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Ind. AS compliant Schedule III scripted in Division II of the Schedule lays out a format of the balance sheet, the statement of profit and loss and that further sets out the minimum requirements of disclosure on the face of the balance sheet and Profit and Loss (P/L). The Schedule does not permit companies to avail of the option of presenting assets and liabilities in the order of liquidity. The disclosure requirements specified in this Schedule are in addition to and not in substitution of the disclosure requirements specified in the Indian Accounting Standards. Additional disclosures specified in the Indian Accounting Standards shall be made in the Notes or by way of additional statement or statements unless required to be disclosed on the face of the Financial Statements. Similarly, all other disclosures as required by the Companies Act, 2013 shall be made in the Notes in addition to the requirements set out in this Schedule.

‘Financial Statements shall disclose all ‘material’ items, i.e., the items if they could, individually or collectively, decisions that users make on the basis of the financial statements. Materiality depends on the size or nature of the item or a combination of both, to be judged in the particular circumstances.

The statement of P&L is to be presented in accordance with the nature of expenses and would include profit or loss for the period and other comprehensive income for the period.

One of the new components of Financial Statements in Ind.AS compliant Schedule III relates to Statement of Changes in Equity that inter-alia includes disclosure of the equity component of the financial instruments in ‘other equity’ under Ind AS 32, apartment reconciliation from opening to closing amounts for each component of equity including reserves and surplus and items of other comprehensive income.

Notes: required under the Companies Act, the Schedule iii and under the relevant Ind. ASs along with narrative descriptions or disaggregation of items recognized in the financial statements and information about items that do not qualify for such recognition.

Approach in the write up of the article:

Balance Sheet

It may be noted that under Ind.AS, Balance Sheet starts with ‘Assets’; and ‘Equity and Liabilities’ follow suit as against ‘Equity and Liabilities’ is exhibited at the beginning and ‘Assets’ thereafter under IGAAP compliant Schedule III, presumably because funds are raised only to meet the applications to run the finance.

In view of the fact there is a significant perception change In ‘Equity and Liabilities’ under Ind.AS, the article first starts with the same. Only Ind. AS specific changes are handled keeping in view of the brevity of the article.

Equity and Liabilities:

Equity is dealt with -- one as Equity share capital and the other as ‘other Equity.’

Regarding Equity Share Capital with Balance at the beginning of the reporting period +/-Changes in equity share capital during the year and Balance at the end of the reporting period. A glance through of the discloser requirements in Note 6 D 1 from (a) to (i) under GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET will highlight that disclosures are by and large of the same of IGAAP Schedule III .Therefore, your attention is drawn to the  said Note and not dealt with here in the interest of briefness.

However, Other Equity that includes Share application money pending allotment, Equity component of compound financial instruments--Convertible preference shares and  Convertible Debenture bonds; Reserves and Surplus-- Capital Reserve, Securities Premium Reserve, Other Reserves (specify nature), Retained Earnings; Debt instruments through Other Comprehensive Income herein after referred to as ‘OCI’, Equity Instruments through OCI, Effective portion of Cash Flow Hedges, Revaluation Surplus, Exchange differences on translating the financial statements of a foreign operation, Other items of Other Comprehensive Income (specify nature), Money received against share warrants with total.

Debit balance of Statement of Profit and Loss shall be shown as a negative figure under the head ‘retained earnings’. Similarly, the balance of ‘Other Equity’, after adjusting negative balance of retained earnings, if any, shall be shown under the head ‘Other Equity’ even if the resulting figure is in the negative(Note 6 D (iv) of the Schedule).

Besides, ‘OCI’ related to the period is to be presented separately in the statement of P&L. The amounts that are accounted through OCI have a great impact in the profit/ loss for the year since they are parked in Statement of changes in Equity for eventual reclassification depending on the set character of the instruments – one that can be reclassified into statement of P&L and the other that cannot be to the statement of P&L but is to be transferred from one reserve to the other in Balance Sheet.

Non Current Liabilities (Note E):

If we make a comparison of Ind AS compliant Schedule III with that of IGAAP, It may be noted that

  • Ind. AS does not use the phrase long term, but only noncurrent liabilities.
  • Liability component of compound financial instruments is included for reason obvious.
  • The word ‘advances’ is striped from ‘Loans and advances from related parties’ under IGAPP to Loans from related parties vide Note 6 E (II) (e) of the Schedule in Ind. AS Compliant Schedule. Perhaps, the word ‘Advances’ is shifted to ‘Other non-current Liabilities’- vide Note 6 E (iv) on other non-current liabilities.
  • The word ‘advances’ is striped from ‘Other Loans and advances’ under IGAPP to Other Loans in Ind. AS Compliant Schedule. Perhaps, The word ‘Advances’ is shifted  to ‘Other non –current Liabilities’
  • Other non-current liabilities is to be presented (a) Provision for employee benefits and (b) others (specify nature) that is a little different in IGAAP-Trade Payables and others
  • Deferred tax liabilities (net)

For further details, necessarily refer the Note E that is not reproduced here for brevity.

