Conceptual Framework for General Purpose Financial

Reporting by Public Sector Entities: Presentation in General

Purpose Financial Reports

International Public Sector Accounting Standards Board

Comments

Introduction

We live in a world where many developed and developing nations have their own independent

ways and procedures of setting and adhering to the accounting standards that provide the

principles and norms to measure the financial transactions and prepare a presentation of the

financial statements, which are often contradictory. But over a span of last twenty years,

globalization has taken place in the economies of the countries. The countries, the present

companies, regulators, investors started to realize that the need of the wide range of information

of the stakeholders of the international economy, which belonged to different jurisdictions, were

not been able to concise at a common point. The accounting practices were failing to meet such

information requirements of various parties. This is also acting like a road block for the potential

international investments and for all the various financial markets present in the globe to interact

with one another and create synergy which is very well possible. The reports being published by

companies of different countries lead to no symmetry at all in the financial market, which is

affecting the efficiency of the global economy. In order to solve this whole problem, all the

accounting principle formulators of different countries started to realize the dire need of a

common standard accounting set which were based on principles, converged internationally and

are consistent global.

1. Meaning of Presentation, Display, and Disclosure

Presentation

Relationship between presentation, display and disclosure is illustrated by what is meant by

GPFRs. Only a few standard setters have been addressing these issues from a conceptual

perspective, note disclosures and the financial statements are generally focused on developing

concepts. A large number of projects have been started including projects on integrated

reporting, note disclosures, and effective communication of financial information3 ~by the

IASB, national standard setters, and others. These projects are monitored by The IPSASB. There

was a belief that there can be progress of these projects without even finalizing it, even its aim

and objectives were given by IPSASB.

In the notes it has been reported that information has been addressed by its disclosure, also in

some jurisdiction the presentation has been viewed in the framework of financial statements. In

the broader perspective of both GPFRs that include financial statements and other GPFRs the

presentations has been taken under consideration by CP, which also stated that there is a need of

modification of technology. Therefore CP has described presentation as the selection, location

and organization of information displayed and disclosed in the GPFRs to meet the objectives of

financial reporting, needs of users, and QCs.

The portrayal of presentation diverges with the meaning of ―fair presentation‖ with respect to

financial statements. IPSAS 1, Presentation of Financial Statements, states that: the faithful

representation of the effects of transactions, other events are required by fair representation, and

conditions in accordance with the definitions and recognition criteria for assets, liabilities,

revenue, and expenses set out in IPSASs. The additional disclosures of the application of

IPSASs, is presumed to result in financial statements that achieve a fair presentation.‖

All the issues encompassed by fair presentation is not addressed by

CP. The recognition and measurement of elements, for example, Phases 2 and 3 of the

Conceptual Framework are covered in and discussed in the CPs issued in December 2010.

Display and Disclosure

Both display and disclosure of information are covered by presentation. This CP differentiates

between core information and supporting information.

Display and Core Information

Key messages related to information are highlighted by core information. When developing

presentation requirements for a particular GPFR information area, it is important to identify (a)

what core information would need to be displayed, (b) where the information should be

displayed, and (c) how it should be organized. Information should be kept to an understandable

level, but core information should also be sufficient to effectively communicate the key

messages related to an information area.

For information included in GPFRs but outside the financial statements, display refers to the

ways in which core information is shown, such that the presentation provides an overview

appropriate to (a) meeting the needs of users, and (b) the characteristics of the information

shown.

Display and disclosure~ based on the specific presentation techniques used which cannot be

differed. Information location is on the face of a financial statement or in the notes. Alignment of

the information prominently displays core for the presentation techniques of other information.

Disclosure and Supporting Information

Core information is made more user friendly and important with the help of supporting

information. The level of details presented by supporting information, makes core information

more transparent and easy to use. Following things are included theorugh supporting

information:

Basis on which core information has been provided, for example: policies applied and

methodology used

disaggregation’s of core information

all those items which share the characteristics of core information

information on which evaluation of core information is based on.

