PRESENTATION OF FINANCIAL STATEMENTS AND ADDITIONAL

DISCLOSURES

PRESENTATION OF THE STATEMENT OF FINANCIAL POSITION:

The presentation of the Statement of Financial Position in IFRS is guided by IAS 1-
Presentation of Financial Statements. Here’s an overview of how it is structured and
presented:
Key Principles of the Statement of Financial Position (Balance Sheet):
1. Objective:
 Provides information about an entity’s assets, liabilities, and equity at a
specific point in time, offering insight into its financial position and liquidity.
2. Components: The Statement of Financial Position must include, at a minimum:
 Assets: Current and non-current.
 Liabilities: Current and non-current.
 Equity: Components such as share capital, reserves, and retained earnings.
3. Classification:
 Current vs. non-current:
 Current assets: Expected to be realized or consumed within 12 months
or the operating cycle, whichever is longer (e.g., inventory,
receivables).
 Current liabilities: Expected to be settled within 12 months or the
operating cycle (e.g., accounts payable, short-term debt).
 Non-current assets and liabilities: All other items not classified as
current.
4. Key Line Items:
 IAS 1 requires that certain key items be presented separately, including:
 Property, plant, and equipment (PPE).
 Investment property.
 Intangible assets.
 Financial assets.
 Deferred tax assets and liabilities.
 Provisions.
 Non-controlling interests.
 5. Format Options:
 IFRS does not prescribe a specific format, but the statement must be clearly
organized and consistent. Entities can use either:
 Vertical format: Listing assets first, followed by liabilities and equity.
 Horizontal format: Listing assets on one side and liabilities and equity
on the other.
6. Additional Requirements:
 IAS 1 emphasizes comparability; thus, comparative information from the
previous period must be presented.
 Notes to the financial statements provide detailed disclosures supporting the
information on the balance sheet, including accounting policies, assumptions,
and significant estimates.
The Statement of Financial Position ensures a clear depiction of an entity's resources and
obligations at a particular date.

THE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE

INCOME AND THE STATEMENT OF CHANGES IN EQUITY:
The Statement of Profit or Loss and Other Comprehensive Income (OCI) and the Statement
of Changes in Equity are integral components of financial reporting under IAS 1 –
Presentation of Financial Statements.
1. Statement of Profit or Loss and Other Comprehensive Income (OCI)
This statement provides a summary of an entity's financial performance during a reporting
period. It has two parts:
Profit or Loss Section:
 Includes revenue, expenses, gains, and losses that form part of the entity's operating
performance.
 Key line items include:
 Revenue
 Cost of sales
 Gross profit
 Operating expenses
 Finance income/costs
 Tax expense
 Net profit or loss for the period
Other Comprehensive Income (OCI) Section:
 Covers income and expenses not recognized in the profit or loss but directly in equity.
 Examples of OCI items include:
 Changes in revaluation surplus (IAS 16 – Property, Plant and Equipment)
 Actuarial gains and losses on defined benefit plans (IAS 19)
 Gains or losses on financial assets measured at fair value through OCI (IFRS
9)
 Exchange differences on translating foreign operations (IAS 21)
Presentation Options:
 Single Statement: Combines both profit or loss and OCI into one comprehensive
statement.
 Two Statements: Presents a separate Statement of Profit or Loss and a Statement of
Comprehensive Income.
2. Statement of Changes in Equity
This statement highlights the changes in an entity's equity over the reporting period,
providing transparency about equity movements.
Key Components:
 Total Comprehensive Income:
 Links to the Statement of Profit or Loss and OCI, showing how net profit and
OCI impact equity.
 Transactions with Owners:
 Includes dividends paid, share issuances, buybacks, and other changes from
transactions with equity holders.
 Movements in Equity Reserves:
 Shows transfers between different equity components (e.g., retained earnings,
reserves).
Purpose:
 Offers insights into contributions from shareholders, returns to shareholders, and
changes in retained earnings or other reserves.
Disclosures:
 Entities disclose reconciliation for each component of equity, such as share capital,
reserves, and retained earnings, at the beginning and end of the period.
EARNINGS PER SHARE:
Earnings Per Share (EPS) in IFRS is governed by IAS 33 – Earnings Per Share, which
provides guidance on how to calculate and present EPS in financial statements. Here's an
overview:
Key Aspects of IAS 33:
1. Scope:
 Applies to entities whose shares are publicly traded or those in the process of
issuing shares in a public market.
 EPS is presented for both profit or loss and other comprehensive income
(OCI).
Types of EPS:
1. Basic EPS:
 Only considers currently outstanding shares and ignores potential shares such
as stock options or convertible instruments.
2. Diluted EPS:
 Reflects the impact of dilutive potential ordinary shares (e.g., stock options,
convertible debt).
 Dilution reduces EPS by including potential shares that could be issued.
Key Components and Adjustments:
1. Profit or Loss:
 The numerator is the net profit or loss attributable to ordinary shareholders
(after deducting dividends on preference shares, if any).
2. Weighted Average Shares:
 The denominator is the time-weighted average of shares outstanding during
the reporting period, adjusted for share splits, reverse splits, and bonus issues.
3. Potential Ordinary Shares:
 For diluted EPS, potential shares are included if they decrease EPS (i.e., they
are dilutive).
 Examples include:
 Convertible bonds
 Convertible preference shares
 Stock options or warrants
 4. Anti-Dilution Rule:
 Potential shares that increase EPS (anti-dilutive) are excluded from the
calculation of diluted EPS.
Presentation Requirements:
 Both basic EPS and diluted EPS must be presented on the face of the Statement of
Profit or Loss for:
 Profit or loss from continuing operations
 Total profit or loss attributable to ordinary shareholders
 If applicable, EPS figures related to discontinued operations must also be disclosed.
Disclosures:
Entities must disclose:
 Details of the profit or loss figures used for EPS calculations.
 The weighted average number of shares used in each calculation.
 Information about potential ordinary shares and their impact on dilution.
IAS 33 ensures uniformity in reporting EPS, providing stakeholders with a clear picture of
profitability per share.

