Amendments in Schedule Iii & Other Matters To Be Included in Auditors Report

AMENDMENTS IN SCHEDULE III
&
OTHER MATTERS TO BE INCLUDED IN
AUDITORS REPORT
CA Padmashree Crasto
AMENDMENTS IN
SCHEDULE III
AMENDMENTS IN SCHEDULE III
The Ministry of Corporate Affairs (MCA) has amended
Schedule III of the Companies Act, 2013
Applicable : 01st April 2021
The Schedule III is divided into 3 divisions which are as below
Division III - Financial

Division I – Financial Division II – Financial
Statements for Non-
Statements for a Statements for a
Banking Financial
company whose company whose
Company (NBFC)
Financial Statements financial statements
whose financial
are required to are drawn up in
statements are drawn
comply with compliance of the
up in compliance of
Companies Companies (Indian
the Companies
(Accounting Accounting
(Indian Accounting
Standards) Rules, Standards) Rules,
Standards) Rules,
2006 2015
2015
DIVISION I –
ACCOUNTING
STANDARDS
DIVISION I – INDIAN GAAP (Part 1 – Balance sheet)
Particulars Amendments
Compulsory Rounding a. Total Income less than Rs. 100 crores – Nearest
off figures based on hundreds, thousands, lakhs or millions
Total Income instead of b. Total Income more than Rs. 100 crores – Nearest lakhs,
Turnover. (‘May’ millions or crores.
substituted with ‘Shall’)
Now companies have to round off the figures appearing in
the financial statements, hitherto it was optional. Once
selected it ‘Should’ apply consistently
Point / Question – Definition of Total Income?

Not defined under Act / Schedule
Changes – Part I - Addition/Deletion under sub head Non-Current Assets
Balance Sheet (face) II. ASSETS
Non-current assets
(1)(a) Property, Plant and Equipment and Intangible assets
(i) Tangible assets Property, Plant and Equipment
(ii) Intangible Assets
Point / Question - The disclosure was earlier warranted as

per AS, now it’s a specific sub - heading on the face of the
B/S
Additional disclosures under Notes - Balance Sheet under each head
Share Capital
Shareholding of Promoters at the end of the Year in tabular form containing
o Name
o No of Shares (separately for each class of shares)
o % of Total Shares (separately for each class of shares)
o % change during the year (computed with respect to the number at the beginning of the year
or if issued during the year for the first time then with respect to the date of issue)
Promoters – means as defined u/s 2(69)

"promoter" means a person—
(a) who has been named as such in a prospectus or is identified by the company in the annual
return referred to in section 92; or
(b) who has control over the affairs of the company, directly or indirectly whether as a
shareholder, director or otherwise; or
(c) in accordance with whose advice, directions or instructions the Board of Directors of the
company is accustomed to act:
Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a
professional capacity;
Page 6
Short-term borrowings
Current maturities of Long-term borrowings shall be disclosed separately
Point / Question – As a practice this was being disclosed – now it is mandatory
Page 7
Trade payables
Insertion of sub-heading - Trade payables due for payment and the Ageing
Schedule as below:
Page 8
Trade payables
Point / Question –
• Necessary to determine due date of payment
• In case no due date of payment is specified disclosure shall be from the date of the
transaction
• Unbilled – whether will include certain estimations / provision
• Bucketing to be built into the system to ensure that information is available
• Whether additional note to be provided for time barred debt?
Other Current Liabilities – sub-heading (a) Current maturities of long-term debt is

