Expected Theory Questions on Revised Schedule VI for CA IPCC and Final

The Ministry of Corporate Affairs has notified the revised Schedule VI on 28 February, 2011 vide Notification No. S.O. 447(E) (as amended by Notification No. SO 653(E) dated 30 March 2011). The revised Schedule VI will replace the existing Schedule VI in respect of Balance Sheet and Profit and Loss Account to be prepared for the financial year commencing on or after 01-04-2011.

1. What was the need for revised Schedule VI?

The existing Schedule VI to the Companies Act, 1956 (herein after called as old Schedule VI) has been in place for almost five decades without any major change and has not been able to keep pace with the changes taking place in the international arena. The revised Schedule VI is an attempt to bridge that gap.

2. What is the effective date of revised Schedule VI?

As per Notification No. 653(E) dated 30 March 2011, the revised Schedule VI shall come into force for the Balance Sheet and Profit and Loss Account to be prepared for the financial year commencing on or after 01-04-2011.

3. In case of a conflict between the requirements of an accounting standard and revised Schedule VI, which one will prevail?

Where compliance with the requirements of the Act including Accounting Standards as applicable to the companies require any change in treatment or disclosure including addition, amendment, substitution or deletion in the head/sub-head or any changes inter se, in the financial statements or statements forming part thereof, the same shall be made and the requirements of the Schedule VI shall stand modified accordingly. Thus, in other words, the requirements of accounting standards notified under the Companies (Accounting Standards) Rules, 2006 will prevail in case of a conflict with the requirements of revised Schedule VI.

4. Can the amount appearing in the financial statements be rounded off?

Depending upon the turnover of the company, the figures appearing in the Financial Statements may be rounded off as below:

Turnover Rounding off
Less than one hundred crore rupees To the nearest hundreds, thousands, lakhs or millions, or decimals thereof.
One hundred crore rupees or more To the nearest, lakhs, millions or crores, or decimals thereof.

Once a unit of measurement is used, it should be used uniformly in the Financial Statements.

5. What is the requirement of revised Schedule VI regarding presentation of comparative amounts?

The revised Schedule VI clearly provides that except in the case of the first Financial Statements laid before the company (after its incorporation) the corresponding amounts (comparatives) for the immediately preceding the reporting period for all items shown in the Financial Statements including notes shall also be given. A question, thus, arises that whether at the time of first time application of revised Schedule VI, i.e. while drawing up the financial statements for 2011/12, an entity would need to give the comparative for 2010/11 as per the revised Schedule VI. Our view is that the comparatives for 2010/11 will also be based on the revised Schedule VI.

6. Is schedule VI applicable on Cash Flow?

The revised Schedule VI prescribes the format for information to be presented on the face of Balance Sheet and Statement of Profit and Loss. There is no format prescribed for cash flow statement.

See Format of Revised Schedule VI – Profit and Loss and Balance Sheet

What is the structure of the Statement of Profit and Loss under the revised Schedule VI?

The key points regarding Statement of Profit and Loss are as under:

  1. The format of Statement of Profit and Loss is prescribed.
  2. Only a vertical form of Statement of Profit and Loss is permitted.
  3. Classification of expenses by nature needs to be given.
  4. Profit or loss from discontinuing operations needs to be shown separately on the face of the Statement of Profit and Loss. Earlier this requirement was based on accounting standard and not Schedule VI.
  5. Quantitative disclosures relating to turnover, raw materials, purchases, installed capacity, actual production, details of managerial remuneration are to be dispensed with.

'Expected Theory Questions on Revised Schedule VI for CA IPCC and Final' has 1 comment

  1. April 21, 2013 @ 2:23 pm geethanjali kanagarajan

    thanks for all the infomation published here….


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