Presentation of Financial Statements – IAS 1

Objective of IAS 1
• The objective of IAS 1 is to prescribe the basis for presentation of general-purpose
financial statements, to ensure comparability both with
a) the entity's financial statements of previous periods and
b) with the financial statements of other entities.
• IAS 1 sets out the overall requirements for
a) the presentation of financial statements,
b) guidelines for their structure and
c) minimum requirements for their content.
• Standards for recognizing, measuring, and disclosing specific transactions are addressed
in other Standards and Interpretations.
Scope of IAS 1
• Applies to all general-purpose financial statements based on International Financial
Reporting Standards.
• General purpose financial statements are those intended to serve users who are NOT in a
position to require financial reports tailored to their particular information needs.

Objective 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 meet that objective, financial statements provide information about an entity’s:
- Assets
- Liabilities
- Equity
- income and expenses, including gains and losses
- contributions by and distributions to owners
- cash flows
• That information, along with other information in the notes, assists users of financial
statements in predicting the entity's future cash flows and, in particular, their timing and
certainty
Components of Financial Statements
• A complete set of financial statements should include:
1) Statement of Financial Position “at the end of the period”,
2) Single Statement of Profit or Loss and Other Comprehensive Income “for the
period” (or two statements: Statement of Profit and Loss and Statement of Other
Comprehensive Income),
3) Statement of changes in equity “for the period”,
4) Statement of Cash Flows “for the period”, and
5) Notes, comprising a summary of accounting policies and other explanatory notes
• An entity must also present a statement of financial position as at the beginning of the
earliest comparative period when:
• an accounting policy is applied retrospectively; or
• items are restated retrospectively; or
• when items are reclassified
• An entity must also present a statement of financial position as at the beginning of the
earliest comparative period when:
• an accounting policy is applied retrospectively; or
• items are restated retrospectively; or
• when items are reclassified
• Reports that are presented outside of the financial statements – Including financial
reviews by management, environmental reports, and value added statements – are outside
the scope of IFRSs.

Presentation Requirements
General Features
STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS IN GENERAL CLEARLY
IDENTIFY:
• The financial statements must be clearly identified and distinguished from other
information in the same published document.
• Each financial statement and the notes must be clearly identified
• In addition, the following must be displayed prominently:
 • name of the reporting entity;
• whether the financial statements are of an individual entity or a group;
• reporting date;
• presentation currency (as defined in IAS 21); and
• level of rounding used (thousands, millions, etc.)
FAIR PRESENTATION AND COMPLIANCE WITH IFRSs
• The financial statements must "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.
• IAS 1 requires that an entity whose financial statements comply with IFRSs make an
explicit and unreserved statement of such compliance in the notes.
• Departure from a requirement might be required (extremely rarely).
• In extremely rare cases compliance with an IFRS requirement would be so misleading as
to conflict with the objective of financial statements set out in “The Framework”
• Rebuttable presumption – there is no conflict where other entities in similar
circumstances comply with the requirement
• In assessing whether conflict exists management must consider:
- why the objective is not achieved in the particular circumstances; and
- how the entity’s circumstances differ from those of other entities that comply with the
requirement
• Inappropriate accounting policies are NOT rectified either by
- disclosure of the accounting policies used or
- by notes or explanatory material.
GOING CONCERN
• An entity preparing IFRS financial statements is presumed to be a going concern.
• If management has significant concerns about the entity's ability to continue as a going
concern, the uncertainties must be disclosed.
• If management concludes that the entity is NOT a going concern, the financial statements
should NOT be prepared on a going concern basis, in which case IAS 1 requires a series
of disclosures.
ACCRUAL BASIS OF ACCOUNTING
• IAS 1 requires that an entity prepare its financial statements, except for cash flow
information, using the accrual basis of accounting.
CONSISTENCY OF PRESENTATION
• The presentation and classification of items in the financial statements shall be retained
from one period to the next unless a change is justified either by a change in
circumstances or a requirement of a new IFRS.
MATERIALITY AND AGGREGATION
• Preparation of financial statements involves processing a large number of transactions
and aggregating these into classes according to their nature or function
• The final stage in the process is the presentation line items on the face of the financial
statements
• Guidance
• Each material class of similar items must be presented separately
• Items of a dissimilar nature or function must be presented separately unless they
are immaterial
• If a line item is not individually material it is aggregated with other items
• A specific disclosure requirement in IFRS need not be satisfied if the information
is not material
OFFSETTING
• Assets and liabilities, and income and expenses, must not be offset unless required or
permitted by IFRS
• IAS 32 (Financial Instruments: Presentation) contains rules on the offset of financial
assets and financial liabilities which require offset when (and only when) an entity:
• has a legal right to set off; and
• intends to settle on a net basis; or
• to realise the asset and settle the liability simultaneously
COMPARATIVE INFORMATION
• IAS 1 requires that comparative information shall be disclosed in respect of the previous
period for all amounts reported in the financial statements, both face of financial
statements and notes, unless another Standard requires otherwise.
• If comparative amounts are changed or reclassified, various disclosures are required.
COMPARATIVE INFORMATION
• IAS 1 requires that comparative information shall be disclosed in respect of the previous
period for all amounts reported in the financial statements, both face of financial
statements and notes, unless another Standard requires otherwise.
• If comparative amounts are changed or reclassified, various disclosures are required.
REPORTING PERIOD
• There is a presumption that financial statements will be prepared at least annually.
• When an entity changes the end of its reporting period (resulting in financial statements
covering a period longer or shorter than one year) it must disclose:
• the reason for using a longer or shorter period, and
• the fact that amounts presented in the financial statements are not entirely
comparable

