Thursday, December 1, 2011

Concepts - XBRL, IRFS,Sch VI etc

eXtensible Business Reporting Language (XBRL) is an open technology standard which makes it possible to store business and financial information in a computer-readable format. Many countries and/or financial regulators have approved, or are in the process of implementing, requirements around XBRL as the electronic financial reporting standard. These include the US, Japan, UK, Netherlands, Australia & China to name a few.

On 1 April 2011, the Ministry of Corporate Affairs (MCA) in India posted a circular on its website requiring certain class of companies (Phase 1) to file balance sheets and profit and loss accounts for the year 2010-11 onwards by using XBRL. The financial statements required to be filed in XBRL format will be based upon the taxonomy or terminlogy on XBRL developed for the existing Schedule VI and non-converged accounting standards notified under the Companies (Accounting Standards) Rules, 2006.

As per the circular, the following class of companies will be considered as Phase 1 and will have to file their Financial Statements in XBRL from the year 2010-11:-

i.        All companies listed in India and their subsidiaries, including overseas subsidiaries
ii.       All companies having a paid up capital of Rs. 5 Crore and above or a turnover of Rs.  100 crore or above

Ministry of corporate affairs , the regulators of corporate entities in India has mandated filing of financial returns in XBRL format except banking, insurance, NBFCs and power sector companies. 

This represents a significant change in the manner in which companies are required to share financial information with regulatory authorities. XBRL will facilitate the transmission of data in electronic form between companies and different regulatory agencies in India, and has the potential to increase comparability and transparency of financial information.

Phase 1 companies have a short time-frame to prepare for XBRL filing of 201011 financial statements

The basis for XBRL is a “tagging” process where each value, item, descriptor, etc., in the exchanged information can be given a unique set of tags to describe it.

XBRL is being positioned as the vocabulary of business and financial reporting. It is a way to “bar code” business information contained in general ledgers, income and cash flow statements, balance sheets, as well as text information included within the footnotes and other requirements of business reporting. Tagging financial data in XBRL is similar to the use of bar codes. The bar code was created to electronically identify different products. Similar to a bar code, applications that utilize XBRL data can automatically identify each piece of data and specific information about it, such as value, type, currency, date, source and its relationships with other data.

source : 

Changes in Schedule VI – Old vs New (Revised)

Ministry of Corporate Affairs (MCA) had revised Schedule VI of Companies Act, 1956 and notified the same on 1st March 2011.  The refreshed Schedule VI shall apply to all companies from 1st April 2011 onwards.
The revised Schedule VI introduces many new concepts and disclosure requirements and does away with several statutory disclosure requirements of the existing Schedule VI. The New Schedule VI is as per the currently in use non-converged accounting standards as under Companies (Accounting Standards) Rules, 2006.
For your ready reference on how to present the P&L and Balance Sheet – refer our Article on Format of Schedule VI
The following article highlights the major changes brought in by the New Schedule VI

Changes in Revised Sch VI

Schedule VI Changes in Schedule VI – Old vs New (Revised)
The changes brought in revised format have been segregated in the following manner: -
  1. Balance Sheet
  2. Profit & Loss A/c

General Changes

1. While both Vertical and horizontal forms of presentation were allowed under old schedule VI, only vertical form is allowed under revised Schedule VI.
2. Once a unit measurement is used, it should be used uniformly in the Financial Statements.

Changes in Balance Sheet


1. Change in nomenclature – “Sources of Funds” has been replaced with “Equity & Liabilities”
2. Share Capital – Company would need to show in sub-head à Shares held more than 5% in company along with number of shares
3. Debit Balance of P&L A/c shall now be shown as negative figure under head Surplus
4. Liabilities will now broadly be classified as
  • Current Liabilities &
  • Non Current Liabilities
5. Deferred payment liabilities and loans & advances from related parties to be shown separately under head “Long term Borrowings”.
6. Provisions to be classified as Short Term Provisions & Long Term Provisions


1. Change in nomenclature – “Application Of Funds” has been replaced with “Assets”
2. Fixed Assets to be further classified as
  • Tangible
  • Non-Tangible
4. Current Assets are to be shown under separate head.
5. “Sundry Debtors” have now been named “Trade Receivables”
6. “Cash and Bank Balances” have now been termed as “Cash and Cash Equivalents”. Classification under this head has been completely revamped.
7. Inventories – Goods in transit shall be disclosed under the relevant sub-head of inventories
8. Misc expenditure (to the extent not written off or adjusted) shall now not be shown separately under head “Other Current Assets”
9. The amount of dividend proposed to be distributed to shareholders (equity and preference) for the period and amount per share to be disclosed separately

Changes in Profit & Loss A/c

1. Under head “Other Income” -  Net gain/loss on foreign currency translation and transaction (other than finance cost) shall be disclosed separately.
2. Employee benefit expense shall disclose additionally expense on account of Employee stock option scheme (ESOP)
3. Following shall now be disclosed separately –
  • Provision for loss of Subsidiary companies
  • Net loss on sale of Investments
  • Details of exceptional and extraordinary items
  • Prior Period items
  • Adjustment to carrying amount of investments
4. A new format has been issued for face reporting of Profit & Loss A/c.

Impact of Revision in Schedule VI

1. The revised schedule VI intends to familiarize companies with Ind-AS/IFRS by using certain concepts such as current/non-current classification.
2. The revised Schedule VI has eliminated the concept of schedules and such information will now be provided in the notes to accounts. This is as done when applying IFRS.
3. From now on, the compliance requirements of Act and/or Accounting standards will prevail over schedule VI.
4. Better presentation, disclosure is intended to facilitate better organised data for users of financial statement.


FAQ :As per the roadmap for convergence given my MCA, Companies whether listed or not and having Net Worth > 1000 Cr were required to convert their opening Balance sheet to comply with the requirements of IFRS. My question is that whether this convergence has actually been applied or is it still in the it still a roadmap only?

This roadmap was issued in 2009-10 but as per the press release issued by MCA in Feb 11, IFRS (in India called IndAS) although IndAS have been issued but implementation have been deferred till further notification. Till date no further notification issued by MCA and the roadmap issued earlier has no relevance now.  In stead, the revised schedule VI is trying to make the indian companies "IFRS Compliant"

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