Yes, even the consolidated financial statements will need to be prepared in the new format

Will the format for the quarterly results change as well?

SEBI is yet to revise the format of the quarterly results in the Listing Agreement. This is expected to be changed in the near future.

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