STATEMENT OF FINANCIAL POSITION

• An entity must normally present a classified statement of financial position, separating
current and noncurrent assets and liabilities.
• Only if a presentation based on liquidity provides information that is reliable and more
relevant may the current/noncurrent split be omitted.
• CURRENT ASSETS - are cash; cash equivalent; assets held for collection, sale, or
consumption within the entity's normal operating cycle; or assets held for trading within
the next 12 months. All other assets are noncurrent.
• CURRENT LIABILITIES - are those to be settled within the entity's normal operating
cycle or due within 12 months, or those held for trading, or those for which the entity
does NOT have an unconditional right to defer payment beyond 12 months. Other
liabilities are noncurrent.
• When a long-term debt is expected to be refinanced under an Existing loan facility and
the entity has the discretion, the debt is classified as non-current, even if due within 12
months.
• If a liability has become payable on demand because an entity has breached an
undertaking under a long-term loan agreement on or before the reporting date, the
liability is CURRENT, even if the lender has agreed, after the reporting date and before
the authorization of the financial statements for issue, NOT to demand payment as a
consequence of the breach.
 • However, the liability is classified as NON-CURRENT if the lender agreed by the
reporting date to provide a period of grace ending at least 12 months after the end of the
reporting period, within which the entity can rectify the breach and during which the
lender cannot demand immediate repayment.
• On 3 May 2012, the (IASB) issued amendments to IAS 1 which clarifies that a liability is
classified as NON-CURRENT if an entity expects, and has the discretion, to refinance or
roll over the obligation for at least 12 months after the reporting period under an existing
loan facility with the same lender and on the same or similar terms.
• IAS 1 does NOT prescribe the format of the Statement of Financial Position. Assets can
be presented current then noncurrent, or vice versa, and liabilities and equity can be
presented current then noncurrent then equity, or vice versa. A net asset presentation
(assets minus liabilities) is allowed.
• Certain items (“line items”) must be shown on the face of the statement of financial
position as a minimum:
- additional line items, headings and sub-totals are presented when relevant to an
understanding of financial position;

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

• Profit ot Loss for that period + Other Comprehensive Income recognized in that period
• All items of income and expense recognized in a period must be included in profit or loss
unless a Standard or an Interpretation requires otherwise.
• Some IFRSs require or permit that some components to be excluded from profit or loss
and instead to be included in other comprehensive income.
THE COMPONENTS OF OTHER COMPREHENSIVE INCOME INCLUDE:
• Changes in revaluation surplus (IAS 16 and IAS 38)
• Actuarial gains and losses on defined benefit plans recognized in accordance with IAS 19
• Gains and losses arising from translating the financial statements of a foreign operation
(IAS 21)
• Gains and losses on remeasuring available-for-sale financial assets (IAS 39)
• The effective portion of gains and losses on hedging instruments in a cash flow hedge
(IAS 39).
AN ENTITY HAS A CHOICE OF PRESENTING:
• a single statement of profit or loss and other comprehensive income or two statements:
 • a statement of profit or loss displaying components of profit or loss and
• a statement of other comprehensive income that begins with profit or loss and displays
components of other comprehensive income

• No items may be presented in the statement of profit or loss and other comprehensive
income (or in the statement of profit or loss, if separately presented) or in the notes as
‘extraordinary items’.
• Expenses recognized in profit or loss should be analyzed either by nature (raw materials,
staffing costs, depreciation, etc.) or by function (cost of sales, selling, administrative,
etc).
• If an entity categorizes by function, then additional information on the nature of expenses
– at a minimum depreciation, amortization and employee benefits expense – must be
disclosed.

STATEMENT OF CASH FLOWS

• IAS 1 refers to IAS 7 Statement of Cash Flows

STATEMENT OF CHANGES IN EQUITY

IAS 1 requires an entity to present a statement of changes in equity as a separate component of
the financial statements. The statement must show:
• total comprehensive income for the period, showing separately amounts attributable to
owners of the parent and to non-controlling interests
• the effects of retrospective application, when applicable, for each component
• reconciliations between the carrying amounts at the beginning and the end of the period
for each component of equity, separately disclosing:
• profit or loss,
• each item of other comprehensive income, and
• transactions with owners.

• The amount of dividends recognised as distributions to owners during the period, and the
related amount per share must be disclosed either in the statement of changes in equity or
in the notes
NOTES TO THE FINANCIAL STATEMENTS
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 used in preparing the financial statements
• the other accounting policies used
• other disclosures, including:
• contingent liabilities (see IAS 37) and unrecognized contractual commitments
• non-financial disclosures, such as the entity's financial risk management
objectives and policies (see IFRS 7)
Disclosure of key sources of estimation uncertainty.
• An entity must disclose, in the notes, information about the key assumptions concerning
the future, and other key sources of estimation uncertainty at the end of the reporting
period, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
• These disclosures do not involve disclosing budgets or forecasts
• the amount of dividends proposed or declared before the financial statements were
authorized for issue but not recognized as a distribution to owners during the period, and
the related amount per share and the amount of any cumulative preference dividends not
recognized.
• Capital Disclosures
• An entity should disclose information about its objectives, policies and processes
for managing capital.