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Revised schedule vi confusion

Arka Bose (None) (313 Points)

13 July 2012

Hi,
I am confused about what revised schedule vi says about trade receivables.
In trade receivables,under curent assetss it says to disclose the receivables outstanding over 6 months from the due date of payment.This means there can be trade receivables of over one year outstanding in the current items?

Or do i have to put the receivables outstanding of over a year in the non current items? (even though I havent seen anything like this stated in the non current part of the revised scheduled vi,except deffered credit).

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33 Replies

Rachaita Aggarwal (CHARTERED ACCOUNTANT) (96 Points)
Replied 13 July 2012

under revised schedule VI, current asset means ANY asset, which qualifies any of these 4 conditions..

1.expected to realise within normal operating cycle

2. expected to realise within 12 mnths

3.held for trade

4. cash and cash equivalent

Thus an asset even held for more than 1 year can be current asset, for eg. an asset with operating cycle expected of 15 months and is expected to realise in 14 months is a current asse as per condition 1..

Hope U understood.....

1 Like

Rachaita Aggarwal (CHARTERED ACCOUNTANT) (96 Points)
Replied 13 July 2012

it is only disclosure requirement to seperately show the debtors of more than 6 months and other, having no concern about the division of asset into current and non- current

1 Like

SIDDHARTH KOTHARI (N.A) (280 Points)
Replied 13 July 2012

Hi FRIEND,

IT'S MENTIONED IN REVISED SCHEDULE VI THAT THE AGREEGATE AMOUNT OF THE TRADE RECEIVABLE OUTSTANDING FOR THE A PERIOD EXCEEDING SIX MONTHS FROM THE DATE THEY ARE DUE FOR THE PAYMENT SAPERATELY STATED.

WITH REFERENCE TO YOUR QUESTION ABOUT THE OUTSTANDING TRADE RECEVABLE FOR MORE THAN ONE YEAR - THEY ARE REQUIRED THE SEPERATE DISCLOSURE AS PER THE NEW GUIDELINE GIVEN UNDER REVEISED SCHEDULE VI BECAUSE THEY ARE OUTSTANDING FOR MORE THAN SIX MONTHS SO THAT THEY ARE REQUIRED THE SEPERATE DISCLOSURE.

DEAR, THE TRADE RECEIVABLES CAN NEVER BE THE PART OF NON CURRENT ASSET WHETEHR THEY ARE OUTSTANDING FOR ONE YEAR OR FOR FIVE YEARS.IF THEY ARE OUTSTNDING FOR MANY YEARS THEN YOU ARE REQUIRED TO SUBCLASSIFIED THEM AS PER THE GUDLINES GIVEN UNDER SCHEDULE VI THAT IS TO SAY:

1)SECURED ,CONSIDERED GOOD

2)UNSECURED ,CONSIDERED GOOD,

3)DOUBTFUL

Ritesh Khaitan (Pracice & Business) (148 Points)
Replied 13 July 2012

totally agree with Rachaita Aggarwal.

SOWMYA SARAG (s) (116 Points)
Replied 13 July 2012

Yes, exactly. Emphasis is on disclosure wrt -6months from the due date..Nothing as to classification of receivables as non current..even though it remains due for more than the normal operatig cycle period.

Ankit CA and CS (Manager - Accounts) (204 Points)
Replied 13 July 2012

Hi all,

Following is an extract from Guidance Note on revised Schedule VI, Page 48, please through it to avoid confusion as i saw all the annwers above were not satisfactory :

"8.7.4 Other non-current assets

Other non-current assets shall be classified as:

(i) Long term Trade Receivables (including trade receivables on deferred

credit terms);

(ii) Others (specify nature)

Long term Trade Receivables, shall be sub-classified as:

(i) (a) Secured, considered good;

(b) Unsecured considered good;

(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.

A receivable shall be classified as 'trade receivable' if it is in respect of the

amount due on account of goods sold or services rendered in the normal

course of business. "

So this means that debtors more than one year to be classified under Non Current Asset.

Hope this helps you.....

1 Like

Pathik (.) (83 Points)
Replied 13 July 2012

Yes in the revised schedule VI, you have to classify Trade receivables in 3 categories.

- Trade Receivables less than 6 months.

- Trade Receivables more than 6 months.

Above both will be under current assets.

And

-Trade Receivables more than 12 months will be under Non - current assets.

SIDDHARTH KOTHARI (N.A) (280 Points)
Replied 13 July 2012

HI ANKIT,

WOULD YOU PLEASE GIVE THE DIFFERENCE BETWEEN THE LONG TERM TRADE RECEIVABLES(WHICH ARE SHOWN UNDER NON-CURRENT ASSETS) AND NORMAL TRADE RECEIVABLE(WHICH ARE SHOWN UNDER CURRENT ASSETS)?

Ankit CA and CS (Manager - Accounts) (204 Points)
Replied 13 July 2012

Hi Siddharth,

The defination of Trade Receivable is same for both Current and Non Current.

