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FIFTH SCHEDULE
[See section 234]
REQUIREMENTS AS TO BALANCE SHEET AND PROFIT AND
LOSS ACCOUNT OF NON-LISTED COMPANIES
PART I
GENERAL

1. In this Schedule, unless there is anything repugnant in the subject or context--
(i) "accounting polices" includes the principles, bases, conventions, rules and procedures adopted by directors in preparing and presenting financial statements of a company;
(ii) "debts" includes loans and advances and other receivables where it relates to amounts written off and provision for doubtful and bad debts;
(iii) "finance lease" means a lease that transfers substantially all risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred];
(iv) "financial statements" include balance-sheet and profit and loss account. In case of a company not carrying on business for profit, all references to "profit and loss account", "profit" and "loss" shall be construed in relation to such a company as reference respectively to the "income and expenditure account" "surplus" or "deficit";
(v) "fund" in relation to any reserve, shall be used only where such a reserve is represented by specifically earmarked investments or other assets realisable at not less than the amount of the reserve;
(vi) "liability" includes all liabilities in respect of expenditure contracted for and all contingent liabilities,
(vii) "operating lease" means a lease other than a finance lease;
(viii) "prior period items" means charges or credits that arise in the current financial year as a result of errors or omissions in the preparation of financial statement of one or more prior financial years;
(ix) "Provision" means any amount written off or retained by way of providing for depreciation, renewals and diminution in value of assets, or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy:
(x) "reserve" subject to the proviso in clause (vii), does not include any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets or retained by way of providing for any known liability;
(xi) "turnover" means the gross income, exclusive of trade discount shown on invoices of bills, derived from sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts;
(xii) "unusual items" means gains or losses that derive from events or transactions which are distinct from the ordinary activities of a company and therefore are not expected to recur frequently or regularly; and any term or expression not defined in the Ordinance or this Schedule shall be construed to mean the same as under the generally recognised accounting principles.

2. The following shall be disclosed in the financial statement namely:
(i) All material information necessary to make the financial statements clear and understandable;
(ii) if fundamental accounting assumption, namely, going concern consistency and accrual is not followed in preparation of financial statements, that fact together with the reasons therefor;
(iii) 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 to the change, if material;
(iv) the basis of conversion or translation into rupees of assets and liabilities in foreign currencies.

3. Where any material item shown in the financial statements or included in amounts shown therein cannot be determined with substantial accuracy, an estimated amount described as such shall be included in respect of that item together with the description of the item.

4. Except for the first financial statements laid before the company, financial statements shall also give the corresponding figures for the immediately preceding financial year.

5. No provision with respect to the information to be given in the financial statements shall be deemed to require the amount of any item that is of no material significance to be given separately.

6. Any information required to be given in respect of any of the items in the financial statements shall, if it cannot be included in such statements, be furnished in a separate note, schedule or statement to be attached to, and which shall be deemed to form an integral part of the financial statements.

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

8. 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 it is held shall be disclosed.

9. 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 alongwith the nature of interest of the company or its directors or other offices.

1. The assets and liabilities shall be classified under the headings appropriate to the company's business distinguishing as regards assets between fixed assets, long-term prepayments and deferred costs, investments, loans and advances and current assets and as regards liabilities between share capital and reserves, long-term loans, redeemable capital, debentures and deferred liabilities and current liabilities and provisions.

2. (A) Fixed assets (other than investments) shall be distinguished between tangible and intangible and shall be classified under appropriate sub-heads, duly itemized such as,
(i) tangible:
(a) land (distinguishing between free-hold and lease-hold);
(b) buildings (distinguishing between building on free-hold land and those on lease-hold land);
(c) plant and machinery;
(d) furniture and fittings;
(e) vehicles;
(f) capital work in progress indicating significant itemwise details;
(g) others (to be specified).
(ii) intangible:
(a) goodwill;
(b) patents, copyright, trade marks and designs; and
(c) others (to be specified)

(B) Under each sub-head, other than capital work in progress, the original cost or the amount of valuation, as the case may be, and the additions thereto and deductions therefrom since the date of the previous balance-sheet shall be stated and the aggregate amount written off or provided or retained up to the date of the balance-sheet, by way of provision for depreciation or amortization or diminution in value shall be shown as deduction therefrom.

