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Thread: 01 Indian Accounting Standard (Ind AS) 1 - Presentation of Financial Statements

  1. #1
    IND-AS
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    Thumbs up 01 Indian Accounting Standard (Ind AS) 1 - Presentation of Financial Statements

    Indian Accounting Standard (Ind AS) 1

    Presentation of Financial Statements



    (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.).

    Objective

    1 This Standard prescribes the basis for presentation of general purpose financial statements to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities. It s ets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content.

    Last edited by IND-AS; 27-01-2011 at 04:09 PM.

  2. #2
    IND-AS
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    Thumbs up Scope of Indian Accounting Standard (Ind AS) 1 - Presentation of Financial Statements

    Scope of Indian Accounting Standard (Ind AS) 1

    Presentation of Financial Statements




    Scope


    2 An entity shall apply this Standard in preparing and presenting general purpose financial statements in accordance with Indian Accounting Standards (Ind ASs).

    3 Other Ind ASs set out the recognition, measurement and disclosure requirements for specific transactions and other events.

    4 This Standard does not apply to the structure and content of condense d interim financial statements prepared in accordance with Ind AS 34 Interim Financial Reporting. However, paragraphs 15–35 apply to such financial statements. This Standard applies equally to all entities, including those that present consolidated financial statements and those that present separate financial statements as defined in Ind AS 27 Consolidated and Separate Financial Statements .

    5 This Standard uses terminology that is suitable for profit -oriented entities, including public sector business enti ties. If entities with not-for-profit activities in the private sector or the public sector apply this Standard, they may need to amend the descriptions used for particular line items in the financial statements and for the financial statements themselves.

    6 Similarly, entities whose share capital is not equity may need to adapt the financial statement presentation of members’ interests.


  3. #3
    IND-AS
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    Thumbs up Definitions of Indian Accounting Standard (Ind AS) 1 - Presentation of Financial Statements

    Definitions of Indian Accounting Standard (Ind AS) 1

    Presentation of Financial Statements



    Definitions


    7. The following terms are used in this Standard with the meanings specified:

    General purpose financial statements (referred to as ‘financial statements’) are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs.

    Impracticable Applying a requirement is impracti cable when the entity cannot apply it after making every reasonable effort to do so.

    Indian Accounting Standards (Ind ASs) are Standards prescribed underthe Companies Act, 1956.

    Material Omissions or misstatements of items are material if they could,individually or collectively, influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor.

    Assessing whether an omission or misstatement could influence economic decisions of users, and so be material, requires consideration of the characteristics of those users. The Framework for the Preparation and Presentation of Financial Statements issued by the Institute of Chartered Accountants of India states in paragraph 25 that ‘users are assumed to have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence.’ Therefore, the assessment needs to take into account how users with such attributes could reasonably be expected to be influenced in making economic decisions.


    Notes contain information in addition to that presented in the balance sheet (including statement of changes in equity which is a part of the balance sheet), statement of profit and loss and statement of cash flows. Notes provide narrative descriptions or disaggregations of items pres ented in those statements and information about items that do not qualify for recognition in those statements.

    Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other Ind ASs.


    The components of other comprehensive income include:

    (a) changes in revaluation surplus (see Ind AS 16 Property, Plant and Equipment and Ind AS 38X) Intangible Assets);

    (b) actuarial gains and losses on def ined benefit plans recognised in accordance with paragraph 92 and 129A of Ind A S 19 Employee Benefits;

    (c) gains and losses arising from translating the financial statements of a foreign operation (see Ind AS 21 The Effects of Changes in Foreign Exchange Rates);

    (d) gains and losses on remeasuring available -for-sale financial assets (see Ind AS 39 Financial Instruments: Recognition and Measurement );

    (e) the effective portion of gains and losses on hedging instruments in a cash flow hedge (see Ind AS 39).

    Owners are holders of instruments classified as equity.

    Profit or loss is the total of income less expenses, excluding the components of other comprehensive income.

    Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods.

    Total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners.

