HKAS 1 Presentation of FS

HKAS 1 (Revised)
Revised October 2008May 2009
Effective for annual periods

beginning on or after 1 January 2009*
Hong Kong Accounting Standard 1 (Revised)
Presentation of
Financial Statements
* (a) HKAS 1 (Revised) is applicable for annual periods beginning on or after 1 January 2009.
Earlier application is permitted. HKAS 1 (Revised) supersedes HKAS 1 issued in 2004, as
amended in 2005.
(b) An entity shall apply amendments resulting from Improvements to HKFRSs issued in October
2008 for annual periods beginning on or after 1 January 2009.
(c) An entity shall apply amendments resulting from Improvements to HKFRSs 2009 issued in
May 2009 for annual periods beginning on or after 1 January 2010.
COPYRIGHT
© Copyright 2008 Hong Kong Institute of Certified Public Accountants
This Hong Kong Financial Reporting Standard contains International Accounting Standards
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(retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of
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© Copyright 1A
PRESENTATION OF FINANCIAL STATEMENTS
CONTENTS
paragraphs
INTRODUCTION IN1-IN16
HONG KONG ACCOUNTING STANDARD 1
OBJECTIVE 1
SCOPE 2–6
DEFINITIONS 7–8
FINANCIAL STATEMENTS 9–46
Purpose of financial statements 9
Complete set of financial statements 10–14
General features 15–46
True and fair view and compliance with HKFRSs 15–24
Going concern 25–26
Accrual basis of accounting 27–28
Materiality and aggregation 29–31
Offsetting 32–35
Frequency of reporting 36–37
Comparative information 38–44
Consistency of presentation 45–46
STRUCTURE AND CONTENT 47–138
Introduction 47–48
Identification of the financial statements 49–53
Statement of financial position 54–80
Information to be presented in the statement of financial position 54–59
Current/non-current distinction 60–65
Current assets 66–68
Current liabilities 69–76
Information to be presented either in the statement of financial position 77–80
or in the notes
Statement of comprehensive income 81–105
Information to be presented in the statement of comprehensive 82–87
income
Profit or loss for the period 88–89
Other comprehensive income for the period 90–96

Information to be presented in the statement of comprehensive 97–105
income or in the notes
Statement of changes in equity 106–110
Statement of cash flows 111
© Copyright 2 HKAS 1
Notes 112–138
Structure 112–116
Disclosure of accounting policies 117–124
Sources of estimation uncertainty 125–133
Capital 134–136
Other disclosures 137–138
TRANSITION AND EFFECTIVE DATE 139
WITHDRAWAL OF HKAS 1 (ISSUED 2004) 140
Pages
APPENDICES:
A Amendments to other pronouncements 31–59
B Comparison with International Accounting Standards 60
C Notes on legal requirements in Hong Kong 61–76
D Amendments to HKAS 32 and HKAS 1 Puttable Financial 76A-76B
Instruments and Obligations Arising on Liquidation
DE Amendments resulting from other HKFRSs 76AC
BASIS FOR CONCLUSIONS 77–99
APPENDIX:
Amendments to the Basis for Conclusions on other HKFRSs 100–111
Amendments to Basis for Conclusions on HKAS 32 and HKAS 1 Puttable 111A
Financial Instruments and Obligations Arising on Liquidations
Amendments resulting from other Basis for Conclusions 111AB
DISSENTING OPINIONS 112
IMPLEMENTATION GUIDANCE 113–130
APPENDIX:
Amendments to guidance on other HKFRSs 132–145
Amendments resulting from other Implementation Guidance 145A
TABLE OF CONCORDANCE 146
Hong Kong Accounting Standard 1 Presentation of Financial Statements (HKAS 1) is set out in
paragraphs 1–140 and Appendices A and, D and E. All the paragraphs have equal authority.
HKAS 1 should be read in the context of its objective and the Basis for Conclusions, the Preface to
Hong Kong Financial Reporting Standards and the Framework for the Preparation and
Presentation of Financial Statements. HKAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors provides a basis for selecting and applying accounting policies in the
absence of explicit guidance.
This revised Standard was issued in December 2007 and revised in June 2008. It supersedes
HKAS 1, issued in 2004, as amended in 2005.
© Copyright 3 HKAS 1 (March June 2008)

Introduction
IN1 Hong Kong Accounting Standard 1 Presentation of Financial Statements (HKAS 1)
replaces HKAS 1 Presentation of Financial Statements (issued in 2004) as amended in
2005. HKAS 1 sets overall requirements for the presentation of financial statements,
guidelines for their structure and minimum requirements for their content.
Reasons for revising HKAS 1

IN2 The objective of Hong Kong Institute of Certified Public Accountants (HKICPA) revising
HKAS 1 is to maintain international convergence arising from the revision of IAS 1
Presentation of Financial Statements by the International Accounting Standards Board
(IASB). The HKICPA supported the reasons for revising IAS 1 of the IASB.
The main objective of the IASB in revising IAS 1 was to aggregate information in the
financial statements on the basis of shared characteristics. With this in mind, the IASB
considered it useful to separate changes in equity (net assets) of an entity during a period
arising from transactions with owners in their capacity as owners from other changes in
equity. Consequently, the IASB decided that all owner changes in equity should be
presented in the statement of changes in equity, separately from non-owner changes in
equity.
IN3 In its review, the IASB also considered FASB Statement No. 130 Reporting
Comprehensive Income (SFAS 130) issued in 1997. The requirements in IAS 1 regarding
the presentation of the statement of comprehensive income are similar to those in SFAS
130; however, some differences remain and those are identified in paragraph BC106 of
the Basis for Conclusions.
IN4 In addition, the IASB’s intention in revising IAS 1 was to improve and reorder sections of
IAS 1 to make it easier to read. The IASB’s objective was not to reconsider all the
requirements of IAS 1.
Main features of HKAS 1

IN5 HKAS 1 affects the presentation of owner changes in equity and of comprehensive
income. It does not change the recognition, measurement or disclosure of specific
transactions and other events required by other HKFRSs.
IN6 HKAS 1 requires an entity to present, in a statement of changes in equity, all owner
changes in equity. All non-owner changes in equity (ie comprehensive income) are
required to be presented in one statement of comprehensive income or in two statements
(a separate income statement and a statement of comprehensive income). Components of
comprehensive income are not permitted to be presented in the statement of changes in
equity.
IN7 HKAS 1 requires an entity to present a statement of financial position as at the beginning
of the earliest comparative period in a complete set of financial statements when the entity
applies an accounting policy retrospectively or makes a retrospective restatement, as
defined in HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, or
when the entity reclassifies items in the financial statements.
IN8 HKAS 1 requires an entity to disclose reclassification adjustments and income tax relating
to each component of other comprehensive income. Reclassification adjustments are the
amounts reclassified to profit or loss in the current period that were previously recognised
in other comprehensive income.
IN9 HKAS 1 requires the presentation of dividends recognised as distributions to owners and
related amounts per share in the statement of changes in equity or in the notes.
Dividends are distributions to owners in their capacity as owners and the statement of
changes in equity presents all owner changes in equity.
Changes from previous requirements

IN10 The main changes from the previous version of HKAS 1 are described below.
A complete set of financial statements

IN11 The previous version of HKAS 1 used the titles ‘balance sheet’ and ‘cash flow statement’
to describe two of the statements within a complete set of financial statements. HKAS 1
uses ‘statement of financial position’ and ‘statement of cash flows’ for those statements.
The new titles reflect more closely the function of those statements, as described in the
Framework (see paragraphs BC14–BC21 of the Basis for Conclusions).
IN12 HKAS 1 requires an entity to disclose comparative information in respect of the previous
period, ie to disclose as a minimum two of each of the statements and related notes. It
introduces a requirement to include in a complete set of financial statements a statement
of financial position as at the beginning of the earliest comparative period whenever the
entity retrospectively applies an accounting policy or makes a retrospective restatement of
items in its financial statements, or when it reclassifies items in its financial statements.
The purpose is to provide information that is useful in analysing an entity’s financial
statements (see paragraphs BC31 and BC32 of the Basis for Conclusions).
Reporting owner changes in equity and comprehensive income

IN13 The previous version of HKAS 1 required the presentation of an income statement that
included items of income and expense recognised in profit or loss. It required items of
income and expense not recognised in profit or loss to be presented in the statement of
changes in equity, together with owner changes in equity. It also labelled the statement of
changes in equity comprising profit or loss, other items of income and expense and the
effects of changes in accounting policies and correction of errors as ‘statement of
recognised income and expense’. HKAS 1 now requires:
(a) all changes in equity arising from transactions with owners in their capacity as
owners (ie owner changes in equity) to be presented separately from non-owner
changes in equity. An entity is not permitted to present components of
comprehensive income (ie non-owner changes in equity) in the statement of
changes in equity. The purpose is to provide better information by aggregating
items with shared characteristics and separating items with different
characteristics (see paragraphs BC37 and BC38 of the Basis for Conclusions).
(b) income and expenses to be presented in one statement (a statement of

comprehensive income) or in two statements (a separate income statement and a
statement of comprehensive income), separately from owner changes in equity
(see paragraphs BC49–BC54 of the Basis for Conclusions).
(c) components of other comprehensive income to be displayed in the statement of

comprehensive income.
(d) total comprehensive income to be presented in the financial statements.
Other comprehensive income—reclassification adjustments and

related tax effects
IN14 HKAS 1 requires an entity to disclose income tax relating to each component of other
comprehensive income. The previous version of HKAS 1 did not include such a
requirement. The purpose is to provide users with tax information relating to these
components because the components often have tax rates different from those applied to
profit or loss (see paragraphs BC65–BC68 of the Basis for Conclusions).
IN15 HKAS 1 also requires an entity to disclose reclassification adjustments relating to

components of other comprehensive income. Reclassification adjustments are amounts
reclassified to profit or loss in the current period that were recognised in other
comprehensive income in previous periods. The purpose is to provide users with
information to assess the effect of such reclassifications on profit or loss (see paragraphs
BC69–BC73 of the Basis for Conclusions).
Presentation of dividends
IN16 The previous version of HKAS 1 permitted disclosure of the amount of dividends
recognised as distributions to equity holders (now referred to as ‘owners’) and the related
amount per share in the income statement, in the statement of changes in equity or in the
notes. HKAS 1 requires dividends recognised as distributions to owners and related
amounts per share to be presented in the statement of changes in equity or in the notes.
The presentation of such disclosures in the statement of comprehensive income is not
permitted (see paragraph BC75 of the Basis for Conclusions). The purpose is to ensure
that owner changes in equity (in this case, distributions to owners in the form of dividends)
are presented separately from non-owner changes in equity (presented in the statement of
comprehensive income).
Hong Kong Accounting Standard 1

Presentation of Financial Statements
Objective
1 This Standard 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. It sets out overall requirements
for the presentation of financial statements, guidelines for their structure and minimum
requirements for their content.
Scope
2 An entity shall apply this Standard in preparing and presenting general purpose
financial statements in accordance with Hong Kong Financial Reporting Standards
(HKFRSs).
3 Other HKFRSs set out the recognition, measurement and disclosure requirements for
specific transactions and other events.
4 This Standard does not apply to the structure and content of condensed interim financial
statements prepared in accordance with HKAS 34 Interim Financial Reporting. However,
paragraphs 15–35 apply to such financial statements. This Standard applies equally to all
entities, including those that present consolidated financial statements and those that
present separate financial statements as defined in HKAS 27 Consolidated and Separate
Financial Statements.
5 This Standard uses terminology that is suitable for profit-oriented entities, including public
sector business entities. If entities with not-for-profit activities in the private sector or the
public sector apply this Standard, they may need to amend the descriptions used for
particular line items in the financial statements and for the financial statements
themselves.
6 Similarly, entities that do not have equity as defined in HKAS 32 Financial Instruments:
Presentation (eg some mutual funds) and entities whose share capital is not equity (eg
some co-operative entities) may need to adapt the financial statement presentation of
members’ or unitholders’ interests.
Definitions
7 The following terms are used in this Standard with the meanings specified:
General purpose financial statements (referred to as ‘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. *
Impracticable Applying a requirement is impracticable when the entity cannot apply

it after making every reasonable effort to do so.
*
An example of tailored reports are those accounts prepared by certain private companies taking advantage of the
exemptions granted by Section 141D of the Companies Ordinance.
Hong Kong Financial Reporting Standards (HKFRSs) are Standards and Interpretations
issued by the Hong Kong Institute of Certified Public Accountants (HKICPA). They
comprise:
(a) Hong Kong Financial Reporting Standards;
(b) Hong Kong Accounting Standards; and
(c) Interpretations.
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. Materiality depends on the size and nature of the omission
or misstatement judged in the surrounding circumstances. The size or nature of the
item, or a combination of both, could be the determining factor.
Assessing whether an omission or misstatement could influence economic decisions of

users, and so be material, requires consideration of the characteristics of those users. The
Framework for the Preparation and Presentation of Financial Statements states in
paragraph 25 that ‘users are assumed to have a reasonable knowledge of business and
economic activities and accounting and a willingness to study the information with
reasonable diligence.’ Therefore, the assessment needs to take into account how users
with such attributes could reasonably be expected to be influenced in making economic
decisions.
Notes contain information in addition to that presented in the statement of financial

position, statement of comprehensive income, separate income statement (if
presented), statement of changes in equity and statement of cash flows. Notes
provide narrative descriptions or disaggregations of items presented in those
statements and information about items that do not qualify for recognition in those
statements.
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 HKFRSs.
The components of other comprehensive income include:
(a) changes in revaluation surplus (see HKAS 16 Property, Plant and Equipment and
HKAS 38 Intangible Assets);
(b) actuarial gains and losses on defined benefit plans recognised in accordance with
paragraph 93A of HKAS 19 Employee Benefits;
(c) gains and losses arising from translating the financial statements of a foreign
operation (see HKAS 21 The Effects of Changes in Foreign Exchange Rates);
(d) gains and losses on remeasuring available-for-sale financial assets (see HKAS 39
Financial Instruments: Recognition and Measurement);
(e) the effective portion of gains and losses on hedging instruments in a cash flow
hedge (see HKAS 39).
Owners are holders of instruments classified as equity.
Profit or loss is the total of income less expenses, excluding the components of other
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.
Total comprehensive income is 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.
Total comprehensive income comprises all components of ‘profit or loss’ and of ‘other
comprehensive income’.
8 Although this Standard uses the terms ‘other comprehensive income’, ‘profit or loss’ and
‘total comprehensive income’, an entity may use other terms to describe the totals as long
as the meaning is clear. For example, an entity may use the term ‘net income’ to describe
profit or loss.
Financial statements
Purpose of financial statements

