AMENDMENTS TO FOURTH AND FIFTH SCHEDULES TO THE COMPANIES ORDINANCE, 1984

The Securities and Exchange Commission of Pakistan vide SRO 182(I)/2013 and 183(I)/2013 dated March 04, 2013 has made certain amendments to Fourth and Fifth Schedules of Companies Ordinance, 1984 in exercise of the powers conferred by Section 505 of the Companies Ordinance, 1984 read with clause (c) of Section 43 of the Securities and Exchange Commission of Pakistan Act, 1997.

SALIENT AMENDMENTS COMMON TO FOURTH AND FIFTH SCHEDULE

1. Additional requirement of disclosing the reasons in case of property/asset not being in the name of or possession or control of the company. 2. A new class of asset has been introduced under Property, Plant and Equipment as Major spare parts and stand-by equipment qualifying as Property, Plant and Equipment. 3. It is required to disclose trade debts receivable from related parties that are either past due or impaired along with their age analysis separately. 4. A new class of non-current liabilities has been introduced, namely, redeemable capital which qualies for recognition as a nancial liability. 5. Expenses to be classied according to nature or function as compared to previous requirement to classify according to function. 6. In case of provident fund/trust, the Company is required to disclose the following: o Disclosure with regards to provident fund/trust such as size of the trust, cost of investment, percent age of investment and fair value of investment. o Breakup of investments (in term of amount and percentage of the size of the fund/trust)in categories as provided in section 227 of the Ordinance. o A statement that investments out of provident fund have been made in accordance with provisions of section 227 of the Ordinance.

SALIENT AMENDMENT SPECIFIC TO FOURTH SCHEDULE

1. All listed companies are required to disclose number of persons employed as on the year end and average number of employees during the year.

SALIENT AMENDMENTS SPECIFIC TO FIFTH SCHEDULE

1. Criteria for Small Sized Entities of having employees not exceeding two hundred and fty at any time during the year omitted. 2. The companies having paid up capital of Rs. 500 million and above are required to disclose the capacity of an industrial unit, actual production and reason for shortfall. 3. All the unlisted companies including ESEs, MSEs and SSEs are required to disclose number of persons employed as on the year end. ESEs also required to disclose average number of employees during the year .

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CLAUSE FOURTH SCHEDULE

Part I 1

NATURE OF AMENDMENT REQUIREMENTS AS TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF LISTED COMPANIES
GENERAL Words International Accounting Standards has been replaced with International Financial Reporting Standards. Words generally accepted accounting principles has been replaced with International Financial Reporting Standards. Through this clause, the Company is now further required to disclose the reasons for the property or asset not being in the name of or possession or control of the company. REQUIREMENTS AS TO BALANCE SHEET A new class of asset has been added under Property, Plant and Equipment namely Major spare parts and stand-by equipment qualifying as Property, Plant and Equipment. A new disclosure requirement has been included which requires trade debts receivable from related parties that are either past due or impaired along with their age analysis to be disclosed separately. A new class of non-current liabilities has been introduced namely redeemable capital which qualies for recognition as a nancial liability. REQUIREMENTS AS TO PROFIT AND LOSS ACCOUNT Existing clause has been replaced with The prot and loss account shall present items of income and expense recognized in prot or loss using a classication based on either their nature or their function within the entity, whichever provides information that is reliable and more relevant. Previously, it was required to disclose separately the manufacturing, trading and operating results. Existing clause is substituted with Expenses classied according to their nature or function: Provided that an entity classifying expenses by function shall also disclose addition information on the nature of expenses. Previously, the expenses were required to be classied according to their function, with a requirement to provide additional information regarding the nature of expenses. Further, previously, sub categories of expenses according to function were dened (cost of sales, distribution cost, administrative expenses, other operating expenses and nance cost). These have now been excluded under the new clause.

