Background:
ICAI has noted in numerous instances that financial reporting disclosures does not align with statutory requirements or fails to provide stakeholders with a clear depiction. Below are some identified shortcomings in reporting practices with respect to Trade Payable and Trade Receivables Ageing Schedule, with the intention of aiding preparers and presenters in recognizing and enhancing commonly observed pitfalls:
Shortcomings: “Trade Payable And Trade Receivable Ageing Schedule”
| S.No | Observation(s) | Remarks | |
| 1 | It was noticed that some companies failed to give trade payables ageing schedule which is required as per Schedule III of the Companies act, 2013 The Classification generally presented by the company. Refer Table Below Particular Outstanding Period Total < 1 year 1-2 Year 2-3 Year >3 year MSME Other AcceptanceOther than acceptance Disputed – Other Accrued Expense | As per schedule III of the Companies Act, 2013 requires the company to provide ageing of trade payables due for payment as on the balance sheet date. Refer Schedule below– Particular Outstanding Period Total < 1 Year 1-2 Year 2-3 Year >3 year MSME Other Disputed- MSME Disputed-others | |
| 2 | It was noticed that some companies failed to give trade receivables ageing schedule which is required as per Schedule III of the Companies act, 2013 | As per schedule III of the Companies Act, 2013 requires the company to provide ageing of trade receivables outstanding as on balance sheet date. Similar information shall be given where no due date of payment is specified in that case disclosure shall be from the date of the transaction and Unbilled dues shall be disclosed separately. | |
| 3 | It was noted in another case, that the company has presented the trade receivables ageing schedule, but it is not mentioned whether it has been prepared on the basis of due date of payment or date of transaction | As per Division II of Schedule III of Companies Act, 2013, trade receivables ageing schedule is to be presented on the basis of due date of payment. In case, where due date of payment is not specified, separate ageing schedule to be presented on the basis of date of the transaction | |
| SW Remarks: Companies must adhere to the statutory requirements mentioned above and use the correct terminologies and disclosure requirements. |
Umang Mittal, Audit Associate, SW
