PRESENTATION OF FINANCIAL STATEMENT AS PER Ind AS 1:
Ind AS 1 is considered as a basic standard, which is prescribed as the overall requirements for the presentation of the general purpose of financial statements and guidelines for their structure, i.e., components of financial statements, viz., balance sheet, statement of profit and loss (including other comprehensive income), statement of cash flows and notes are comprising from significant accounting policies, etc.
Further, the Standard has been prescribed as the minimum disclosures that have to be made in the financial statements and further explains the general features of the financial statements. The presentation requirements prescribed in the Standard are supplemented for the recognition, measurement and disclosure, which are the requirements set out in other Ind AS 1 for specific transactions and other events.
OBJECTIVE OF Ind AS 1:
This standard will usually go on prescribes with the basis for the presentation of the mainly general purpose of financial statements to mainly ensure comparability-
- With the entity’s financial statements of previous periods.
- With the financial statements of several other entities.
It sets mainly a out of a overall main type of requirements for in a presenting financial statements, a guidelines for their mainly type of a structure and a minimum requirements for their know type of content.
SCOPE OF Ind AS 1:
This Standard which can be mainly applicable on all the types of entities, including those for that present-
(a) Consolidated financial statements following Ind AS 110.
(b) Consolidated Financial Statements and Separate financial statements following Ind AS 27.
- This Standard is not applicable on the structure and content of condensed interim financial statements prepared following Ind AS 34 except for para 15 to 35 of Ind AS 1.
- This Standard that can use as the terminology of that can be mainly suitable for a profit-oriented entities, including known as the public sector of a business entities.
- If entities are performing non-profit activities in the private sector or the public sector by applying this Standard, they may be needed for the amendment of the descriptions used for particular type of a line items in the mention financial statements.
- Similarly, entities that are not having equity are defined in Ind AS 32
Instruments of finance: Presentation and entities whose share capital is not equity (e.g., some co-operative entities) may need to be adopted by the financial statement presentation of members’ or unit holders’ interests.
- General purpose financial statements (referred to as financial statements) and those intended for meeting the requirements of users who are not in a position usually require an entity to prepare reports tailored to their particular information needs.
- Impracticable: By Applying a requirement is a impracticable thus when a entity cannot apply it. This is just after making every type of reasonable effort to do so.
- Indian Accounting Standards (Ind AS) are the Standards may be prescribed under this Section 133 of the Companies Act, 2013.
- Material Information is material if it is omitted, misstated or obscured it could reasonably be expected for the decisions that are influencing the primary users of the general purpose of financial statements, which are based on those financial statements which are providing financial information about a reporting entity.
- Materiality depends on the magnitude or nature of information or even both. An entity can assess information, either individually or combined with other information. In the financial statements context, material can be taken as a whole.
- Information can be obscured if it is communicated in a way that it would have the same effect for primary users of financial statements to omitting or misstating that information.
- Notes contain information in addition to that presented in the balance sheet, statement of profit and loss, other comprehensive income, statement of equity changes and cash flow statement. Notes that are provided for narrative descriptions or disaggregation of items are presented in those statements, and information about items that are not qualifying for recognition in those statements.
- Owners are basically a holders of a instruments that can be classified as equity.
- Profit or loss is the mainly a total income of a fewer expenses, excluding the main components of basic other than a comprehensive income.
- Reclassification adjustments are those amounts which are reclassified to profit or loss in the current period, which can be recognized in other comprehensive income in the current or previous periods.
- The change in equity is total comprehensive income during a period which results from several transactions and other events, other than those which changes in resulting from transactions with owners in their capacity as owners.
- Other comprehensive type of income comprises of a items of a income and a expenses, which are includes as the reclassification or a adjustments that is cannot be recognized in a profit or loss as required or permitted by other Ind AS.
PURPOSE OF FINANCIAL STATEMENT Ind AS 1:
The primary objective of general purpose financial statements is to provide details about entities financial performance, financial position, and cash flows which is applicable for a wide range of users for making economic decisions.
For meeting the objective, financial statements provide information about an entity’s-
Income and expenses which are including gains and a losses.
Distributions and contributions to owners in their capacity.
