Financial Accounting and Reporting Ii: Examinable Supplement

2020
FINANCIAL ACCOUNTING
AND REPORTING II
Examinable Supplement
Certificate in Accounting and Finance
1
Financial accounting and reporting II
CHAPTER
Legal Background to the Preparation of
Financial Statements
Contents
1 Key Definitions
2 Regulatory framework for accounting in Pakistan
3 Companies Act, 2017: Fourth Schedule
4 Companies Act, 2017: Fifth Schedule
5 Objective based questions and answers
* The student must refer original handbook of IFRS.

1 KEY DEFINITIONS
Section overview
 Key definitions
Executive: An employee, other than the chief executive and directors, whose basic salary exceeds
twelve hundred thousand rupees in a financial year.
Capital reserve includes:
(i) share premium account;
(ii) reserve created under any other law for the time being in force;
(iii) reserve arising as a consequences of scheme of arrangement;
(iv) profit prior to incorporation; and
(v) any other reserve not regarded free for distribution by way of dividend
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 or accumulated profits of previous years.
© Emile Woolf International 2 The Institute of Chartered Accountants of Pakistan

2 REGULATORY FRAMEWORK FOR ACCOUNTING IN PAKISTAN
Section overview
 Accounting regulation in Pakistan

 Companies Act, 2017: Introduction to the third, fourth and fifth schedules
 International Financial Reporting Standards
 Classification of Companies
2.1 Accounting regulation in Pakistan

The objective of financial statements is to provide information about the financial position (balance
sheet), financial performance (profit and loss) and cash flows of an entity that is useful to a wide
range of users in making economic decisions.
The Securities and Exchange Commission of Pakistan
The Securities and Exchange Commission of Pakistan (SECP) was established under the
Securities and Exchange Commission of Pakistan Act, 1997 and became operational in 1999.
It is the corporate and capital market regulatory authority in Pakistan. Its stated mission is “To
develop a fair, efficient and transparent regulatory framework, based on international legal
standards and best practices, for the protection of investors and mitigation of systemic risk aimed
at fostering growth of a robust corporate sector and broad based capital market in Pakistan” (SECP
website).
One of the roles of the SECP is to decide on accounting rules that must be applied by companies
in Pakistan.
Companies must prepare financial statements in accordance with accounting standards approved
as applicable and notified in the official gazette by the Securities and Exchange Commission of
Pakistan (SECP) and in accordance with rules in the Companies Act, 2017.
The Institute of Chartered Accountants in Pakistan (ICAP)
ICAP regulates the Chartered Accountancy profession. It is the body responsible for
recommending accounting standards for notification by the Securities and Exchange Commission
of Pakistan.
2.2 Companies Act, 2017: Introduction to the third, fourth and fifth schedules
The Companies Act, 2017 contains a series of appendices called schedules which set out detailed
requirements in certain areas.
The third schedule
This schedule lists the classification criteria of the companies on the basis of company size and
whether it is commercial or non-profit. It also specifies which companies are required to follow
requirements of fourth and fifth schedule of the Act.
The fourth schedule
This schedule sets out the disclosure requirements that must be complied with in respect of the
financial statements of a listed company.
The schedule specifies that listed companies and their subsidiaries must follow International
Financial Reporting Standards as notified for this purpose in the Official gazette.
The fifth schedule
This schedule applies to the balance sheets and profit and loss accounts of non-listed companies
(including large, medium and small sized entities) and their subsidiaries.

2.3 International Financial Reporting Standards
The International Accounting and Financial Reporting Standards are developed with the aim of
harmonising accounting procedures throughout the world.
The first International Accounting Standards (IASs) were issued in 1975 by International
Accounting Standards Committee (IASC). The IASs were supported with interpretations for
matters where there was a divergence in practice. These interpretations were issued by another
body called the Standing Interpretation Committee and were referred to as Standing
Interpretation Committee Pronouncements or SICs.
In 2001 the constitution of the IASC was changed leading to the replacement of the IASC and the
SIC by new bodies called the International Accounting Standards Board (IASB) and the
International Financial Reporting Interpretations Committee (IFRIC).
The IASB adopted all IASs and SICs that were extant at the time but said that standards written
from that time were to be called International Financial Reporting Standards (IFRS).
Interpretations are known as IFRICs.
Thus IFRS is made up as follows:
Published by the IASC (up Published by the IASB

to 2001) (from 2001)
Accounting standards IASs IFRSs
Interpretations SICs IFRICs
International accounting standards cannot be applied in any country without the approval of the
national regulators in that country. All jurisdictions have some kind of formal approval process
which is followed before IFRS can be applied in that jurisdiction.
Adoption process for IFRS in Pakistan
The adoption of an IFRS involves the following steps:
 As a first step the IFRS is considered by ICAP’s Accounting Standards Board, which
identifies any issues that may arise on adoption.
 The Board also determines how the adoption and implementation of the standard can be
facilitated. It considers issues like how long any transition period should be and whether
adoption of the standard would require changes in regulations.
 The Board also identifies the need for changes to regulations it refers the matter to the
Securities and Exchange Commission of Pakistan (SECP) (and/or the State Bank of
Pakistan (SBP) for matters affecting banks and other financial institutions). This process is
managed by the Coordination Committees of ICAP, SECP and SBP.
 After the satisfactory resolution of issues, the Board and the Council of ICAP reconsider
the matter of adoption.
 ICAP recommends the adoption to the SECP by decision of the Council. The decision to
adopt the standard rests with the SECP.
 IFRSs are adopted by the SECP by notification in the Official Gazette. When notified, the
standards have the authority of the law.

2.4 Classification of Companies
Applicable Schedule of
S. No. Classification criteria accounting Companies
framework Act, 2017
1. Public Interest Company (PIC)
Sub-categories of PIC:
a) Listed Company International Fourth

Financial Schedule
Reporting
Standards
b) Non-listed Company which is: International Fifth

(i) a public sector company as defined in the Financial Schedule
Act; or Reporting
Standards
(ii) a public utility or similar company carrying on
the business of essential public service; or
(iii) holding 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.
(iv) having such number of members holding
ordinary shares as may be notified; or
(v) holding assets exceeding such value as may
be notified.
2. Large Sized Company LSC
Sub-categories of LSC
a) Non-listed Company with: International Fifth

(i) paid-up capital of Rs. 200 million or more; or Financial Schedule
Reporting
(ii) turnover of Rs. 1 billion or more; or Standards
(iii) employees more than 750.
b) Foreign Company with turnover of Rs. 1 billion or
more.
c) Non-listed Company licensed / formed under International
Section 42 / Section 45 of the Act having annual Financial
gross Reporting
revenue(grants/income/subsidies/donations) Standards and
including other income/revenue of Rs. 200 million Accounting
and above. Standards for
NPOs
3. Medium Sized Company (MSC)

Sub-categories of MSC:
a) Non-listed Public Company with: Revised AFRS Fifth

(i) paid-up capital less than Rs.200 million; for SSEs Schedule
(ii) turnover less than Rs1 billion;
(iii) Employees more than 250 but less than 750.