9 Financial statements are a structured representation of the financial position and financial
performance of an entity. The objective of financial statements is 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. Financial statements also show
the results of the management’s stewardship of the resources entrusted to it. To meet this
objective, financial statements provide information about an entity’s:
(a) assets;
(b) liabilities;
(c) equity;
(d) income and expenses, including gains and losses;
(e) contributions by and distributions to owners in their capacity as owners; and
(f) cash flows.
This 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.
Complete set of financial statements

10 A complete set of financial statements comprises:
(a) a statement of financial position as at the end of the period;
(b) a statement of 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 information; and
(f) 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, or when it reclassifies items in its financial statements.
An entity may use titles for the statements other than those used in this Standard.
11 An entity shall present with equal prominence all of the financial statements in a
complete set of financial statements.
12 As permitted by paragraph 81, an entity may present the components of profit or loss
either as part of a single statement of comprehensive income or in a separate income
statement. When an income statement is presented it is part of a complete set of financial
statements and shall be displayed immediately before the statement of comprehensive
income.
13 Many entities present, outside the financial statements, a financial review by management
that describes and explains the main features of the entity’s financial performance and
financial position, and the principal uncertainties it faces. Such a report may include a
review of:
(a) the main factors and influences determining financial performance, including
changes in the environment in which the entity operates, the entity’s response to
those changes and their effect, and the entity’s policy for investment to maintain
and enhance financial performance, including its dividend policy;
(b) the entity’s sources of funding and its targeted ratio of liabilities to equity; and
(c) the entity’s resources not recognised in the statement of financial position in
accordance with HKFRSs.
14 Many entities also present, outside the financial statements, reports and statements such
as environmental reports and value added statements, particularly in industries in which
environmental factors are significant and when employees are regarded as an important
user group. Reports and statements presented outside financial statements are outside
the scope of HKFRSs.
General features
True and fair view and compliance with HKFRSs *
15 Financial statements shall present a true and fair view of the financial position,
financial performance and cash flows of an entity. True and fair view 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. The application of HKFRSs, with
additional disclosure when necessary, is presumed to result in financial statements
that achieve a true and fair view.
16 An entity whose financial statements comply with HKFRSs shall make an explicit
and unreserved statement of such compliance in the notes. An entity shall not
describe financial statements as complying with HKFRSs unless they comply with
all the requirements of HKFRSs.
17 In virtually all circumstances, an entity achieves a true and fair view by compliance with
applicable HKFRSs. A true and fair view also requires an entity:
(a) to select and apply accounting policies in accordance with HKAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors. HKAS 8 sets out a
hierarchy of authoritative guidance that management considers in the absence of
an HKFRS that specifically applies to an item.
*
Based on the communication with International Accounting Standards Board, the HKICPA believes that the term 'true and
fair view' and the term 'fair presentation' used in IAS 1, Presentation of Financial Statements are equivalent terms.
Please also refer to paragraph 46 of the Framework which contains certain references to the two terms.
(b) to present information, including accounting policies, in a manner that provides

relevant, reliable, comparable and understandable information.
(c) to provide additional disclosures when compliance with the specific requirements
in HKFRSs is insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity’s financial position and
financial performance.
18 An entity cannot rectify inappropriate accounting policies either by disclosure of

the accounting policies used or by notes or explanatory material.
19 In the extremely rare circumstances in which management concludes that

compliance with a requirement in an HKFRS would be so misleading that it would
conflict with the objective of financial statements set out in the Framework, the
entity shall depart from that requirement in the manner set out in paragraph 20 if the
relevant regulatory framework requires, or otherwise does not prohibit, such a
departure.
20 When an entity departs from a requirement of an HKFRS in accordance with

paragraph 19, it shall disclose:
(a) that management has concluded that the financial statements present fairly
the entity’s financial position, financial performance and cash flows;
(b) that it has complied with applicable HKFRSs, except that it has departed
from a particular requirement to achieve a true and fair view;
(c) the title of the HKFRS from which the entity has departed, the nature of the
departure, including the treatment that the HKFRS would require, the reason
why that treatment would be so misleading in the circumstances that it
would conflict with the objective of financial statements set out in the
Framework, and the treatment adopted; and
(d) for each period presented, the financial effect of the departure on each item
in the financial statements that would have been reported in complying with
the requirement.
21 When an entity has departed from a requirement of an HKFRS in a prior period, and
that departure affects the amounts recognised in the financial statements for the
current period, it shall make the disclosures set out in paragraph 20(c) and (d).
22 Paragraph 21 applies, for example, when an entity departed in a prior period from a
requirement in an HKFRS for the measurement of assets or liabilities and that departure
affects the measurement of changes in assets and liabilities recognised in the current
period’s financial statements.
23 In the extremely rare circumstances in which management concludes that

compliance with a requirement in an HKFRS would be so misleading that it would
conflict with the objective of financial statements set out in the Framework, but the
relevant regulatory framework prohibits departure from the requirement, the entity
shall, to the maximum extent possible, reduce the perceived misleading aspects of
compliance by disclosing:
(a) the title of the HKFRS in question, the nature of the requirement, and the
reason why management has concluded that complying with that
requirement is so misleading in the circumstances that it conflicts with the
objective of financial statements set out in the Framework; and
(b) for each period presented, the adjustments to each item in the financial
statements that management has concluded would be necessary to achieve
a true and fair view.
24 For the purpose of paragraphs 19–23, an item of information would conflict with the
objective of financial statements when it does not represent faithfully the transactions,
other events and conditions that it either purports to represent or could reasonably be
expected to represent and, consequently, it would be likely to influence economic
decisions made by users of financial statements. When assessing whether complying with
a specific requirement in an HKFRS would be so misleading that it would conflict with the
objective of financial statements set out in the Framework, management considers:
(a) why the objective of financial statements is not achieved in the particular
circumstances; and
(b) how the entity’s circumstances differ from those of other entities that comply with
the requirement. If other entities in similar circumstances comply with the
requirement, there is a rebuttable presumption that the entity’s compliance with
the requirement would not be so misleading that it would conflict with the objective
of financial statements set out in the Framework.
Going concern
25 When preparing financial statements, management shall make an assessment of an

entity’s ability to continue as a going concern. An entity shall prepare financial
statements on a going concern basis unless management either intends to liquidate
the entity or to cease trading, or has no realistic alternative but to do so. When
management is aware, in making its assessment, of material uncertainties related to
events or conditions that may cast significant doubt upon the entity’s ability to
continue as a going concern, the entity shall disclose those uncertainties. When an
entity does not prepare financial statements on a going concern basis, it shall
disclose that fact, together with the basis on which it prepared the financial
statements and the reason why the entity is not regarded as a going concern.
26 In assessing whether the going concern assumption is appropriate, management takes

into account all available information about the future, which is at least, but is not limited to,
twelve months from the end of the reporting period. The degree of consideration depends
on the facts in each case. When an entity has a history of profitable operations and ready
access to financial resources, the entity may reach a conclusion that the going concern
basis of accounting is appropriate without detailed analysis. In other cases, management
may need to consider a wide range of factors relating to current and expected profitability,
debt repayment schedules and potential sources of replacement financing before it can
satisfy itself that the going concern basis is appropriate.
Accrual basis of accounting
27 An entity shall prepare its financial statements, except for cash flow information,
using the accrual basis of accounting.
28 When the accrual basis of accounting is used, an entity recognises items as assets,
liabilities, equity, income and expenses (the elements of financial statements) when they
satisfy the definitions and recognition criteria for those elements in the Framework.
Materiality and aggregation
29 An entity shall present separately each material class of similar items. An entity
shall present separately items of a dissimilar nature or function unless they are
immaterial.
30 Financial statements result from processing large numbers of transactions or other events
that are aggregated into classes according to their nature or function. The final stage in the
process of aggregation and classification is the presentation of condensed and classified
data, which form line items in the financial statements. If a line item is not individually
material, it is aggregated with other items either in those statements or in the notes. An
item that is not sufficiently material to warrant separate presentation in those statements
may warrant separate presentation in the notes.
31 An entity need not provide a specific disclosure required by an HKFRS if the information is
not material.
Offsetting
32 An entity shall not offset assets and liabilities or income and expenses, unless
required or permitted by an HKFRS.
33 An entity reports separately both assets and liabilities, and income and expenses.
Offsetting in the statements of comprehensive income or financial position or in the
separate income statement (if presented), except when offsetting reflects the substance of
the transaction or other event, detracts from the ability of users both to understand the
transactions, other events and conditions that have occurred and to assess the entity’s
future cash flows. Measuring assets net of valuation allowances—for example,
obsolescence allowances on inventories and doubtful debts allowances on
receivables—is not offsetting.
34 HKAS 18 Revenue defines revenue and requires an entity to measure it at the fair value of
the consideration received or receivable, taking into account the amount of any trade
discounts and volume rebates the entity allows. An entity undertakes, in the course of its
ordinary activities, other transactions that do not generate revenue but are incidental to the
main revenue-generating activities. An entity presents the results of such transactions,
when this presentation reflects the substance of the transaction or other event, by netting
any income with related expenses arising on the same transaction. For example:
(a) an entity presents gains and losses on the disposal of non-current assets,
including investments and operating assets, by deducting from the proceeds on
disposal the carrying amount of the asset and related selling expenses; and
(b) an entity may net expenditure related to a provision that is recognised in

accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent
Assets and reimbursed under a contractual arrangement with a third party (for
example, a supplier’s warranty agreement) against the related reimbursement.
35 In addition, an entity presents on a net basis gains and losses arising from a group of
similar transactions, for example, foreign exchange gains and losses or gains and losses
arising on financial instruments held for trading. However, an entity presents such gains
and losses separately if they are material.
Frequency of reporting
36 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 statements are not entirely
comparable.
37. Normally, an entity consistently prepares financial statements for a one-year period.
However, for practical reasons, some entities prefer to report, for example, for a 52-week
period. This Standard does not preclude this practice.
Comparative information
38 Except when HKFRSs 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. An entity shall include comparative
information for narrative and descriptive information when it is relevant to an
understanding of the current period’s financial statements.
39 An entity disclosing comparative information shall present, as a minimum, two statements

of financial position, two of each of the other statements, and related notes. When an
entity applies an accounting policy retrospectively or makes a retrospective restatement of
items in its financial statements or when it reclassifies items in its financial statements, it
shall present, as a minimum, three statements of financial position, two of each of the
other statements, and related notes. An entity presents statements of financial position as
at:
(a) the end of the current period,
(b) the end of the previous period (which is the same as the beginning of the current
period), and
(c) the beginning of the earliest comparative period.
40 In some cases, narrative information provided in the financial statements for the previous
period(s) continues to be relevant in the current period. For example, an entity discloses in
the current period details of a legal dispute whose outcome was uncertain at the end of the
immediately preceding reporting period and that is yet to be resolved. Users benefit from
information that the uncertainty existed at the end of the immediately preceding reporting
period, and about the steps that have been taken during the period to resolve the
uncertainty.
41 When the entity changes the presentation or classification of items in its financial
statements, the entity shall reclassify comparative amounts unless reclassification
is impracticable. When the entity reclassifies comparative amounts, the entity shall
disclose:
(a) the nature of the reclassification;
(b) the amount of each item or class of items that is reclassified; and
(c) the reason for the reclassification.
42 When it is impracticable to reclassify comparative amounts, an entity shall disclose:
(a) the reason for not reclassifying the amounts, and
(b) the nature of the adjustments that would have been made if the amounts
had been reclassified.
43 Enhancing the inter-period comparability of information assists users in making economic

decisions, especially by allowing the assessment of trends in financial information for
predictive purposes. In some circumstances, it is impracticable to reclassify comparative
information for a particular prior period to achieve comparability with the current period.
For example, an entity may not have collected data in the prior period(s) in a way that
allows reclassification, and it may be impracticable to recreate the information.
44 HKAS 8 sets out the adjustments to comparative information required when an entity
changes an accounting policy or corrects an error.
Consistency of presentation
45 An entity shall retain the presentation and classification of items in the financial
statements from one period to the next unless:
(a) it is apparent, following 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 having regard to the criteria for
the selection and application of accounting policies in HKAS 8; or
(b) an HKFRS requires a change in presentation.
46. For example, a significant acquisition or disposal, or a review of the presentation of the
financial statements, might suggest that the financial statements need to be presented
differently. An entity changes the presentation of its financial statements only if the
changed presentation provides information that is reliable and more relevant to users of
the financial statements and the revised structure is likely to continue, so that
comparability is not impaired. When making such changes in presentation, an entity
reclassifies its comparative information in accordance with paragraphs 41 and 42.
Structure and content
Introduction
47 This Standard requires particular disclosures in the statement of financial position or of

