Schedule III is the Companies Act's prescribed template for financial statements. Every company required to follow Ind AS (listed companies, companies with net worth ≥ ₹250 crore, subsidiaries/holding/associate of Ind AS companies) must present their Balance Sheet, Statement of Profit and Loss, and Statement of Changes in Equity using the Division II format. The 2021 amendment added sweeping new disclosure requirements that have significantly increased the compliance burden — and become a frequent source of audit observations and ROC queries. This guide covers the complete format, all 2021 amendments, practical notes, and common errors.
Schedule III Division II applies to companies that are required to prepare financial statements in compliance with Ind AS under the Companies (Indian Accounting Standards) Rules, 2015:
| Division | Applies To | Key Difference |
|---|---|---|
| Division I | Companies following Indian GAAP (AS) | Old Schedule VI format; no OCI; no ROU assets; old classification rules |
| Division II | Companies following Ind AS (non-financial) | Ind AS format; OCI section; ROU assets; current/non-current; 2021 amendments |
| Division III | NBFCs following Ind AS | Liquidity-ordered format (no current/non-current); specific NBFC line items (loans, borrowings) |
"Other Equity" in the Division II Balance Sheet contains multiple components that were previously called "Reserves and Surplus" under Indian GAAP. Under Ind AS, this is significantly expanded:
| Component | Contents | Ind AS Reference |
|---|---|---|
| Capital Reserve | Arising from capital profits (amalgamations, forfeiture of shares) | Ind AS 103 |
| Capital Redemption Reserve | Created on buyback/redemption of preference shares | Companies Act s.69 |
| Securities Premium | Premium on issue of shares | Companies Act s.52 |
| Retained Earnings | Accumulated profits not distributed; opening balance adjusted for Ind AS transition | Ind AS 1 |
| General Reserve | Transferred from retained earnings; discretionary | Companies Act |
| Revaluation Reserve (OCI) | Arising from PPE/intangible revaluation — presented within OCI items | Ind AS 16/38 |
| FVTOCI Reserve | Fair value changes on equity instruments designated at FVTOCI | Ind AS 109 |
| Cash Flow Hedge Reserve | Effective portion of cash flow hedge gains/losses | Ind AS 109 |
| Foreign Currency Translation Reserve (FCTR) | Translation differences on foreign operations | Ind AS 21 |
| Remeasurement of DB Plans (OCI) | Actuarial gains/losses on gratuity — stays in OCI permanently | Ind AS 19 |
MCA's March 2021 amendment added significant new disclosure requirements to Schedule III. These apply from FY 2021-22 and have become a major focus of statutory audits:
| New Disclosure | Where Disclosed | Key Details Required |
|---|---|---|
| Ageing of Trade Receivables | Notes on Trade Receivables | Outstanding for: <6 months, 6m-1yr, 1-2yr, 2-3yr, >3yr. Separately: disputed vs undisputed; Good / Doubtful / Bad |
| Ageing of Trade Payables | Notes on Trade Payables | Same ageing buckets. MSME vs Others separately. Highlight if payment to MSME delayed beyond 45 days |
| MSME Details | Separate Note | Amounts due to MSMEs, interest due/paid under MSMED Act, amounts paid beyond 45-day limit |
| Loans to Promoters/Directors/KMPs | Notes on Loans | Amount, purpose, terms; as % of total loans & advances |
| CSR Obligation | Notes on Other Expenses or separate Note | Amount required to spend, amount spent, unspent amount and reason, ongoing projects |
| Utilisation of Borrowed Funds | Notes on Borrowings | Whether borrowed funds used for purposes stated; any diversion to subsidiaries/related parties |
| Undisclosed Income | Notes | Whether any income surrendered/disclosed under Income Tax / Benami Acts during the year |
| Crypto/Virtual Currency | Notes | Profit/loss on transactions; amount of holdings; basis of valuation |
| Struck-Off Companies | Notes | Transactions with companies struck off under Companies Act s.248 — name, nature, amount |
| Charges not Registered with ROC | Notes | Details of charges/hypothecation created during the year but not registered with ROC |
| Wilful Defaulter | Notes | Whether any bank/FI has declared the company a wilful defaulter |
| Category | <6 Months | 6M–1Yr | 1–2 Yrs | 2–3 Yrs | >3 Yrs | Total |
|---|---|---|---|---|---|---|
| Undisputed — Good | XXX | XXX | XXX | XXX | XXX | XXX |
| Undisputed — Doubtful | — | XXX | XXX | XXX | XXX | XXX |
| Disputed — Good | — | XXX | XXX | XXX | XXX | XXX |
| Disputed — Doubtful | — | — | XXX | XXX | XXX | XXX |
| Total | XXX | XXX | XXX | XXX | XXX | XXX |
The ageing is measured from the date the receivable was due (not the invoice date). Management must also disclose the basis for classifying receivables as "doubtful" versus "good" — this ties into the ECL (Expected Credit Loss) model under Ind AS 109.
Companies must disclose the following about dues to Micro and Small Enterprises (MSMEs) under the MSMED Act, 2006:
Scenario: A mid-size auto components manufacturer (₹800 Cr revenue) had trade receivables of ₹120 Cr at year-end. For FY22-23 (first year of new disclosure), the company disclosed ageing only for "undisputed good" receivables, missing the "disputed" and "doubtful" categories. Additionally, they measured ageing from invoice date instead of due date (typically 30-60 days after invoice for auto OEMs).
