EITHER As per the statutory requirements, exceptional items are required to be disclosed whereas Ind AS requires separate disclosure of material…

(a) Exceptional items is neither defined in Division II Schedule III nor in Ind AS. However, paragraph 85, 86, 97 and 98 of Ind AS 1 has reference to such items. Para 85 of Ind AS 1 states that additional line items, headings and subtotals in the statement of profit and loss shall be presented, when such presentation is relevant to an understanding of the entity's financial performance. Further, para 86 of Ind AS 1 states that disclosing the components of financial performance assists users in understanding the financial performance achieved and in making projections of future financial performance. An entity considers factors including materiality and the nature and function of the items of income and expense. Para 97 of Ind AS 1 states that when items of income or expense are material, an entity shall disclose their nature and amount separately. As per Ind AS 1, materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor. The format of Statement of Profit and Loss requires determination of profit(loss) before exceptional items and tax and thereafter exceptional items are required to be shown. Hence, all material items are not exceptional items. In other words, exceptional items are those items which meet the test of 'materiality' (size and nature) and the test of 'incidence'. Generally, items of income or expense fulfilling the above-mentioned criteria are classified as exceptional items and are disclosed separately. Para 98 of Ind AS states that circumstances that would give rise to the separate disclosure of items of income and expense includes: (a) write-downs of inventories to net realisable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs; (b) restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring; (c) disposals of items of property, plant and equipment; (d) disposals of investments; (e) discontinued operations; (f) litigation settlements; and (g) other reversals of provisions Note: Students may answer any of the four examples out of the seven examples stated above or can provide any other valid example not covered in the above list.