comprehensive income, in the separate income statement (if presented), or in the
statement of changes in equity and requires disclosure of other line items either in those
statements or in the notes. HKAS 7 Statement of Cash Flows sets out requirements for the
presentation of cash flow information.
48 This Standard sometimes uses the term ‘disclosure’ in a broad sense, encompassing
items presented in the financial statements. Disclosures are also required by other
HKFRSs. Unless specified to the contrary elsewhere in this Standard or in another HKFRS,
such disclosures may be made in the financial statements.
Identification of the financial statements
49 An entity shall clearly identify the financial statements and distinguish them from
other information in the same published document.
50 HKFRSs apply only to financial statements, and not necessarily to other information
presented in an annual report, a regulatory filing, or another document. Therefore, it is
important that users can distinguish information that is prepared using HKFRSs from other
information that may be useful to users but is not the subject of those requirements.
51 An entity shall clearly identify each financial statement and the notes. In addition,
an entity shall display the following information prominently, and repeat it when
necessary for the information presented to be understandable:
(a) the name of the reporting entity or other means of identification, and any
change in that information from the end of the preceding reporting period;
(b) whether the financial statements are of an individual entity or a group of

entities;
(c) the date of the end of the reporting period or the period covered by the set of
financial statements or notes;
(d) the presentation currency, as defined in HKAS 21; and
(e) the level of rounding used in presenting amounts in the financial

statements.
52 An entity meets the requirements in paragraph 51 by presenting appropriate headings for

pages, statements, notes, columns and the like. Judgement is required in determining the
best way of presenting such information. For example, when an entity presents the
financial statements electronically, separate pages are not always used; an entity then
presents the above items to ensure that the information included in the financial
statements can be understood.
53 An entity often makes financial statements more understandable by presenting information

in thousands or millions of units of the presentation currency. This is acceptable as long as
the entity discloses the level of rounding and does not omit material information.
Statement of financial position
Information to be presented in the statement of financial position
54 As a minimum, the statement of financial position shall include line items that
present the following amounts:
(a) property, plant and equipment;
(b) investment property;
(c) intangible assets;
(d) financial assets (excluding amounts shown under (e), (h) and (i));
(e) investments accounted for using the equity method;
(f) biological assets;
(g) inventories;
(h) trade and other receivables;
(i) cash and cash equivalents;
(j) the total of assets classified as held for sale and assets included in disposal
groups classified as held for sale in accordance with HKFRS 5 Non-current
Assets Held for Sale and Discontinued Operations;
(k) trade and other payables;
(l) provisions;
(m) financial liabilities (excluding amounts shown under (k) and (l));
(n) liabilities and assets for current tax, as defined in HKAS 12 Income Taxes;
(o) deferred tax liabilities and deferred tax assets, as defined in HKAS 12;
(p) liabilities included in disposal groups classified as held for sale in

accordance with HKFRS 5;
(q) minority interest, presented within equity; and
(r) issued capital and reserves attributable to owners of the parent.
55 An entity shall present additional line items, headings and subtotals in the
statement of financial position when such presentation is relevant to an
understanding of the entity’s financial position.
56 When an entity presents current and non-current assets, and current and
non-current liabilities, as separate classifications in its statement of financial
position, it shall not classify deferred tax assets (liabilities) as current assets
(liabilities).
57 This Standard does not prescribe the order or format in which an entity presents items.
Paragraph 54 simply lists items that are sufficiently different in nature or function to
warrant separate presentation in the statement of financial position. In addition:
(a) line items are included when the size, nature or function of an item or aggregation
of similar items is such that separate presentation is relevant to an understanding
of the entity’s financial position; and
(b) the descriptions used and the ordering of items or aggregation of similar items
may be amended according to the nature of the entity and its transactions, to
provide information that is relevant to an understanding of the entity’s financial
position. For example, a financial institution may amend the above descriptions to
provide information that is relevant to the operations of a financial institution.
58 An entity makes the judgement about whether to present additional items separately on
the basis of an assessment of:
(a) the nature and liquidity of assets;
(b) the function of assets within the entity; and
(c) the amounts, nature and timing of liabilities.
59 The use of different measurement bases for different classes of assets suggests that their
nature or function differs and, therefore, that an entity presents them as separate line
items. For example, different classes of property, plant and equipment can be carried at
cost or at revalued amounts in accordance with HKAS 16.
Current/non-current distinction
60 An entity shall present current and non-current assets, and current and non-current
liabilities, as separate classifications in its statement of financial position in
accordance with paragraphs 66–76 except when a presentation based on liquidity
provides information that is reliable and more relevant. When that exception applies,
an entity shall present all assets and liabilities in order of liquidity.
61 Whichever method of presentation is adopted, an entity shall disclose the amount

expected to be recovered or settled after more than twelve months for each asset
and liability line item that combines amounts expected to be recovered or settled:
(a) no more than twelve months after the reporting period, and
(b) more than twelve months after the reporting period.
62 When an entity supplies goods or services within a clearly identifiable operating cycle,
separate classification of current and non-current assets and liabilities in the statement of
financial position provides useful information by distinguishing the net assets that are
continuously circulating as working capital from those used in the entity’s long-term
operations. It also highlights assets that are expected to be realized within the current
operating cycle, and liabilities that are due for settlement within the same period.
63 For some entities, such as financial institutions, a presentation of assets and liabilities in
increasing or decreasing order of liquidity provides information that is reliable and more
relevant than a current/ non-current presentation because the entity does not supply
goods or services within a clearly identifiable operating cycle.
64 In applying paragraph 60, an entity is permitted to present some of its assets and liabilities
using a current/non-current classification and others in order of liquidity when this provides
information that is reliable and more relevant. The need for a mixed basis of presentation
might arise when an entity has diverse operations.
65 Information about expected dates of realisation of assets and liabilities is useful in

assessing the liquidity and solvency of an entity. HKFRS 7 Financial Instruments:
Disclosures requires disclosure of the maturity dates of financial assets and financial
liabilities. Financial assets include trade and other receivables, and financial liabilities
include trade and other payables. Information on the expected date of recovery of
non-monetary assets such as inventories and expected date of settlement for liabilities
such as provisions is also useful, whether assets and liabilities are classified as current or
as non-current. For example, an entity discloses the amount of inventories that are
expected to be recovered more than twelve months after the reporting period.
Current assets
66 An entity shall classify an asset as current when:
(a) it expects to realise the asset, or intends to sell or consume it, in its normal
operating cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the reporting
period; or
(d) the asset is cash or a cash equivalent (as defined in HKAS 7) unless the
asset is restricted from being exchanged or used to settle a liability for at
least twelve months after the reporting period.
An entity shall classify all other assets as non-current.
67 This Standard uses the term ‘non-current’ to include tangible, intangible and financial
assets of a long-term nature. It does not prohibit the use of alternative descriptions as long
as the meaning is clear.
68 The operating cycle of an entity is the time between the acquisition of assets for
processing and their realisation in cash or cash equivalents. When the entity’s normal
operating cycle is not clearly identifiable, it is assumed to be twelve months. Current
assets include assets (such as inventories and trade receivables) that are sold, consumed
or realised as part of the normal operating cycle even when they are not expected to be
realised within twelve months after the reporting period. Current assets also include assets
held primarily for the purpose of trading (financial assets within this category are classified
as held for trading in accordance with HKAS 39) and the current portion of non-current
financial assets.
Current liabilities
69 An entity shall classify a liability as current when:
(a) it expects to settle the liability in its normal operating cycle;
(b) it holds the liability primarily for the purpose of trading;
(c) the liability is due to be settled within twelve months after the reporting
period; or
(d) the entity does not have an unconditional right to defer settlement of the
liability for at least twelve months after the reporting period.
An entity shall classify all other liabilities as non-current.
70 Some current liabilities, such as trade payables and some accruals for employee and
other operating costs, are part of the working capital used in the entity’s normal operating
cycle. An entity classifies such operating items as current liabilities even if they are due to
be settled more than twelve months after the reporting period. The same normal operating
cycle applies to the classification of an entity’s assets and liabilities. When the entity’s
normal operating cycle is not clearly identifiable, it is assumed to be twelve months.
71 Other current liabilities are not settled as part of the normal operating cycle, but are due for
settlement within twelve months after the reporting period or held primarily for the purpose
of trading. Examples are financial liabilities classified as held for trading in accordance with
HKAS 39, bank overdrafts, and the current portion of non-current financial liabilities,
dividends payable, income taxes and other non-trade payables. Financial liabilities that
provide financing on a long-term basis (ie are not part of the working capital used in the
entity’s normal operating cycle) and are not due for settlement within twelve months after
the reporting period are non-current liabilities, subject to paragraphs 74 and 75.
72 An entity classifies its financial liabilities as current when they are due to be settled within
twelve months after the reporting period, even if:
(a) the original term was for a period longer than twelve months, and
(b) an agreement to refinance, or to reschedule payments, on a long-term basis is

completed after the reporting period and before the financial statements are
authorised for issue.
73 If an entity expects, and has the discretion, to refinance or roll over an obligation for at
least twelve months after the reporting period under an existing loan facility, it classifies
the obligation as non-current, even if it would otherwise be due within a shorter period.
However, when refinancing or rolling over the obligation is not at the discretion of the entity
(for example, there is no arrangement for refinancing), the entity does not consider the
potential to refinance the obligation and classifies the obligation as current.
74 When an entity breaches a provision of a long-term loan arrangement on or before the end
of the reporting period with the effect that the liability becomes payable on demand, it
classifies the liability as current, even if the lender agreed, after the reporting period and
before the authorization of the financial statements for issue, not to demand payment as a
consequence of the breach. An entity classifies the liability as current because, at the end
of the reporting period, it does not have an unconditional right to defer its settlement for at
least twelve months after that date.
75 However, an entity classifies the liability as non-current if the lender agreed by the end of
the reporting period to provide a period of grace ending at least twelve months after the
reporting period, within which the entity can rectify the breach and during which the lender
cannot demand immediate repayment.
76 In respect of loans classified as current liabilities, if the following events occur between the
end of the reporting period and the date the financial statements are authorised for issue,
those events are disclosed as non-adjusting events in accordance with HKAS 10 Events
after the Reporting Period:
(a) refinancing on a long-term basis;
(b) rectification of a breach of a long-term loan arrangement; and
(c) the granting by the lender of a period of grace to rectify a breach of a long-term
loan arrangement ending at least twelve months after the reporting period.
Information to be presented either in the statement of financial position or in the

notes
77 An entity shall disclose, either in the statement of financial position or in the notes,
further subclassifications of the line items presented, classified in a manner
appropriate to the entity’s operations.
78 The detail provided in subclassifications depends on the requirements of HKFRSs and on

the size, nature and function of the amounts involved. An entity also uses the factors set
out in paragraph 58 to decide the basis of subclassification. The disclosures vary for each
item, for example:
(a) items of property, plant and equipment are disaggregated into classes in
accordance with HKAS 16;
(b) receivables are disaggregated into amounts receivable from trade customers,
receivables from related parties, prepayments and other amounts;
(c) inventories are disaggregated, in accordance with HKAS 2 Inventories, into

classifications such as merchandise, production supplies, materials, work in
progress and finished goods;
(d) provisions are disaggregated into provisions for employee benefits and other
items; and
(e) equity capital and reserves are disaggregated into various classes, such as
paid-in capital, share premium and reserves.
79 An entity shall disclose the following, either in the statement of financial position or
the statement of changes in equity, or in the notes:
(a) for each class of share capital:
(i) the number of shares authorised;
(ii) the number of shares issued and fully paid, and issued but not fully
paid;
(iii) par value per share, or that the shares have no par value;
(iv) a reconciliation of the number of shares outstanding at the

beginning and at the end of the period;
(v) the rights, preferences and restrictions attaching to that class

including restrictions on the distribution of dividends and the
repayment of capital;
(vi) shares in the entity held by the entity or by its subsidiaries or

associates; and
(vii) shares reserved for issue under options and contracts for the sale of
shares, including terms and amounts; and
(b) a description of the nature and purpose of each reserve within equity.
80 An entity without share capital, such as a partnership or trust, shall disclose

information equivalent to that required by paragraph 79(a), showing changes during
the period in each category of equity interest, and the rights, preferences and
restrictions attaching to each category of equity interest.
Statement of comprehensive income

81 An entity shall present all items of income and expense recognised in a period:
(a) in a single statement of comprehensive income, or
(b) in two statements: a statement displaying components of profit or loss

(separate income statement) and a second statement beginning with profit
or loss and displaying components of other comprehensive income
(statement of comprehensive income).
Information to be presented in the statement of comprehensive income
82 As a minimum, the statement of comprehensive income shall include line items that
present the following amounts for the period:
*
(a) revenue ;
(b) finance costs;
(c) share of the profit or loss of associates and joint ventures accounted for
using the equity method;
(d) tax expense;
(e) a single amount comprising the total of:
(i) the post-tax profit or loss of discontinued operations and
(ii) 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;
(f) profit or loss;
(g) each component of other comprehensive income classified by nature

