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Educational Material on Ind AS 1 Presentation of Financial Statements

Educational Material on Ind AS 1 Presentation of Financial Statements

Ind AS 1 Presentation of Financial Statements : Indian Accounting Standard (Ind AS) 1, Presentation of Financial Statements, prescribes the overall requirements for the presentation of financial statements and guidelines for their structure. The Educational Material on Ind AS 1 contains summary of Ind AS 1 and Frequently Asked Questions (FAQs) on issues which are expected to be encountered while implementing this Standard.

Educational Material on Ind AS 1 Presentation of Financial Statements

Ind AS 1 Presentation of Financial Statements :  Financial statements are a collection of reports about an organisation’s financial results, financial condition, and cash flows. They are useful for the following reasons:

  • To determine the ability of a business to generate cash, and the sources and uses of that cash.
  • To determine whether a business has the capability to pay back its debts.
  • To track financial results on a trend line to spot any looming profitability issues.
  • To derive financial ratios from the statements that can indicate the condition of the business.
  • To investigate the details of certain business transactions, as outlined in the disclosures that accompany the statements.

The standard contents of a set of financial statements are:

  • Balance sheet Shows the entity’s assets, liabilities, and stockholders’ equity as of the report date. It does not show information that covers a span of time.
  • Income Statement Shows the results of the entity’s operations and financial activities for the reporting period. It includes revenues, expenses, gains, and losses.
  • Statement of cash flow Shows changes in the entity’s cash flows during the reporting period.
  • Supplementary notes. Includes explanations of various activities, additional detail on some accounts, and other items as mandated by the applicable accounting framework, such as GAAS or IFRS.

Relevant link to download the Educational Material : 

Ind AS 1 Presentation of Financial Statements : The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.” Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organisation’s financial position.

Financial statements are intended to be understandable by readers who have “a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently.”

Financial statements may be used by users for different purposes:

  • Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management’s annual report to the stockholders.
  • Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labour unions or for individuals in discussing their compensation, promotion and rankings.
  • Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and are prepared by professionals (financial analysts), thus providing them with the basis for making investment decisions.
  • Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures.

Objective of Ind AS 1 Financial Statements provide information about an entity’s

– Assets

– Liabilities

– Equity

– Income and Expense incl gains and losses

– Contribution by and Distribution to owners

Scope of Ind AS 1 An entity shall apply this Standard

•in preparing and presenting general purpose financial statements

• in accordance with Indian Accounting Standards (Ind ASs). – Cash Flows

Relevant link to download the Educational Material: 

Educational Material on Ind AS 1 Presentation of Financial Statements

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Educational Material on Ind AS 1 Presentation of Financial Statements

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