The disclosure test is specific, not a list of every estimate
For statements prepared under Ind AS 1, paragraph 125 addresses future assumptions and other major sources of estimation uncertainty at period-end that carry a significant risk of a material adjustment to asset or liability carrying amounts within the next financial year. The note identifies the nature and carrying amount of the affected balances. An accounting policy list or a statement that all estimates are uncertain does not explain that risk.
Read the applicable text: ICAI 2025–26 compendium: Ind AS 1 paragraphs 125–133.
Build the scope from actual balances
Review the measurement files and identify the assumptions, affected balance, possible adjustment, timing and evidence supporting the assessment. A large balance is not automatically within paragraph 125, and a smaller one is not automatically irrelevant. Do not invent a universal percentage or rupee threshold. Distinguish this assessment from the separate disclosure of judgements in applying accounting policies under paragraph 122, as paragraph 132 requires.
Explain sensitivity with supported facts
Paragraph 129 describes examples of useful information, including the assumption’s nature, sensitivity with reasons, expected resolution and reasonably possible next-year outcomes, and changes to unresolved past assumptions. Choose information appropriate to the actual uncertainty. The illustrative numerical scenarios below do not prescribe measurement models, probability weights or accounting entries under the underlying asset or liability standard.
Observe the active-market distinction
Paragraph 128 excludes from this paragraph 125 requirement specified balances measured at period-end fair value using an active-market quoted price for an identical asset or liability, even where market prices may change materially next year. Market-price volatility is not automatically the same as period-end estimation uncertainty. Check the exact measurement facts and other applicable disclosures before using that distinction.
Impracticability does not remove the balance disclosure
Paragraph 131 addresses cases where disclosing the extent of possible effects is impracticable. The entity still describes that reasonably possible different next-year outcomes could require a material adjustment on existing knowledge, and discloses the nature and carrying amount of the affected balance. Paragraph 130 does not require budget or forecast disclosure for this purpose. Do not manufacture a sensitivity range just to fill a template.
Tie the note to the approved accounts
Use the relevant period-end balance and ensure that any described range, scenario and change in assumption can be traced to the underlying working. Do not substitute a whole-business balance for the specific affected class or treat a downside illustration as an automatically recognised loss. Other standards may require additional disclosures. Keep those requirements and the actual measurement conclusion separate while making the uncertainty note readable and entity-specific.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Receivable sensitivity
Assume an approved gross receivable population ₹1 crore with an independently measured ₹5 lakh allowance, net ₹95 lakh. A supported disclosure scenario increases the allowance to ₹9 lakh, giving net ₹91 lakh, a ₹4 lakh sensitivity. This scenario does not itself require booking the downside allowance.
Illustrative example 2: Provision range
Assume recognised provision ₹8 lakh and supported reasonably possible next-year outcomes of ₹6 lakh to ₹11 lakh. Differences from the carrying amount are a ₹2 lakh decrease and ₹3 lakh increase. Explain the actual uncertainty and why the range is supportable, rather than imply a statutory symmetrical range.
Illustrative example 3: Inventory assumption
Assume an affected inventory class has cost ₹100 lakh and approved carrying amount ₹80 lakh. A separately supported downside scenario gives ₹70 lakh, or ₹10 lakh below carrying amount. The calculation illustrates the disclosure sensitivity; measurement and recognition remain governed by the applicable standard.
Illustrative example 4: Carrying amount must match the affected class
The balance sheet has ₹5 crore of assets in a broad category, but the actual uncertainty affects an identified ₹1 crore class. The unaffected remainder is ₹4 crore. Do not disclose ₹5 crore as the affected carrying amount merely because it is the top-level caption.
Illustrative example 5: Changed unresolved assumption
Assume the relevant provision’s approved carrying amount changes from ₹12 lakh to ₹15 lakh after a properly supported current-period measurement update, with the underlying uncertainty unresolved. Increase is ₹3 lakh, or 25% of the earlier amount. Explain the actual assumption change and period rather than calling the whole ₹15 lakh a new uncertainty.
Illustrative example 6: Separate observable-price population
Assume a ₹90 lakh investment population includes ₹50 lakh meeting the precise paragraph 128 active-market quoted-price facts and ₹40 lakh requiring separate uncertainty assessment. The ₹40 lakh is the remaining review population, not an automatic conclusion that every rupee of it qualifies under paragraph 125.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm reporting framework | Statements prepared under Ind AS 1. |
| 2 | Identify period-end estimates | Underlying measurement and assumption files. |
| 3 | Apply the significant-risk test | Material carrying-amount adjustment within next financial year. |
| 4 | Identify nature and affected balance | Specific asset, liability or class. |
| 5 | Separate policy judgements | Paragraphs 122 and 132 distinction. |
| 6 | Check active-market facts | Precise paragraph 128 scope. |
| 7 | Select useful disclosure information | Nature, sensitivity, outcomes or changes as appropriate. |
| 8 | Support any quantitative range | No invented percentage or model. |
| 9 | Address impracticability properly | Paragraph 131 nature and carrying amount still disclosed. |
| 10 | Reconcile final notes | Approved balances, assumptions and other-standard requirements. |
Sixteen practitioner FAQs
1. Does every estimate require this note?
No. Apply paragraph 125’s specific risk and timing test.
2. What timing does that test identify?
A possible material carrying-amount adjustment within the next financial year.
3. Must the affected carrying amount be disclosed?
Yes, with the nature of the relevant asset or liability.
4. Is a large balance alone sufficient?
No. Assess the actual estimation uncertainty.
5. Is there a universal 10% disclosure trigger?
No such universal threshold is supplied here.
6. Is this the same as policy-application judgement disclosure?
No. Paragraph 132 distinguishes it from paragraph 122.
7. Must every sensitivity be symmetrical?
No. Use actual supported information appropriate to the uncertainty.
8. Does a downside scenario require an automatic journal?
No. Apply the underlying measurement standard separately.
9. Can the note use a whole-category total casually?
It should identify the actual affected balance or class.
10. Does every market-price movement represent estimation uncertainty?
No. Consider the specific paragraph 128 distinction.
11. What active-market fact is relevant?
Period-end fair value based on an active-market quoted price for an identical asset or liability.
12. Are budgets or forecasts required by this disclosure?
Paragraph 130 says they are not required for this purpose.
13. What if possible effects cannot practicably be quantified?
Apply paragraph 131 and retain the required nature and carrying-amount disclosure.
14. Can a sensitivity be invented to complete a template?
No. It needs support.
15. Do unresolved past assumptions need attention?
Paragraph 129 identifies explanation of changes as an example of useful information.
16. Does this replace other standards’ disclosures?
No. Review their additional requirements separately.