Schedule III Additional Regulatory Information: The Formats, Division I and Division II

The 2021 amendments to Schedule III added a block of disclosures that the notification groups under additional regulatory information. Three years on, the items that still cost time in a file review are the ones where the format is prescribed and the working paper was built to a different shape.

The ageing schedules, and the column that makes them tie

Four ageing schedules were added. Their buckets are not the same as each other.

Trade receivables run in five buckets: less than 6 months, 6 months to 1 year, 1-2 years, 2-3 years, and more than 3 years, measured from the due date of payment.

Trade payables run in four: less than 1 year, 1-2 years, 2-3 years, more than 3 years, also from the due date.

Both carry the same footnote: where no due date of payment is specified, the disclosure is made from the date of the transaction. And in both, unbilled dues are disclosed separately.

The row categories differ by Division, and this is the single most common mismatch in a first-year file:

• Division I receivables: undisputed considered good, undisputed considered doubtful, disputed considered good, disputed considered doubtful — four rows.
• Division II receivables: undisputed considered good, undisputed which have significant increase in credit risk, undisputed credit impaired, and the same three for disputed — six rows, because Ind AS 109 measures expected credit losses rather than a doubtful provision.
• Trade payables, both Divisions: MSME, Others, Disputed dues – MSME, Disputed dues – Others.

Then the part that makes the schedule agree with the balance sheet. The Guidance Note says that to tie the total column to the amounts presented in the financial statements, two additional columns headed "Unbilled" and "Not due" shall be added before the ageing columns. A schedule built with only the prescribed ageing columns will not foot to the face of the balance sheet whenever anything is within its credit period — which is to say, always.

Capital work-in-progress: two tables, not one

CWIP needs an ageing schedule split between projects in progress and projects temporarily suspended, in the same four buckets as payables, with the total tallying to CWIP in the balance sheet.

It also needs a second, different table: for projects whose completion is overdue or which have exceeded their cost compared to the original plan, a completion schedule, project by project, showing when each is to be completed in — less than 1 year, 1-2, 2-3, more than 3 years. Projects where activity has been suspended are given separately.

Two points from the Guidance Note that decide the numbers:

• Ageing runs from the date of initial recognition of each item to the balance sheet date, so one project usually spreads across several buckets rather than sitting in one.
• "Original plan" means the plan approved by the relevant approving authority — not the latest revised estimate. A project re-baselined twice is still measured against the first approval.

The same requirements apply to intangible assets under development, and the CWIP requirements apply to investment property under development.

The eleven ratios are the same in both Divisions

Division I paragraph 8.9.12 and Division II paragraph 8.5.14 list them identically, in this order: Current Ratio, Debt-Equity Ratio, Debt Service Coverage Ratio, Return on Equity Ratio, Inventory turnover ratio, Trade Receivables turnover ratio, Trade payables turnover ratio, Net capital turnover ratio, Net profit ratio, Return on Capital employed, Return on investment.

Two obligations travel with them, and both are routinely half-done:

• The company shall explain the items included in the numerator and denominator for each ratio. Schedule III prescribes the names, not the formulas, so the composition has to be stated — and stated consistently between the two years shown.
• An explanation is required for any change in a ratio by more than 25% compared with the preceding year. The Guidance Note asks for a commentary on the change whether it is positive or negative. A ratio that doubled because the denominator collapsed still needs its sentence.

The rest of the additional regulatory information

In the Guidance Note's order, with the trigger for each:

• Title deeds of immovable property not held in the name of the company — a prescribed table: line item in the balance sheet, description, gross carrying value, in whose name the deed is held, whether that person is a promoter, director or their relative or employee, the period held, and the reason for not being held in the company's name. Properties where the company is the lessee under a duly executed lease are outside it. Jointly held property is disclosed to the extent of the company's share.
• Revaluation of property, plant and equipment — whether the valuation was by a registered valuer.
• Loans or advances to specified persons — additional disclosures for loans to promoters, directors, KMPs and related parties that are repayable on demand or without specifying terms.
• CWIP and intangible assets under development ageing and completion schedules.
• Benami property held — where proceedings have been initiated or are pending under the Benami Transactions (Prohibition) Act, 1988: details of the property including year of acquisition, amount, beneficiaries, and whether it is in the books or not, with reasons.
• Security of current assets against borrowings — whether the quarterly returns filed with banks or financial institutions agree with the books, and if not, a summary of the reconciliation and the reasons for material discrepancies.
• Wilful defaulter — the date of declaration and the details of the defaults.
• Relationship with struck off companies — name, nature of transactions, balance outstanding and the relationship, across investments, receivables, payables, shares held by the struck off company, and other balances.
• Registration of charges or satisfaction with the Registrar — where any are yet to be registered beyond the statutory period, the details and reasons.
• Compliance with the number of layers of companies.
• The eleven ratios.
• Compliance with approved schemes of arrangement — that the effect has been accounted for in accordance with the scheme and with the accounting standards, and any deviation explained.
• Utilisation of borrowed funds and share premium — for funds advanced to intermediaries with an understanding that they will lend or invest in ultimate beneficiaries, and for funds received with a like understanding: dates, amounts, complete details of each intermediary and ultimate beneficiary, guarantees provided, and a declaration that FEMA and the Companies Act have been complied with and the transactions do not violate the Prevention of Money-Laundering Act, 2002.
• Undisclosed income — transactions not recorded in the books that were surrendered or disclosed as income in tax assessments, unless there is immunity under a scheme, and whether the previously unrecorded income and related assets have now been properly recorded.
• Corporate social responsibility — amount required to be spent, spent, shortfall, previous years' shortfall, reason, nature of activities, related party transactions in relation to CSR, and provisions made.
• Crypto currency or virtual currency — where traded or invested in during the year: profit or loss on such transactions, amount held at the reporting date, and deposits or advances from any person for the purpose of trading or investing in them.

The checklist

A two-sheet checklist: every additional regulatory information head with its trigger, the prescribed format and a column for where the working paper sits; and the ageing and ratio formats with their buckets and categories for both Divisions.

Download the Schedule III disclosure checklist (.xlsx) — free, no sign-up.

Where this meets the audit file

Two of these disclosures are the same fact the auditor reports on in CARO: the quarterly returns filed with lenders appear in Schedule III as security of current assets against borrowings and in CARO clause (ii)(b); benami proceedings appear here and in clause (i)(e); and the wilful defaulter position appears here and in clause (ix)(b). Answering one and not the other is how a file ends up internally inconsistent. The clause-by-clause detail is in CARO 2020, clause by clause.

Audcrix builds the ratio table with a numerator ÷ denominator column on every row and flags a movement over 25% for an explanation, and builds the receivables and payables ageing from bill-wise data in the Schedule III buckets, with the MSME, Others and Disputed split. What it does not do is decide whether a receivable is disputed. That is a fact about the file, and it comes from the engagement.