CHAPTER

2
IND AS 1 – PRESENTATION OF
FINANCIAL STATEMENTS

CONCEPTS COVERED

1. DIVISION II OF THE SCHEDULE III TO THE COMPANIES ACT, 2013

2. INTRODUCTION – IND AS 1
3. OBJECTIVE
4. SCOPE
5. DEFINITIONS
6. GENERAL FEATURES OF FINANCIAL STATEMENT
7. STRUCTURE AND CONTENT
8. SELF PRACTICE QUSTIONS

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IND AS 1 – Presentation of Financial Statements

1
1. DIVISION II OF THE SCHEDULE III TO THE COMPANIES ACT, 2013 :
The Ministry of Corporate Affairs vide its notification dated 6th April, 2016 notified amendments
to Schedule III to the Companies Act, 2013 thereby inserting Division II to Schedule III for
preparation of financial statements by those entities who have to comply with Indian Accounting
Standards (Ind AS). Now
1. Division I is applicable to a company whose financial statements are required to comply
with the current accounting standards
2. Division II is applicable to a company whose financial statements are drawn up in
compliance with Ind AS.
FINANCIAL STATEMENTS FINANCIAL STATEMENTS
DIVISION I

DIVISION II
APPLICABLE TO THOSE APPLICABLE TO ALL THE
COMPANIES WHO ARE COMPANIES REQUIRED
REQUIRED TO PREPARE TO FOLLOW IND AS
THEIR STATEMENT AS
PER EXISTING
ACCOUNTING
STANDARDS

FINANCIAL STATEMENTS – DIV II :

BALANCE SHEET
FINANCIAL STATEMENTS

PROFIT AND LOSS

ACCOUNT
STATEMENT FOR PROFIT
AND LOSS
OTHER COMPREHENSIVE
INCOME
STATEMENT FOR
CHANGES IN EQUITY

CASH FLOW STATEMENT

NOTES

PART 1 – BALANCE SHEET :

Particulars Note Current Previous

No Year Year
Assets
1. Non Current Assets
a. Property, Plant and Equipment XX XX
b. Capital Work in Progress XX XX
c. Investment property XX XX
d. Goodwill XX XX

IND AS 1 – Presentation of Financial Statements

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 e. Other Intangible Assets XX XX
f. Intangible Assets Under Development XX XX
g. Biological Assets other than bearer plants XX XX
h. Financial Assets
i) Investments XX XX
II) Trade Receivables XX XX
III) Loans XX XX
iv) Others (to be specified) XX XX
i) Deferred Tax Assets (Net) XX XX
j) Other Non-Current Assets XX XX

2. Current Asset
a) Inventories XX XX
b) Financial Assets
i) Investments XX XX
II) Trade Receivables XX XX
III) Cash and Cash Equivalents XX XX
iv) Bank Balance XX XX
v) Others (to be Specified) XX XX
c) Current Tax Assets (Net) XX XX
d) Other Current Assets XX XX
TOTAL XX XX

Particulars Note Current Previous

No Year Year
Equity and Liabilities
Equity
a. Equity Share Capital XX XX
b. Other Equity XX XX

Liabilities
1. Non-current Liability
a. Financial Liabilities
(i) Borrowings XX XX
(ii) Trade Payable XX XX
(iii) Other financial Liabilities (to be specified) XX XX
b. Provisions XX XX
c. Deferred tax Liabilities XX XX
d. Other non – current liabilities XX XX

2. Current Liabilities
a. Financial Liabilities
(i) Borrowings XX XX
(ii) Trade Payable XX XX

IND AS 1 – Presentation of Financial Statements

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 (iii) Other financial Liabilities (to be specified) XX XX
b. Provisions XX XX
c. Current tax Liabilities XX XX
d. Other non – current liabilities XX XX
TOTAL XX XX

PART 2 – STATEMENT FOR CHANGES IN EQUITY :

The Statement of Changes in Equity has been introduced on the lines of IFRS. An SOCE is prepared
in order to reconcile the various components of equity in the balance sheet for any period.
A. Equity share capital
B. Other Equity
a. Share Application money pending Allotment
b. Equity Component of Compound Financial Instrument
c. Reserves and Surplus
i. Capital Reserve
ii. Security Premium Reserve
iii. Other Reserve (to be Specified)
iv. Retained Earnings
d. Debt instrument through other comprehensive income
e. Equity instrument through other comprehensive income
f. Effective portion of cash flow hedges
g. Revaluation Reserve
h. Exchange difference on translating the financial statements of a foreign operations
i. Other items of other comprehensive income
j. Money received against share warrant

