IAS 1

Presentation of Financial Statements

OBJECTIVE & SCOPE
Objective Scope

 Prescribed presentation  General purpose

of general purpose
financial statements
 Comparable with
previous periods and
other entities
 Minimum requirements
for content
 Specific transactions
dealt with in individual
IAS’s
financial statements
 Included in annual
report and prospectus
 Interim reports
 Consolidated and
separate FS
 Non profit entities or
those without equity
need to amend
descriptions
PURPOSE AND COMPONENTS OF
FINANCIAL STATEMENTS
Purpose Components

 Present financial  financial position

position and (Balance sheet)
performance  statement of profit or loss
 For a wide range of and other comprehensive
users to make income (Income statement)
 Statement of changes in
economic decisions
 Measure management
equity
 Cash flow statement
performance
 Summary of significant
 Predict future cash
accounting policies and
flows, timing and
other explanatory notes
certainty
DEPARTURE FROM AN
INTERNATIONAL STANDARD

 Instances are rare and must influence economic

decisions made by users of FS

 Management conclude that compliance is

misleading and conflicts with objective of
financial statement set out in Framework:

 Consider reasons why

FAIR PRESENTATION AND COMPLIANCE WITH
IFRSS

 Financial statements shall present fairly the

financial position, financial performance and
cash flows of an entity.

 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.
GOING CONCERN: ASSESSMENT
 Assess all available information about the
future
 Assessment must cover minimum of 12
months from Financial position date
 Higher risks requires more detailed analysis

 Factors such as
 Current and expected profitability
 Access to finance
 Debt repayment
 Loss of key customers, suppliers or personnel
 Competition and market conditions
 Effects of the credit crunch
ACCRUAL BASIS OF ACCOUNTING
 Prepare FS on accrual basis except for cash
flow information

 Recogniseelements (assets, liabilities, equity,

income and expenses)

 Satisfy definitions in the Framework

 Satisfy recognition criteria in the Framework

CONSISTENCY OF PRESENTATION
 Retain classification and presentation from one
period to another unless

 Significant change in operations

 Review of financial statements shows more appropriate

classification or presentation

 Standard of Interpretation requires change in presentation

 Restatement of comparative information is required

 Results in more reliable and relevant information

MATERIALITY AND AGGREGATION
 Aggregate information into classes according
to nature or function

 Present in separate lines in Financial position ,

income statement, statement of changes in
equity, cash flow statement & notes

 Present items of dissimilar nature or function

separately unless they are immaterial

 Specific requirements of standards need not

be satisfied if the item is not material
OFFSETTING
 Do not offset assets, liabilities, income or expenses unless
required or permitted by a standard

 Only if it reflects the substance of a transaction

 Assets measured at net of valuation allowances is not

offsetting

 Per IAS 18 Revenue recognition, certain income is presented

net of incidental expenses

 Gains and losses on disposal of non current assets net of proceeds

and selling expenses

 Non material gains and losses of similar transactions such as

foreign exchange gains and losses
COMPARATIVE INFORMATION
 Present comparative information for all amounts
reported, including narrative and descriptive
information where relevant to current period
except where a standard requires otherwise
-allows assessment of trends for predictive
purposes

 Adjust comparative information when

presentation or classification of current amounts
are amended and disclose:
 Nature of reclassification
 Amount of each item reclassified
 Reason for reclassification
 Follow IAS8 for changes in accounting policy or
correction of errors
 FREQUENCY OF REPORTING

 An entity shall present a complete set of financial

statements (including comparative information) 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, in addition to the
period covered by the financial statements:
 
(a) the reason for using a longer or shorter period, and
 

(b) the fact that amounts presented in the financial

nnnnstatements are not entirely comparable.
 