Applicable Schedule of
S. No. Classification criteria accounting Companies
framework Act, 2017
b) Private Company with:

(i) paid-up capital of greater than Rs. 10 million
but not exceeding Rs. 200 million;
(ii) turnover greater than Rs. 100 million but not
exceeding Rs. 1 billion;
(iii) Employees more than 250 but less than 750.
c) A Foreign Company which has turnover less than
Rs. 1 billion.
d) Non-listed Company licensed / formed under Accounting

Section 42 or 45 of the Act which has annual Standards for
gross revenue NPOs
(grants/income/subsidies/donations) including
other income or revenue less than Rs.200 million.
4. Small Sized Company (SSC)
A private company having: Revised AFRS Fifth

(i) paid-up capital up to Rs. 10 million; for SSEs Schedule
(ii) turnover not exceeding Rs.100 million;
(iii) Employees not more than 250.
NOTE:
1. The classification of a company shall be based on the previous year‘s audited financial
statements.
2. The classification of a company can be changed where it does not fall under the previous
criteria for two consecutive years.
3. The number of employees means the average number of persons employed by a company in
that financial year calculated on monthly basis.

3 COMPANIES ACT, 2017: FOURTH SCHEDULE
Section overview
 General Requirements
 Requirements as to Statement of Financial Position
 Requirements as to Profit and Loss Account
3.1 General Requirements

a) All listed companies and their subsidiaries shall follow the International Financial Reporting
Standards in regard to financial statements as notified by the Commission, under Section 225
of the Companies Act, 2017 (Act);
b) The disclosure requirements, as provided in this schedule, are in addition to the disclosure
requirements prescribed in International Financial Reporting Standards notified by the
Commission unless specifically required otherwise;
c) In addition to the information expressly required to be disclosed under the Act and this
schedule, there shall be added such other information as may be considered necessary to
ensure that required disclosure is not misleading.
Example 1: Statement of Compliance

These financial statements have been prepared in accordance with the accounting and reporting
standards as applicable in Pakistan. The accounting and reporting standards as applicable in
Pakistan comprise of:
– International Financial Reporting Standards (IFRS Standards), issued by the International
Accounting Standards Board (IASB) as notified under the Companies Act, 2017; and
– Provisions of and directives issued under the Companies Act, 2017.
Where the provisions of and directives issued under the Companies Act, 2017 differ from IFRS
Standards, the provisions of and directives issued under the Companies Act, 2017 have been
followed.
d) The following shall be disclosed in the financial statements, namely:

i. General information about the company comprising the following:
 Geographical location and address of all business units including mills/plant;
 Particulars of company’s immovable fixed assets, including location and area of land;
 The capacity of an industrial unit, actual production and the reasons for shortfall;
 Number of persons employed as on the date of financial statements and average
number of employees during the year;
 Name of associated companies or related parties or undertakings along with the basis
of relationship describing common directorship and percentage of shareholding.
Example 2: Legal Status and nature of business

MT Limited (the Company) is a public limited company and was incorporated in Pakistan in 1995
under the Companies Ordinance, 1984 (now the Companies Act, 2017), and is listed on the
Pakistan Stock Exchange Limited. The registered office and factory of the Company is situated at
Multan Road, Lahore. The Company also has regional offices located in Karachi, Multan, Sukkur
and Islamabad.
The Company is principally engaged in assembling and manufacturing of agricultural machinery
and applications.

Example 3: Property, plant and equipment (Disclosed in sub-note)

The freehold land and building on owned land of the company are as follows:
- 202,343 square meters of factory land situated at Multan Road, Lahore;
- 697 square meters of land in sector F-6/1 Islamabad;
- Corporate office floors in Corporate Centre Lahore.
Example 4: Property, plant and equipment (Disclosed in sub-note)

Following are particulars of the Company’s immovable fixed assets:
Location Usage Total area (in Acres)
Shahrah-e-Roomi, Lahore Plant site and administrative offices 34.02
Herdo Sehari, Kasur Administrative offices 34.84
Lakho Baryar, Kasur Administrative offices 50.63
Example 5: Production Capacity
Design Capacity Production
2018 2017 2018 2017
Urea Tonnes ‘000 Tonnes ‘000
Lahore – Plant I 695 695 688 692
Faisalabad – Plant II 635 635 635 635
Peshawar – Plant III 718 718 714 703
2,048 2,048 2,037 2,030
The shortfall in actual production are insignificant and considered normal in the industry.
Example 6: Capacity and production
2018 2017
MWh
Installed capacity (based on 8,760 hours) 1,086,240 1,086,240
Actual energy delivered 387,435 645,395
Under-utilisation of available capacity is due to less demand by WAPDA.

Example 7: Number of employees
2018 2017
Total number of employees at end of the year 3,357 3,364
Average number of employees for the year 3,369 3,384

.
Example 8: Associated companies and undertakings
Name Percentage of shareholding Basis of relationship Common directorship
ABC Limited 58% Subsidiary Ms. S

Mr. A
Mr. B
XYZ Limited 25% More than 20% Mr. B
shareholding
KLM Limited 6% Common directors Mr. K
Mr. M
.
Example 9: Associated companies and undertakings

The names of related parties with whom the Company has entered into transactions or had
agreements / arrangements in place during the year and whose names have not been disclosed
elsewhere in these financial statements are as follows:
Percentage of
Name of the related party Basis of relationship
Shareholding %
Toyota Tsusho Corporation Associated company 20%
Tomen Power (Singapore) (Private) Limited Associated company 16%
Red Communication Arts (Private) Limited Common directorship -
Kohinoor Power Company Limited Common directorship -
Pak Elektron Limited Common directorship -
Pel Marketing (Private) Limited Common directorship -
Wartsila Pakistan (Private) Limited Common directorship -
Kohinoor Energy Limited Employees Gratuity
Common control 0.23%
Fund
. All transactions with related parties are carried out on mutually agreed terms and conditions.
ii. In respect of associated companies, subsidiaries, joint ventures or holding companies

incorporated outside Pakistan, following shall be separately disclosed;
 Name of undertaking and country of incorporation;
 Basis of association; and
 Aggregate percentage of shareholding, including shareholding through other
companies or entities;

