Accounting & Presentation Treatment of Bank Fixed Deposits (Division I vs. Division II of Schedule III)

 

The classification and presentation of Bank Fixed Deposits (Term Deposits) under the Companies Act, 2013 and applicable accounting standards depend on two distinct metrics:

1. Original Maturity at Acquisition: Determines classification as a Cash Equivalent vs. Investing Activity/Other Bank Balance for Cash Flow Statement purposes.
2. Remaining Maturity from Reporting Date: Determines classification as a Current Asset vs. Non-Current Asset on the Balance Sheet.

 

Part A: Non-Ind AS Companies (Division I of Schedule III & AS)

1. Statutory Wording in Division I Schedule III

Under Part I – Form of Balance Sheet  II. Current Assets  (d) Cash and cash equivalents, Note 6(Q) provides:

Note 6(Q):

"Cash and cash equivalents shall be classified as:

(i) Balances with banks;

(ii) Cheques, drafts on hand;

(iii) Cash on hand;

(iv) Others (specify nature).

(v) Bank deposits with more than 12 months maturity shall be disclosed separately."

 

2. ICAI Guidance Note Clarification (Division I)

Because the statutory line item is titled "Cash and cash equivalents", but AS 3 restricts cash equivalents strictly to investments with an original maturity of three months or less, the ICAI Guidance Note on Division I addresses this drafting issue:

• Modification on the Face of Balance Sheet:

"To maintain consistency with AS 3, it is recommended that the line item on the face of the Balance Sheet be titled as 'Cash and bank balances' instead of 'Cash and cash equivalents'."

 

• Two Sub-heads:

The Guidance Note recommends showing two sub-classifications:

• (a) Cash and cash equivalents (complying with AS 3, original maturity  months).
• (b) Other bank balances (deposits with original maturity  months, but remaining maturity  months).
• Treatment of Deposits  Months Maturity:

"The maturity of a bank deposit should be considered from the reporting date (i.e., remaining maturity) and not from the date of deposit. Accordingly, bank deposits with remaining maturity of more than 12 months should be classified under 'Other non-current assets'."

 

Part B: Ind AS Companies (Division II of Schedule III & Ind AS)

1. Statutory Wording in Division II Schedule III

Division II aligns with Ind AS 7 and Ind AS 109, dividing bank balances directly on the face of the Balance Sheet under Current Financial Assets:

Face of Balance Sheet (Current Assets  Financial Assets):

(c) Cash and cash equivalents

(d) Bank balances other than cash and cash equivalents

Instructions for Non-Current Assets  Financial Assets  Others (Item IX):

(ii) "Bank deposits with more than 12 months maturity shall be disclosed under 'Other financial assets'."

2. ICAI Guidance Note Clarification (Division II)

The ICAI Guidance Note on Division II clarifies how these lines operate in tandem with Ind AS 7:

• Cash and Cash Equivalents (Line c):

"For the purpose of presentation in the Balance Sheet, Cash and cash equivalents shall be classified in accordance with Ind AS 7 'Statement of Cash Flows'."

 

Under Paragraph 7 of Ind AS 7, this covers deposits having:

"a short maturity of, say, three months or less from the date of acquisition."

• Bank Balances Other than Cash and Cash Equivalents (Line d):

Houses deposits with an original maturity of more than 3 months, provided their remaining maturity from the Balance Sheet date is  months.

• Other Financial Assets (Non-Current):

"As per Ind AS Schedule III, Bank deposits with more than 12 months maturity shall be disclosed under 'Other financial assets'. The maturity should be construed as remaining maturity of more than 12 months."

Summary Checklist for Classification

Scenario	Balance Sheet Classification (Division I - AS)	Balance Sheet Classification (Division II - Ind AS)	Cash Flow Statement Treatment
Original maturity  3 months	Current Assets  Cash and bank balances  Cash and cash equivalents	Current Financial Assets  Cash and cash equivalents	Part of Cash and Cash Equivalents
Original maturity  months, Remaining  months	Current Assets  Cash and bank balances  Other bank balances	Current Financial Assets  Bank balances other than cash and cash equivalents	Investing Activities (Placement/Maturity of Term Deposits)
Remaining maturity  months	Non-Current Assets  Other Non-Current Assets	Non-Current Financial Assets  Other Financial Assets	Investing Activities