Ind AS 1: Presentation of Financial Statements

Unit – 1
Prof. Krishna Gayathri
WHAT IS GAAP?
GAAP = Generally Accepted Accounting Principles
A set of financial accounting standards and reporting
guidelines used to prepare accounts
May or may not have legal authority
A dynamic concept.
 SOURCES OF GAAP
 Regulatory framework
 Statute (e.g. Companies Acts)
 Accounting standards
 IFRSs
 UK FRS
 USA FAS
 Other sources
 Best practice
 Industry groups.
 Rules based GAAP

 Principles based GAAP

 Presenting economic resources of the entity

Objectives Presenting the claims against the entity

of financial
reporting Presenting the changes in economic resources and
claims against the entity

Underlying assumption: Going concern

 Fundamental: Enhancing:
• Relevance • Comparability
Qualitative • Faithful representation • Verifiability
• Timeliness
characteristics
• Understandability

Elements of financial statements

• Assets
• Liabilities
• Equity
• Expenses
• Income
Basic Introduction of Ind AS
 Ind-AS are IFRS converged standards issued by Central Government of India through
Ministry of Corporate Affairs( MCA) under the supervisions and control of Accounting
standard board (ASB) of ICAI and in consultation with National Advisory Committee on
Accounting Standards ( NACAS) now National Financial Reporting Authority (NFRA)
 Ind-AS are named and numbered in the same way as the corresponding IFRS/IAS for ease of
reference

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 Indian Accounting Standard are converged standards for IFRS (International Financial
Reporting Standards).
Ind AS 101 – Ind AS 113 – Ind AS 12 – Ind AS 33 –
First-time adoption of Ind AS Fair Value Measurement Income Taxes Earnings per Share
Ind AS 102 – Ind AS 114 – Ind AS 16 – Ind AS 34 –
Share Based payments Regulatory Deferral Accounts Property, Plant and Equipment Interim Financial Reporting
Ind AS 103 – Ind AS 115 – Ind AS 116 – Ind AS 36 –
Business Combination Revenue from Contracts with Customers Leases Impairment of Assets
Ind AS 104 – Ind AS 1 – Ind AS 19 – Ind AS 37 –
Insurance Contracts Presentation of Financial Statements Employee Benefits Provisions, Contingent Liabilities and Contingent
Assets
Ind AS 105 – Ind AS 2 – Ind AS 20 – Ind AS 38 –
Non-Current Assets Held for Sale and Discontin- Inventories Accounting Accounting for Government Grants and Disclosure Intangible Assets
ued Operations of Government Assistance
Ind AS 106 – Ind AS 7 – Ind AS 21 – Ind AS 40 –
Exploration for and Evaluation of Mineral Re- Statement of Cash Flows The Effects of Changes in Foreign Exchange Rates Investment Property
sources
Ind AS 107 – Ind AS 8 – Ind AS 23 – Ind AS 41 –
Financial Instruments: Disclosures Accounting Policies, Changes in Accounting Esti- Borrowing Costs Agriculture
mates and Errors
Ind AS 108 – Ind AS 10 – Ind AS 24 –
Operating Segments Events after Reporting Period Related Party Disclosures

Ind AS 109 – Ind AS 112 – Ind AS 27 –

Financial Instruments Disclosure of Interests in Other Entities Separate Financial Statements
Ind AS 110 – Ind AS 113 – Ind AS 28 –
Consolidated Financial Statements Fair Value Measurement Investments in Associates and Joint Ventures

Ind AS 111 – Ind AS 114 – Ind AS 29 –

Joint Arrangements Regulatory Deferral Accounts Financial Reporting in Hyperinflationary
Economies
Ind AS 112 – Ind AS 115 – Ind AS 32 –
Disclosure of Interests in Other Entities Revenue from Contracts with Customers Financial Instruments: Presentation

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Some important points regarding Ind-AS
 Law overrides Ind-AS
 Ind AS applicable on material items only
 Ind-AS applicable both on SFS and CFS
 Partial adoption of Ind-AS is not allowed
 One Ind-AS applied/adopted, after that back out /withdraw
not allowed
 Ind-AS shall be applicable on Group( Holding, subsidiary,
Associates and Joint Ventures)

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Carve-in /Carve-out in Ind-AS
 Government of India in consultation with ICAI decided to converge and not to adopt
IFRS/IAS issued by IASB/IASC.
 The decision of convergence rather than adoption was taken after detail analysis of
IFRS/IAS requirements and extensive discussion with various stakeholders
 Accordingly , while formulating IFRS-converged Ind-AS, efforts have been made to
keep these standards , as far as possible, in line with the corresponding IFRS/IAS and
departures have been made where considered absolutely essential

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Terminology changes
Various terminology changes have been made to make it consistent with the terminology used in Indian law eg
Statement of profit and loss in place of Statement of Comprehensive income and balance sheet in place of
Statement of financial position.

Carve outs
Certain changes have been made considering the economic environment of India, which is different as compare
to the economic environment of developed countries which has been considered while making IFRS/IAS. The
differences which are in deviation to the accounting principles and practices stated in IFRS, are commonly
known as Carve-Outs. It may be noted that removal of options in accounting principles & practices in Ind AS vis-
à-vis IFRS, in order to maintain the consistency & comparability of the financial statements , shall not be treated
as Carve-Outs

Carve-Ins
If there is no guidelines under IFRS for any particular transaction or event, then the guidelines provided under Ind-
AS is known as Carve-Ins.

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An asset

A present economic
resource

Controlled by the entity

As a result of past events

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A liability

A present obligation of the entity

Arising from past events

To transfer economic resources

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Equity

The residual interest

In the assets of the entity

After deducting all its

liabilities

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Income

Increase in assets or

decreases in liabilities or

Increases in equity

Other than those relating to contributions

from equity participants.

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Expenses

Decrease in assets

Increase in liabilities

That result in decreases in equity

Other than those relating to

distributions to equity participants.

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Ind AS 1 defines a complete set of financial statements as including the following components:

 a balance sheet as at the end of the period ;

 a statement of profit and loss for the period;

 a statement of changes in equity for the period;;

 a statement of cash flows for the period;

 notes, comprising a summary of significant accounting policies and other explanatory information;

 comparative information in respect of the preceding period as specified in paragraphs 38 and 38A of Ind AS 1; and

 a balance sheet as at the beginning of the preceding 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 in accordance with paragraphs 40A–40D of Ind AS 1.

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Users

• Providers of capital and their advisers

• Employees and their representatives
• Lenders
• Suppliers and other trade creditors
• Customers
• Governments and their agencies
• Public

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Consider the following situations. In each case, name the element involved. Give reasons for
your answer.

(a) Pat Co has purchased a patent for $20,000. The patent gives the company sole use of a
particular manufacturing process which will save $3,000 a year for the next five years.

(b) Baldwin Co paid Don Brennan $10,000 to set up a car repair shop, on condition that
priority treatment is given to cars from the company's fleet (Entry is required in Baldwin’s
books).

(c) Deals on Wheels Co provides a warranty with every car sold.

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 Answer
(a) This is an asset, albeit an intangible one. There is a past event, control and future
economic benefit (through cost savings).

(b) This cannot be classified as an asset. Baldwin Co has no control over the car repair
shop and it is difficult to argue that there are 'future economic benefits’.

(c) The warranty claims in total constitute a liability; the business has taken on an
obligation. It would be recognised when the warranty is issued rather than when a claim is
made.

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