In order to bring in greater transparency and clarity in financial reporting by India Inc, a slew of changes to the Indian Accounting Standards (Ind AS) has been mooted with respect to the presentation of financial statements, interim financial reporting and financial instruments.

These changes have been proposed by the accounting standards board of the Institute of Chartered Accountants of India (ICAI), the apex body that regulates chartered accountants and auditors. ICAI has invited comments from stakeholders on these changes before they are adopted.

As per the proposal, ICAI has suggested changes to Ind AS1 and Ind AS 34, which deal with the 'presentation of financial statements' and 'interim financial reporting'. Under Ind AS1 and Ind AS 34, for comparative information of previous preceding period, India Inc may have to present a minimum of two balance sheets, two statements of profit and loss and two statements of cash flow. Currently, there is no provision for presenting two sets of financial data.

ICAI has also proposed that an entity will also have to present a third balance sheet at the beginning of the preceding period if it applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements or reclassifies items in its financial statements.

In its exposure draft note floated last week, ICAI has suggested changes to Ind AS 16, which lays down accounting standards for property, plant and equipment; Ind AS 32 for financial instruments and Ind AS 34 dealing with interim financial reporting. For Ind AS 16, ICAI has recognised items such as spare parts, stand-by equipment and servicing equipment in the proposed amendments.

For Ind AS 32, the proposed amendments deal with the tax effect of distribution to holders of equity instruments. Under the proposed change, income tax relating to distributions to holders of an equity instrument and transaction costs of an equity transaction shall be accounted for in accordance with the accounting standards for income tax, it said. According to a senior ICAI functionary, the institute has now sought comments and feedback from the stakeholders. "Post comments, feedback and internal discussions, the due process of changes in the accounting standards will be finalized. The process may take some months," he said. So far, the complete set of financial statements comprises following parts -- balance sheet, profit and loss statement, cash flow statement, notes containing explanatory information and a balance sheet as at the beginning of the earliest comparative period. As per the ICAI proposal, a new element will now be inserted to the definition of what constitutes a complete set of financial statements.

"Comparative information in respect of the preceding period as specified in paragraphs 38 and 38A. An entity shall include comparative information for narrative and descriptive information if it is relevant to the current period's financial statement," a senior accountant said. (Fincial Express)