1. Requirement as to Balance Sheet.- The assets and liabilities shall be classified under the headings appropriate to the modarabas business, distinguishing as regards assets between fixed asset, long-term pre-payments and deferred costs, investments, loans and advances and current assets and regards liabilities between capital and reserves, Participation Term Certificates (PTC), long-term loans and deferred liabilities, and current liabilities and provisions.

2. Fixed assets.- (A) Fixed assets 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 buildings 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; and
(g)other;

(ii) intangible;

(a) goodwill;
(b) patents, copyright, trade marks and designs; and
(c) others.

(B) Under each sub-head, other than capital work in progress, the original cost, 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, upto 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) In case of revaluation;

(a) In the year of valuation the basis of revaluation and by whom revalued, e.g. independent professionals or modaraba company management and particulars of person or persons by whom revalued should be additionally disclosed (in the later year, the basis of revaluation).

(b) In the account for the period subsequent to the period of valuation, disclosure be restricted to total amount of revaluation, year of revaluation and the revaluation element included in the book value.

3. Long-term prepayments and deferred costs.- (A) Long-term pre- payments and deferred costs shall include prepayments for services or benefits to be received after twelve months from the date of the balance-sheet. Any material items shall be stated separately together with the basis on which item is being amortized or written off, and in respect of each item of deferred costs the reasons for carrying forward shall be stated. Such deferred costs should be written off during a period of five years or less.

(B) Preliminary expenses, discount allowed on the Issue of certificates, if any, and expenses incurred on the Issue of certificates Including any sums paid by way of commission or brokerage on the issue of certificates, to the extent not written off or adjusted, shall be treated as deferred costs and shown separately under each head.

4. Investment, loans and advances. (A) There shall be shown under separate sub-heads the aggregate amount respectively of the modarabas ·

(i) investment in and loans and advances to controlled firms and other associated undertakings;
(ii) investments in other quoted companies and modarabas.
(iii) investment in other unquoted companies and modaraba other than investment in subsidiary companies;
(iv) investments in immovable properties;
(v) Investments in PTC; and
(vi) other Investments, loans and advances.

(B) There shall be stated under sub-head 4 (A) (i) the names of the modarabas, controlled firms and other associated undertakings and the nature and extent of the Investment made and loans and advances given in each case, showing separately, in the case of each associated undertaking, shares of different classes and of different paid-up values. PTCs and in the case of each controlled firm, the amount Invested as capital and the amounts of loans and advances. in the case of loans and advances, the nature of collateral security shall be stated.

(C) There shall be stated under sub-head 4 (A) (11) the names of the companies and modarabas (in every case with the name of the modaraba company), In whose shares or certificates, investments have been made and the nature and extent of the investment made in each case, showing separately, shares of different classes and of different paid up values.

(D) There shall be stated under sub-head 4 (A) (iii) the names of the unquoted companies and modarabas (in every case with the name of the modaraba company) in whose shares or certificates, Investments have been made and the nature and extent of the Investment made in each case, showing separately, shares of different classes and of different paid-up values. Value of Investment in shares of unquoted companies and modarabas calculated by reference to net assets of the investee unquoted companies and modaraba on the basis of the latest available audited accounts (the period of which to be indicated) of such companies or modaraba and the names of their auditors to be disclosed.

(E) The mode of valuation of Investment, e.g. 'cost of market value,-shall be stated separately and, If Investments in quoted companies and modarabas are valued otherwise than at market value the aggregate amount of the market value thereof shall be shown.

(F) Loans and advances due for payment after a period of twelve months from the date of the balance-sheet shall be shown under this head.

(G) The following particulars shall be stated separately by way of a note in respect of sub-head 4 (A) (vi):

(a) aggregate amount due by the officers and employees of the modaraba and any of them severally or Jointly with any other person; and

(b) aggregate amounts due by associated undertakings.

(H) Percentage of the equity held by the modaraba in an investee company or modaraba where it exceeds 10% of the investee's total equity shall be disclosed by way of a note.

5. Current assets.- (A) Current assets shall be classified under sub-heads appropriate to the modarabas business, Including, where applicable, the following.

(i) stores and spare parts;
(ii) loose tools;
(iii) stock-in-trade, distinguishing where practicable, between;

(a) stock of raw materials and components;
(b) work in progress;
(c) stock of finished products; and
(d) other stock.

