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CMA Intermediate · Corporate Accounting and Auditing

Presentation of Financial Statements (Ind AS 1) for CMA Inter

Ind AS 1 sets out how a company presents general purpose financial statements so they are comparable across entities and periods. It covers the components, fair presentation, going concern, accrual basis, current and non-current classification, and the minimum line items. To solve problems, classify each item, then prepare the statements in Schedule III format.

What this chapter covers

This chapter explains how financial statements must be presented under Ind AS 1. It tells you what a complete set contains, what general features apply (fair presentation, going concern, accrual basis, materiality and aggregation, offsetting, comparative information, consistency), and how each statement is structured.

The chapter is a mix of theory and practice. The theory covers definitions, components and classification rules. The practice covers preparing a Balance Sheet, a Statement of Profit and Loss, and a Statement of Changes in Equity from a trial balance or a list of balances. For companies, the format follows Division II of Schedule III of the Companies Act, 2013, which applies to Ind AS-compliant companies.

It connects to the rest of Paper 10 directly. Company accounts questions on share capital, debentures, final accounts and other Ind AS topics all end in these statements. The auditing part of the paper also relies on the idea of a true and fair view, which is the same idea as fair presentation here. If you master this chapter, later chapters become easier to present.

This chapter gives you marks in both parts of the paper. Section A can test definitions such as current liability, OCI items or the components of a complete set, and each MCQ is worth 2 marks with no negative marking. In the written section, a presentation problem is a format-driven question where correct headings, classification and grouping earn step marks even if one figure is wrong. The same skills are needed in every company accounts question, so time spent here pays back across the paper.

Presentation of Financial Statements (Ind AS 1): topics in the order to study them

  1. 1Ind AS 1 Objective, Scope and Key DefinitionsStart here because every later rule uses these terms, such as material, general purpose financial statements and other comprehensive income.
  2. 2Components of Financial Statements and Fair PresentationNext, learn what a complete set contains and what fair presentation requires, since this frames all the statements that follow.
  3. 3Structure and General Features of Financial StatementsThen learn the overall principles like going concern, accrual, aggregation, offsetting and comparatives, which apply to every statement.
  4. 4Balance Sheet: Current and Non-Current ClassificationThe Balance Sheet is the most tested statement, and the classification tests are rule-based and easy to practise.
  5. 5Statement of Profit and Loss and Other Comprehensive IncomeStudy this after the Balance Sheet, because you need to separate profit or loss items from OCI items and know which OCI items are reclassified.
  6. 6Statement of Changes in Equity and Notes to AccountsThis links the Balance Sheet and the P&L through equity movements, so it comes once both are clear.
  7. 7Practical Problems on Preparing Financial Statements under Ind AS 1Finish with full problems, which bring all the rules together in the exam format.

How to prepare Presentation of Financial Statements (Ind AS 1)

Treat this chapter as theory first, then format practice. Spend most of your time on classification and layout, as that is where marks are won.

  1. Read the definitions and write each one in your own words. Pay close attention to the tests for current assets and current liabilities.
  2. List the components of a complete set of financial statements and the general features, and learn them as a short checklist.
  3. Learn the Schedule III Division II layout of the Balance Sheet and the Statement of Profit and Loss. Rewrite the heading order from memory until you can do it without looking.
  4. Practise classifying items as current or non-current, and as profit or loss or OCI, using small lists of balances.
  5. Prepare the Statement of Changes in Equity with its two parts: equity share capital and other equity, showing each movement.
  6. Solve full problems from a trial balance under exam time limits. Show working notes for figures that need adjustment, so you earn step marks.
  7. Finish with a round of MCQs on definitions and classification, and note every error in a short list for revision.

Common mistakes in Presentation of Financial Statements (Ind AS 1)

  • Classifying a liability as non-current only because it is long term in nature, ignoring the portion due within twelve months.

    Fix: Check repayment dates at the reporting date. Show the instalments due within twelve months as current and the rest as non-current.

  • Showing deferred tax as current.

    Fix: Remember that deferred tax assets and liabilities are always non-current under Ind AS 1.

  • Putting OCI items in the profit or loss section, or leaving them out of total comprehensive income.

    Fix: Keep a short list of typical OCI items, such as remeasurement of defined benefit plans and revaluation surplus, and place them below profit for the year.

  • Using the old Schedule III or Indian GAAP headings, for example showing 'Reserves and Surplus' and 'Shareholders' funds'.

    Fix: Use Division II headings: Equity (Equity Share Capital and Other Equity), Liabilities, and Assets, split into current and non-current.

  • Skipping comparative information or the Notes, and presenting only the current year's numbers.

    Fix: State the requirement for comparatives in your answer and show the main note disclosures, such as share capital and other equity, in the layout asked.

  • Failing to balance the statement because adjustments were applied to only one side.

    Fix: Write a working note for each adjustment, post both effects, and check that total assets equal total equity and liabilities before you finalise.

Last-day revision: Presentation of Financial Statements (Ind AS 1)

  • A complete set has: Balance Sheet, Statement of Profit and Loss, Statement of Changes in Equity, Statement of Cash Flows, and Notes, plus comparative information.
  • Fair presentation is the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses in the Framework. Compliance with Ind AS is presumed to achieve it.
  • Going concern and accrual basis of accounting are general features; cash flow information is the exception to accrual.
  • Each material class of similar items is presented separately; immaterial items may be aggregated.
  • Assets and liabilities, and income and expenses, are not offset unless an Ind AS requires or permits it.
  • An asset is current if it is expected to be realised, sold or consumed in the normal operating cycle, it is held primarily for trading, it is expected to be realised within twelve months after the reporting period, or it is cash or a cash equivalent that is not restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
  • A liability is current if it is expected to be settled in the normal operating cycle, it is held primarily for trading, it is due to be settled within twelve months after the reporting period, or the entity has no right at the end of the reporting period to defer settlement for at least twelve months after the reporting period.
  • Deferred tax assets and liabilities are always shown as non-current.
  • Ind AS 1 does not permit extraordinary items to be shown in the Statement of Profit and Loss or in the notes.
  • OCI items are split into those that will be reclassified to profit or loss later and those that will not.
  • Total comprehensive income is profit or loss plus other comprehensive income for the period.
  • The Statement of Changes in Equity shows movements in equity share capital and in other equity such as retained earnings and reserves.

Presentation of Financial Statements (Ind AS 1) practice questions

Presentation of Financial Statements (Ind AS 1) in other exams

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

Presentation of Financial Statements (Ind AS 1): frequently asked questions

Is Ind AS 1 tested more in theory or in numericals?

Both. Section A can ask definitions and classification as MCQs, and the written part can ask a format-based problem. Prepare both the rules and the layout.

Which format should I use for company financial statements in the exam?

Use the Division II format of Schedule III of the Companies Act, 2013, which is meant for companies following Ind AS. Use its headings and order of items.

Do I need to learn the Statement of Cash Flows in this chapter?

Ind AS 1 lists it as a component of a complete set, but its preparation is covered under its own standard. Here, know that it is part of the set.

How do I avoid mistakes in current and non-current classification?

Apply the tests in order: operating cycle, held for trading, due within twelve months, and for liabilities, the right to defer settlement. Practise with short lists until the tests feel automatic.