(C) Where sums have been written off on a reduction of capital or revaluation of assets and where sums have been added by writing up the assets, the first balance-sheet subsequent to the reduction or revaluation or writing up shall show the original cost, the reduced or increased figures, as the case may be, alongwith the date of and amount of the reduction or increase made, basis thereof and name and qualification of the valuer who should be an independent person competent to do so. Every balance-sheet subsequent to the reduction or revaluation or writing up, shall show the year and the total amount of induction or revaluation or writing up, and the element thereof excluded from or included in the book value of the asset.

(D) Any exchange, gain or loss in any year, as a consequence of fluctuations in rate of exchange, relative to the foreign currency borrowings out of the proceeds of which assets were acquired may be added to or reduction from the value of the respective assets and where such addition or deduction is made, the amount thereof under each sub-head shall be disclosed together with the depreciation policy therefor.

(E) In the case of a company which immediately, before the commencement of this Ordinance, has been providing for depreciation or amortization or diminution in value by way of lump sum charge to profit and loss account or as appropriation of profit, without allocating the amount so provided to different sub-heads the amount retained in the books of the company at the commencement of the said Ordinance as provision or reserve for depreciation or amortization or diminution in value shall be allocated against the respective sub-head.

(F) In every case where the original cost cannot be ascertained without unreasonable expense or delay, the valuation shall be the net amount at which an asset stood in the books of the company as at the commencement of this Ordinance after deduction of the amounts previously provided or written off for depreciation or amortization of diminution in value.

(G) Fixed assets used by the company that are the subject of finance lease shall be separately identified by each major class of asset.

3. (A) There shall be shown under separate sub-heads the aggregate amount respectively of the company's--
(i) investments in subsidiary, companies and associated undertakings;
(ii) investments in listed companies and modarabas other than those included in (i) above;
(iii) investments in unlisted companies and modarabas other then those included in (i) above;
(iv) investments in immovable properties;
(v) investments in redeemable capital;
(vi) investments in debentures and bonds issued by a Government, Municipal Committee or other local authority,
(vii) other investments (to be specified).

(B) Provisions, if any, made for diminution in the value of investments and in respect of losses of subsidiary companies shall be shown as deduction from the gross amount of the respective sub-head.
(C) Investments made against any specific fund or other item shown on the liabilities side especially those required to be made under any provision of the Ordinance shall be stated separately for each item.

7. (A) Share capital and reserve shall be classified under the following sub-heads:--
(i) paid-up capital, distinguishing between different classes of shares and the amount paid up in respect of each class; and
(ii) reserves, distinguishing between capital reserves and revenue reserves, capital reserves shall include capital redemption reserve, shall premium account,[....] profit prior to incorporation or any reserve not regarded free for distribution, by way of dividend (to be specified), while revenue reserves shall include general reserve, dividend equalisation reserve [...], other reserves created out of profit (to be specified), and unappropriated profit (i.e., credit balance of profit and loss account, after appropriations for the period to the date of balance-sheet). Additions to and deductions from each item of reserves shall be shown in the balance-sheet under the respective items unless they are disclosed in the profit and loss account or a statement or a report annexed thereto. Accumulated loss-adverse balance of profit and loss account shall be shown as deduction from the capital and reserves.

(B) There shall be shown in the balance-sheet--
(i) authorised share capital. distinguishing between various classes of shares and stating the number and value of each class;
(ii) issued share capital, distinguishing between various classes of shares and stating the number and value in respect of each class;
(iii) subscribed share capital, distinguishing between various classes of shares and stating the number and value in respect of each class. In the case of preference shares the rate of dividend shall also be stated;
(iv) called up share capital, distinguishing between various classes of shares and stating the number, value and the amount called up in respect of each class;
(v) calls unpaid as a deduction from called up share capital, distinguishing calls unpaid by (a) directors (including chief executive), (b) managing agents, (c) executives, and (d) others;
(vi) paid-up share capital, distinguishing in respect of each class between (a) shares allotted for consideration paid-in cash, (b) shares allotted for consideration other than cash, and (c) bonus shares stating the number and value of each class;
(vii) particulars of any option on unissued shares, such as amount of option, class of shares, issue price, period during which option is exercisable, etc.;
(viii) in the case of redeemable preference shares, the terms of redemption or conversion, if any, together with the earliest date on which the company has power to redeem or the company or the holder of the shares has power to convert the shares; and
(ix) in the case of subsidiary companies, the number of shares of each class held by the holding company.

