Ind AS 1 (corresponding to IAS 1) is the foundation of financial reporting under Ind AS. It prescribes how financial statements should be structured, what minimum information must be presented, and the core principles every preparer must follow.
The primary objectives of Ind AS 1 are:
Every Indian company that applies Ind AS must comply with Ind AS 1 — it is not optional and cannot be overridden except in the extremely rare circumstances described in paragraph 19-24 of the standard (departure from a standard to achieve fair presentation).
Ind AS 1 applies to all general-purpose financial statements prepared and presented in accordance with Ind AS. This covers:
It does NOT apply to condensed interim financial statements (Ind AS 34 governs those), but its principles still influence how they are prepared.
Under Ind AS 1, a complete set of financial statements comprises five components:
| # | Component | Key Content |
|---|---|---|
| 1 | Balance Sheet (Statement of Financial Position) | Assets, liabilities, equity at a point in time |
| 2 | Statement of Profit and Loss + OCI | Income and expenses for the period including OCI items |
| 3 | Statement of Changes in Equity | Movements in equity components during the period |
| 4 | Statement of Cash Flows | Cash inflows and outflows (governed by Ind AS 7) |
| 5 | Notes to Accounts | Accounting policies + explanatory and supplementary disclosures |
When there is a retrospective change in accounting policy or restatement of errors, a third balance sheet (as at the beginning of the earliest comparative period) must also be presented.
Ind AS 1 mandates several overarching features:
Financial statements must "fairly present" financial position, performance, and cash flows. Fair presentation requires faithful application of Ind AS, additional disclosures where necessary, and — in the extremely rare case — departure from a specific standard if compliance would be misleading (with full disclosure of the departure).
Management must assess the entity's ability to continue as a going concern for at least 12 months from the balance sheet date. If significant doubts exist, they must be disclosed. If the entity is NOT a going concern, financial statements must be prepared on a different basis (e.g., liquidation basis) with full disclosure.
All financial statements (except the cash flow statement) must be prepared on an accrual basis — income and expenses are recognized when earned/incurred, not when cash is received/paid.
Each material class of similar items must be presented separately. Immaterial items may be aggregated. Materiality is assessed based on whether omission or misstatement could influence users' decisions. There is no fixed threshold — it requires professional judgment.
Assets and liabilities, income and expenses, must NOT be offset unless specifically required or permitted by an Ind AS. Presenting items net when the substance is gross transactions obscures information and is prohibited.
Entities must present at least annual financial statements. When a different period is used (e.g., 15-month period due to change in year-end), the entity must disclose the reason and note that comparative amounts are not entirely comparable.
At minimum, two periods must be presented for all financial statement components (current year + one prior year comparative). Narrative and descriptive information is also comparative when relevant.
Ind AS 1 prescribes minimum line items on the balance sheet and requires current/non-current classification (unless a liquidity-based presentation provides more relevant information, common for banks).
| Current Asset if… | Current Liability if… |
|---|---|
| Expected to be realised within 12 months OR within operating cycle | Expected to be settled within 12 months OR within operating cycle |
| Held primarily for trading | Held primarily for trading |
| Cash or cash equivalents (unrestricted) | No unconditional right to defer settlement for 12+ months |
Ind AS 1 allows two presentation formats for income and expenses — a single statement (P&L + OCI combined) or two separate statements (P&L first, then a separate OCI statement). In practice, most Indian companies present a single statement.
Other Comprehensive Income captures items that are NOT recognized in P&L but still affect equity. Key OCI items under Ind AS:
| OCI Item | Standard | Recyclable to P&L? |
|---|---|---|
| Remeasurements of defined benefit plans (gratuity actuarial gains/losses) | Ind AS 19 | No (locked in OCI) |
| Changes in fair value of equity instruments at FVOCI | Ind AS 109 | No |
| Changes in fair value of debt instruments at FVOCI | Ind AS 109 | Yes (on disposal) |
| Effective portion of cash flow hedges | Ind AS 109 | Yes |
| Exchange differences on translation of foreign operations | Ind AS 21 | Yes (on disposal) |
| Revaluation surplus (PPE/intangibles) | Ind AS 16/38 | No (transferred to retained earnings on disposal) |
Expenses may be classified by either nature (raw materials, employee costs, depreciation) or function (cost of goods sold, distribution, administration). Indian companies predominantly use the nature of expense method.
This statement shows all movements in each component of equity during the period. It bridges the opening and closing equity balances and is essential for understanding what drove equity changes beyond just net profit.
Minimum disclosures include:
Notes must be presented in a structured manner. Ind AS 1 requires the following order:
Infosys presents a single Statement of Profit and Loss including OCI. Key FY25 disclosures illustrate Ind AS 1 in practice:
The Statement of Changes in Equity shows dividends paid of ₹13,614 crore and share buyback of ₹9,456 crore reducing retained earnings directly — not through P&L.
HDFC Bank (as a banking company) uses a liquidity-based balance sheet format rather than current/non-current classification, as permitted by Ind AS 1 when this provides more relevant information for banks.
Tata Steel's FY25 financials demonstrate materiality and discontinued operations disclosures under Ind AS 1:
Other Comprehensive Income (OCI) is the section of the income statement that captures gains and losses which, under specific Ind AS standards, are NOT recognized in the main Profit & Loss account. The IASB/ICAI deliberately kept these items out of P&L to avoid artificial volatility in reported earnings.
Non-recyclable OCI items (permanent in equity): Remeasurements of defined benefit obligations (actuarial gains/losses under Ind AS 19) and fair value changes on equity instruments classified at FVOCI (Ind AS 109). These are locked in OCI because allowing them into P&L would either create excessive earnings volatility (for actuarial changes) or allow cherry-picking gains on equity instruments.
Recyclable OCI items (reclassified to P&L later): Translation differences on foreign operations (recycled when the foreign operation is disposed of), effective portion of cash flow hedges (recycled when the hedged item affects P&L), and FVOCI debt instruments (recycled on disposal). These eventually hit P&L because the underlying economic event is completed at that point.
From a user's perspective, Total Comprehensive Income (P&L + OCI) is a better measure of overall wealth creation than just net profit, as it captures all economic changes in equity during the period.
A third balance sheet (i.e., the balance sheet as at the beginning of the earliest comparative period) is required under Ind AS 1 para 40A when there is:
1. Retrospective application of an accounting policy: For example, if a company changes its revenue recognition policy and applies it retrospectively, it must restate prior period comparatives and also present a "Day 1" balance sheet showing the opening balances after the restatement.
2. Retrospective restatement for errors: When a material prior period error is corrected (under Ind AS 8), comparative figures are restated and a third balance sheet is needed.
3. Reclassification of items: If reclassification of comparative period amounts has a material effect, the third balance sheet captures the reclassified opening position.
Practically, companies presenting their first Ind AS financial statements (transitioning from IGAAP) are required to show a transition date balance sheet — this is the third balance sheet for the transition year and is governed by Ind AS 101 read with Ind AS 1. The third balance sheet does NOT need to be accompanied by full comparative notes — only the notes relevant to understanding the changes are needed.
Management must assess going concern for at least 12 months from the balance sheet date (not from the date of signing). In practice, boards and CFOs go through this assessment during the financial statements preparation process.
The assessment considers:
Disclosure requirements:
Post-COVID, SEBI and MCA emphasized the importance of robust going concern disclosures. Companies in sectors like aviation, retail, and real estate that faced liquidity stress had to provide detailed going concern assessments in FY 2020–22.