In this guide · 9 sections
- General Instruction 5 of Schedule III Division I requires corresponding amounts for all items, including notes. The only exception in it is the first financial statements after incorporation; the second year needs comparatives, even against a short or long first period.
- Neither Division I nor ICAI's Guidance Note has a paragraph on regrouping. The note is established practice, which ICAI's Expert Advisory Committee accepted in 1983 subject to appropriate disclosure. For the auditor, the authority is SA 710 para 7: evaluate whether comparatives are appropriately classified and agree with what was presented last year.
- A working test: regrouping moves a figure between lines and never changes last year's profit or reserves. If a change would alter either, it is not a regrouping.
- A wrong income or expense of last year goes through this year's Statement of Profit and Loss as a prior period item (AS 5). SA 710, as issued in India, records that restatement of prior period statements does not exist here.
- Keep a bridge from the signed figures to the regrouped column, line by line. Our view, not a stated rule: work the ratios on the regrouped column too, since a regrouping can push a variance past 25%.
Try SignReady: See which ledgers moved to another Tally group since last year.
Start freeThe draft is ready, and the previous year column shows trade payables of ₹42.00 lakh. Last year's signed Balance Sheet says ₹48.00 lakh. Nobody on the team can say why. Somewhere a ledger moved group, a line was renamed, and "regrouped wherever necessary" went into the notes to cover it. That sentence is not a working. This guide sets out, as at 31 October 2026, what Schedule III Division I requires for comparatives, when a figure may be regrouped and when it has to go through this year's profit as a prior period item, how to word the note, and what SA 710 and SA 510 ask of the auditor. It covers companies following the Accounting Standards. Figures in the examples are illustrative.
What Schedule III requires, and the first-year exception
Section 129(1) of the Companies Act, 2013 requires the financial statements to give a true and fair view, comply with the notified Accounting Standards and follow the form in Schedule III. General Instruction 5 of Division I then requires the corresponding amounts for the immediately preceding reporting period for all items in the statements, including notes. ICAI's Guidance Note on Division I (Revised January 2022) adds three points worth knowing:
- Same basis. Comparatives are prepared on the same lines of guidance as the current schedules (para 6.5). A new disclosure therefore needs a previous year column too, as para 3.2 said when the format first applied.
- Specific items. It calls for comparatives in the share capital reconciliation (para 8.1.1.9), holders of more than 5% (para 8.1.1.12) and loans to promoters, directors and related parties (para 8.9.3.4).
- Ratios. If an item in a numerator or denominator changes, the same change is made for the comparative period, with a footnote giving the reason (para 8.9.12.3).
What neither Division I nor the Guidance Note contains is a paragraph on regrouping. No Accounting Standard in the 2021 Rules sets a general rule on it either. The nearest ICAI statement we found is an old opinion of its Expert Advisory Committee (Query 1.6, 27 December 1983, in the Schedule VI era): changing last year's figures in this year's accounts because of a regrouping is permissible if appropriate disclosure is made. It is not a standard, but it supports the usual note, which remains established practice. The work is therefore judgement, backed by the auditor's duties described below. For contrast, Ind AS 1 (para 41) requires comparatives to be reclassified unless impracticable, with the nature, amount and reason disclosed. It does not bind a Division I company, but it is a sound model for what a good note says.
First financial statements
The exception covers only the first financial statements laid before the company after its incorporation. Read it with the definition of financial year in section 2(41):
| Date of incorporation | First financial year ends | Comparatives in first statements | Previous year column in second statements |
|---|---|---|---|
| 10 August 2025 | 31 March 2026 | None | 10 August 2025 to 31 March 2026 |
| 15 February 2025 (on or after 1 January) | 31 March 2026, the following year | None | 15 February 2025 to 31 March 2026 |
Three practical points follow. Head the second year's column with the actual dates, because "2025-26" hides that the period was not twelve months. Expect turnover-based ratios to swing against a short or long first period, and give that as the explanation where a change crosses 25%. And note that the exception ends there: a company that had no business last year still shows its previous year column, with nil where that is the fact. Separately, AS 21 (para 30) excuses comparatives on the first occasion consolidated statements are presented, even for an existing group (Guidance Note para 13.6).
