Para 4.8 of Guidance Note on Division III of Schedule III needs change

Paragraph 4.8 of the Guidance Note on Division III of Schedule III to the Companies Act, 2013 issued by the Institute of Chartered Accountants of India is misleading as it misleads its readers to understand that the requirement of paragraph 61 of Ind AS 1, Presentation of Financial Statements, to disclose assets recoverable more than 12 months after the end of the reporting period as disclosure of non-current asset. It may be noted that paragraph 66 of Ind AS 1 defines current asset as under:

"An entity shall classify an asset as current when:
(a) it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the reporting period; or
(d) the asset is cash or a cash equivalent (as defined in Ind AS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
An entity shall classify all other assets as non-current."

Further, paragraph 68 of Ind AS 1 clarifies as under:

"Current assets include assets (such as inventories and trade receivables) that are sold, consumed or realised as part of the normal operating cycle even when they are not expected to be realised within twelve months after the reporting period."

Paragraph 4.8 of the Guidance Note on Division III of Schedule III misleads a reader to understand that the disclosure of more than 12 months means non-current. The classification on current / non-current is more from the perspective of operating cycle than 12 months. 12 months is only one of the criteria to classify as current / non-current. However, current assets may include assets recoverable after more than 12 months. For example, inventories / receivables recoverable after more than 12 months are current assets. Therefore, to provide information to users on assets that are recoverable more than 12 months, paragraph 61 requirement has been included in Ind AS 1. Thus, the disclosure of more than 12 months required by para 61 of Ind AS 1 is more for assets that are considered current though recoverable more than 12 months than any other assets than for non-currrent assets.