(excluding amounts in (h));
*
Hong Kong incorporated companies are required to disclose turnover for the financial year and the method by which it is
arrived at (HKCO Tenth Sch. Para 16.) Turnover should consist of revenue arising from the principal activities of the
entity and therefore should not usually include those items of revenue and gains that arise incidentally.
(h) share of the other comprehensive income of associates and joint ventures
accounted for using the equity method; and
(i) total comprehensive income.
83 An entity shall disclose the following items in the statement of comprehensive

income as allocations of profit or loss for the period:
(a) profit or loss for the period attributable to:
(i) minority interest, and
(ii) owners of the parent.
(b) total comprehensive income for the period attributable to:
(i) minority interest, and
(ii) owners of the parent.
84 An entity may present in a separate income statement (see paragraph 81) the line
items in paragraph 82(a)–(f) and the disclosures in paragraph 83(a).
85 An entity shall present additional line items, headings and subtotals in the
statement of comprehensive income and the separate income statement (if
presented), when such presentation is relevant to an understanding of the entity’s
financial performance.
86 Because the effects of an entity’s various activities, transactions and other events differ in
frequency, potential for gain or loss and predictability, disclosing the components of
financial performance assists users in understanding the financial performance achieved
and in making projections of future financial performance. An entity includes additional line
items in the statement of comprehensive income and in the separate income statement (if
presented), and it amends the descriptions used and the ordering of items when this is
necessary to explain the elements of financial performance. An entity considers factors
including materiality and the nature and function of the items of income and expense. For
example, a financial institution may amend the descriptions to provide information that is
relevant to the operations of a financial institution. An entity does not offset income and
expense items unless the criteria in paragraph 32 are met.
87 An entity shall not present any items of income or expense as extraordinary items,
in the statement of comprehensive income or the separate income statement (if
presented), or in the notes.
Profit or loss for the period
88 An entity shall recognise all items of income and expense in a period in profit or
loss unless an HKFRS requires or permits otherwise.
89 Some HKFRSs specify circumstances when an entity recognises particular items outside
profit or loss in the current period. HKAS 8 specifies two such circumstances: the
correction of errors and the effect of changes in accounting policies. Other HKFRSs
require or permit components of other comprehensive income that meet the Framework’s
definition of income or expense to be excluded from profit or loss (see paragraph 7).
Other comprehensive income for the period
90 An entity shall disclose the amount of income tax relating to each component of
other comprehensive income, including reclassification adjustments, either in the
statement of comprehensive income or in the notes.
91 An entity may present components of other comprehensive income either:
(a) net of related tax effects, or
(b) before related tax effects with one amount shown for the aggregate amount of
income tax relating to those components.
92 An entity shall disclose reclassification adjustments relating to components of

other comprehensive income.
93 Other HKFRSs specify whether and when amounts previously recognised in other
comprehensive income are reclassified to profit or loss. Such reclassifications are referred
to in this Standard as reclassification adjustments. A reclassification adjustment is
included with the related component of other comprehensive income in the period that the
adjustment is reclassified to profit or loss. For example, gains realised on the disposal of
available-for-sale financial assets are included in profit or loss of the current period. These
amounts may have been recognised in other comprehensive income as unrealised gains
in the current or previous periods. Those unrealised gains must be deducted from other
comprehensive income in the period in which the realised gains are reclassified to profit or
loss to avoid including them in total comprehensive income twice.
94 An entity may present reclassification adjustments in the statement of comprehensive

income or in the notes. An entity presenting reclassification adjustments in the notes
presents the components of other comprehensive income after any related reclassification
adjustments.
95 Reclassification adjustments arise, for example, on disposal of a foreign operation (see

HKAS 21), on derecognition of available-for-sale financial assets (see HKAS 39) and when
a hedged forecast transaction affects profit or loss (see paragraph 100 of HKAS 39 in
relation to cash flow hedges).
96 Reclassification adjustments do not arise on changes in revaluation surplus recognised in

accordance with HKAS 16 or HKAS 38 or on actuarial gains and losses on defined benefit
plans recognised in accordance with paragraph 93A of HKAS 19. These components are
recognised in other comprehensive income and are not reclassified to profit or loss in
subsequent periods. Changes in revaluation surplus may be transferred to retained
earnings in subsequent periods as the asset is used or when it is derecognised (see HKAS
16 and HKAS 38). Actuarial gains and losses are reported in retained earnings in the
period that they are recognised as other comprehensive income (see HKAS 19).
Information to be presented in the statement of comprehensive income or in the

notes
97 When items of income or expense are material, an entity shall disclose their nature
and amount separately.
98 Circumstances that would give rise to the separate disclosure of items of income and
expense include:
(a) write-downs of inventories to net realisable value or of property, plant and

equipment to recoverable amount, as well as reversals of such write-downs;
(b) restructurings of the activities of an entity and reversals of any provisions for the
costs of restructuring;
(c) disposals of items of property, plant and equipment;
(d) disposals of investments;
(e) discontinued operations;
(f) litigation settlements; and
(g) other reversals of provisions.
99 An entity shall present an analysis of expenses recognised in profit or loss using a

classification based on either their nature or their function within the entity,
whichever provides information that is reliable and more relevant.
100 Entities are encouraged to present the analysis in paragraph 99 in the statement of
comprehensive income or in the separate income statement (if presented).
101 Expenses are subclassified to highlight components of financial performance that may
differ in terms of frequency, potential for gain or loss and predictability. This analysis is
provided in one of two forms.
102 The first form of analysis is the ‘nature of expense’ method. An entity aggregates
expenses within profit or loss according to their nature (for example, depreciation,
purchases of materials, transport costs, employee benefits and advertising costs), and
does not reallocate them among functions within the entity. This method may be simple to
apply because no allocations of expenses to functional classifications are necessary. An
example of a classification using the nature of expense method is as follows:
Revenue X
Other income X
Changes in inventories of finished goods and work
in progress X
Raw materials and consumables used X
Employee benefits expense X
Depreciation and amortisation expense X
Other expenses X
Total expenses (X)
Profit before tax X
103 The second form of analysis is the ‘function of expense’ or ‘cost of sales’ method and
classifies expenses according to their function as part of cost of sales or, for example, the
costs of distribution or administrative activities. At a minimum, an entity discloses its cost
of sales under this method separately from other expenses. This method can provide more
relevant information to users than the classification of expenses by nature, but allocating
costs to functions may require arbitrary allocations and involve considerable judgement.
An example of a classification using the function of expense method is as follows:
Revenue X
Cost of sales (X)
Gross profit X
Other income X
Distribution costs (X)
Administrative expenses (X)
Other expenses (X)
Profit before tax X
104 An entity classifying expenses by function shall disclose additional information on

the nature of expenses, including depreciation and amortisation expense and
employee benefits expense.
105 The choice between the function of expense method and the nature of expense method
depends on historical and industry factors and the nature of the entity. Both methods
provide an indication of those costs that might vary, directly or indirectly, with the level of
sales or production of the entity. Because each method of presentation has merit for
different types of entities, this Standard requires management to select the presentation
that is reliable and more relevant. However, because information on the nature of
expenses is useful in predicting future cash flows, additional disclosure is required when
the function of expense classification is used. In paragraph 104, ‘employee benefits’ has
the same meaning as in HKAS 19.
Statement of changes in equity

106 An entity shall present a statement of changes in equity showing in the statement:
(a) total comprehensive income for the period, showing separately the total
amounts attributable to owners of the parent and to minority interest;
(b) for each component of equity, the effects of retrospective application or

retrospective restatement recognised in accordance with HKAS 8;
(c) the amounts of transactions with owners in their capacity as owners,

showing separately contributions by and distributions to owners; and
(d) for each component of equity, a reconciliation between the carrying amount
at the beginning and the end of the period, separately disclosing each
change.
107 An entity shall present, either in the statement of changes in equity or in the notes,
*
the amount of dividends recognised as distributions to owners during the period ,
and the related amount per share.
108 In paragraph 106, the components of equity include, for example, each class of
contributed equity, the accumulated balance of each class of other comprehensive income
and retained earnings.
109 Changes in an entity’s equity between the beginning and the end of the reporting period
reflect the increase or decrease in its net assets during the period. Except for changes
resulting from transactions with owners in their capacity as owners (such as equity
contributions, reacquisitions of the entity’s own equity instruments and dividends) and
transaction costs directly related to such transactions, the overall change in equity during a
period represents the total amount of income and expense, including gains and losses,
generated by the entity’s activities during that period.
110 HKAS 8 requires retrospective adjustments to effect changes in accounting policies, to the
extent practicable, except when the transition provisions in another HKFRS require
otherwise. HKAS 8 also requires restatements to correct errors to be made retrospectively,
to the extent practicable. Retrospective adjustments and retrospective restatements are
not changes in equity but they are adjustments to the opening balance of retained
earnings, except when an HKFRS requires retrospective adjustment of another
component of equity. Paragraph 106(b) requires disclosure in the statement of changes in
equity of the total adjustment to each component of equity resulting from changes in
*
Hong Kong incorporated companies are required to show the aggregate amount of the dividends paid and proposed in
their profit and loss account (HKCO Tenth Sch., para 13(1)(j)).
accounting policies and, separately, from corrections of errors. These adjustments are
disclosed for each prior period and the beginning of the period.
Statement of cash flows

111 Cash flow information provides users of financial statements with a basis to assess the
ability of the entity to generate cash and cash equivalents and the needs of the entity to
utilise those cash flows. HKAS 7 sets out requirements for the presentation and disclosure
of cash flow information.
Notes
Structure
112 The notes shall:
(a) present information about the basis of preparation of the financial

statements and the specific accounting policies used in accordance with
paragraphs 117–124;
(b) disclose the information required by HKFRSs that is not presented

elsewhere in the financial statements; and
(c) provide information that is not presented elsewhere in the financial

statements, but is relevant to an understanding of any of them.
113 An entity shall, as far as practicable, present notes in a systematic manner. An

entity shall cross-reference each item in the statements of financial position and of
comprehensive income, in the separate income statement (if presented), and in the
statements of changes in equity and of cash flows to any related information in the
notes.
114 An entity normally presents notes in the following order, to assist users to understand the
financial statements and to compare them with financial statements of other entities:
(a) statement of compliance with HKFRSs (see paragraph 16);
(b) summary of significant accounting policies applied (see paragraph 117);
(c) supporting information for items presented in the statements of financial position
and of comprehensive income, in the separate income statement (if presented),
and in the statements of changes in equity and of cash flows, in the order in which
each statement and each line item is presented; and
(d) other disclosures, including:
(i) contingent liabilities (see HKAS 37) and unrecognised contractual

commitments, and
(ii) non-financial disclosures, eg the entity’s financial risk management

objectives and policies (see HKFRS 7).
115 In some circumstances, it may be necessary or desirable to vary the order of specific items
within the notes. For example, an entity may combine information on changes in fair value
recognised in profit or loss with information on maturities of financial instruments, although
the former disclosures relate to the statement of comprehensive income or separate
income statement (if presented) and the latter relate to the statement of financial position.
Nevertheless, an entity retains a systematic structure for the notes as far as practicable.
116 An entity may present notes providing information about the basis of preparation of the
financial statements and specific accounting policies as a separate section of the financial
statements.
Disclosure of accounting policies
117 An entity shall disclose in the summary of significant accounting policies:
(a) the measurement basis (or bases) used in preparing the financial
statements, and
(b) the other accounting policies used that are relevant to an understanding of
the financial statements.
118 It is important for an entity to inform users of the measurement basis or bases used in the
financial statements (for example, historical cost, current cost, net realisable value, fair
value or recoverable amount) because the basis on which an entity prepares the financial
statements significantly affects users’ analysis. When an entity uses more than one
measurement basis in the financial statements, for example when particular classes of
assets are revalued, it is sufficient to provide an indication of the categories of assets and
liabilities to which each measurement basis is applied.
119 In deciding whether a particular accounting policy should be disclosed, management

