05B.Revision of the Fifth Schedule to the Companies Ordinance_ 1984

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05B.Revision of the Fifth Schedule to the Companies Ordinance_ 1984 Powered By Docstoc
					                                        PART II

                             Statutory Notifications (S.R.O)

             SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

                                    NOTIFICATION

                             Islamabad, the August 21, 2007

       S. R. O. 859(I)/2007 – In exercise of the powers conferred by section 505 of the
Companies Ordinance, 1984 (XLVII of 1984), read with clause (c) of section 43 of the
Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997), and SRO No.
698(I)/86 dated 2nd July, 1986, the Securities and Exchange Commission of Pakistan is
pleased to direct that for the Fifth Schedule to the said Ordinance the following shall be
substituted, namely: -


                                  “FIFTH SCHEDULE

                                     (See section 234)

       REQUIREMENT AS TO BALANCE SHEET AND PROFIT AND LOSS
               ACCOUNT OF NON-LISTED COMPANIES

PART I - GENERAL

1A. All Medium-Sized and Small-Sized companies as defined in this Schedule shall
follow the Accounting and Financial Reporting Standards for Medium-Sized
Companies and Small-Sized Companies, whichever is applicable, in regard to accounts
and preparation of balance sheet and profit and loss account as are specified for the
purpose by the Commission under sub-section (3)of section 234 of the Companies
Ordinance, 1984 (XLVII of 1984).

1B.  The requirements contained in this Schedule shall apply to all un-listed
companies unless otherwise specified.

2.    In this Schedule, unless there is anything repugnant in the subject or context, -

      (i)      "capital reserve" includes capital redemption reserve, capital repurchase
               reserve account, share premium account, profit prior to incorporation or
               any reserve not regarded free for distribution by way of dividend;

      (ii)     "debts" includes loans and advances and other receivables where it relates
               to amounts written off and provisions for doubtful and bad debts;
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(iii)   “economically significant company” means a company which has:

        (a)   turnover in excess of Rs. 1 billion, excluding other income;

        (b)   number of employees in excess of 750;

        (c)   total borrowings (excluding trade creditors and accrued liabilities)
              in excess of Rs. 500 million:

Provided that in order to be treated as economically significant any two of the
criterion mentioned in (a), (b) and (c) above have to be met. The criteria followed
will be based on the previous year’s audited financial statements. Companies can
be excluded from this category where they do not fall under the aforementioned
criteria for two consecutive years;

(iv)    “Medium-Sized Company” means a company that:

        (a)   is not a listed company or a subsidiary of a listed company;

        (b)   has not filed, or is not in the process of filing, its financial
              statements with the Securities and Exchange Commission of
              Pakistan (SECP) or other regulatory organization for the purpose of
              issuing any class of instruments in a public market;

        (c)   does not hold assets in a fiduciary capacity for a broad group of
              outsiders, such as a bank, insurance company, securities
              broker/dealer, pension fund, mutual fund or investment banking
              entity;

        (d)   is not a public utility or similar company that provides an essential
              public service;

        (e)   is not economically significant on the basis of criteria defined in
              clause (iii); and

        (f)   is not a Small-Sized Company on the basis of criteria defined in
              clause (vii);

(v)     “related party” shall mean an entity that :-
        (a)    directly or indirectly through one or more intermediaries:
               (i)    controls, is controlled by, or is under common control with,
                      the entity (this includes parents, subsidiaries and fellow
                      subsidiaries);

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              (ii)    has an interest in the entity that gives it significant influence
                      over the entity; or
              (iii) has joint control over the entity;
        (b)   the party is an associate of the entity;
        (c)   the party is a joint venture in which the entity is a venturer;
        (d)   the party is a member of the key management personnel of the
              entity or its parent;
        (e)   the party is a close member of the family of any individual referred
              to in (a) or (d);

        (f)   the party is an entity that is controlled, jointly controlled or
              significantly influenced by, or for which significant voting power in
              such entity resides with, directly or indirectly, any individual
              referred to in (d) or (e); or
        (g)   the party is a post-employment benefit plan for the benefit of
              employees of the entity, or of any entity that is a related party of
              the entity;