Main information are displayed in the financial stamen, it is the supporting information which

elaborate these information with the help of disclosures, additional information and non-core

information. For example, contingent liabilities, though the information on this financial item is

not recognized in the balance sheet, but still they are substantially relevant. Similarly information

related to segment are again very important. All these information are not provided on the face of

financial statements but holds substantial relevance and can be provided and explained through

supporting information and this is the objective of presentation of GPFRs. Though supporting

information cannot be present as prominently as core information, but they should be given due

importance and their role cannot be neglected. Just like core information, supporting information

can be presented through graphs, tables, statements and all. Thus whether its core information or

the supporting one, both are integral part of GPFRs.

Identification of Core and Supporting Information

At the standards level, identification of specific core and supporting information is done, for a

particular topic or information area, applying the descriptions above for core information and

supporting information, rather than through development of a single set of criteria or

characteristics for application across all GPFRs. There is an inextricable link between the

identification of core and supporting information. The IPSASB considered such identification.

The approach to presentation of information has been set out on Section 3.

Both standard setters and preparers would guide the identification of core and supporting

information. Based on the needs of users Presentation objectives have been discussed in Sections

3 and 4. In Section 5 details are discussion of description of presentation and the relationship

between the QCs has been described.

Following area of information are to be developed for identifying a level of standard of core and

supporting information:

First principle on which information are to be classified should be identified

appropriately

Information which should be provided as core information and information which should

be provided as supporting information should be segregated properly

a list of specific core information that all preparers must provide for that area

All those who are to prepare these information should be guided in crystal clear manner that

what should be included as core information and what should be included as supporting

information.

Alternative View – Core and Supporting Information

An alternative to the proposal would be to develop an approach where core information would be

separately defined from display and supporting information would be separately defined from

disclosures, based on the premise that either core or supporting information could be displayed

or disclosed. An example of one approach based on this alternative view is described in the

following paragraph.

Core information could be seen as any information that is important to users of that information.

Therefore the person who agrees with the view that disclosure is not a substitute for display, they

believe that notes have a clear and demonstrable relationship to the display information to which

they relate and that such notes are essential to a user’s understanding of that information. The

core information in an appropriate operational, economic, or historical context placed and

viewed this information as supporting information. Supporting information can even be

displayed or demonstrated. Based on this approach, the substance of the information would

influence the classification of either core or supporting information versus the form of that

information.

2. IPSASB Approach to Presentation of Information

The countries depending on their different languages the preparation or the presentation of the

financial statements differed because of it, which is a problem for the global investors as it is cost

and time consuming to put the effort to translate the reports. The Convergence of Accounting

Standards has enabled the companies having their operations across the globe to prepare the

financial statement in a language which is acceptable universally which can help in comparing

and comprehending the published reports. This helps the investors to compare the reports and

seek different opportunities to invest in different countries. For the companies to create and

image and get itself recognized in the global market the companies accepted the international

accounting standard. This helps in increasing the FDIs and FPIs in the country. This would also

help the MNCs to look over the demands and meet the human capital needs of the subsidiaries of

the companies present in the other part of the world. This will bring an ultimate development of

the economy in the country. A survey by IFAC (International Federation of Accounts) shows

that 90% of the accounting leaders agree to the change and consider it very important for the

economic growth. The companies had to bear high cost in preparing different sets of financial

statements because of the different jurisdictions, which comply with the different accounting

requirements. All this is being faced because there is no common set of global accounting

standards. The companies wanted to raise their capital in the international market. Hence

acceptance of such a change helped in reducing the cost and also makes them realize the

credibility of the company with the help of the financial reports, which would help the company

to raise their capital at at lower cost in the international market due to the easy access to the

equity markets and the international debts. Such reduction of the cost of the capital of a company

would help them raise the value of their business. Companies had to face a lot of problems while

making the different financial reports in the various different countries they were operating in.

they had to prepare the reports according to the requirements of the country they were operating

in and had to consolidate it to see the current position and the performance of the company. The

acceptance of the Global Accounting Standards eases out this situation and reduced the hassles

that were present earlier.

The acceptance of the GPFRs brings lots of benefits to the auditing firms as well in a number of

ways. The problems caused due to the diversity in the financial reports of different countries will

now be minimized or eliminated. This would help the firms in improving the quality of their

work globally as they would have more time and space. And secondly, with the common set of

standard, the auditors will be able to improve their skills and seek opportunities to have a

worldwide exposure professionally. GPFRs doesn’t adopt international standard on disclosures

in financial statements fully but it brings the corporate disclosures closer to international

practices. The GPFRs is simplified and modernized and is up to the present needs.

