Investments under Schedule III: non-current and current, quoted and unquoted

In a small company the investments note is usually short: shares in a group company, a few listed shares bought by a director years ago, some mutual fund units, perhaps capital in a partnership firm. Short, but heavily prescribed. Investments disclosure under Schedule III Division I requires a classification by type, names of investees with their relationship to the company, quoted and unquoted aggregates with market value, the provision for diminution and, for partnership firms, details of every partner. This guide, part of our Schedule III guide, covers both notes line by line, the AS 13 measurement behind the figures, a worked note and the related checks. Ind AS companies use Division II, where most investments are financial assets measured under Ind AS 109 — not covered here.

Non-current or current: which note an investment goes to

AS 13 and Schedule III use different tests. AS 13 classifies an investment as current if it is by its nature readily realisable and intended to be held for not more than one year from the date it is made; everything else is long-term, even if readily marketable. Schedule III classifies assets as current or non-current at the balance sheet date, using the definitions in its General Instructions.

ICAI's Guidance Note on Division I (Revised January 2022) reconciles the two: AS 13 governs measurement and Schedule III governs presentation. So the portion of a long-term investment that is expected to be realised within twelve months of the balance sheet date is shown under current investments in the balance sheet — while it continues to be measured as a long-term investment. A debenture redeemable partly within twelve months is split between the two notes. The general test is covered in current and non-current classification under Schedule III.

Two exclusions are worth checking. Shares and securities held for sale in the ordinary course of business are stock-in-trade, not investments (AS 13). And short-term, highly liquid investments that are readily convertible into known amounts of cash and subject to an insignificant risk of changes in value may be cash equivalents under AS 3 — see cash and cash equivalents under Schedule III.

Non-current investments under Schedule III: the format

Note K of Part I requires non-current investments to be classified as trade investments and other investments, and further into these sub-heads:

1. Investment property;
2. Investments in equity instruments;
3. Investments in preference shares;
4. Investments in Government or trust securities;
5. Investments in debentures or bonds;
6. Investments in mutual funds;
7. Investments in partnership firms;
8. Other non-current investments (specify nature).

Under each sub-head, give the names of the bodies corporate invested in, indicating separately whether each is a subsidiary, an associate, a joint venture or a controlled special purpose entity, with the nature and extent of the investment, showing partly-paid investments separately. Then disclose:

• investments carried at other than cost, stated separately with the basis of valuation;
• the aggregate amount of quoted investments and their market value;
• the aggregate amount of unquoted investments;
• the aggregate provision for diminution in value of investments.

The Guidance Note fills several gaps in the text:

• Trade investment is defined neither in Schedule III nor in the Accounting Standards; it is normally understood as an investment in shares or debentures of another company made to promote the investor's own trade or business. Shares in a key supplier or distributor are a typical example.
• Nature and extent means the number and face value of shares; the Guidance Note advises stating clearly whether each is fully or partly paid.
• Controlled special purpose entity is not defined in the Act or the Accounting Standards, so no separate disclosure is required under that caption for now.
• Quoted means an investment with a quotation or permission to deal on a recognised stock exchange. Mutual fund units not quoted on an exchange stay unquoted even though NAV is published; their NAV-based value may be given as additional information.
• LLPs are bodies corporate, not partnership firms, so an investment in an LLP goes under the sub-head "Other non-current investments" (or "Other investments" among current investments) and the partner-wise details are not required.
• Application money paid for securities not allotted at the balance sheet date is shown as a separate line, under current investments if the investment is current in nature.

Current investments under Schedule III: the format

Note N lists seven sub-heads — the same as Note K without investment property: equity instruments, preference shares, Government or trust securities, debentures or bonds, mutual funds, partnership firms and other investments (specify nature). The same investee-wise details and partnership details apply. The differences:

• there is no trade / other split for current investments (the Guidance Note confirms this);
• the basis of valuation of individual investments is required for every current investment, not only those carried at other than cost;
• the aggregate provision for diminution is the cumulative write-down to fair value under AS 13.

AS 13: how the figures in the note are measured

Cost includes brokerage, fees and duties. On disposal of part of a holding, the carrying amount is taken at the average carrying amount of the total holding. A transfer from long-term to current is made at the lower of cost and carrying amount; from current to long-term, at the lower of cost and fair value.

For basis of valuation, the Guidance Note accepts disclosure as one of three bases as sufficient: at cost, at cost less provision for other than temporary diminution, or lower of cost and fair value. It also recommends showing the provision netted off against each long-term investment, in addition to the aggregate figure Schedule III requires.

In practice, the question that most often needs evidence is the unquoted equity in a loss-making group company carried at cost for years. Indicators under AS 13 include the investee's assets and results and expected cash flows. Where the investee's net worth has been wiped out and there is no credible revival plan, "cost" is hard to support; ask for the investee's latest audited accounts and management's assessment, and keep both on file.

