Schedule III Balance Sheet Format for Ind AS Companies (Division II)

Schedule III Balance Sheet Format for Ind AS Companies (Division II)#

Schedule III to the Companies Act, 2013 (see Section 129) prescribes how a company presents its balance sheet, statement of changes in equity, statement of profit and loss and notes. It has more than one format, and using the wrong one is a basic error. This article walks through the Division II balance sheet, the one used by Ind AS companies, heading by heading.

It is written for CFOs, accountants and directors preparing or reviewing financial statements. We drew on the text of Division II as reproduced in the ICAI's Guidance Note on Division II (revised January 2022 edition) and its companion note on Division I. The Schedule has been amended more than once, so please check the current official text before relying on any heading below.

Which companies use Division II, and which use Division I#

Per that ICAI Guidance Note, the position after the 2016 amendment to Schedule III is:

• Division I is the original Schedule III format, for companies preparing statements under the Companies (Accounting Standards) Rules, 2006 (non-Ind AS companies).
• Division II is the format for companies whose statements are drawn up in compliance with the Companies (Indian Accounting Standards) Rules, 2015. The Guidance Note says this covers companies applying Ind AS mandatorily or voluntarily.

Whether a company must adopt Ind AS is a separate question decided by the Ind AS Rules, which we do not restate here. The Guidance Note also says these formats do not apply to companies covered by the proviso to Section 129(1), such as insurance and banking companies, or companies for which another Act specifies a form of balance sheet.

A point of frequent confusion: Schedule III is for companies. ICAI's newer vertical format for non-corporate entities is a different requirement, covered in our article on the ICAI format for non-corporate entities. That article describes it as a Schedule III-style format for proprietorships, partnership firms, LLPs and trusts, not for companies. If you searched "schedule 3 balance sheet format" because of that ICAI change, check which entity type you are preparing statements for first.

How current and non-current are decided#

The General Instructions for the balance sheet require each item to be classified as current or non-current.

An asset is current when:

• the entity expects to realise it, or intends to sell or consume it, in its normal operating cycle;
• it is held primarily for trading;
• the entity expects to realise it within twelve months after the reporting period; or
• it is cash or a cash equivalent, unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are non-current.

A liability is current when:

• the entity expects to settle it in its normal operating cycle;
• it is held primarily for trading;
• it is due to be settled within twelve months after the reporting period; or
• the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms that could, at the counterparty's option, result in settlement by issuing equity instruments do not affect classification.

All other liabilities are non-current.

The operating cycle is the time between acquiring assets for processing and realising them in cash or cash equivalents. Where it is not clearly identifiable, it is assumed to be twelve months. The Instructions also say a receivable is a "trade receivable" if it is due on account of goods sold or services rendered in the normal course of business, and a payable is a "trade payable" if it is due on account of goods purchased or services received in the normal course of business.

The Division II balance sheet, top to bottom#

Division II starts with assets, then equity and liabilities. This matters if your team is used to the Division I layout (discussed below). The headings in the format are:

Assets

Non-current assets: property, plant and equipment; capital work-in-progress; investment property; goodwill; other intangible assets; intangible assets under development; biological assets other than bearer plants; financial assets (investments, trade receivables, loans); deferred tax assets (net); other non-current assets. The notes also carry an "other financial assets" heading.

Current assets: inventories; financial assets (investments, trade receivables, cash and cash equivalents, bank balances other than cash and cash equivalents, loans, others to be specified); current tax assets (net); other current assets.

Equity and liabilities

Equity: equity share capital; other equity.

Non-current liabilities: financial liabilities (borrowings, lease liabilities, trade payables split between micro and small enterprises and other creditors, other financial liabilities); provisions; deferred tax liabilities (net); other non-current liabilities.

Current liabilities: financial liabilities (borrowings, lease liabilities, trade payables with the same split, other financial liabilities); other current liabilities; provisions; current tax liabilities (net).

The format has columns for the note number and for the current and previous reporting periods. The General Instructions require comparatives for the preceding period, other than for the first financial statements laid before the company after incorporation. Each face item is to be cross-referenced to related notes.