    Total comprehensive income comprises all components of ‘profit or loss’ and of ‘other comprehensive income’.

    8. [Refer to Appendix 1)]


    8A. The following terms are described in Ind AS 32 Financial Instruments:

    Presentation and are used in this Standard with the meaning specified in Ind AS 32:

    (a) puttable financial instrument classified as an equity instrument (described in paragraphs 16A and 16B of Ind AS 32)

    (b) an instrument that imposes on the entity an obligatio n to deliver to another party a pro rata share of the net assets of the entity only on liquidation and is classified as an equity instrument (described in paragraphs 16C and 16D of Ind AS 32).



  4. #4
    IND-AS
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    Thumbs up Purpose of financial statements of Indian Accounting Standard (Ind AS) 1 - Presentation of Financial Statements

    Purpose of financial statements of Indian Accounting Standard (Ind AS) 1

    Presentation of Financial Statements


    FINANCIAL STATEMENTS


    Purpose of financial statements

    9 Financial statements are a structured representation of the financial position and financial performance of an entity. The objective of 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. Financial statements also show the results of the management’s
    stewardship of the resources entrusted to it. To meet this objective, financial statements provide information about an en tity’s:

    (a) assets;
    (b) liabilities;
    (c) equity;
    (d) income and expenses, including gains and losses;
    (e) contributions by and distributions to owners in their capacity as owners ;
    and
    (f) 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.



  5. #5
    IND-AS
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    Thumbs up Complete set of financial statements of Indian Accounting Standard (Ind AS) 1 - Presentation of Financial Statements

    Complete set of financial statements of Indian Accounting Standard (Ind AS)1

    Presentation of Financial Statements



    Complete set of financial statements

    10. A complete set of financial statements comprises:

    (a) a balance sheet as at the end of the period (including statement of changes in equity which is presented as a part of the balance sheet );

    (b) a statement of profit and loss for the period;

    (c) [Refer to Appendix 1 ];

    (d) a statement of cash flows for the period;

    (e) notes, comprising a summary of significant accounting policies and other explanatory information; and

    (f) 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, or when it reclassifies items in its financial statements.


    11. An entity shall present with equal prominence all of the financial statements in a complete set of financial statements.

    12. As per paragraph 81, an entity shall present the components of profit or loss and components of other comprehensive income as part of a single statement of profit and loss.

    13. Many entities present, outside the financial statements, a financial review by management that describes and explains the main features of the entity’s financial performance and financial position, and the principal uncertainties it faces. Such a report may include a review of:

    (a) the main factors and influences determining financ ial performance, including changes in the environment in which the entity operates, the entity’s response to those changes and their effect, and the entity’s policy for investment to maintain and enhance financial performance, including its
    dividend policy;

    (b) the entity’s sources of funding and its targeted ratio of liabilities to equity;
    and

    (c) the entity’s resources not recognised in the balance sheet in accordance with Ind ASs.

    14. Many entities also present, outside the financial statements, re ports and statements such as environmental reports and value added statements, particularly in industries in which environmental factors are significant and when employees are regarded as an important user group. Reports and statements presented outside financial statements are outside the scope of Ind ASs.


    Last edited by IND-AS; 27-01-2011 at 04:39 PM.

  6. #6
    IND-AS
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    Thumbs up General features - Presentation of True and Fair View and compliance with Ind ASs of Indian Accounting Standard (Ind AS) 1

    Presentation of True and Fair View and compliance with Ind ASs of Indian Accounting Standard (Ind AS) 1


    Presentation of Financial Statements


    General features





    Presentation of True and Fair View and compliance with Ind ASs

    15. Financial statements shall present a true and fair view of the financial position, financial performance and cash f lows of an entity. Presentation of true and fair view requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework. The application of Ind ASs, with additional disclosure when necessary, is presumed to result in financial statements that present a true and fair view.


    16. An entity whose financial statements comply with Ind ASs shall make an explicit and unreserved statement of such compliance in the notes. An entity shall not describe financial statements as complying with Ind ASs unless they comply with all the requirements of Ind ASs.