(iv) trade debts, which shall Include amounts due in respect of goods sold or services rendered or in respect of other contracted obligations but shall not include the amounts which are in the nature of loans or advances. Debts considered good and debts considered doubtful or bad shall be separately stated. Debts considered good shall be distinguished between those which are secured and those for which the company holds no security other than the debtor's personal security;

(v) loans and advances due for repayment within a period of twelve months from the date of the balance-sheet showing separately the amounts due from subsidiaries, controlled firms and other associated undertakings and also the amounts lent out to employees of the modaraba. Loans and advances considered good and loans and advances considered doubtful or bad shall be separately stated;

(vi) trade deposits and short term prepayments for which services or benefits are to be received within twelve months from the date of the balance-sheet and current account balances with statutory authorities;

(vii) bills receivable;

(viii) balance on current account with the officers and employees of the modaraba, the maximum amount held by any of them at any time since the date of incorporation or since the date of the previous balance-sheet, whichever is the later, being stated by way of a note. Such maximum amounts to be calculated by reference to month-end balance;

(ix) tax refunds due from Government, showing separately excise duties, customs duties, sales taxes, etc.; and

(x) cash and bank balances, distinguishing between:

(a)amount in hand;
(b)amount in transit; and
(c)balance with banks showing nature of balance, e.g. current, deposit, etc.

(B) In the case of sub-heads 5 (A) (i), (ii) and (iii), the respective basis of valuation shall
be stated. If the basis such as "cost", "net realizable value" or "cost or net realizable value, whichever is lower" is given, there shall also be given, to the extent practicable, a general Indication of the method of determining the "cost" or" net realizable value", e.g. "average cost", "first-in, first-out", or "last, in, first-out".

(C) In respect of each of the sub-heads 5 (A) (iv) and (v), the following particulars shall
be stated separately :-

(a) aggregate amounts due by officers and employees of modaraba and any of them severally or jointly with any other person;
(b) aggregate amount due by associated undertakings;
(c) maximum amount of debts, under each of the preceding Items (a) and (b), at any time, Since the date of floatation or since the date the previous balance- sheet, whichever is the later (by way of note). Such maximum amounts to be calculated by reference to month-end balance.

6. Assets in respect of which different methods or basis of valuation or of provision for depreciation or diminution in value are used shall be regarded as assets of different classes.

7. Capital and reserves.- (A) Capital and reserves shall be classified under the following sub-heads:

(i) reserves, distinguishing between capital reserves and revenue reserves. Capital reserves shall Include certificate premium account, surplus on revaluation of fixed assets, profit prior to certificate floatation or on re-issue of forfeited certificates or any reserve not available for distribution by way of revenue profit (to be specified), while revenue reserves shall Include general reserve, profit distribution 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. Only revaluation element Included in the book value of the fixed assets at the balance- sheet date be treated as capital reserves.

(B) There shall be shown in the balance-sheet'

(i) authorised amount of certificates;
(ii) issued amount of certificates, stating the number and value;
(iii) called up value of certificates and the amount called up;
(iv) calls unpaid as a deduction from called up value of certificates, distinguishing calls
unpaid by'

(a) modaraba company, its directors and officers and employees:
(b)officers and employees of the modaraba; and
(c)others.

(v) paid-up certificates, distinguishing, between;
(a) certificates allotted for consideration paid in cash;
(b) certificates allotted for consideration other than cash; and
(c) bonus certificates stating the number and value.

(vi) The number, description and amount of any certificate in the modaraba which any person has an option to subscribe for together with the following particulars of the option, that is to say-

(a) the period during which it is exercisable;
(b) the price to be paid for certificates subscribed for under it.

(C) Where circumstances permit, authorised, Issued, subscribed, called up and paid-up value of certificates may be shown as one item.

(D) The word "fund" in relation to any 'reserve', shall be used only where such a reserve is represented by specifically earmarked investments or other assets realisable as and when required at not less than the amount of the reserve fund.

8. Participation Term Certificates (PTC).- (A) The rate of profit and terms of redemption or conversion, if any, of the Participation Term Certificates issued shall be stated together with the earlier date on which they may be redeemed or converted into certificates and it shall also be stated if any sinking fund arrangement exists.

(B) There shall be stated, by way of a note or otherwise particulars of any redeemed PTC which the modaraba has power to re-issue.

(C) Where any of the modaraba's PTC are held by a nominee of, or a trustee for the modaraba, the amount thereof, calculated on the same basis as the total amount standing in the balance-sheet in respect of the PTC of that class, shall unless and until the PTC so held and re-issued or cancelled, be shown as deduction from the total by way of a note.