STRUCTURE AND CONTENT
 IAS 1 deals with Financial position , income statement,
statement of changes in equity and notes
 IAS 7 deals with Cash Flow Statements

 Identify financial statements clearly from other

documents published with financial statements
 Identify each component clearly

 Display and repeat the following clearly for proper

understanding of information presented:
 Name of reporting entity and any change since prior period
 Individual entity or group of entities
 Financial position date and period covered
 Presentation currency
 Level of rounding used
FINANCIAL POSITION : CURRENT/NON-
CURRENT DISTINCTION
 Present current and non-current assets and liabilities on the face
of the financial position
 Exception when presentation based on liquidity provides
information that is reliable and is more relevant, then present
assets and liabilities on order of liquidity
 E.g. financial institutions do not supply goods or services in clear
operating cycles
 Present assets and liabilities in increasing or decreasing order of
liquidity
 Disclose assets recoverable or liabilities payable in more than
twelve months if combined with those recoverable or payable in
less than twelve months
 Mixed presentation is allowed for entities with diverse operations

 Distinguishes working capital from long term net assets

 Highlights cash flows expected from assets and to liabilities

within the same twelve month period following the financial
position date
FINANCIAL POSITION : CURRENT
ASSETS
 Expected realisation, sale or consumption
within normal operating cycle
 Time from acquisition of assets for processing to
realisation in cash
 If not identifiable, assumed to be 12 months

 Held primarily for trade (IAS 39 Financial

Instruments)
 Expected to be realised within twelve months
after financial position date
 Current portion of non-current assets
 It is an unrestricted cash or cash equivalent.
 All other assets are non-current
 FINANCIAL POSITION : CURRENT
LIABILITIES
 Any of the following:

 Settled in normal operating cycle, eg some accruals for

employee costs to be settled after 12 months

 Held primarily for trade, bank overdrafts, dividends, income

tax and current portion of non-current liabilities

 Keep as current even if long term debt is refinanced or repayments

are rescheduled after the financial position date to show current
liabilities at financial position date

 If discretion does not lie with entity, treat as current

 If discretion lies with entity to settle after 12 months treat as

non-current
FACE OF THE FINANCIAL POSITION
 Minimum line items:
 Total assets classified as held for
 Additional line items, headings and
sale per IFRS 5
 Assets and liabilities in disposal sub-totals relevant to understanding of
groups classified as held for sale financial position
 If not included in minimum:
 Property, plant and equipment  Deferred tax assets and liabilities are
 Investment property always classified as non-current
 Intangible assets
 Financial assets  Judgement to be used
 Investments accounted for using
equity method
 Biological assets  Separate items when different
 Inventories measurement basis are used
 Trade and other receivables
 Cash and cash equivalents
 Trade and other payables
 Provisions
 Financial liabilities
 Liabilities and assets for current
tax
 Deferred tax liabilities and assets
 Minority interest, presented within
equity
 Issued capital and reserves
attributable to equity holders of
the parent
FACE OF FINANCIAL POSITION OR IN
NOTES: SUB CLASSIFICATIONS
 Sub-classificationsof line items on the face of the
financial position according to requirements of
IFRS’s and the size, nature and function of
amounts:
 Property, plant and equipment

 Receivables – trade, related parties & prepayments

 Inventories

 Provisions – employee benefits and other

 Equity capital and reserves – paid –in, share premium and

reserves
FACE OF FINANCIAL POSITION OR IN
NOTES: SHARE CAPITAL AND
RESERVES
 For each class of share capital
 Number of shares authorised
 Number issued, fully paid and not fully paid
 Par value per share (or that they have no par
value)
 Reconciliation of number of shares outstanding at
the beginning and end of the period
 Shares in entity held by entity, its subsidiaries or
associates
 Shares reserved for issue under options and
contracts for the sale of shares, including terms
and amounts
 Description of the nature and purpose of each
reserve within equity
PROFIT OR LOSS STATEMENT FOR THE
PERIOD
 All items of income and expenses recognised in a
period unless a standard requires otherwise
 Includes effects of changes in accounting
estimates
 Some items meet Framework definition of
income and expenses but other standards
require that they are excluded from profit or loss:
 IAS 8 correction of errors and effect of changes in
accounting policies not included
 IAS 16 revaluation surpluses
 IAS 21 certain foreign exchange gains and losses
 IAS 39 gains and losses on re-measuring available-
for-sale financial assets
FACE OF THE PROFIT OR LOSS
STATEMENT
 Minimum line items:
 Revenue
 Finance costs
 Share of profit or loss of associates and joint
ventures accounted for using the equity method
 Tax expense
 Profit or loss on discontinued operation, including

