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Corporate Accounting and Auditing · Presentation of Financial Statements (Ind AS 1)

Statement of Profit and Loss and OCI under Ind AS 1

Updated 10 October 2026 · Fact-checked

Under Ind AS 1, the statement of profit and loss has a profit or loss section and an other comprehensive income (OCI) section. Expenses are analysed only by nature, never by function. No item can be shown as extraordinary. OCI items are split into those that will and will not be reclassified to profit or loss.

Understand Statement of Profit and Loss and Other Comprehensive Income

The statement of profit and loss shows how the entity performed in a period. It has two sections. The profit or loss section ends with profit or loss for the period. The OCI section adds items that other Ind ASs say must bypass profit or loss. Together they give total comprehensive income.

Paragraph 82 lists the minimum line items in the profit or loss section. These include revenue (with interest revenue by the effective interest method shown separately), gains and losses from derecognition of financial assets measured at amortised cost, finance costs, impairment losses (including reversals) under Section 5.5 of Ind AS 109, share of profit or loss of associates and joint ventures under the equity method, tax expense, and a single amount for discontinued operations. Paragraph 85 says you add more line items, headings and subtotals when that helps understand performance. Paragraph 85B says you must also show line items that reconcile any such subtotal to the totals required by Ind AS.

Expenses must be analysed by nature: depreciation, purchases of materials, transport, employee benefits, advertising. Paragraph 102 says you do not reallocate them among functions. This is simple because no allocation is needed. Ind AS 1 differs from IAS 1 here: IAS 1 allows either nature or function, but Ind AS 1 requires only nature (paragraph 99 and Appendix 1). Function-wise paragraphs 103 to 105 are retained as numbers only.

The OCI section (paragraph 82A) shows items by nature, grouped into those that will not be reclassified to profit or loss and those that will be reclassified when specific conditions are met. The share of OCI of associates and joint ventures under the equity method is shown separately in the same two groups. Income tax on each OCI item, including reclassification adjustments, is disclosed in the statement or in the notes (paragraph 90). Reclassification adjustments may be shown in the statement or in the notes. If shown in the notes, OCI items are presented after those adjustments (paragraph 94).

Two more rules matter. Material items of income or expense must be disclosed separately with nature and amount (paragraph 97). No item may be presented as extraordinary, in the statement or in the notes (paragraph 87). Income and expense items are not offset unless the offsetting criteria in paragraph 32 are met (paragraph 86).

Key rules to remember

Expense classification
Ind AS 1 = nature of expense method only
Paragraph 99 and Appendix 1. The function-wise (cost of sales) method of IAS 1 is not permitted.
Extraordinary items
No item presented as extraordinary
Paragraph 87. Applies to the statement of profit and loss and the notes.
Total comprehensive income
Total comprehensive income = Profit or loss for the period + Other comprehensive income (net of tax)
OCI is grouped into items not reclassified and items reclassified to profit or loss.
Profit before tax (nature method)
PBT = Revenue + Other income − (Changes in inventories of FG and WIP + Raw materials and consumables used + Employee benefits expense + Finance costs + Depreciation and amortisation + Other expenses)
The paragraph 102 layout lists only revenue, other income, changes in inventories, raw materials and consumables used, employee benefits expense, depreciation and amortisation, and other expenses. Finance costs is not part of that layout. It is a separate line item required by paragraph 82, and you show it among the expenses before PBT. Treat an increase in inventory as a credit to expenses (reduction) and a decrease as an addition.
OCI grouping
(i) Will not be reclassified to P&L; (ii) Will be reclassified to P&L when specific conditions are met
Paragraph 82A. Same split for share of OCI of associates and joint ventures.
Material items
Material income or expense: disclose nature and amount separately
Paragraph 97.

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

Use this order for any question asking you to prepare or analyse the statement of profit and loss under Ind AS 1.

  1. 1List all income and expense items from the data and tag each as revenue, other income, or an expense by nature.
  2. 2Remove items that do not belong in profit or loss, such as remeasurement gains and losses that other Ind ASs route to OCI.
  3. 3Compute changes in inventories of finished goods and work in progress as closing minus opening, and show it with the correct sign.
  4. 4Arrange expenses by nature: materials, employee benefits, depreciation, finance costs, other expenses. Do not use cost of sales or function headings.
  5. 5Show finance costs, impairment, share of associates, tax and discontinued operations on separate lines where they arise.
  6. 6Arrive at profit or loss for the period, then list OCI items in two groups (not reclassified, reclassified), each net of tax or with tax shown.
  7. 7Add profit and OCI to get total comprehensive income, and state any material items or reclassification adjustments in a note.

Quickest way: Nature-and-OCI sort

When to use it: Use when time is short and the question gives a mixed list of items to classify or a short statement to prepare.