(vi)    "revenue reserve" means reserve that is normally regarded as available for
        distribution through the profit and loss account, including general
        reserves and other specific reserves created out of profit and un-
        appropriated profit i.e. credit balance of profit and loss account after
        appropriations for the period to the date of balance sheet;

(vii)   “Small-Sized Company” means a company that:

        (a)   has a paid up capital plus undistributed reserves (total equity after
              taking into account any dividend proposed for the year) not
              exceeding Rs. 25 million;

        (b)   has employees not exceeding two hundred and fifty at any time
              during the year; and

        (c)   has annual turnover not exceeding Rs. 250 million, excluding other
              income:

        Provided that in order to qualify as a Small-Sized Company, all of the
        above-mentioned conditions must be satisfied;

(viii) "turnover" means the gross income exclusive of trade discount shown on
       invoice of bills, derived from sale of goods or from rendering, giving or
       supplying services or benefits or from execution of contracts;



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     (ix)   any word or expression used herein but not defined in the Ordinance or
            this Schedule or Accounting and Financial Reporting Standards for
            Medium-Sized Companies and Small-Sized Companies issued by the
            Institute of Chartered Accountants of Pakistan or International Financial
            Reporting Standards issued by International Accounting Standards Board
            shall be assigned the meaning as under the generally accepted accounting
            principles.

3.   The following shall be disclosed in the financial statements, namely: -

     (i)    All material information necessary to make the financial statements clear
            and understandable;

     (ii)   change in an accounting policy that has material effect in the current year
            or may have a material effect in the subsequent year together with reasons
            for the change and the financial effect of the change, if material;

4.   The general nature of any credit facilities available to the company under any
     contract, other than trade credit available in the ordinary course of business, and
     not availed of at the date of the balance sheet shall be disclosed in financial
     statements.

5.   Any penalty in terms of money or otherwise imposed under any law by any
     authority shall be disclosed in the first annual report furnished after the
     imposition of the penalty. If, as a result of any appeal, revision, petition, or
     review application, such penalty is reduced, enhanced or waived, the original
     penalty imposed shall nevertheless be disclosed, and the fact of any reduction,
     enhancement or waiver shall be disclosed, in the first financial statements
     furnished after such reduction, enhancement or waiver.

6.   Where any property or asset, acquired with the funds of the company, is not held
     in the name of the company, or is not in the possession and control of the
     company, this fact shall be stated; and the description and value of the property
     or asset, the person in whose name and possession or control it is held shall be
     disclosed.

7.   If any loan or advance has been granted or debt allowed on terms softer than
     those generally prevalent in trade or any relief or concession allowed in matters
     of interest, repayment, security or documentation, details with reasons thereof
     shall be stated along with the nature of interest of the company or its directors or
     other officers.

8.   The figures in the financial statements may be rounded off to the nearest
     thousand of rupees.

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PART II - REQUIREMENTS AS TO BALANCE SHEET

NON-CURRENT ASSETS

1.     Non-current assets, other than investments, shall be classified under appropriate
       sub- heads, duly itemized such as:

(i) Property, plant and equipment:

       (a)    land (distinguishing between free-hold and leasehold);
       (b)    buildings (distinguishing between buildings on free- hold land and those
              on leasehold land);
       (c)    plant and machinery;
       (d)    furniture and fittings;
       (e)    vehicles;
       (f)    office equipment;
       (g)    capital work in progress indicating significant item wise details;
       (h)    development of property; and
       (i)    others (to be specified).

(ii) Intangible:

       (a)    goodwill;
       (b)    brands names;
       (c)    computer software;
       (d)    licenses and franchises;
       (e)    patents, copyright, trade marks and designs; and
       (f)    others (to be specified).

LONG-TERM INVESTMENTS

2(A). There shall be shown under separate sub-heads the aggregate amount in respect
      of the following, namely: -

       (i)    investments in related parties; and
       (ii)   other investments.

(B)    A company which is not a Small-Sized Company shall, for the purposes of
       clauses (i) and (ii) of sub-head 2(A) above, also disclose investments under the
       head long term investments, indicating separately,

       (a)    held to maturity investments, which are not due to mature within next
              twelve months; and



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      (b)    available for sale investments, which are not intended to be sold within
             next twelve months, and
      (c)    market value of listed securities and book value of unlisted securities as
             per their latest available financial statements.