PART 3 – STATEMENT OF PROFIT AND LOSS ACCOUNT :

Particulars Note Current Previous

No Year Year
I Revenue from operations XX XX
II Other income XX XX
III Total Income (I + II) XX XX
IV Expenses
Cost of Material Consumed XX XX
Purchase of Stock in Trade XX XX
Changes in inventory of Finished goods, Stock in trade
and work in progress XX XX
Employee benefit Expense XX XX
Finance Cost XX XX
Depreciation and Amortisation Expense XX XX
Other Expense XX XX

IND AS 1 – Presentation of Financial Statements

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 TOTAL EXPENSES (IV) XX XX
V Profit / Loss before exceptional Items and Tax XX XX
VI Exceptional Items XX XX
VII Profit Before Tax XX XX
VIII Tax Expense
1. Current Tax XX XX
2. Deferred Tax XX XX
IX Profit / Loss for the period from continuing operations
XX XX
X Profit / Loss from discontinued operations XX XX
XI Tax expense from discontinued operations XX XX
XII Profit / Loss from discontinued operations (After Tax) XX XX
XIII Profit / Loss for the period (IX + XII) XX XX
XIV Other comprehensive Income
A (I) Items that will not be reclassified to profit and loss
Account XX XX
(II) Income tax relating to above items XX XX
B (I) Items that will be reclassified to profit and loss
Account XX XX
(II) Income tax relating to the above items XX XX
XV Total comprehensive income for period (XIII + XIV) XX XX
XVI Earnings per share (for continuing operations)
1. Basic XX XX
2. Diluted XX XX
XVII Earnings per share (for discontinuing operations)
1. Basic XX XX
2. Diluted XX XX
XVIII Earnings per share (for continuing and discontinuing
operations)
1. Basic XX XX
2. Diluted XX XX

OTHER COMPREHENSIVE INCOME :

1. It contains generally unrealised gains and losses arising from re-measurements of Assets
and Liabilities
2. On Realisation, with few exceptions, gains and losses are recognised in profit or loss
section
3. Exceptions
a. Sale of revalued assets

IND AS 1 – Presentation of Financial Statements

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 b. Equity instruments opted to be measured at fair value through OCI

At outset, it is worthwhile to note that Total Comprehensive Income is different from Other
Comprehensive Income and can be better understood as follows:
PROFIT /
LOSS FOR
OCI TCI
THE
PERIOD

PART 4 – CASH FLOW STATEMENT :

Alike under the IGAAP, Schedule III for Ind AS does not provide for a format of the Cash Flow
Statement and requires that the statement be prepared in accordance with the relevant Ind AS.
However, in a sharp contrast to the AS 3 on Cash Flow Statements, Ind AS 7 on Cash Flow
Statements Statements “encourages” the use of Direct Method instead of the Indirect Method
for preparing the Cash Flow Statements but provides no format for the preparation of the same.

PART 5 – NOTES :
Notes containing information in addition to that which is presented in the financial statements
would be provided, including, where required, narrative descriptions or disaggregation of items
recognised in the financial statements and information about items that do not qualify for such
recognition.

Disclosure under Ind AS (for e.g., fair value measurement reconciliation, fair value hierarchy, risk
management and capital management, disclosure of interests in other entities, components of
other comprehensive income, reconciliations on first-time adoption of Ind AS, etc.) shall be made
in the Notes or by way of additional statement(s) unless required to be disclosed on the face of
the Financial Statements.

2. INTRODUCTION – IND AS 1 :
Ind AS 1 is a basic Standard, which prescribes the overall requirements for the presentation of
financial statements and guidelines for their structure, i.e., components of financial statements,
viz., balance sheet, statement of profit and loss, statement of cash flows and notes comprising
significant accounting policies, etc. Further, the Standard prescribes the minimum disclosures
that are to be made in the financial statements and explains the general features of the financial
statements. The presentation requirements prescribed in the Standard are supplemented by the
recognition, measurement and disclosure requirements set out in other Ind AS for specific
transactions and other events.

3. OBJECTIVE :
This standard prescribes the basis for presentation of general purpose financial statements to
ensure comparability a) with the entity’s financial statements of previous periods and b) 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.