considers whether disclosure would assist users in understanding how transactions, other
events and conditions are reflected in reported financial performance and financial position.
Disclosure of particular accounting policies is especially useful to users when those
policies are selected from alternatives allowed in HKFRSs. An example is disclosure of
whether a venturer recognises its interest in a jointly controlled entity using proportionate
consolidation or the equity method (see HKAS 31 Interests in Joint Ventures). Some
HKFRSs specifically require disclosure of particular accounting policies, including choices
made by management between different policies they allow. For example, HKAS 16
requires disclosure of the measurement bases used for classes of property, plant and
equipment.
120 Each entity considers the nature of its operations and the policies that the users of its
financial statements would expect to be disclosed for that type of entity. For example,
users would expect an entity subject to income taxes to disclose its accounting policies for
income taxes, including those applicable to deferred tax liabilities and assets. When an
entity has significant foreign operations or transactions in foreign currencies, users would
expect disclosure of accounting policies for the recognition of foreign exchange gains and
losses.
121 An accounting policy may be significant because of the nature of the entity’s operations
even if amounts for current and prior periods are not material. It is also appropriate to
disclose each significant accounting policy that is not specifically required by HKFRSs but
the entity selects and applies in accordance with HKAS 8.
122 An entity shall disclose, in the summary of significant accounting policies or other
notes, the judgements, apart from those involving estimations (see paragraph 125),
that management has made in the process of applying the entity’s accounting
policies and that have the most significant effect on the amounts recognised in the
financial statements.
123 In the process of applying the entity’s accounting policies, management makes various
judgements, apart from those involving estimations, that can significantly affect the
amounts it recognises in the financial statements. For example, management makes
judgements in determining:
(a) whether financial assets are held-to-maturity investments;
(b) when substantially all the significant risks and rewards of ownership of financial
assets and lease assets are transferred to other entities;
(c) whether, in substance, particular sales of goods are financing arrangements and
therefore do not give rise to revenue; and
(d) whether the substance of the relationship between the entity and a special
purpose entity indicates that the entity controls the special purpose entity.
124 Some of the disclosures made in accordance with paragraph 122 are required by other
HKFRSs. For example, HKAS 27 requires an entity to disclose the reasons why the
entity’s ownership interest does not constitute control, in respect of an investee that is not
a subsidiary even though more than half of its voting or potential voting power is owned
directly or indirectly through subsidiaries. HKAS 40 Investment Property requires
disclosure of the criteria developed by the entity to distinguish investment property from
owner-occupied property and from property held for sale in the ordinary course of
business, when classification of the property is difficult.
Sources of estimation uncertainty
125 An entity shall 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:
(a) their nature, and
(b) their carrying amount as at the end of the reporting period.
126 Determining the carrying amounts of some assets and liabilities requires estimation of the
effects of uncertain future events on those assets and liabilities at the end of the reporting
period. For example, in the absence of recently observed market prices, future-oriented
estimates are necessary to measure the recoverable amount of classes of property, plant
and equipment, the effect of technological obsolescence on inventories, provisions subject
to the future outcome of litigation in progress, and long-term employee benefit liabilities
such as pension obligations. These estimates involve assumptions about such items as
the risk adjustment to cash flows or discount rates, future changes in salaries and future
changes in prices affecting other costs.
127 The assumptions and other sources of estimation uncertainty disclosed in accordance with
paragraph 125 relate to the estimates that require management’s most difficult, subjective
or complex judgements. As the number of variables and assumptions affecting the
possible future resolution of the uncertainties increases, those judgements become more
subjective and complex, and the potential for a consequential material adjustment to the
carrying amounts of assets and liabilities normally increases accordingly.
128 The disclosures in paragraph 125 are not required for assets and liabilities with a
significant risk that their carrying amounts might change materially within the next financial
year if, at the end of the reporting period, they are measured at fair value based on
recently observed market prices. Such fair values might change materially within the next
financial year but these changes would not arise from assumptions or other sources of
estimation uncertainty at the end of the reporting period.
129 An entity presents the disclosures in paragraph 125 in a manner that helps users of
financial statements to understand the judgements that management makes about the
future and about other sources of estimation uncertainty. The nature and extent of the
information provided vary according to the nature of the assumption and other
circumstances. Examples of the types of disclosures an entity makes are:
(a) the nature of the assumption or other estimation uncertainty;
(b) the sensitivity of carrying amounts to the methods, assumptions and estimates
underlying their calculation, including the reasons for the sensitivity;
(c) the expected resolution of an uncertainty and the range of reasonably possible
outcomes within the next financial year in respect of the carrying amounts of the
assets and liabilities affected; and
(d) an explanation of changes made to past assumptions concerning those assets

and liabilities, if the uncertainty remains unresolved.
130 This Standard does not require an entity to disclose budget information or forecasts in
making the disclosures in paragraph 125.
131 Sometimes it is impracticable to disclose the extent of the possible effects of an

assumption or another source of estimation uncertainty at the end of the reporting period.
In such cases, the entity discloses that it is reasonably possible, on the basis of existing
knowledge, that outcomes within the next financial year that are different from the
assumption could require a material adjustment to the carrying amount of the asset or
liability affected. In all cases, the entity discloses the nature and carrying amount of the
specific asset or liability (or class of assets or liabilities) affected by the assumption.
132 The disclosures in paragraph 122 of particular judgements that management made in the
process of applying the entity’s accounting policies do not relate to the disclosures of
sources of estimation uncertainty in paragraph 125.
133 Other HKFRSs require the disclosure of some of the assumptions that would otherwise be
required in accordance with paragraph 125. For example, HKAS 37 requires disclosure, in
specified circumstances, of major assumptions concerning future events affecting classes
of provisions. HKFRS 7 requires disclosure of significant assumptions the entity uses in
estimating the fair values of financial assets and financial liabilities that are carried at fair
value. HKAS 16 requires disclosure of significant assumptions that the entity uses in
estimating the fair values of revalued items of property, plant and equipment.
Capital
134 An entity shall disclose information that enables users of its financial statements to
evaluate the entity’s objectives, policies and processes for managing capital.
135 To comply with paragraph 134, the entity discloses the following:
(a) qualitative information about its objectives, policies and processes for managing
capital, including:
(i) a description of what it manages as capital;
(ii) when an entity is subject to externally imposed capital requirements, the

nature of those requirements and how those requirements are
incorporated into the management of capital; and
(iii) how it is meeting its objectives for managing capital.
(b) summary quantitative data about what it manages as capital. Some entities regard
some financial liabilities (eg some forms of subordinated debt) as part of capital.
Other entities regard capital as excluding some components of equity (eg
components arising from cash flow hedges).
(c) any changes in (a) and (b) from the previous period.
(d) whether during the period it complied with any externally imposed capital
requirements to which it is subject.
(e) when the entity has not complied with such externally imposed capital
requirements, the consequences of such non-compliance.
The entity bases these disclosures on the information provided internally to key
management personnel.
136 An entity may manage capital in a number of ways and be subject to a number of different
capital requirements. For example, a conglomerate may include entities that undertake
insurance activities and banking activities and those entities may operate in several
jurisdictions. When an aggregate disclosure of capital requirements and how capital is
managed would not provide useful information or distorts a financial statement user’s
understanding of an entity’s capital resources, the entity shall disclose separate
information for each capital requirement to which the entity is subject.
Other disclosures
137 An entity shall disclose in the notes:
(a) the amount of dividends proposed or declared before the financial

statements were authorised for issue but not recognised as a distribution to
*
owners during the period , and the related amount per share; and
(b) the amount of any cumulative preference dividends not recognised.
138 An entity shall disclose the following, if not disclosed elsewhere in information
published with the financial statements:
(a) the domicile and legal form of the entity, its country of incorporation and the
address of its registered office (or principal place of business, if different
from the registered office);
(b) a description of the nature of the entity’s operations and its principal
activities; and
(c) the name of the parent and the ultimate parent of the group.
Transition and effective date

139 An entity shall apply this Standard for annual periods beginning on or after 1
January 2009. Earlier application is permitted. If an entity adopts this Standard for
an earlier period, it shall disclose that fact.
Withdrawal of HKAS 1 (issued 2004)

140 This Standard supersedes HKAS 1 Presentation of Financial Statements issued in 2004,
as amended in 2005.
*
Hong Kong incorporated companies are required to show the aggregate amount which is recommended for distribution
by way of dividend under a separate heading(s) in their balance sheet (HKCO Tenth Sch., para 9(1)(e)),
Appendix A
Amendments to other pronouncements
The amendments in this appendix shall be applied for annual periods beginning on or after 1
January 2009. If an entity applies this Standard for an earlier period, these amendments shall be
applied for that earlier period. In the amended paragraphs, new text is underlined and deleted text
is struck through.
A1 In the Preface to Hong Kong Financial Reporting Standards, paragraphs 10, 15 and 18 are
amended as follows:
10 A complete set of financial statements includes a balance sheet statement of

financial position, an income statement a statement of comprehensive income, a
statement showing either all of changes in equity or changes in equity other than
those arising from capital transactions with owners and distributions to owners, a
statement of cash flows statement, and accounting policies and explanatory notes.
When a separate income statement is presented in accordance with HKAS 1
Presentation of Financial Statements (as revised in 2007), it is part of that
complete set. In the interest …
15. Entities shall apply interpretations if their financial statements are described as
being prepared in accordance with HKFRSs (see paragraph 14 16 of HKAS 1
Presentation of Financial Statements (as revised in 2007)).
18 HKAS 1 (as revised in 2007) includes the following requirement:
An entity whose financial statements comply with HKFRSs shall make an explicit and
unreserved statement of such compliance in the notes. An entity shall not describe
Ffinancial statements shall not be described as complying with HKFRSs unless they
comply with all the requirements of HKFRSs.
This requirement extends to HKFRSs currently in issue.
A2 In the Framework for the Preparation and Presentation of Financial Statements a rubric
preceding the ‘Introduction’ section is added as follows:
The Framework has not been amended to reflect the changes made by HKAS 1
Presentation of Financial Statements (as revised in 2007).
A3 In Hong Kong Financial Reporting Standards (including Hong Kong Accounting Standards
and Interpretations), and the introductions to HKFRSs, the following references are
amended as described below, unless otherwise stated in this appendix.
• ‘on the face of’ is amended to ‘in’.
• ‘income statement’ is amended to ‘statement of comprehensive income’.
• ‘balance sheet’ is amended to ‘statement of financial position’.
• ‘cash flow statement’ is amended to ‘statement of cash flows’.
• ‘balance sheet date’ is amended to ‘end of the reporting period’.
• ‘subsequent balance sheet date’ is amended to ‘end of the subsequent

reporting period’.
• ‘each balance sheet date’ is amended to ‘the end of each reporting

period’.
• ‘after the balance sheet date’ is amended to ‘after the reporting period’.
• ‘reporting date’ is amended to ‘end of the reporting period’.
• ‘each reporting date’ is amended to ‘the end of each reporting period’.
• ‘last annual reporting date’ is amended to ‘end of the last annual reporting
period’.
• ‘equity holders' is amended to 'owners' (except in HKAS 33 Earnings per Share).
• ‘removed from equity and recognised in profit or loss’ and ‘removed from equity
and included in profit or loss’ are amended to ‘reclassified from equity to profit or
loss as a reclassification adjustment’.
• ‘Standard or Interpretation’ is amended to ‘HKFRS’.
• ‘a Standard or an Interpretation’ is amended to ‘an HKFRS’.
• ‘Standards and Interpretations’ is amended to ‘HKFRSs’. (except in

paragraph 5 of HKAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors).
• References to the current version of HKAS 7 Cash Flow Statements are amended
to HKAS 7 Statement of Cash Flows.
• References to the current version of HKAS 10 Events after the Balance Sheet
Date are amended to HKAS 10 Events after the Reporting Period.
HKFRS 1 First-time Adoption of Hong Kong Financial

Reporting Standards
A4 HKFRS 1 is amended as described below.
In the rubric, the first sentence is amended as follows:
Hong Kong Financial Reporting Standard 1 First-time Adoption of Hong Kong

Financial Reporting Standards (HKFRS 1) is set out in paragraphs 1–47G 1–47H
and Appendices A–C. All the paragraphs …
In paragraph IN3, ‘at the reporting date for its first HKFRS financial statements’ is
amended to ‘at the end of its first HKFRS reporting period’.
Paragraphs 6 and 7 are amended as follows:
6 An entity shall prepare and present an opening HKFRS balance sheet statement
of financial position at the date of transition to HKFRSs. This is the starting point
for its accounting under HKFRSs. An entity need not present its opening HKFRS
balance sheet in its first HKFRS financial statements.
7 An entity … Those accounting policies shall comply with each HKFRS

effective at the reporting date for end of its first HKFRS financial statements
reporting period, except as specified in paragraphs 13–34B, 36A–36C and
37.
The Example after paragraph 8 is amended as described below.
References to the years ‘2003’ to ‘2005’ are amended to ‘20X3’ to ‘20X5’ respectively.
The paragraphs Background and Application of requirements are amended as follows:
Background
The reporting date for end of entity A’s first HKFRS financial statements reporting
period is 31 December 20X5 2005. Entity A decides to present comparative
information in those financial statements for one year only (see paragraph 36) …
Application of requirements
Entity A … in:
(a) preparing and presenting its opening HKFRS balance sheet statement of
financial position at 1 January 20X4 2004; and …
Paragraphs 10, 12(a) and 21 are amended as follows:
10 Except as described in paragraphs 13–34B and 36A–36C, an entity shall, in its

opening HKFRS balance sheet statement of financial position: …
12 This HKFRS establishes two categories of exceptions to the principle that an

entity’s opening HKFRS balance sheet statement of financial position shall comply
with each HKFRS:
(a) paragraphs 13–25I and 36A–36C grant exemptions from some

requirements of other HKFRSs.
21 HKAS 21 The Effects of Changes in Foreign Exchange Rates requires an entity:
(a) to classify recognise some translation differences in other comprehensive

income and accumulate these as in a separate component of equity; and
(b) on disposal of a foreign operation, to transfer reclassify the cumulative

translation difference for that foreign operation (including, if applicable,
gains and losses on related hedges) from equity to the income statement
profit or loss as part of the gain or loss on disposal.
In paragraph 32, references to the years ‘2003’ and ‘2004’ are amended to ‘20X4’ and
‘20X5’ respectively.
Paragraphs 32, 35 and 36 are amended as follows:
32 An entity … Instead, the entity shall reflect that new information in its income
statement profit or loss (or, if appropriate, other comprehensive income other
changes in equity) for the year ended 31 December 20X4 2004.
35 Except as described in paragraphs 36A–37, this HKFRS does not provide