Current Liabilities:

  • Ind. AS does not use the phrase Short-term, but only current liabilities.
  • The word ‘advances’ is striped from ‘Loans and advances from related parties used IGAPP to Loans from related parties vide Note 6 F (I) (II) (b) in Ind. AS Compliant Schedule. Perhaps, The word ‘Advances’ is shifted to ‘Other current Liabilities’
  • Interest accrued but not due/ and due on borrowings are separately presented under the head other current liabilities In IGAPP; But, are disclosed as Interest accrued in Ind. As  Compliant Schedule III
  • There is a distinct discloser under other current liabilities: as to

(a) Revenue received in advance;
(b) Other advances (specify nature); and
(c) Others (specify nature)            

Also refer Note for further details that are not reproduced here for brevity.

Non Current Assets and Current Assets are presented under the broader head ‘Assets’ both under Ind. AS compliant Schedule III and under IGAAP but presentation of the individual assets are a little different in the two.

Noncurrent Assets Item (I):

Under Ind.AS, the phrase fixed assets is not used

(a) Property, Plant and Equipment is the first item under assets. The Note 6A (i) to GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET lists out different classification of PPEs that may be visited upon to understand the different approach. Bearer Plants (g) is a new addition.

Assets under lease shall be separately specified under each class of assets.  Note A (I) (ii)

(b) Capital work-in-progress

(c) Investment property Note (II) separate presentation in the body of the Balance Sheet.

(d) Goodwill separate presentation

(e) Other intangible assets and (f) under development -separate presentation in the body of the Balance Sheet with details in the note`

(f) Intangible assets under development

(g) Biological Assets other than bearer plants or reversals shall be disclosed separately.

Financial Assets item (I)(h) under non-current assets-Note 6. A (VI):

Please note that a reconciliation of the gross and net carrying amounts of each class of assets mentioned above at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations and other adjustments and the related depreciation and impairment losses

(I) Investments: (i) Investments shall be classified as:(a) Investments in Equity Instruments; (b) Investments in Preference Shares;(c) Investments in Government or trust securities;(d) Investments in debentures or bonds;(e) Investments in Mutual Funds;(f) Investments in partnership firms; or (g) Other investments (specify nature).

Under each classification, details shall be given of names of the bodies corporate that are-(i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) structured entities, In whom investments have been made and the nature and extent of the investment so made in each such body corporate (showing separately investments which are partly-paid). Investments in partnership firms along with names of the firms, their partners, total capital and the shares of each partner shall be disclosed separately.

(ii) The following shall also be disclosed: a) Aggregate amount of quoted investments and market value thereof ; (b) Aggregate amount of unquoted investments; and( c) Aggregate amount of impairment in value of investments.

(ii) Trade receivables (note 6.A VII) (i) Trade receivables shall be sub-classified as:(a) Secured, considered good;(b) Unsecured considered good; and (c) Doubtful.(ii) Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately.(iii) Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated.

(iii) Loans (IV) others (to be specified) (i) Deferred tax assets (net) (j) other non-current assets.

Also refer Note 6 A - to Schedule III – Ind. AS compliant

Current Assets –item (2)

Unlike in the IGAAP, the word ‘short term’ is not used in Ind. AS compliant Schedule III. Besides, as in the case of non-current assets, a separate sub grouping has been made for Finance assets as indicated under (b). Loans are separated from loans and advances

(a) Inventories (b) Financial Assets (i) Investments (ii) Trade receivables (iii) Cash and cash equivalents (iv) Bank balances other than (iii) above (v) Loans (vi) Others (to be specified) (c) Current Tax Assets (Net) (d) Other current assets.  For investments and trade receivables, since has been dealt with under non –current assets,

Note 6 B may be referred to (as well for other items since no major changes) for brevity.

Statement of Profit and Loss:

 The statement of P&L is to be presented in accordance with the nature of expenses and would include profit or loss for the period and other comprehensive income for the period. Extraordinary items are given goodbye. Under Ind. AS, Exceptional items are recognized. Reverting to ‘Other comprehensive Income’, they are presented as (I) that can be reclassified into P/L and (2) that cannot be.