(C) Where circumstances permit. authorised, issued, subscribed and paid-up capital or any two or more of them may be shown as one item.

SURPLUS ON REVALUATION OF FIXED ASSETS

DEBENTURES AND LONG-TERM LOANS

8. (A) Borrowings in respect of debentures shall be separately shown classified as secured and unsecured together with a statement of the assets upon which they are secured and where more than one class of liabilities is so secured their relative priorities and material terms with respect to payment of interest and redemption shall be stated.

(B) Long-term loans shall be classified as secured and unsecured, and under each class shall be shown separately --
(i) loans from banking companies and other financial institutions;
(ii) loans from subsidiary companies, managed modarabas and associated undertakings;
(iii) loans from directors (including chief executive) and managing agent of the company;
(iv) other loans.

(C) Where any of the long-term loans are secured otherwise than by the operation of law on any assets of the company, the fact that the loans are so secured, shall be stated together with a statement of the assets upon which they are secured, and where more than one class of liabilities is so secured, their relative priorities with respect to payment of interest or profit and redemption.

LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

12. (A) Current liabilities shall mean liabilities due and payable (other than liabilities the payment of which may, at the company's option, be postponed) within twelve months from the date of the balance-sheet, together with such other liabilities as are under recognised accounting principles appropriately so classified.

(B) Current liabilities and provisions shall, so far as they are appropriate to the company's business be classified under the following sub-heads:
(i) short-term loans, distinguishing between secured and unsecured and between loans taken from--
(a) banking companies and other financial institution;
(b) subsidiary, companies, modaraba managed and associated undertakings;
(c) directors (including chief executive) and managing agents; and
(d) others;

(ii) current portion of long-term liabilities;

(ii-a) short-term running finance utilised under mark-up arrangement, distinguishing between secured and unsecured together with a statement of the assets upon which it is secured, the extent of the facility available, the rate of mark-up and the period within which the mark-up or repurchase price is to be repaid;
(ii-b) current portion of the aggregate amount of liabilities related to the assets subject to finance lease;
(iii) deposits;
(iv) creditors;
(v) accrued liabilities;
(vi) bills payable;
(vii) advance payments and unexpired discount for the portion for which is still to be given, e.g., in the case of newspapers, clubs and steamship companies;
(viii) interest accrued on secured loans;
(ix) interest accrued on unsecured loans;
(x) profit return or mark-up accrued or proposed on each class of redeemable capital;
(xi) other liabilities, e.g., unclaimed dividends, unpaid dividend;
(xii) provision for taxation, showing separately excise duties, custom duties, sales tax, income tax, etc.;
(xiii) proposed dividend; and
(xiv) other provisions and accruals for contingencies.

(C) Where any short-term loans or any other liabilities of the company are secured otherwise than by the operation of law on any assets of the company, the fact that the liabilities are so secured shall be stated, together with a statement of the assets upon which they are secured, and where more than one class of liabilities is so secured their relative priorities with respect to payment of interest or profit and redemption.

13. No liability shall be shown in the balance sheet or the notice thereto at a value less than the amount at which it is repayable (unless the quantum of repayment is at the option of the company) at the date of the balance-sheet or, if it is not there repayable, at the amount at which it will first become so repayable thereafter, less, where appropriate, a reasonable deduction for discount until that date.

