12.30.2002

Indian Accounting Standard : Ind AS 1: Presentation of Financial Statements

Indian Accounting Standard 1 sets out the overall framework and responsibilities for the presentation of financial statements, guidelines for their structure and minimum requirements for the content of the financial statements. It does not however prescribe any fixed format for presentation of Financial Statements. It applies to all general purpose financial statements based on Ind AS.

To meet that objective, financial statements provide information about an entity's Assets; Liabilities; Equity; Income and expenses, including gains and losses; Other changes in equity; and Cash flows. This information, along with other information in the notes, assists users of financial statements in predicting the entity's future cash flows and, in particular, their timing and certainty.

Components of financial statements

Indian Accounting Standard 1 defines a complete set of Financial Statements to include the following:

 a Balance Sheet as at the end of the period;

 a Statement of Profit and Loss for the period;

 a statement of changes in equity for the period;

 a statement of cash flows for the period; (earlier referred to as cash flow statement)

 notes, comprising significant accounting policies and other explanatory information; and

 comparative information in respect of the preceding period;

 a Balance Sheet as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements

Reports that are presented outside of the financial statements -- including financial reviews by management, environmental reports, and value added statements -- are outside the scope of Ind ASs.

Basis of Preparation of Financial Statements

         Fair presentation and Compliance with Ind AS: The financial statements must present fairly the financial position, financial performance and cash flows of an entity. Ind AS 1 requires that an entity whose financial statements comply with all the requirements of every Ind ASs, to make an explicit and unreserved statement of such compliance in the notes. In extremely rare circumstances, management may conclude that compliance with an Ind AS requirement would be so misleading that it would conflict with the objective of financial statements set out in the Framework. In such a case, the entity is required to depart from the Ind AS requirement, with detailed disclosure of the nature, reasons, and impact of the departure. However, inappropriate accounting policies cannot be rectified either by disclosure of the accounting policies used or by notes or explanatory material.

          Going Concern: An entity preparing Ind AS financial statements is presumed to be a going concern. If management has significant concerns about the entity's ability to continue as a going concern, the uncertainties must be disclosed. If management concludes that the entity is not a going concern, a series of disclosures like the basis on which the financial statements are prepared and the reasons why the entity is not regarded as going concern should be stated.

Accrual basis of accounting: Ind AS 1 requires that an entity prepare its financial statements, except for cash flow information, using the accrual basis of accounting.

Consistency of Presentation: The presentation and classification of items in the financial statements should be retained from one period to the next unless a change is justified either by a change in circumstances or a requirement of a new Ind AS.

Materiality and Aggregation: Each material class of similar items must be presented separately in the financial statements. Dissimilar items may be aggregated only if they are individually immaterial and are of similar nature or function. The aggregation must not hamper the understandability of the financial statements by obscuring material information with immaterial once.

Offsetting: Assets and liabilities, and income and expenses, should not be offset unless required or permitted by a Standard.

Comparative Information: Ind AS 1 requires that comparative information must be disclosed in respect of the previous period for all amounts reported in the financial statements, both face of financial statements and notes, unless another Standard requires otherwise. When the presentation or classification of items in the financial statements is amended, comparative amounts should be reclassified unless the reclassification is impracticable.

Frequency of reporting: Financial statements are usually prepared annually. If the annual reporting period changes and financial statements are prepared for a different period, then the enterprise must disclose the reason for the change and a warning about problems of comparability.

Structure and Content

The financial statements should be identified clearly and each component of the financial statements should be identified clearly. The following information should also be displayed prominently and repeated when necessary for proper understanding of the information presented:

Name of the reporting entity and any change in that information from the preceding reporting date.

Whether the statements are for an entity or for a group.
The date or period covered.
The presentation currency
Level of rounding used in presenting amounts (thousands, millions etc).

Information to be presented in the Balance Sheet

As a minimum, the Balance Sheet should include line items that present the following amounts:

            a)  property, plant and equipment;

         b)   investment property;

         c)   intangible assets;

         d)  financial assets (excluding amounts shown under (e), (h) and (i) below);

         e)  investments accounted for using the equity method;

         f)   biological assets;

         g)   inventories;

        h)    trade and other receivables;

         i)   cash and cash equivalents;

      j)  The total of assets classified as held for sale and assets included in disposal groups classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations;

        k)  trade and other payables;

        l)   provisions;

          m)  financial liabilities (excluding amounts shown under (k) and (l) above);

         n)  liabilities and assets for current tax, as defined in Ind AS 12 Income Taxes;

        o)   deferred tax liabilities and deferred tax assets, as defined in Ind AS 12;

          p)  liabilities included in disposal groups classified as held for sale in accordance with Ind AS 105;

          q)  minority interest, presented within equity; and

          r)  Issued capital and reserves attributable to owners of the parent.



