Library / Technical Accounting Manual: IFRS, IAS and Ind AS Equivalents

IAS 1 - Presentation of Financial Statements

Indian equivalent: Ind AS 1 - Presentation of Financial Statements

Objective and scope

IAS 1 is the rule book for the shape of a company's financial statements. It does not tell you how to measure things (that is the job of the other standards) - it tells you what statements must be produced, what they are called, how they are laid out, and what overriding principles govern them, so that any reader anywhere in the world sees a familiar, comparable report.

Core principle

Think of IAS 1 as the template and constitution of a company's annual accounts. Every IFRS company presents the same set of statements built on the same foundations - going concern, accrual, consistency, materiality and fair presentation - so an investor in Tokyo can read an Indian company's accounts without getting lost.

Defined terms and technical terminology

Term	Technical meaning
Financial statements	The formal set of reports showing a company's financial position and performance for a period.
Going concern	The assumption that the business will keep operating for the foreseeable future (at least 12 months from the reporting date) and is not about to close or be liquidated.
Accrual basis	Record income and expenses when they are earned or incurred, not when cash moves.
Materiality	Information is material if omitting, misstating or obscuring it could influence the decisions users make. Immaterial items may be aggregated.
Fair presentation	The accounts must give a true and faithful picture of the entity's position and performance.
Offsetting	Netting an asset against a liability, or income against expense. Generally prohibited unless a standard requires it.
Comparative information	Presenting the prior period's figures alongside the current period.
Current vs non-current	Current = expected to be recovered/settled within 12 months or the operating cycle; non-current = beyond that.
Other Comprehensive Income (OCI)	Gains and losses that bypass profit or loss and sit directly in equity (e.g., revaluation surpluses, certain remeasurements).

Application and worked illustrations

The complete set of financial statements

Under IAS 1 a complete set comprises five statements plus notes: (1) a Statement of Financial Position (formerly 'Balance Sheet') - a photograph of what the entity owns (assets) and owes (liabilities) and the owners' residual stake (equity) at the period-end; (2) a Statement of Profit or Loss and Other Comprehensive Income - the earnings story for the period; (3) a Statement of Changes in Equity - how each component of owners' funds moved; (4) a Statement of Cash Flows - actual cash movements (detailed by IAS 7); and (5) Notes - the accounting policies and the breakdowns that make the numbers understandable. If the entity restates or reclassifies retrospectively, a third balance sheet at the beginning of the earliest comparative period is also required.

The overriding principles

IAS 1 rests on a handful of foundations that apply to everything in the accounts. Going concern - the accountant must assess, at least 12 months ahead, whether the business will survive; if material uncertainties exist they must be disclosed, and if the entity is not a going concern the accounts must be prepared on a break-up (liquidation) basis, which usually slashes asset values. Accrual basis - profit reflects earning and consuming, not cash timing. Consistency - presentation and classification are kept the same period to period so trends are meaningful. Materiality and aggregation - each material class is shown separately; trivial items are grouped. No offsetting - you generally cannot net a receivable against a payable to make the balance sheet look smaller. Comparatives - at least one prior period must be shown.

Worked example 1 - accrual basis in action

Anita's Bakery delivers a ₹50,000 cake order to a hotel in December; the hotel will pay in January. Under the accrual basis, Anita recognises the sale in December (when earned) and shows a receivable. She does not wait for cash.

Journal entry - December - record the earned sale
Account	Debit (₹)	Credit (₹)
Trade Receivable (asset)	50,000
Revenue (income)		50,000

Journal entry - January - when the hotel pays
Account	Debit (₹)	Credit (₹)
Bank (asset)	50,000
Trade Receivable (asset)		50,000

Notice the profit is recognised in December, but cash arrives in January - this is exactly why accrual profit and the bank balance diverge, and why a separate cash-flow statement (IAS 7) is essential.

Worked example 2 - going concern judgement

Anita's flour supplier threatens to stop supplies and her bank may recall its loan. She must assess going concern. If she reasonably believes she can trade for the next 12 months, she prepares normal accounts but discloses the material uncertainty in the notes. If closure is likely, she must switch to a break-up basis: stock that cost ₹2,00,000 but would fetch only ₹80,000 in a rushed sale is now carried at ₹80,000, and long-term assets are reclassified as current. The going-concern call therefore changes the numbers themselves, not just a footnote.

Common mistake: treating going concern as a mere disclosure. If the entity truly isn't a going concern, the entire measurement basis changes - assets to recoverable/realisable amounts and long-term items to current.

