Schedule III of the Companies Act, 2013 provides the format and disclosure requirements for financial statements of companies in India. It ensures uniformity, transparency, and compliance with accounting standards. The Ministry of Corporate Affairs (MCA) has made several amendments to Schedule III, the latest being on October 11, 2018, introducing Division III for NBFCs.
Structure of Schedule III
Schedule III is divided into three divisions, catering to different categories of companies:
| Division | Applicable To |
|---|---|
| Division I | Companies following Indian GAAP (Accounting Standards – AS) |
| Division II | Companies following Ind AS (Indian Accounting Standards) |
| Division III | NBFCs following Ind AS |
Key Amendments to Schedule III
1. Amendments to Division I (For AS-Compliant Companies)
📌 Terminology Changes:
- The term “Fixed Assets” has been replaced with “Property, Plant, and Equipment” under Non-Current Assets.
📌 Enhanced Disclosures:
- Companies must disclose information related to trade payables, loans receivables, and MSME dues in financial statements.
2. Amendments to Division II (For Ind AS-Compliant Companies)
📌 Trade Payables Classification:
- Separate disclosure of trade payables to:
1️⃣ Micro and Small Enterprises
2️⃣ Other Enterprises
📌 Trade Receivables Classification:
- Revised format for trade receivables classification:
✔ Considered Good – Secured
✔ Considered Good – Unsecured
✔ Significant Credit Risk
✔ Credit Impaired
📌 Loan Receivables Classification:
- Similar classification introduced for loans:
✔ Considered Good – Secured
✔ Considered Good – Unsecured
✔ Significant Credit Risk
✔ Credit Impaired
📌 Additional MSME Disclosures:
Companies must disclose:
✔ Unpaid principal and interest at year-end
✔ Interest paid under the MSME Act
✔ Interest due on delayed payments
3. Introduction of Division III (For NBFCs Following Ind AS)
📌 Applicability:
- NBFCs complying with Indian Accounting Standards (Ind AS) must prepare financial statements as per Division III.
📌 Additional Disclosure Requirements for NBFCs:
- Breakdown of assets and liabilities into current and non-current categories.
- Detailed notes on financial instruments and credit risk exposure.
- Materiality concept to ensure only relevant items are disclosed.
- Consistency in reporting units (hundreds, lakhs, or millions).
- Comparative financial statements for previous periods.
📌 Presentation Flexibility:
- NBFCs can alter the order of financial statement items based on liquidity.
Impact of Amendments to Schedule III
✔ Increased Transparency: More disclosures on loans, trade payables, and MSME payments.
✔ Better Financial Reporting: Classification of assets improves credit risk assessment.
✔ Regulatory Compliance: NBFCs now have a structured format for financial statements.
✔ Improved Investor Confidence: Detailed reporting helps stakeholders assess company health.
Conclusion
The amendments to Schedule III of the Companies Act, 2013 enhance financial transparency, reporting consistency, and regulatory compliance. Companies must adhere to these changes to avoid penalties and maintain financial integrity.
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