1. The profit and loss account shall be so made out as to disclose clearly the results of the company during the financial year covered by the account and shall show, arranged under the most convenient heads, the gross income and the gross expenditure of the company during the financial year disclosing every material feature and in particular the following:

(A) (i) the turnover and showing as deduction therefrom--
(a) commission paid to sole selling agents;
(b) commission paid to other selling agents; and
(c) brokerage and discount on sales.
(ii) income from investments, showing separately income from each associated undertaking and from other investments;
(iii) income from modaraba or modaraba certificates;
(iv) income arising from redeemable capital showing separately the income from each class of such capital:
(v) income by way of interest on loans and advances and other interest;
(vi) profit on sale of investments;
(vii) profit on sale of fixed assets;
(viii) income arising from unusual items,
(ix) income arising from prior period items; and
(x) other income.

(B) (i) the value of stock-in-trade, including raw materials and components, work in progress and finished products, as at the commencement and as at the end of the financial year; and
(ii) purchase of raw materials and components and finished products; or
(iii) instead of the information in (B) (i) and (ii) above, cost of raw materials and components consumed and cost of purchased finished goods sold.

(C) expenditure on--
(i) store and spare parts consumed;
(ii) fuel and power;
(iii) salaries and wages including bonus, contribution to provident and other funds and expenses on staff welfare (showing separately) aggregate amounts relating to directors (including the Chief Executive) and managing agents;
(iv) rent, municipal rates and provincial and local taxes;
(v) insurance;
(vi) repairs and maintenance; and
(vii) patents, copyrights, trade-marks, designs, royalties and technical assistance;
(viii) auditors remuneration and where joint auditors are appointed, the amount of remuneration in respect of each such auditor;
(ix) donations.

(D) (i) The amount provided for depreciation, renewals or diminution in the value of fixed assets. The value of the assets, the additions or depletions thereto shall be disclosed;
(ii) If such provision is not made by means- of a charge for depreciation, the method adopted for making such provision shall be disclosed;
(iii) where no such provision has been made, the reasons for not making it and the amount of depreciation which should have been provided and the quantum of arrears of depreciation, if any.

(E) (i) the share of profit of holders of redeemable capital distinguishing the amount paid and that payable in respect of each class of such capital];
(ii) interest on borrowings;
(iii) loss or provision for loss on redeemable capital showing separately the extent of loss or provision therefor in respect of each class of such capital];
(iv) loss on sale of investments;
(v) loss on sale of fixed assets;
(vi) debts written off as irrecoverable distinguishing between trade and other debts;
(vii) provision for doubtful or bad debts distinguishing between trade and other debts;
(viii) provision for diminution in value of investments;
(ix) loss or expenses arising from unusual items and provisions therefor;
(x) loss or expenses arising from prior period items and provisions therefor--;
(xi) (a) provision for taxation on income capital gains and other tax or taxes, showing separately the provision for liability in respect of the profit of the financial year and the provision for liability deferred due to timing differences and distinguishing, where applicable, between the provision for Pakistan taxation ant the provision for taxation elsewhere;

(b) provision for deferred liability for taxation on income for the financial year may exclude the tax effect of certain timing differences when there is reasonable evidence that these timing differences will not reverse for some considerable period (at least three years) ahead. There should also be no indication that after this period these timing differences as likely to reverse;

(c) where provision for taxation in respect of the profits of the period is reduced by the writing back of a part or the whole of the provision for deferred liability made in previous periods the amount written back shall be shown as deduction from the gross charge for taxation; and (m) other provisions for meeting specific liabilities, contingencies or commitments.

(F) (i) The amount set aside or proposed to be set aside as reserves, showing separately the respective amounts in respect of each item of reserve;
(ii) the amount of the dividend proposed.

2. The profit and loss arising from "hedge" and "forward" contracts, trading in "futures" and "badla (contango and backwardation)" ant other transactions of a similar nature, carried forward or completed by "meeting the difference" and not resulting in actual purchase or sale of stock-in-trade, shall not be deducted from or added to the cost of item (B) (ii) ant (iii) in paragraph 1 of this Part, and shall be shown separately in the profit and loss account.

3. 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. Value of items exported during the financial year shall also be shown provided such value exceeds twenty per cent. of the total turnover of the company.

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