Example 10: Related party disclosure (Disclosed in sub note)

Following particulars relate to associated companies incorporated outside Pakistan with whom the
company had entered into transactions during the year:
Name of undertaking Pakistan Maroc Phosphore S.A.
Country of incorporation Morocco
Basis of association Joint venture of OCP Group and Fauji Group
Aggregate %age of shareholding 12.5% Equity investment by the company
Example 11: Related party disclosure (Disclosed in sub note)

Following particulars relate to associated companies incorporated outside Pakistan with whom the
company had entered into transactions during the year:
Name of company Toyota Tsusho Corporation
Country of incorporation Japan
Basis of association Associated undertaking
Aggregate %age of shareholding 20%
iii. General nature of any credit facilities available to the company, other than trade credit
available in the ordinary course of business, and not availed at the date of the statement
of financial position;
Note: This is not required in fifth schedule.
Example 12: Facilities of letters of credit and letters of guarantee (Disclosed in sub note)
Facilities of letters of credit and letters of guarantee amounting to Rs 17,395,000 thousand and
Rs 239,293 thousand (2017: Rs 13,580,000 thousand and Rs 101,655 thousand) respectively are
available to the company against lien on shipping / title documents, US $ Term Deposit Receipts
and charge on assets of the company.
Example 13: Credit facilities (Disclosed in sub note)

Of the aggregate facility of Rs. 875 million (2018: Rs. 476.85 million) for opening letters of credit
and Rs. 440 million (2018: Rs. 207.05 million) for guarantees, the amount utilized as at June 30,
2019 were Rs. 4.44 million (2018: Rs. 151.4 million) and Rs. 274.43 million (2018: Rs. 207.05
million) respectively.
iv. In cases where company has made export sales following disclosures are required to be
made in respect of outstanding trade debts;
 Name of company or undertaking in case of related party; and
 Name of defaulting parties, relationship if any, and the default amount.
Note: This is not required in fifth schedule.
Example 14: Trade debts (Disclosed in sub note)

Included in due from export customers is an amount of Rs. 2.021 million (2017: 1.765 million)
receivable from ABC Shoe Company, Peru against export sales made by the Company. During the
year, the Company made export sales amounting to Rs. 6.332 million (2017: Rs. 4.077 million) to
ABC Shoe Company, Peru through bank contracts.

3.2 Requirements as to Statement of Financial Position
1. Sundry Requirements
Following items shall be disclosed as separate line items on the face of the financial statements;
(i) Revaluation surplus on property, plant and equipment;
(ii) Long term deposits and prepayments;
(iii) Unpaid dividend;
(iv) Unclaimed dividend; and
(v) Cash and bank balances.
2. Fixed Assets
Where any property or asset acquired with the funds of the company and is not held in the name
of the company or is not in the possession and control of the company, this fact along with reasons
for the property or asset not being in the name of or possession or control of the company 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;
Example 15: Property, plant and equipment (Disclosed in sub note)
Land measuring 2 kanals and 2 marlas in possession of the Company, acquired in 2014 at a cost
of Rs. 57,800 thousand is not in the name of the Company due to pending legal case.
Example 16: Property, plant and equipment (Disclosed in sub note)
Land measuring 10 kanals is neither in the name of the Company nor in possession of the
Company. The Company paid Rs. 75,000 thousand in July 2017 for land to be acquired from
Pakistan Railways through open auction. The auction was later challenged in Lahore High Court
and legal case is stilling pending.
Land and building shall be distinguished between free-hold and leasehold;

Forced sale value shall be disclosed separately in case of revaluation of Property, Plant and
Equipment.
In the case of sale of fixed assets, if the aggregate book value of assets exceeds five million rupees,
following particulars of each asset, which has book value of five hundred thousand rupees or more,
shall be disclosed,
(i) cost or revalued amount, as the case may be;
(ii) the book value;
(iii) the sale price and the mode of disposal (e.g. by tender or negotiation);
(iv) the particulars of the purchaser;
(v) gain or loss; and
(vi) relationship, if any of purchaser with Company or any of its directors.

Example 17: Disposal of operating fixed assets
Book Sale Gain /
Particulars Cost Mode of
Sold to value proceeds (loss)
of assets disposal
(Rupees in thousand)
Book value greater than Rs. 500,000
Vehicle Employee: Mr. Ayaz 1,973 524 524 -
Company
Scheme
Car
Vehicle Employee: Mr. Sikandar 2,503 1,608 1,608 -
Vehicle Employee: Mr. Amir 1,124 884 884 -
Book value less than Rs. 500,000 29,952 9,366 12,948 3,582
Year ended: June 30, 2019 35,552 12,382 15,964 3,582
Year ended: June 30, 2018 31,532 17,128 17,128 -
3. Long term loans and advances

With regards to loans and advances to directors following shall be disclosed:
(i) the purposes for which loans or advances were made; and
(ii) reconciliation of the carrying amount at the beginning and end of the period, showing
disbursements and repayments;
In case of any loans or advances obtained/provided, at terms other than arm‘s length basis,
reasons thereof shall be disclosed
In respect of loans and advances to associates and related parties there shall be disclosed,
(i) the name of each associate and related party;
(i) the terms of loans and advances;
(ii) the particulars of collateral security held, if any;
(iii) the maximum aggregate amount outstanding at any time during the year calculated by
reference to month-end balances;
(iv) provisions for doubtful loans and advances; and
(v) loans and advances written off, if any.
Example 18: Long Term Loans and advances - Secured

2018 2017
Rs‘000 Rs’000
Loans and advances – considered good, to:
Executives 763,000 691,000
Other employees 719,000 618,000
1,482,000 1,309,000
Less: Amount due within twelve months 368,000 343,000
1,114,000 966,000
Reconciliation Executive Other 2018 2017

Rs‘000 Rs‘000 Rs‘000 Rs‘000
Balance at January 1 691,000 618,000 1,309,000 1,269,000
Disbursement 339,000 308,000 647,000 570,000
1,030,000 926,000 1,956,000 1,839,000
Repayments (267,000) (207,000) (474,000) (530,000)
Balance at December 31 763,000 719,000 1,482,000 1,309,000

These subsidized and interest free loans and advances are granted to employees as per the
Company’s policy and are repayable within one to ten years. House building loans carry mark-up at
4% per annum and are secured against the underlying assets.
The maximum amount of loans and advances to executives outstanding at the end of any month
during the year was Rs 805,865 thousand (2017: Rs 772,548 thousand).
.
4. Current assets
In respect of debts/receivables from associates and related parties there shall be disclosed.
(ii) the maximum aggregate amount outstanding at any time during the year calculated by
(iii) receivables, that are either past due or impaired, along with age analysis distinguishing
between trade debts, loans, advances and other receivables;
(iv) debts written off as irrecoverable, distinguishing between trade debts and other receivables;
(v) provisions for doubtful or bad debts distinguishing between trade debts, loans, advances
and other receivables; and
(vi) justification for reversal of provisions of doubtful debts, if any;
Example 19: Trade debts - Unsecured

