Tuesday, August 4, 2009

Major differences between the draft of AS 1 (Revised), Presentation of Financial Statements, and existing AS 1 (issued 1979)

The Draft of revised AS 1 generally deals with presentation of financial statements,
whereas existing AS 1 (issued1979) deals only with the disclosure of accounting
policies. The scope covered by the draft is thus much wider and line by line
comparison of the difference with the present standard is not possible. However, the
major requirements as laid down in the draft are as follows..

* An enterprise shall make an explicit statement in the financial statements of
compliance with all the Accounting Standards. Further, the draft allows deviation
from a requirement of an accounting standard in case the management
concludes that compliance with ASs will be misleading and if the regulatory
framework requires or does not prohibit such a departure.

* The draft of revised AS 1 requires presentation and provides criteria for
classification of Current / Non- Current assets / liabilities.

* The draft of revised AS 1 prohibits presentation of any item as extraordinary Item
in the Statement of Comprehensive Income.

* The draft of revised AS 1 requires disclosure of judgments made by management
while framing of accounting polices. Also, it requires disclosure of key
assumptions about the future and other sources of measurement uncertainty that
have significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within next financial year.

* The draft of revised AS 1 requires classification of expenses to be presented
either based on nature or function of expenses. If classification is based on
function, additional information on the nature of expenses should be disclosed.

* The draft of revised AS 1 requires presentation of statement of financial position
as at the beginning of the earliest period when an entity applies an accounting
policy retrospectively or makes a retrospective restatement of items in the
financial statements, or when it reclassifies items in its financial statements.

* The draft of revised AS 1 requires presentation of components of comprehensive
income (i.e. non-owner changes in equity) are required to be presented in the
Statement of Other Comprehensive Income.

* In respect of reclassification of items, the draft of revised AS 1 requires disclosure of nature, amount and reason for reclassification in the notes to financial statements.

* The draft of revised AS 1 requires the financial statements to include a Statement
of Changes in Equity which, inter alia, includes reconciliation between opening
and closing balance for each component of equity