exemptions from the presentation and disclosure requirements in other HKFRSs.
36 To comply with HKAS 1, an entity’s first HKFRS financial statements shall include
at least one year of comparative information under HKFRSs. three statements of
financial position, two statements of comprehensive income, two separate income
statements (if presented), two statements of cash flows and two statements of
changes in equity and related notes, including comparative information.
Paragraphs 36A–36C and the headings above them are deleted.
Paragraphs 39 and 45(a) are amended as follows:
39 To comply with paragraph 38, an entity’s first HKFRS financial statements shall
include: …
(a) (ii) the end … under previous GAAP;.
(b) a reconciliation to its total comprehensive income under HKFRSs of the

profit or loss reported under previous GAAP for the latest period in the
entity’s most recent annual financial statements to its profit or loss under
HKFRSs for the same period;. The starting point for that reconciliation
shall be total comprehensive income under previous GAAP for the same
period or, if an entity did not report such a total, profit or loss under
previous GAAP. and
(c) …
45 To comply with …
(a) Each such interim financial report shall, if the entity presented an interim
financial report for the comparable interim period of the immediately
preceding financial year, include reconciliations of:
(i) a reconciliation of its equity under previous GAAP at the end of that
comparable interim period to its equity under HKFRSs at that date;
and
(ii) a reconciliation to its profit or loss total comprehensive income

under HKFRSs previous GAAP for that comparable interim period
(current and year-to-date). The starting point for that reconciliation
shall be total comprehensive income under previous GAAP for that
period or, if an entity did not report such a total, profit or loss under
previous GAAP. to its profit or loss under HKFRSs for that period.
Paragraph 47C is deleted.
Paragraph 47H is added as follows:
47H HKAS 1 (as revised in 2007) amended the terminology used throughout HKFRSs.
In addition it amended paragraphs 6, 7, 8 (Example), 10, 12(a), 21, 32, 35, 36,
39(b) and 45(a), Appendix A and paragraph B2(i) in Appendix B, and deleted
paragraphs 36A–36C and 47C. An entity shall apply those amendments for
annual periods beginning on or after 1 January 2009. If an entity applies HKAS 1
(revised 2007) for an earlier period, the amendments shall be applied for that
earlier period.
In Appendix A, the defined terms are amended as follows:
first HKFRS reporting The latest reporting period ending on the reporting
period date of covered by an entity’s first HKFRS financial
statements.
opening HKFRS balance An entity’s balance sheet statement of financial position

sheet statement of (published or unpublished) at the date of transition to
financial position HKFRSs.
reporting date The end of the latest period covered by financial

statements or by an interim financial report.
In Appendix B, paragraph B2(i) is amended as follows:
B2 If a first-time adopter ...
(i) If the first-time adopter recognised goodwill under previous GAAP as a

deduction from equity:
(i) it shall not recognise that goodwill in its opening HKFRS balance
sheet statement of financial position. Furthermore, it shall not
transfer reclassify that goodwill to the income statement profit or
loss if it disposes of the subsidiary or if the investment in the
subsidiary becomes impaired.
HKFRS 4 Insurance Contracts

A5 In HKFRS 4, paragraphs 30 and 39A(a) are amended as follows:
30 In some accounting models … The related adjustment to the insurance liability (or
deferred acquisition costs or intangible assets) shall be recognised in equity other
comprehensive income if, and only if, the unrealised gains or losses are
recognised directly in equity in other comprehensive income. This practice ...
39A To comply with …
(a) a sensitivity analysis that shows how profit or loss and equity would have
been affected had if changes in the relevant risk variable that were
reasonably possible at the balance sheet date end of the reporting period
had occurred; the methods and assumptions used in preparing the
sensitivity analysis; and any changes from the previous period in the
methods and assumptions used. However …
Paragraph 41B is added as follows:
41B HKAS 1 (as revised in 2007) amended the terminology used throughout HKFRSs.
In addition it amended paragraph 30. An entity shall apply those amendments for
earlier period.
HKFRS 5 Non-current Assets Held for Sale and Discontinued

Operations
In paragraph 28, ‘in the same income statement caption’ is amended to ‘in the same
caption in the statement of comprehensive income’.
Paragraph 33A is added as follows:
33A If an entity presents the components of profit or loss in a separate income

statement as described in paragraph 81 of HKAS 1 (as revised in 2007), a section
identified as relating to discontinued operations is presented in that separate
statement.
In paragraph 38, ‘recognised directly in equity’ is amended to ‘recognised in other

44A HKAS 1 (as revised in 2007) amended the terminology used throughout HKFRSs.
In addition it amended paragraphs 3 and 38, and added paragraph 33A. An entity
shall apply those amendments for annual periods beginning on or after 1 January
2009. If an entity applies HKAS 1 (revised 2007) for an earlier period, the
amendments shall be applied for that earlier period.
In Appendix A, the definition of current asset is amended as follows:
An entity shall classify an asset as current when: that satisfies any of the following criteria:
(a) it is expectsed to be realised in the asset, or is intendsed for to sale sell or

consumeption it, in, the entity's its normal operating cycle;
(b) it is held holds the asset primarily for the purpose of being tradinged;
(c) it is expectsed to be realised the asset within twelve months after the balance
sheet date reporting period; or
(d) it the asset is cash or a cash equivalent (as defined in HKAS 7) unless the asset it
is restricted from being exchanged or used to settle a liability for at least twelve
months after the balance sheet date reporting period.
HKFRS 7 Financial Instruments: Disclosures

The heading above paragraph 20 is amended as follows:
Income statement and equity Statement of comprehensive income
Paragraph 20 is amended as follows:
20 An entity shall disclose the following items of income, expense, gains or losses
either on the face of in the financial statements statement of comprehensive
income or in the notes:
(a) net gains or net losses on:
(i) ...
(ii) available-for-sale financial assets, showing separately the amount

of gain or loss recognised directly in equity in other comprehensive
income during the period and the amount removed reclassified from
equity and recognised in to profit or loss for the period;
(iii) ...
21 In accordance with paragraph 108 117 of HKAS 1 Presentation of Financial

Statements (as revised in 2007), an entity discloses, 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.
Paragraph 23(c) and (d) is amended as follows:
23 For cash flow hedges, an entity shall disclose: …
(c) the amount that was recognised in equity other comprehensive income
during the period;
(d) the amount that was removed reclassified from equity and included in to
profit or loss for the period, showing the amount included in each line item
in the income statement of comprehensive income; and …
In paragraph 27(c), ‘in equity’ is amended to ‘in other comprehensive income’.
In addition it amended paragraphs 20, 21, 23(c) and (d), 27(c) and B5 of Appendix
B. An entity shall apply those amendments for annual periods beginning on or
after 1 January 2009. If an entity applies HKAS 1 (revised 2007) for an earlier
period, the amendments shall be applied for that earlier period.
Paragraph B5 is amended as follows:
B5 … Paragraph 113 122 of HKAS 1 (as revised in 2007) also requires entities to
disclose, in the summary of significant accounting policies or other notes, the
judgments, apart from those involving estimations, that management has made in
the process of applying the entity’s accounting policies and that have the most
significant effect on the amounts recognised in the financial statements.
In paragraph B14 of Appendix B, ‘balance sheet amount’ is amended to ‘amount in the

statement of financial position’.
HKFRS 8 Operating Segments

A8 In HKFRS 8, paragraphs 21 and 23(f) are amended as follows:
21 To give … Reconciliations of the amounts in the statement of financial position

balance sheet amounts for reportable segments to the amounts in the entity’s
statement of financial position balance sheet amounts are required for each date
at which a balance sheet statement of financial position is presented. Information
for prior periods shall be restated as described in paragraphs 29 and 30.
23 An entity shall...
(f) material items of income and expense disclosed in accordance with

paragraph 86 97 of HKAS 1 Presentation of Financial Statements (as
revised in 2007);
In addition it amended paragraph 23(f). An entity shall apply those amendments
for annual periods beginning on or after 1 January 2009. If an entity applies HKAS
1 (revised 2007) for an earlier period, the amendments shall be applied for that
earlier period.
HKAS 7 Statement of Cash Flows

A9 HKAS 7 is amended as described below.
The title is amended to ‘Statement of Cash Flows’.
The title (as amended) above the Objective is footnoted as follows: ‘In December 2007 the
Institute amended the title of HKAS 7 from Cash Flow Statements to Statement of Cash
Flows as a consequence of the revision of HKAS 1 Presentation of Financial Statements in
2007.'
In paragraph 32, ‘the income statement’ is amended to ‘profit or loss’.

.
HKAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors
• in the definition of Material, ‘of users taken’ is amended to ‘that users make’.
HKAS 10 Events after the Reporting Period

The title is amended to ‘Events after the Reporting Period’.
The title (as amended) above the Objective is footnoted as follows:
‘In December 2007 the Institute amended the title of HKAS 10 from Events after
the Balance Sheet Date to Events after the Reporting Period as a consequence of
the revision of HKAS 1 Presentation of Financial Statements in 2007.'
In paragraph 21, ‘of users taken’ is amended to ‘that users make’.
HKAS 11 Construction Contracts

A12 In HKAS 11, in paragraphs 26, 28 and 38, ‘the income statement’ is amended to ‘profit or
loss’.
HKAS 12 Income Taxes

In the rubric, the first sentence is amended as follows:
Hong Kong Accounting Standard 12 Income Taxes (HKAS 12) is set out in
paragraphs 1–91 1–92. All the paragraphs …
The third paragraph of the ‘Objective’ in HKAS 12 is amended as follows:
‘… For transactions and other events recognised outside profit or loss (either in
other comprehensive income or directly in equity), any related tax effects are also
recognised outside profit or loss (either in other comprehensive income or directly
in equity, respectively).
In paragraphs 22(b), 59, 60 and 65, ‘the income statement’ is amended to ‘profit or loss’,
and in paragraph 81(g)(ii) ‘the income statement’ is amended to ‘profit or loss’.
23 … In accordance with paragraph 61A, the deferred tax is charged directly to the
carrying amount of the equity component. In accordance with paragraph 58,
subsequent changes in the deferred tax liability are recognised in profit or loss the
income statement as deferred tax expense (income).
In paragraph 52, in the notes at the end of Example B and Example C, 'paragraph 61' is
amended to ‘paragraph 61A’ and ‘charged directly to equity’ is amended to ‘recognised in
other comprehensive income’.
The heading above paragraph 58 and paragraph 58 are amended as follows:
Income statement Items recognised in profit or loss
58 Current and deferred tax shall be recognised as income or an expense and

included in profit or loss for the period, except to the extent that the tax
arises from:
(a) a transaction or event which is recognised, in the same or a different

period, outside profit or loss, either in other comprehensive income
or directly in equity (see paragraphs 61A to 65); …
In paragraph 60, ‘charged or credited to equity’ is amended to ‘recognised outside

profit or loss’.
In the heading above paragraph 61, ‘credited or charged directly to equity’ is

amended to ‘recognised outside profit or loss’.
Paragraph 61 is deleted and paragraph 61A is added as follows:
61A Current tax and deferred tax shall be recognised outside profit or
loss if the tax relates to items that are recognised, in the same or a
different period, outside profit or loss. Therefore, current tax and
deferred tax that relates to items that are recognised, in the same or
a different period:
(a) in other comprehensive income, shall be recognised in other

comprehensive income (see paragraph 62).
(b) directly in equity, shall be recognised directly in equity (see

paragraph 62A).
Paragraphs 62 and 63 are amended and paragraph 62A is added as follows:
62 Hong Kong Financial Reporting Standards require or permit certain

particular items to be credited or charged directly to equity recognised in
other comprehensive income. Examples of such items are:
(a) a change in carrying amount arising from the revaluation of property,

plant and equipment (see HKAS 16); and
(b) [deleted] an adjustment to the opening balance of retained earnings

resulting from either a change in accounting policy that is applied
retrospectively or the correction of an error (see HKAS 8
Accounting Policies, Changes in Accounting Estimates and Errors);
(c) exchange differences arising on the translation of the financial

statements of a foreign operation (see HKAS 21); and.
(d) [deleted] amounts arising on initial recognition of the equity

component of a compound financial instrument (see paragraph 23).
62A Hong Kong Financial Reporting Standards require or permit particular

items to be credited or charged directly to equity. Examples of such items
are:
(a) an adjustment to the opening balance of retained earnings resulting

from either a change in accounting policy that is applied
retrospectively or the correction of an error (see HKAS 8
Accounting Policies, Changes in Accounting Estimates and Errors);
and
(b) amounts arising on initial recognition of the equity component of a

compound financial instrument (see paragraph 23).
63 In exceptional circumstances it may be difficult to determine the amount of

current and deferred tax that relates to items credited or charged to equity
recognised outside profit or loss (either in other comprehensive income or
directly in equity). This may be the case, for example, when:
(a) …
(b) a change in the tax rate … to an item that was previously

recognised outside profit or loss charged or credited to equity; or
(c) an entity … and the deferred tax asset relates (in whole or in part) to
an item that was previously recognised outside profit or loss
charged or credited to equity.
In such cases, the current and deferred tax related to items that are
recognised outside profit or loss are credited or charged to equity is based
on a reasonable pro rata allocation of the current and deferred tax of the
entity in the tax jurisdiction concerned, or other method that achieves a
more appropriate allocation in the circumstances.
In paragraph 65, 'credited or charged to equity' is amended to 'recognised in other

comprehensive income'.
Paragraph 68C is amended as follows:
68C As noted … (a) a transaction or event which that is recognised, in the same or a
different period, directly in equity outside profit or loss, or (b) a business
combination. …
Paragraph 77 is amended and paragraph 77A is added as follows:
77 The tax expense (income) related to profit or loss from ordinary activities
shall be presented in on the face of the income statement of comprehensive
income.