2(vii)

Part II 1(i)(ca)

5(B)(iii)

8(A)(iva)

Part III 1

2(B)

2(C) 2(H)

Omission of the word operating from the heading other operating income. A new sub clause is inserted which requires the Company to disclose the number of persons employed as on the year end and average number of employees during the year. A new sub clause is inserted as under: In the case of provident fund/provident trust fund trust: aa Disclosure with regards to provident fund/trust: > Size of the fund/trust; > Cost of investments made; > Percentage of investments made; and > Fair value of investments. Break-up of investments (in terms of amount and percentage of the size of the fund/trust) in categories as provided in Section 227 of the Ordinance and rules formulated for this purpose. A statement that investments out of provident fund/trust have been made in accordance with the provisions of section 227 of the Ordinance and the rules formulated for this purpose.

4(iii)

bb c

Section 227 relevant extracts all moneys contributed to such funds shall either 1. be deposited > in a National Savings Scheme; > in a special account to be opened by the company for the purpose in a scheduled bank; or > where the company itself is a scheduled bank, in a special account to be opened by the company for the purpose either in itself or in any other scheduled bank; or 2. be invested in Government securities; or 3. in bonds, redeemable capital, debt securities or instruments issued by Pakistan Water and Power Development Authority and in listed securities subject to the conditions as may be prescribed by the Commission].

CLAUSE

NATURE OF AMENDMENT
The Employees Provident Fund (Investment in listed Securities) Rules, 1996 - relevant extracts Where it is decided to make investment, out of the provident fund constituted for the employees of a company, in securities of the companies listed on any stock exchange in Pakistan, such investment shall be subject to the following conditions, namely: Total investment in listed securities shall not exceed [thirty] thirty percent of the provident fund; Investment in shares or other listed securities of a particular company shall not exceed ve percent of its paid up capital; In the case of investment in the shares of listed companies, it shall be made only where such companies > have a minimum operational record of ve years; and > have paid not less than fteen per cent dividend to their share holders during the three preceding consecutive years; in the case of investment in securities other than shares of listed companies, it shall not be made unless such securities have been rated as an investment grade with minimum rating of BBB by a credit rating company registered with the Authority under the Securities and Exchange Ordinance, 1969 (XVII of 1969), and the rating is maintained as such at the time of investment; and Investment shall not be made in a security if it is publicly known that the issuer of the security has committed default while availing of any nancing facility.

FIFTH SCHEDULE

REQUIREMENTS AS TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF NON-LISTED COMPANIES
GENERAL The substitution in clause claries and noties that Non-listed companies that are not Medium-Sized companies or Small-Sized companies shall follow the International Financial Reporting Standards while Medium-Sized companies and Small-Sized companies shall follow Accounting and Financial Reporting Standards for Medium-Sized companies and Small Sized companies, respectively, as issued by the Institute of Chartered Accountants of Pakistan. However, Medium-Sized companies and Small-Sized companies are encouraged to follow International Financial Reporting Standards. The omission of sub clause has resulted in deletion of the inclusive denition of Debts. The omission of sub clause has resulted in amending the denition of Small Sized Company. The amendment deletes the criteria of employees not exceeding two hundred and fty at any time during the year for Small Sized Companies. This amendment results in the denition being consistent with that available in the Accounting and Financial Reporting Standards for Medium Sized Entities and Small Sized Entities. The omission and substitution in sub clause claries that any word or expression used under the Companies Ordinance, 1984 (the Ordinance) but not dened under the Ordinance or Fifth Schedule to the Ordinance shall be assigned the meaning as under International Financial Reporting Standards / Accounting and Financial Reporting Standards. Previously, the reference was made to generally accepted accounting principles, which has now been substituted. The substitution in clause 3 has resulted in new disclosure requirement for companies having paid up capital of Rs. 500 million and above. The substitution requires such entities to disclose the capacity of an industrial unit, actual production and reason for shortfall. Sub clause has been deleted relating to the disclosure requirement for change in accounting policy along with the reason for change and nancial effect of the change owing to the reason that the said disclosure requirements are already covered under International Financial Reporting Standards / Accounting and Financial Reporting Standards. Therefore, the pre-existing sub-clause was superuous. Through this clause, the Company is now further required to disclose the reasons for the property or asset not being in the name of or possession or control of the company. REQUIREMENTS AS TO BALANCE SHEET A new class of asset has been added under Property, Plant and Equipment namely Major spare parts and stand-by equipment qualifying as Property, Plant and Equipment. A new disclosure requirement has been included which requires trade debts receivable from related parties that are either past due or impaired along with their age analysis to be disclosed separately. A new class of non-current liabilities has been introduced namely redeemable capital which qualies for recognition as a nancial liability.

