IAS 1

PRESENTATION OF FINANCIAL
STATEMENTS
OBJECTIVES
At the end of this lesson, students are expected to:
• Provide information regarding the complete set of entity’s financial
statements;
• State the general features of IFRS financial statements;
• Itemize minimum line items found in the statement of financial
position (SOFP), Statement of comprehensive income (SOCI) and state
of changes in equity (SOCE);
• State the disclosure requirements and the basic format for the
calculation of SOFP, SOCI, and SOCE.
 DEFINITIONS
• General purpose financial statements are those intended to meet the needs of users who are not
in a position to require an entity to prepare reports tailored to their particular information needs
• Profit or loss:
• is the total of income less expenses, excluding the components of other comprehensive income .
• Other comprehensive income
• Comprises items of income and expense (including reclassification adjustments) that are not recognised
in profit or loss as required or permitted by other IFRSs
• Total comprehensive income
The change in equity during a period resulting from transactions and other events, other than
those changes resulting from transactions with owners in their capacity as owners
• Comprising:
• All components of profit or loss
• All components of other comprehensive income
 DEFINITION CONT.
• IFRSs are Standards and Interpretations issued by the IASB
(International Accounting Standards Board) comprising IFRSs/ IASs,
IFRIC (International Financial Reporting Interpretations Committee)
and former SIC (Standard Interpretations Committee).
• Owners are holders of instruments classified as equity.
• Reclassification adjustments: Are amounts reclassified to profit or
loss in the current period that were recognised in other
comprehensive income in the current or previous periods.
• Impracticable Applying a requirement is impracticable when the
entity cannot apply it after making every reasonable effort to do so.
• Material omissions or misstatements of items are material if they
could, individually or collectively, influence the economic decisions
that users make on the basis of the financial statements.
PURPOSE OF FINANCIAL
STATEMENTS
• To provide information about the financial position, financial performance and cash flows
of an entity that is useful to a wide range of users in making economic decisions;

• To show the results of the management’s stewardship of the resources entrusted to it;

• To provide information about an entity’s:

• Assets
• Liabilities
• Equity
• Income and expenses, including gains and losses
• Contributions by and distributions to owners in their capacity as owners
• Cash flows.
 COMPLETE SET OF FINANCIAL
STATEMENTS
• A statement of financial position
• A statement of comprehensive income for the period
• A statement of changes in equity for the period
• A statement of cash flows for the period
• Notes-Comprising a summary of significant accounting policies and other explanatory information;
and
• A statement of financial position as at the beginning of the earliest comparative period when an
entity applies an accounting policy retrospectively or makes a retrospective restatement of items in
its financial statements
• An entity may use titles for the statements other than those used as listed
• An entity shall present with equal prominence all of the financial statements in a complete set of
financial statements
• Financial Review by management, Environmental reports and value added statements are outside
the scope of IFRSs and are therefore not required.
 GENERAL FEATURES OF IFRS FINANCIAL STATEMENTS

IFRS Financial Statements should:

• Be fairly presented
• Explicitly and unreservedly state compliance with IFRS in the notes
• Use going concern basis unless management intends to liquidate or cease trading
• Use accrual basis of accounting except for cash flow information
• Classify and present items consistently except when:
• A significant change in the nature of the entity’s operations or a review of its financial statements, that
another presentation or classification would be more appropriate
• An IFRS requires a change in presentation

• Fair presentation requires the faithful representation of the effects of transactions, other events
and conditions in accordance with the definitions and recognition criteria for assets, liabilities,
income and expenses set out in the Framework
• An entity achieves a fair presentation by compliance with applicable IFRSs.
GENERAL FEATURES OF IFRS FINANCIAL STATEMENTS CONT.
• Frequency of reporting
• An entity shall present a complete set of financial statements at least annually
• When an entity changes the end of its reporting period and presents financial statements for a
period longer or shorter than one year, an entity shall disclose:
• The reason for using a longer or shorter period
• The fact that amounts presented in the financial statements are not entirely comparable
• Comparative information
• Except when IFRSs permit or require otherwise, an entity shall disclose comparative information in
respect of the previous period for all amounts reported in the current period’s financial statements
• Include comparative information for narrative and descriptive information when it is relevant
to an understanding of the current period’s financial statements.
 GENERAL FEATURES OF IFRS FINANCIAL
STATEMENTS CONT.
• An entity disclosing comparative information shall present as a minimum:
• Two statements of financial position
• Two of each of the other statements
• Related notes
• When retrospective adjustment is made present as a minimum
 Three statements of financial position
 Two of each of the other statements
 Related notes
• When the entity changes the presentation or classification of items in its financial statements:
• Reclassify comparative amounts unless reclassification is impracticable
• Disclose the nature, amount and reason for reclassification
• If impracticable to reclassify disclose:
• The reason for not reclassifying the amounts
• The nature of the adjustments that would have been made if the amounts had been reclassified:
 STRUCTURE AND CONTENT
• Identification of the financial statements
An entity shall:
 Clearly identify the financial statements
 Distinguish them from other information in the same published document

