ICAI Guidance Note on IND AS Schedule III to the Companies Act 2013

1. Schedule III to the Companies Act, 2013 (‘the Act’) was notified along with the Act itself on 29 August, 2013 thereby providing the manner in which every company registered under the Act shall prepare its Financial Statements. Financial Statements as defined under the Act include Balance Sheet, Statement of Changes in Equity for the period if applicable, the Statement of Profit and Loss for the period, Cash flow statement for the period and Notes.

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

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

ii. ‘Division II’ – ‘Ind AS Schedule III’ (Refer Annexure A, Pg 152) 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.

3. 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 Finance 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 as amended from time to time.

4. 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)(d) of the Act states that the provisions of the Act shall apply to companies engaged in the generation or supply of electricity companies, to the extent it is not inconsistent with the provisions of the Electricity Act, 2003. Keeping this in view, Ind AS Schedule III may be followed by such companies till the time any other format is prescribed by the relevant statute.

Objective and Scope

1. 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.

2. Guidance given in ‘Guidance Note on Schedule III to the Companies Act, 2013’ published in May 2017 and third edition published in January 2022 as ‘Guidance Note on Division I- Non Ind AS schedule III to the Companies Act, 2013’ 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.

3. In preparing this Guidance Note, reference has been made to Ind AS notified under Section 133 of the Act read together with Paragraph 3 of the Companies Ind AS Rules given in Annexure D (Pg 210) and various other pronouncements of the ICAI. The primary focus of the Guidance Note is 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.

4. This Guidance Note includes changes to presentation and disclosure requirements of Ind AS Schedule III pursuant to Ind AS notified up to 31 March, 2021.

General Instructions for Preparation of Financial Statements: Notes 1 to 9

1. The General Instructions lay down the broad principles and guidelines for preparation and presentation of Financial Statements.

2. As laid down in Part A of the Annexure to Companies Ind AS Rules, Ind AS, which are specified, are intended to be in conformity with the provisions of applicable laws. However, if due to subsequent amendments in the law, a particular Ind AS is found to be not in conformity with law, the provisions of the said law will prevail and the Financial Statements should be prepared in conformity with such law. In such a scenario, the statement of compliance with Ind AS should be considered in the light of the principle of overriding effect of law over Ind AS when applying the presentation or disclosure requirements of the Ind AS Schedule III.

3. The Ind AS Schedule III requires that if compliance with the requirements of the Act including applicable Ind AS require any change in the presentation or disclosure including addition, amendment, substitution or deletion in the head/sub-head or any changes inter se, in the Financial Statements or Notes to Accounts thereof, the same shall be made and the requirements of Ind AS Schedule III shall stand modified accordingly.

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