Regrouping, error, estimate or policy: which is it?
Under AS 5 (para 4.3), prior period items are income or expenses arising in the current period from errors or omissions in preparing earlier statements. So the first question is whether the change touches income or expense at all.
| What happened | Previous year column | This year's Statement of Profit and Loss | Disclosure |
|---|---|---|---|
| Presentation changed; the ledger's nature did not | Regrouped | No effect | Regrouping note |
| Last year's line was wrong, with no income or expense effect (customer advances netted in receivables) | Regrouped | No effect | A specific note; consider SA 710 paras 8 and 12 if material |
| Income or expense omitted or wrong last year | Unchanged | Prior period item (AS 5 paras 15 and 19) | Nature and amount, separately |
| Last year's estimate revised on new information | Unchanged | Current period; not a prior period item (AS 5 para 21) | Nature and amount, if material (AS 5 para 27) |
| Accounting policy changed | Unchanged | Effect shown in the year of change (AS 5 para 32), subject to any transitional provision (para 33) | The change and its impact |
| Something really changed this year (long-term investment now held as current, AS 13 para 23) | Unchanged | As the relevant standard requires | The relevant note; no regrouping |
The second row is a reading of the standard, not a stated rule. AS 5 speaks only of income and expenses (paras 4.3 and 16), so on this reading a pure classification mistake falls outside prior period items and is put right in the comparative. It is still a correction of last year's presentation, so "regrouped wherever necessary" undersells it when the amount is material.
A working test for every entry in the bridge: a regrouping moves a figure between lines and never changes last year's profit or reserves. The total of the Balance Sheet can change, when netted balances are grossed up, as the example below shows. Profit and reserves cannot. If someone wants last year's profit to read differently, the answer is an AS 5 item this year, and our guide to exceptional, extraordinary and prior period items covers how to present it. ICAI's Financial Reporting Review Board has also objected to the other shortcut: earlier-year bonus and income tax provisions debited directly to reserves (The Chartered Accountant, October 2019).
The signed accounts themselves stay as they are. Section 130 bars re-opening books and recasting statements without a court or Tribunal order, and section 131 allows voluntary revision for any of the three preceding years only where the statements or the Board's report do not comply with section 129 or 134, and only with Tribunal approval. Regrouping changes neither; it only changes how a column is presented in this year's statements.
Worked example: a reclassification, before and after
A company is finalising FY 2025-26. Comparing this year's presentation with last year's signed accounts shows four items:
- A. Current maturities of a term loan, ₹8.00 lakh, were left in long-term borrowings. They belong in short-term borrowings.
- B. Dealer deposits refundable on demand, ₹6.00 lakh, sat in Sundry Creditors. The client moved the ledger to Current Liabilities in Tally this year.
- C. Advances from customers, ₹14.50 lakh, were netted against trade receivables. They are now shown gross.
- D. Freight inward, ₹9.20 lakh, was in other expenses. It now goes to cost of materials consumed, and the company has applied this consistently in both years.
Balance Sheet at 31 March 2025 (₹ in lakh):
| Line | As signed | Items | Reclassified | As regrouped |
|---|---|---|---|---|
| Shareholders' funds | 110.00 | — | 110.00 | |
| Long-term borrowings | 60.00 | A | (8.00) | 52.00 |
| Short-term borrowings | 25.00 | A | 8.00 | 33.00 |
| Trade payables | 48.00 | B | (6.00) | 42.00 |
| Other current liabilities | 12.00 | B, C | 20.50 | 32.50 |
| Short-term provisions | 5.00 | — | 5.00 | |
| Total equity and liabilities | 260.00 | 14.50 | 274.50 | |
| Property, plant and equipment | 100.00 | — | 100.00 | |
| Inventories | 58.00 | — | 58.00 | |
| Trade receivables | 72.00 | C | 14.50 | 86.50 |
| Cash and bank balances | 30.00 | — | 30.00 | |
| Total assets | 260.00 | 14.50 | 274.50 |
Statement of Profit and Loss for FY 2024-25 (₹ in lakh):
| Line | As signed | Item | Reclassified | As regrouped |
|---|---|---|---|---|
| Cost of materials consumed | 410.00 | D | 9.20 | 419.20 |
| Other expenses | 62.00 | D | (9.20) | 52.80 |
| Total of the two lines | 472.00 | — | 472.00 |
Check the result. Last year's profit and shareholders' funds have not moved. The Balance Sheet total rose by ₹14.50 lakh, exactly item C, so the reviewer can see why ₹274.50 lakh differs from the signed ₹260.00 lakh.
