IND AS 1: Presentation of Financial Statement

1.     The Objective

IAS 1 Sets out the overall Requirements for the presentation of Financial Statements, Guidelines for their structure and minimum requirements for their content.

Note: Standards for recognizing, measuring and disclosing specific transactions are addressed in other standards. E.g. Where to disclose Inventory is in the financial statement is dealt with Ind AS 1 however the valuation part is dealt with by Ind AS 2.

Complete Set of Financial Statement should comprise of the following:

a.      Balance Sheet

b.      Statement of Profit and loss

c.       Statement of Change in equity

d.      Statement of Cash Flows

e.      Notes, Comprising Significant Accounting policies and other explanatory information

f.        Comparative Information in respect of the preceding period

g.      A balance sheet at the beginning of the preceding period in case an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements.

e.g. in case of any of the abovementioned event during FY 2018-19, the comparative has to be presented for FY 2017-18 and also balance sheet as at the beginning of 2017-18.

IAS 1 requires a clear identification of:

·         The financial statements -  Balance sheet or Profit loss etc.

·         The reporting Enterprise  - Name of the organization

·         Whether the statements are for the enterprise or for a group

·         The date or period covered

·         The presentation Currency

·         The level of precision (Thousand, Lakhs etc.)

2.     Schedule III

Ministry of Corporate affairs has divided the Schedule III (Format of Financial Statements) of Companies Act, into two divisions:

Division I: Contains General Instructions for preparation of standalone and consolidated financial statement of a company required to comply with Accounting Standards (AS) as per companies (Accounting Standard) Rules 2006.

Division II: Contains General Instructions for preparation of standalone and consolidated financial statement of a company required to comply with Ind AS as per companies (Accounting Standard) Rules 2006.

Division II has been further divided into three parts:

a.      Balance Sheet

b.      Statement of profit and Loss

c.       Consolidated Financial Statements

3.     Balance sheet

Difference in Balance sheet as per Ind AS and as per AS

Subject	Balance Sheet as per AS	Balance Sheet as per Ind AS
Format	Start with Equity and Liabilities First followed by assets	Start with Disclosure of Assets followed by Disclosure of Equity and Liabilities
Investment Property	Disclosed in the notes under “Non-Current Investment	Disclosed on the face of the balance sheet.
Goodwill	Disclosed in the notes under “Intangible Assets”	Disclosed on the face of the balance sheet.
Living Animal or Living Plant other than  bearer plant	No Such Separate heading under AS.	Disclosed under the Separate heading “Biological Assets other than bearer plant”.
Non-Current Trade Receivable and Payable	Other Non-Current Asset/Liability respectively.	Disclosed on the face of Balance sheet under the heading of “Financial Assets” and “Financial Liabilities”
Equity Share capital and Preference share capital	Only Share Capital is presented on the face of balance sheet in which both equity and Preference share capital are included.	Should be presented on the face of Ind AS balance sheet Separately.
Reserves and Surplus, Share application Money etc.	On the face of Balance Sheet	Under “Other Equity” after Equity share capital and preference share capital.
Net Current Income tax Liability	Under “Short Term Provisions  in the AS Balance Sheet.	On the face of balance Sheet
Capital Advances	Under Long term loans and advances	Under other Non-Current assets
Classification of other current assets	Not applicable	Under following two categories: a.      Advances other than capital advance b.      Others (specify nature)

Following are the additional things which have to be disclosed in Balance sheet by Ind AS Companies:

a.      A statement of Changes in Equity which includes changes in equity share capital and other equity.

E.g.

b.      A Reconciliation Statement reconciling carrying amounts at the beginning and end of the reporting period for

-          Investment properties

-          Goodwill

-          Biological assets other than bearer plants

The reconciliation should show additions or acquisitions, deletions or disposals, depreciation or impairment or amortization.

c.       Disclosure of valuation basis either in case of non-current or current investment is NOT required in Ind AS Balance sheet.

4.     Statement of Profit and Loss

Following are the additional requirements which have to be disclosed in statement of profit and loss by Ind AS Companies:

a.      As per Schedule III of the Companies act, 2013, statement of Profit and loss for Ind AS Companies shall comprise following two sections:

1^st : Profit and Loss Section

2^nd : The Other Comprehensive Income Section

Ind AS companies require to disclose Earning per Equity Share (Basic and diluted ) for the following:

-          EPS for Continuing Operations

-          EPS for Discontinued operations

-          Combined EPS for Continuing and Discontinued operations,

E.g.:

b.      Dividend paid on redeemable preference shares should be classified as Finance Cost

c.       IND AS companies shall disclose by way of notes any item of income or expenditure which exceeds 1% of the revenue from operations or Rs. 10,00,000 whichever is higher.

5.     Consolidated Financial Statements

Following are the additional requirements which have to be disclosed for consolidated Financial Statements by Ind AS Companies:

a.      The word “Minority Interest” has been replaced by the word “non-controlling interest”.

b.      “Total Comprehensive Income”  and “Other Comprehensive income” Should be disclosed in following bifurcation:

-          Attributable to “Non-Controlling Interest”

-          Attributable to “Owners of the parent”

e.g. If following are the “Other Comprehensive Incomes” and Total Comprehensive Income”

It should be disclosed in following way:

c.       Ind AS companies should disclose their share in other and total comprehensive income of subsidiaries, associates and joint ventures by way of a statement.

6.     Objectives of Financial Statements:

The Objective of general purpose financial statements is to provide information about the financial position, financial performance, and cash flows of an entity that is useful to a wide range of users in making economic decisions.

7.     Components of financial statements:

A complete set of financial statements should include:

-          A statement of financial position (Balance sheet) at the end of the period

-          A statement of comprehensive income for the period (Profit Loss)

-          A statement of changes in equity for the period

-          A statement of Cash flow for the period

-          Notes, Comprising a summary of accounting policies and other explanatory notes

When an entity applies accounting policy retrospectively or makes retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements, it must also present a statement of financial position (Balance sheet) as at the beginning of the earliest comparative period.

e.g. If company is makes any of the aforesaid change for F.Y. 2017-18, in such case the company must prepare financial statements for two comparative periods i.e. 2016-17 and 2015-16.

8.     Fair Representation and compliance with Ind AS:

IAS 1 requires that an entity whose financial statements comply with Ind AS make an explicit and unreserved statement of such compliance in the Notes. Financial statements shall not be described as complying Ind AS unless they comply with all the requirements of Ind AS (Including Interpretations).

In extremely rare circumstances, management may conclude that compliance with an Ind AS (IFRS) requirement would be so misleading that it would conflict the objective of the financial statements. In such case, the entity is required to depart from the Ind AS requirement with following detailed disclosure:

-          Nature of departure

-          Impact of Departure

-          Reasons of departure

9.     Going concern, Accrual Basis, Consistency, Materiality, Offsetting:

When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. Financial statements shall be prepared on going concern basis unless management either intends to liquidate the entity or to cease trading. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon entity’s ability to continue as a going conern, those uncertainties should be disclosed.

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

The presentation and classification of items in the financial statements shall 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 (IFRS).

Each Material class of similar items must be presented separately in the financial statements. Dissimilar items may be aggregated only if they are immaterial.

Assets and liabilities and income and Expenses, may not be offset unless required or permitted by an IND AS (IFRS).