9. Long-term Profit and Loss sharing loans (PLS) and deferred liabilities.- (A) Long-term loans and deferred liabilities shall means loans and liabilities which become due for payment after twelve months from the date of the balance-sheet. Deferred liabilities shall include such other liabilities as are under recognised accounting principles appropriately so classified, e.g. deferred liability for taxation and customer's deposits. Every material items shall be stated separately.

Balance due to "workers participation fund" and "provident fund" payable within twelve months from the date of balance-sheet should be classified as current liability.

(B) Long-term (PLS) loans shall be classified as secured and unsecured and under each class shall be shown separately:

(i) PLS loans from banking companies and other financial institutions;
(ii) PLS loans form subsidiary companies, controlled firms and other associated undertakings;
(iii) PLS loans from modaraba company, its directors (including Chief Executive), officers and employees; and
(iv) other PLS loans.

(C) Where any of the long-term loans or any other deferred. liabilities are secured otherwise than by the operation of law on any assets of the modaraba, 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 of payment of profit and redemption.

10. Current liabilities.- (A) Current liabilities shall mean liabilities due and payable (other than liabilities the payment of which may, at the modaraba'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 modaraba's business, be classified under the following sub-heads :-

(i) Short term PLS, loans distinguishing between secured and unsecured and between PLS loans from-

(a) banking companies and other financial Institutions;
(b) subsidiary companies, controlled firms and other associated under takings;
(c) directors including Chief Executive, officers and employees of modaraba and modaraba company.

(ii) installments of long-term debt due;
(iii) others;
(iv) deposits;
(v) credits;
(vi) accrued expenses;
(vii) bills payable;
(viii) advance payments and unexpired discounts for the portion for which value is still to be given, e.g. in the case of newspapers, clubs and steamship companies;
(ix) profit accrued on PTC;
(x) other liabilities if any (to be specified), e.g. unclaimed profit distribution unpaid profit distribution;
(xi) provision for taxation showing separately excise duties, customs duties, sale-tax, .income-tax, etc.;
(xii) proposed profit distribution ;and
(xiii) other provisions, if any (to be specified).

(C) Where any short-term loans (PLS) or any other liabilities of the modaraba are secured otherwise than by the operation of law on any assets of the modaraba, 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 profit and redemption.

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

12. The matter referred to in the following sub-paragraphs shall be stated by way of note, or in a statement or report annexed, if not otherwise shown:

(i) Particulars of any charge on the assets of the modaraba to secure the liabilities of any other person, including, where practicable, the amount secured.

(ii) The general nature of any claim not acknowledged as debt and other contingent liabilities not provided for and, where practicable, the aggregate amount or estimated amount of those liabilities, if it is material.

(iii) Where practicable the aggregate amount or estimated amount, if it is material, of contracts for capital expenditure, so far as not provided for.

(iv) If in the opinion of the directors of modaraba company any of the current assets have not a value, on realisation in the ordinary course of the modaraba’s business, at least equal to the amount at which they are stated, the fact that they are of that opinion.

(v) The basis on which foreign currencies have been converted into rupees, where the amount of the assets or liabilities affected is material.

(vi) The basis on which the amount, if any, set aside for Pakistan income-tax is computed.

(vii) Except in the case of the first balance-sheet, the corresponding amounts at the end of the immediately preceding financial year for all items shown in the balance sheet. This requirement shall, in the case of modaraba preparing quarterly or half-yearly accounts, relate to the balance sheet as on the last day of the period which ended on the corresponding date of the period which ended on the corresponding date of the immediately preceding year, --

(viii) Other sums for which the modaraba is continentally liable. The aggregate amount of any guarantees given by the modaraba on behalf of the managers or other officers of the modaraba or any of them severally or jointly with any other person shall be stated separately, and, where practicable, the general nature and amount of each such contingent liability, if material, shall also be specified.

(ix) Where determinable the capacity of the industrial unit, actual production and the reasons for shortfall, if any, except in a case where the Registrar upon an application agree that such information need not be disclosed in the public interest.

(x) The general nature of any credit facilities available to the modaraba 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.

13. Where there has been any change in the basis of accounting, e.g. change in the mode of the stock-in-trade, change in the method of charging depreciation, such changes, together with the effects thereof, if material, shall be stated by way of a note. The auditor will state in his report whether or not he concurs with the change.

14. Where any item shown in the balance sheet 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.

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

16. Any information required to be given in respect of any of the items in the balance sheet shall, if it cannot be included in the balance sheet itself, be furnished in a separate schedule or note or schedules or notes to be attached to and to form part of the balance sheet.

