Ind AS 1 : Presentation of Financial Statements (IAS 1): Ind AS 1 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.
This carve-out is due to difference in application of accounting principles and practices and economic conditions prevailing in India.
IAS 1 requires that in case of a loan liability, if any condition of the loan agreement which was classified as non-current is breached on the reporting date, such loan liability should be classified as current. Where the breach is rectified after the balance sheet date IAS requires loans to be classified as current.
Carve Out: Ind AS 1 clarifies that where there is a breach of a material provision of a long - term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date, the entity does not classify the liability as current, if the lender agreed, after the reporting period and before the approval of the financial statements for issue, not to demand payment as a consequence of the breach.
Reason: Under Indian banking system, a long-term loan agreement generally contains a large number of conditions. Some of these conditions are substantive, such as, recalling the loan in case interest is not paid, and some conditions are procedural and not substantive, such as, submission of insurance details where the entity has taken the insurance but not submitted the details to the lender at the end of the reporting period. Generally, customer-banker relationships are developed whereby in case of any procedural breach, a loan is generally not recalled. Also, in many cases, a breach is rectified after the balance sheet date and before the approval of financial statements. Carve out has been made on the basis of above mentioned reason
AS 1 : Disclosure of Accounting Policy
Deals with Disclosure of Accounting Policy (Limited Scope) - Accounting polices means specific accounting principles & method of applying such principle in preparing & presentation of financial statement.
- Valuation of inventory
- Treatment of Goodwill
- Treatment of Borrowing Cost etc.
AS - 1 Specifies disclosure requirement of accounting policies
Difference Between AS 1 and IndAS 1
|AS 1||IND AS 1|
|Deals only with disclosure of accounting policies.||Deals with presentation of financial statements in general and its scope is much wider than AS 1.|
|Does not specifically deals with this aspect as it is deals only with the discosure of accounting policies. However, as per AS 5, extraordinary items are to be disclosed separately in the statement of profit and loss.||Ind AS 1 prohibits presentation of any item as ‘Extraordinary Item’ in the statement of profit and loss or in the notes.|
|AS 1 is silent on this matter.||
Requires an enterprise to explicitly state in the notes, that all IND AS have been complied with. Deviation from the requirements of IND AS will be allowed only when:
|It requires the classification of expense on the basis of their function. Eg: Classification into cost of sales, administrative expense, selling and distribution expense, etc.||For the purpose of presentation of expenses in the statement of Profit and loss, the expenses shall be classified based on their nature. Eg: they can be classified as finance cost, depreciation, employee cost, etc.|
|There is no such requirement in AS 1.||If a presentation based on liquidity is more relevant and reliable, than the presentation based on current / non current classification, the assets and liabilities shall be presented in the order of liquidity.|
|There is no specific requirement of presentation of Statement of Profit and loss in two parts. Generally, a single P&L Statement is presented.||
The statement of profit and loss has two distinct parts.
The first part displays the various components of the profit or loss for the period (Just like profit and loss account)
The second part displays the various components of “Other comprehensive Income” for the period, which includes Items like unrealised gains and losses (gains on revaluation of fixed assets, actuarial gains and losses on employee benefits, etc.)
|There is no such requirement in AS 1.||Requires that the assets and liabilities should be classified as current and non current and also provides a criteria for such classification.|
|AS 1 is silent on this matter.||Requires the disclosure of judgments made by management while framing of accounting polices. It also requires disclosure of key assumptions about the future and other sources of measurement uncertainty, that have significant risk of causing material adjustment to the carrying amounts of assets and liabilities in the next financial year.|
|In such cases, AS 1 requires the effect of such change in accounting policy or rectification of error to be adjusted in current period only.||Where there is a change in accounting policy or when there is rectification of error (i.e. Prior period item), IND AS 1 requires retrospective changes i.e. all comparative information, current period information and opening balances should be restated.|
- Difference Between AS 9 and Ind AS 18 - Revenue Recognition
- Difference Between AS 7 and Ind AS 11 - Construction Contracts
- Difference Between AS 1 and IndAS 1 - All you need to know about
- Difference Between AS 2 and Ind AS 2: Valuation of Inventory
- Difference Between AS 3 and Ind AS 7 - Cash Flow Statement
- Difference Between AS 4 and Ind AS 10 - All you need to know about
- Difference Between AS 5 and Ind AS 8 - All you need to know about
- Applicability of Ind AS (Indian Accounting Standards)
- Difference Between AS 10 and Ind AS 16: All you need to know about
- Difference Between AS 11 and Ind AS 21: Foreign Exchange Rates