Financial Reporting · Ind AS 1 Presentation of Financial Statements

Ind AS 1: Statement of Profit and Loss and Other Comprehensive Income

Updated 5 October 2026 · Fact-checked

Under Ind AS 1, the Statement of Profit and Loss shows profit or loss, then other comprehensive income (OCI), and ends with total comprehensive income. To solve questions, classify each item, split OCI into items that will or will not be reclassified, show minimum face items, and never show extraordinary items.

Understand Statement of Profit and Loss and Other Comprehensive Income

Ind AS 1 requires all income and expenses of a period to be presented in a Statement of Profit and Loss. This statement has two sections: profit or loss and other comprehensive income (OCI). Their total is total comprehensive income.

OCI holds items that other Ind AS require or permit to bypass profit or loss. Examples: changes in revaluation surplus under Ind AS 16 and Ind AS 38, remeasurements of defined benefit plans, gains and losses on equity instruments designated at fair value through OCI, exchange differences on translating foreign operations, and the effective part of cash flow hedge gains and losses.

OCI items are grouped into two classes: those that will not be reclassified to profit or loss later, and those that will be reclassified when specific conditions are met. A reclassification adjustment is an amount moved from OCI to profit or loss in the current period, for example the hedge reserve released when the hedged transaction affects profit or loss. Revaluation surplus, remeasurements of defined benefit plans and fair value changes on equity instruments designated at FVOCI are never reclassified to profit or loss, though the amount may be transferred within equity.

As a matter of the standard, Ind AS 1 lets an entity analyse expenses in profit or loss either by nature (depreciation, purchases, employee benefits, transport) or by function (cost of sales, distribution, administration). The entity chooses the method that gives reliable and more relevant information. If it uses the function method, it must also disclose depreciation, amortisation and employee benefits expense by nature in the notes.

This choice does not apply to the Schedule III format. A company preparing its statements under Schedule III (Division II) must follow the nature-wise format prescribed there. The nature-or-function choice is therefore a point about Ind AS 1 itself, not a free choice in the Division II format.

Ind AS 1 prohibits presenting any item of income or expense as an extraordinary item, on the face of the statement or in the notes. IAS 1 also prohibits extraordinary items, so the contrast here is with the old AS 5 approach, not with IAS 1.

Ind AS 1 differs from IAS 1 in one well-known way. IAS 1 permits either a single statement or two statements. Ind AS 1 carves out that option and requires a single Statement of Profit and Loss with profit or loss and OCI, not two separate statements.

Key rules to remember

Total comprehensive income: Total comprehensive income = Profit or loss for the period + Other comprehensive income (net of tax); Attribute separately to owners of the parent and non-controlling interests.
Profit or loss for the period: Profit or loss = Total income − Total expenses (including tax expense); Items not in OCI by Ind AS requirement go here.
OCI classification: OCI = Items that will not be reclassified + Items that will be reclassified to profit or loss; Show tax either net against each item or by a note; show the total of each group.
Minimum face items: Revenue; gains or losses from derecognition of financial assets measured at amortised cost; impairment losses (including reversals) under Ind AS 109; finance costs; share of profit or loss of associates and JVs (equity method); any gain or loss on reclassification of a financial asset from amortised cost to FVTPL; any cumulative gain or loss moved from equity to profit or loss on reclassification of a financial asset from FVOCI to FVTPL; tax expense; post-tax result of discontinued operations; profit or loss; each OCI class; share of OCI of associates and JVs; total comprehensive income; Also show profit or loss and total comprehensive income attributable to NCI and owners. Other Ind AS and Schedule III may require further line items.
Expense analysis: By nature: depreciation, employee benefits, purchases. By function: cost of sales, distribution, administration; Under Ind AS 1 the function method needs extra disclosure of depreciation, amortisation and employee benefits expense. Schedule III (Division II) prescribes the nature-wise format for companies.
Extraordinary items: Presentation of extraordinary items = Prohibited; Material items are disclosed separately by nature and amount, but not labelled extraordinary.

How to solve Statement of Profit and Loss and Other Comprehensive Income questions

Use this sequence for any question that asks you to prepare or correct a Statement of Profit and Loss, or to classify items.

1List every income and expense item in the question and note which Ind AS governs it.
2Decide if each item goes to profit or loss or to OCI, based on what the governing Ind AS requires.
3For each OCI item, decide whether it will be reclassified to profit or loss later or not.
4Tax-effect the OCI items if tax is given, and present them net of tax or disclose the tax by item.
5Check minimum face items and decide nature or function presentation for expenses, adding by-nature disclosures if function is used.
6Reject any 'extraordinary' label; instead disclose material items separately by nature and amount.
7Compute profit or loss, then OCI, then total comprehensive income, and state the attribution to owners and NCI if given.
8Write the answer as provision, facts, conclusion.

Quickest way: Two-bucket OCI test

When to use it: Use for MCQs and short classification questions where you must say where an item is shown.

Ask: does an Ind AS say this goes to OCI? If not, it is profit or loss.
If OCI, ask: can it ever be recycled to profit or loss? Revaluation, remeasurements and FVOCI equity gains: no. Foreign operation translation and cash flow hedge reserve: yes.
If the item is called extraordinary, reject the label at once.
If expenses are by function, add the by-nature disclosure line in your answer.