 gain or loss recognised on the measurement to fair

value less costs to sell

 gain or loss on disposal of assets or disposal groups

constituting the discontinued operation
FACE OF THE PROFIT OR LOSS : ALLOCATIONS
OF PROFIT OR LOSS FOR THE PERIOD
 Profit or loss attributable to non-controlling
interest
 Profit or loss attributable to equity holders of
the parent
 DO NOT present any extraordinary items on the
face of the profit or loss or in the notes.
 Present additional line items on the face of the
profit or loss statement when relevant to
understanding of performance, considering:
 Materiality
 Nature and function of components of income and
expenses
 Market in which entity operates
FACE OF PROFIT OR LOSS OR IN
NOTES
 Include on face of profit or loss or in notes:
 Material items such as
 Write-downs of inventories to NRV
 Write-downs of property, plant and equipment to

recoverable amount
 Restructuring costs of activities

 Disposal of property, plant and equipment

 Disposal of investments

 Discontinued operations

 Litigation settlements
FACE OF PROFIT OR LOSS OR IN NOTES: ANALYSIS
OF EXPENSES BY NATURE OR FUNCTION

Expenses by nature Expenses by function

 Revenue  Revenue
 Other income
 Cost of sales
 Changes in inventories
 Gross profit
of finished goods and
work in progress  Other income
 Raw materials and  Distribution costs
consumables
 Administrative
 Employee benefits
expense expenses
 Other expenses  Other expenses

 Total expenses  Profit

FACE OF PROFIT OR LOSS OR IN NOTES:
ANALYSIS OF EXPENSES BY NATURE OR FUNCTION

Analysis by nature Analysis by function

 All expenses of the  Allocated to various

same nature functions, e.g. cost of
presented together sales, distribution costs
or administrative costs
 Not allocated among
 Disclose additional
various functions analysis of nature of
 Simple classification expenses, including
depreciation,
amortisation and
employee benefit
expense
STATEMENT OF CHANGES IN EQUITY
 In addition to the statement of recognised
income and expense, the following should be
shown on the face of the statement of
changes in equity or in the notes :
 Transactions with and distributions to equity
holders

 Retainedearnings at the beginning of the period,

changes during the period and at the end of the
period

 For each class of equity and reserves, the

balance at the beginning and end of the period,
and the changes during the period
NOTES
 Basis of preparation of financial statements

 Specific accounting policies used

 Disclosures required by IFRSs that are not

disclosed in the primary statements

 Additional information about amounts in

primary statements necessary for
understanding of those items
ACCOUNTING POLICIES
 Measurement bases of items in financial
statements
 Historicalcost, current cost, net realisable value, fair
value and recoverable amount
 Affects analysis of financial information
 Highlight categories of assets affected

 Other policies relevant to understanding of the

financial statements
 Proportionate consolidation method vs equity method
 Accounting for income taxes
 Deferred tax
 Foreign exchange gains and losses
 Good will and minority interest measurement
DISCLOSING JUDGEMENTS USED IN
APPLICATION OF ACCOUNTING
POLICIES
 Whether financial assets are held-to-maturity
investments

 Sale of goods classed as financing

arrangements and not revenue

 Whether a special purpose entity is

controlled by the reporting entity
KEY SOURCES OF ESTIMATION
UNCERTAINTY
 Disclose key assumptions concerning the
future with significant risk of material
adjustment in the next financial year
including:
 Nature of the assets and liabilities
 Carrying amount as at the financial position date
 E.g. risk adjustment to cash flows; discount
rates; future changes in salary; future changes in
prices, etc
 Disclose following:
 Nature of uncertainty
 Sensitivity of carrying amounts and reasons

 Changes to past assumptions

CAPITAL
 Disclose objectives, policies and processes for
managing capital to enable users to evaluate them
 Qualitative objectives, policies and processes

 Summary quantitative data analysing the sources of

capital (i.e. includes or excludes financial liabilities and
cash flow hedges)

 Changes from the previous period

 Compliance with imposed capital requirements

 Separate information for each capital requirement

OTHER DISCLOSURES
 Dividends proposed or declared before the
financial statements were authorised but not
recognised, and amount per share
 Cumulative preference dividends not recognised

 Domicile and legal form of the entity

 Country of incorporation

 Address of registered office

 Principal place of business if different

 Nature of operations

 Principal activities

 Name of the parent and ultimate parent of the

group