3. Identification of Presentation Objectives

We will now discuss how the GPFRs helped in bringing the corporate disclosures closer to

international practices.

i. The GPFRs introduced some conceptual changes like current/non- current distinction,

primacy to the requirements of accounting standards, etc.

ii. The GPFRs would apply to all the companies till they are required to follow IFRS. By

following the GPFRs the companies will disclose more, which will help in international

practices.

iii. The GPFRs is more practical. It eliminated the concept of schedules and introduced the

notes to accounts. This is done when the company is applying IFRS.

iv. After the revision, the compliance of requirements Act and accounting standards will

prevail over previous presentation style.

v. The GPFRs gave the better presentation of data. It gave the more organized data to the

users of financial statements. It will result in better quality of financial reporting due to

improvement in quality of financial statements.

vi. By using the GPFRs, companies will become internationally competitive. They will be

able to raise capital from abroad easily as they will gain the confidence of foreign

investors by using the globally accepted financial standards.

vii. Companies will be able to attract foreign investors as they will have the data in clearer

form. Investors have to incur less cost in terms of time and efforts. Their confidence

would also be well- built.

viii. By adopting GPFRs, companies in India which have operations abroad will get the

benefit as their cost will reduce because reporting will be done on the same way. This

will also give consistency.

ix. Companies can streamline their operations, reporting standards, training and

development, auditing and company standards. Whether company has its office aboard

or local, they will be able to adopt similar reporting techniques which will give them

precise data.

x. By using the GPFRs, companies will be able to do world class financial reporting. It

will enhance the comparability of financial performance and information of companies

with its global peers.

xi. GPFRs will result in more transparent financial reporting of company’s activities which

will benefit stakeholders, investors, customers, etc. in abroad and in India.

4. Presentation Concept

The companies will be in comfort now, as now the new standards will be common for all. The

auditors, regulators, investors, and stakeholders everyone will be at ease. Now there is going to

be a proper co-ordination among the industrial accountants, regulators, auditors and standard-

setters. The educational institutes play a major role in framing out and developing new teaching

on this new method in this area that will help in generating more and better educational standard

setters. However there are a ceratin number of limitations which have been identified in this

schedule that can be seen as under:

Limitations of GPFRs

1. Changing from old schedule to GPFRs doesn’t simply change the accounting procedure

but it will transform the companies too. They need to focus on developing an action plan

as well as a plan for future GPFRs users.

2. GPFRs cannot be easily applied on all the industries. Small companies will take more

time to adopt it as they have less man power and resources to make the changes fast as

compared to the large companies who can change their format easily and fast.

3. The GPFRs cannot be applied on banking and insurance companies.

4. The process of changing from the old schedule to the GPFRs is a long process and is not

very cost effective.

Companies are becoming global and are entering into international markets and it is needed to

have accounting principles and disclosures in India that have global acceptance. There are two

GAAP’s (generally accepted accounting principles), which are being followed in international

accounting world namely IFRS (International Financial Reporting Standards) and US GAAP.

The Institute of Chartered Accountants of India (ICAI) has been thinking to adopt account-

reporting practices of IFRS for large companies in India from many years. This is discussed to

converge accounting system with IFRS in context of financial statement and technical

awareness of accounting experts.

Ministry of Corporate Affairs (MCA) planned for convergence with IFRS and it is moving

toward adopting IFRS. First phase of convergence has been implemented from April 1, 2011 and

previous presentation style has been revised. The other phases of convergence will be

implemented later. MCA took the first step in direction of convergence like presentation format

of a balance sheet and profit & loss account. The GPFRs suggests a different format for balance

sheet and profit & loss account of the companies, which is different from the format mentioned

in the old schedule. New format in GPFRs requires categorizing of assets and liabilities into

current liabilities and assets and non-current liabilities and assets.

