While preparing the financial statements for the year ended 31 st March, 2025, Gama Ltd. observed two issues in the previous year Ind AS financial…
CA Final · Financial Reporting · PYQS · September 2025
While preparing the financial statements for the year ended 31 st March, 2025, Gama Ltd. observed two issues in the previous year Ind AS financial statements (i.e. 31 st March, 2024) which are as follows: Issue 1: The company had presented certain material liabilities as non-current in its financial statements as on 31 st March, 2024. While preparing annual financial statements for the year ended 31 st March, 2025, management discovers that these liabilities should have been classified as current. The management intends to restate the comparative amounts for the prior period i.e. as at 31 st March, 2024. Issue 2: The company had charged off certain expenses as finance costs in the year ended 31 st March, 2024. While preparing annual financial statements for the year ended 31 st March, 2025, it discovered that these expenses should have been classified as other expenses instead of finance costs. The error occurred because the management inadvertently misinterpreted certain facts. The entity intends to restate the comparative amounts for the prior period in which the error occurred i.e. year ended 31 st March, 2024. You are required to analyze the above issues and give your recommendation as to their treatment in preparation of the financial statements for the financial year 2024-2025.
Suggested Answer and Working Notes:
As per paragraph 41 of Ind AS 8, errors can arise in respect of the recognition, measurement, presentation or disclosure of elements of financial statements. Financial statements do not comply with Ind AS if they contain either material errors or immaterial errors made intentionally to achieve a particular presentation of an entity's financial position, financial performance or cash flows. Issue 1 In accordance with the guidance provided above, the reclassification of liabilities from non-current to current would be considered as correction of an error under Ind AS 8. Accordingly, in the financial statements for the year ended 31 st March 2025, the comparative amounts as at 31 st March 2024 would be restated to reflect the correct classification. Issue 2 The reclassification of expenses from finance costs to other expenses would be considered as correction of an error under Ind AS 8. Accordingly, in the financial statements for the year ended 31 st March 2025, the comparative amounts for the year ended 31 st March 2024 would be restated to reflect the correct classification. In the given case, the retrospective restatement of relevant items in statement of profit and loss has no effect on the information in the balance sheet at the beginning of the preceding period (1 st April 2023). Therefore, the entity is not required to present a third balance sheet.
Topics: Ind AS 8, Ind AS 10
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