IAS 1 Financial Statements PDF

IFRS Certification IAS 1 - Financial Statements Presentation 2  IAS 1 - Presentation of financial statements The objective of IAS 1 (2007): – Prescribes the basis for presentation of general purpose financial statements, to ensure comparability both wit...

IFRS Certification IAS 1 - Financial Statements Presentation 2  IAS 1 - Presentation of financial statements The objective of IAS 1 (2007): – Prescribes the basis for presentation of general purpose financial statements, to ensure comparability both with the entity's financial statements of previous periods and with the financial statements of other entities. – Sets out the overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. 3 IAS 1 - Presentation of financial statements The objective of general purpose financial statements: To provide information about the financial position, financial performance, and cash flows of an entity that is used by a wide range of users in making economic decisions. To meet this objective, financial statements provide information about an entity’s: - Assets - Liabilities - Equity - Income & expenses (including gains and losses) - Cash flows - Contributions by and distributions to the owners (e.g., Dividends) 4  IAS 1 - Presentation of financial statements A complete set of financial statements includes: A. A statement of financial position (balance sheet) at the end of the period B. A statement of profit or loss and other comprehensive income for the period C. A statement of changes in equity for the period D. A statement of cash flows for the period E. Notes, comprising a summary of significant accounting policies and other explanatory notes F. Comparative information in respect of the preceding period. G. Statements of financial position at the beginning of the preceding period where retrospective adjustment is made in accordance with IAS 8 Note: Entities are not required to use the titles listed above in their financial statements (for example, they may instead use 'old' titles such as balance sheet and income 5 statement), but all existing Standards and Interpretations reflect the terminology referred to above.  IAS 1 - Presentation of financial statements General features of financial statements A. Fair presentation B. Going concern C. Accrual basis D. Materiality and aggregation E. Offsetting F. Frequency of reporting G. Comparative information H. Consistency of presentation 6  General features of financial statements Fair presentation IAS 1 requires that financial statements show a fair presentation of the financial position, performance, and cash flows of an entity. This will nearly always be achieved by compliance with the requirements of IFRS Standards. 7  General features of financial statements Going concern Financial statements should be prepared on a going concern basis unless management intends to liquidate an entity or cease trading or has no realistic alternative but to do so. Disclosure is required where financial statements are not prepared on the going concern basis. 8  General features of financial statements Accrual basis Financial statements, other than cash flow information, should be prepared on the accrual basis. 9  General features of financial statements Materiality and aggregation Each material class of similar items should be presented separately. Line items that are not material individually should be aggregated with other line items. 10  General features of financial statements Offsetting Assets and liabilities and income and expenses should not be offset unless this is required or permitted by another IFRS Standard. 11  General features of financial statements Frequency of reporting A complete set of financial statements should be prepared at least annually. Reasons for a reporting period of more or less than a year should be disclosed. 12  General features of financial statements Comparative information Comparative information should be presented for the preceding period for all amounts reported in the current year financial statements. A third statement of financial position is required to be presented if the entity retrospectively applies an accounting policy, restates items, or reclassifies items, and those adjustments had a material effect on the 13 information in the statement of financial position at  General features of financial statements Consistency of presentation Consistent presentation and classification should be retained unless a change is required by an IFRS Standard or another presentation and classification would be more appropriate. 14  General features of financial statements 1) General purpose financial statements are prepared to provide useful information to a wide range of users about the financial position, financial performance and ---------------- of an entity. 2) Comparative information should be presented for the preceding period for all amounts reported in the current year. A third statement of ---------- -------- is required where retrospective adjustment is made. 15 Structure and content of financial statements IAS 1 does not lay down particular formats for financial statements but does have minimum requirements for the presentation of items on the face of the financial statements. Statement of financial position Statement of profit or loss and other comprehensive income Statement of changes in equity Notes 16 Structure and content of financial statements The following information must be displayed prominently, and repeated as necessary: the name of the reporting entity and any change in the name whether the financial statements are a group of entities or an individual entity information about the reporting period the presentation currency (as defined by IAS 21 The Effects of Changes in Foreign Exchange Rates) the level of rounding used (e.g. thousands, millions). 