Businesses might be asked to follow new Financial Statements Format from 2027:

Businesses might be asked to follow new Financial Statements Format from 2027 A new accounting rule offered by the Institute of Chartered Accountants of India (ICAI) will require businesses to arrange their income and expenses into three specific categories: Operating activities related to regular business work, Investing activities covering profits or losses from investments and Financing activities such as interest paid or earned. This amendment is expected to make profit and loss (P&L) statements more structured than they are now, where related details can be spread out. Also, businesses commonly share certain performance metrics outside the main financial statements, such as profits after removing unusual one-time costs, to show a clearer picture of their regular performance. Under the new rule, these figures should now be included in the audited financial statements. The proposed standard, called IndAS 118, is on the basis of a new global rule called IFRS 18, which comes into effect worldwide in January 2027. The motive is to improve the quality and clarity of financial reports by clearly highlighting important information. ICAI plans to implement these changes in India from 1 April 2027 and is currently asking for public comments. Indas applies to: Listed companies, Companies planning to list, Unlisted companies with a net worth of Rs. 250 crore or more and Large or listed non-banking financial companies. Globally, more than 140 countries, including those in the European Union, follow IFRS. The United States uses its own system called Generally Accepted Accounting Principles (GAAP). India's IndAS rules are largely coordinated with IFRS, with some adjustments for local needs. Another major update in IFRS 18 and also in IndAS 118 relates to custom profit figures often shown by businesses to investors. These are usually called “non-GAAP” measures or management-defined performance measures (MPMs). Right now, these are shared separately from official financial reports, but under the new rule, they must be included in the audited financial statements with full details. Experts say this move will make financial reports more transparent and easier to understand. With added explanations and proper labelling, readers will be able to find important information more easily and make better decisions based on it.