EVENTS AFTER THE REPORTING PERIOD ACCOUNTING

POLICIES:
Events after the reporting period are addressed in IAS 10 – Events After the Reporting
Period. Here’s an overview of the accounting policies related to these events:
Definition and Scope:
1. Events after the reporting period:
 These are events, both favorable and unfavorable, that occur between the
reporting date (end of the financial period) and the date when the financial
statements are authorized for issue.
 IAS 10 categorizes them into:
 Adjusting events: Require adjustments to the financial statements.
 Non-adjusting events: Do not require adjustments but may need
disclosure.
Key Accounting Policies:
 1. Adjusting Events:
 Provide evidence of conditions that existed at the reporting date.
 Examples include:
 Resolution of court cases confirming liabilities as of the reporting date.
 Discovery of errors or fraud affecting financial statements.
 Changes in asset impairment indicators present at the reporting date.
 Financial statements are adjusted to reflect the impact of these events.
2. Non-Adjusting Events:
 Indicative of conditions that arose after the reporting date.
 Examples include:
 Major business combinations or acquisitions.
 Decline in market value of investments due to events after the
reporting period.
 Natural disasters occurring post-reporting date.
 No adjustment is made, but the nature of the event and its financial impact
must be disclosed if material.
3. Going Concern Considerations:
 If events after the reporting period indicate the entity is no longer a going
concern, the financial statements must not be prepared on a going concern
basis, and disclosures are required.
Disclosure Requirements:
1. Adjusting events:
 The nature and financial impact must be disclosed if not clearly reflected in
adjustments.
2. Non-adjusting events:
 Entities must disclose the nature of the event and an estimate of its financial
impact (or a statement that such an estimate cannot be made).
IAS 10 ensures clarity in reporting events that occur after the reporting period, maintaining
the reliability and relevance of financial statements.

CHANGES IN ACCOUNTING ESTIMATES AND ERRORS:

