Ind AS 1 | Presentation of Financial Statement | Summary

IND AS 1 Presentation of Financial Statements is a basis of the whole IND AS reporting, as it provides a framework for the presentation of financial statements, guidelines for their format and least requirements for their content.

Ind AS 1 | Financial Statements

The main purpose of the financial statements is to provide financial information so that users of financial statements can take an economic decision using the financial statement. It provides the financial health of an entity in terms of financial positions, operating profitability and cash flow position.

When we say The complete set of financial statements compliant with Ind AS, we mean:

• a balance sheet as at the end of the period + Comparative of Prior Period
• a profit and loss statement  for the period + Comparative of Prior Period
• statement of other comprehensive income(OCI) for the period + Comparative of Prior Period
• a statement of changes in equity(SOCE) for the period
• a statement of cash flows for the period + Comparative of Prior Period
• notes and other explanatory information + Comparative of Prior Period

If because of the transition provision of Ind AS 101, "First Time Adoption of Indian Accounting Standards",  some accounting policy is being applied retrospectively, then also a Balance sheet as at the beginning of the earliest comparative period shall be presented in which cumulative retrospective adjustment shall be adjusted.

IND AS 1 explains the general characteristics of financial statements, such as fair presentation and compliance with IND AS, the accrual basis of accounting going concern, materiality, the regularity of reporting, comparative information, aggregation, offsetting,  and consistency of presentation.

Structure and Content

Every component of the financial statements shall include the name of the reporting entity, the information whether the financial statements are of an individual entity or a consolidated, the period covered and date of the reporting entity, the level of rounding and the presentation currency  (thousands, millions, crores…).

IND AS 1 prescribes the minimum content to be shown in the financial statements. So let’s look at it in detail.

Balance Sheets 

Before important amendments of IND AS 1, this statement was simply called “balance sheet”, however, it was renamed under IFRS. This can be one of the Carve-Outs because we still call it a balance-sheet

IND AS 1 requires the presentation of classified statements of financial position where current assets or liabilities are classified based on the operating cycle of the business. Basically, the asset or liability is current when it is expected to be recovered or settled within 12 months or its operating cycle after the reporting period.

With regard to a minimum content, the following line items shall be presented:

ASSETS	EQUITY AND LIABILITIES
Property, plant, and equipment	Issued capital and reserves attributable to owners of the parent
Investment property
Intangible assets	Non-controlling interests
Financial assets	Financial Liabilities
Investments accounted for using the equity method	Provisions
Biological assets
Inventories
Trade and other receivables	Trade and other payables
Cash and cash equivalents
Totals of assets in accordance with IFRS 5 Non-current assets Held for Sale and Discontinued Operations	Totals of liabilities in accordance with IFRS 5 Non-current assets Held for Sale and Discontinued Operations
Current tax assets	Current tax liabilities
Deferred tax assets	Deferred tax liabilities

Further sub-classifications of the line items can be disclosed either directly in the Balance Sheet or in the relevant notes, such as categorization of property, plant, and equipment into different classes, on basis of similarity. Also, some information having any relation to the share capital, reserves and a few others shall be included in the balance sheet, the statement of changes in equity or in the notes.

IND AS 1 as notified by the Ministry of Corporate affairs prescribes the precise format of the statement of financial position as mentioned in Division II of Schedule III to the Companies Act 2013. 

Statement of Comprehensive Income

The statement of comprehensive income has 2 basic elements:

• Profit or loss for the period: here, all items of income and expenses must be recognized.
• Other comprehensive income (OCI): Its items can be those that are recognized directly to equity or reserves, such as changes in revaluation surplus, gains or losses from the subsequent measurement of available-for-sale financial assets, etc.

As a least, the statement of comprehensive income must contain the following items:

PROFIT OR LOSS
Revenue
Gains and losses arising from the derecognition of financial assets at amortized cost
Finance costs
Share of the profit or loss of associates and joint ventures accounted for using the equity method
Tax expense
Post-tax profit/gain or loss of operations or assets in accordance with IFRS 5 (Non-current assets Held for Sale and Discontinued Operations)
Profit or loss
OTHER COMPREHENSIVE INCOME (OCI)
Each component of other comprehensive income classified by nature
Share of the other comprehensive income of associates and joint ventures accounted for using the equity method
Total comprehensive income

As per Carve-Out, Ind AS 1 provides you an option to prepare one single statement of profit loss in which you are not required to prepare OCI statement separately, or prepare both the statement separately. 

As per Indian GAAP, IND AS 1 prohibits to report any transaction or item which is an extraordinary item.

Profit or loss for the period, as well as total comprehensive income,  shall be allocated to Non-Controlling Interest and controlling entity in such a manner that the income is;

• attributable to non-controlling interests and
• attributable to owners of the parent.

The entity might choose to classify expenses recognized in profit or loss for the period by their nature or by their function.

IND AS 1 requires to disclose certain items separately, either in the notes or in the statement of profit or loss. These items are as follows: 

• disposals of investments, discontinuing operations, 
• disposals of property, plant, and equipment, 
• restructuring of activities and reversals of related provisions, 
• write-downs of inventories and property, 
• plant and equipment, their reversals, 
• litigation settlements and 
• other reversals of provisions.

Statement of Changes in Equity

As a least, the statement of changes in equity should contain the following items:

• total comprehensive income for the period, showing separately amounts which is attributable to owners of the parent and to non-controlling interests
• the effect of a retrospective application for each component of equity (if applicable)
• the reconciliation between the carrying amount at the beginning and the end of the period for each element of equity. Here, the following changes shall be disclosed separately:
  • those resulting from profit or loss
  • resulting from other comprehensive income
  • resulting from transactions with owners (contributions, distributions, and changes in ownership)

Notes to the Financial Statements

The notes are meant to be that document that accompanies the bifurcation of items of financial statements listed above. They should also provide additional information which is not contained in the figures of items of the balance sheet, profit or loss statement, the basis of preparing the financial statements and some additional information that might be material to the users of financial statements.

IND AS 1 set that the notes shall contain a statement of compliance with Ind AS, a summary of significant accounting policies applied, supporting information for the numbers presented in the financial statements and other disclosures.

Reference

1.) Statement of Indian Accounting Standards(Ind AS) issued by the Ministry of Corporate Affairs(MCA)

2.)  Knowledge material of the Institute of Chartered Accountants of India

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DISCLAIMER 

The information provided in this article is for general informational purposes only. All efforts have been made to provide accurate information in this document, however, it should not be perceived as professional or legal advice. The reader should consult a professional before making any decision based upon this document. Under no circumstance, the author or the publisher shall have any liability to you for any loss or damage of any kind incurred as a result of the use of this information.