As we know the Revised Schedule VI has introduced a concept of classified balance sheet. Para 1 and 3 of General Instructions for preparation of Balance Sheet defines “current assets” / “non-current assets” and “current liabilities” / non-current liabilities” respectively. In these definitions the criterion for determining a current asset / liability has been spelled out with the non-current category being the residual. Accordingly the balance pertaining to items of assets and liabilities contained in the Balance Sheet need to be split into its current and non-current portions and be classified accordingly as on the reporting date i.e. Balance Sheet date.
For ready reference of the members, the head wise classification concepts are summarized below:-
1. Shareholders’ funds:
As under Old Schedule VI Shareholders’ funds are always non-current under Revised Schedule VI as well. Accordingly minority interest is also always non-current.
2. Share Application Money:
There were no specific guidelines prescribed for disclosure of share application money under old schedule VI.
Revised Schedule VI requires Share application money not exceeding the issued capital and to the extent not refundable to be classified as non-current and to be shown on face of balance sheet as “Share application money pending allotment”.
Amount in excess of subscription or in case requirements of minimum requirements are not met shall be separately shown under “Other current liabilities” and amount is given in the Notes to accounts.
It is pertinent to mention here that in case the issued capital is equal to authorized share capital, however the application for increase in authorized share capital has been filed but is pending with ROC and such a company receives share application money. Such application money should be shown under other current liabilities till authorized share capital is hiked.
Under Old Schedule VI the entire borrowing were shown as Secured / Unsecured Loans and no part of it was included in current liabilities.
However under Revised Schedule VI the total borrowing are required to be trifurcated into long term borrowing , short-term borrowing and current maturities to long term debt.
The loans which are repayable in a period more than twelve months or the operating cycle in case of loans taken specifically for the purposes of business are classified as long-term borrowing and shown on face of balance sheet.
The current maturities of long-term borrowings i.e. amount repayable within 12 months / operating cycle in respect of loans taken for purposes of business, would be shown as current maturities to long term debt under ‘other current liabilities” and amount to be given in the Notes to accounts.
The loans which are repayable on demand or whose original tenure not more than 12 months / operating cycle in respect of loans taken for purposes of business, would be shown as short-term borrowings on the face of balance sheet.
4. Deferred Tax Assets / Liabilities are always Non-current. This is in accordance to the principles of the IFRS. (IAS 1 “ Presentation of Financial Statements”)
Under old schedule VI the sundry creditors were always considered as current liabilities, however under Revised Schedule VI they need to be bifurcated between current and non-current.
Trade payables which would be settled beyond 12 months from the balance sheet date or beyond the operating cycle starting from the date of their recognition i.e. purchase of goods or services in normal course of business are classified under “Other Long term liabilities.” and amount is shown in Notes to Accounts.
The balance Trade payables are classified as current liabilities and shown on the face of the balance sheet.
Under old schedule VI all the Provisions were always considered as current liabilities, however under Revised Schedule VI they need to be classified as current and non-current.
The amount of provision which would be settled within 12 months from the balance sheet date or within operating cycle period from date of its recognition, in case of provision related to business, would be classified as short-term provisions to be shown under current liabilities on face of balance sheet. Provisions other than these are shown as long-term provisions under Non-current liabilities to be depicted on face of balance sheet.
7. Fixed Assets:
Here there is no change as far as classification is concerned and all the Fixed Assets , both tangible as well as intangible assets would always be non-current , even if its balance useful life is less than 12 months, unless same are retired from use and are held for sale/ disposal which shall then be shown under other current assets.
Old Schedule VI required all investments to be shown separately before Current assets. However now its classification into current and non-current is required.
Investments which are expected to be realized within 12 months from after the balance sheet date are considered as current investments under current assets. Other investments are classified as Non-current investments and shown under Non-current assets. Both of these are depicted on the face of the balance sheet.
9. Inventories. Here there is no change as far as classification is concerned, as all the Inventories are always current.
10. Trade Receivables:
Under old schedule VI the sundry debtors were always considered as current assets, however under Revised Schedule VI they need to be bifurcated between current and non-current.
Trade receivables which would be realized beyond 12 months from the balance sheet date or beyond the operating cycle starting from the date of their recognition i.e. sale of goods or rendering of services in normal course of business, are classified under “other non-current assets” under head Non-current assets and amount is shown in Notes to accounts.
The balance Trade receivables are classified as current assets and shown on the face of the balance sheet.
11. Cash and Cash equivalents:
It is always current, however only the amount, which qualifies as cash and cash equivalent as per AS 3, should be shown here. It is important to note here that the old schedule VI contained the term of cash and bank balances on face of balance sheet as against cash and cash equivalents now.Further as now supremacy has been accorded to Accounting Standards over the Schedule VI which was earlier not there, accordingly now the cash and cash equivalents need to be disclosed strictly in accordance to AS 3 Cash Flow Statements.
If the companies are having items which are not cash equivalents but are current in nature i.e. realizable within 12 months e.g. bank deposits (FDRs) having balance maturity more than 3 months but within 12 months as on balance sheet date, then on face of balance sheet the name of cash and cash equivalents be replaced with cash and bank balances , and it may be bifurcated between “cash and cash equivalents” (as per AS 3) and “Other bank balances” (other bank balances not qualifying as cash and cash equivalent but current in nature) and amount of same be given in notes to accounts.
The bank deposits who have more than 12 months balance maturity period or placed as security for borrowing / deposited as margin money not realizable within 12 months as on balance sheet date are to be shown as other “other non-current assets” under head “non-current assets” and amount shown in notes to accounts.