IND AS 1 – Presentation of Financial Statements

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4. SCOPE :
• This standard applies to all types of entities including
(a) those that present consolidated financial statements in accordance with Ind AS 110
‘Consolidated Financial Statements’
(b) those that present separate financial statements in accordance with Ind AS 27
‘Separate Financial Statements’.
• This standard does not apply to Interim Financial statements prepared in accordance with
Ind AS 34 except for para 15 to 35 of Ind AS 1.

5. DEFINITIONS :

• General purpose financial statements

• Impracticable
• Indian Accounting Standards (Ind AS)
• Material
• Notes
Definitions • Owners
• Profit or loss
• Reclassification adjustments
• Total comprehensive income
• Other comprehensive income

1. General purpose financial statements :

General purpose 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

2. Impracticable :
Impracticable Applying a requirement is impracticable when the entity cannot apply it
after making every reasonable effort to do so.

3. Indian Accounting Standards (Ind AS) :

Indian Accounting Standards (Ind AS) are Standards prescribed under Section 133 of the
Companies Act, 2013.

4. Material :
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.

IND AS 1 – Presentation of Financial Statements

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5. Notes :
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 disaggregation of items presented in those
statements and information about items that do not qualify for recognition in those
statements.

6. Owners :
Owners are holders of instruments classified as equity

7. Profit or loss :
Profit or loss is the total of income less expenses, excluding the components of other
comprehensive income

8. Reclassification adjustments :
Reclassification adjustments are amounts reclassified to profit or loss in the current period
that were recognised in other comprehensive income in the current or previous periods.

9. Total comprehensive income :

Total comprehensive income is 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.

Total comprehensive income comprises all components of ‘profit or loss’ and of ‘other
comprehensive income’

10. Other comprehensive income :

Other comprehensive income comprises items of income and expense (including
reclassification adjustments) that are not recognised in profit or loss as required or
permitted by other Ind AS.

The components of Other Comprehensive Income include the following:

No. Components Reference
1 Changes in revaluation surplus Ind AS 16
2 Remeasurements of defined benefit plans Ind AS 19
3 Gains and losses arising from translating the financial statements of a Ind AS 21
foreign operation
4 Gains and losses from investments in equity instruments designated at fair Ind AS 109
value through other comprehensive income
5 Gains and losses on financial assets measured at fair value through other Ind AS 109
comprehensive income

IND AS 1 – Presentation of Financial Statements

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 6 The effective portion of gains and losses on hedging instruments in a cash Ind AS 109
flow hedge and the gains and losses on hedging instruments that hedge
investments in equity instruments measured at fair value through other
comprehensive income
7 For particular liabilities designated as at fair value through profit or loss, Ind AS 109
the amount of the change in fair value that is attributable to changes in the
liability’s credit risk
8 Changes in the value of the time value of options when separating the Ind AS 109
intrinsic value and time value of an option contract and designating as the
hedging instrument only the changes in the intrinsic value
9 Changes in the value of the forward elements of forward contracts when IND AS 109
separating the forward element and spot element of a forward contract
and designating as the hedging instrument only the changes in the spot
element, and changes in the value of the foreign currency basis spread of
a financial instrument when excluding it from the designation of that
financial instrument as the hedging instrument

6. GENERAL FEATURES OF FINANCIAL STATEMENT :

True and Fair
Presentation
and
Compliance
with Ind AS
Comparitive
Going Concern
Information

Frequency of Accrual Basis of

Reporting Accounting

Materiality and
Consisitency
Aggregation

Offsetting

6.1 Presentation of True and Fair View and compliance with Ind AS :
Financial statements 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 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.

IND AS 1 – Presentation of Financial Statements

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 An explicit and unreserved statement :
An entity whose financial statements comply with Ind AS shall make an explicit and
unreserved statement of such compliance in the notes.
Presentation of a true and fair view also requires an entity:
(a) to select and apply accounting policies in accordance with Ind AS 8 Accounting
Policies, Changes in Accounting Estimates and Errors. Ind AS 8 sets out a hierarchy
of authoritative guidance that management considers in the absence of an Ind AS
that specifically applies to an item.
(b) to present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information.
(c) to provide additional disclosures when compliance with the specific requirements
in Ind AS 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.

