Changes in Financial reporting

 https://www.youtube.com/watch?v=Mf8uuEkSuXc&t=1246s

Changes in Financial reporting - Transformational w.e.f. 2027. IAS 1 will be replaced by IFRS 18

Primary Accounting Statements:

Income statement will take a format closer to cash flow statement - because of the clarity it gives on earning and spend. Same format for Income statement. The first segment will be operating profit, second segment will be investing portion and third part will be financing portion. Then we have PBT followed by PAT. 

For insurance company the template will be little different. 

It recognise that each sector with have each way to recognise operating profit. So each can give additionally Management Performance Measure reconcile to EBITA. 

Unusual items - exceptional items will go away, and everything unusual would come here. 

For the future minimum period of 3 years, give the rational, assumptions for acquisition and where we stand on the same. So users get more information. 

When entities get consolidated in parents, for subsidiary you need not give same level of information as parent. 

AS framework and INTAS  will be brought closer.  Extend of disclosure might change, but others will be made similar as much as possible. 

We now have Fair Value as basis - we do not use for all items in FS. Fixed assets we show at historical cost though we can revalue. 

From users perspective, historical cost is irrelevant number. He wants to know today's worth. Principal shareholder and management team have the real idea. There is an information arbitrage. We need to recognise that we will start witnessing institutional participation, and as markets develop, we will find that there is substantial amount of risk capital. 

There are institutional investors and retail investors, high net worth individuals - as more and more of public money comes in - listed or unlisted, arbitrage will go away of one set of people knowing full details and not the other. 

We do not like to share information to others as finance person. Those days are gone. We have come to an era of open stack. We cannot give surprise. We need to get prepared to make information available and not holding information. Predictive information is the need of the hour. Historical information they already know. Evolve financial information to make predictive information available. 

We know the distance from here to airport, but we need to know by how much time we can reach there. i.e. predictive information. 

Audit

Audit quality indicators - like performance indicators. Between audit committee and auditor, quality indicators will be agreed. End of each year review and that will be the basis of continuation of audit. 

Regulatory

NFRA - Review completed, it is published in website. Continuously publish information. 

Developmental stage, expect regulators to be in hyper active mode. 

Things would change pretty fast. In our own life time. When we drive at that speed, accidents are bound to happen to the organisations - we are part of. There can be collateral damages too. So while the economic growth happens, Governance and reporting standards should be high. We should not be victim of those accidents.