statement as described in paragraph 81 of HKAS 1 Presentation of Financial
Statements (as revised in 2007), it presents the tax expense (income) related
to profit or loss from ordinary activities in that separate statement.
81 The following shall also be disclosed separately:
(a) the aggregate current and deferred tax relating to items that are
charged or credited directly to equity (see paragraph 62A);
(ab) the amount of income tax relating to each component of other

comprehensive income (see paragraph 62 and HKAS 1 (as revised in
2007));
(b) [deleted]; ...
Paragraph 92 is added as follows:
92 HKAS 1 (as revised in 2007) amended the terminology used throughout

HKFRSs. In addition it amended paragraphs 23, 52, 58, 60, 62, 63, 65, 68C, 77
and 81, deleted paragraph 61 and added paragraphs 61A, 62A and 77A. An
entity shall apply those amendments for annual periods beginning on or
after 1 January 2009. If an entity applies HKAS 1 (revised 2007) for an earlier
period, the amendments shall be applied for that earlier period.
HKAS 14 Segment Reporting

In the rubric, the first sentence is amended as described below.
Hong Kong Accounting Standard 14 Segment Reporting (HKAS 14) is set out in
Paragraphs 2, 52A and 54 are amended as follows:
2 A complete set of financial statements includes a balance sheet statement of

financial position, income a statement of comprehensive income, cash flow a
statement of cash flows, a statement showing of changes in equity, and notes, as
provided in HKAS 1 Presentation of Financial Statements (as revised in 2007).
When a separate income statement is presented in accordance with HKAS 1, it is
part of that complete set.
52A An entity ...all operations that had been classified as discontinued at the
balance sheet date end of the latest reporting period presented.
54 An example of a measure of segment performance above segment result on in the

income statement of comprehensive income is gross margin on sales. Examples
of measures of segment performance below segment result on in the income
statement of comprehensive income are profit or loss from ordinary activities
(either before or after income taxes) and profit or loss.

HKFRSs. In addition it amended paragraph 2. An entity shall apply HKAS 1
(revised 2007) for annual periods beginning on or after 1 January 2009. If an
entity applies HKAS 1 (revised 2007) for an earlier period, the amendments
shall be applied for that earlier period.
HKAS 16 Property, Plant and Equipment

39 If an asset’s carrying amount is increased as a result of a revaluation, the

increase shall be credited directly to equity recognised in other
comprehensive income and accumulated in equity under the heading of
revaluation surplus. However …
40 If an asset’s … However, the decrease shall be debited directly to equity

under the heading of revaluation surplus recognised in other
comprehensive income to the extent of any credit balance existing in the
revaluation surplus in respect of that asset. The decrease recognised in
other comprehensive income reduces the amount accumulated in equity
under the heading of revaluation surplus.
In paragraph 73(e)(iv), ‘recognised or reversed directly in equity’ is amended to

‘recognised or reversed in other comprehensive income’.
81B HKAS 1 Presentation of Financial Statements (as revised in 2007) amended

the terminology used throughout HKFRSs. In addition it amended
paragraphs 39, 40 and 73(e)(iv). An entity shall apply those amendments for
annual periods beginning on or after 1 January 2009. If an entity applies
HKAS 1 (revised 2007) for an earlier period, the amendments shall be
applied for that earlier period.
HKAS 19 Employee Benefits

Hong Kong Accounting Standard 19 Employee Benefits (HKAS 19) is set out in
In paragraph 69, ‘at each successive balance sheet date’ is amended to ‘at the end of
each successive reporting period’.
Paragraphs 93A–93D are amended as follows:
93A If, as permitted by paragraph 93, an entity adopts a policy of recognising

actuarial gains and losses in the period in which they occur, it may
recognise them outside profit or loss in other comprehensive income, in
accordance with paragraphs 93B–93D, providing …
93B Actuarial gains and losses recognised outside profit or loss in other
comprehensive income as permitted by paragraph 93A shall be presented in the a
statement of comprehensive income. changes in equity titled ‘statement of
recognised income and expense’ that comprises only the items specified in
paragraph 96 of HKAS 1. The entity shall not present the actuarial gains and
losses in a statement of changes in equity in the columnar format referred to in
paragraph 101 of HKAS 1 or any other format that includes the items specified in
paragraph 97 of HKAS 1.
93C An entity that recognises actuarial gains and losses in accordance with paragraph
93A shall also recognise any adjustments arising from the limit in paragraph 58(b)
in other comprehensive income outside profit or loss in the statement of
recognised income and expense.
93D Actuarial gains and losses and adjustments arising from the limit in paragraph
58(b) that have been recognised directly in the statement of recognised income
and expense in other comprehensive income shall be recognised immediately in
retained earnings. They shall not be recognised in reclassified to profit or loss in a
subsequent period.
In paragraph 105 and in the third paragraph of the Example illustrating paragraph 106, ‘the
income statement’ is amended to ‘profit or loss’.
Paragraph 120A is amended as follows:
120A An entity shall disclose the following information about defined benefit
plans: …
(h) the total amount recognised in other comprehensive income the

statement of recognised income and expense for each of the
following: …
(i) for entities that recognise actuarial gains and losses in the
statement of recognised income and expense other comprehensive
income in accordance with paragraph 93A, the cumulative amount of
actuarial gains and losses recognised in the statement of
recognised income and expense other comprehensive income.
HKFRSs. In addition it amended paragraphs 93A–93D, 106 (Example) and
120A. An entity shall apply those amendments for annual periods beginning
on or after 1 January 2009. If an entity applies HKAS 1 (revised 2007) for an
earlier period, the amendments shall be applied for that earlier period.
HKAS 20 Accounting for Government Grants and Disclosure of

Government Assistance
Hong Kong Accounting Standard 20 Accounting for Government Grants and

Disclosure of Government Assistance (HKAS 20) is set out in paragraphs 1–41
1–42. All the paragraphs …
In paragraphs 14 and 15, ‘the income statement’ is amended to ‘profit or loss’.
In paragraph 28, ‘for the purpose of balance sheet presentation’ is amended to ‘for
presentation purposes in the statement of financial position’.

statement as described in paragraph 81 of HKAS 1 (as revised in 2007), it
presents grants related to income as required in paragraph 29 in that separate
statement.

HKFRSs. In addition it added paragraph 29A. An entity shall apply those
amendments for annual periods beginning on or after 1 January 2009. If an
HKAS 21 The Effects of Changes in Foreign Exchange Rates

In paragraph 7, '... a cash flow statement of cash flows arising …' is amended to '... a
statement of cash flows of the cash flows arising…'.
In the heading above paragraph 23, ‘Reporting at subsequent balance sheet dates’ is
amended to ‘Reporting at the ends of subsequent reporting periods’.
In paragraph 27, ‘reported initially in equity’ is amended to ‘recognised initially in other

In paragraphs 30 and 31, ‘recognised directly in equity’ and ‘recognised in equity’ are
amended to ‘recognised in other comprehensive income’.
In paragraph 32, ‘recognised initially in a separate component of equity and

recognised in profit or loss’ is amended to ‘recognised initially in other
comprehensive income and reclassified from equity to profit or loss’.
In paragraph 33, ‘reclassified to the separate component of equity’ is amended to

‘recognised in other comprehensive income’.
37 The effect … Exchange differences arising from the translation of a foreign

operation previously classified in equity recognised in other comprehensive
income in accordance with paragraphs 32 and 39(c) are not recognised in
reclassified from equity to profit or loss until the disposal of the operation.
In paragraph 39(a), ‘at the closing rate at the date of that balance sheet’ is amended to
‘at the closing rate at the date of that statement of financial position’.
In paragraph 39(b), ‘each income statement’ is amended to ‘each statement of

comprehensive income or separate income statement presented’.
In paragraph 39(c), ‘as a separate component of equity’ is amended to ‘in other

Paragraphs 41, 45, 46, 48 and 52 are amended as follows:
41 The exchange differences referred to in paragraph 39(c) result from:
(a) translating income and expenses at the exchange rates at the dates
of the transactions and assets and liabilities at the closing rate. Such
exchange differences arise both on income and expense items
recognised in profit or loss and on those recognised directly in
equity.
...
These exchange differences are not recognised in profit or loss

because the changes in exchange rates have little or no direct effect
on the present and future cash flows from operations. The
cumulative amount of the exchange differences is presented in a
separate component of equity until disposal of the foreign operation.
When the exchange differences relate to a foreign operation that is
consolidated but not wholly-owned, …
45 The incorporation … Accordingly, in the consolidated financial statements

of the reporting entity, such an exchange difference continues to be is
recognised in profit or loss or, if it arises from the circumstances described
in paragraph 32, it is classified as equity recognised in other comprehensive
income and accumulated in a separate component of equity until the
disposal of the foreign operation.
46 When … HKAS 27 allows the use of a different reporting date provided that
the difference is no greater than three months and adjustments are made for
the effects of any significant transactions or other events that occur
between the different dates. …
48 On the disposal of a foreign operation, the cumulative amount of the

exchange differences relating to that foreign operation, deferred recognised
in other comprehensive income and accumulated in a separate component
of equity, relating to that foreign operation shall be recognised in
reclassified from equity to profit or loss (as a reclassification adjustment)
when the gain or loss on disposal is recognised (see HKAS 1 Presentation
of Financial Statements (as revised in 2007)).
52 An entity shall disclose: …
(b) net exchange differences classified recognised in other

comprehensive income and accumulated in a separate component
of equity, and a reconciliation of the amount of such exchange
differences at the beginning and end of the period.
60A HKAS 1 (as revised in 2007) amended the terminology used throughout
HKFRSs. In addition it amended paragraphs 27, 30–33, 37, 39, 41, 45, 48 and
52. An entity shall apply those amendments for annual periods beginning on
or after 1 January 2009. If an entity applies HKAS 1 (revised 2007) for an
HKAS 24 Related Party Disclosures

A19 In HKAS 24, in paragraph 19, ‘on the balance sheet’ is amended to ‘in the statement of
financial position’.
HKAS 27 Consolidated and Separate Financial Statements

In paragraph 4, in the definition of the cost method, ‘accumulated profits’ is amended to

‘retained earnings’.
Paragraphs 26, 27, 30 and 40(e) are amended as follows:
26 The financial statements of the parent and its subsidiaries used in the
preparation of the consolidated financial statements shall be prepared as of
the same reporting date. When the reporting dates end of the reporting
period of the parent is different from that of and a subsidiary are different,
the subsidiary prepares, for consolidation purposes, additional financial
statements as of the same date as the financial statements of the parent
unless it is impracticable to do so.
27 When … the financial statements of a subsidiary used in the preparation of

consolidated financial statements are prepared as of a reporting date
different from that of the parent, adjustments shall be made for the effects of
significant transactions or events that occur between that date and the date
of the parent’s financial statements. In any case, the difference between the
reporting date end of the reporting period of the subsidiary and that of the
parent shall be no more than three months. The length of the reporting
periods and any difference between in the reporting dates ends of the
reporting periods shall be the same from period to period.
30 The income … recognised in equity other comprehensive income in accordance

with HKAS 21 The Effects of Changes in Foreign Exchange Rates, is recognised
in the reclassified to consolidated income statement profit or loss as a
reclassification adjustment as the gain or loss on the disposal of the subsidiary.
40 The following disclosures …
(e) the reporting date end of the reporting period of the financial
statements of a subsidiary when such financial statements are used
to prepare consolidated financial statements and are as of a
reporting date or for a period that is different from that of the parent,
and the reason for using a different reporting date or period; ...
Paragraph 43C is added as follows:
43C HKAS 1 Presentation of Financial Statements (as revised in 2007) amended

the terminology used throughout HKFRSs. In addition it amended paragraph
HKAS 28 Investments in Associates

Paragraphs 11, 24, 25, 37(e) and 39 are amended as follows:
11 Under the equity method … Adjustments to the carrying amount may also be
necessary for changes in the investor’s proportionate interest in the investee
arising from changes in the investee’s other comprehensive income equity that
have not been recognised in the investee’s profit or loss. Such changes include
those arising from the revaluation of property, plant and equipment and from
foreign exchange translation differences. The investor’s share of those changes is
recognised directly in equity in other comprehensive income of the investor (see
HKAS 1 Presentation of Financial Statements (as revised in 2007)).
24 The most recent … When the reporting dates end of the reporting period of
the investor and is different from that of the associate are different, the
associate prepares, for the use of the investor, financial statements as of the
same date as the financial statements of the investor unless it is
impracticable to do so.
25 When … the financial statements of an associate used in applying the equity

method are prepared as of a different reporting date from that of the
investor … In any case, the difference between the reporting date end of the
reporting period of the associate and that of the investor shall be no more
than three months. The length of the reporting periods and any difference
between in the reporting dates ends of the reporting periods shall be the
same from period to period.
37 The following disclosures ...
(e) the end of the reporting period reporting date of the financial
statements of an associate, when such financial statements are used
in applying the equity method and are as of a reporting date or for a
period that is different from that of the investor, and the reason for
using a different reporting date or different period;
39 The investor’s share of changes recognised directly in the associate’s

equity in other comprehensive income by the associate shall be recognised
by the investor in other comprehensive income directly in equity by the
investor and shall be disclosed in the statement of changes in equity as
required by HKAS 1 Presentation of Financial Statements.
HKFRSs. In addition it amended paragraphs 11 and 39. An entity shall apply
those amendments for annual periods beginning on or after 1 January 2009.
If an entity applies HKAS 1 (revised 2007) for an earlier period, the
amendments shall be applied for that earlier period.
HKAS 29 Financial Reporting in Hyperinflationary Economies