GPFR is the major step towards convergence of accounting practices with IFRS. This is

because presentation format in GPFRs is according to the requirements of IFRS. However, there

are few differences also. Like in GPFRs, there is only one option to present balance sheet i.e.

assets and liabilities has to be classified under current and non-current heads while in

International practices, there is one additional option that balance sheet on the basis of liquidity

when liquidity format represents trustworthy and more significant information. International

accounting standards provides option of classifying expenses either on the basis of nature or on

the basis of function but GPFRs requires companies to classify expense on the basis of nature

only. But all these difference will be abolished with the implementation of other phases of

convergence process.

There are many issues related to convergence of accounting practices and international

practices like requirement of training institutes for accounting personnel for revised standards,

change in the technological technology and regulatory requirements. These issues will be

resolved with implementation of international practices and in coming time. This shows that

GPFRs is bringing corporate disclosures closer to international pratices and in coming time

accounting will be done according to international practices.

GPFRs doesn’t adopt international standard on disclosures in financial statements fully but it

brings the corporate disclosures closer to international practices. The GPFRs is simplified and

modernized and is up to the present needs.

We will now discuss how the GPFRs helped in bringing the corporate disclosures closer to

international practices.

1. The GPFRs introduced some conceptual changes like current/non- current distinction,

primacy to the requirements of accounting standards, etc.

2. The GPFRs would apply to all the companies till they are required to follow IFRS. By

following the GPFRs the companies will disclose more, which will help in international

practices.

3. The GPFRs is more practical. It eliminated the concept of schedules and introduced the

notes to accounts. This is done when the company is applying IFRS.

4. After the revision, the compliance of requirements Act and accounting standards will

prevail over previous presentation style.

5. The GPFRs gave the better presentation of data. It gave the more organized data to the

users of financial statements. It will result in better quality of financial reporting due to

improvement in quality of financial statements.

6. By using the GPFRs, companies will become internationally competitive. They will be

able to raise capital from abroad easily as they will gain the confidence of foreign

investors by using the globally accepted financial standards.

7. Companies will be able to attract foreign investors as they will have the data in clearer

form. Investors have to incur less cost in terms of time and efforts. Their confidence

would also be well- built.

8. By adopting GPFRs, companies in India which have operations abroad will get the

benefit as their cost will reduce because reporting will be done on the same way. This

will also give consistency.

9. Companies can streamline their operations, reporting standards, training and

development, auditing and company standards. Whether company has its office aboard

or local, they will be able to adopt similar reporting techniques which will give them

precise data.

10. By using the GPFRs, companies will be able to do world class financial reporting. It

will enhance the comparability of financial performance and information of companies

with its global peers.

11. GPFRs will result in more transparent financial reporting of company’s activities which

will benefit stakeholders, investors, customers, etc. in abroad and in India.

As per Statement of Profit and Loss:

1. Earlier it used to be called as Profit and Loss account, now it’s been called as

‘Statement of Profit and Loss’.

2. There is a proper format now for the presentation of the Statement of the P&L. This

format does not include any kind of appropriation item. And such adjustments, which are

below the line, are recorded under ‘Reserves and Surplus’.

3. According to the new GPFRs, any exceed of 1% from the revenue of operations because

of any item of income or expense or Rs.100, 000 (which used to be 1% of total revenue

or Rs.5, 000), whichever transaction is higher is needed to be disclosed and shown

separately.

4. Other than the financial companies, other companies have to show their revenue from

operations separately. And this revenue is recorded separately as ‘sale of product’ or ‘sale

of services’ or ‘any other operating revenue’.

5. Any kind of gain or loss due to net exchange of foreign currency has to be shown

separately as financial cost.

6. Raw materials consumed, purchases, sales and stocks, all these have been more

simplified and have been replaced with the disclosure of ‘Broad Heads’. On the basis if

true value, the broad heads are being presented in the Statement of Profit and Loss.