2018 2017
Considered good Rs‘000 Rs’000
Due from customers 2,165,093 1,561,668
Due from associated undertakings 2,021 1,765
2,167,114 1,563,433
Considered doubtful
Due from customers 30,362 30,527
Less: Provision for doubtful debts (30,362) (30,527)
- -
2,167,114 1,563,433
These customers have no recent history of default.
2018 2017
Due from associated undertaking Rs‘000 Rs’000
ABC Shoe Company, Peru 2,021 1,765
Maximum aggregate amount due from associated undertakings at the end of any month in the year
was Rs. 3.319 million (2017: Rs. 1.967 million). No interest has been charged on the amounts due
from associated undertakings.
In respect of loans and advances, other than those to employees as per company’s human
resource policy or to the suppliers of goods or services, the name of the borrower and terms of
repayment if the loan or advance exceeds rupees one million, together with the particulars of
collateral security, if any, shall be disclosed separately;
Note: The requirements in above para relate to fourth schedule only and not required in fifth
schedule.

Provision, if any, made for bad or doubtful loans and advances or for diminution in the value of or
loss in respect of any asset shall be shown as a deduction from the gross amounts;
Example 20: Loans and advances

2018 2017
Rs‘000 Rs’000
Current portion of long term loans and advances 368,000 343,000
Loans and advances to employees - unsecured 27,000 17,000
Advance to suppliers – considered good 82,000 150,000
Advance to subsidiary company – interest bearing 582,000 1,122,000
1,059,000 1,632,000
Advance to subsidiary company
This represents aggregate unsecured advance to, ABCEL, subsidiary company under a revolving
credit facility upto an amount of Rs 1,500,000 thousand to meet debt servicing obligations and
other working capital requirements. This carries mark-up at 1 month KIBOR + 0.60%. The maximum
outstanding amount at the end of any month during the year was Rs 671,261 thousand (2017: Rs
1,336,386 thousand).
5. Share capital and reserves

Capital and Revenue reserves shall be clearly distinguished. Any reserve required to be
maintained under the Act shall be separately disclosed. Any legal or other restrictions, on the ability
of the company to distribute or otherwise, shall be disclosed for all kind of reserves maintained by
the company;
Example 21: Reserves

Capital Reserves 2018 2017
Rs‘000 Rs’000
Share premium 5.1 40,000 40,000
Capital redemption reserve 5.2 120,000 120,000
160,000 160,000
5.1 This represents premium of Rs. 5 per share received on public issue of 8,000,000 ordinary
shares of Rs. 10 each in 1991.
5.2 This represents reserve set up on redemption of preference shares of Rs. 120,000
thousands in 1996.
Revenue Reserves 2018 2017
Rs‘000 Rs’000
General reserve 8,802,360 8,802,360
Unappropriated profit 11,720,153 7,374,114
20,522,513 16,176,474
.
In respect of issued share capital of a company following shall be disclosed separately:

(i) shares allotted for consideration paid in cash;
(ii) shares allotted for consideration other than cash, showing separately shares issued
against property and others (to be specified);
(iii) shares allotted as bonus shares; and
(iv) treasury shares;
Shareholders agreements for voting rights, board selection, right of first refusal and block voting
shall be disclosed.

Example 22: Share Capital

Authorised share capital
2018 2017 2018 2017
Number of shares ‘000 Rs’000
10,000 10,000 Ordinary shares of Rs. 10 each 100,000 100,000
Issued, subscribed and paid up capital

2018 2017 2018 2017
Number of shares ‘000 Rs’000
Fully paid in cash
300 300 Ordinary shares of Rs. 10 each 3,000 3,000
Issued for consideration other than
cash
Issued as fully paid bonus shares
7,560 7,560 75,600 75,600
Shares issued for consideration other than cash were issued against plant and machinery.
All ordinary shares rank equally with regard to the Company’s residual assets. Holders of the shares
are entitled to dividends from time to time and are entitled to one vote per share at the general
meetings of the Company.
6. Non-current liabilities
Amount due to associated companies and related parties shall be disclosed separately
7. Current liabilities
Following items shall be disclosed as separate line items:

(i) Payable to provident fund;
(ii) Deposits, accrued liabilities and advances;
(iii) Loans from banking companies and other financial institutions, other than related parties;
(iv) Loans and advances from related parties including sponsors and directors along with
purpose and utilization of amounts; and
(v) Loans and advances shall be classified as secured and unsecured.
Example 23: Current liabilities
Note 2018 2017

Rs‘000 Rs’000
Trade and other payables 9 60,599,330 38,781,144
Mark-up and profit accrued 10 300,574 190,707
Short term borrowings - secured 11 28,526,484 11,539,083
Unclaimed dividend 638,783 437,291
Current portion of long term borrowings - secured 7 7,237,742 6,831,804
Taxation 2,641,779 1,229,780
99,944,692 59,009,809
..

Example 24: Current liabilities

Note 2019 2018
Rs‘000 Rs’000
Employee benefits 7 31,929 29,950
Short term finances - secured 8 5,354,474 5,285,780
Trade and other payables 9 53,867 84,120
Accrued finance costs 10 103,727 48,878
Unclaimed dividend 50,088 10,305
Provision for taxation – net 59,078 61,439
5,653,163 5,520,472
..
In respect of security deposit payable, following shall be disclosed:

(i) Bifurcation of amount received as security deposits for goods/services to be delivered /
provided, into amounts utilizable for company business and others;
(ii) Amount utilized for the purpose of the business from the security deposit in accordance with
requirements of written agreements, in terms of section 217 of the Act; and
(iii) Amount kept in separate bank account;
Example 25: Long Term Deposits

2019 2018
Rs‘000 Rs’000
Long term deposits from dealers 12,731 12,691
These represent security deposits received from dealers which, by virtue of agreement, are interest
free. These are repayable on cancellation of dealership contract with dealers and cannot be utilized
for the purpose of the business. These have been kept in separate bank account in accordance with
the requirements of the section 217 of the Companies Act, 2017. .
8. Contingencies and commitments

In describing legal proceedings, under any court, agency or government authority, whether local
or foreign, include name of the court, agency or authority in which the proceedings are pending,
the date instituted, the principal parties thereto, a description of the factual basis of the proceeding
and the relief sought.
Example 26: Contingencies and Commitments

