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 sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. Scope 2 An entity shall apply this Standard in preparing and presenting general purpose financial statements in accordance with Indian Accounting Standards (Mind ASs). 3 Other Mind 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 condensed interim financial statements prepared in accordance with Mind 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 Mind AS 27 Consolidated and Separate Financial Statements. 3 This Standard uses terminology that is suitable for profit-oriented entities, including public sector business entities. If entities with mentor-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. Similarly, entities whose share capital is not equity may need to adapt the financial statement presentation of members’ interests. Definitions 7 The following terms are used in this Standard with the meanings specified: General repose 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 impracticable when the entity cannot apply it after making every reasonable effort to do so. Indian Accounting Standards (Mind ASs) are Standards prescribed under Section 211(C) of the 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 material, requires consideration of the characteristics of those users. The Framework for the Preparation and Presentation of Financial Statements issued by the Institute of 4 Chartered Accountants of India states in paragraph 25 that ‘users are assumed to eave 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 aggregations of items presented 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 recognized in profit or loss as required or permitted by other Mind ASs.
The components of other comprehensive income include: (a) (b) changes in revaluation surplus (see Mind AS 16 Property, Plant and Equipment and Mind AS 38) Intangible Assets); actuarial gains and losses on defined benefit plans recognized in accordance tit paragraph 92 and AAA of Mind AS 19 Employee Benefits; gains and losses arising from translating the financial statements of a foreign operation (see Mind AS 21 The Effects of Changes in Foreign Exchange Rates); gains and losses on remembering available-for-sale financial assets (see Mind AS 39 Financial Instruments: Recognition and Measurement); the effective portion of gains and losses on hedging instruments in a cash flow hedge (see Mind AS 39). 5 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 recognized 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 comprehensive income comprises all components of ‘profit or loss’ and of ‘other comprehensive income’. 8 [Refer to Appendix 1)] AAA.
The following terms are described in Mind AS 32 Financial Instruments: Presentation and are used in this Standard with the meaning specified in Mind AS 32: a) beatable financial instrument classified as an equity instrument (described in paragraphs AAA and BIB of Mind AS 32). An instrument that imposes on the entity an obligation 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 ICC and ADD of Mind AS 32). 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 6 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 entity’s: (a) (b) (c) (d) (e) (f) assets; liabilities; equity; income and expenses, including gains and losses; contributions by and distributions to owners in their capacity as owners; and cash flows. This information, along with other information in the notes, assists users of financial tenements in predicting the entity’s future cash flows and, in particular, their timing and certainty.
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); a statement of profit and loss for the period; [Refer to Appendix 1 ]; a statement of cash flows for the period; notes, comprising a summary of significant accounting policies and other explanatory information; and a balance whet 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 uncial 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 financial 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; the entity’s sources of funding and its regarded ratio of liabilities to equity; and the entity’s resources not recognized in the balance sheet in accordance with Mind ASs. 14 Many entities also present, outside the financial statements, reports 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 Mind ASs.
General features Presentation of True and Fair View and compliance with Mind ASS 15 Financial tenements shall present a true and fair view of the financial position, financial performance and cash flows of an entity. Presentation of true and fair view requires the faithful 8 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 Mind 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 Mind ASS hall make an explicit and unreserved statement of such compliance in the notes.
An entity shall not describe financial statements as complying with Mind ASS unless they comply with all the requirements of Mind ASs. 17 In virtually all circumstances, presentation of a true and fair view is achieved by compliance with applicable Mind ASs. Presentation of a true and fair view also requires an entity: (a) to select and Accounting Estimates and Errors. Mind AS 8 sets out a hierarchy of authoritative guidance that management considers in the absence of an Mind AS that specifically applies to an item. O present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information. O provide additional disclosures when compliance with the specific requirements in Mind ASS is insufficient to enable users to understand the impact of particular transactions, other events and conditions 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 are circumstances in which management concludes that compliance with a requirement in an Mind AS would be so misleading that it would conflict with the objective of financial 9 statements set out in the Framework, the entity shall depart from that requirement in the manner set out in paragraph 20 if the relevant regulatory framework requires, or otherwise does not prohibit, such a departure. 0 When an entity departs from a requirement of an Mind AS in accordance with paragraph 19, it shall disclose: (a) that management has concluded that the financial statements present a true and fair IEEE of the entity’s financial position, financial performance and cash flows; that it has complied with applicable Mind ASs, except that it has departed from a particular requirement to present a true and fair view; the title of the Mind AS from which the entity has departed, the nature of the departure, including the treatment that the Mind 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 for each period presented, the uncial effect of the departure on each item in the financial statements that would have been reported in complying with the requirement. 21 When an entity has departed from a requirement of an Mind AS in a prior period, and that departure affects the amounts recognized in the financial statements for the Paragraph 21 applies, for example, when an entity departed in a prior period from a requirement in an Mind AS for the measurement of assets or liabilities and that departure affects the measurement of changes in assets and liabilities recognized in the current period’s financial statements. 23 In the extremely rare circumstances in which management concludes that compliance with a requirement in an Mind 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 disclosing: (a) the title of the Mind AS in question, the nature of the requirement, and the reason why management has concluded that complying with hat requirement is so misleading in the circumstances that it conflicts with the objective of financial statements set out in the Framework; and 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. 4 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 seasonably be expected to represent and, consequently, it would be likely to influence economic decisions made by users of financial statements. When assessing whether complying with a specific requirement in an Mind AS would be so misleading that it would conflict with the objective of financial statements set out in the Framework, management considers: (a) (b) why the objective of financial statements is not achieved in the particular circumstances; and how the entity’s circumstances differ from those of other entities that comply with the requirement.
If other entities n similar circumstances comply with the requirement, there is a rebuttal presumption that the entity’s compliance with the requirement would not be so misleading that it would conflict with the objective of financial statements set out in the Framework. 1 1 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 management is aware, in making its assessment, of material uncertainties related to vents or conditions that may cast significant doubt upon 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 emitted 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 conclusion 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 sources of replacement financing before it can satisfy itself that the going concern basis is appropriate. Accrual basis of accounting 27 An entity shall prepare its financial statements, except for cash flow information, using the accrual basis of accounting. 28 When the accrual basis of accounting is used, an entity recognizes 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. 2 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 material 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 tenements may warrant separate presentation in the notes. 31 An entity need not provide a specific disclosure required by an Mind AS if the information is not material except when required by law. Offsetting 32 An entity shall not offset assets and liabilities or income and expenses, unless 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 lows.
Measuring assets net of valuation allowances-?for example, obsolescence allowances on inventories and doubtful debts allowances on receivables-?is not offsetting. 34 Mind 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 13 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 example: (a) an entity presents gains and losses on the disposal of nonoccurrence assets, including investments and operating assets, by deducting from the proceeds on disposal the carrying amount of the asset and related selling expenses; and an entity may net expenditure related to a provision that is recognized in accordance with Mind AS 37 Provisions, Contingent Liabilities and Contingent Assets ND reimbursed under a contractual arrangement with a third party (for example, a supplier’s warranty agreement) 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 held for trading. However, an entity presents such gains and losses separately if they are material. Frequency of reporting 36 An entity shall present a complete set of financial statements (including comparative information) at least annually.