omitted
Page 9
Property, Plant and Equipment & Intangible Assets

A reconciliation of the gross and net carrying amounts of each class of assets at
the beginning and end of the reporting period showing additions, disposals,
acquisitions through business combinations, amount of change due to revaluation
(if change is 10% or more in the aggregate of the net carrying value of each class
of Property, Plant and Equipment) and other adjustments and the related
depreciation and impairment losses/reversals shall be disclosed separately.
• Calculation of change on account of revaluation for each class of PPE
• Reversals are also specifically disclosed (this was not there earlier)
Page 10
Security Deposits –
Omitted from Long Term Loans & Advances
added under Other Non-current Assets
Point / Question
Where to disclose – in accordance with AS
Utilisation of Borrowings
Where the company has not used the borrowings from banks and financial
institutions for the specific purpose for which it was taken at the balance sheet
date, the company shall disclose the details of where they have been used.
Point / Question
Tracking of money trail will not be easy task
Ensuring that all related details are available will be necessary
Onus on the Company to prove that it was utilized for the purpose of borrowing
Page 11
Trade Receivables
Ageing Schedule
Page 12
Trade Receivables
• Schedule of ageing is under both Trade Receivable & Other Non-Current Asset
• If the receivable is non-current – ideally ageing upto 1 year will not be available
• If the receivable is current, then unless the operating cycle is longer – it cannot be more
than 1 year
• ‘Due date of payment’ is mentioned – it should be from the ‘date it is due’
• In case no due date of payment is specified disclosure shall be from the date of the
transaction
• Bucketing to be built into the system to ensure that information is available
Disclosure relating to SBN

Finally deleted
Page 13
Additional Regulatory Information
Title deeds of Immovable Property not held in name of the Company
(i) Details of all the Immovable Property (other than under lease and the agreement is in
the name of the Co) whose title deeds are not held in name of the Company. If the same
is held jointly with others, details to the extent of the company’s shares shall be
disclosed.
Page 14
• Detailed inspection of documents will be required
• In case of Companies which are very old – getting all documents may be an issue
• Reason for not being held in the Name of the Company may be difficult to ascertain
• Relative is a wide term
• Collation of all disputes will also be necessary
Disclosure of revaluation of Property, Plant and Equipment – whether based on the valuation
by a registered valuer as defined under rule 2 of the Companies (Registered Valuers and
Valuation) Rules, 2017.
In case of Loans or Advances in the nature of loans are granted to promoters, directors, KMPs
and the related parties either severally or jointly with any other person, that are: (a)
repayable on demand or (b) without specifying any terms or period of repayment.
Type of Borrower Amt of Loan or Adv o/s % of total L & A
Promoters/ Directors/
KMPs/RP
Page 15
Capital Work In Progress (CWIP) & Intangible Assets-
Ageing schedule
For CWIP/ Intangible Assets, whose completion is overdue or has exceeded its cost compared
to its original plan, CWIP completion schedule mandatory – (Projects where activity is
Suspended to be given separately:
Page 16
Loans & Advances
• Open ended lending is being curbed
• More details required
CWIP / Intangible schedules (ageing &completion)
• Reproduction of AWP
• Very detailed information is required
• Careful reading of project / extension etc.,
• Activities are suspended? – whether project is suspended?
Details of Benami Property Held