Penalty of Rs 5.5 billion imposed by the Competition Commission of Pakistan (CCP) in 2013, for
alleged unreasonable increase in urea prices, had been set aside by the Competition Appellate
Tribunal with directions to the CCP to decide the case under guidelines provided by the Tribunal. No
petition was filed by the CCP for review of the decision within the stipulated time, and this option
has thus become time barred for the CCP. However, the CCP can file fresh case under the guidelines
provided by the Tribunal, but the Company remains confident of successfully defending these
unreasonable claims in future as well.
2018 2017
Commitments in respect of: Rs‘000 Rs’000
Capital expenditure 1,919,124 2,498,658
Purchase of stores, spares and other items 1,528,517 2,821,573
Investment in an associated company – ABC Limited 500,000 640,000
Investment in a Joint Venture XYZ Energy Limited 3,685,374 -
Contracted out services 392,100 221,390
Rentals under lease agreements:
Premises 254,827 312,656
Vehicles 88,226 83,674
..

Example 27: Contingencies

The Company is defending a suit for Rs. 19,579 thousand, filed in previous years by an ex-vendor
on account of damages and inconvenience. Previously, the case was pending before the Civil Court,
Lahore. However, during the last year, it was held by the Civil Court that the damages of Rs. 15,000
thousand has been awarded in favour of vendor for the aforementioned inconvenience. In addition
to that the Company is also required to pay the amount of parts already supplied by the vendor
which amounts to Rs. 4,579 thousand along with mark-up @ 7% per annum till its realization.
However, the Company has filed an appeal in the Honourable High Court, Lahore against the
aforesaid order of Civil Court. The management and the legal advisor are confident that outcome
of the case would be in the Company’s favour and no payment in this regard would be required,
hence no provision there against has been made in these financial statements.
Example 28: Commitments .
(i) Letters of credit / bank contracts other than capital expenditure are nil (June 30, 2018:
Rs. 68.13 million).
(ii) Letters of credit / bank contracts for capital expenditure Rs. 4.44 million (June 30, 2018:
Rs. 131.35 million)..
3.3 Requirements as to Statement of Profit or Loss Account

Following items shall be disclosed as deduction from turnover as separate line items:
(i) trade discount; and
(ii) sales and other taxes directly attributed to sales.
Example 29: Turnover

2018 2017
Rs‘000 Rs’000
Manufactured urea – local 74,462,673 67,095,578
Manufactured urea – export - 5,066,304
Purchased and packaged fertilizers 32,930,082 27,031,569
109,392,755 99,193,451
Sales tax (3,381,261) (5,101,021)

Trade discount (47,023) (3,378,316)
(3,428,284) (8,479,337)
105,964,471 90,714,114
..
The aggregate amount of auditors’ remuneration, showing separately fees, expenses and other
remuneration for services rendered as auditors and for services rendered in any other capacity
and stating the nature of such other services. In the case of joint auditors, the aforesaid information
shall be shown separately for each of the joint auditors;
Example 30: General

Auditors’ remuneration 2019 2018
Rs‘000 Rs’000
Audit fee 1,650 1,650
Fee for half yearly review, audit of consolidated financial
statements, review of Code of Corporate Governance and other 899 899
certifications in the capacity of external auditors
Out of pocket expenses 160 160
2,709 2,709
..

In case, donation to a single party exceeds 10 per cent of company’s total amount of donation or
Rs. 1 million, whichever is higher, name of donee(s) shall be disclosed and where any director or
his spouse has interest in the donee(s), irrespective of the amount, names of such directors along
with their interest shall be disclosed;
Example 31: Donations

Cost of sales and Distribution cost include donations amounting to Rs 60,176 thousand (2017: Rs
64,125 thousand) and Rs 24,515 thousand (2017: Rs 25,289 thousand) respectively. These are
disbursed through ABC Welfare Foundation (associated undertaking). Interest of CEO Mr. Tariq in
ABC Welfare Foundation is limited to the extent of his involvement in ABC Welfare Foundation as
Chairman. .
Complete particulars of the aggregate amount charged by the company shall be disclosed
separately for the directors, chief executive and executives together with the number of such
directors and executives such as:
(i) fees;
(ii) managerial remuneration;
(iii) commission or bonus, indicating the nature thereof;
(iv) reimbursable expenses which are in the nature of a perquisite or benefit;
(v) pension, gratuities, company's contribution to provident, superannuation and other staff
funds, compensation for loss of office and in connection with retirement from office;
(vi) other perquisites and benefits in cash or in kind stating their nature and, where practicable,
their approximate money values; and
(vii) amount for any other services rendered.
Example 32: Remuneration of Chief Executive, Directors and Executives

The aggregate amounts charged in these financial statements in respect of remuneration including
benefits applicable to the chief executive, directors and executives of the company are given below:
2018 2017
Chief Chief
Executives Executives
Executive Executive
Rs‘000 Rs‘000 Rs‘000 Rs‘000
Managerial remuneration 7,915 1,353,075 8,583 1,297,932
Contribution to provident fund 542 84,995 618 81,561
Bonus and other awards 2,783 - 3,703 561
Good performance awards - 1,458,366 - 1,394,652
Allowance and contribution to
9,030 1,186,791 11,113 1,068,165
retirement benefit plans
Total 20,270 4,083,227 24,017 3,842,871
Number of person(s) 1 339 1 336
The above were provided with medical facilities; the chief executive and certain executives were
also provided with some furnishing items and vehicles in accordance with the Company’s policy.
Gratuity is payable to the Chief Executive in accordance with the terms of employment while
contributions for executives in respect of gratuity and pension are based on actuarial valuations.
Leave encashment of Rs 4,431 thousand (2017: Nil) and Rs 57,380 thousand (2017: Rs 46,454
thousand) were paid to chief executive and executives on separation, in accordance with the
Company’s policy.
In addition, 18 (2017: 16) directors were paid aggregate fee of Rs 6,075 thousand (2017: Rs 4,625
thousand).
Directors are not paid any remuneration except meeting fee.

In case of royalties paid to companies/entities/individuals, following shall be disclosed:
(i) Name and registered address; and
(ii) Relationship with company or directors, if any.
Example 33: Royalty payments
Distribution costs 2018 2017

Rs‘000 Rs’000
Salaries and benefits 840,000 813,000
Freight 270,000 239,000
Trademark license fee Note 635,000 388,000
Depreciation 165,000 146,000
Miscellaneous 1,000 500
1,911,000 1,586,500
The trademark license fee represents the royalty fee of ABC Brands S.A.R.L., Switzerland, an
associated company situated in Avenue d’Ouchy 6, 1006 Lausanne, Switzerland.

