exper a . san roy operating, njectives of Financial Statements: The ) provide necessary information interested parti (i provide information about the efficiency or ‘ regarding proper utilisation of the Scarce ierwise of the management, éi provide information for predictions (Mini sources; to evaluate the earning capacity of the fir by i financial position, a statement of ables oar ee satement of statement of financial activities to the colle tile siectiay ote ops sot . ested parties; v) facilitate decisions regarding the changes in the mann f rm utilisation, preservation and distribution of scarce resea eee (vi) facilitate decisions regarding replacement of fixed assets and expansion of the firm: (vi) provide necessary data to the government for taking proper decisions on duties, taxes and price control etc. and for some legal and contro! purposes; - (viii) initiate remedial measures for the deviations between the actual and budgeted performances; (x) provide data to the managers for internal reporting and formulation of overall policies; (x) safeguard the interest of shareholders who are not allowed to go through the day to day affairs of the firm; (9) help to settle disputes arising from High court and Supreme court. Arbitrators etc, and (xi) help credit rating agencies to determine the rating of the firm. finanei ae " Statements are Prepared mainly to the financial activities to the ial forecasting); iv)2 mmion users of fir ina of Financial Statements: ‘The most co! inanci wae 5 Owiletn The first and foremost user of the financial statements ito o ital to the firm. They are curious to know who provide onde ‘on sound lines or not and whether teen business aaa esa or not. They always keep an eye on the return grt being wi sais iyean get good pieces of information by comparing the a ‘ inv . s f various years. ; , statements 0! t; The management goes through the financial statem i) Management and growth of the firm. The financial statements are ro assess O° ihe perspective of liquidity, profitability, cash flows, asset, “ looked at balances, fund requirements, debt to be paid, project fe liabilities, Sa day to day operational activities. To put it simply, finan i eae needed by the management to make decisions about the Dusieg oats joyees: Apart from salary and wages taken every month, the employe, ia et bonus atthe end of the year. Bonus is linked oth po aby the frm. In view of this, the employees are interested inthe fancy statements of the firm. . . (@) Creditors: The creditors are the persons who supplies goods on credit the firm. Before granting credit, creditors satisfy themselves about the credi worthiness of the firm. The financial statements are immensely helpful to themir making such an assessment. ( Banks and Financial institutions: The banks and financial institution: provide loans to the firm. It is natural that they watch keenly the performance o| firm to find whether it is making progress as projected to ensure safety ani recovery of loans sanctioned. With the help of firm’s cash flow statement ant segment reports, the banks and financial institutions could assess the cast position and find whether the firm is making progress as planned and projected (vi) Investors and potential investors: Every investment involves risk and the investors cannot have direct control over business affairs, In view of this, te investors have to depend on the available accounting information and se answers to the questions such as: What is the earning capacity of the firm oad how safe is its investment? (vii) Government and its authorities: The government is dependent on final statements ofthe firm to compile national income accounts and other informatie The information so available enables it to take policy decisions. Gover! ae oe oe of taxes from the firm such as Income tax, GST, vara xelse duty etc. The government authoriti : rect tax from an analysis of financial Statements. mes Peal seas Be © ‘ tele Hehe Securities and Exchange Board of India and other: agencies and in the financial statements to see whether the firms are within itsi™ interest of the investors is well protected,Objectives of Accounting standards The main objectives of accounting standards are: @ To provide a set of standard accounting policies, valuation norms and @) To promote the dissemination of timely and useful financial information all the stakeholders and users. (Gi) To enhance the quality of financial reporting by promoting comparabilit}, consistency and transparency, SsAccounting Standards 18.5 (wv) To ensure disclosure of accounting policies and treatments where important information is not otherwise statutorily required to be disclosed. (\) To reduce or eliminate if possible, accounting alternatives thereby leading to better inter firm and intra firm comparison of financial statements. (Hi) Toreduce scope for creative accounting i.e., twisting of accounting policies to prepare financial statements favourable to a particular interest group.gies SSA SADUSl Teseryeg, ent of India has followed the path of Convergence rather js Ov" ERS, some differences exist between Ind.AS and IFRS. sa ‘of sat termed as carve outs. The curve outs are there considering if onic environment and reporting requirements, A few are mentioned a yew ents of financial statements: Under IFRS, the financial statements @ astatement of financial position, a statement of profit or loss and other isl ive income, a statement of changes in equity, a statement of cash es comprising significant accounting policies and other explanatory gos jon. But under Ind. AS, acomplete set of financial statements consist of isfomat sheet as at the end of the period, a statement of profit and loss, a cabal of changes in equity, a statement of cash flows and notes comprising sem ificant accounting policies and other explanatory information. (a Format of balance sheet: IFRS contains comprehensive guidance for balance iring an entity to present assets and liabilities and classi them at rguiting n fy rately as current or non-current items. No particular format of balance sheet isspecfied in Ind.AS. However, there are guidance for how balance sheet should te presented. (i) Format of Income statement: Under IFRS, the income statement can be presented in two ways: single statement format and double statements format. lathe latter, an income statement is separated into different components that include Profit and loss, operating and non-operating expenses and other comprehensive income. Single statement displays only profit and loss. But in PI — no format is specified but as with balance sheet, there are guidelines for Presentation of income statement. = ene Policies and changes in accounting estimates: As per IAS 8,a Tauited by =e its accounting Policy in two instances i.e.,if the change is tse na if the change results in more reliable and relevant financial ions I “ing the company’s current financial position, the effects of its “be follow Mts cash flows, But Ind. AS allows change in accounting policy "hired bythe ntnees: (a) if the adoption of a different accounting policy* e8iereg that atute; (b) for Compliance with an accounting standard (c)i* “ei Stateme change would result in a more appropriate presentation 0 Sats of the company.a Financial Accounting (*) Foreign exchange rates: IFRS requires a company to determine a functional currency which is the currency of the economy in which it mainly operates. Its financial position will subsequently be measured in that currency. In contrast, Ind.AS requires that currency reported is the same as that included in financial statements. (vi) EPS: Under IFRS, the earnings per share (EPS) is not required in separate financial statements if both separate and consolidated financial statements are presented. On the contrary, EPS is to be presented for both standalone and consolidated financial statements under Ind.AS. (vii) Investment property: For investment property under IFRS, both cost and fair value options of accounting are available. Whereas under Ind.AS, the investment property is to be accounted using only cost model with fair value disclosure. ‘