Information, along with other information in the notes, assists users of financial statements for the prediction of the entity’s future cash flows and, in particular, their certainty and timing.
SET OF COMPLETE FINANCIAL STATEMENTS Ind AS 1:
A complete set of financial statements comprises-
- A balance sheet which is represented at the ending of the period.
- A profit and loss statement for the particular period.
- Statement of changes in equity for the particular period.
- A statement of cash flows for the particular period.
- Other explanatory information and comprising significant accounting policies.
- In respect of the preceding period comparative information.
- At the start of the preceding period, when an entity’s balance sheet is retrospectively applied on an accounting policy, it makes a retrospective restatement of an items in its financial statements or when it can reclassify these items in its financial statements.
An entity shall present a single profit and loss statement, which indicates profit or loss and various other comprehensive income which are presented in two sections. The sections are necessary for presenting together, with the profit or loss section presented first, followed directly by the other comprehensive income section.
Many entities present reports and statements (generally in annual reports) such as financial reviews by management, environmental reports, and value-added statements outside the financial statements. Such reports and statements which are from the outside of the financial statements are outside the scope of Ind AS.
GENERAL FEATURES OF FINANCIAL Ind AS 1:
Presentation of compliance with Ind AS and True and Fair-
Financial statements shall present an accurate and fair view of an entity’s financial position, financial performance, and cash flows. Presentation of accurate and fair view requires the faithful representation of the effects of transactions, other events and conditions following the criteria of definitions and recognitions for income, expenses, assets and liabilities set out in the Framework.
The applying of Ind AS with additional disclosure when necessary is presumed to result in financial statements that present an accurate and fair view.
An explicit and unreserved statement-
An entity whose financial statements are complied with the Ind AS 1 should create an unreserved and explicit statement of such compliance in the notes.
An entity shouldn’t describe the financial statements as complying with Ind AS unless they comply with Ind AS’s requirements. There may be disagreement with the auditor on the applicability of any Ind AS or particular requirement of any Ind AS, and accordingly, the auditor may qualify the audit report. Even in such a situation, the financial statements will be assumed to be Ind AS compliant.
Inappropriate accounting policies-
An entity cannot rectify inappropriate accounting policies by disclosing the accounting policies used or by notes or explanatory material.
Departure from the Requirements of an Ind AS 1
In the circumstances which are not frequent in management can conclude that compliance with any kind of requirement in an Ind AS would be misleading too much that it would be conflicting with the objective of financial statements which would set out in the Framework, the entity should depart from the requirement that if the relevant regulatory Framework is required, or otherwise it does not prohibit such a departure.
Financial statements are prepared under Ind AS that should be prepared on a basis of going concern unless the management is intended to liquidate the entity or cease the trading or has no realistic alternative but to do so. Management requires assessing the entity’s ability to continue as a going concern at the time of preparing the financial statements.
This assessment should cover the entity’s prospects from the end of the reporting period for at least 12 months. The 12 month period for considering the entity’s future is a minimum requirement; an entity cannot, for example, if financial statements are prepared on the basis of going concern if it is intended to cease operations for 18 months from the end of the reporting period.
The assessment of the entity’s status as a going concern will often be straightforward. A profitable entity with no financing problems will generally be a going concern. In other cases, management might need to carefully consider the entity’s ability to meet its liabilities as they fall due. Detailed of a cash flow and a profit forecasts might be required to satisfy management that the entity is a going concern.
ACCRUAL BASIS OF ACCOUNTING Ind AS 1
- The financial statements should be prepared by an entity, except information for cash flow by the usage of the accrual basis of accounting.
- When the accrual basis of accounting has been used, it allows an entity to recognize items such as income, expenses, equity, a assets and a liabilities, which are considered financial statements when it is satisfied with the criteria of definitions and recognition for those elements in the Framework.
MATERIALITY AND AGGREGATION
- An entity should present each material class of similar items separately. An entity shall present items of a different nature or function separately unless they are immaterialized except when it is required by law.
- Financial statements can result from processing large numbers of transactions or other aggregated events into classes according to their nature or function. The final stage in classification and aggregation is the presentation of classified and condensed data, which form the line of items in the financial statements. If a line of item is not individually material, it is aggregated with other items in those statements or notes. An item that is insufficiently material to warrant a separate presentation in those statements may need a separate presentation in the notes.