  1. Scan for the words extraordinary, function, cost of sales: reject them, as Ind AS 1 does not allow them.
  2. Write the paragraph 102 skeleton first: Revenue, Other income, inventories, materials, employee benefits, depreciation, other expenses.
  3. Drop each item into a line. Finance costs is not in the paragraph 102 skeleton. Add it as a separate paragraph 82 line among the expenses before PBT, and show tax expense below PBT.
  4. Put remeasurements and similar items into OCI, then split into will-not and will be reclassified.
  5. Add profit and OCI for total comprehensive income and check the total.

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

  • Presenting expenses by function, such as cost of goods sold and administrative expenses.

    Students carry over the IAS 1 or older textbook format.

    Fix: Under Ind AS 1 only the nature of expense method is allowed. Show materials, employee benefits, depreciation and other expenses.

  • Showing an item as extraordinary.

    Older Indian standards allowed it.

    Fix: Paragraph 87 prohibits it. Disclose a material unusual item separately with its nature and amount instead.

  • Taking the change in inventories with the wrong sign.

    Students add closing stock without thinking about direction.

    Fix: Compute closing minus opening. An increase reduces total expenses; a decrease increases them.

  • Putting all OCI items in one list.

    Students forget the reclassification split.

    Fix: Group OCI into items that will not be reclassified and items that will be reclassified when conditions are met.

  • Omitting tax on OCI items.

    Focus is only on the profit figure.

    Fix: Disclose income tax for each OCI item, including reclassification adjustments, in the statement or in the notes.

  • Offsetting income against expense to show a net line.

    It looks tidier.

    Fix: Do not offset unless the criteria in paragraph 32 are met.

Worked examples

Example 1

Mehta Ltd has these figures for the year (₹ lakh): Revenue 900; Other income 40; Raw materials consumed 380; Opening finished goods 60; Closing finished goods 90; Employee benefits 150; Depreciation 70; Other expenses 110; Finance costs 30; Tax expense 45. Prepare the statement of profit and loss in nature-wise form up to profit for the year.

Show the solution
  1. Change in inventories of finished goods = Closing 90 − Opening 60 = 30 increase, shown as (30) within expenses.
  2. Total income = 900 + 40 = 940.
  3. Expenses, with finance costs shown as a separate line item as paragraph 82 requires: Changes in inventories (30) + Raw materials 380 + Employee benefits 150 + Finance costs 30 + Depreciation 70 + Other expenses 110 = 710.
  4. Check: 380 + 150 = 530; 530 + 30 = 560; 560 + 70 = 630; 630 + 110 = 740; 740 − 30 = 710.
  5. Profit before tax = 940 − 710 = 230.
  6. Profit for the year = 230 − 45 = 185.

Answer: Profit before tax is ₹230 lakh and profit for the year is ₹185 lakh, with expenses shown only by nature and finance costs on a separate line.

Example 2

For Rao Ltd, profit for the year is ₹500 lakh. OCI items (net of tax): remeasurement gain on defined benefit plan ₹12 lakh; gain on equity instrument measured at fair value through OCI ₹8 lakh; exchange gain on translation of a foreign operation ₹5 lakh. Prepare the OCI section and total comprehensive income. The foreign translation gain will be reclassified to profit or loss on disposal.

Show the solution
  1. Items not reclassified: remeasurement gain 12 + equity instrument gain 8 = 20.
  2. Items that will be reclassified when conditions are met: foreign operation translation 5.
  3. Total OCI = 20 + 5 = 25.
  4. Total comprehensive income = 500 + 25 = 525.
  5. Disclose tax for each OCI item in the statement or the notes.

Answer: OCI is ₹25 lakh (₹20 lakh not reclassified, ₹5 lakh reclassified), and total comprehensive income is ₹525 lakh.

Exam tips

  • In MCQs, any option with extraordinary items or function-wise expense analysis is almost always wrong for Ind AS 1.
  • In written answers, draw the paragraph 102 skeleton first. It earns format marks even if a figure goes wrong.
  • Always split OCI into the two reclassification groups and write net of tax or tax shown separately.
  • Quote paragraph numbers sparingly and only the ones you are sure of: 87 for extraordinary items, 99 and 102 for nature of expense, 82A for OCI grouping.

Practice questions from Presentation of Financial Statements (Ind AS 1)

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 I show expenses by function under Ind AS 1?

No. Ind AS 1 requires only the nature of expense method. IAS 1 allows nature or function, but Ind AS 1 removed the function option.

Are extraordinary items allowed in the statement of profit and loss?

No. Paragraph 87 says an entity must not present any item of income or expense as extraordinary, in the statement or in the notes. If an item is material, disclose its nature and amount separately.

What is a reclassification adjustment in OCI?

It is an amount moved from OCI to profit or loss in the current period, having been recognised in OCI earlier. You may show these adjustments in the statement or in the notes. If in the notes, OCI items are shown after the adjustments.

What are the two groups of OCI items?

Items that will not be reclassified subsequently to profit or loss, and items that will be reclassified when specific conditions are met. The share of OCI of associates and joint ventures is split the same way.