Framework, Presentation and Disclosure (Ind AS 1, 8, 10, 34, 101)
Ind AS 1, 8, 10, 34 and 101 together govern the shape and reliability of general-purpose financial statements. The exam tests classification, retrospective versus prospective adjustment, subsequent events and the transition mechanics of first-time adoption.
Core rules
- Ind AS 1 requires fair presentation, going concern, accrual, materiality and no offsetting; classify assets and liabilities as current using the 12-month or operating-cycle test.
- Ind AS 8: policy changes and material prior-period errors are applied retrospectively; changes in estimates are prospective. Impracticability permits prospective treatment with disclosure.
- Ind AS 10: adjusting events provide evidence of conditions at the reporting date; non-adjusting events are disclosed. Dividends proposed after the period end are not a liability.
- Ind AS 34 prescribes minimum content for interim reports and treats the interim period as part of the annual period.
- Ind AS 101 uses a transition date and an opening Ind AS balance sheet. Mandatory exceptions include estimates, derecognition, hedge accounting, NCI and classification of financial assets; optional exemptions include deemed cost, business combinations and cumulative translation differences.
Worked example
An asset costing ₹100 lakh, life 10 years, SLM, is 2 years old (carrying ₹80 lakh). The remaining life is revised to 4 years. This is a change in estimate, so depreciation is ₹80/4 = ₹20 lakh prospectively. A switch from FIFO to weighted average would be a policy change, applied retrospectively.
Traps
- Treating a change in depreciation method as a policy change.
- Recognising proposed dividends as a liability.
- Using hindsight in Ind AS 101 estimates.
- Omitting comparative restatement for policy changes.