Now come for Current & Non Current.

Current will be basically which will be realised in less than a year, which for most of the companies is applicable, so entire Trade Receivable will be classified as Current.

Now Come to non current, where in the agreement with customer its there thtat he will pay after 12 months or a year. that type of Trade Receivable will form part of Long Term trade Receivable, practically this situation arises in very few companies e.d a company manufacturing ship.

Hope this will clear......

Paras Khurana (Chartered Accountant) (75 Points)
Replied 13 July 2012

Yes , trade receivables are not to be called as non current assets. They are to be shown separately only in trade receivables schedule in respective columns stated in it if they are outstanding for more than six months or less then six months.

SIDDHARTH KOTHARI (N.A) (280 Points)
Replied 13 July 2012

ANKIT ,

IT'S MENTIONED IN THE GUIDENCE NOTE TO REVISED SCHEDULE VI THAT THE TRADE RECEVABLES SHOULD BE CONSIDERED AS THE CURRENT IF THEY ARE GOING TO BE REALISED WITHIN THE 12 MONTHS FROM THE BALANCE SHEET DATE OR 12 MONTHS FROM THE OPERATING CYCLE.

FOR EXAMPLE ,IF THE OPERATING CYECLE IS OF 12 MONTHS THAN OUR TRADE RECEIVABLE SHOULD BE REALISED 12 MONTHS FROM OPERATING CYCLE(THAT IS TO SAY 12 MONTHS + 12 MONTHS =24 MONTHS).

THE WORDING OF THE GUIDENCE NOTE "CURRENT IF THEY ARE GOING TO BE REALISED WITHIN THE 12 MONTHS FROM THE BALANCE SHEET DATE" IT MEANS AT EACH BALANCE SHEET DATE WE HAVE TO REVIEW THAT WHETHER THE TRADE RECEIVABLES CAN BE REALISED IN NEXT 12 MONTHS IF "YES" THEN IT SHOULD BE CONSIDERED AS CURRENT OTHERWISE NON CURRENT.IT'S DEPENDED ON THE MANAGEMENT TO REVIEW THE TRADE RECEIVABLE AT EACH BALANCE SHEET DATE AND CONSIDERE THAT WHETHER THEY ARE CURENT OR NON-CURRENT.

Ankit CA and CS (Manager - Accounts) (204 Points)
Replied 13 July 2012

Siddharth,

Exactly thts the point it depends on managment to consider current as 12 months or operating cycle.

SIDDHARTH KOTHARI (N.A) (280 Points)
Replied 13 July 2012

HI, ANKIT

What the management will do?

THE OPERATING CYCLE CAN BE MORE THAN ONE YEAR IN CASE OF MANUFACTURING INDUSTRY.THIS DISCLUSURE HAS GREAT IMPACT ON THE WORKING CAPITAL OF THE COPMAY.

WORKING CAPITAL=CURRENT ASSET - CURRENT LIABLITIES.

IF FOR THE BETTER PRESENTATION OF THE BALANCE SHEET WHAT THE MANAGEMENT DO, THEY WILL CONSIDER ALL THE TRADE RECEIVABLES AS CURRENT ASSET AND BECAUSE OF WHICH THE ALL THE RATIOS WHICH ARE BASED ON THE CURRENT ASSET ,GOING TO BE HIGHLY INFLATED.

WHAT I FEEL THAT THE DEFINITION OF THE CURRENT ASSET GIVEN IN THE GUIDENCE NOT IS INCOMPLETE AND MAY GUIDE US INCORRCTLY.WHAT THE MANAGEMENT DO IS SOMETHING BENEFICIAL TO THEM.

TT'S MENTIONED IN THE GUIDENCE NOTE TO REVISED SCHEDULE VI THAT THE TRADE RECEVABLES SHOULD BE CONSIDERED AS THE CURRENT IF THEY ARE GOING TO BE REALISED WITHIN THE 12 MONTHS FROM THE BALANCE SHEET DATE OR 12 MONTHS FROM THE OPERATING CYCLE.

INSDEAD OF ABOVE IT SHOULD BE LIKE TRADE RECEVABLES SHOULD BE CONSIDERED AS THE CURRENT IF THEY ARE GOING TO BE REALISED WITHIN THE 12 MONTHS FROM THE BALANCE SHEET DATE OR 12 MONTHS FROM THE OPERATING CYCLE WHICH EVER IS EARLIER.

SO IN THAT CASE CHANCES OF MISUNDESTANDING AND MISREPRESENTATION WILL BE LESS.

Ankit CA and CS (Manager - Accounts) (204 Points)
Replied 13 July 2012

Siddharth,

For Practical purposes no one opts for operating cycle all opt for 12 months... bcoz a company might be in 3-4 business whr the operating cycles r different so it bcoms practicalyy impossible to opt for working capital route...