4 COMPANIES ACT, 2017: FIFTH SCHEDULE
Section overview
 General Requirements
 Requirements as to Statement of Financial Position
 Requirements as to Profit and Loss Account
4.1 General Requirements

a) The companies other than listed companies and their subsidiaries shall follow the applicable
Financial Reporting Framework as defined in Third Schedule, in regards to financial statements
as notified by the Commission, under section 225 of the Companies Act, 2017;
b) The disclosure requirements, as provided in this schedule, are in addition to the disclosure
requirements prescribed in applicable Financial Reporting Framework notified by the
Commission unless specifically required otherwise;
c) In addition to the information expressly required to be disclosed under the Act and this
schedule, there shall be added such other information as may be necessary to ensure that
required disclosure is not misleading;
d) The following shall be disclosed in the financial statements namely:
i. General information about the company comprising the following:
 geographical location of all business units including mills/plant;
Note: Particulars of company’s immovable fixed assets, including location and area of land
is required in fourth schedule but not required in fifth schedule.
 the capacity of an industrial unit, actual production and the reasons for shortfall;
 number of persons employed as on the date of financial statements and average
number of employees during the year.
 name of associated companies or related parties or undertakings along with the basis
of relationship describing common directorship and/or percentage of shareholding;
ii In respect of associated companies, subsidiaries, joint ventures or holding companies
incorporated outside Pakistan, name of undertaking, registered address and country of
incorporation shall be disclosed;
Note: In comparison, the Fourth schedule additionally requires basis of association and
aggregate percentage of shareholding and does not require registered address to be
disclosed.
4.2 Requirements as to Statement of Financial Position

1. Sundry requirements
Following items shall be disclosed as separate line items on the face of the financial statements;
(i) revaluation surplus on property, plant and equipment;
(ii) long term deposits and prepayment;
(iii) unpaid dividend;
(iv) unclaimed dividend; and
(v) cash and bank balances.

2. Fixed assets
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 along with reasons
for the property or asset not being in the name of or possession or control of the company 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;
Land and building shall be distinguished between freehold and leasehold.
Forced sale value shall be disclosed separately in case of revaluation of property, plant and
equipment.
In the case of sale of fixed assets, if the aggregate book value of assets exceeds five million rupees,
following particulars of each asset, which has five hundred thousand rupees or more, shall be
disclosed,
(i) cost or revalued amount, as the case may be;
(ii) the book value;
(iii) the sale price and the mode of disposal (e.g. by tender or negotiation);
(iv) the particulars of the purchaser;
(v) gain or loss; and
(vi) relationship, if any of purchaser with company or any of its directors.
3. Long term loans and advances
With regards to loans and advances to directors, following shall be disclosed:
(i) the purposes for which loans or advances were made; and
(ii) reconciliation of the carrying amount at the beginning and end of the period, showing
disbursements and repayments;
In case of any loans or advances obtained/provided, at terms other than arm’s length basis,
reasons thereof shall be disclosed;
In respect of loans, advances to associates there shall be disclosed:
(i) the name of each associate and related parties;
(ii) the terms of loans and advances;
(iii) the particulars of collateral security held, if any;
(iv) the maximum aggregate amount outstanding at any time during the year calculated by
(v) provisions for doubtful loans and advances; and
(vi) loans or advances written off, if any.
4. Current assets
In respect of debts/receivables from associates there shall be disclosed:
(ii) the maximum aggregate amount outstanding at any time during the year calculated by
(iii) receivables, that are either past due or impaired, along with age analysis distinguishing
between trade debts, loans, advances and other receivables;
(iv) debts written off as irrecoverable distinguishing between trade debts and other receivables;
(v) provisions for doubtful or bad debts distinguishing between trade debts, loans, advances
and other receivables; and
(vi) justification for reversal of provisions of doubtful debts, if any;

Provision, if any, made for bad or doubtful loans and advances or for diminution in the value of or
loss in respect of any asset shall be shown as a deduction from the gross amounts;
5. Share capital and reserves
Capital and revenue reserves shall be clearly distinguished. Any reserve required to be maintained
under the Act shall be separately disclosed. Any legal or other restrictions on the ability of the
company to distribute or otherwise apply its reserves shall also be disclosed for all kind of reserves
maintained by the company;
In respect of issued share capital of a company following shall be disclosed separately;
(i) shares allotted for consideration paid in cash;
(ii) shares allotted for consideration other than cash, showing separately shares issued against
property and others (to be specified);
(iii) shares allotted as bonus shares; and
(iv) treasury shares;
Shareholder agreements for voting rights, board selection, rights of first refusal and block voting
shall be disclosed.
6. Non-current liabilities
Amount due to associated company shall be disclosed separately.
Note: In comparison, the fourth schedule states ‘due to associated companies and related parties’.
7. Current liabilities
Following items shall be disclosed as separate line items;
(i) payable to provident fund;
(ii) deposits, accrued liabilities and advances;
(iii) loans from banking companies and other financial institutions other than associated
company;
(iv) loans and advances from associated company, sponsors and directors along with purpose
and utilization of amounts; and
(v) loans and advances shall be classified as secured and unsecured.
In respect of security deposit payable, following shall be disclosed:
(i) bifurcation of amount received as security deposits for goods/services to be
(ii) delivered/provided, into amounts utilizable for company business and others;
(iii) amount utilized for the purpose of the business from the security deposit in accordance with
requirements of written agreements, in terms of section 217 of the Act; and
(iv) amount kept in separate bank account;
8. Contingencies and commitments
In describing legal proceedings, under any court, agency or government authority, whether local
or foreign include name of the court, agency or authority in which the proceedings are pending, the
date instituted, the principal parties thereto, a description of the factual basis of the proceeding and
the relief sought.
4.3 Requirements as to Profit and Loss Account

Following items shall be disclosed as deduction from turnover as separate line items;
(i) trade discount; and
(ii) sales and other taxes directly attributable to sales.
The aggregate amount of auditors’ remuneration, showing separately fees, expenses and other
remuneration for services rendered as auditors and for services rendered in any other capacity
and stating the nature of such other services. In the case of joint auditors, the aforesaid information
shall be shown separately for each of the joint auditors;

In case, donation to a single party exceeds 10 per cent of company’s total amount of donation or
Rs. 1 million, whichever is higher, name of donee(s) shall be disclosed and where any director or
his spouse has interest in the donee(s) irrespective of the amount, names of such directors along
with their interest shall be disclosed;
Management assessment of sufficiency of tax provision made in the company’s financial
statements along with comparisons of tax provision as per accounts viz a viz tax assessment for
last three years;
Note: The requirements in above para now relate to fifth schedule only after exclusion from
fourth schedule.
Example 34: Management’s assessment on sufficiency of provision for income taxes

