Material – Presentation of Financial Statements - Ind AS - Indian Accounting Standards - Companies Law

Material Presentation of Financial Statements Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. Materiality depends on the nature or magnitude of information, or both. An entity assesses whether information, either individually or in combination with other information, is material in the context of its financial statements taken as a whole. Information is obscured if it is communicated in a way that would have a similar effect for primary users of financial statements to omitting or misstating that information. The following are examples of circumstances that may result in material information being obscured:- Given information in unclear or vague language; Scattered information throughout the financial statements where in users cannot get in properly; dissimilar items, transactions or other events are inappropriately aggregated; similar items, transactions or other events are inappropriately disaggregated; and Providing lot of immaterial information so that users wont focus on material matters. Assessing whether information could reasonably be expected to influence decisions made by the primary users of a specific reporting entity s general purpose financial statements requires an entity to consider the characteristics of those users while also considering the entity s own circumstances. User should get valid information from Financials Statements Many existing and potential investors, lenders and other creditors cannot require reporting entities to provide information directly to them and must rely on general purpose financial statements for much of the financial information they need. Consequently, they are the primary users to whom general purpose financial statements are directed. Financial statements are prepared for users who have a reasonable knowledge of business and economic activities and who review and analyze the information diligently. At times, even well informed and diligent users may need to referk the aid of an adviser to understand information about complex economic phenomena. Notes contain information in addition to that presented in the balance sheet, statement of profit and loss, statement of changes in equity and statement of cash flows. Notes provide narrative descriptions or disaggregation s 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 recognised in profit or loss as required or permitted by other Ind ASs. The components of other comprehensive income include: Changes in revaluation surplus (refer Ind AS 16, Property, Plant and Equipment and Ind AS 38, Intangible Assets); Remeasurements of defined benefit plans (refer Ind AS 19, Employee Benefits); Gains and losses arising from translating the financial statements of a foreign operation (refer Ind AS 21, The Effects of Changes in Foreign Exchange Rates); Gains and losses from investments in equity instruments, financial asset, hedging instruments designated at fair value through other comprehensive income in accordance with Ind AS 109, Financial Instruments; for particular liabilities designated as at fair value through profit or loss, the amount of the change in fair value that is attributable to changes in the liability s credit risk (refer Ind AS 109); changes in the value of the time value of options when separating the intrinsic value and time value of an option contract and designating as the hedging instrument only the changes in the intrinsic value (refer Ind AS 109); changes in the value of the forward elements of forward contracts when 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 (refer Ind AS 109).