(1) That can be reclassified into P/L:

- Debt instruments through OCI- on liquidation-net of income tax.
- Exchange differences in translating the statement of foreign operations -on disposal.
- The effective portion of gains and loss on cash flow hedge net of income tax.
- Share of OCI in Associates and Joint ventures to the extent that can be classified in P&L-based   on the nature of respective item
- Others

(2) That cannot be reclassified to statement of P/L:

- Changes in revaluation surplus net of income tax
- RE-measurement of defined benefit plans net of income tax;
- Equity Instruments measured at fair value through OCI-net of income taxes
- Share of OCI in Associates and Joint ventures to the extent that cannot be classified in P&L

3. Others

Discontinued operations:- if recognized in OCI, separately to be disclosed-Ind. AS 105.

A Cursory look at possible Changes in Profit and Loss other than OCI already dealt with:

Sr. NO


Under  Ind.AS



Revenue –Ind.AS 18-Revenue

Gross of excise duty.

Treated as expenditure

 Revenue will increase No impact In Net Profit.

Cost will increase


Cash Discount

Shown as deduction from Revenue

No impact in P&L


Forward Contract to hedge ‘off Balance Sheet’ foreign exchange Exposure

Revenue will not include premium on forward contracts to hedge ‘off Balance Sheet’ foreign exchange exposure.

No impact in P/L


Actuarial gains & losses on Defined Benefit Plans-Ind.AS-18 Employee benefits

Accounted in OCI

Impact P&L to the extent &Balance Sheet


Income Tax-Ind. As 12

Balance Sheet approach

May  have consequential impact in P&L and Balance Sheet


ESOP charge

Based on Fair Value as against Intrinsic value

Impact to the extent


Earnings per equity Share-Basic/ Diluted

Will be exclusive of OCI-separately for continuing and

Discontinued operation.

Impact to the extent


Interest -Zero Coupon Bonds with premium

At amortized cost

Total out go will not change, but there is yearly impact.


Dividend proposed after reporting period

Disclosed in notes to Financial statements

Net worth will increase-No provision. Will be directly charged to reserve.


Separate disclosure of exceptional items,

Separate disclosure of exceptional items, if any.

No extraordinary items


a  disclosure a note-

 -for any item of income or expenditure which exceeds 1 per cent of the revenue from operations or INR10,00,000, whichever is higher


Other presentations/Notes to Balance sheet (in synopsis):

The Schedule gives a very good road map. Auditing community is already conversant with current and noncurrent concept with the back-up experience of the earlier years and hence, it is better not to beat the bush for brevity, except where required for Ind. AS Compliance. It may be noted that

Ind AS Standards: Not all notified standards may be applicable for a particular entity. Therefore, it is ideal to note down the Standards applicable/ not applicable for proper planning and compliance. 

Ind AS 101 is the nucleus or in other words, a beacon light for the first time adoption of Ind.AS compliant financial statements. For the first time adoption, Ind. AS has to be from the inception and not from the date of transition, as birth initiates from the date of conception. But, since it may confront practical difficulties, the Ind. AS permits to consider certain mandatory and optional exemptions from retrospective application.  For example, a co. may elect to measure all its Property, Plant, Equipment and Intangible properties at the previous IGAAP carrying amount as deemed cost at the date of transition. Similarly, a Co., may elect to measure all its investments in subsidiaries, joint ventures, and associates at the previous INGAAP  carrying  amount  as deemed cost at the date of transition. Again, a co. may opt to apply Ind AS 103 on Business Combination prospectively from the date of transition- acquisitions prior to transition may not be restated and so on (Refer the standard). What a relief!

On the top, the Standard sets first time adoption rules apart from exemptions and options deliberated above. The standard has to be visited for details- for brevity not listed here. For the first time adoption, three years Balance Sheets are to be presented with all the adjustments required for first adoption for earlier years as suggested above reflected in the first year relevant balances of the Balance Sheet.

Except as described in paragraphs 13–19 and Appendices B–D, an entity shall, in its opening Ind. AS Balance Sheet: (a) recognize all assets and liabilities whose recognition is required by Ind. ASs; (b) not recognize items as assets or liabilities if Ind. ASs do not permit such recognition; (c) reclassify items that it recognized in accordance with previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity in accordance with Ind. ASs; and (d) apply Ind. ASs in measuring all recognized assets and liabilities.(Para -10).

Accounting policies, changes in accounting estimates and errors are choreographed in line with the respective Ind.AS. Changes in policies follow suit the adoption of new Standard or early adoption of a new Standard with appropriate disclosures. If Standards offer a choice or no guidance given, management may have to use judgment to select an appropriate policy.

Accounting estimates are prospectively accounted except where they affect the value of assets/ liabilities/equity whence adjusted in the period of change. Errors noted in subsequent periods are prior periods and if material are to be restated unless impractical.