Disclosure of any proceedings initiated or pending against the company for holding any
benami property under the Benami Transactions (Prohibition) Act, 1988 with all details like
Details of such property, including year of acquisition, Amount, Beneficiaries, reference to
the item in the Balance Sheet (if it is in Books of account), If property is not in the books,
then the fact shall be stated with reasons, any proceedings against the company under this
law as an abetter of the transaction or as the transferor then the details shall be provided,
Nature of proceedings, status of same and company’s view on same.
Page 17
• Details of Beneficiaries – may not be available readily
• If property is not in the books – way to find out?
• All pending cases in this regard along with status to be collated
Enhanced Disclosure for borrowings from banks or financial institutions on the basis of
security of current assets:
• Whether quarterly returns or statements of current assets filed by the Company with
banks or financial institutions are in agreement with the books of accounts.
• if not, summary of reconciliation and reasons of material discrepancies, if any to be
adequately disclosed
Point / Question
• Company has to make available all the details and tally it with books of account
• Preparation of reconciliation and reasoning out discrepancies will require dedicated time
& resource
• Estimations / projections?
• Bank may not accept provisional information in that case
Page 18
Where a company is a declared wilful defaulter by any bank or financial Institution or other
lender – [“wilful defaulter” here means a person or an issuer who or which is categorized as
a wilful defaulter by any bank or financial institution (as defined under the Act) or
consortium thereof, in accordance with the guidelines on wilful defaulters issued by the
Reserve Bank of India.]
(a) Date of declaration as wilful defaulter, (b) Details of defaults (amount and nature of
defaults)
Disclosure of any transactions with struck off Companies u/s 248 or 560
Page 19
• Where any charges or satisfaction yet to be registered with Registrar of Companies
beyond the statutory period, details and reasons thereof shall be disclosed.
• Where Company has not complied with the no. of layers prescribed u/s 2(87) read with
Rules, name and CIN of the companies beyond the specified layers and the
relationship/extent of holding of the company in such downstream companies shall be
disclosed.
• Ratios with explanation for items included in numerator & denominator - Reasons for 25%
or more variation as compared to PY
Current Ratio Trade payables turnover ratio
Debt-Equity Ratio Net capital turnover ratio
Debt Service Coverage Ratio Net profit ratio
Return on Equity Ratio Return on Capital employed
Inventory turnover ratio Return on investment
Trade Receivables turnover ratio
Page 20
In case Scheme of Arrangements has been approved in terms of sections 230 to 237, the
Company shall disclose that the effect of such Scheme of Arrangements have been accounted
for in the books of account of the Company ‘in accordance with the Scheme’ and ‘in
accordance with accounting standards’ and deviation in this regard shall be explained.
Point / Question
Very wide reporting in terms of charges etc., - these are covered under secretarial report
Ratios not defined specifically – may lead to ambiguity
Statutory auditors certificate is issued in w.r.t adherence to scheme – reconfirmation in FS
Utilisation of Borrowed funds and share premium

In case the Co has advanced or loaned or invested funds (either borrowed funds or share
premium or any other sources or kind of funds) to any other person(s) or entity(ies),
including foreign entities (Intermediaries) with the understanding (whether recorded in
writing or otherwise) that the Intermediary shall:
[Similar provisions shall apply in case the Co has received any funds]
Page 21
(i) directly or indirectly lend or invest in other persons or entities identified in any manner
whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries; the
company shall disclose the following
• date and amount of fund advanced /loaned /invested with complete details of each
Intermediary.
• date and amount of fund further advanced or loaned or invested by such Intermediaries to
other intermediaries or Ultimate Beneficiaries alongwith complete details
• date and amount of guarantee, security or the like provided to or on behalf of the Ultimate
Beneficiaries
• declaration that relevant provisions of the FEMA, Companies Act has been complied with for
such transactions and the transactions are not violative of the Prevention of Money-Laundering
act, 2002
Point / Question
Compilation of data for this disclosure will be a task
Completeness of information is always questionable - Whether in writing or otherwise
Compliance with all laws and very detailed disclosure
Other sources / kind of funds
Declaration separately or as part of Notes?
Page 22
DIVISION I – INDIAN GAAP (Part 2 – Statement of Profit &
Loss)
Changes – Part 2 a. Addition / Deletion under III is as below