Now look at the current ratio. As signed, it was 160.00 ÷ 90.00 = 1.78. As regrouped, it is 174.50 ÷ 112.50 = 1.55. Suppose this year's ratio is 2.00. Against the signed figure the change is about 12%; against the regrouped figure it is about 29%, past the limit for an explanation under the 25% ratio disclosure. Schedule III does not say which figure to compare with. Our view is to use the regrouped one and explain the change: it is the figure the column shows, and Guidance Note para 8.9.12.3 asks for ratio items consistent across the periods presented. The working capital movements in the cash flow statement comparatives also need a look. Here all four items stay within their existing activity, but a move between a working capital line and borrowings would shift last year's classification, though net cash must not change.
SignReady's Ledger checks read the trial balances: this year's opening balances against last year's closing, and ledgers moved to another Tally group since last year. A group that points to another area tells you the comparatives may need regrouping.
Wording the note
The general sentence is fine for small movements that change nothing a reader relies on:
Previous year's figures have been regrouped or reclassified wherever necessary to conform to this year's presentation.
It is not enough where the amounts are material or last year's line was wrong. Items A and C affect liquidity, so name them. Sample wording for the example above:
Reclassification of previous year's figures. The following figures for the year ended 31 March 2025 have been reclassified to conform to this year's presentation, with no effect on that year's profit or reserves: (a) ₹8.00 lakh of current maturities of term loans, from long-term borrowings to short-term borrowings; (b) ₹6.00 lakh of dealer deposits, from trade payables to other current liabilities; (c) ₹14.50 lakh of advances from customers, earlier netted against trade receivables, now shown in other current liabilities; (d) ₹9.20 lakh of freight inward, from other expenses to cost of materials consumed.
Regroup the comparatives in the relevant notes too, not only on the face; each must still total to the column it supports. A separate note line of this kind already appears in common formats, as our guide to the notes to accounts shows.
When ledgers moved between Tally groups
Most regroupings on a small file begin this way. The client's accountant tidies the chart of accounts during the year: deposits out of creditors, staff advances out of loans, a new custom group for directors. Since a ledger's group belongs to the ledger master, a previous year column printed from the current data generally follows the new group and will not match last year's statements line by line, even though every balance is right. Our guide to Tally groups and Schedule III mapping covers where each group should land. The routine for comparatives is:
- Start from documents, not the export. Keep the signed statements and last year's final trial balance on the file. Take the "as signed" column from the signed copy.
- Compare groups ledger by ledger between last year's final TB and this year's. A moved ledger with an unchanged balance is invisible in a totals check; the method in what changed in a revised trial balance applies.
- Ask whether the move changes a line of the statements. A move between two custom groups under Sundry Creditors usually changes nothing. A move from Sundry Creditors to Current Liabilities does.
- Decide whether the new home is right, and for which year. If the old group was right, the fix is to the current mapping, not to the comparative.
- Build the bridge in the form shown above, with one row for each ledger moved, and agree its totals to the signed figures.
- Compare opening balances separately. An opening balance that differs from last year's closing is a different problem from a moved ledger. Treat it as a question about entries, not presentation.
A CY vs PY check run on the draft will show the new and vanished ledgers that point to this. If the figures also feed filings, carry the same care into the check of Schedule III figures against AOC-4.
