What are the important aspects of Revised Schedule VI?[5 Marks]

  1. INTRODUCTION
    • The Ministry of Corporate Affairs (MCA) has recently the text of revised Schedule VI to the Companies Act, 1956 (Act) on its website www.mca.gov. in.
    • As per the MCA's website, the revised Schedule VI (revised Schedule) shall be effective for financial years commencing on or after 1 April 2011. Existing Schedule VI will remain applicable to 2010–11 financial statements.
    • The existing Schedule VI has been in existence for almost five decades without any major structural changes.
    • In view of the drastic changes during this long period in economic philosophy and environment coupled with advancements in accounting principles and in global practices relating to corporate financial reporting, a major overhaul of the Schedule was overdue.
    • In this context, introduction of the revised Schedule VI is indeed welcome step to cope with the global changes.
    • The Revised Schedule VI introduces some significant conceptual changes such as current–non-current distinction, as per the requirements of the Accounting Standards.
    • While the revised Schedule does not adopt the international standard on disclosures in financial statements fully, it does take the Schedule closer to international practices. The attempt is largely making it more relevant to the present developments.
  2. IMPORTANT ASPECTS
    • Some of the significant aspects of the revised Schedule VI include :
      1. Applicable to all : The revised Schedule to apply to all companies following Indian GAAP–until such companies are required to follow International Financial Reporting Standards (IFRS) converged Indian accounting standards (Ind AS).
      2. Accounting Standards Override : Accounting standards and requirements of the Act to override the requirements of the revised Schedule, wherever the two are inconsistent.
      3. Broad Items : Information to be mandatorily presented on the face of financial statements limited to only broad and significant items – details by way of notes.
      4. Part IV Dispensed with : Part IV of the existing Schedule (giving balance sheet abstract and general business profile) dispensed with.
      5. No Change in Cash Flow : Format of cash flow statement not prescribed – hence companies which are required to present this statement (i.e. other than small and medium sized companies) to continue to prepare it as per AS 3, Cash Flow Statement.
      6. Compliance with Accounting Standards : Disclosure requirements of various accounting standards also need to be complied with.