17. The figures may be rounded off to the nearest thousand of rupees.

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

(A) (i) the turnover, that is, the aggregate amount for which sales are effected by the modaraba, and the gross income derived from rendering, giving or supplying services or benefits, and showing as deduction therefrom-

(a) commission paid to selling; and
(b) brokerage and discount on sales, other than the usual trade discount;

(ii) income from investments, showing separately income from each subsidiary company, from each controlled firm, from each associated undertaking and from other investments;

(iii) income arising from PTC;

(iv) profit on sale of investments;

(v) profit on sale of fixed assets;

(vi) profit in respect of transactions of an exceptional or non- recurring nature, not usually undertaken by the modaraba or not envisaged in the normal nature of business; and

(vi) other income, showing separately every material item and the nature of each such item;

(B) (i) the value of stock-in-trade, including raw materials and components, work in progress and finished products as at the commencement and the value at the end of the period;

(ii) purchase of raw materials and components and finished products;

(C) (i) stores 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, distinguishing between manufacturing salaries and wages, if any, and other salaries and also showing by way of a note the amount included in salaries and wages in respect of persons who are officers and employees of the modaraba;

(iv) rent, municipal rates and provincial and local taxes (excluding the taxes on income capital gains and wealth);

(v) insurance;

(vi) repairs and maintenance (being repairs to and maintenance of the modaraba's fixed assets);and

(vii) patents, copyrights, trade marks, designs, royalties and technical assistance;

(D) the aggregate amount of auditor's remuneration, whether fees expenses or otherwise, for services rendered as auditors or in any other capacity, showing separately the remuneration for services rendered as auditors and the remuneration for services rendered in any other capacity and stating broadly the nature of such other services.

(E) other expenses, showing separately every item of an exceptional or non-recurring nature and every material item;

(F) The amount provided for depreciation, renewal or diminution in value of fixed assets. The value of the assets by various groups, the additions or depletions thereto the rate at which depreciation is charged, shall be shown separately. Where such provision is not made by means of a charge for depreciation, the method adopted for making such provision shall be stated. If no provision has been made and the reasons for not making it shall be stated and the amount which should have been provided and the quantum of arrears of depreciation, if any, shall be disclosed.

(G) (i) the amount of profit/loss on borrowing showing separately the amount on long-term loans (PLS) and on short-term loans (PLS) and showing by way of a note the amount of profit/loss on borrowings from the modaraba company, its directors and others;

(ii) loss on sale of investments;

(iii) loss on sale of fixed assets;

(iv) debts written off as irrecoverable;

(v) provision for doubtful or bad debts;

(vi) provision for diminution in value of investments;

(vii) 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 period and the provision for liability deferred due to timing difference including the difference between the rates of depreciation allowed for purposes of taxation in income and those adopted by the company for the charge to profit and loss account, and distinguishing, where applicable, between the provision for Pakistan taxation and the provision for taxation elsewhere. Where the 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

(viii) other provisions for meeting specific liabilities, contingencies or commitments;

(H) (i) the amount of profit payable to the PTC holders;

(ii) the amount of profit payable to the modaraba company as their remuneration;

(iii) the amount set aside or proposed to be set aside as reserves, showing separately the respective amounts in respect of each item of reserves; and

(iv) the amount of proposed profit distribution to certificate- holders.

2. There shall be stated by way of a note the respective amounts included in items (G) (iv) and (v) of paragraph 1 of this Part for (a) debts due by the officer and employees and others of the modaraba and any of them severally or jointly with any other person, (b) debts due by associated undertakings.

3. The following shall be stated by way of a note:

(i) the aggregate amounts paid during the period to or in respect of or provided during the period for payment to or in respect of officers and the employees by the modaraba 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 officers and employees under appropriate heads such as:

(a) fees;

(b) managerial remuneration;
(c) remuneration or commission based on net profit or turnover;
(d) reimbursable expenses;
(e)pensions; gratuities; modarabas contribution to provident superannuation and other staff funds, compensation for loss or office and in connection with retirement from office;
(f) buying commission;
(g) selling agency commission, showing separately the amount provided for or paid to an associated undertaking or to an associated person or to a director or officer of the modaraba company or the modaraba or any of their partners;
(h) other allowances, and commission, including commission for guarantee, specifying the nature of the allowances and commission and the respective amounts;
(i) other perquisites and benefits in cash or in kind stating their nature and, where practicable, their approximate money values;
(j) the amount of commission to an associated person of the modaraba company or, to an associated person of a partner or a director or officer of the modaraba company as selling or buying agents of other concerns in respect of contracts entered into by such concerns with the modaraba;
(k) the calculation of the remuneration or commission based on net profits or turnover payable to the officers and employees of modaraba or any other person with relevant particulars; and
(l) the amounts, if material, by which any items shown therein affected by any change in the basis of accounting. Auditor must state in his report as to whether he agrees with such change or not;
(m) any material respects in which any items shown in the profit and loss account are affected by transaction of a sort not usually undertaken by the modaraba or otherwise by circumstances of an exceptional or non-recurrent nature;