A comparison of provision on account of income taxes with most recent tax assessment for last
three tax years is as follows:
2018 2017 2016
(Rupees in thousand)
Tax assessed as per most recent tax assessment 2,361,733 1,998,074 869,634
Provision in accounts for income tax 2,361,733 1,997,464 869,122
The tax assessed as per most recent tax assessment for the year 2018 is based on “deemed
assessment” as per income tax return filed for respective years.
As at June 30, 2019, as per the treatments adopted in tax returns filed that are based on the
applicable tax laws and decisions of appellate authorities on similar matters, the provision in
accounts for income tax is sufficient as there are strong grounds that the said treatments are likely
to be accepted by the tax authorities.
Complete particulars of the aggregate amount charged by the company shall be disclosed
separately for the directors, chief executive and executives together with the number of such
directors and executives such as:
(i) fees;
(ii) managerial remuneration;
(iii) commission or bonus, indicating the nature thereof;
(iv) reimbursable expenses which are in the nature of a perquisite or benefit;
(v) pension, gratuities, company's contribution to provident, superannuation and other staff
funds, compensation for loss of office and in connection with retirement from office;
(vi) other perquisites and benefits in cash or in kind stating their nature and, where practicable,
their approximate money values; and
(vii) amount for any other services rendered.
In case of royalties paid to companies/entities/individuals following shall be disclosed:
(i) Name and registered address; and
(ii) Relationship with company or directors, if any.

5 OBJECTIVE BASED QUESTIONS
01. Which of the following body/institution decides on accounting rules that must be applied by companies
in Pakistan?
(a) Federal Government
(b) Securities and Exchange Commission of Pakistan
(c) State Bank of Pakistan
(d) The Institute of Chartered Accountants of Pakistan
02. Which of the following body/institution is responsible for recommending accounting standards for
notification by Securities and Exchange Commission of Pakistan?
(a) Pakistan Institute of Corporate Governance
(b) Pakistan Stock Exchange
(c) The Institute of Chartered Accountants of Pakistan
(d) Pakistan Chamber of Commerce
03. Which of the following are applicable to a company listed on Pakistan Stock Exchange?
(a) IFRSs and Fourth Schedule of Companies Act, 2017
(b) IFRSs and Fifth Schedule of Companies Act, 2017
(c) IFRSs for SMEs and Fourth Schedule of Companies Act, 2017
(d) IFRSs for SMEs and Fifth Schedule of Companies Act, 2017
04. Which of the following are applicable to a non-listed public interest company?
05. Which of the following are applicable to a non-listed large size Pakistani company?
06. How a public utility or similar company carrying on the business of essential public services shall be
classified according to Companies Act, 2017?
(a) Pubic Interest Company
(b) Large Sized Company
(c) Medium Sized Company
(d) Small Sized Company

07. A public unlisted company has paid up capital of Rs. 8 million, turnover of Rs. 90 million and 225
employees. How it shall be classified according to Companies Act, 2017?
08. A private company has paid up capital of Rs. 80 million, turnover of Rs. 900 million and 525 employees.
How it shall be classified according to Companies Act, 2017?
09. A public unlisted company has paid up capital of Rs. 80 million, turnover of Rs. 1,200 million and 225
10. A foreign company has paid up capital equivalent of Rs. 250 million, turnover of Rs. 900 million and 725
11. In the case of sale of fixed assets, if the aggregate book value of assets exceeds five hundred
thousand rupees, following particulars of each asset shall be disclosed:
(i) cost or revalued amount, as the case may be.
(ii) the book value.
(iii) the sale price and the mode of disposal (e.g. by tender or negotiation).
(iv) the particulars of the purchaser.
(v) gain or loss.
(vi) relationship, if any of purchaser with Company or any of its directors.
(a) (i), (ii) and (v) only
(b) (i) to (iv) only
(c) (i) to (v) only
(d) (i) to (vi) all

12. With regards to loans and advances to directors a company is required to disclose whether the loans
and advances have been made in compliance with the requirements of the Companies Act, 2017.
The above disclosure is required by:
(a) Fourth Schedule
(b) Fifth Schedule
(c) Both (a) and (b)
(d) Neither (a) nor (b)
13. In respect of loans and advances, other than those to the suppliers of goods or services, the name of
the borrower and terms of repayment if the loan or advance exceeds rupees one million, together with
the particulars of collateral security, if any, shall be disclosed separately.
The above disclosure is required by:
(a) Fourth Schedule
(b) Fifth Schedule
(c) Both (a) and (b)
(d) Neither (a) nor (b)
14. In Fourth and Fifth Schedule, an executive has been defined as an employee, other than the chief
executive and directors, whose basic salary exceeds a certain amount in a financial year. What is that
amount?
(a) Rs. 600,000
(b) Rs. 1,200,000
(c) Rs. 2,000,000
(d) Rs. 3,000,000
15. In respect of issued share capital of a company following shall be disclosed separately:
(i) shares allotted for consideration paid in cash.
(ii) shares allotted for consideration other than cash, showing separately shares issued against
property and others (to be specified).
(iii) shares allotted as bonus shares.
(iv) treasury shares.
(a) (i), (ii) and (iii) only
(b) (i) and (ii) only
(c) (i) and (iii) only
(d) (i) to (iv) all
16. Mercury Limited is a listed company on Pakistan Stock Exchange. Which schedule of Companies Act,
2017 is applicable to it for disclosure requirements?
___________
17. Neptune (Private) Limited is a large size company according to Third schedule of Companies Act, 2017.
Which schedule of Companies Act, 2017 is applicable to it for disclosure requirements?
___________

18. Mars Limited is public unlisted company. It is subsidiary of Mercury Limited which is listed on Pakistan
Stock Exchange. Which schedule of Companies Act, 2017 is applicable to it for disclosure
requirements?
___________
19. Which schedule of Companies Act, 2017 lists the classification criteria of the companies based on
company size?
___________
20. Earth Limited is a non-listed company but according to Third schedule of Companies Act, 2017 it is
public interest company. Which schedule of Companies Act, 2017 is applicable to it for disclosure
requirements?
___________

5 OBJECTIVE BASED ANSWERS
01. (b)
02. (c)
03. (a)
04. (b)
05. (b)
06. (a)
07. (c) If it was private company, it would have been classified as small sized company.
08. (c)
09. (b) It has turnover of more than Rs. 1 billion.
10. (c) Only turnover criteria are evaluated for foreign companies.
11. (d) All are required under Fourth and Fifth Schedule.
12. (a) This is requirement of Fourth Schedule only.
13. (a) This is requirement of Fourth Schedule only.
14. (b)
15. (d)
16. Fourth Schedule The Fourth schedule is applicable to all listed companies.
17. Fifth Schedule The Fifth schedule is applicable to non-listed companies regardless of its size.
18. Fifth Schedule The Fifth schedule also applies to private and non-listed companies that are a
subsidiary of a listed company.
19. Third Schedule The Third schedule lists the classification criteria of the company on the basis
of company size.
20. Fifth Schedule The Fifth schedule is applicable to non-listed companies even if it is public
interest company.