6.2 Departure from the Requirements of an Ind AS — Whether Permissible? :

In the extremely rare circumstances in which management concludes that compliance with
a requirement in an Ind AS would be so misleading that it would conflict with the objective
of financial statements set out in the Framework, the entity shall depart from that
requirement if the relevant regulatory framework requires, or otherwise does not prohibit,
such a departure.
When an entity departs from a requirement of an Ind AS, it shall disclose:
(a) that management has concluded that the financial statements present a true and
fair view of the entity’s financial position, financial performance and cash flows;
(b) that it has complied with applicable Ind AS, except that it has departed from a
particular requirement to present a true and fair view;
(c) the title of the Ind AS from which the entity has departed, the nature of the
departure, including the treatment that the Ind 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
(d) for each period presented, the financial effect of the departure on each item in the
financial statements that would have been reported in complying with the
requirement.

Question 1 – An entity
An entity prepares its financial statements that contain an explicit and unreserved
statement of compliance with Ind AS. However, the auditor’s report on those financial
statements contains a qualification because of disagreement on application of one
Accounting Standard. In such case, is it acceptable for the entity to make an explicit
and unreserved statement of compliance with Ind AS?

IND AS 1 – Presentation of Financial Statements

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6.3 Going Concern :
Financial statements prepared under Ind AS should be prepared on a going concern basis
unless management either intends to liquidate the entity or to cease trading, or has no
realistic alternative but to do so.
If management has significant doubt of the entity’s ability to continue as a going concern,
the uncertainties should be disclosed.
In case the financial statements are not prepared on a going concern basis, the entity
should disclose the basis of preparation of financial statements and also the reason why
the entity is not regarded as a going concern. Illustration

Question 2 – Entity XYZ

Entity XYZ is a large manufacturer of plastic products for the local market. On 1 April
2016 the newly elected government unexpectedly abolished all import tariffs,
including the 40 per cent tariff on all imported plastic products. Many other economic
reforms implemented by the new government contributed to the value of the
country’s currency (CU(2)) appreciating significantly against most other currencies.
The currency appreciation severely reduced the competitiveness of the entity’s
products.
Before 2016 entity XYZ was profitable. However, because it was unable to compete
with low priced imports, entity XYZ reported a loss of CU 4,000 for the year ended 31
March 2017. At 31st March 2017, entity XYZ’s equity was CU 1,000. Management
restructured entity B’s operations in the second quarter of 2017. That restructuring
helped reduce losses for the third and fourth quarters to CU 400 and CU 380,
respectively.
In January 2017 the local plastic industry and labour union lobbied government to
reinstate tariffs on plastic. On 15 March 2017, the government announced that it
would reintroduce limited plastic import tariffs in 2018. However, it emphasised that
those tariffs would not be as protective as the tariffs enacted by the previous
government. In its latest economic forecast, the government predicts a stable
currency exchange rate in the short term with a gradual weakening of the jurisdiction’s
currency in the longer term. Management of entity XYZ undertook a going concern
assessment at 31 March 2017. Management projects/forecasts that imposition of a 10
per cent tariff on the import of plastic products would, at current exchange rates, result
in entity XYZ returning to profitability. How should the management of entity XYZ
disclose the information about the going concern assessment in entity XYZ’s 31 March
2017 annual financial statements?

6.4 Accrual basis of accounting :

• An entity shall prepare its financial statements, except for cash flow information,
using the accrual basis of accounting.
• When the accrual basis of accounting is used, an entity recognises 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.

IND AS 1 – Presentation of Financial Statements

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6.5 Materiality and aggregation :
• 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
immaterial except when required by law.
• 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 statements may warrant separate presentation in
the notes.
• An entity need not provide a specific disclosure required by an Ind AS if the
information is not material except when required by law.

Example :
1. Entity A has done a misclassification of assets between 2 categories of plant and
machinery. Such a misclassification would not be material in amount if it affected
two categories of plant or equipment however it might be material if it changed the
classification between a noncurrent and a current asset category.
2. Losses from bad debts or pilferage that could be shrugged off as routine by a large
business may threaten the continued existence of a small one.
3. An error in inventory valuation may be material in a small enterprise for which it
cut earnings in half but immaterial in an enterprise for which it might make a barely
perceptible ripple in the earnings.

6.6 Offsetting :
• An entity shall not offset assets and liabilities or income and expenses, unless
required or permitted by an Ind AS.
• An entity reports separately both assets and liabilities, and income and expenses.
Measuring assets net of valuation allowances — for example, obsolescence
allowances on inventories and doubtful debts allowances on receivables — is not
offsetting.

Question 3 –
Is offsetting of revenue against expenses, permissible in case of a company acting as
an agent and having sub-agents, where commission is paid to sub-agents from the
commission received as an agent?