Current/ Non- current distinction

Ind AS1 states that an entity should make a distinction between current and non- current assets and liabilities, except when the presentation based on liquidity provides information that is more reliable and relevant.

Information to be presented either in the Balance Sheet or in the notes

An entity should disclose further sub-classifications of the line items presented, classified in an appropriate manner. The details to be provided would depend on the requirements of Ind AS and on the size, nature and function of the amounts involved.

Regarding share capital and reserves, the entity should disclose the following on the face of the Balance Sheet or in the notes:

                  Number of shares authorised
                    Number of shares issued and fully paid and issued but not fully paid
                     Par value of shares or that shares have no par value
Reconciliation of shares outstanding at the beginning and the end of the period
Description of rights, preferences, and restrictions
Shares held by the entity, including shares held by subsidiaries and associates
Shares reserved for issuance under options and contracts
A description of the nature and purpose of each reserve within owners' equity

Statement of Profit and Loss

Ind AS 1 requires all non-owner changes in equity to be presented in single Statement of Profit and Loss.

Information to be presented on the face of the Statement of Profit and Loss

The following information should be disclosed on the face of the Statement of Profit and Loss, together with any additional headings or sub-totals as may be required by individual standards or that may be required to give a fair presentation of the entity's performance

  Revenue

  Finance costs

  Share of the profit or loss of associates and joint ventures accounted for using the equity method

  Tax Expenses

  A single amount comprising the total of

          The post-tax profit or loss of discontinued operations and

          The post-tax gain or loss recognised on the disposal of the assets or disposal group(s)   
                constituting the discontinued operation

  Profit or loss

  Each component of other comprehensive income classified by nature

  Each component of other comprehensive income of associates and joint venture accounted using equity method; and

  Total comprehensive income

The following items must also be disclosed on the face of the Statement of Profit and Loss as allocations of

a) profit or loss for the period:

profit or loss attributable to minority interest; and

Profit or loss attributable to equity holders of the parent.

b) Total comprehensive income for the period as:

  Comprehensive income attributable to minority interest; and
Comprehensive income attributable to equity holders of the parent.

All items of income or expense recognised in a period must be included in profit or loss unless a Standard requires otherwise.

No items may be presented on the face of the Statement of Profit and Loss or in the notes as extraordinary items.

Following items need to be disclosed either on the face of the statement of profit & loss or in the notes, if material:

  Write-downs of inventories to net realisable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs;

  Restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring;

  Disposal of items of property, plant and equipment;

  Disposal of investments;

  Discontinued operations;

  Litigation settlements; and

  Other reversals of provisions.

Expenses should be analysed either by nature of expenses (raw materials, staffing costs, depreciation, etc.) or by function (cost of sales, selling, administrative, etc.) either on the face of the statement of profit & loss or in the notes. If an enterprise categorizes by function, additional information on the nature of expenses including depreciation, amortisation expense and employee benefits expense must be disclosed.

The amount of dividends recognised as distributions to equity holders during the period and the related amount per share should be disclosed on the face of the Statement of Profit and Loss or the statement of changes in equity or in the notes.



Statement of Cash Flows

The detailed requirements for preparation and presentation of Statement of Cash Flows have been dealt in Ind AS 7 and therefore has been discussed in forthcoming section.

Statement of Changes in Equity

An entity must present a statement of changes in equity showing in the statement:

Total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests;

For each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with Ind AS 8; and

For each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from:
   profit or loss;
   each item of other comprehensive income: and
     transactions with owners in their capacity as owners, showing separately contributions by and 
          distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control.

Notes to the Financial Statements

The notes must:

present information about the basis of preparation of the financial statements and the specific accounting policies used;

disclose any information required by Ind ASs that is not presented on the face of the Balance Sheet, Statement of Profit and Loss, Statement of Changes in Equity, or Statement of Cash Flows;

provide additional information regarding any item presented in above statements if that is deemed relevant to an understanding of that item; and

be cross-referenced from the face of the financial statements to the relevant note.

Indian Accounting Standard 1 suggests that the notes should normally be presented in the following order:

  A statement of compliance with Ind ASs;
  The significant accounting policies applied, including:
        the measurement basis (or bases) used in preparing the financial statements and
        the other accounting policies used that are relevant to an understanding of the financial 
                statements ;

  Supporting information for items presented on the face of the financial statements, in the order in which each statement and each line item is presented;

  Other disclosures, including:
     contingent liabilities and unrecognised contractual commitments and
     non-financial disclosures, such as the entity's financial risk management objectives and policies.