• Prominently display the following:

 The name of the reporting entity
 Whether the financial statements are of an individual entity or a group of entities
 The date of the end of the reporting period
 The presentation currency
 The level of rounding used in presenting amounts.
 STATEMENT OF FINANCIAL
• Minimum line items: POSITION
• Property, plant and equipment
• Investment property
• Intangible assets
• Financial assets
• Investments accounted for using the equity method
• Biological assets
• Inventories
• Trade and other receivables
• Cash and cash equivalents
• Non current asset held for sale and disposal groups
• Trade and other payables
• Provisions
• Financial liabilities
 STATEMENT OF FINANCIAL POSITION CONT.
• Liabilities and current tax assets
• Deferred tax liabilities and deferred tax assets
• Liabilities included in disposal groups classified as held for sale
• Non-controlling interests, presented within equity
• Issued capital and reserves attributable to owners of the parent

• Current/non-current distinction
Present assets and liabilities separately as current and non current except:
• When a presentation based on liquidity provides information that is reliable and more
relevant
• When that exception applies, present all assets and liabilities in order of liquidity
• Disclose the amount expected to be recovered or settled:
• No more than 12 months after the reporting period
• More than 12 months after the reporting period.
 CURRENT ASSETS AND
LIABILITIES
• Classify an asset as current when:
• Expected to realize the asset, or intends to sell or consume it, in the normal operating cycle
• Held primarily for the purpose of trading
• Expected to realize the asset within 12 months after the reporting period
• The asset is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for
at least 12 months after the reporting period
• Classify a liability as current
• Expected to settle the liability in its normal operating cycle
• Held primarily for the purpose of trading
• The liability is due to be settled within 12 months after the reporting period
• It does not have an unconditional right to defer settlement of the liability for at least 12 months after the
reporting period
• Current liabilities such as trade payables, some accruals for employee and other operating costs forming part of
working capital are classified as current liabilities even if they are due to be settled more than 12 months after
the reporting period
All other assets and liabilities should be classified as non-current.
 DISCLOSURE EITHER IN SOFP OR SOCE OR NOTES
• For each class of share capital:
• The number of shares authorized
• The number of shares issued and fully paid, and issued but not fully paid
• Par value per share, or that the shares have no par value
• A reconciliation of the number of shares outstanding at the beginning and at the end of the period
• The rights, preferences and restrictions attaching to that class including restrictions on the distribution of
dividends and the repayment of capital
• Shares in the entity held by the entity or by its subsidiaries or associates
• Shares reserved for issue under options and contracts for the sale of shares, including terms and amounts

• A description of the nature and purpose of each reserve within equity

• An entity without share capital, such as a partnership or trust, shall disclose equivalent information.
 STATEMENT OF COMPREHENSIVE INCOME
(MINIMUM LINE ITEMS)
 Revenue
 Gains and losses on derecognition of financial assets measured at amortized cost

 Finance costs

 Share of profit or loss associates and joint ventures.

 Gains and losses on reclassification of financial asset now measured on fair value basis.

 Tax expense

 A single amount comprising the total of:

 the post-tax profit or loss of discontinued operations and
 the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the
disposal of the assets or disposal group(s) constituting the discontinued operation;
 Profit or loss.
 STATEMENT OF COMPREHENSIVE INCOME

 Each component of other comprehensive income classified by nature

 Share of the other comprehensive income of associates and joint ventures.

 Total comprehensive income

Disclose:
• Profit or loss for the period attributable to:
• Non-controlling interests
• Owners of the parent
• total comprehensive income for the period attributable to:
• Non-controlling interests
• Owners of the parent

• The statement can be presented as either a single statement or two statements:

• Income Statement
• Statement of Other Comprehensive Income
 STATEMENT OF COMPREHENSIVE
INCOME CONT.
• Do not present any items of income or expense as extraordinary items, in the SOCI or the
separate income statement (if presented), or in the notes

• The components of other comprehensive income include:

• Revaluation surplus arising from revaluation of PPE;
• Actuarial gains and losses on defined benefit plans;
• Gains and losses arising from translating the financial statements of a foreign operation;
• Gains and losses from investments in equity instruments measured at fair value through other
comprehensive income;
• The effective portion of gains and losses on hedging instruments in a cash flow hedge
• Revaluation of available for sale financial assets
• Net investment hedge gains or losses.
 NATURE OF EXPENSES METHOD

ReREVENUE xxx

Other income xxx

Changes in inventories of finished goods and W.I.P x

Raw materials consumables used x

Employee benefits expense x

Depreciation and amortization expense x

Other expenses x

Total expenses (xx)

Profit before tax x

 FUNCTION OF EXPENSES METHOD
Using this method requires disclosure on the nature of
expenses, including depreciation and amortization expense and
employee benefits expense.

