Complete Set of Financial Statements & its General Features - Ind AS - Indian Accounting Standards - Companies Law

Complete Set of Financial Statements its General Features Purpose of financial statements 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 to a wide range of users in making economic decisions. To meet this objective, financial statements provide information about an entity s: 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 statements in predicting the entity s future cash flows and their timing and certainty. Complete set of financial statements A complete set of financial statements comprises: a balance sheet as at the end of the period (BS); a statement of profit and loss for the period (P L) Along with Statement of changes in equity for the period (SOCE); a statement of cash flows for the period; notes, comprising significant accounting policy information and other explanatory information;] comparative information in respect of the preceding period; 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. An entity shall present a single statement of profit and loss, with profit or loss and other comprehensive income presented in two sections. The sections shall be presented together, with the profit or loss section presented first followed directly by the other comprehensive income section. Management Review of Financial Statements Many entities present, outside the financial 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: 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 targeted ratio of liabilities to equity; and the entity s resources not recognised in the balance sheet in accordance with Ind ASs. 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 Ind ASs. Presentation of True and Fair View and compliance with Ind ASs 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 Conceptual Framework for Financial Reporting under Indian Accounting Standards (Conceptual Framework) issued by the Institute of Chartered Accountants of India (ICAI). The application of Ind ASs, with additional disclosure, when necessary, is presumed to result in financial statements that present a true and fair view. Presentation of a true and fair view also requires an entity: 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. to present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information. to provide additional disclosures when compliance with the specific requirements in Ind 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. An entity cannot rectify inappropriate accounting policies either by disclosure of the accounting policies used or by notes or explanatory material. Can an entity depart from Compliance of IndAS 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, 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. When an entity departs from a requirement of an Ind AS, it shall disclose: 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; that it has complied with applicable Ind ASs, except that it has departed from a particular requirement to present a true and fair view; 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, and the treatment adopted; and 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. When an entity has departed from a requirement of an Ind AS in a prior period, and that departure affects the amounts recognised in the financial statements for the current period, it shall make the disclosures set out in point (c) and (d) above.