pri Exposure Draft on AS-1- My Opinion Exposure Draft on AS-1- My Opinion

With the onset of the IND AS in the Corporate world and the tightening screws of the Ministry of Corporate Affairs, ICAI has come up with a series of Exposure Drafts to revamp the Accounting Standards that were erstwhile issued. This move is to ensure that the older accounting standards are in line with IND AS.

It may not be completely in line, but probably one may call it a Converged Accounting standard with Ind AS.

Here are my comments on the Exposure Draft on AS-1-Presentation of Financial Statements written to the Accounting Standard Board:

The following are the comments on the Exposure Draft on AS-1:
  • Para 7 of the ED refers to Para 26 of the Framework for the Presentation and Preparation of Financial Statements, whereas the same Para 7 of Ind AS-1 mentions Para 25 of the Framework. Though both the paras intend to convey the same meaning, Para 7 of Ind AS-1 should be amended to change the reference of Para 25 to Para 26 of the Framework.
  • Para 10 of the ED lists out the statements that would form a part of the Financial Statements. Statement of Cash flows is included as a part of financial statements with a condition stating where applicable. More clarity is required in the standard to define instances where Cash flows would be required to be prepared. For instance, Companies Act mandates preparation of Cash Flow statement for companies meeting certain criteria of Profits/Turnover. Elaborate definition of the same can be given to provide clarity.
  • Para 27 of the ED makes it mandatory to prepare Financial Statement on an accrual basis. Suitable exemptions/modifications to be made in Level I/Level II/Level III entities to carve out entities and providing them an option to follow Cash Basis of Accounting, which most of the smaller enterprises adopt.
  • Para 41 of the ED sets out the disclosure requirement for the changes in the presentation and the classification of the items in the financial statements. The disclosure requirement is difficult to follow for the smaller entities as at present a simple statement is included to the effect that the previous years’ figures have been reclassified wherever necessary for comparative purposes. The disclosure should be made simpler. In fact, the need for such a disclosure should also be looked into.
  • Para 123 of Ind AS 1 can be included so as to provide a guide as to what would be considered as Judgements, in line with Para 122.
Further guidance would be required if smaller entities are expected to follow the revised AS, as there are major differences in the disclosure requirements of the proposed AS 1 and the existing AS 1 along with model financial statements to guide the enterprises in following the new standards.
Here is the link for downloading the Exposure Draft:
All the businesses are advised to take note of these developments in Accounting Standards, as they may be brought into force as early as April’19(looking at the speed at which the Accounting Standards Board is bringing out the EDs- though it depends on the Notification in the Gazette by the MCA which is highly unlikely by March’19)

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  1. sankar says:

    regarding point 2, you have said that ” elaborate definition” to be given. When it is mentioned in companies act, why should it again be defined here. If the companies act is amended for cash flow, does it mean AS should also be amended. Is it not a waste of time and resource??

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July 2021