International Accounting Standard (IAS) 1 Indian Accounting Standard (Ind AS) 1

1. WELCOMES YOU

2. IND-AS 1/ IAS 1 – PRESENTATION OF
FINANCIAL STATEMENTS
- Anand Banka

3. BACKGROUND…

4. Netherlands
Australia
France
Germany
Canada
UK
USA
Japan
Mexico
Ireland

5. HISTORY…
 Different countries, different standards
 Australia, Canada, France, Germany,
Japan, Mexico, Netherlands, USA, UK
and Ireland agreed to form IASC in June 1973
 India joined in 1974
 Nigeria, South Africa, Pakistan, Sri Lanka, Italy, China,
Japan, Singapore, Hong Kong, Malaysia, New Zealand,
…….. More than 130 countries across globe signed the
agreement
 One World, One Accounting Language!

6. IAS Name of the Standard Year AS Name of the Standard Year
1 Disclosure of Accounting
Policies
1974 1 Disclosure of Accounting
Policies
1979
2
Valuation and Presentation of
Inventories in the context of
the Historical Cost System
1975 2 Valuation of Inventories 1981
7
Statement of changes in
Financial Position
1977 3 Changes in Financial Position 1981
1982
Prior Period and Extraordinary
Items and Changes in
Accounting Policies
51978
Unusual and Prior Period
Items and Changes in
Accounting Policies
8
1982
Contingencies and Events
Occurring After the Balance
Sheet Date
4
1983
Accounting for Construction
Contracts
7
1978
1979
Contingencies and Events
Occurring After the Balance
Sheet Date
Accounting for Construction
Contracts
10
11

7. GLOSSARY
 IFRS – International Financial Reporting Standards
 IAS – International Accounting Standards
 IFRIC – International Financial Reporting
Interpretation Committee
 SIC – Standing Interpretation Committee

8. THE STANDARD….

9.  Fair Presentation
 Compliance with all IFRSs
 Going Concern
 Accrual basis of accounting
 Materiality
 Offsetting
 Comparatives (reclassification, when needed)
FEATURES OF FINANCIAL STATEMENTS

10. FAIR PRESENTATION
 Fair presentation requires 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 (IAS 1.15)

11.  Achieved by appropriate application of IFRSs
 Requires faithful representation of effects of
transactions, events and conditions in accordance
with recognition criteria set out in the Framework
 If compliance with an IFRS is misleading, departure
from that standard requires comprehensive
disclosure requirements
FAIR PRESENTATION

12.  Explicit and unreserved statement of compliance
 Compliance with all IFRSs
 Inappropriate accounting treatments can not be
rectified by disclosure
COMPLIANCE WITH ALL IFRSS

13.  Management shall make an assessment of an
entity’s ability to continue as a going concern
 Disclosure requirements if
 Significant uncertainties regarding ability to continue as
going concern
 Financial statements not prepared on going concern
basis should indicate the basis on which they are
prepared and the reason why not prepared on a going
concern basis
GOING CONCERN

14.  Separate presentation of material items of
dissimilar nature or function
 Immaterial items need not be presented separately
 Aggregate with amounts of similar nature or function
 If sufficiently material after aggregation, separate
presentation in notes required
MATERIALITY

15. OFFSETTING
 An entity shall not offset assets and liabilities or
income and expenses, unless required or permitted
by an IFRS.
 Allowed only when it reflects the substance of the
transaction
 Measuring assets net of valuation, e.g. doubtful
debts, is not offsetting
 Reimbursements are allowed to be netted off

16.  Assets
 Liabilities
 Equity
 Income and expenses / gains and losses
 Appropriations / Distributions
 Cash Flows
ELEMENTS OF FINANCIAL STATEMENTS

17.  Statement of Financial Position (SoFP)
 Statement of Comprehensive Income
 Income Statement
 Other comprehensive income (OCI)
 Statement of Changes in Equity (SOCIE)
 Statement of Cash Flows
 Notes to accounts / significant accounting policies
 A SoFP as at the beginning of the earliest comparative
period when
 Change in accounting policy
 Retrospective restatement/ reclassification
COMPONENTS