17  Structure and content of financial statements Statement of financial position A statement of financial position may be presented in the format ‘assets - liabilities = equity’ or ‘assets = liabilities + equity’. It may be in a vertical or horizontal format. 18  Structure and content of financial statements Regardless of the selected format, certain line items MUST be presented in the statement of financial position. They are: assets held for sale trade and other property payables provisions financial liabilities , plant 19 current tax amounts Structure and content of financial statements Statement of financial position It is necessary to present assets and liabilities on the basis of the distinction between current items and non-current items except where a presentation based on liquidity is reliable and more relevant. 20 Structure and content of financial statements Statement of financial position Current items are those which meet at least one of the following criteria: Expected to be realised/ settled in an entity's normal operating cycle Held primarily for the purpose of trading Expected to be realised/due to be settled within 12 months In the case of an asset, is unrestricted cash or cash equivalent In the case of a liability, has no right at the end of the reporting period to defer settlement for at least 12 months 21 Structure and content of financial statements Statement of financial position Additional information should be disclosed either in the statement of financial position or in the notes, for example: Classes of property, plant and equipment Classifications of inventory Details of classes of share capital A description of reserves within equity. 22  Structure and content of financial statements Statement of profit or loss and other comprehensive income (SPLOCI) The statement of profit or loss and other comprehensive income may be presented as one single statement or two separate statements 1. a statement of profit or loss 2. a statement disclosing OCI and total comprehensive income. 23 Structure and content of financial statements Statement of profit or loss and other comprehensive income (SPLOCI) 24  Structure and content of financial statements Statement of profit or loss and other comprehensive income (SPLOCI) Minimum disclosure requirements in the statement of profit or loss are 1. Revenue 2. Gains/losses on derecognition of financial assets measured at amortized cost 3. Finance costs 4. Impairment losses (and reversals) 5. Share of profit or loss 25 of associates/joint ventures  Structure and content of financial statements Statement of profit or loss and other comprehensive income (SPLOCI) Examples of OCI: 1. Changes in revaluation surplus where the revaluation method is used under IAS 16 and IAS 38. 2. Exchange differences from translating functional currencies into presentation currency in accordance with IAS 21. 3. Gains and losses on re-measuring non-trading financial assets in accordance with26 IAS 39. Structure and content of financial statements Statement of profit or loss and other comprehensive income (SPLOCI) Expenses in profit or loss may be analysed using either the 'nature of expense' or the 'function of expense' method. 27  Structure and content of financial statements Statement of change in equity (SOCE) The statement of changes in equity must include: 1. Total comprehensive income for the period 2. For each component of equity, the effects of changes in accounting policies and corrections of errors recognized in accordance with IAS 8 28 Structure and content of financial statements Notes to financial statements It includes: Present information about the basis of preparation and accounting policies Disclose information required by IFRS Standards that is not disclosed elsewhere Provide other relevant information not presented elsewhere. 29 Structure and content of financial statements Notes to financial statements Notes are presented in a systematic manner and cross- referenced from the face of the financial statements to the relevant note. IAS 1, suggests that the notes should normally be presented in the following order: a statement of compliance with IFRSs a summary of significant accounting policies applied, including: the measurement basis (or bases) 30 used in preparing the financial  Questions Which one of the following is not a required disclosure under IAS 1 A. Number of employees B. Assets held for sale C. Provision D. Intangible assets 31  Questions Under IAS 1, how often should financial statements be prepared: A. At least annually B. No more than annually C. As often as the company require D. Monthly 32  Questions When is offsetting permitting under IAS 1? A. Always B. Never C. When required or permitted under an IFRS D. When approved by the board of directors 33  Questions Which of the following is not required in the financial statements under IAS 1? A. Name of the entity B. Whether accounts cover a single entity or a group C. Chairman’s commentary on performance D. The accounting period E. Presentation currency 34  Questions Which of the following is not a component of a statement of financial position? A. Non-current assets B. Inventory C. Cost of goods sold D. Retained earnings E. Deferred tax 35  Questions Which of the following does IAS 1 not require to be disclosed in the statement of change in equity (SOCE)? A. Total comprehensive income for the period B. Reconciliation between the carrying amount at the beginning and at the end of the period for each component of the equity C. Each item of other comprehensive income D. The cumulative effect of changes in accounting policy and the corrections of material errors 36  Questions Which line item should be disclosed separately on the face of the statement of financial position (SOFP)? A. Intangible assets B. Work in process C. Prepayments D. Accruals 37 38