REVENUE XXX
Cost of sales (xx)
Gross profit x
Other Income x
Distribution cost (x)
Administrative expense (x)
Other expenses (x)
Profit before tax x
 STATEMENT OF CHANGES IN
EQUITY
• Present a SOCE showing in the statement:
• Total comprehensive income for the period, showing separately the total amounts attributable to
owners of the parent and to non-controlling interests
• The effects of retrospective application or retrospective restatement on each component of equity
• A reconciliation between the carrying amount of each component of equity at the beginning and end of
the period, separately disclosing changes resulting from:
• profit or loss
• each item of other comprehensive income
• transactions with owners in their capacity as owners.
 Statement of Changes in equity for the year ended 31 December 2013
Share Retained Available Revaluation Total Non- Total
capital earnings for sale surplus Controlling Equity
financial Interest
assets

Balance at 1/1/2012 xxx xxx xxx xxx xxx xxx xxx

Changes in accting policy xxx xxx xxx xxx xxx xxx xxx
Restated balance xxx xxx xxx xxx xxx xxx xxx
Changes in equity xxx xxx xxx xxx xxx xxx xxx
Dividend xxx xxx xxx xxx xxx xxx xxx
Total comp. inc. for the yr. xxx xxx xxx xxx xxx xxx xxx
Balance at 31/12/2012 xxx xxx xxx xxx xxx xxx xxx
Changes in eqty -1/1/ 2013 xxx xxx xxx xxx xxx xxx xxx
Issue of share capital xxx xxx xxx xxx xxx xxx xxx
Dividends xxx xxx xxx xxx xxx xxx xxx
Total comp inc. for the yr. xxx xxx xxx xxx xxx xxx xxx
Transfer to ret. Earnings xxx xxx xxx xxx xxx xxx xxx
Balance at 31/12/2012 xxx xxx xxx xxx xxx xxx xxx
 NOTES TO THE ACCOUNTS
Objective
• The objective of notes to the financial statement is to:
• present information about the basis of preparation of the financial statements and the specific
accounting policies used.
• disclose the information required by IFRSs that is not presented elsewhere in the financial statements;
and
• provide information that is not presented elsewhere in the financial statements, but is relevant to an
understanding of any of them.
• Structure
An entity shall, as far as practicable, present notes in a systematic manner in the following order:
• Statement of compliance with IFRSs
• Summary of significant accounting policies applied
• Supporting information for each line items as they appear in the financial statements in the order in
which the statements are presented; and
• other disclosures such as contingent liabilities, unrecognised contractual commitments, and non-
financial disclosures, e.g. the entity’s financial risk management objectives and policies.
DISCLOSURE OF ACCOUNTING POLICIES
• An entity shall disclose in the summary of significant accounting policies:
• the measurement basis (or bases) used in preparing the financial statements, and
• the other accounting policies used that are relevant to an understanding of the financial
statements
Sources of estimation uncertainty
• Management is also expected to disclose those judgements it made in the process of applying the
accounting policies that have the most significant effect on the amounts recognised in the financial
statements
• An entity should disclose information about the assumptions it makes about the future, and other
major sources of estimation uncertainty at the end of the reporting period, that have a significant risk
of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next
financial year. In respect of those assets and liabilities, the notes shall include details of:
• their nature, and
• their carrying amount as at the end of the reporting period.
 CAPITAL DISCLOSURES
The following information which enables users of an entity's financial statements to evaluate its
objectives, policies and processes for managing capital should be disclosed
• qualitative information about its objectives, policies and processes for managing capital,
including:
• a description of what it manages as capital;
• when it is subject to externally imposed capital requirements, the nature and how those
requirements are incorporated into the management of capital; and
• how it is meeting its objectives for managing capital.
• summary quantitative data about what it manages as capital.
• any changes in the above from the previous period.
• whether it complied with any externally imposed capital requirements during the period.
• The consequences of not complying with any externally imposed capital requirements to which it
is subjected to.
FINANCIAL INSTRUMENT CLASSIFIED AS EQUITY

• Summary quantitative data about the amount classified as

equity;
• Its objectives, policies and processes for managing its obligation
to repurchase or redeem the instruments when required to do so
by the instrument holders.
• The expected cash outflow on redemption or repurchase of that
class of financial instruments; and
• Information about how the expected cash outflow on
redemption or repurchase was determined