6.7 Frequency of reporting :

• An entity shall present a complete set of financial statements (including
comparative information) at least annually.

IND AS 1 – Presentation of Financial Statements

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 • When an entity changes the end of its reporting period and presents financial
statements for a period longer or shorter than one year, an entity shall disclose, in
addition to the period covered by the financial statements:
o the reason for using a longer or shorter period, and
o the fact that amounts presented in the financial statements are not entirely
comparable.

6.8 Comparative information :

• An entity should present comparative information in respect of the preceeding
period for all amounts reported in the current period’s financial statements except
when Ind AS permit or require otherwise.
• Comparative information for narrative and descriptive information should be
included if it is relevant to understand the current period’s financial statements.
• An entity shall present, as a minimum:
o 2 Balance Sheets
o 2 Statement of Profit and Loss
o 2 Statement of Cash Flows
o 2 Statement of Changes in Equity and
o Related Notes.
• 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, it shall present, as a minimum, three balance
sheets, two of each of the other statements, and related notes. An entity presents
balance sheets as at
o the end of the current period,
o the end of the previous period (which is the same as the beginning of the
current period), and
o the beginning of the earliest comparative period.

Question 4 – A retail chain

A retail chain acquired a competitor in March, 20X1 and accounted for the business
combination under Ind AS 103 on a provisional basis in its 31st March, 20X1 annual
financial statements. The business combination accounting was finalised in 20X1-20X2
and the provisional fair values were updated. As a result, the 20X0-20X1 comparatives
were adjusted in the 20X1-20X2 annual financial statements. Does the restatement
require an opening statement of financial position (that is, an additional statement of
financial position) as of 1st April, 20X0?

6.9 Consistency of presentation :

• An entity shall retain the presentation and classification of items in the financial
statements from one period to the next unless:
o it is apparent, following a significant change in the nature of the entity’s
operations or a review of its financial statements, that another presentation

IND AS 1 – Presentation of Financial Statements

13
 or classification would be more appropriate having regard to the criteria for
the selection and application of accounting policies in Ind AS 8; or
o an Ind AS requires a change in presentation.
• When making such changes in presentation, an entity reclassifies its comparative
information in accordance.

7. STRUCTURE AND CONTENT :

Ind AS 1 requires particular disclosures in the balance sheet (including statement of changes in
equity which is a part of the balance sheet) or in the statement of profit and loss and requires
disclosure of other line items either in those statements or in the notes.
• An entity shall display the following information prominently:
o the name of the reporting entity
o whether the financial statements are of an individual entity or a group of entities;
o Reporting date or the reporting period
o the presentation currency
o the level of rounding used in presenting amounts in the financial statements.

Balance Sheet

“Format as per last chapter”

An entity shall present current and non-current assets, and current and non-current liabilities, as
separate classifications in its balance sheet except when a presentation based on liquidity
provides information that is reliable and more relevant.

Current and Non-Current Assets

An entity shall classify an asset as current when:
(a) it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the reporting period; or
(d) the asset is cash or a cash equivalent (as defined in Ind AS 7) unless the asset is restricted
from being exchanged or used to settle a liability for at least twelve months after the
reporting period.

An entity shall classify all other assets as non-current.

Current and Non-current Liabilities :

An entity shall classify a liability as current when:
(a) it expects to settle the liability in its normal operating cycle;
(b) it holds the liability primarily for the purpose of trading;
(c) the liability is due to be settled within twelve months after the reporting period; or
(d) it does not have an unconditional right to defer settlement of the liability for at least twelve
months after the reporting period. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity instruments do not affect its
classification.

IND AS 1 – Presentation of Financial Statements

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An entity shall classify all other liabilities as non-current.

Operating Cycle :
The operating cycle of an entity is the time between the acquisition of assets for processing and
their realisation in cash or cash equivalents. When the entity’s normal operating cycle is not
clearly identifiable, it is assumed to be twelve months. Current assets include assets (such as
inventories and trade receivables) that are sold, consumed or realised as part of the normal
operating cycle even when they are not expected to be realised within twelve months after the
reporting period. Current assets also include assets held primarily for the purpose of trading
(examples include some financial assets classified as held for trading in accordance with Ind AS
109) and the current portion of non-current financial assets.

Question 5 – X Ltd.
X Ltd provides you the following information:
Raw material stock holding period : 3 months
Work-in-progress holding period : 1 month
Finished goods holding period : 5 months
Debtors collection period : 5 months
You are requested to compute the operating cycle of X Ltd.