Statement Profit I. Revenue from Operations
& Loss Face II. Other Income
III. Total Revenue Income (I+II)
Additional 1. Revenue from Operations
disclosure under Grants or donations received (relevant in case of section 8
Notes Statement companies only)
of Profit and
Loss 2. Undisclosed Income
Co. shall give details of any transaction not recorded in the books
of accounts that has been surrendered or disclosed as income
during the year in the tax assessments under the Income Tax Act,
1961 (such as, search or survey or any other relevant provisions of
the Income Tax Act, 1961), unless there is immunity for disclosure
under 11 any scheme and also shall state whether the previously
unrecorded income and related assets have been properly
recorded in the books of account during the year.
DIVISION I – INDIAN GAAP (Part 2 – Statement of
Profit & Loss)
Corporate Social Responsibility (CSR)
When the company is covered under section 135 disclosure of :
a. Amount required to be spent during the year
b. Amount of expenditure incurred
c. shortfall at the end of the year
d. total of previous years shortfall
e. reason for shortfall
f. nature of CSR activities
g. details of related party transactions, - contribution to trust controlled by Co as per AS
h. Where a provision is made w.r.t liability incurred, the movement in provision during the
year should be shown separately.
Details of Crypto Currency or Virtual Currency
Where the Company has traded or invested in Crypto currency or Virtual Currency during the
financial year, the following shall be disclosed:-
a. profit or loss on transactions involving Crypto currency or Virtual Currency
b. amount of currency held as at the reporting date,
c. deposits or advances from any person for the purpose of trading or investing in Crypto
Currency/ virtual currency.
Page 24
DIVISION II – INDIAN
ACCOUNTING
STANDARDS
DIVISION II – IND AS (Part 1 – Balance sheet)
Changes – Part I Additional disclosures in division II
Balance sheet 1.Addition under head Equity and Liabilities
face II. Equity and Liabilities
Liabilities
(1) Non – Current Liabilities
(a) Financial Liabilities
(ia) Lease Liabilities
Current Liabilities
(a) Financial Liabilities
(ia) Lease Liabilities
Additional 1. Other Financial Assets

disclosures i. Security Deposits
under Notes ii. Bank deposits with more than 12 months maturity
Balance sheet iii. Others (to be specified)
each head wise
Statement of Changes in Equity
Equity Share Capital – additional disclosure - Changes in Equity Share Capital due to prior
period errors - Restated balance at the beginning of the current reporting period
Trade Receivables – ageing schedule along with additional classification into

Undisputed Trade receivables – considered good
Undisputed Trade Receivables – which have significant increase in credit risk
Undisputed Trade Receivables – credit impaired
Disputed Trade Receivables– considered good
Disputed Trade Receivables – which have significant increase in credit risk
Disputed Trade Receivables – credit impaired
Trade Payable
Classification into – MSME – Others – Disputed dues MSME- Disputed dues Others
Point / Question
Inclusion of changes due to prior period errors in SOCIE
Classification / detailing may be painful
Page 27
Other Financial Assets: This is an all-inclusive heading, which incorporates financial assets that
do not fit into any other financial asset categories, such as, Security Deposits
Other Financial Liabilities: Current maturities of long-term debt & Current maturities of
finance lease obligations – omitted
Non-Current liabilities : Long term maturities of finance lease obligations - omitted

Disclose as to whether the fair value of investment property (as measured for disclosure
purposes in the financial statements) is based on the valuation by a registered valuer as defined
under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017
Where the company has revalued its intangible assets/ PPE(including ROU), the company shall
disclose as to whether the revaluation is based on the valuation by a registered valuer
Page 28
DIVISION III – NBFC
WHOSE FS ARE
PREPARED ON IND AS
BASIS
DIVISION III – NBFC (Part 1 – Balance sheet)
Additional Regulatory Additional disclosures in division II
Information Similar to Div I & II
Following ratios shall be disclosed