Investments disclosure under Schedule III: a worked example for FY 2025-26

Sunrise Components Pvt Ltd (illustrative figures, ₹) holds the investments below at 31 March 2026. ABC Engineering Pvt Ltd is a subsidiary; Shree Traders is a partnership firm that distributes the company's products.

Partnership firm details (as at the company's balance sheet date): Shree Traders — total capital ₹16,00,000; partners and profit-sharing ratio: Sunrise Components Pvt Ltd 50%, Mr A. Mehta 30%, Mrs R. Mehta 20%. The Guidance Note suggests giving each partner's share in profits, since the company's share of capital is already visible; where it is not practicable to draw up the firm's accounts to the company's balance sheet date, accounts to a different date may be used, adjusted for significant transactions by analogy with AS 21 and AS 27; the gap should not exceed six months and is disclosed.

Three points the example illustrates. The DEF Ltd debentures are long-term under AS 13 (measured at cost) but redeemable within twelve months, so they sit in current investments. The LMN shares are written down to market because they are current. And the investment property is shown on its own and left out of the quoted/unquoted aggregates in this example — Schedule III does not say whether it should be included, so state your treatment.

Investments in subsidiaries, associates and joint ventures

In the company's own (standalone) statements, an investment in a subsidiary is accounted for under AS 13 (AS 21 says so expressly), normally at cost less any other-than-temporary decline; investments in associates are also measured under AS 13 there. The equity method and line-by-line consolidation belong to the consolidated statements — see consolidated financial statements under AS 21. The relationship labels in the note must agree with the related party disclosure and with the company's list of subsidiaries and associates.

Related checks in the same accounts:

• Other income: dividend income and net gain or loss on sale of investments are separate lines; dividends from subsidiary companies are disclosed separately; AS 13 asks for income and gains split between long-term and current investments. Share of profit from a partnership firm is disclosed separately.
• Additional regulatory information: investment property whose title deeds are not held in the company's name goes in the title deeds table; investments in a struck-off company appear in the struck-off companies table; layers of companies and the use of borrowed funds or share premium also touch investments — see additional regulatory information under Schedule III.
• Ratios: return on investment is one of the eleven ratios.

Section 186 and CARO: the compliance side

Section 186(4) requires the financial statements to disclose to members full particulars of investments made (along with loans, guarantees and security). Section 186(2) limits acquisitions of securities of other bodies corporate, together with loans, guarantees and security, to 60% of paid-up share capital, free reserves and securities premium, or 100% of free reserves and securities premium, whichever is more; beyond that, a prior special resolution is needed under section 186(3), except for acquiring securities of a wholly owned subsidiary (which must still be disclosed). Every investment also needs a Board resolution passed with the consent of all directors present at the meeting (section 186(5)). Section 186(1) restricts investment to not more than two layers of investment companies, and section 187 requires investments to be held in the company's own name, with listed exceptions such as a depository. Section 186(11) exempts certain investments, including those made by an investment company and rights or section 62(1)(a) allotments, from all but sub-section (1).

Where CARO 2020 applies, clause 3(iii)(b) asks whether investments made are not prejudicial to the company's interest, and clause 3(iv) whether sections 185 and 186 have been complied with. A loss-making investee carried at cost is relevant to both the provision question and clause 3(iii)(b) — see CARO 2020 clauses that are easy to get wrong.

Review checklist before signing

• Every investment ledger agrees to a holding statement, demat statement, MF account statement, share certificate or partnership deed at 31 March.
• Each holding is classified at the balance sheet date; amounts due within twelve months moved to current investments.
• Investee names, relationship (subsidiary, associate, joint venture), number and face value of shares and paid-up status given for both years.
• Quoted aggregates with market value, unquoted aggregates and the aggregate provision shown in both notes.
• Current investments at the lower of cost and fair value, individually; long-term investments reviewed for other-than-temporary decline, with evidence.
• Partnership firm: names of all partners, total capital and shares as at the company's balance sheet date; LLPs under the other investments sub-head.
• Section 186 particulars disclosed, limits and resolutions checked, and the CARO clauses answered consistently with the notes.

Frequently asked questions

Sources

• Companies Act, 2013 (as amended) — Schedule III, Division I, Part I Notes K and N; sections 186 and 187 (India Code)
• Schedule III amendment — G.S.R. 207(E), 24 March 2021 (Gazette)
• ICAI — Guidance Note on Division I – Non Ind AS Schedule III to the Companies Act, 2013 (Revised January 2022), paras 7.4, 8.7.5, 8.8.1, 9.2, 9.3
• AS 13 Accounting for Investments and AS 21 Consolidated Financial Statements — Companies (Accounting Standards) Rules, 2021 (G.S.R. 432(E))
• ICAI — Guidance Note on CARO 2020 (Revised 2022 Edition), clauses 3(iii) and 3(iv)

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