(ii) in the case of a sale of an item of fixed assets otherwise than through a regular auction showing particulars of the original cost, accumulated depreciation charged thereon, the written down value, the sale price, the mode of disposal (e.g. by tender or negotiation); and the particulars of the purchaser, indicating whether such purchases was a director or officer or employee of the modaraba company or a certificate holder owning 20 per cent of the certificates of the modaraba.

(iii) the aggregate amounts of the purchases from and sales of goods, materials and services to the modaraba company, an associated undertaking of the modaraba company or to an associated person of a director or officer of the modaraba company or of the modaraba or any of their partners. The nature of transaction with the associated undertaking should be clearly stated.

4. A modaraba need not show the amount set aside as provisions other than those relating to depreciation, renewal or diminution in value of assets, if, no application made by it, it has been allowed by the Registrar to do so on being satisfied that the disclosure of such information would be prejudicial to the amount of such provision as to indicate that it has been so allowed by the Registrar.

5. The profit and loss account shall be so drawn up as to disclose separately manufacturing trading and operational results. In the case of a manufacturing concern, the cost of goods manufactured shall also be shown. Where the modaraba has more than one unit of operation or line of business the working results of each such unit or line of business should be separately given.

6. Except in the case of the first profit and loss accounts the corresponding amounts for the immediately preceding financial year for all items shall be shown in the profit and loss account. In the case of modaraba preparing quarterly or half-yearly accounts (sic) relate to the profit and loss account for the period which ended on the corresponding date of the immediately preceding year.

7. The information required to be given in respect of any of the items in profit and loss shall, if it cannot be included in the profit and loss account itself, be furnished in a separate schedule or note or schedules or notes to be attached and to form part of the profit and loss account.

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

1. For the purpose of this schedule unless the context otherwise requires-

(a) the expression "associated undertakings" means any two or more undertakings interconnected with each other in the following manner, namely :-

(i) if a person who is the owner or a partner, officer or director of an undertaking or who directly or indirectly holds or controls shares, carrying not less than twenty per cent of the voting power in such undertaking, is also the owner or a partner, officer or director of another undertaking or directly or indirectly holds or controls shares carrying not less than twenty per cent of the voting power in that undertaking; or

(ii) if the undertakings are under common management or common control or one is the subsidiary of another; and the shares of the issuer shall be deemed to be owned, held or controlled by a person if they are owned, held or controlled by that person or by the spouse, brother or sister or any lineal ascendant or descendant of that person and the person who is the owner or a partner, officer or director of, or directly or indirectly holds or controls shares carrying not less than twenty per cent of the voting power in an undertaking shall be deemed to be an "associated person" of the person who is the owner or a partner, officer or director of, or directly or indirectly holds or controls shares carrying not less than twenty per cent of the voting power in, another undertaking which is an associated undertaking of that undertaking ·

Provided that the modaraba company and modaraba under its management shall be deemed to be an undertaking and common director shall by virtue of their nomination or common shareholding or certificate holding by the financial institutions owned/or controlled by the Federal Government or

Provincial Government will not constitute "associated undertaking" as defined in the aforesaid sub-rule;

(b) the expression 'debts', shall include loans and advances and other receivables where it relates to amounts written off and provision for doubtful and bad debts;

(c) the expression "liability" shall include all liabilities in respect of expenditure contracted for and all disputed or contingent liabilities;

(d) the expression "manufacturing salaries and wages" shall mean those direct and administrative salaries and wages which under recognized accounting principles are so classified;

(e) the expression "provision" shall, subject to paragraph 2 of this Part mean 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 of which the amount cannot be determined with substantial accuracy;

(f) the expression "reserve" shall not, subject to aforesaid 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.

2. Any amount retained by way of providing for any known liability, if in excess of the amount which, in the opinion of the directors of the modaraba company, is reasonably necessary for the purpose, the excess shall be treated for the purpose of this schedule.

3. A firm shall be deemed to be controlled by a company if the latter controls the firm's management or is entitled to more than fifty per cent of its profits or is liable to bear more than fifty per cent of its losses.