Question 6 – Inventory or trade

Inventory or trade receivables of X Ltd. are normally realised in 15 months. How should
X Ltd. classify such inventory/trade receivables: current or non-current if these are
expected to be realised within 15 months?

Question 7 – B Ltd.
B Ltd. produces aircrafts. The length of time between first purchasing raw materials to
make the aircrafts and the date the company completes the production and delivery
is 9 months. The company receives payment for the aircrafts 7 months after the
delivery. (a) What is the length of operating cycle? (b) How should it treat its inventory
and debtors?

Question 8 – Charming Ltd.

On 1st April, 20X3, Charming Ltd issued 100,000 Rs. 10 bonds for Rs. 1,000,000. On 1st
April, each year interest at the fixed rate of 8 percent per year is payable on
outstanding capital amount of the bonds (ie the first payment will be made on 1st April,
20X4). On 1st April each year (i.e from 1st April, 20X4), Charming Ltd has a contractual
obligation to redeem 10,000 of the bonds at Rs. 10 per bond. In its statement of

IND AS 1 – Presentation of Financial Statements

15
 financial position at 31st March, 20X4. How should this be presented in the financial
statements?

Question 9 – X Ltd.
X Ltd provides you the following information:
Raw material stock holding period : 3 months
Work-in-progress holding period : 1 month
Finished goods holding period : 5 months
Debtors collection period : 5 months
The trade payables of the Company are paid in 12.5 months. Should these be classified
as current or non-current?

Question 10 – Entity A
Entity A has two different businesses, real estate and manufacture of passenger
vehicles. With respect to the real estate business, the entity constructs residential
apartments for customers and the normal operating cycle is three to four years. With
respect to the business of manufacture of passenger vehicles, normal operating cycle
is 15 months. Under such circumstance where an entity has different operating cycles
for different types of businesses, how classification into current and non-current be
made?

Question 11 – An entity
An entity has placed certain deposits with various parties. How the following deposits
should be classified, i.e., current or non-current?
(a) Electricity Deposit
(b) Tender Deposit/Earnest Money Deposit [EMD]
(c) GST Deposit paid under dispute or GST payment under dispute

Question 12 – Ind AS 1
Ind AS 1 states “An entity shall classify a liability as current when it expects to settle
the liability in its normal operating cycle”. An entity develops tools for customers and
this normally takes a period of around 2 years for completion. The material is supplied
by the customer and hence the entity only renders a service. For this, the entity
receives payments upfront and credits the amount so received to “Income Received in
Advance”. How should this “Income Received in Advance” be classified, i.e., current or
non- current?

IND AS 1 – Presentation of Financial Statements

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 Question 13 – An entity
An entity has taken a loan facility from a bank that is to be repaid within a period of 9
months from the end of the reporting period. Prior to the end of the reporting period,
the entity and the bank enter into an arrangement, whereby the existing outstanding
loan will, unconditionally, roll into the new facility which expires after a period of 5
years.
(a) How should such loan be classified in the balance sheet of the entity?
(b) Will the answer be different if the new facility is agreed upon after the end of
the reporting period?
(c) Will the answer to (a) be different if the existing facility is from one bank and
the new facility is from another bank?
(d) Will the answer to (a) be different if the new facility is not yet tied up with the
existing bank, but the entity has the potential to refinance the obligation?

Question 14 – In December 2001

In December 2001 an entity entered into a loan agreement with a bank. The loan is
repayable in three equal annual instalments starting from December 2005. One of the
loan covenants is that an amount equivalent to the loan amount should be contributed
by promoters by March 24 2002, failing which the loan becomes payable on demand.
As on March 24, 2002, the entity has not been able to get the promoter’s contribution.
On March 25, 2002, the entity approached the bank and obtained a grace period up to
June 30, 2002 to get the promoter’s contribution. The bank cannot demand immediate
repayment during the grace period. The annual reporting period of the entity ends on
March 31, 2002.
(a) As on March 31, 2002, how should the entity classify the loan?
(b) Assume that in anticipation that it may not be able to get the promoter’s
contribution by due date, in February 2002, the entity approached the bank
and got the compliance date extended up to June 30, 2002 for getting
promoter’s contribution. In this case will the loan classification as on March 31,
2002 be different from (a) above?

