Presentation of Financial Statements (Copy) (Copy)

Due Date Assign Tag

Objective of IAS 1
To prescribe the basis for presentation of general purpose financial statements to
compare the entity's financial statements of previous periods and other entities
set out overall requirements: the presentation of financial statements, guidelines for
their structure and minimum requirements

Scope of IAS 1
Applies to all general purpose financial statements based on IFRSs
General purpose financial statements - to give users their particular information needs.

Objective of Financial Statements

To provide information about the financial position, financial performance, and cash
flows of an entity to the users in making economic decisions.
It provide information about an entity's:
a. assets
b. liabilities
c. equity
d. income and expenses, including gains and losses
e. contributions by and distributions to owners
f. cash flows

It assists users of financial statements in predicting the entity's future cash flows and, in
particular, their timing and certainty.

Components of Financial Statements

financial statements should include:
Statement of Financial Position - ”at the end of the period”
Single Statement of Profit or Loss and Other Comprehensive Income, Statement of
changes in equity and Statement of Cash Flows - ”for the period”
Notes, comprising a summary of accounting policies and other explanatory notes
An entity must present a statement of financial position as at the beginning of the
earliest comparative period when:
an accounting policy is applied retrospectively; or
items are restated retrospectively or reclassified
 Reports that are presented outside of the FS are outside the scope of IFRSs

Presentation requirements
General Features
Structure and Content of Financial Statements in General Clearly identify:
Each financial statement and the notes must be clearly identified and
distinguished
FS must "present fairly"
Fair presentation - faithful representation of the effects of transactions, other
events, and conditions, with the definitions and recognition criteria for assets,
liabilities, income and expenses set out in the Framework
an entity whose FS comply with IFRSs make an explicit and unreserved statement
Departure from a requirement might be required (extremely rarely).
Extremely rare cases - IFRS requirement would be so misleading as to conflict
with the objective of financial statements set out in “The Framework”
Rebuttable presumption – no conflict with other entities in similar circumstances
comply with the requirement
In assessing whether conflict exists management must consider:
why the objective is not achieved in the particular circumstances; and
how the entity’s circumstances differ from those of other entities that comply
with the requirement
Fair Presentation and Compliance with IFRSs
Inappropriate accounting policies are NOT rectified either by
disclosure of the accounting policies used or
by notes or explanatory material
Going Concern
An entity is presumed to be a going concern.
If management concerns about entity going concern, it must be disclosed
If management concludes the entity is not going concern, FS should not
prepared on going concern basis, AIS 1 requires a series of disclosure
Accrual Basis of Accounting
entity prepare FS, except for cash flow information
Consistency of Presentation
FS shall be retained from one period to the next
unless a change in circumstances or a requirement of a new IFRS.
Materiality and Aggregation
It involves processing a large number of transactions and aggregating into
classes (nature or function)
The final stage in the process - presentation line items on the FS
 Guidance
similar items must be presented separately
dissimilar nature or function must be presented separately unless they are
immaterial
If a line item is not individually material, it is aggregated with other items
A specific disclosure requirement in IFRS need not be satisfied if the
information is not material
Offsetting
Assets and liabilities, and income and expenses, must not be offset unless
required or permitted by IFRS
IAS 32 (Financial Instruments: Presentation) contains rules:
legal right to set off; and
to settle on a net basis; or
to realise the asset and settle the liability simultaneously
Comparative Information
It shall be disclosed in respect of the previous period for all amounts reported
in the financial statements
If comparative amounts are changed or reclassified, various disclosures are
required.
Reporting Period
FS will be prepared at least annually
When an entity changes the end of its reporting period, it must disclose:
the reason for using a longer or shorter period, and
amounts presented in the financial statements are not entirely comparable
Statement of Financial Position
An entity must classified statement of financial position, separating current and
noncurrent assets and liabilities.
Only if presentation based on liquidity provides information that is reliable and
more relevant may the current/noncurrent split be omitted.
Current assets - are cash; cash equivalent; assets held for collection, sale, or
consumption within the entity's normal operating cycle; or assets held for trading
within the next 12 months. All other assets are noncurrent
Current liabilities - are to be settled within the entity's normal operating cycle or due
within 12 months, or those held for trading, or those for which the entity does NOT
have an unconditional right to defer payment beyond 12 months. Other liabilities
are noncurrent
a long-term debt is expected to be refinanced under an Existing loan facility and
the entity has the discretion, the debt is Non-current, even if due within 12 months.
Liability become payable on demand because entity has breached a long-term loan
agreement on or before the reporting date, the liability is CURRENT
 the liability is NON-CURRENT, if the lender agreed by the reporting date to provide
a period of grace ending at least 12 months after the end of the reporting period
On 3 May 2012, the (IASB) issued amendments to IAS 1 clarifies that a liability is
NON-CURRENT if an entity expects, and has the discretion, to refinance or roll
over the obligation for at least 12 months after the reporting period under an
existing loan facility with the same lender and on the same or similar terms.
IAS 1 does NOT prescribe the format of the Statement of Financial Position.
Certain items (“line items”) must be shown on the statement of financial position as
a minimum:
additional line items, headings and sub-totals are presented when relevant to
an understanding of financial position
Statement of Profit or Loss and Other Comprehensive income
Profit or Loss for that period + Other Comprehensive Income recognized in that
period = Total Comprehensive income for a period
All items of income and expense recognized in a period must be included in profit
or loss
Some IFRSs require that some components to be included in other comprehensive
income.
other comprehensive income include:
Changes in revaluation surplus (IAS 16 and IAS 38)
Actuarial gains and losses on defined benefit plans recognized in accordance
with IAS 19
Gains and losses arising from translating the financial statements of a foreign
operation (IAS 21)
Gains and losses on remeasuring available-for-sale financial assets (IAS 39)
The effective portion of gains and losses on hedging instruments in a cash
flow hedge (IAS 39)
No items may be presented as ‘extraordinary items’.
Expenses recognized in profit or loss should be analyzed either by nature or by
function
entity categorizes by function - additional information on the nature of expenses
must be disclosed.
other comprehensive income could also be presented as net of tax amounts
Statement of Cash Flows
IAS 1 refers to IAS 7 Statement of Cash Flows
Statement of Change in Equity
an entity to present a statement of changes in equity as a separate component of
the financial statements.
total comprehensive income for the period, showing separately amounts
attributable to owners of the parent and to non-controlling interests
the effects of retrospective application, when applicable, for each component
 reconciliations between the carrying amounts at the beginning and the end of
the period for each component of equity, separately disclosing:
profit or loss,
each item of other comprehensive income, and
transactions with owners.
The amount of dividends recognized as distributions to owners during the period,
and the related amount per share must be disclosed
Notes to The Financial Statements
notes should be presented:
a statement of compliance with IFRSs
a summary of significant accounting policies applied, including:
the measurement basis used in financial statements
the other accounting policies used
supporting information for items presented on the FS (except notes)
other disclosures, including:
contingent liabilities (see IAS 37) and unrecognized contractual
commitments
non-financial disclosures
Disclosure of key sources of estimation uncertainty.
An entity must disclose information that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year.
These disclosures do not involve disclosing budgets or forecasts
Dividends - the amount of dividends proposed or declared before the FS were
authorized for issue but not recognized as a distribution to owners during the
period
Capital Disclosures - An entity should disclose information about its objectives,
policies and processes for managing capital.