Restated Financial Statements for an Indian IPO: What Promoters Need to Know

By CA Dhruv Seth, Seth & Associates, Chartered Accountants, Lucknow

Why the numbers you already have are not the numbers SEBI wants

Most promoters assume their audited financial statements are IPO-ready simply because an auditor has signed them every year. They are not. A prospectus does not carry the financial statements a company files with the Registrar each year — it carries restated financial statements, a separate, more demanding presentation of the same underlying numbers. Companies that leave this exercise until the DRHP is nearly ready routinely lose two to three months to it. Understanding what restatement involves, well before the IPO process starts, is one of the more overlooked pieces of listing preparation.

What restated financial statements actually mean

Restated financial statements are not new accounts. They take the audited financial statements for the track record period covered by the offer document and re-present them on one consistent set of accounting policies, one consistent format, and one consistent basis of classification. If a company changed an accounting policy midway through the track record period, restatement applies that policy across all the years shown. If an item was classified differently in different years, restatement regroups it so the years are comparable. If a prior period error was found and corrected, restatement reflects the correction throughout, not just in the year it was caught.

This work is governed by the SEBI (Issue of Capital and Disclosure Requirements) Regulations and, from the profession's side, by the ICAI's Guidance Note on Reports in Company Prospectuses. The Guidance Note sets out how the restatement statements, the summary of significant accounting policies, and the accountants' report should be structured, and it is the document your auditors will actually work from.

Where the adjustments usually come from

In practice, restatement adjustments cluster around a few recurring issues:

• Accounting policy changes made during the track record period, including any shift required by a new or revised accounting standard.

• Regrouping and reclassification of items presented inconsistently year to year, such as expenses moved between heads.

• Correction of prior period errors found during IPO diligence itself — this is common, and not something to be defensive about.

• Adjustments from a change in the applicable financial reporting framework during the track record period.

• Proforma adjustments for a material acquisition, divestment or restructuring, where such presentation helps investors understand the business.

None of this implies the original audited accounts were wrong. It reflects the fact that a prospectus is read across several years at once, and those years need to speak the same language.

The auditor question promoters often miss

Not every practising chartered accountant can sign the restated financial statements. Under the ICDR framework, the financial information in the offer document must be certified by an auditor who has gone through ICAI's Peer Review process and holds a valid Peer Review certificate. Many well-run private companies have been audited for years by a perfectly competent CA who has simply never undergone peer review, because it was never required for their private reporting. Discovering this three months before a planned DRHP filing forces a late auditor transition at the worst possible time, when continuity and institutional knowledge of the accounts matter most.

Practical steps for the CFO's office

• Confirm early whether the statutory auditor holds a current ICAI Peer Review certificate; if not, plan the transition well ahead of the IPO timeline.

• Map every accounting policy change and reclassification across the track record period before restatement begins, rather than discovering them during it.

• Treat restatement as a full accounting project with its own timeline, not a by-product of the year-end audit.

• Reconcile restated figures back to the original audited statements line by line, so every adjustment has a documented rationale.

The bottom line

Restated financial statements are where the accounting discipline of an IPO becomes visible before anyone reads the business narrative. Getting the framework, the auditor eligibility and the adjustment trail right early avoids the most common cause of last-minute delay in DRHP finalisation, and gives the rest of the offer document a foundation that will not need revisiting later.

This article is for general information and does not constitute investment, legal or tax advice. Regulations change; please verify the current position or speak to a qualified adviser before acting.