Ind AS 16 requires an entity to choose either the cost model or the revaluation model as its accounting policy and to apply that policy to an entire class of property plant and equipment. However, one should consult the separate Guidance issued for it. Initial costs as well as the subsequent costs are assessed on the same recognition principles to determine whether the same should be recognized as an item of property, plant and equipment. Component Accounting - cost of replacing such parts is capitalized, if recognition criteria are met with consequent de-recognition of carrying amount of the replaced part. Major Inspection expenses are also to be capitalized.

Intangible Assets Ind.AS 38: Any brand/trademark having indefinite useful life or goodwill arising from future transactions will not be amortized and only tested for impairment. Goodwill arising on business combination cannot be amortized and is only tested for impairment. No impact on Ind. AS opening B/S.

Investment Property (IP) is valued at cost- though fair valuation is required to be disclosed- Ind. AS-40

Non-current Financial Assets: (i) Investments (other than IP) (ii) Trade receivables (iii) Loans (iv) Others (to be specified) are to be presented.

Current - Financial Assets: (i) Investments (ii) Trade receivables (iii) Cash and cash equivalents (iv) Bank balances other than (iii) above (v) Loans are to be presented,

Financial/ non- Financial Assets /liabilities are to be properly identified for proper classification and presentation.

Valuation of Investments: The Company will account for its investments (i.e., treasury bills, government securities and mutual funds) at fair value.  The other investments will be classified as either Fair Value through the Profit or Loss (FVTPL) or Fair Value through the Other Comprehensive Income (FVOCI) depending on the nature of investment. Debt instruments valued at amortized cost, unless other mode of valuations warranted/elected Ind.AS- 109 on financial Instruments.

Some of the significant points are identified in following standards for example only.

This is NOT a comprehensive or complete listing of Ind AS and point of differences between Ind AS and existing IGAAP.

Provisioning based on Expected credit Loss (ECL): It is based on expected loss than incurred loss. ECL is grounded on time value of loss (due to delayed payment) as well for realization loss (credit risk) – Ind.AS 109 (B5.5.35 for Consumer Receivables) and hence provisioning norms is nor discretionary but matrix based. It must be born in mind that expected credit loss arises even if it expects to be paid but later than contractually due date (B5.5.28).

Liability component of financial instruments is to be presented under long/short term borrowings.

Derivatives not designated as hedges to be presented as non-current.   

Derivatives designated as hedges to be presented as current.

Provisions: The Company will discount provisions to their present value where the effect of time value of money is material. The increase in the provision due to the passage of time will be recognised as finance cost resulting in higher interest cost.

Dividend proposed after reporting period disclosed in notes to Financial statements- no provision. (IND.AS 10 on Events after Reporting Period)

Movements in provisions are to be disclosed.

The Performance Linked Revenue pertaining to FY 2014-15 if paid & accounted in 2015-16, it will be accounted in opening reserves as on 1.4.2015 under Ind.AS.

Actuarial gains & losses on Defined Benefit Plans-Ind.AS-18 Employee benefits Accounted in OCI.

Income Tax:-Ind. As 12- Balance Sheet approaches Recognition of DTL on non-depreciable assets. Recognition of DTL on non-depreciable assets may have to be considered. ICAI should come forward with clarification before it is too late.

Ind AS 11: When goods or services are sold on credit, the arrangement has in substance two components, firstly the sale of the goods or services and secondly a financing element. The two components are accounted for separately.

AS per Ind AS 20: on ‘Accounting of Government Grants and Disclosers of Govt. Assistance’, the benefit derived below market rate is to be accounted as government grant--- measured  between  initial carrying  amount of the loan determined as per Ind. AS and the actual amount received. Very often interest Free Sale Tax payment concessions are extended on specific situations and payable after appointed dates as prescribed - may come under amortized cost.

Fixed term interest-free loans to Employees and similar arrangements may also invite similar treatments. 

Also refer the article by the author’s article on Measurement of Debt Instruments

In the Statement of cash flows, a reconciliation to match with cash and cash equivalent should be given---- Over draft on demand to be shown as deduction.


The Standards dealt with above are in synopsis to have a feel and better understanding of the Standards/ The Ind. AS Compliant Schedule III. Therefore, it goes without saying one should have the basic knowledge of all standards with guidance notes relevant for the proper compliance of Standards. Act is to be acted upon. Standards are to be complied with- more so if referred to in the provisions of the Act. We are already on the verge of March 2017. Companies coming under the first phase have to present the financial statements under Ind.AS. Division II of Schedule III that is to be properly understood for proper compliance. Notes required under the Companies Act, the Schedule iii and under the relevant Ind. ASs along with narrative descriptions or disaggregation of items recognized in the financial statements and information about items that do not qualify for such recognition are to be taken care of.

“Arise, awake, stop not till our goal is reached.”


Published by

P.R. Sethuraman
(Chartered Accountantant)
Category Audit   Report

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