The annual reports season is upon us. This is a very exciting time for anyone who is serious about investing. Annual reports give a lot of information and are extremely useful for analysis.
However, from FY12 onwards, the New Schedule VI has come into effect. The presentation of financial statements (as well as schedules and notes to accounts) is governed by Schedule VI. As a result, the way in which the financial statements are presented this year onwards will be completely different from those of last year. This, of course, completely screws up my excel sheets as I will have to rearrange the numbers to make it comparable to previous years. Very irritating indeed, but totally unavoidable!
Therefore, one should know how the presentation is done now, so that the financial statements can be understood and appreciated better. Specially, on the balance sheet side, the way long term and short term/current liabilities are presented has changed significantly. Many documents are available on the net regarding the new Schedule VI. The Institute of Company Secretaries of India has come up with a well drafted note which explains the entire difference between the old and the new schedule. The note can be accessed here. Please go through the same, it is very important.
A couple of negative points about the new Schedule VI come to mind;
1) It is no longer mandatory to give details of management remuneration in the financial statements. (although computation still has to be done as per the Companies Act). I think this is a big big negative. Unreasonable managerial remuneration is one of the points which tells investors about the quality of management and the disclosures of this should not have been discontinued.
2) A bigger and more worrying point is that now it is no longer mandatory to give Quantitative Details. Earlier, companies had to disclose the details of raw material and sales, product wise, in terms of quantity and rupees. This enabled calculation of per unit cost of raw material and sales. For me, this was something invaluable, which has now been discontinued and is a huge negative as far as my research and analysis goes. Sad, very sad.
Well, no use cribbing. The law is the law and it is us investors who will have to adjust our analysis accordingly. Knowing about these things is therefore very important so that decision-making can be done properly..
Cheers and happy investing..
