Schedule III (Division II) Financial Statements under Ind AS: Format, Mandatory Disclosures & Common Errors (FY 2025-26)

Schedule III Division II to the Companies Act, 2013 is the legally prescribed framework for presentation and disclosure for companies preparing financial statements under Ind AS. 

It covers Balance Sheet, Statement of Profit and Loss and notes, including ageing schedules, financial ratios and other mandatory information for FY 2025-26 and beyond.

This Master Brains’ article explains the Schedule III Division II format, applicability, mandatory disclosures, 11 financial ratios, ageing schedules, Division I vs Division II vs Division III and common errors identified during financial statement preparation and audit.

1. What is Schedule III Division II?

Schedule III Division II is the part of Schedule III that applies to companies whose financial statements are prepared in accordance with the Companies (Indian Accounting Standards) Rules, 2015.

Schedule III tells you how the financial statements should be presented and what additional information should be disclosed. Ind AS tells you how the underlying transaction or balance is recognised and measured.

So, following the Schedule III format alone does not make the financial statements fully Ind AS compliant. Both need to be considered together.

2. Schedule III: Division I vs Division II vs Division III Comparison Table

3. Which Companies Prepare Financial Statements Under Division II?

Division II-Schedule III applies to companies which are required to prepare financial statements complied with Ind AS under the Companies (Indian Accounting Standards) Rules, 2015.

Ind AS Applicability Criteria:

1. Listed Entities: All companies whose equity or debt securities are listed or in the process of being listed on any recognized stock exchange in India or outside India.
2. Unlisted Public & Private Companies: Unlisted entities with a net worth of ₹ 250 crore.
3. Group Companies: Holding, subsidiary, joint venture, or associate companies of any entity covered under the above two points.

Exclusions for Division II: NBFCs following Ind AS must use Division III. Banking companies and insurance firms follow their respective accounting framework (Banking Regulation Act, Insurance Act/IRDAI), overriding Schedule III.

Get Ultimate Ind AS Guide.

4. What Financial Statements Does Division II Schedule III Cover?

Division II-Schedule III prescribe the presentation of:

1. Balance Sheet
2. Statement of Profit and Loss
3. Other Comprehensive Income (OCI)
4. Statement of Changes in Equity (SOCE)
5. Cash Flow Statement
6. Notes to the Financial Statements

ICAI’s Division II Guidance Note provides detailed guidance on the Balance Sheet, Statement of Profit and Loss, OCI, Notes and consolidated financial statements.

5. Schedule III Division II Balance Sheet Format

Ind AS Financial Statements Format

Master Brains provides Schedule III Division II Financial Statement Preparation Services and Company Law Services to help businesses get their financial reporting right.

6. Statement of Changes in Equity from Division II-Schedule III

A major attraction when moving from Indian GAAP to Ind AS is the Statement of Changes in Equity (SOCE). It provides a reconciliation of changes in Equity Share Capital and Other Equity, including retained earnings, securities premium, reserves and OCI.

7. Statement of Profit and Loss Under Division II

The Statement of Profit and Loss presents:

1. Revenue from Operations
2. Expenses 
3. Profit Before Tax
4. Tax Expense 
5. Profit/(Loss) from Continuing Operations
6. Profit/(Loss) from Discontinued Operations, where applicable
7. Other Comprehensive Income (OCI)
8. Total Comprehensive Income

8. Mandatory Disclosures Under Division II

A. The 11 Mandatory Analytical Ratios

Companies must disclose the following 11 ratios (numerator and denominator used) for both the current and the preceding financial year. If any ratio fluctuates by more than 25% compared to the preceding year, the company must provide a detailed explanation of the factors.

B. Ageing Schedules for Trade Receivables & Trade Payables

Division II of the Schedule III needs companies to disclose ageing schedules for both Trade Payables and Trade Receivables.