Head Office-Karachi: Chartered Accountants Avenue, Cli on, Karachi-75600
Phone: (92-21) 99251636-39, UAN: 111-000-422, Fax: (92-21) 99251626, e-mail: info@icap.org.pk
Hyderabad Office: 3rd oor, Salman Icon Tower, Main Auto Bhan Road, Near RT Restaurant,
Opp. Faysal Bank, La fabad, Hyderabad.
Phone: (022) 3821227, e-mail: hyderabad@icap.org.pk
Sukkur Office: Admin Block Sukkur IBA, Airport Road, Sukkur
Phone: (92-71) 5806109, e-mail: sukkur@icap.org.pk
Que a Office: Civic Business Center, Hali Road, Que a Can
Phone: (92-81) 2865533, e-mail: que a@icap.org.pk
Regional Office-Lahore: 155-156, West Wood Colony, Thokar Niaz Baig, Raiwind Road, Lahore
Phone: (92-42) 37515910-12, UAN: 111-000-422, e-mail: lahore@icap.org.pk
Islamabad Office: Sector G-10/4, Mauve Area, Islamabad
UAN: 111-000-422, Fax: (92-51) 9106095, e-mail: islamabad@icap.org.pk
Faisalabad Office: P- 3/33 East Canal road, Muhammadi Colony, Near Govt. College of Commerce Abdullahpur,
Opposite Nusrat Fateh Ali Khan under pass, Faisalabad
Phone: (92-41) 8531028, Fax: (92-41) 8712626, e-mail: faisalabad@icap.org.pk
Multan Office: 3rd Floor, Parklane Tower, Officers’ Colony, Near Eid Gaah Chowk, Khanewal Road, Multan.
Phone: (92-61) 6510511-6510611, Fax: (92-61) 6510411, e-mail: multan@icap.org.pk
Peshawar Office: House No. 30, Old Jamrud Road, University Town, Peshawar
Phone: (92-91) 5851648, Fax: (92-91) 5851649, e-mail: peshawar@icap.org.pk
Gujranwala Office: 2nd Floor, Gujranwala Business Center, Opp. Chamber of Commerce, Main G.T. Road, Gujranwala.
Phone: (92-55) 3252710, e-mail: gujranwala@icap.org.pk
Mirpur AJK Office: Basic Health Unit (BHU) Building Sector D, New City Mirpur, Azad Jammu and Kashmir
Phone: 05828-205296, e-mail: mirpur@icap.org.pk
Abbo abad Office: Yusef Jammal Plaza, Mansehra Road, Abbo abad
Phone: 0992-405515, e-mail: abbo abad@icap.org.pk
2020
FINANCIAL ACCOUNTING
AND REPORTING II

Financial Accounting and Reporting Ii: Examinable Supplement

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* The student must refer original handbook of IFRS.

© Emile Woolf International 2 The Institute of Chartered Accountants of Pakistan

2 REGULATORY FRAMEWORK FOR ACCOUNTING IN PAKISTAN

 Accounting regulation in Pakistan

2.1 Accounting regulation in Pakistan

© Emile Woolf International 3 The Institute of Chartered Accountants of Pakistan

Published by the IASC (up Published by the IASB

Accounting standards IASs IFRSs

Interpretations SICs IFRICs

© Emile Woolf International 4 The Institute of Chartered Accountants of Pakistan

1. Public Interest Company (PIC)

a) Listed Company International Fourth

b) Non-listed Company which is: International Fifth

2. Large Sized Company LSC

a) Non-listed Company with: International Fifth

3. Medium Sized Company (MSC)

a) Non-listed Public Company with: Revised AFRS Fifth

© Emile Woolf International 5 The Institute of Chartered Accountants of Pakistan

b) Private Company with:

d) Non-listed Company licensed / formed under Accounting

4. Small Sized Company (SSC)

A private company having: Revised AFRS Fifth

© Emile Woolf International 6 The Institute of Chartered Accountants of Pakistan

3 COMPANIES ACT, 2017: FOURTH SCHEDULE

3.1 General Requirements

Example 1: Statement of Compliance

d) The following shall be disclosed in the financial statements, namely:

Example 2: Legal Status and nature of business

© Emile Woolf International 7 The Institute of Chartered Accountants of Pakistan

Example 3: Property, plant and equipment (Disclosed in sub-note)

Example 4: Property, plant and equipment (Disclosed in sub-note)

Location Usage Total area (in Acres)

Shahrah-e-Roomi, Lahore Plant site and administrative offices 34.02

Herdo Sehari, Kasur Administrative offices 34.84

Lakho Baryar, Kasur Administrative offices 50.63

Example 5: Production Capacity

Design Capacity Production

2018 2017 2018 2017

Urea Tonnes ‘000 Tonnes ‘000

Lahore – Plant I 695 695 688 692

Faisalabad – Plant II 635 635 635 635

Peshawar – Plant III 718 718 714 703

2,048 2,048 2,037 2,030

Example 6: Capacity and production

Installed capacity (based on 8,760 hours) 1,086,240 1,086,240

Actual energy delivered 387,435 645,395

Under-utilisation of available capacity is due to less demand by WAPDA.

© Emile Woolf International 8 The Institute of Chartered Accountants of Pakistan

Example 7: Number of employees

Total number of employees at end of the year 3,357 3,364

Average number of employees for the year 3,369 3,384

Example 8: Associated companies and undertakings

Name Percentage of shareholding Basis of relationship Common directorship

ABC Limited 58% Subsidiary Ms. S

Example 9: Associated companies and undertakings

ii. In respect of associated companies, subsidiaries, joint ventures or holding companies

© Emile Woolf International 9 The Institute of Chartered Accountants of Pakistan

Example 10: Related party disclosure (Disclosed in sub note)

Example 11: Related party disclosure (Disclosed in sub note)

Example 13: Credit facilities (Disclosed in sub note)

Example 14: Trade debts (Disclosed in sub note)

© Emile Woolf International 10 The Institute of Chartered Accountants of Pakistan