- An entity do not need to provide a specific disclosure which is required by an Ind AS if the information is not materialised except when the law is required.
OFFSETTING Ind AS 1
- An entity should not offset liabilities and assets or expenses and income unless permit is required by an Ind AS.
- An entity can report separately both assets and liabilities and income and expenses. Measuring net valuation of assets with allowances.
For example, if obsolescence allowances on inventories and doubtful debts allowances on receivables are not offsetting.
- Under Ind AS 115, Revenue achieved from Contracts with Customers usually requires an entity for measuring revenue from contracts received from the customers at the amount of consideration for which the entity is expecting to be entitled in exchange for transferring promised goods or services.
For example, the amount of recognized revenue reflects any trade discounts and volume rebates the entity allows. In the period of its ordinary activities, an entity can undertakes other transactions that are not generating revenue but are incidental for the main revenue in generating activities. An entity can present the results of such transactions when this kind of a presentation is reflecting the substance of the transaction or other event by netting any income with related expenses arising on the same transaction.
- In addition, an entity can be presented on the basis of net gains and losses which arises from the group of same transactions.
For example, foreign exchange gains and losses which is arising on financial instruments are held for trading. However, if they are material, an entity can present such losses and gains separately.
FREQUENCY OF REPORTING
- A complete set of financial statements should be represented by an entity which includes comparative information for at least annually.
- When an entity is changing the end of its reporting period and presents financial statements for longer period or less than one year, then an entity should be disclosed in addition to the period which is covered by the financial statements:
- A particular reason for using a longer or shorter period.
- The fact in which the amounts presented in the financial statements are not entirely comparable.
Minimum comparative information:
- An entity should present comparative information regarding the preceding period for all respected amounts which are reported in the current period’s financial statements which can be excepted when Ind AS permit or require otherwise.
- Information which can be comparative for narrative and descriptive information should be included if it is relevant to understand the current period’s financial statements.
An entity shall present as a minimum-
- 2 Balance Sheets.
- 2 Statement of Profit and Loss.
- 2 Statement of Cash Flows.
- 2 Statement of Changes in Equity.
- Related Notes.
Additional comparative information:
An entity may also present a comparative information in addition to the minimum comparative financial statements required by Ind ASs, as long as that information is prepared following Ind AS. This comparative information might consist of more than one statements which is referred to as a complete set of financial statements. But when it is needed it is not comprised of a complete set of financial statements. When this is the matter, the entity should present related note information for those additional statements.
Changes in policy of accounts, reclassification or retrospective restatement:
When an entity is applying for an accounting policy retrospectively or making a retrospective restatement of the items in its financial statements or reclassified items in its financial statements, it should present three balance sheets, as a minimum two of each of the other statements, and related notes.
An entity presents balance sheets as at for Ind AS 1
- The end of the current period.
- The end of the preceding period.
- The start of the preceding period.
- When an entity is required for presenting an additional balance sheet at the beginning of the preceding period, it must disclose the information as required by Ind AS 8 and the information as explained in the following points. However, it is not needed to present the related notes to the opening balance sheet at the beginning of the preceding period.
- When the entity is changing the presentation or classification of items in its financial statements, then the entity should reclassify as a comparative amounts unless reclassification is considered as impracticable.
When the entity is reclassifying comparative amounts, the entity shall disclose:
- The nature of the reclassification.
- The value of class of items or each item that is reclassified.
- The reclassification reason.
When it becomes impracticable to reclassify comparative amounts, an entity shall disclose:
- The reason for not reclassifying the amounts.
- If the amounts had been reclassified, the nature of the adjustments would have been made.
CONSISTENCY OF PRESENTATION in Ind AS 1
An entity should retain the presentation and classify the items in the financial statements from one period to the next unless:
- It is apparent, following a significant change like the operations of the entity or a review of the financial statements, that another classification or presentation would be much more appropriate to have in regards of the criteria for the selection and application of accounting policies in Ind AS 8.
- A change in presentation is required by an Ind AS.
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