Audit Observation: The statutory auditor issued an "Emphasis of Matter" noting that: (a) the ageing schedule was not presented in the prescribed Schedule III format; (b) approximately ₹8 Cr of receivables from two OEM customers under commercial dispute were incorrectly classified as "good" rather than "disputed"; (c) provision for doubtful debts appeared understated by approximately ₹3 Cr under Ind AS 109 ECL model.
Corrective Action: Company restated the trade receivable note, segregated disputed balances, and enhanced its ECL provision. The ageing system in the ERP was reconfigured to track ageing from due date rather than invoice date.
Scenario: A listed construction company (₹2,500 Cr revenue) had total trade payables of ₹380 Cr, including payables to subcontractors and material suppliers. In FY21-22, the company classified all trade payables as "Others" without separately identifying MSME creditors. It turned out that 23% of vendors by count (but only 8% by value — ₹30 Cr) were registered MSMEs.
Issues Identified: The company had delayed payments to 18 MSME vendors beyond 45 days (the statutory limit under MSMED Act). Under MSMED Act, interest at 3× RBI base rate applies on delayed MSME payments — creating an unrecognised liability of approximately ₹1.8 Cr in interest. The company had no system to track vendor MSME registration status.
NFRA Guidance: NFRA's 2023 inspection reports found MSME disclosure gaps across multiple listed companies and recommended auditors specifically verify vendor MSME registration certificates and cross-check against payment records for 45-day compliance.
Scenario: A large diversified conglomerate (similar to Tata Sons structure) with domestic and overseas operations, a defined benefit pension scheme, equity investments at FVTOCI, and USD borrowings (hedged via cross-currency swaps as cash flow hedges). The "Other Equity" section of the Balance Sheet contained six OCI components in addition to retained earnings.
OCI Reserve Breakdown in Other Equity (Illustrative FY25):
| OCI Component | Opening | Movement | Closing |
|---|---|---|---|
| FVTOCI Reserve (Equity) | ₹420 Cr | ₹(85) Cr | ₹335 Cr |
| Cash Flow Hedge Reserve | ₹(120) Cr | ₹210 Cr | ₹90 Cr |
| FCTR | ₹680 Cr | ₹(95) Cr | ₹585 Cr |
| Remeasurement — DB Plan | ₹(240) Cr | ₹(35) Cr | ₹(275) Cr |
Key Analyst Insight: Total reported equity was ₹12,400 Cr. But the FCTR of ₹585 Cr will reverse to P&L only on disposal of foreign operations. The DB plan remeasurement of ₹(275) Cr represents an unrecognised economic cost. Analysts must understand which OCI components are "permanent" versus "recycling" to correctly assess sustainable equity value.
Schedule III of the Companies Act, 2013 prescribes the format for financial statements of companies required to comply with Ind AS (Division II of Schedule III). It was significantly revised in March 2021 (effective for FY21-22 onwards) to incorporate new disclosure requirements including: (1) Ageing of trade receivables and payables across five time buckets, distinguishing disputed vs undisputed and good vs doubtful; (2) Disclosure of outstanding dues to MSMEs separately on the face of the balance sheet; (3) Details of loans/advances given to promoters/directors/KMPs and their percentage of total loans; (4) Disclosure of CSR obligations — amount required to spend, spent, and unspent; (5) Utilisation of borrowed funds and share premium; (6) Details of transactions with struck-off companies; (7) Whether company or any group entity has been declared a wilful defaulter; (8) Details of crypto/virtual currency holdings; (9) Disclosure of any undisclosed income surrendered during the year.
The Schedule III (Ind AS) Balance Sheet follows a vertical format. Equity and Liabilities side: Shareholders' Funds (Share Capital + Other Equity including all reserves and OCI components), Non-Current Liabilities (long-term borrowings, lease liabilities, provisions, deferred tax liabilities), and Current Liabilities (short-term borrowings, lease liabilities current portion, trade payables split as MSME/Others on face, other current liabilities, provisions, current tax). Assets side: Non-Current Assets (PPE, Capital WIP, Investment Property, Goodwill, Intangibles, Right-of-Use Assets, Non-current Financial Assets, Deferred Tax Assets, Other Non-current Assets) and Current Assets (Inventories, Current Financial Assets including trade receivables/cash/investments/loans, Current Tax Assets, Other Current Assets, Assets Held for Sale). A key change from Division I: Right-of-Use Assets (Ind AS 116 leases) appear as a separate line item and trade payables show MSME/Others split on the face.
The Ministry of Corporate Affairs (MCA) issued significant amendments to Schedule III on 24 March 2021, effective for financial years beginning on or after 1 April 2021 (i.e., FY21-22 annual reports onwards). Key new disclosures: (1) Ageing schedule of trade receivables in five time buckets from due date, classified as disputed/undisputed and good/doubtful; (2) Ageing of trade payables similarly, with MSME vs Others breakup; (3) Details of amounts due to Micro and Small Enterprises under MSMED Act including interest for delays beyond 45 days; (4) Loans/advances to promoters, directors, KMPs with percentage of total; (5) Undisclosed income surrendered during the year under income tax/benami transactions acts; (6) Details of charges not registered with ROC; (7) Utilisation of borrowed funds — whether used as stated; (8) Crypto/virtual currency holdings and valuation basis; (9) Transactions with struck-off companies under s.248; (10) Whether entity is a wilful defaulter as declared by any bank/FI.