Here is why businesses should submit financial statements in a new format

Copyright © HT Digital Streams Limit all rights reserved. The industry -Indian accounting standards are harmonized with the international financial reporting standard, but have certain carving points to comply with the local context. (IStockphoto) Summary The Institute of Chartered Accountants of India intends to implement a new accounting standard that requires businesses to classify their finances in the operational, investment and financing categories. It aims to improve clarity and transparency in financial reporting from April 2027. Indian businesses will soon have to offer their financial statements in a new way to quickly judge investors and regulators their performance and financial health, two people informed about the development said. The attempt to make financial statements more relevant, transparent and uniform applies to all listed businesses as well as large unlisted firms. A new accounting standard set up by the Institute of Chartered Accountants of India (ICAI) based on a global accounting rule change, mandate businesses to classify all income and expenses in three defined groups – which work, which deals with core business activities, investment activities, the handling of returns or loses, cited above. This is expected to make the profit and loss account more structured compared to the current format in which some of the information is distributed. In addition, certain statistics beyond financial statements will be shown to fill the profit and loss account-for example to exclude certain one-time expenses to show a normalized or underlying operating performance-will now be part of the financial statements and thus covered by the statutory audit, experts explained. Read also | Forex Rate Discounts: Icai Support Change proposed by audit watchdog Nfra Icai’s proposed accounting standard indased 118 is broadly on the lines of a global accounting norm that in January 2027 in effect International Financial Reporting Standard (IFRS) 18, which must make the financial statements more relevant by highlighting material statements. Inquiries by e -mail to Icai, Nfra and the Ministry of Corporate Affairs that commented remained unanswered. ‘Once Icai’s Board of Accounting Standards and the Council approves Indas 118, it will be referred to the National Financial Reporting Authority (NFRA) board, after which it will be sent to the Ministry of Corporate Affairs for notice, a person who is aware of the process of implementing the new standard on condition that he is not called. Indas only apply to listed companies, companies that are in the process of being listed, unlisted companies with £ 250 Crore Networth and more, and large or lenders who were not a bank. IFRS is followed in more than 140 countries and trade blocks, including the EU, but not the US, which follows its own generally accepted accounting principles (yawn). India’s inda -accounting standards are harmonized with IFRS, but have certain carving points that fit local context. Read it | Nfra inches before ICAI in the regulatory turf ICAI suggested to make changes on April 1, 2027. The accounting standard setter is now looking for public feedback on this. “IFRS18 seeks to give more prominence to more relevant and substantial information in the presentation of financial statements,” explained Steinar S. Kvifte, partner and IFRS leader at EY Nordics, which represents EY’s operations in Nordic countries. “IFRS 18 will to a certain extent restructure the profit and loss account, which is a primary focus of investors, so that you get new categories, investment and financing and subtles in the income statement, such as operating profit and profit before financing and income tax,” says Kvifte. The second major impact of IFRS18 is related to adjusted profit measures or key performance indicators, after which investor communities are usually referred to as non-yarn items, KVIFTE explained. Read also | ICAI To flag the concerns about the financial statements of withju, these statistics are called “management measures for managed defined performance” or MPMS, which is currently communicated by businesses outside financial statements, must be reported within the financial statements, he said. “There would be significant revelations around them. It would now be within the review of statutory audits. The idea is to improve the communication done by financial statements,” Kvifte said. Indas 118 brings more transparency and better understanding of the financial statements, says Nemish Kapadia, partner, insurance at Sudit K. Parekh & Co LLP, an advice, audit and tax service firm. The requirement of the new standards, with the additional revelations and labeling, enables readers to make more informed decisions as it brings more clarity to users to decipher the information in question in a logical way, Kapadia said. “It certainly provides for the expectations of stakeholders from companies regarding the presentation of financial information in a way that supports better understanding and in turn, informed decision -making,” Kapadia said. Read also | ICAI To increase the peer review process for auditors: Talati businesses must be well prepared for the expiration date of transition. “Year 2027 is another time away, but the point is that when you implement the new standard from 2027, you also have to refute your comparisons. Typically companies will have 2026 comparisons, and in 2026 they will have their 2026 numbers after IFRS18,” says Kvifte. Indas only apply to listed companies, companies that are in the process of being listed, unlisted companies with £ 250 Crore Networth and more, and large or lenders who were not a bank. And read | The anxiety in Icai over an audit regulation moves all the industry news, bank news and updates on live currency. Download the Mint News app to get daily market updates. More Topics #Financials Mint Specials