IND AS 1 : PRESENTATION OF FINANCIAL STATEMENTS

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IND AS 1 : PRESENTATION OF FINANCIAL
STATEMENTS

(I) General Features of Financial Statements

(1) Fair Presentation and Compliance with IND AS:
An entity should make on explicit and unreserved statement of compliance
with IND AS
(2) Going Concern
(3) Accrual
(4) Materiality
(5) Consistency
(6) Comparative Reporting
(7) Offsetting:
Permitted only if the settlement happens on a net basis. E.g.: Provision for Tax
and Advance Tax

(II) Current and Non-Current Classification

Assets / Liabilities which are expected to be realized / discharged within 12 months
or operating cycle whichever is longer are considered to be current.

Operating Cycle: It is the time taken from the purchase of Raw material till the
realization from Debtors i.e. RM Holding Period + WIP processing period + FG
Holding Period + Debtors Collection Period – Creditors payment period.

(Refer Q. 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 19,20)

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 IND AS 1 : PRESENTATION OF FINANCIAL STATEMENTS

(III) Special Cases

Loan Repayable After 12 Months Non Current Liability

Breach of a material
condition before Balance Current Liability
Sheet Date
(Repayable on Demand)

Grace Period (Note 1)

(Before Balance Sheet Waiver
Date)

< 12 Months > 12 Months Before During Post After Post

from Balance from Balance Balance Balance Sheet Balance Sheet
Sheet Sheet Sheet Date Period Period

Current Non Non Non Current

Current
Liability Current Current Liability
Liability
Liability Liability [IFRS:CL]

Note 1

In case of anticipation of breach if an entity gets a grace period from the banker
in such a manner that the date for complying the condition is extended beyond the
Balance Sheet Date, then the classification will continue to remain Non-Current. This
is because if the extension is received before the date of breach then there is no
breach at all and hence the loan continues to remain a Non Current Liability.

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 IND AS 1 : PRESENTATION OF FINANCIAL STATEMENTS

Loan Repayable Before

12 Months  Current
Liability

No Refinancing / No Refinancing / Rollover

Roll over Agreed Till Agreed before Balance
Balance Sheet Date Sheet Date

Current Option of Unconditional /

Liability Banker Entity’s option
(Note 1)

Current Liability
Same Bank Different Bank

Non Current Current

Liability Liability

Note 1

In case Rollover / Refinancing is not agreed till the Balance Sheet Date, the
classification will remain current. An expectation / potential to Refinance / Rollover
is irrelevant

POST BALANCE SHEET PERIOD

WAIVER REFINANCING / GRACE

PERIOD

Reclassify to Non
Ignored
Current Liability
(Non Adjusting)
(Adjusting)

(Refer Q. 1,2,3) (Q 17,18 can be referred at the end of the course)

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IND AS 8 : ACCOUNTING POLICIES CHANGES IN ACCOUNTING ESTIMATES AND ERRORS

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IND AS 8 : ACCOUNTING POLICIES CHANGES IN
ACCOUNTING ESTIMATES AND ERRORS

(I) Accounting Policies

Refers to specific principles, rules and conventions applied by an entity while
presenting financial statements E.g.: FIFO

Retrospective Application

A Change in Accounting Policy should be retrospectively applied. This means applying

a new policy as if it always applied to all the earlier years i.e. the comparative years
presented and even years prior to the comparative years presented. An accounting
policy can be changed if:
(i) Required by and IND AS

OR

(ii) A voluntary change for better presentation

VOLUNTARY CHANGE

For Comparative Years

Prior to Comparative
Presented
Year Presented
[E.g.: Previous Years]

Cumulative adjustment should

Each relevant line item to be be made in the opening Retained
adjusted as if policy had always Earnings and Opening Balances for
applied. each Component Presented

KEY POINTS

1. A change in accounting policy needs to be retrospectively applied only if a

new policy is applied to the same transactions. In case an entity applies a
new policy for new transactions, then such a policy would not be considered
as a change in Accounting Policy and hence would not require retrospective
application. Example: Broker entering into construction business.

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IND AS 8 : ACCOUNTING POLICIES CHANGES IN ACCOUNTING ESTIMATES AND ERRORS

2. In case Accounting Policies are changed on the transition date on First time
adoption of IND AS, then IND AS 101 should be applied on the transition date.
3. Retrospective Application is Mandatory unless it is Impracticable.
Impracticability refers to situations where an entity cannot apply a policy
retrospectively even after making every reasonable effort to do so. E.g.: Lack of
Data due to destruction of Accounts during 8 years. Mere commercial difficulty
is not impracticability. An entity needs to explain in the notes the reasons for
impracticability
4. The following are not treated as changes in Accounting Policies:
•  Change in Method of Depreciation
•  Change from PPE to Investment Property due to nature of use.
• Change in Functional Currency due to a change in the Primary Economic
Environment

Refer Q. 1, 2, 3, 4, 5, 6, 7, 8, 9)

(II) Errors
Refers to mistakes, omissions, misstatements which get detected in the current
year but pertain to previous years. Errors should be retrospectively restated unless
impracticable. (similar to Accounting Policies)

KEY POINTS

1. Errors are clerical / mathematical / factual in nature

2. Accounting Estimates can never be treated as errors since accounting estimated
are linked to judgements and not facts and judgements are bound to change.
Hence a change in accounting estimate should be prospectively applied
3. Errors include:
a. Fraud
b.  Failure to use a Reliable Information

Error / Accounting Policy Change

Presentation of Third Balance

Sheet

Impacts Periods Prior to Comparative No Impact on Periods Prior to

Previous Year Presented Comparative Previous Year

Third B/S Not

Third B/S Needed
Needed

(Refer Q. 10, 11, 12, 13, 14,15)

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 IND AS 10 : EVENTS AFTER THE REPORTING PERIOD

5 IND AS 10 : EVENTS AFTER THE REPORTING PERIOD

(I) Post Balance Sheet Period

Starts immediately after the Balance Sheet date and ends when the accounts are
approved by the Board. The date when the accountant prepares, Auditor signs,
shareholder reviews, regulatory filing happens is irrelevant.

(Refer Q. 1, 2, 3)

(II) Events

EVENTS

ADJUSTING NON-ADJUSTING

Events occurring after the

Material events occurring after
Balance sheet Date which
the Balance Sheet Date which
give additional evidence of
pertain to new events after the
a condition existing on the
Balance Sheet Date.
Balance Sheet Date

Needs to be accounted Disclosure to be given

during the year in the Notes

Examples: Examples:
1. Settlement of Ongoing Litigation 1. Business
(Favourable / Unfavourable) Combination / Demerger
2. Insolvency of Existing Customer 2. Major Asset
3. Subsequent Sale of Inventory in Purchases / Sales
the Post Balance Sheet Period 3. Share Issue / Buyback
4. MD Remuneration based on Net 4. Dividend declared after the
Profits Balance Sheet Date.
5. Discovery of Errors / Frauds

(III)  Exceptions to Non-Adjusting Events

1. Going Concern
2. Subsequent waiver for the breach of a material condition in the loan

(Refer Q. 4, 5, 6, 7, 8, 9, 10, 11, 12, 13,14,15)

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