FINANCIAL-STATEMENTS.pdf

FINANCIAL STATEMENTS 3. Accrual Basis of Accounting - An entity shall prepare its financial statements, except for cash flow info...

FINANCIAL STATEMENTS 3. Accrual Basis of Accounting - An entity shall prepare its financial statements, except for cash flow information, using the accrual basis of FINANCIAL STATEMENTS DEFINED accounting. They are structured representations of an 4. Materiality & Aggregation - Each material entity’s financial position and the results of class of similar items must be presented its operations. separately in the financial statements. GENERAL PURPOSE FINANCIAL 5. Offsetting - Assets and liabilities, and income STATEMENTS – those intended to meet the and expenses, shall not be offset unless required needs of users who are not in a position to or permitted by a PFRS. require an entity to prepare reports tailored to - Measuring assets net of valuation their particular information needs; one that allowances, for example, obsolescence caters to the most common needs of a wide allowances on inventories, allowances for range of external users. doubtful accounts on receivables, and PURPOSE OF FINANCIAL STATEMENTS accumulated depreciation on property, plant, and equipment are not offsetting. PRIMARY: To provide information about the 6. Frequency of reporting – An entity shall financial position, financial performance and cash present a complete set of financial statements flows of an entity that is useful to a wide range of (including comparative information) at least users in making economic decisions. annually. SECONDARY: To show the results of the - When an entity changes the end of its management’s stewardship of the resources entrusted reporting period and presents financial to it. statements for a period longer or shorter than one year, an entity shall disclose the GENERAL FEATURES OF FINANCIAL following, STATEMENTS a. The period covered by the financial statements: b. The reason for using a longer or shorter 1. Fair Presentation and Compliance with period, and PFRSs - The application of PFRSs, with c. The fact that amounts presented in the additional disclosure when necessary, is financial statements are not entirely presumed to result in financial statements that comparable. achieve a fair presentation. 7. Comparative Information - An entity shall 2. Going concern - An entity is not a going present comparative information in respect of concern if, as of financial reporting date or prior the preceding period for all amounts reported in to the date of authorization of financial the current period’s financial statements, unless statements for issue, management either other standards permit or require otherwise. a. Intends to liquidate the entity or to cease 8. Consistency of presentation - An entity shall trading, or retain the presentation and classification of b. Has no realistic alternative but to do so. items in the financial statements from one The assessment of going concern is at least 12 period to the next unless: months. a. it is apparent that another presentation or classification would be more appropriate following a significant change in the nature  of the entity’s operations or a review of its RECOGNITION AND DERECOGNITION financial statements; or CRITERIA b. a PFRS requires a change in presentation. An item is recognized if: COMPLETE SET OF FINANCIAL It meets the definition of any of the financial STATEMENTS statement elements; and Statement of financial position (Balance Recognizing it would provide useful Sheet) information. Statement of profit or loss and An item is derecognized if: comprehensive income (Statement of Comprehensive Income) an item no longer meet the definition of an asset or liability. Statement of changes in equity Statement of cash flows FS ARTICULATION Notes to financial statement Financial statement articulation, the Additional statement of financial position (in relationships among financial statements and some cases) financial statement elements, is a critical concept in understanding financial ELEMENTS OF FINANCIAL STATEMENTS statements. Financial Position Element: The elements of the four basic financial Assets statements are intrinsically interrelated. Liabilities Equity Financial Performance Element Income Expenses RECOGNITION AND DERECOGNITION OF ITEMS IN THE FINANCIAL STATEMENTS Recognition – the process of including in the financial statements (particularly in the statement of financial position and statement of comprehensive income) an item that meets the definition of one of its elements. - This involves recording the items in words and in monetary amount and including that amount in the totals of either of those statements. Derecognition – the removal of a previously recognized item (specifically assets and liabilities) from the statement of financial position.