Changes in accounting estimates and errors in IFRS are covered under IAS 8 – Accounting
Policies, Changes in Accounting Estimates, and Errors. Here's a concise summary:
1. Changes in Accounting Estimates:
These arise when there is a revision of an estimate due to new information or developments.
Accounting Treatment:
 Changes in accounting estimates are applied prospectively (moving forward).
 The effect is recognized in:
 The period of the change, if it affects only that period.
 The period of the change and future periods, if applicable.
Examples:
 Revision of useful lives of assets.
 Changes in estimated recoverable amounts of assets.
 Adjustments in provisions based on new expectations.
2. Accounting Errors:
Errors occur due to omissions, misstatements, or misapplication of accounting policies in
prior period financial statements.
Accounting Treatment:
 Errors are corrected retrospectively by restating:
 The comparative figures in the financial statements.
 The opening balances of affected accounts for the earliest prior period
presented.
Types of Errors:
 Mathematical mistakes.
 Misinterpretation of facts.
 Fraud or oversight.
3. Disclosures:
Entities must disclose:
 The nature of the change or correction.
 For changes in estimates, the reasons for the change and its financial impact.
 For corrections of errors, the amounts of adjustments for each period presented.
IAS 8 ensures transparency in financial reporting by appropriately addressing changes and
corrections.
RELATED PARTY DISCLOSURES OPERATING SEGMENTS:
Related Party Disclosures and Operating Segments in IFRS are governed by IAS 24 and
IFRS 8, respectively. Here's an overview of each:
1. Related Party Disclosures (IAS 24):
IAS 24 requires entities to disclose transactions and relationships with related parties to
ensure transparency and prevent conflicts of interest.
Key Principles:
 Definition of Related Parties:
 A person or entity with control or significant influence over the reporting
entity (e.g., parent companies, subsidiaries, associates, key management
personnel).
 Entities under common control or joint control with the reporting entity.
 Close family members of key management or controlling individuals.
 Required Disclosures:
 Relationships between a parent and its subsidiaries, even if no transactions
occurred.
 Nature and number of transactions with related parties.
 Outstanding balances, including terms and conditions of those balances.
 Key management personnel compensation, broken down into categories (e.g.,
salaries, bonuses, share-based payments).
 Purpose: Ensures stakeholders are aware of potential risks or benefits arising from
related party relationships.
2. Operating Segments (IFRS 8):
IFRS 8 provides guidance on the disclosure of financial performance for different operating
segments of an entity.
Key Principles:
 Definition of Operating Segments:
 A component of an entity that:
 Engages in business activities from which it earns revenues and incurs
expenses.
 Has results regularly reviewed by the entity’s chief operating decision-
maker (CODM) to allocate resources and assess performance.
  Has discrete financial information available.
 Identification:
 Operating segments are based on internal reports used by management,
reflecting the entity's organizational structure and decision-making process.
 Measurement and Reporting:
 Information disclosed about each segment includes:
 Segment revenues (internal and external).
 Segment profits or losses.
 Segment assets and liabilities, if reviewed by the CODM.
 Basis of measurement, including accounting policies and intersegment
transactions.
 Aggregation Criteria:
 Segments can be aggregated only if they have similar economic characteristics
and meet specific criteria.
 Disclosures:
 Reconciliation between segment totals and the entity’s consolidated financial
statements.
 Explanation of the basis of segmentation and how it aligns with the entity’s
operations.
Together, IAS 24 and IFRS 8 ensure comprehensive transparency in financial reporting,
providing insights into both external relationships and internal operations.

REPORTING REQUIREMENTS OF SMALL AND MEDIUM-SIZED

ENTITIES(SMEs):
The reporting requirements for Small and Medium-Sized Entities (SMEs) in IFRS are
governed by the IFRS for SMEs Accounting Standard, which is a simplified framework
designed specifically for entities without public accountability. Here's an overview:
Key Features of IFRS for SMEs:
1. Simplifications from Full IFRS:
 Topics not relevant to SMEs are omitted (e.g., earnings per share, interim
financial reporting).
 Simplified recognition and measurement principles (e.g., no requirement to
measure financial instruments at fair value unless it is readily determinable).
 Reduced disclosure requirements to ease the reporting burden.
 2. Eligibility:
 SMEs are entities that do not have public accountability, meaning they are not
publicly traded and do not hold assets in a fiduciary capacity for a broad group
of outsiders (e.g., banks, insurance companies).
3. Structure:
 The standard is self-contained and written in plain language, making it easier
to understand and apply.
 It includes sections on various topics such as financial statement presentation,
inventories, revenue, and leases.
4. Financial Statements:
 SMEs are required to prepare a complete set of financial statements, including:
 Statement of Financial Position
 Statement of Comprehensive Income or Income Statement
 Statement of Changes in Equity
 Statement of Cash Flows
 Notes to the Financial Statements
5. Updates:
 The IFRS for SMEs Standard is periodically reviewed and updated to align
with relevant changes in full IFRS, while maintaining simplicity.
Benefits of IFRS for SMEs:
 Reduces the cost and complexity of financial reporting for smaller entities.
 Provides financial information that is relevant to the needs of lenders, creditors, and
other users.
 Enhances comparability across SMEs globally.