The auditor's side: SA 710 and SA 510
SA 710 notes that financial reporting frameworks in India typically use the corresponding figures approach for general purpose statements. Under it, your opinion refers to the current period only and, outside the cases in the table below, does not mention the comparatives. Paragraph A2 explains why: the opinion is on the current statements as a whole, including those figures. A regrouped column is therefore yours to answer for, whoever signed last year.
| Situation | What the standard asks | Reference |
|---|---|---|
| Every audit with comparatives | Determine that required comparatives are included and appropriately classified; evaluate that they agree with amounts and disclosures presented last year, and that policies are consistent or changes properly dealt with | SA 710 para 7 |
| Possible material misstatement in the comparatives | Further procedures to determine whether one exists. If you audited last year, also follow the relevant requirements of SA 560 | SA 710 para 8 |
| Prior period item disclosed separately this year | A specific written representation on it | SA 710 para 9, A1 |
| Last year's report was modified and the matter is unresolved | Modify this year's opinion, referring to both years' figures or to comparability, as the case requires | SA 710 para 11 |
| Material misstatement found in statements that carried an unmodified opinion | Verify it has been dealt with as the framework requires; if not, a qualified or adverse opinion. If dealt with and disclosed, an Emphasis of Matter paragraph may be included | SA 710 para 12, A6 |
| Last year was not audited | Other Matter paragraph saying so, and ask management to disclose it on the face. Evidence on opening balances is still required | SA 710 para 14, A7a, A8 |
When a predecessor audited last year
This is an initial audit engagement, so SA 510 applies with SA 710 (SA 710 para 1). You read last year's statements and the predecessor's report (para 5), then determine that closing balances were correctly brought forward or, when appropriate, that adjustments have been disclosed as prior period items in this year's Statement of Profit and Loss (para 6(a)). SA 510 as issued in India speaks of perusing copies of the audited statements and related documents such as supporting schedules, and it records why the predecessor's working papers were dropped from the text: the Chartered Accountants Act bars disclosure of information acquired in an engagement. Paragraph A2 says the current auditor can ordinarily rely on those closing balances, unless the audit work indicates possible misstatement.
If the predecessor's opinion was modified, evaluate the effect on your risk assessment (para 9), and modify your own opinion if the matter stays relevant and material (para 13). If you cannot get sufficient evidence on opening balances, the outcome is a qualified opinion or a disclaimer (para 10). Referring to the predecessor's report in an Other Matter paragraph is your decision where law or regulation permits. If you do, state that the prior period was audited by the predecessor, the type of opinion with reasons if it was modified, and the date of the report (SA 710 para 13; Illustration 3). Sample wording:
The financial statements for the year ended 31 March 2025 were audited by the predecessor auditor, whose report dated [date] expressed an unmodified opinion on them.
Where you have regrouped the predecessor's figures, keep the bridge on file. It is the evidence that the audited amounts and your column agree. SA 230 requires your working papers to let an experienced auditor follow what was done.
Previous year figures: the checklist
| Check | Done |
|---|---|
| Signed statements and final TB of last year on the file; "as signed" column taken from the signed copy | |
| First statements after incorporation? If so, no comparatives. Second statements: column headed with the actual dates | |
| Comparatives in every note, including new disclosures, in the same unit as this year | |
| Ledgers compared group by group with last year; each move that changes a line listed | |
| Each change classified: regrouping, prior period error, estimate, policy, or a real change this year | |
| Bridge from signed to regrouped: last year's profit and reserves unchanged; any change in the Balance Sheet total explained | |
| Errors in income or expense taken through this year as prior period items, not into the previous year column or reserves | |
| Note specific where amounts are material or last year's line was wrong | |
| Ratios, variance explanations and cash flow comparatives recomputed on the regrouped column | |
| Opening balances agree with last year's closing; differences explained | |
| Written representation on any prior period item; unaudited or predecessor position dealt with in the report |
Try SignReady: Opening balances checked against last year's closing, by area and ledger.