18. STATEMENT OF FINANCIAL POSITION

19. STATEMENT OF FINANCIAL POSITION

20. CURRENT ASSETS
 An asset shall be classified as current when it
satisfies any of the following criteria:
 It is expected to be realized in, or is intended for sale or
consumption in, the company’s normal operating cycle;
 It is held primarily for the purpose of being traded;
 It is expected to be realized within 12 months after the
reporting date; or
 It is cash or cash equivalent

21. OTHER ISSUES IN CURRENT/ NON-CURRENT
CLASSIFICATION
 Loans given to staff, deducted per month
 Loans from Bank with fixed EMI
 Capital Advances

22. CURRENT LIABILITIES
 A liability shall be classified as
current when it satisfies any of
the following criteria:
 It is expected to be settled in the
company’s normal operating cycle;
 It is held primarily for the purpose
of being traded;
 It is due to be settled within 12
months after the reporting date;
 The company does not have an
unconditional right to defer
settlement of the liability for at
least 12 months after the reporting
date

23. Revenue 800
Other income 100
Changes in inventories
of Finished goods & WIP 50
Raw materials and
consumables 150
Employee benefits
expense 350
Depreciation expense 200
Other expense 60
Total expenses (810)
Profit before tax 90
Income Statement
Classification by Nature Classification by Function
Revenue 800
Cost of sales (500)
Gross Profit 300
Other Income 100
Distribution (Selling
Cost)
(100)
Administrative
Expenses
(150)
Other Expense (60)
Profit before tax 90

24. STATEMENT OF COMPREHENSIVE INCOME
 Profit for the year
 Other comprehensive income
◦ items to be grouped on the basis of whether they are potentially reclassifiable to
profit or loss subsequently
◦ Disclose income tax relating to each component of other comprehensive income
 Total comprehensive income attributable to:
◦ Owners of the parent
◦ Non-controlling interests

25. OCI - COMPONENTS
 Components:
 changes in revaluation surplus
 remeasurements of defined benefit plans
 FCTR
 FVTOCI
 Cash Flow Hedge
 Change due to Credit Risk (for Financial Liabilities)
 changes in the value of the time value of options when separating
the intrinsic value and time value of an option contract and
designating as the hedging instrument only the changes in the
intrinsic value
 changes in the value of the forward elements of forward contracts
when separating the forward element and spot element of a
forward contract and designating as the hedging instrument only
the changes in the spot element, and changes in the value of the
foreign currency basis spread of a financial instrument when
excluding it from the designation of that financial instrument as
the hedging instrument

26. STATEMENT OF CHANGES IN EQUITY
 Total comprehensive income
 Effects of retrospective application of accounting policy
 Effects of retrospective restatement (prior period adjustment)
 Reconciliation between carrying amount at the beginning and
the end separately disclosing changes from:
◦ Profit or loss
◦ Each item of OCI
◦ Transactions with owners in that capacity

27. STATEMENT OF CHANGES IN EQUITY

28.  Basis of preparation
 Statement of compliance with IFRS
 Accounting policies
 Supporting information
 Other disclosures
NOTES

29.  Critical Management Judgments
 Assumptions and Sources of estimations
 Example: Impairment due to fall in market prices
 Capital management policies
OTHER DISCLOSURES

30. CRITICAL MANAGEMENT JUDGMENTS
 Examples –
 Substance over form issues
 Sub leases
 Sale of goods/ financing arrangements
 Existence of control over SPEs

31. CRITICAL ESTIMATES
 Examples -
 Recoverability of internally generated intangible assets
 Impairment of goodwill
 Useful lives of property, plant and equipment
 Fair value of derivatives and other financial instruments
 Long term employee benefit liabilities such as pension
obligations

32. Anand Banka
Consulting Director,
Talati & Talati Group
Email: anand.banka@talatiandtalati.com