Businesses will soon have to file their financials in a new format

Indian businesses will soon have to present their financial statements in a new way to help investors and regulators quickly assess their performance and financial health, two persons informed about the development said.

- Gireesh Chandra Prasad

The attempt to make financial statements more relevant, transparent and uniform will apply to all listed companies as well as large unlisted firms.

A new accounting standard prepared by the Institute of Chartered Accountants of India (ICAI) based on a global accounting rule change mandates businesses to classify all income and expenses into three defined groups—operating, which deals with core business activities, investing activities, dealing with returns or losses; and financing, which deals with items like interest paid or received, one of the persons quoted above said.

This is expected to make the profit and loss account more structured compared to the current format in which some of the information is scattered. Besides, certain metrics shown outside financial statements to complement the profit and loss account—for example, excluding certain one-off expenses to show a normalized or underlying operational performance—will now be part of the financial statements and, hence, covered by the statutory audit, experts explained.