LONG-TERM LOANS AND ADVANCES

3(A). There shall be shown under separate sub-heads, distinguishing between
      considered good and considered bad or doubtful, aggregate amounts
      respectively of the company’s, -

      (i)    loans and advances to related parties; and
      (ii)   other loans and advances.

(B)   Information on terms and conditions, securities obtained and any other material
      information shall be disclosed.

(C)   Provision, if any, made for bad or doubtful loans and advances shall be shown as
      a deduction under each sub-head of paragraph 3(A).

LONG-TERM DEPOSITS AND PREPAYMENTS

4.    There shall be stated separately long-term deposits and long-term prepayments.

CURRENT ASSETS

5(A). Current assets shall be classified under sub-heads appropriate to the company’s
      affairs including, where applicable, the following, namely: -

      (i)     stores, spare parts and loose tools distinguishing, where practicable, each
              from the other;
      (ii)     stock- in-trade distinguishing between appropriate classifications;
      (iii) trade debts other than loans or advances, showing separately debts
              considered good and debts considered doubtful or bad;
      (iv) loans and advances, showing separately those considered good and those
              considered doubtful or bad;
       (v)    trade deposits and short term prepayments and current account balances
              with statutory authorities.
       (vi) interest accrued;
       (vii) other receivables
       (viii) financial assets, other than as mentioned in clauses (iii) to (vii) above, and
               cash and bank balances;
       (ix)    tax refunds due from the Government; and
       (x)     cash and bank balances, distinguishing between current and deposit
               accounts, where applicable.

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5(B). A company which is not a Small -Sized Company shall, in the case of clauses (iii),
      (iv) and (viii) of sub-head 5 (A) above, also state the following particulars,
      namely: -

      (i)     the aggregate amount due by directors and chief executive and executives
              of the company and any of them severally or jointly with any other
              person; and
      (ii)    aggregate amount due by related parties, other than in clause (i) of sub-
              head 5(B) above; names to be specified in each case.

5(C). A company which is not a Small-Sized Company shall, in case of clause (iv) of
      sub-head (5)(A) above, also disclose under separate sub- heads the aggregate
      amount in respect of the following, namely: -

      (i)     investments in related parties; and
      (ii)    other investments.

5(D). A company which is not a Small-Sized Company, for the purposes of clause (i)
      and (ii) of sub-head 5(C) above, shall also disclose investments under the head
      current assets, wherever applicable, indicating separately: -

      (i)     held to maturity investments;
      (ii)    available for sale investments; and
      (iii)   held for trading.

5(E). Provision, if any, made for diminution in the value of or loss in respect of any
      current asset shall be shown as a deduction from the gross amount of the
      respective asset.

SHARE CAPITAL AND RESERVES

6.    Share capital and reserves shall be classified under the following subheads,
      namely: -

      (i)     Issued, subscribed and paid up capital, distinguishing in respect of each
              class between: -

              (a)   shares allotted for consideration paid in cash;
              (b)   shares allotted for consideration other than cash, showing
                    separately shares issued against property and others (to be
                    specified); and
              (c)   shares allotted as bonus shares.

      (ii)    Reserves, distinguishing between capital reserves and revenue reserves.


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SURPLUS ON REVALUATION OF FIXED ASSETS


7.      The surplus on revaluation of fixed assets shall be treated and shown as specified
        in section 235 of the Companies Ordinance, 1984 (XLVII of 1984).

NON CURRENT LIABILITIES

8(A). In the case of a company which is not a Small-sized company non-current
      liabilities shall be classified under appropriate sub- heads, duly itemized such as:

        (i)     long term financing;
        (ii)    debentures;
        (iii)   liabilities against assets subject to finance lease;
        (iv)    long term murabaha;
        (v)     long term deposits; and
        (vi)    deferred liabilities.

8(B).     Long term loans shall be classified as secured and unsecured. In the case of a
          company which is not a Small-sized company, under each class, it shall also
          disclose separately:

        (i)     loans from banking companies and other financial institutions, other than
                those as specified in clause (ii) below;
        (ii)    loans from related parties; and
        (iii)   other loans.