Start free- Schedule III rounding off
- Schedule III Divisions I–III
- Current vs non-current
- Notes to accounts format
- Cash flow statement (AS 3)
Frequently asked questions
Are previous year figures required in the first financial statements of a company?
No. General Instruction 5 of Schedule III Division I excepts the first financial statements laid before the company after its incorporation. The second year's statements need comparatives, and the column should show the actual first period, which under section 2(41) can be shorter or longer than twelve months.
What is the difference between regrouping and correcting a prior period error?
Regrouping moves a figure between lines of last year's column and leaves last year's profit and reserves unchanged. An error in income or expense of an earlier year is a prior period item under AS 5: it goes through this year's Statement of Profit and Loss with its nature and amount disclosed separately, and the previous year column stays as it was.
Is a regrouping note mandatory under Schedule III?
Division I and ICAI's Guidance Note do not have a specific paragraph on it, so the note is established practice rather than a stated requirement. ICAI's Expert Advisory Committee (Query 1.6, 1983) accepted regrouping subject to appropriate disclosure, and the note is needed in practice because the previous year column no longer matches the signed statements without it. Where amounts are material, or last year's line was wrong, give the nature and amount rather than the general sentence.
Should previous year figures be restated for an error under AS 5?
No. AS 5 deals with the correction through the current year as a separately disclosed prior period item. The Material Modifications section of SA 710 as issued in India records that restatement of prior period statements does not exist in the Indian scenario. Ind AS 8 differs. Changing last year's accounts themselves is a separate matter, under section 130 or 131 of the Companies Act, 2013.
What must an auditor do about comparatives audited by a previous auditor?
Apply SA 710 and SA 510 together. Check the comparatives agree with last year's amounts and are appropriately classified, read the predecessor's report, and obtain evidence on opening balances, which may include perusing the audited statements and supporting schedules. An Other Matter paragraph on the predecessor's report is your decision where law or regulation permits it.
A ledger moved to another Tally group this year. Do I have to regroup last year's figures?
Only if the move changes a line in the statements and the new line is the right one. Compare groups ledger by ledger with last year's final trial balance, list the moves that change a line, and regroup the comparative with a bridge back to the signed figures. If the old group was right, correct this year's mapping instead.
Sources
- Companies Act, 2013: sections 2(41), 129(1), 130, 131; Schedule III, Division I, General Instruction 5 (India Code, amended text)
- Companies (Accounting Standards) Rules, 2021, G.S.R. 432(E), 23 June 2021 (Gazette): AS 5 paras 4.3, 15 to 21, 27 to 33; AS 13 paras 23 and 24; AS 21 para 30
- ICAI: Guidance Note on Division I, Non Ind AS Schedule III to the Companies Act, 2013 (Revised January 2022), paras 3.2, 6.5, 8.1.1.9, 8.1.1.12, 8.9.3.4, 8.9.12.3 and 13.6
- ICAI: SA 710, Comparative Information: Corresponding Figures and Comparative Financial Statements, paras 1 to 14, A1 to A8, Material Modifications and Illustration 3
- ICAI: SA 510, Initial Audit Engagements: Opening Balances, paras 4 to 13, A2 and Material Modifications
- ICAI: Financial Reporting Review Board update on common errors in implementing AS 5, The Chartered Accountant, October 2019
- ICAI: Board of Studies material on Ind AS 1 (reclassification of comparatives); Ind AS 1 para 41 under the Companies (Indian Accounting Standards) Rules, 2015
- ICAI Expert Advisory Committee: Query 1.6, Disclosure of the corresponding figures for the immediately preceding financial year in the current year's annual accounts, opinion of 27 December 1983
- ICAI: SA 230, Audit Documentation
Upload both years' trial balances to SignReady: ledgers moved to another Tally group and opening balances that differ from last year's closing are listed, and material items appear as review points. The statements come out as an editable Excel draft for your review. First 3 finalisations free.
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Version history: 9 Nov 2026 — first published.