Profit and Loss :

• The statement of profit and loss shall present, in addition to the profit or loss and other
comprehensive income sections:
(a) profit or loss;
(b) total other comprehensive income;
(c) comprehensive income for the period, being the total of profit or loss and other
comprehensive income.
• An entity shall present the following items as allocation of profit or loss and other
comprehensive income for the period:
(a) profit or loss for the period attributable to:
(i) non-controlling interests, and
(ii) owners of the parent.

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 (b) comprehensive income for the period attributable to:
(i) non-controlling interests, and
(ii) owners of the parent.

Information to be presented in the profit or loss section of the Statement of Profit and Loss :
In addition to items required by other Ind AS, the profit or loss section of the statement of profit
and loss should include line items that present the following amounts for the period:
(a) revenue, presenting separately interest revenue calculated using the effective interest
method;
(b) gains and losses arising from the derecognition of financial assets measured at amortised
cost
(c) finance costs;
(d) impairment losses (including reversals of impairment losses or impairment gains)
determined in accordance with Section 5.5 of Ind AS 109
(e) share of the profit or loss of associates and joint ventures accounted for using the equity
method;
(f) if financial asset is reclassified out of the amortised cost measurement category so that
it is measured at fair value through profit or loss, any gain or loss arising from a difference
between the previous amortised cost of the financial asset and its fair value at the
reclassification date;
(g) if a financial asset is reclassified out of the fair value through other comprehensive
income measurement category so that it is measured at fair value through profit or loss,
any cumulative gain or loss previously recognized in other comprehensive income that is
reclassified to profit or loss
(h) tax expense;
(i) a single amount for the total discontinued operations

Statement of Changes in Equity :

An entity shall present a statement of changes in equity as a part of balance sheet. The statement
of changes in equity includes the following information:
a. total comprehensive income for the period, showing separately the total amounts
attributable to owners of the parent and to non-controlling interests;
b. for each component of equity, the effects of retrospective application or retrospective
restatement recognised in accordance with Ind AS 8;
c. for each component of equity, a reconciliation between the carrying amount at the
beginning and the end of the period, separately disclosing each changes resulting from:
• profit or loss;
• each item of other comprehensive income;
• transactions with owners in their capacity as owners, showing separately
contributions by and distributions to owners and changes in ownership interests in
subsidiaries that do not result in a loss of control; and
• any item recognised directly in equity such as amount recognised directly in equity
as capital reserve with Ind AS 103.

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Notes :
The notes shall:
a. present information about the basis of preparation of the financial statements and the
specific accounting policies used;
b. disclose the information required by Ind AS that is not presented elsewhere in the financial
statements; and
c. provide information that is not presented elsewhere in the financial statements, but is
relevant to an understanding of any of them.
An entity shall present notes in a systematic manner. In determining a systematic manner, the
entity shall consider the effect on the understandability and comparability of its financial
statements.

An entity shall cross-reference each item in the balance sheet, in the statement of changes in
equity which is a part of the balance sheet and in the statement of profit and loss, and statement
of cash flows to any related information in the notes.
Examples of systematic ordering or grouping of the notes include following the order of the line
items in the statement of profit and loss and the balance sheet, such as:
(i) statement of compliance with Ind AS;
(ii) significant accounting policies applied;
(iii) supporting information for items presented in the balance sheet and in the statement of
profit and loss, and in the statements of changes in equity and of cash flows, in the order
in which each statement and each line item is presented; and
(iv) other disclosures,
An entity may present notes providing information about the basis of preparation of the financial
statements and specific accounting policies as a separate section of the financial statements.

8. SELF PRACTICE QUESTIONS :

Question 15 – Entity A
Entity A has undertaken various transactions in the financial year ended March 31, 20X1.
Identify and present the transactions in the financial statements as per Ind AS 1.
Rs.
Remeasurement of defined benefit plans 2,57,000
Current service cost 1,75,000
Changes in revaluation surplus 1,25,000
Gains and losses arising from translating the monetary assets in foreign 75,000
currency
Gains and losses arising from translating the financial statements of a 65,000
foreign operation
Gains and losses from investments in equity instruments designated at 1,00,000
fair value through other comprehensive income
Income tax expense 35,000
Share based payments cost 3,35,000

