Corporate Financial Reporting and Disclosure
This domain tests the presentation and note-disclosure standards that turn accounting numbers into decision-useful information: Ind AS 108 operating segments, Ind AS 24 related parties, Ind AS 33 EPS, Ind AS 34 interim reporting, Ind AS 10 events after the reporting period, and narrative frameworks such as integrated reporting and BRSR.
Core rules
- Segment reporting follows the chief operating decision maker's internal reporting. Reportable segments meet a 10% revenue, profit or assets test; segment revenue includes inter-segment sales and reconciles to entity revenue.
- Related party disclosures state the relationship, transaction amounts, outstanding balances and terms; naming the party alone is insufficient.
- Basic EPS = profit attributable to ordinary shareholders ÷ weighted average ordinary shares. Bonus issues and splits restate all prior periods; rights issues use a bonus factor.
- Diluted EPS applies the treasury-share method to options and adds dilutive potential shares; anti-dilutive instruments are ignored.
- Events after the reporting date that provide evidence of conditions at the date are adjusting; those indicating later conditions are non-adjusting.
Worked example
Profit is ₹1,000 lakh. Opening shares are 500 lakh; a 1-for-1 bonus is issued mid-year. Restated shares = 1,000 lakh for the whole year. Basic EPS = ₹1.00, not ₹2.00. The prior year's EPS is restated as if the bonus had always existed. Reasoning: a bonus changes only the number of shares, not resources, so comparability requires restatement.
Traps
Not restating comparatives for bonus issues; computing weighted average shares from year-end balances; omitting segment liabilities because they are not mandatory; disclosing only parent transactions and ignoring subsidiaries, associates and key managerial personnel; treating a customer bankruptcy after year-end as non-adjusting when it confirms a receivable condition at the date.