Common mistakes in Statement of Profit and Loss and Other Comprehensive Income

Showing remeasurement of a defined benefit plan in profit or loss.
Students link all employee costs to the P&L.
Fix: Remeasurements go to OCI and are not reclassified later. Only current service cost and net interest go to profit or loss.
Recycling revaluation surplus to profit or loss on disposal.
Confusing it with the foreign currency translation reserve.
Fix: Revaluation surplus is never reclassified to profit or loss. It may be transferred within equity, to retained earnings.
Presenting an item as extraordinary because it is unusual.
Old AS 5 habits.
Fix: Ind AS 1 prohibits the label. Disclose a material item separately with nature and amount.
Using the function method without by-nature disclosures.
Students think one method is enough.
Fix: With the function method, also disclose depreciation, amortisation and employee benefits expense.
Preparing two statements and calling it Ind AS compliant.
IAS 1 allows two statements.
Fix: Ind AS 1 carves out the IAS 1 two-statement option and requires a single Statement of Profit and Loss with profit or loss, OCI and total comprehensive income.
Mixing up OCI and the Statement of Changes in Equity.
Both show reserve movements.
Fix: OCI is income and expense recognised in the period. Transactions with owners, such as dividends, appear only in the Statement of Changes in Equity.

Worked examples

Example 1

For the year, X Ltd (an Ind AS company) reports profit before tax of ₹80,00,000 and tax expense of ₹20,00,000. It also has: gain on revaluation of PPE ₹10,00,000 (tax ₹2,50,000); remeasurement loss on defined benefit plan ₹4,00,000 (tax saving ₹1,00,000); exchange gain on translating a foreign operation ₹6,00,000 (tax ₹1,50,000). Compute total comprehensive income and classify OCI.

Show the solution

Profit for the year = ₹80,00,000 − ₹20,00,000 = ₹60,00,000.
Revaluation gain net of tax = ₹10,00,000 − ₹2,50,000 = ₹7,50,000. Will not be reclassified.
Remeasurement loss net of tax = −₹4,00,000 + ₹1,00,000 = −₹3,00,000. Will not be reclassified.
Items that will not be reclassified = ₹7,50,000 − ₹3,00,000 = ₹4,50,000.
Exchange gain net of tax = ₹6,00,000 − ₹1,50,000 = ₹4,50,000. Will be reclassified on disposal of the foreign operation.
OCI total = ₹4,50,000 + ₹4,50,000 = ₹9,00,000.
Total comprehensive income = ₹60,00,000 + ₹9,00,000 = ₹69,00,000.

Answer: Total comprehensive income is ₹69,00,000. OCI is ₹9,00,000: ₹4,50,000 not reclassified and ₹4,50,000 reclassifiable.

Example 2

Y Ltd lost ₹15,00,000 in a fire at a warehouse and calls it an extraordinary item in its Ind AS statement. It presents expenses by function and shows only cost of sales, distribution and administration costs. Advise on both points.

Show the solution

Provision: Ind AS 1 prohibits presenting any item of income or expense as extraordinary, on the face of the statement or in the notes.
Facts: the fire loss of ₹15,00,000 is unusual, so Y Ltd labelled it extraordinary.
Conclusion on the first point: the label must be removed. The loss is included in profit or loss. If it is material, disclose its nature and amount separately, as required for material items.
Provision: if expenses are classified by function, Ind AS 1 requires additional disclosure of the nature of expenses, including depreciation, amortisation and employee benefits expense.
Facts: Y Ltd shows only function-wise lines.
Conclusion on the second point: Y Ltd must add by-nature information in the notes.

Answer: The 'extraordinary' label is not allowed; show the ₹15,00,000 loss in profit or loss with separate disclosure of nature and amount. Y Ltd must also disclose depreciation, amortisation and employee benefits expense by nature.

Exam tips

For MCQs on OCI, memorise which items are never reclassified: revaluation surplus, defined benefit remeasurements and FVOCI equity gains.
In written answers, use the provision, facts, conclusion format and name the Ind AS being applied to each item.
Always show OCI net of tax or state the tax per item, and give the total of each OCI group.
If a question mentions 'extraordinary', the answer is almost always that Ind AS 1 prohibits it.
Know the difference from IAS 1: Ind AS 1 carves out the two-statement option and requires one statement, while IAS 1 allows one or two.

Practice questions from Ind AS 1 Presentation of Financial Statements

Statement of Profit and Loss and Other Comprehensive Income in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Statement of Profit and Loss and Other Comprehensive Income: frequently asked questions

Can an Ind AS company present two separate statements for profit or loss and OCI?

No. Ind AS 1 carves out the IAS 1 option and requires a single Statement of Profit and Loss with a profit or loss section and an OCI section. IAS 1 allows a choice between one statement and two.

What is a reclassification adjustment?

It is an amount recycled from OCI to profit or loss in the current period. An example is the cash flow hedge reserve moved to profit or loss when the hedged item affects profit or loss. Items like revaluation surplus are never reclassified.

Which method of expense analysis should I use, nature or function?

Ind AS 1 as a standard lets an entity choose nature or function, whichever gives reliable and more relevant information. The function method requires extra by-nature disclosure of depreciation, amortisation and employee benefits expense. A company preparing Division II statements under Schedule III must follow the nature-wise format prescribed there, so the choice does not apply to that format.

Are material unusual items disclosed at all?

Yes. If an item of income or expense is material, its nature and amount are disclosed separately. It just cannot be labelled extraordinary.