Revised Schedule Vi

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ACCOUNTING AND AUDITING UPDATE
This heading style is set in Univers bold 27.5pt on 30pt Revised Schedule VI February 2012
This paragraph style is set at 12pt with 16pt leading and 8pt space after.

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1 | Accounting and Auditing Update - February 2012

© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Accounting and Auditing Update - February 2012 | 2

Editorial
It is with immense pleasure we bring forth the February 2012 edition of the Accounting and Auditing Update. Schedule VI to the Companies Act, 1956 (Act), which, prescribes the format for presentation of Balance Sheet and Statement of Profit and Loss by companies was introduced in 1960 and is almost as old as the Act itself. It is inevitable that regulators in India have felt the imperative need to marry the accounting advancements witnessed over the last two or three decades with that of the manner in which the financial information is presented. Further, some of the presentation and disclosure requirements as set out in the pre-revised Schedule VI appear to have become outdated and do not appear to synchronise with the objective of a fair presentation of financial information. Although from time to time, the Central Government had amended Schedule VI, some of the disclosures required by that Schedule such as licensed capacity, CIF value of imports, etc. are quite irrelevant from the perspective of today’s investor. Furthermore, the current version of Schedule VI does not require a company to distinguish current assets from non-current assets and current liabilities from their non-current counterparts. For example, a security deposit which is likely to be refunded after 10 years from the time of origination is likely to be classified as Loans and Advances and embedded in the larger Current Assets, Loans and Advances category which could potentially mislead a reader into thinking that all Loans and Advances are current assets. Some of these limitations appear to have persuaded MCA’s move to go ahead with the implementation of the revised Schedule VI for periods commencing on or after 1 April 2011 without waiting for IFRS convergence in India. Whilst the existing Schedule VI does not require companies to classify their assets and liabilities into current and non-current, the revised Schedule VI does so in order to facilitate a fair portrayal of the financial and liquidity position of a company to the readers of the financial statements. The revised Schedule VI, among other things, has also prescribed a format for Statement of Profit and Loss mandating classification of expenses by their nature as opposed to by function and added a host of incremental disclosures. In this publication, apart from discussing the specific implementation issues surrounding the changes brought out by the revised Schedule VI, we have also attempted to provide a sector specific impact analysis for few industries. We hope you find this publication insightful. We would look forward to receiving your feedback on what you would like us to cover in our future publications at aaupdate@in.kpmg.com

Narayanan Balakrishnan Partner KPMG in India

© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

3 | Accounting and Auditing Update - February 2012

Revised Schedule VI

Catching up with global trends
Overview
The Ministry of Corporate Affairs (MCA) has issued revised Schedule VI which lays down a new format for preparation and presentation of financial...
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