Part I 1(A)

2(ii) 2(vii)(b)

2(ix)

3 (i) & (ii)

Part II 1(i)(ca)

5B(iii)

8A(iva)

CLAUSE
Part III 1

NATURE OF AMENDMENT
REQUIREMENTS AS TO PROFIT AND LOSS ACCOUNT Existing clause has been replaced with The prot and loss account shall present items of income and expense recognized in prot or loss using a classication based on either their nature or their function within the entity, whichever provides information that is reliable and more relevant. Previously, it was required to disclose separately the manufacturing, trading and operating results. Existing clause is substituted with Expenses classied according to their nature or function: Provided that an entity classifying expenses by function shall also disclose additional information on the nature of expenses. Previously, the expenses were required to be classied according to their function, with a requirement to provide additional information regarding the nature of expenses. Further, previously, sub categories of expenses according to function were dened (cost of sales, distribution cost, administrative expenses, other operating expenses and nance cost). These have now been excluded under the new clause.

2A(ii)

2D

A new clause has been inserted which has introduced a new disclosure requirement whereby all the unlisted companies including Economically Signicant Companies, Medium Sized Companies and Small Sized Companies shall disclose number of persons employed as on the year end. Economically Signicant Entities are also required to disclose the average number of employees during the year. A new sub clause is inserted as under: In the case of provident fund/provident trust fund trust: aa Disclosure with regards to provident fund/trust: > Size of the fund/trust; > Cost of investments made; > Percentage of investments made; and > Fair value of investments. Break-up of investments (in terms of amount and percentage of the size of the fund/trust) in categories as provided in Section 227 of the Ordinance and rules formulated for this purpose. A statement that investments out of provident fund/trust have been made in accordance with the provisions of section 227 of the Ordinance and the rules formulated for this purpose.

bb cc

Section 227 relevant extracts all moneys contributed to such funds shall either 1. be deposited > in a National Savings Scheme; > in a special account to be opened by the company for the purpose in a scheduled bank; or > where the company itself is a scheduled bank, in a special account to be opened by the company for the purpose either in itself or in any other scheduled bank; or be invested in Government securities; or in bonds, redeemable capital, debt securities or instruments issued by Pakistan Water and Power Development Authority and in listed securities subject to the conditions as may be pre scribed by the Commission].

2. 3.

The Employees Provident Fund (Investment in listed Securities) Rules, 1996 relevant extracts Where it is decided to make investment, out of the provident fund constituted for the employees of a company, in securities of the companies listed on any stock exchange in Pakistan, such investment shall be subject to the following conditions, namely:1. Total investment in listed securities shall not exceed [thirty] thirty percent of the provident fund; 2. Investment in shares or other listed securities of a particular company shall not exceed ve per cent of its paid up capital; 3. In the case of investment in the shares of listed companies, it shall be made only where such companies > have a minimum operational record of ve years; and > have paid not less than fteen per cent dividend to their share holders during the three preceding consecutive years; 4. in the case of investment in securities other than shares of listed companies, it shall not be made unless such securities have been rated as an investment grade with minimum rating of BBB by a credit rating company registered with the Authority under the Securities and Ex change Ordinance, 1969 (XVII of 1969), and the rating is maintained as such at the time of investment; and 5. Investment shall not be made in a security if it is publicly known that the issuer of the security has committed default while availing of any nancing facility.

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