(a) Capital to risk-weighted assets ratio (CRAR)
(b) Tier I CRAR
(c) Tier II CRAR
(d) Liquidity Coverage Ratio
OTHER MATTERS
TO BE INCLUDED IN
AUDITORS REPORT
MCA – IMPORTANT AMENDMENT
MCA vide
notification dated The Amendments
March 24, 2021 has relate to Rule 11 of This notification is
further amended the Companies (Audit effective from date
Companies (Audit and Auditors) Rules, April 01, 2021
and Auditors) Rules, 2014
2014
Point / Question
• Whether Applicable from FY 2021-22
Or
• To Reports issues on or after April 01, 2021
Amendments
The Auditor’s Report shall also include their views and comments on the
following matters, namely:
 Clause (e)
(i) Whether the management has represented that, to the best of it’s knowledge and
belief, other than as disclosed in the notes to the accounts, no funds have been
advanced or loaned or invested (either from borrowed funds or share premium or any
other sources or kind of funds) by the company to or in any other person(s) or
entity(ies), including foreign entities (“Intermediaries”), with the understanding,
whether recorded in writing or otherwise, that the Intermediary shall, whether, directly
or indirectly lend or invest in other persons or entities identified in any manner
whatsoever by or on behalf of the company (“Ultimate Beneficiaries”) or provide any
guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(ii) Whether the management has represented, that, to the best of it’s knowledge and
belief, other than as disclosed in the notes to the accounts, no funds have been
received by the company from any person(s) or entity(ies), including foreign entities
(“Funding Parties”), with the understanding, whether recorded in writing or otherwise,
that the company shall, whether, directly or indirectly, lend or invest in other persons
or entities identified in any manner whatsoever by or on behalf of the Funding Party
(“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of
the Ultimate Beneficiaries; and
Amendments
(iii) Based on such audit procedures that the auditor has considered
reasonable and appropriate in the circumstances, nothing has come to their
notice that has caused them to believe that the representations under sub-
clause (i) and (ii) contain any material mis-statement.
Points for consideration

• Opinion is to be provided on the basis of representation from the management and
also that the representation is not materially misstated
• Management has to provide information to the best of its knowledge
• Requires auditor to report whether there are any transactions other than those
reported in the notes to accounts
• Difficulty in collating audit evidence – as it includes whether in writing or otherwise
• Includes direct / indirect investment – how will the information / evidence be
gathered
• Also includes likes of the guarantee / security
• Covers both received as well as lent / invested
SA 240 & SA 315 to be put to use in letter & spirit to design audit procedures!
Amendments
 (Clause (f)
Whether the dividend declared or paid during the year by the company is
in compliance with section 123 of the Companies Act, 2013.

Factual reporting
Specific non-compliances with the provisions of the section may warrant reporting
Whether dividend out of surplus / out of reserves to be reported
Amendments
 Clause (g)
Whether the company has used such accounting software for maintaining
its books of account which has a feature of recording audit trail (edit log)
facility and the same has been operated throughout the year for
all transactions recorded in the software and the audit trail feature has not
been tampered with and the audit trail has been preserved by the company as
per the statutory requirements for record retention.

Mandatory ITGC to be conducted
Verification of audit trails
Amendment is applicable from 1 April & right from the beginning of the year – the
software should be compliant (we have to report throughout out the year)
Audit Trail to be preserved & not tampered with – does it need certificate from expert –
relying on which we can report?
 Clause (d) - Omitted

Accordingly, w.e.f. 01.04.2021, the matter related to specified bank notes
during demonetisation period is no more required to be stated in “Other
Matters” in the auditor’s report.
Page 37
THANK YOU
Page 38

Amendments in Schedule Iii & Other Matters To Be Included in Auditors Report

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AMENDMENTS IN SCHEDULE III

Division III - Financial

Point / Question – Definition of Total Income?

Point / Question - The disclosure was earlier warranted as

Promoters – means as defined u/s 2(69)

Current maturities of Long-term borrowings shall be disclosed separately

Point / Question – As a practice this was being disclosed – now it is mandatory

Other Current Liabilities – sub-heading (a) Current maturities of long-term debt is

Property, Plant and Equipment & Intangible Assets

Disclosure relating to SBN

Details of Benami Property Held

Utilisation of Borrowed funds and share premium

Changes – Part 2 a. Addition / Deletion under III is as below

Additional 1. Other Financial Assets

Trade Receivables – ageing schedule along with additional classification into

Additional Regulatory Information

Following ratios shall be disclosed

Points for consideration

Points for consideration

Points for consideration

 Clause (d) - Omitted

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