The key objective and the crucial purpose of preparing financial statement is to give information

about the financial position and the performance of a company which can be used by

shareholders and stakeholders for taking and implementing financial decisions the objective of

GPFRs 6 is to provide appropriate and exact information on the income and expenses(current

and non-current) liabilities and assets to shareholders investors general public and stakeholders

and also to give fair and true picture of affairs of the company via balance sheet. The

bifurcation of current and non-current assets and liabilities helps the user of this information to

take better and informed decision and will not mislead as there is no room of interpretation of

financials at the user end it also help in highlighting the assets which may be realize in current

operating cycle and the liabilities which are to be paid in the same cycle. GPFRs give a new

format so that financial statements can be prepared and presented in a more concrete way. This

also includes disclosure and concepts from Accounting Standards and is applicable for the

companies, which are following GAAP. The new schedule 6 is divided into two parts, balance

sheet and profit and loss account but on other hand, old version had four parts. The GPFRs 6

came into effect from 1 April 2011

OBJECTIVES FOR REVISING PREVIOUS PRESENTATION STYLE

According to MCA notifications S.O. 447 (E) dated 28th Feb 2011, previous presentation style is

revised. The company has to follow the schedule from April 1, 2011. According to GPFRs, there

is new format of declaring financial statements of the companies. There are many new concepts

introduced in GPFRs according to requirements of current economic needs. There were many

objectives of revising the schedule. 

Lot of changes has taken place, since the previous presentation style is introduced and it

is necessary to revise the schedule according to current environment.

Accounting standards has been circulated very much and previous presentation style is

framed according to non-converged accounting standards under the Companies

(Accounting Standards), Rules, 2006.

To make the financial statement easy to read and user friendly to its users.

Eliminating the disclosure requirements, which are used for only statistical calculations

and have become outmoded like licensed capacity and numerical facts about inventory?

To fix the minimum disclosure requirements to ensure accurate exhibition of financial

position of the companies.

To make the comparison of figures of companies more easy with their international

counterparts.

Making the reporting system easier for the companies, which are small in size?

To attain the flexibility so that further amendments can be made and disclosure

requirements according to particular industry requirements 

 

 Thus, the introduction of GPFRs is aimed to remove Irregularities in the old schedule and

affiliate the reporting systems with global reporting.

CONCLUSION

Below are the details comments on conceptual framework exposure draft. . These comments

have been according to the topics covered in the conceptual paper. Many comments are the

specific one, but there are certain general comments as well in between. Below, the comments

from the Danish Agency for governmental management are divided into a number of general

comments and a number of specific comments regarding the us generally agree with the

guidelines presented in IPSASBs conceptual framework. Our main divergence from the

framework is concerning the users and the coherence with objectives of the financial reporting.

We stress the importance of identifying parliament, legislators or similar bodies, as a primary

user of GPRF’s and downsizing citizens to be secondary users. Our argument is that GPRS’s are

Mainly used for decision making and citizens mostly have low or no use of GPRS’s. We agree

with the proposed view of role and authority of the Conceptual Framework. The requirements

for financial reporting in public sector entities are already targeted towards information needs of

the users and are consistent with the objectives for financial reporting. We can therefore on a

general level support the proposed view regarding the scope of GPFRs.

The key objective and the crucial purpose of preparing financial statement is to give information

about the financial position and the performance of a company which can be used by

shareholders and stakeholders for taking and implementing financial decisions the objective of

GPFRs 6 is to provide appropriate and exact information on the income and expenses(current

and non-current) liabilities and assets to shareholders investors general public and stakeholders

and also to give fair and true picture of affairs of the company via balance sheet. The

bifurcation of current and non-current assets and liabilities helps the user of this information to

take better and informed decision and will not mislead as there is no room of interpretation of

financials at the user end it also help in highlighting the assets which may be realize in current

operating cycle and the liabilities which are to be paid in the same cycle. GPFRS is aimed to

implement a unique and understandable accounting standard globally. This will lead in having

high quality data information, transparent and universal accepted financial statement which will

make financial reporting easy; it makes comparing in the world capital market easy and also

helps the information's users in making economic decisions. Continuous Promotion and precisely

usage of these standards on a continuous basis as well as evaluating the the existing format and

discarding unwanted disclosure in it. Fulfillment of Point A and Point B objectives; also taking

special consideration in case of small and medium scale enterprise

by minimizing the disclosure requirements and

removing redundant requirements of disclosure and having

a simple presentation of financial report. To attain a high quality solution standard by

harmonizing and converging National Accounting Standards with International Accounting

Standards and International Financial Reporting Standards.

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