SEMINAR ON IFRS by THE INSTITUTE OF COMPANY SECRETARIES OF INDIA WITH RELIANCE COMMUNICATIONS & WIRC ICWAI

22nd AUGUST 2009 THRU 50+ CITIES AND 75+ RELIANCE VIDEO CONF LOCATIONS SPEAKER : Rammohan Bhave, CS, ICWA, CA mohanbhave@gmail.com Dr Mrs Anjali Bhave, ICWA, Ph.D.

IAS 1 Presentation of Financial Statements Rammohan Bhave & Dr Anjali Bhave mohanbhave@gmail.com arbhave@gmail.com +91 9004043365, +91 9322249029 +91 9322249029

IFRS Based Financial Statements IAS -1 “ Presentation of Financial Statements” is a foundation standard that explains basic accounting and financial reporting principles and style of presentation.

IFRS Based Financial Statements A complete set of Financial Statements comprise of A Statement of Financial Position as at the end of the year; A Statement of Comprehensive Income for the period; A Statement of Changes in Equity for the period; A Statement of Cash Flows for the period; Notes comprising of a summary of significant accounting policies and other explanatory information ; A statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements. [ Para 10, IAS-1]

Structure of Statement of Financial Position 2009 2008 ASSETS Non-current Assets Property , Plant & Equipment Goodwill Other Intangible Assets Investments in Associates Available for Sale Investments Current Assets Inventories Trade Receivables Other Current Assets Cash & Cash Equivalents Total Assets

Structure of Statement of Financial Position 2009 2008 EQUITY AND LIABILITIES Equity attributable to the owners of the parent Share Capital Retained Earnings Other components of Equity Non-controlling Interest Total Equity

Non-current Liabilities Long-term borrowings Deferred tax Long term provisions Total non-current liabilities Current Liabilities Trade and other payables Short-term borrowings Current portion of long- term borrowings Current tax payable Short-term provisions Total current liabilities Total liabilities

Minimum Line Items to be Presented in Statement of Financial Position ( Reference Para 54 of IAS 1 Property, plant and equipment; (b) Investment property; (c) Intangible assets; (d) Financial assets (excluding amounts shown under (e), (h) and (i)); (e) Investments accounted for using the equity method; (f) Biological assets; (g) Inventories;

Minimum Line Items to be Presented in Statement of Financial Position ( Reference Para 54 of IAS 1 (h) Trade and other receivables; (i) Cash and cash equivalents; (j) The total of assets classified as held for sale and assets included in disposal groups classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations; (k) Trade and other payables; (l) Provisions; (m) Financial liabilities (excluding amounts shown under (k) and (l)); (n) Liabilities and assets for current tax, as defined in IAS 12 Income Taxes; (o) Deferred tax liabilities and deferred tax assets, as defined in IAS 12; (p) Liabilities included in disposal groups classified as held for sale in accordance with IFRS 5; (q) Non-controlling interests, presented within equity; and (r) Issued capital and reserves attributable to owners of the parent.

Current Assets Current assets should have any of the following characteristics: These are expected to be realised within the normal operating cycle of the entity or within twelve months after the balance sheet date whichever is higher ; examples are receivables, , advances, loans , etc. Financial instruments like available for sale , held to maturity and loans which will be realised within a period of twelve months from the date of balance sheet date. These are intended for sale or consumption within the normal operating cycle of the entity; example inventories. These are held primarily for the purpose of trading ; example Held for Trading Financial Instruments. These are cash and cash equivalents. As per IAS-7 cash comprises of cash on hand and demand deposits. Cash equivalents are highly liquid investments that are readily convertible to known amounts of cash , and which are subjected to insignificant risk of changes in value.

Current Liabilities Liabilities are classified as current liabilities if these satisfy any of the following criteria: These are expected to be settled in the entity’s normal operating cycle. These are primarily held for trading. These are due to be settled within a period of twelve months from the balance sheet date. The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date. All other liabilities are classified as non-current liabilities.

Statement of Comprehensive Income Two-part Statement of Comprehensive Income First part presents Statement of Income Second part presents Statement of Other Comprehensive Income Two Separate Statements Statement of Other Comprehensive Income presents certain items of unrealised gain / loss to be directly accounted for in the equity. This statement intends to present the periodic effect.

Statement of Income There are two distinct presentation styles of the Statement of Income income statement portion can be either presented by nature of expense or function .

Classification of Expenses by Nature Income Statement 2009 2008 Revenue Other Income Changes in inventories of finished goods and work in progress Work performed by the entity and capitalised Raw material consumed Employee Benefit Expenses Depreciation and Amortisation Expenses Impairment of Property , Plant and Equipment and Intangible Assets Other Expenses Finance Costs Share of profit of associates

Classification of Expenses by Nature Income Statement 2009 2008 Profit Before Tax Income tax expense Profit for the year from continuing operations Profit ( Loss) for the year from discontinued operations Profit for the year Profit attributable to : Owners of the entity Non-controlling interest Earning per share Basic Diluted

Classification of Expenses by Functions 2009 2008 Revenue Cost of sales Gross Profit Other Income Distribution Costs Administrative Expenses Other Expenses Finance Costs Share of profit of associates

Classification of Expenses by Functions 2009 2008 Profit Before Tax Income tax expense Profit for the year from continuing operations Profit ( Loss) for the year from discontinued operations Profit for the year Profit attributable to : Owners of the entity Non-controlling interest Total Comprehensive Income attributable to : Earning per share4 Basic Diluted

Statement of Other Comprehensive Income 2009 2008 Profit for the Year Other Comprehensive Income : Exchange differences in translating foreign operations Gain ( loss) on fair value changes in available for sale financial instruments Gain (loss) fair value changes in Cash Flow Hedges Gain on Revaluation of Property , Plant and Equipment Actuarial Gain ( Loss) on defined benefit pension plans Share of other comprehensive income of associates Income tax relating to items of other comprehensive income

Statement of Other Comprehensive Income 2009 2008 Other Comprehensive Income net of tax Total Comprehensive Income for the year Profit attributable to : Owners of the entity Non-controlling interest Total Comprehensive Income attributable to : Earning per share Basic Diluted

Information to be presented on the face of the Income Statement ( or Income Statement portion of the Statement of Comprehensive Income) or in the Note Write-downs of inventories to net realisable value as well as reversals of such write downs Write down of property , plant and equipment to recoverable amount as well as reversals of such write downs Restructuring activities of an entity and reversals of any provisions for the costs of restructuring Disposal of items of property, plant and equipment Disposal of investments Discontinued operations Litigation settlements Other reversals of provisions.

Statement of Changes in Equity Paras 106-110 of IAS 1 set out the principles for presentation of Statement of Changes in Equity . This statement is meant for depicting the movement in equity during the accounting period. This statement reflects – Various components of the equity with separate presentation of non-controlling interest ; Distribution of total comprehensive income during the year to various equity components and non-controlling interest ; Distribution to owners by way of dividend and other transaction with owners like issue of shares.

Statement of Changes in Equity This statement makes reconciliation of balances of various equity components at the beginning and end of the accounting period. Para 107 of IAS 1 particularly requires disclosures of dividend recognised and distributed either in the Statement of Changes in Equity or in Notes along with per share information.