    17. In virtually all circumstances, presentation of a true and fair view is achieved by compliance with applicable Ind ASs. Presentation of a true and fair view also requires an entity:

    (a) to select and apply accounting policies in accordance with Ind AS 8 Accounting Policies, Changes in Accounting Estimates a nd Errors. Ind AS 8 sets out a hierarchy of authoritative guidance that management considers in the absence of an Ind AS that specifically applies to an item.

    (b) to present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information.

    (c) to provide additional disclosures when compliance with the specific requirements in Ind ASs is insufficient to enable users to understand the impact of particular transactions, other events and conditi ons on the entity’s financial position and financial performance.

    18. An entity cannot rectify inappropriate accounting policies either by disclosure of the accounting policies used or by notes or explanatory material.

    19. In the extremely rare circumstances in which management concludes that compliance with a requirement in an Ind AS would be so misleading that it would conflict with the objective of financial statements set out in the Framework, the entity shall depart from that requirement in the man ner set out in paragraph 20 if the relevant regulatory framework requires, or otherwise does not prohibit, such a departure.


    20. When an entity departs from a requirement of an Ind AS in accordance with paragraph 19, it shall disclose:

    (a) that management has concluded that the financial statements present a true and fair view of the entity’s financial position, financial performance and cash flows;

    (b) that it has complied with applicable Ind ASs, except that it has departed from a particular requirement to present a true and fair view;

    (c) the title of the Ind AS from which the entity has departed, the nature of the departure, including the treatment that the Ind AS would require, the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in the Framework, and the treatment adopted; and

    (d) for each period presented, the financial effect of the departure on each item in the financial statements that woul d have been reported in complying with the requirement.

    21. When an entity has departed from a requirement of an Ind AS in a prior period, and that departure affects the amounts recognised in the financial statements for the current period, it shall make t he disclosures set out in paragraph 20(c) and (d).

    22. Paragraph 21 applies, for example, when an entity departed in a prior period from a requirement in an Ind AS for the measurement of assets or liabilities and that departure affects the measurement of c hanges in assets and liabilities recognised in the current period’s financial statements.

    23. In the extremely rare circumstances in which management concludes that compliance with a requirement in an Ind AS would be so misleading that it would conflict with the objective of financial statements set out in the Framework, but the relevant regulatory framework prohibits departure from the requirement, the entity shall, to the maximum extent possible, reduce the perceived misleading aspects of compliance by di sclosing:

    (a) the title of the Ind AS in question, the nature of the requirement, and the reason why management has concluded that complying with that requirement is so misleading in the circumstances that it conflicts with the objective of financial statements set out in the Framework;
    and

    (b) for each period presented, the adjustments to each item in the financial statements that management has concluded would be necessary to present a true and fair view.

    24. For the purpose of paragraphs 19–23, an item of information would conflict with the objective of financial statements when it does not represent faithfully the transactions, other events and conditions that it either purports to represent or could reasonably be expected to represent and, consequ ently, it would be likely to influence economic decisions made by users of financial statements. When assessing whether complying with a specific requirement in an Ind AS would be so misleading that it would conflict with the objective of financial stateme nts set out in the Framework, management considers:

    (a) why the objective of financial statements is not achieved in the particular circumstances; and

    (b) how the entity’s circumstances differ from those of other entities that comply with the requirement. If other entities in similar circumstances comply with the requirement, there is a rebuttable presumption that the entity’s compliance with the requirement would not be so misleading that it would conflict with the objective of financial statements s et out in the Framework.

  7. #7
    IND-AS
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    Thumbs up Going concern of Indian Accounting Standard (Ind AS) 1- Presentation of Financial Statements

    Going concern of Indian Accounting Standard (Ind AS) 1


    Presentation of Financial Statements


    General features


    Going concern

    25. When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt up on the entity’s ability to continue as a going concern, the entity shall disclose those uncertainties. When an entity does not prepare financial statements on a going concern basis, it shall disclose that fact, together with the basis on which it prepared the financial statements and the reason why the entity is not regarded as a going concern.

