Ind AS Presentation Format for NBFCs

Soniya Khanna

13 Nov, 2019

The Schedule III of the Companies Act, 2013 describes instructions of presenting financial statements of the company as per “Accounting Standards (AS) as well as Indian Accounting Standards (Ind AS)”. In this article, we are going to discuss Ind AS format for NBFCs.

Note*

Schedule III of the Companies Act, 2013 is divided into parts, which are as follows:

• Division I

It applies to a company whose financial statements are finalized based on accounting standards.

• Division 2

It applies to a company whose financial statements are finalized based on Indian accounting standards (Ind As) other than Non-Banking Financial Companies (NBFCs).

On 30^th March 2016, MCA issued Companies (Indian Accounting Standards) (Amendment) Rules, 2016^[1], which defined a roadmap for NBFCs regarding the implementation of Indian Accounting Standards (Ind AS).

After this, on 11^th October 2018, MCA notified Ind AS Schedule III applicable to NBFCs. With this, new division III has been incorporated under Schedule III which will apply to NBFCs covered under Ind AS applicability.

As it is clear from the above, that division III of the Schedule III applies to NBFCs on which Ind AS applies while finalising financial statements. In addition to disclosure requirements, this provision also applies when a company is required to prepare consolidated financial statements.

NBFCs shall comply with disclosure requirements which are mentioned under schedule III along with the disclosure requirements prescribed under Ind AS. NBFCs will make additional disclosures in notes specified in Ind AS unless required to be disclosed on the face of financial statements. Similarly, in addition to the disclosure requirements mentioned under schedule III, disclosure requirements as specified under Companies Act, 2013 shall be made in notes.

Read our article:IND Accounting Standard Guidelines for NBFC for the Preparation of Financial Statement

Division III requirements for NBFCs

 The division III requirements are similar to the provisions of division II except few which are as follows:

1. Now, NBFCs can present items of the balance sheet in the order of liquidity;
2. The balance sheet is required to be classified into financial & non-financial;
3. NBFCs have to separately disclose in “note” item of other income or other expenditure exceeding 1% of the total income. However, in the case of division II disclosure were required to be given in case of an item of income or expenditure exceeding 1% of the revenue from operations of Rs. 10 Lakhs whichever is higher.
4. NBFCs have to disclose debts due from LLP under which its director is a partner or member under the head receivables.
5. NBFCs have to disclose items comprising “revenue from operations” and “other comprehensive income” on the P/L statement.

Significant Change for Ind AS Format for NBFCs

The most significant change is concerned with the classification of “trade receivables” & “loan receivables”. It requires companies to disclose receivables having a considerable increase in credit risk.

Takeaway

It was mandatory for companies implementing Ind AS to comply with the format mentioned under schedule II from the financial year 2016-2017 onwards.

As we know from 1^st April 2018, Ind As have become applicable to certain NBFCs therefore from the first quarter thereafter (June 2018) have to report their financials under Ind AS on the basis of Division II, Schedule III and Companies Act, 2013 while divisions III was applicable on NBFCs from the date of its publication in the official gazette as it has not described any specific accounting period.