The ageing has to be made with following categories:

1. Undisputed – Considered Good
2. Undisputed – Significant Increase in Credit Risk
3. Undisputed – Credit Impaired
4. Disputed – Considered Good
5. Disputed – Significant Increase in Credit Risk
6. Disputed – Credit Impaired

Unbilled dues and dues with no due date must be disclosed separately. Trade Payables Ageing is disclosed similarly with separate disclosure for MSME dues and other creditors.

The ageing brackets for trade receivable are less than 6 months, 6 months-1 year, 1-2 years, 2-3 years and more than 3 years. However, the ageing brackets for trade payable are less than 1 year, 1-2 years, 2-3 years and more than 3 years.

C. Capital Work-in-Progress (CWIP) & Intangible Assets Under Development

Ageing schedules are mandatory for both CWIP and Intangible Assets Under Development. The Ageing brackets are less than 1 year, 1-2 years, 2-3 years and greater than 3 years.

In case, completion is overdue or costs exceed the original approved plan, a separate project-wise disclosure with expected completion timelines is needed.

D. Additional Important Notes to be disclosed under Division II

1. Promoter Shareholding Details: Tabular disclosure of shares held by promoters at the end of the year alongside the percentage change during the year for each class of shares.
2. Title Deeds of Immovable Property: Disclosure of Property, Plant and Equipment (PPE) or Investment Property, where title deeds are not held in the company’s name, about carrying value, title holder identity, relationship and holding period).
3. Reconciliation of Quarterly Bank Statements: When borrowings are secured against current assets, companies must reconcile quarterly returns submitted to banks against financial ledgers and details of material discrepancies.
4. Corporate Social Responsibility: Disclosure of amount required to be spent, actual spent, shortfall, unspent amounts transferred to separate bank accounts under Section 135(6) and related-party CSR transactions, etc.
5. Crypto/Virtual Digital Assets: Disclose Total profit/loss on crypto transactions, holding balances as at reporting date and advances/deposits.
6. Wilful Defaulter & Struck-off Companies: Disclose if the entity is declared a wilful defaulter by any financial institution and also disclose transaction and balances with companies struck off by MCA under Section 248.
7. Utilisation of Borrowed Funds and Share Premium: Where the company has advanced, loaned or invested funds through an intermediary with an understanding that the intermediary will further lend/invest those funds for identified ultimate beneficiaries, Schedule III requires disclosures about the intermediary, ultimate beneficiary, amounts, date and other details.

9. Mandatory Rounding Off Rules Under Schedule III (Division II)

As per the MCA Schedule III amendments, rounding off figures in financial statements is mandatory.

The threshold for determining the unit of measurement depends on the company’s Total Income (Revenue from Operations + Other Income) for the reporting financial year:

Source: ICAI Guidance Note on Division II 

10. Most Common Schedule III Errors Flagged by Auditors

1. Ageing schedule doesn’t match the ledger

The ageing schedule is prepared separately and erroneously the total doesn’t match with the trade receivables or trade payables balance in the financial statements.

2. Incorrectly calculating the 11 financial ratios

A formula or working from the previous year is reused without checking if the underlying figures and calculation basis have changed.

3. No explanation for change in ratio 

Companies may disclose the ratios but forget to explain a change of more than 25% from the preceding year, as per Schedule III requirement.

4. Missing MSME disclosures

The trade payables disclosure may not properly differentiate amounts due to Micro and Small Enterprises from other creditors. 

5. Note total doesn’t agree with the face of the Balance Sheet 

A Note is updated after the financial statements are finalised, but the corresponding figure on the face of the statement is not updated.

6. Previous year’s comparatives are copied without checking regrouping

Prior-year figures may be carried forward without considering required regrouping or reclassification.

7. Missing tax-assessment disclosures

Undisclosed income admitted during tax assessments may not be appropriately disclosed in financials.

8. Incorrect current/non-current classification 

Borrowings, lease liabilities, provisions and other balances are sometimes classified incorrectly because of confusion in the applicable current/non-current criteria under Ind AS and Schedule III.

