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Financial Statements under Ind AS regime

GCA India Uncategorized Financial Statements under Ind AS regime
Financial Statements under Ind AS regime


Financial Statements under Ind AS regime

In Indian Economy where everyone is talking about demonetization and black money, we one can’t ignore the importance of Accounting and Financial Statements to make this move successful. Everyone, be it the big corporates, or the smaller companies, or be it the service class or the Investors, has got affected by this radical change. But life is a series of changes those who initiate change will have a better opportunity to manage the change that is inevitable. So for the business community it is a silver lining in the black sky. Investors are looking for new things be it innovation or doing same things differently which ultimately leads to incremental growth in their businesses. And for this, financial policies adaptation plays a crucial role.

Recently, Indian Government has announced IndAS for Indian Corporates, viz the big size corporates, but the question we should ask to ourselves is that are we ready for it or our Investors have the knowledge to understand the transactions recorded under it? I think the answer will be No. As we know, IndAS has been applicable for big size companies & their subsidiaries and it will also cover rest of the business group in phase manner. Even employees from these companies are not able to understand it completely. So, this small article is nothing but a awareness article on Ind AS.

So let’s start this article with a basic structure of Financial Statements: –

Components of Financial Statements are as under: –

• The Primary Statements

o Balance Sheet for the period ended
o Profit or Loss for the period
o Statement of Changes in equity
o Statement of Cash flows for the period (Cash Flow Statement)

• Notes, Including summary of accounting policies and other explanatory Information

However, we are already preparing the above mentioned Statements except for “Statement of Changes in equity” but, there is a huge difference in preparation of Preparing financial statement using IndAS and Accounting Standards. Preparing Financial Statements using IndAS gives an edge to Indian Corporates as it helps in uniformity of the financials of Indian Companies in line with International Standards and thus make financials comparable.

Main Purpose of Financial Statements is to : –

• to provide information about the financial position, financial performance and cash flows to wide users for making economic decisions, covering:
o Assets
o Liabilities
o Equity
o Income & expenses (including gains / losses)
o Contribution by owners and distribution to owners
o Cash flows

• The above along with and other information covered in notes to accounts, assists user of financial statements in predicting the entity’s future cash flows and their timing and certainty.

• Entity must identify each Financial Statement & distinguish them from other information published in the same document. Entity must specify the following details in their Financial Statements: –
o Name of the Entity & Change in name, if any
o Standalone Financial Statements or Consolidated Financial Statements
o Reporting Period along with the reporting period end date
o Presentation Currency
o Level of rounding used in the Financial Statements.

Balance Sheet:

Earlier, we used to prepare Balance sheet using T-Shape Format or Vertical Format. However, there is no prescribed format in IndAS for Balance Sheet but as per Revised Schedule III of Companies Act 2013, companies are using format for preparing Balance Sheet. In this format, Assets and Liabilities are classified on the basis of Current or Non-Current.

• Current Assets are those assets that are: –

o expected to be realised in the entity’s normal operating cycle
o held primarily for the purpose of trading
o expected to be realised within 12 months after the reporting period
o cash and cash equivalents (unless restricted).

• Current Liabilities are those liabilities that are: –

o Expected to settle the Liability in its normal operating cycle;
o Expected to Settle the liability within 12 Months;
o It does not have an unconditional right to defer settlement of the liability for at least 12 Months;
o Primarily hold for the purpose of trading;
• All other Assets/Liabilities are Non-Current Asset/Liabilities

# “The operating cycle of an entity is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents”.

Profit or Loss:

Profit or loss is defined as “the total of income less expenses” or 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”.
Income or Expense in Profit or Loss shall be presented by the nature of Income/Expense. However, we have already defined structure for this, issued by Ministry of Corporate Affairs.

Statement of Changes in Equity:

• This Statement shows movements/ transactions during the reporting period that have affected the Shareholder’s equity.

• There is no specific format for it. But it is generally tabular in approach with the various categories of equity across the top and transaction listed line by line respective to each equity.

Notes to the financial statements:

The notes must:

• present information about the basis of preparation of the financial statements and the specific accounting policies used
• disclose any information required by IFRSs that is not presented elsewhere in the financial statements and
• provide additional information that is not presented elsewhere in the financial statements but is relevant to an understanding of any of them
• Notes are presented in a systematic manner and cross-referenced from the face of the financial statements to the relevant note.

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