Common mistake: offsetting a bank overdraft against a positive bank balance at another bank, or netting revenue against related expenses. IAS 1 prohibits this unless a standard specifically permits it.

IND AS LINK

Ind AS 1 is substantially identical to IAS 1. The crucial Indian overlay is Schedule III of the Companies Act, 2013, which prescribes the statutory face format of the balance sheet and statement of profit and loss. An Indian company therefore follows Ind AS 1 for principles and Schedule III for the format. Ind AS 1 also uses the heading 'Balance Sheet' to align with Schedule III terminology.

Further worked illustrations

Extra numeric example - current vs non-current split

ShopEasy Ltd has: a bank loan of ₹50,00,000 of which ₹10,00,000 is repayable within the next 12 months; trade payables of ₹8,00,000 due in 60 days; and a 5-year machinery loan. Under IAS 1's current/non-current classification, the ₹10,00,000 loan instalment and the ₹8,00,000 payables are current liabilities, while the remaining ₹40,00,000 and the machinery loan are non-current. Splitting them this way instantly shows a reader how much must be paid soon versus later - the essence of assessing short-term solvency.

INDIAN REGULATORY CONTEXT

An Indian company doesn't just apply Ind AS 1 principles; it must present the balance sheet in the exact Schedule III order: Equity and Liabilities first (Equity → Non-current liabilities → Current liabilities), then Assets (Non-current → Current). So even though Ind AS 1 gives principles, the sequence and line items on the face are dictated by the Companies Act. A CFO preparing accounts keeps both open side by side.

TECHNICAL EDGE CASE

A company has a long-term loan but breaches a covenant before year-end, giving the bank the right to demand immediate repayment. Even though the original term was 5 years, the loan is now current at the reporting date, because the entity does not have an unconditional right to defer settlement for 12 months. If the bank grants a waiver of at least 12 months before year-end, it stays non-current; a waiver granted after year-end does not help - it would be a non-adjusting event (IAS 10).

Extended technical analysis

Recognition, Measurement, Presentation and Disclosure - the full architecture

IAS 1 is a presentation standard: it prescribes no recognition or measurement rules of its own, but it governs the structure, minimum line items, and overriding qualitative requirements of a complete set of financial statements. Its authority is significant because it contains the fair presentation override and the going concern assessment - two matters that reach into every other standard.

The fair presentation override

Financial statements must present fairly the financial position, financial performance and cash flows. Compliance with IFRS is presumed to achieve fair presentation. In extremely rare circumstances where compliance with a specific requirement would be so misleading as to conflict with the objective of financial statements, IAS 1 permits a departure from that requirement - but only where the regulatory framework does not prohibit it, and with extensive disclosure of the nature, reason and financial effect of the departure. This is the true and fair override and is almost never invoked in practice.

Statement of Financial Position - prescribed minimum line items

Statement of Financial Position (illustrative format, ₹ in lakhs)
Particulars	Note	31-Mar-26	31-Mar-25
ASSETS
Non-current assets
Property, plant and equipment	3	12,450	11,200
Right-of-use assets	4	3,120	3,480
Goodwill	5	2,800	2,800
Other intangible assets	5	1,640	1,750
Investments in associates and joint ventures	6	980	910
Deferred tax assets (net)	7	430	390
Total non-current assets		21,420	20,530
Current assets
Inventories	8	4,260	3,980
Trade receivables	9	5,140	4,620
Cash and cash equivalents	10	2,310	1,870
Total current assets		11,710	10,470
TOTAL ASSETS		33,130	31,000
EQUITY AND LIABILITIES
Equity
Equity share capital	11	2,000	2,000
Other equity	12	13,180	11,640
Equity attributable to owners of the parent		15,180	13,640
Non-controlling interests		1,240	1,090
Total equity		16,420	14,730
Non-current liabilities
Borrowings	13	8,200	8,900
Lease liabilities	14	2,480	2,810
Provisions (employee benefits)	15	1,120	1,040
Deferred tax liabilities (net)	7	310	280
Total non-current liabilities		12,110	13,030
Current liabilities
Borrowings (incl. current maturities)	13	1,450	1,320
Trade payables	16	2,340	1,120
Other current liabilities and provisions	17	810	800
Total current liabilities		4,600	3,240
TOTAL EQUITY AND LIABILITIES		33,130	31,000

PRACTICE NOTE

Under Schedule III, Division II (Ind AS compliant companies), the sequence is Assets → Equity and Liabilities with prescribed sub-classifications, and current/non-current classification is mandatory. Trade payables additionally require MSME ageing disclosures.