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 Question 16 – XYZ Limited
XYZ Limited (the ‘Company’) is into the manufacturing of tractor parts and mainly
supplying components to the Original Equipment Manufacturers (OEMs). The
Company does not have any subsidiary, joint venture or associate company. During the
preparation of financial statements for the year ended March 31, 20X1, the accounts
department is not sure about the treatment/presentation of below mentioned
matters. Accounts department approached you to advice on the following matters.
S. No. Matters
(i) There are qualifications in the audit report of the Company with reference
to two Ind AS.
(ii) Is it mandatory to add the word “standalone” before each of the
components of financial statements?
(iii) The Company is Indian Company and preparing and presenting its financial
statements in Rs. Is it necessary to write in the financial statements that the
financial statements has been presented in Rs.
(iv) The Company had sales transactions with 10 related party parties during
previous year. However, during current year, there are no transactions with
4 related parties out of aforesaid 10 related parties. Hence, Company is of
the view that it need not disclose sales transactions with these 4 parties in
related party disclosures because with these parties there are no
transactions during current year.
Evaluate the above matters with respect to preparation and presentation of general
purpose financial statement

Question 17 – A Company
A Company presents financial results for three years (i.e one for current year and two
comparative years) internally for the purpose of management information every year
in addition to the general purpose financial statements. The aforesaid financial results
are presented without furnishing the related notes because these are not required by
the management for internal purpose. During current year, management thought why
not they should present third year statement of profit and loss also in the general
purpose financial statements. I t will save time and will be available easily whenever
management needs this in future.
With reference to above background, answer the following:
(i) Can management present the third statement of profit and loss as additional
comparative in the general purpose financial statements?
(ii) If management present third statement of profit and loss in the general purpose
financial statement as comparative, is it necessary that this statement should
be compliant of Ind AS?

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 (iii) Can management present third statement of profit and loss only as additional
comparative in the general purpose financial statements without furnishing
other components (like balance sheet, statement of cash flows, statement of
change in equity) of financial statements?

Question 18 – A Company
A Company while preparing the financial statements for Financial Year (FY) 20X1-20X2,
erroneously booked excess revenue of Rs. 10 Crore. The total revenue reported in FY
20X1-20X2 was Rs. 80 Crore. However, while preparing the financial statements for
20X2-20X3, it discovered that excess revenue was booked in FY 20X1-20X2 which it
now wants to correct in the financial statements. However, management of the
Company is not sure whether it need to present the third balance sheet as additional
comparative.
With regard to the above background, answer the following:
(i) Is it necessary to provide the third balance sheet at the beginning of the
preceding period in this case?
(ii) The Company wants to correct the error during FY 20X2-20X3 by giving impact
in the figures of current year only. Is the contention of management correct?

Question 19 – XYZ Limited

XYZ Limited (the ‘Company’) is into construction of turnkey projects and has assessed
its operating cycle to be 18 months. The Company has certain trade receivables and
payables which are receivable and payable within a period of twelve months from the
reporting date, i.e, March 31, 20X2.
In addition to above there are following items/transactions which took place during
financial year 20X1-20X2.
S. No. Items/transactions
(1) The Company has some trade receivables which are due after 15 months
from the date of balance sheet. So the Company expects that the payment
will be received within the period of operating cycle.
(2) The Company has some trade payables which are due for payment after 14
months from the date of balance sheet. These payables fall due within the
period of operating cycle. Though the Company does not expect that it will
be able to pay these payable within the operating cycle because the nature
of business is such that generally projects gets delayed and payments from
customers also gets delayed.
(3) The Company was awarded a contract of Rs. 100 Crore on March 31, 20X2.
As per the terms of the contract, the Company made a security deposit of
5% of the contract value with the customer, of Rs. 5 crore on March 31,
20X2. The contract is expected to be completed in 18 months’ time. The
aforesaid deposit will be refunded back after 6 months from the date of the
completion of the contract.

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 (4) The Company has also given certain contracts to third parties and have
received security deposits from them of Rs. 2 Crore on March 31, 20X2
which are repayable on completion of the contract but if contract is
cancelled before the contract term of 18 months, then it becomes payable
immediately. However, the Company does not expect the cancellation of
the contract.
Considering the above items/transactions answer the following:
(i) The Company wants to present the trade receivable as current despite the fact
that these are receivables in 15 months’ time. Does the decision of presenting
the same as current is correct?
(ii) The Company wants to present the trade payables as non-current despite the
fact that these are due within the operating cycle of the Company. Does the
decision of presenting the same as non-current is correct?
(iii) Can the security deposit of Rs. 5 Crore made by the Company with the
customers be presented as current?
(iv) Can the security deposit of Rs. 2 Crore taken by the Company from contractors
be presented as non-current?

Thanks ….

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