8(C).   Long-term deposits shall be classified according to their nature.



CURRENT LIABILITIES

9.      Current liabilities and provisions shall, so far as they are appropriate to the
        company's business, be classified under the following sub- heads, namely:__

        (i)     Trade and other payables, which shall be classified as:

                (a)    creditors;
                (b)    murabaha;
                (c)    accrued liabilities;
                (d)    advance payments;
                (e)    payable to employee retirement benefit funds;
                (f)    unpaid and unclaimed dividend; and
                (g)    others (to be specified, if material);

        (ii)    interest, profit, return or mark-up accrued on loans and other payables;
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      (iii)   short term borrowings which shall be classified as:

              (a)   short-term borrowings, distinguishing   between secured and
                    unsecured. A company which is not a Small-sized Company shall
                    also classify between loans taken from:

                     i.     banking companies and other financial       institutions other
                            than related parties;
                     ii.    related parties; and
                     iii.   others;

              (b)    short-term running finance, distinguishing between secured and
                     unsecured;

      (iv)    current portion of long term borrowings;
      (v)     current portion of long term Murabaha; and
      (vi)    provision for taxation, showing separately income tax and other taxes.

CONTINGENCIES AND COMMITMENTS

10.   In case of a company which is not a Small-sized company there shall be added a
footnote to the balance-sheet, showing: -

      (i)     aggregate amount of any guarantees given by the company on behalf of
              any related party and where practicable, the general nature of the
              guarantee;
      (ii)    where practicable the aggregate amount or estimated amount, if it is
              material, of contracts for capital expenditure, so far as not provided for or
              a statement that such an estimate can not be made;
      (iii)   any other commitment, if the amount is material, indicating the general
              nature of commitment.

PART III – REQUIREMENTS AS TO PROFIT AND LOSS ACCOUNT

1.      The profit and loss account shall be so drawn up as to disclose separately the
manufacturing, trading and operating results. In the case of manufacturing concern, the
cost of goods manufactured shall also be shown.

2(A). The profit and loss account shall disclose all material items of income and
expenses including the following, namely: -

      (i)     The turnover and showing as deduction therefrom trade discount and
              sales tax.
      (ii)    Expenses, classified according to their function under the following sub-
              heads, along with additional information on their nature, namely: -
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                (a)   cost of sales;
                (b)   distribution cost;
                (c)   administrative expenses;
                (d)   other operating expenses; and
                (e)   finance cost.

        (iii)   Other operating income, which shall include items such as:-
                (a)   Income from financial assets;
                (b)   income from investments in debts, loans, advances and receivables
                      from each related party; and
                (c)   income from assets other than financial assets.

          The above items shall be sub-classified appropriately if amount is material.
2(B).     In the case of a company which is not a Small-sized company, it shall also
          disclose separately the amount of interest on borrowings from related parties, if
          any.

2(C).   Other information relating to the following, namely:-

        (i)     Debts written off as irrecoverable distinguishing between trade debts,
                loans, advances and other receivables; and
        (ii)    provisions for doubtful or bad debts distinguishing between trade debts,
                loans, advances and other receivables.

3.     A company which is not a Small-sized company shall state the following by way
of a note, namely:-

        (i)     The aggregate amount charged in the financial statements in respect of the
                directors and chief executive by the company as fees, remuneration,
                allowances, commission, perquisites or benefits or in any other form or
                manner and for any services rendered, and shall give full particulars of
                such aggregate amounts separately for the directors and chief executive
                together with the number of such directors, under appropriate heads,
                such as, -

                (a)   fees;
                (b)   managerial remuneration;
                (c)   commission or bonus, indicating the nature thereof;
                (d)   reimbursable expenses which are in the nature of a perquisite or
                      benefit;
                (e)   pension, gratuities, company’s contribution to provident,
                      superannuation and other staff funds, compensation for loss of
                      office and in connection with retirement from office;


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(f) other perquisites and benefits in cash or in kind stating their nature
    and, where practicable, their approximate monetary values; and
(g) the amounts, if material, by which any items shown above are affected
    by any change in an accounting policy.”




                                        (Abdul Rehman Qureshi)
                                            Advisor/Secretary




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