Next: 6 Common Ind AS Non-Compliance Mistakes Companies Make (and How to Avoid Them)

11. Division II Schedule III Compliance Checklist for FY 2025-26

Before finalising Ind AS financial statements, finance teams should check:

• Correct Division II Balance Sheet & Statement of Profit and Loss format
• OCI presentation
• Statement of Changes in Equity
• Notes cross-referencing
• Trade receivables & Trade payables ageing 
• MSME information correctly shown
• CWIP ageing & Intangible assets under development ageing
• All 11 financial ratios calculated
• Title-deed disclosures
• Borrowing/default disclosures
• Intermediary & ultimate beneficiary disclosures
• CSR disclosures reconciled
• Undisclosed-income disclosure
• Crypto/virtual currency disclosure 
• Related-party information

Get professional support for preparing Ind AS financial statements under Division II of Schedule III of Companies Act, 2013 with Master Brains’ Financial Statement Preparation services. 

Frequently Asked Questions on Division II-Schedule III of Companies Act

1. What is the difference between Division I, Division II and Division III of Schedule III?

Division I applies to companies following the Indian GAAP (AS), Division II applies to companies following Ind AS and Division III applies to NBFCs following Ind AS. The three Divisions prescribe different presentation and disclosure requirements.

2. Which companies must prepare financial statements under Division II?

Companies (except NBFC) that are required to prepare their financial statements under Ind AS generally follow Division II of Schedule III under Companies Act, 2013. 

3. What are the key mandatory disclosures – ageing schedules, 11 financial ratios, title deeds, CSR, crypto holdings?

The key Schedule III disclosures include trade receivables and trade payables ageing, 11 financial ratios, title-deed details, promoter shareholding, CSR information, crypto or virtual currency disclosures and many others.

4. How is Division II presentation different from the old AS-based Division I format?

Division II follows an Ind AS-based presentation, with differences such as separate presentation of OCI, Statement of Changes in Equity, financial assets and liabilities and lease-related balances. Division I follows the presentation framework compatible with Indian GAAP (AS).

5. What Schedule III errors do auditors most commonly flag?

Common errors flagged by auditors include incorrect ageing schedules, missing MSME or title-deed disclosures, incorrect financial ratios, unexplained ratio movements, incorrect current/non-current classification and differences between the Notes and the financial statements.

6. Can Master Brains prepare or review Schedule III-compliant Ind AS financial statements?

Yes. Master Brains can assist with the preparation and review of Ind AS financial statements, including Schedule III Division II presentation, mandatory disclosures, financial ratios and year-end compliance for Indian GAAP and Ind AS compliant financial statements.

7. What happens if a company does not disclose the 11 financial ratios correctly?

Incorrect or incomplete ratio disclosures can result in non-compliance with Schedule III and may lead to audit observations or qualification, depending on the nature and materiality of the issue. The company should disclose the numerator and denominator used for each ratio and explain changes of more than 25% from the preceding year.

8. Is Schedule III Division II applicable to unlisted private companies? 

Yes, an unlisted private company may fall under Division II if it is required to comply with Ind AS under the Companies (Indian Accounting Standards) Rules, 2015, subject to the Ind AS criteria, exemptions and sector-specific requirements (NBFC/Bank/Insurance Co.).

Need a Second Pair of Eyes for Ind AS & Schedule III Compliance?

Schedule III errors are small, but they can surface at the final stage of reporting. Master Brains can review your Ind AS financial statements and Schedule III disclosures before annual filings.

We help with Schedule III Division II presentation, mandatory Division II disclosure review, finalisation of books of accounts, financial ratio checks, Ind AS compliant financial statement preparation and year-end compliance support.

Have a question on Division II of Schedule III?

Call/WhatsApp: +91-8595867402

Email: masterbrains.office@gmail.com 

Submit a query via our Query form

Sources & References

• Ministry of Corporate Affairs (MCA) – Schedule III to the Companies Act, 2013 and amendments.
• MCA Notification G.S.R. 207(E), dated 24 March 2021 
• ICAI – Guidance Note on Division II – Ind AS Schedule III to the Companies Act, 2013 (Revised January 2022)