    26. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. The degree of consideration depends on the facts in each case. When an entity has a history of profitable operations and ready access to financial resources, the entity may reach a co nclusion that the going concern basis of accounting is appropriate without detailed analysis. In other cases, management may need to consider a wide range of factors relating to current and expected profitability, debt repayment schedules and potential sou rces of replacement financing before it can satisfy itself that the going concern basis is
    appropriate.



  8. #8
    IND-AS
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    Thumbs up Accrual basis of accounting of Indian Accounting Standard (Ind AS) 1- Presentation of Financial Statements

    Accrual basis of accounting of Indian Accounting Standard (Ind AS) 1



    Presentation of Financial Statements

    General features



    Accrual basis of accounting


    27. An entity shall prepare its financial statements, except for cash flow information, using the accrual basis of accounti ng.

    28. When the accrual basis of accounting is used, an entity recognises items as assets, liabilities, equity, income and expenses (the elements of financial statements) when they satisfy the definitions and recognition criteria for those elements in the Framework.



  9. #9
    IND-AS
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    Thumbs up Materiality and aggregation of Indian Accounting Standard (Ind AS) 1- Presentation of Financial Statements

    Materiality and aggregation of Indian Accounting Standard (Ind AS) 1


    Presentation of Financial Statements

    General features


    Materiality and aggregation

    29. An entity shall present separately each material class of similar items. An entity shall present separately items of a dissimilar nature or function unless they are immaterial except when required by law.

    30. Financial statements result from processing large numbers of transactions or other events that are aggregated into classes according to their nature or function. The final stage in the process of aggregation and classification is the presentation of condensed and classified data, which form line items in the financial statements. If a line item is not individually material, it is aggregated with other items either in those statements or in the notes. An item that is not sufficiently material to warrant separate presentation in those statements may warrant separate presentation in the notes.

    31. An entity need not provide a specific disclosure required by an Ind AS if the information is not material except when required by law.

    Last edited by IND-AS; 27-01-2011 at 05:19 PM.

  10. #10
    IND-AS
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    Thumbs up Offsetting of Indian Accounting Standard (Ind AS) 1- Presentation of Financial Statements

    Offsetting of Indian Accounting Standard (Ind AS) 1


    Presentation of Financial Statements

    General features


    Offsetting

    32. An entity shall not offset assets and liabilities or income and expenses, unless required or permitted by an Ind AS.

    33. An entity reports separately both assets and liabilities, and income and expenses. Offsetting in the statements of profit and loss or balance sheet, except when offsetting reflects the substance of the transaction or other event, detracts from the ability of users both to understand the transactions, other events and conditions that have occurred and to assess the entity’s future cash
    flows. Measuring assets net of valuation allowances—for example, obsolescence allowances on inventories and doubtful debts allowances on receivables—is not offsetting.

    34. Ind AS 18 Revenue defines revenue and requires an entity to measure it at the fair value of the consideration received or receivable, taking into account the amount of any trade discounts and volume rebates the entity allows. An entity undertakes, in the course of its ordinary activities, other transactions that do not generate revenue but are incidental to the main revenue-generating activities. An entity presents the results of such transactions, when this presentation reflects the substance of the transaction or other event, by netting any income with related expenses arising on the same transaction. For e xample:

    (a) an entity presents gains and losses on the disposal of non -current assets, including investments and operating assets, by deducting from the proceeds on disposal the carrying amount of the asset and related selling expenses; and

    (b) an entity may net expenditure related to a provision that is recognised in accordance with Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets and reimbursed under a contractual arrangement with a third party (for example, a supplier’s warranty agreem ent) against the related reimbursement.

    35. In addition, an entity presents on a net basis gains and losses arising from a group of similar transactions, for example, foreign exchange gains and losses or gains and losses arising on financial instruments h eld for trading. However, an entity presents such gains and losses separately if they are material.

    Last edited by IND-AS; 27-01-2011 at 05:20 PM.

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