Statement of Profit or Loss and Other Comprehensive Income

IAS 1 permits either a single statement or two statements (a separate income statement followed by a statement of comprehensive income). The critical structural requirement is the split of OCI into items that will be reclassified to profit or loss and those that will not be reclassified.

Statement of Profit and Loss and OCI (illustrative, ₹ in lakhs)
Particulars	Note	FY 2025-26	FY 2024-25
Revenue from operations	18	28,400	25,900
Other income	19	640	520
Total income		29,040	26,420
Expenses
Cost of materials consumed	20	11,300	10,450
Changes in inventories of finished goods and WIP	21	(280)	150
Employee benefits expense	22	5,940	5,320
Finance costs	23	1,180	1,240
Depreciation and amortisation expense	24	2,260	2,110
Other expenses	25	4,120	3,880
Total expenses		24,520	23,150
Profit before exceptional items and tax		4,520	3,270
Exceptional items	26	(180)	-
Profit before tax		4,340	3,270
Current tax		1,180	890
Deferred tax		(95)	40
Profit for the year (A)		3,255	2,340
Other Comprehensive Income
(i) Items that will not be reclassified to P&L
Remeasurement of defined benefit plans		(140)	85
Income tax relating to above		35	(21)
Equity instruments through OCI		210	160
(ii) Items that will be reclassified to P&L
Effective portion of cash flow hedges		95	(60)
Exchange differences on translating foreign operations		(70)	45
Income tax relating to above		(6)	4
Other Comprehensive Income for the year (B)		124	213
Total Comprehensive Income (A + B)		3,379	2,553
Profit attributable to:
Owners of the parent		3,062	2,196
Non-controlling interests		193	144
Earnings per equity share (face value ₹10)	27
Basic (₹)		15.31	10.98
Diluted (₹)		15.02	10.81

Going concern - the assessment framework

Going Concern Assessment - Decision Tree
■ Assess ability to continue as a going concern for at least 12 months from reporting date
▼
◆ Are there events or conditions casting doubt (losses, negative working capital, covenant breach, funding gap)?
▼
✖ NO → Prepare on going concern basis. No specific disclosure required.
▼
▸ YES → Evaluate management's mitigating plans (refinancing, asset sales, promoter support)
▼
◆ Do the plans remove the material uncertainty?
▼
✔ YES → Going concern basis; disclose significant judgement under IAS 1.122
▼
▸ NO, but entity will still continue → Going concern basis PLUS disclose MATERIAL UNCERTAINTY (IAS 1.25)
▼
■ Entity will NOT continue → DO NOT use going concern basis. Prepare on break-up / liquidation basis and disclose the fact and reason

The distinction between a material uncertainty (going concern basis retained, with prominent disclosure) and a going concern failure (basis abandoned) is one of the most consequential judgements in financial reporting, and drives the auditor's report modification - an Emphasis of Matter / Material Uncertainty Related to Going Concern paragraph versus an adverse opinion.

Key disclosure requirements

IAS 1 requires disclosure of: the judgements management made in applying accounting policies that have the most significant effect on recognised amounts; and the sources of estimation uncertainty - assumptions about the future carrying a significant risk of material adjustment within the next financial year. In practice these two disclosures (IAS 1.122 and IAS 1.125) are where impairment assumptions, useful lives, ECL models and provisions estimates are surfaced, and they are a primary focus of regulatory review.

IFRS vs Ind AS - Comparative Analysis
Aspect	IFRS / IAS position	Ind AS position (carve-out / carve-in)
Statement titles	IAS 1 uses 'Statement of Financial Position'; alternative titles permitted.	Ind AS 1 uses 'Balance Sheet' and 'Statement of Profit and Loss' to align with the Companies Act, 2013.
Format prescription	IFRS prescribes minimum line items only; format is flexible.	Format is rigidly prescribed by Schedule III, Division II - a carve-in going beyond IFRS.
Extraordinary items	Prohibited under IAS 1.	Also prohibited; however Schedule III mandates a separate 'Exceptional items' line, which is presentation-specific to India.
Fair presentation override	Departure permitted in extremely rare circumstances.	Ind AS 1 retains the concept but it is constrained by the Companies Act; in practice a departure is effectively unavailable.
Breach of loan covenant	Loan classified current unless waiver obtained before reporting date.	Ind AS 1 carries a carve-out: if the lender agrees, before the financial statements are approved, not to demand payment, the liability may be classified non-current.