The main notes#

The Instructions list what must be disclosed in the notes. At a high level, and always subject to the current text:

• Property, plant and equipment and intangibles: classification by class, and reconciliations of gross and net carrying amounts. The text we read refers to revaluation disclosure where the change is 10% or more of the aggregate net carrying value of a class.
• Trade receivables: sub-classification (good, secured or unsecured; significant increase in credit risk; credit impaired) and an ageing schedule split between undisputed and disputed items.
• Equity share capital: for each class, authorised, issued and subscribed numbers, par value, a reconciliation of shares outstanding, rights and restrictions, holdings above five percent, and shareholding of promoters with percentage change during the year.
• Other equity: the nature and amount of each item, with the statement of changes in equity presented alongside the balance sheet.
• Borrowings: classification (for example bonds or debentures, and term loans from banks and other parties), secured versus unsecured with nature of security, terms of repayment, and the period and amount of any default. For current borrowings, current maturities of long-term borrowings are to be disclosed separately.
• Trade payables: disclosures on micro, small and medium enterprises (principal and interest unpaid, interest paid under Section 16 of the MSMED Act, and related amounts) and a payables ageing schedule.
• Contingent liabilities and commitments: to the extent not provided for. See our article on provisions and contingent liabilities under Ind AS 37.
• Additional regulatory information: the Schedule lists items such as title deeds of immovable property not held in the company's name, benami property, wilful defaulter status, relationship with struck-off companies, registration of charges, ratios and compliance with schemes of arrangement.

Related-party information is a separate requirement under Ind AS 24; see our article on related party disclosures. For a wider overview, read our financial statements guide.

What the March 2021 amendment changed#

The Ministry of Corporate Affairs amended Schedule III by notification G.S.R. 207(E) dated 24 March 2021. The ICAI Guidance Note says the changes apply to financial years commencing on or after 1 April 2021. In Division II, the changes visible in the text we read include:

• lease liabilities shown as a separate line within financial liabilities;
• an "other financial assets" head in the notes;
• ageing schedules for trade receivables and trade payables;
• promoter shareholding disclosure;
• current maturities of long-term borrowings disclosed separately;
• disclosure where bank or financial institution borrowings were not used for the purpose taken;
• the additional regulatory information list; and
• rounding of figures based on total income rather than turnover.

We did not find a later amendment to Division II while preparing this article, but we could not confirm that none exists. Please check the current text on the Ministry of Corporate Affairs website.

How Division I differs at a high level#

The ICAI's companion note on Division I shows the non-Ind AS balance sheet. Broad differences include:

The share capital disclosures are broadly common to both, but per the Guidance Note Division II restricts them to equity share capital.

A short illustration of classification#

The figures below are round numbers for illustration only, not drawn from any company.

Suppose a company has a term loan of ₹100 lakh at the reporting date, repayable over 18 months, with ₹40 lakh due within twelve months and ₹60 lakh after that.

• ₹40 lakh is due within twelve months, so it is a current liability, presented as current maturities of long-term borrowings within current borrowings.
• ₹60 lakh is due later and, assuming the company has an unconditional right to defer settlement for at least twelve months, is a non-current borrowing.

The second portion depends on the loan terms. The Guidance Note stresses that a liability is current where the company does not have an unconditional right to defer settlement for at least twelve months. Covenants and any breach need careful review, and Ind AS 1 has since been amended on this point; we have not covered those amendments here.

Points to check before you finalise#

These are review points drawn from our reading of the Schedule, not statements made in it, and not findings about how often any error occurs:

• Check that a loan is split between its current and non-current portions, instead of the whole amount being shown as one or the other.
• Check whether the operating cycle test applies to trade receivables and payables, instead of applying a twelve-month test alone.
• Check that ageing schedules follow the basis the Schedule refers to: the due date of payment, or the transaction date where no due date is specified, and not the invoice date by default.
• After a move to Ind AS, check that Division II headings are used and Division I headings are not carried across.

Where to read the official text#

Read Schedule III as currently notified on the Ministry of Corporate Affairs website, and the ICAI Guidance Notes on Division II and Division I, which reproduce the text and add explanation. Practice on some items, particularly borrowing classification, varies, so confirm the current position with your auditor.

Consult a professional#

The choice of division, the classification of individual items and the required notes depend on your company's facts and the version of the Schedule in force. This article is general information, not advice. Please consult a qualified Chartered Accountant before finalising your statements.