In paragraph 27, ‘income statement items’ is amended to ‘items in the statement of

In paragraph 28, ‘income statement items’ is amended to ‘income and expense items’.
In paragraph 36, ‘reporting dates’ is amended to ‘ends of the reporting periods’.
HKAS 32 Financial Instruments: Presentation

In paragraph 18, ‘on the entity’s balance sheet’ is amended to ‘in the entity’s statement of
In paragraph 29, last sentence, ‘on its balance sheet’ is amended to ‘in its statement of
In paragraph 40, ‘income statement’ is amended to ‘statement of comprehensive income

or separate income statement (if presented)’ (twice).
HKFRSs. In addition it amended paragraph 40. An entity shall apply those
The Application Guidance is amended as described below.
In paragraph AG31, ‘on the balance sheet’ is amended to ‘in the statement of financial
position’.
In paragraph AG39, ‘on an entity’s balance sheet’ is amended to ‘in an entity’s statement
of financial position’.
HKAS 33 Earnings per Share

In paragraph 4, ‘on the face of its separate income statement’ is amended to ‘in its
statement of comprehensive income’.

statement as described in paragraph 81 of HKAS 1 Presentation of Financial
Statements (as revised in 2007), it presents earnings per share only in that
separate statement.
In paragraph 13, ‘Presentation of Financial Statements’ is deleted.
Paragraph 67 is amended as follows: ‘… dual presentation can be accomplished in one

line in on the income statement of comprehensive income.’
Paragraphs 67A, 68A, 73A and 74A are added as follows:

presents basic and diluted earnings per share, as required in paragraphs 66 and
67, in that separate statement.

presents basic and diluted earnings per share for the discontinued operation, as
required in paragraph 68, in that separate statement or in the notes.
73A Paragraph 73 applies also to an entity that discloses, in addition to basic

and diluted earnings per share, amounts per share using a reported
component of the separate income statement (as described in paragraph 81
of HKAS 1 (as revised in 2007)), other than one required by this Standard.
HKFRSs. In addition it added paragraphs 4A, 67A, 68A and 73A. An entity
shall apply those amendments for annual periods beginning on or after 1
January 2009. If an entity applies HKAS 1 (revised 2007) for an earlier period,
the amendments shall be applied for that earlier period.
HKAS 34 Interim Financial Reporting

Hong Kong Accounting Standard 34 Interim Financial Reporting (HKAS 34) is set
out in paragraphs 1–46 1–47. All the paragraphs …
Paragraphs 4, 5 and 8 are amended as follows:
4 ...
Interim financial report means a financial report containing either a

complete set of financial statements (as described in HKAS 1 Presentation
of Financial Statements (as revised in 2007)) or a set of condensed financial
statements (as described in this Standard) for an interim period.
5 HKAS 1 (as revised in 2007) defines a complete set of financial statements as

including the following components:
(a) a balance sheet a statement of financial position as at the end of the

period;
(b) an income statement a statement of comprehensive income for the

period;
(c) a statement of changes in equity for the period; showing either:
(i) all changes in equity; or
(ii) changes in equity other than those arising from transactions with
equity holders acting in their capacity as equity holders;
(d) a cash flow statement of cash flows for the period; and
(e) notes, comprising a summary of significant accounting policies and other

explanatory notes. information; and
(f) 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, or when it reclassifies items in its financial
statements.
8 An interim financial report shall include …
(a) a condensed balance sheet statement of financial position;
(b) a condensed income statement of comprehensive income,

presented as either:
(i) a condensed single statement; or
(ii) a condensed separate income statement and a condensed

statement of comprehensive income;
(c) a condensed statement of changes in equity showing either (i) all

changes in equity or (ii) changes in equity other than those arising
from capital transactions with owners and distributions to owners;
(d) a condensed cash flow statement of cash flows; and
(e) selected explanatory notes.

presents interim condensed information from that separate statement.
11 In the statement that presents the components of profit or loss for an

interim period, an entity shall present Bbasic and diluted earnings per share
shall be presented on the face of an income statement, complete or
condensed, for an interim that period.

presents basic and diluted earnings per share in that separate statement.
12 HKAS 1 (as revised in 2007) provides guidance on the structure of financial

statements. …
Paragraph 13 is deleted.
In paragraph 16(j), ‘last annual balance sheet date’ is amended to ‘end of the last
annual reporting period’.
20 Interim reports shall ...
(a) … financial year;.
(b) income statements of comprehensive income for the current interim

period and cumulatively for the current financial year to date, with
comparative income statements of comprehensive income for the
comparable interim periods (current and year-to-date) of the
immediately preceding financial year;. As permitted by HKAS 1 (as
revised in 2007), an interim report may present for each period either
a single statement of comprehensive income, or a statement
displaying components of profit or loss (separate income statement)
and a second statement beginning with profit or loss and displaying
components of other comprehensive income (statement of
comprehensive income).
(c) statement showing of changes in equity … preceding financial year;

and.
(d) …
In paragraph 21, ‘ending on the interim reporting date’ is amended to ‘up to the end of the
interim period’.
In paragraph 30(b), ‘on the balance sheet’ is amended to ‘in the statement of financial
position’.
In paragraph 31, ‘both at annual and interim financial reporting dates’ is amended to ‘at the
end of both annual and interim financial reporting periods’.
In paragraph 32, ‘at an interim reporting date’ is amended to ‘at the end of an interim
reporting period’ and ‘at an annual reporting date’ is amended to ‘at the end of an annual

HKFRSs. In addition it amended paragraphs 4, 5, 8, 11, 12 and 20, deleted
paragraph 13 and added paragraphs 8A and 11A. An entity shall apply those
HKAS 36 Impairment of Assets

61 An impairment loss on a non-revalued asset is recognised in profit or loss.

However, an impairment loss on a revalued asset is recognised directly against
any revaluation surplus for the asset in other comprehensive income to the extent
that the impairment loss does not exceed the amount in the revaluation surplus for
that same asset. Such an impairment loss on a revalued asset reduces the
revaluation surplus for that asset.
120 A reversal of an impairment loss on a revalued asset is credited directly to equity

under the heading recognised in other comprehensive income and increases the
revaluation surplus for that asset. However, …
In paragraphs 126 and 129, ‘directly in equity’ is amended to ‘in other comprehensive
income’.
140A HKAS 1 Presentation of Financial Statements (as revised in 2007) amended

paragraphs 61, 120, 126 and 129. An entity shall apply those amendments
for annual periods beginning on or after 1 January 2009. If an entity applies
HKAS 37 Provisions, Contingent Liabilities and Contingent Assets

In paragraph 25, ‘balance sheet items’ is amended to ‘items in the statement of financial
position’.
In paragraph 75, 'of users taken' is amended to 'that users make'.
HKAS 38 Intangible Assets

85 If an intangible asset’s carrying amount is increased as a result of a

revaluation, the increase shall be credited directly to recognised in other
comprehensive income and accumulated in equity under the heading of
revaluation surplus. However, ...
86 If an intangible … However, the decrease shall be debited directly to equity

under the heading of revaluation surplus recognised in other
comprehensive income to the extent of any credit balance in the revaluation
surplus in respect of that asset. The decrease recognised in other
comprehensive income reduces the amount accumulated in equity under
the heading of revaluation surplus.
In paragraph 87, ‘through the income statement’ is amended to ‘through profit or loss’.
In paragraph 118(e)(iii), ‘directly in equity’ is amended to ‘in other comprehensive

income’.
130B HKAS 1 Presentation of Financial Statements (as revised in 2007) amended

paragraphs 85, 86 and 118(e)(iii). An entity shall apply those amendments
for annual periods beginning on or after 1 January 2009. If an entity applies
HKAS 39 Financial Instruments: Recognition and Measurement

References to:
• ‘recognised in equity’ and ‘recognised directly in equity’ are amended to

‘recognised in other comprehensive income’.
• ‘separate balance sheet line item’ are amended to ‘separate line item in the
statement of financial position’.
In the last sentence of paragraph 11, ‘on the face of the financial statements’ is
amended to ‘in the statement of financial position’.
In paragraph 12, ‘at a subsequent financial reporting date’ is amended to ‘at the end of
a subsequent financial reporting period’.
In paragraph 14, ‘on its balance sheet’ is amended to ‘in its statement of financial
position’.
54 If, as a result … Any previous gain or loss on that asset that has been
recognised directly in equity other comprehensive income in accordance
with paragraph 55(b) shall be accounted for as follows:
(a) In the case … If the financial asset is subsequently impaired, any

gain or loss that has been recognised directly in equity in other
comprehensive income is recognised in reclassified from equity to
profit or loss in accordance with paragraph 67.
(b) In the case of a financial asset that does not have a fixed maturity,
the gain or loss shall remain in equity until the financial asset is sold
or otherwise disposed of, when it shall be recognised in profit or
loss when the financial asset is sold or otherwise disposed of. If the
financial asset is subsequently impaired any previous gain or loss
that has been recognised directly in equity is recognised in other
comprehensive income is reclassified from equity to profit or loss in
accordance with paragraph 67.
55 A gain or loss … shall be recognised, as follows.
(b) A gain or loss on an available-for-sale financial asset shall be

recognised directly in equity, through the statement of changes in
equity (see HKAS 1 Presentation of Financial Statements), in other
comprehensive income, except for impairment losses (see
paragraphs 67–70) and foreign exchange gains and losses (see
Appendix A paragraph AG83), until the financial asset is
derecognised., a At which that time, the cumulative gain or loss
previously recognised in equity other comprehensive income shall
be recognised in reclassified from equity to profit or loss as a
reclassification adjustment (see HKAS 1 Presentation of Financial
Statements (as revised in 2007)). However, …
In paragraph 68, ‘removed from equity and recognised in profit or loss’ is amended to
‘reclassified from equity to profit or loss’.
In paragraph 95(a), ‘recognised directly in equity through the statement of changes

in equity (see HKAS 1)’ is amended to ‘recognised in other comprehensive income’.
In paragraph 97, ‘reclassified into profit or loss’ is amended to ‘reclassified from

equity to profit or loss as a reclassification adjustment (see HKAS 1 (as revised in
2007))’.
98 If a hedge …
(a) It reclassifies the associated gains and losses that were recognised
directly in equity in other comprehensive income in accordance with
paragraph 95 into profit or loss as a reclassification adjustment (see
HKAS 1 (revised 2007)) in the same period or periods during which
the asset acquired or liability assumed affects profit or loss (such as
in the periods that depreciation expense or cost of sales is
recognised). However, if an entity expects that all or a portion of a
loss recognised directly in equity in other comprehensive income
will not be recovered in one or more future periods, it shall reclassify
from equity into profit or loss as a reclassification adjustment the

amount that is not expected to be recovered.
(b) It removes the associated gains and losses that were recognised
directly in equity other comprehensive income in accordance with
paragraph 95 …
100 For cash flow hedges other than those covered by paragraphs 97 and 98,
amounts that had been recognised in other comprehensive income directly
in equity shall be recognised in reclassified from equity to profit or loss as a
reclassification adjustment (see HKAS 1 (revised 2007)) in the same period
or periods during which the hedged forecast transaction affects profit or
loss (for example, when a forecast sale occurs).
In paragraph 101, ‘remains recognised directly in equity’ is amended to ‘has been

recognised in other comprehensive income’, ‘shall remain separately recognised in
equity’ is amended to ‘shall remain separately in equity’ and ‘shall be recognised in
profit or loss’ is amended to ‘shall be reclassified from equity to profit or loss as a
reclassification adjustment’.
102 Hedges of a net investment …
(a) the portion of the gain or loss on the hedging instrument that is
determined to be an effective hedge (see paragraph 88) shall be
recognised in other comprehensive income directly in equity
through the statement of changes in equity (see HKAS 1); and
(b) the ineffective portion shall be recognised in profit or loss.
The gain or loss on the hedging instrument relating to the effective portion
of the hedge that has been recognised in other comprehensive income
directly in equity shall be recognised in reclassified from equity to profit or
loss as a reclassification adjustment (see HKAS 1 (revised 2007)) on
disposal of the foreign operation.
Paragraph 103C is added as follows:
103C HKAS 1 (as revised in 2007) amended the terminology used throughout
HKFRSs. In addition it amended paragraphs 26, 27, 34, 54, 55, 57, 67, 68,
95(a), 97, 98, 100, 102, 105, 108, AG4D, AG4E(d)(i), AG56, AG67, AG83 and
AG99B. An entity shall apply those amendments for annual periods
beginning on or after 1 January 2009. If an entity applies HKAS 1 (revised
2007) for an earlier period, the amendments shall be applied for that earlier
period.
105 When … For any such financial asset, the entity shall recognise all
cumulative changes in fair value in a separate component of equity until
subsequent derecognition or impairment, when the entity shall transfer
reclassify that cumulative gain or loss from equity to profit or loss as a
reclassification adjustment (see HKAS 1 (revised 2007)). The entity ...
108 An entity shall not adjust the carrying amount of non-financial assets and
non-financial liabilities to exclude gains and losses related to cash flow
hedges that were included in the carrying amount before the beginning of
the financial year in which this Standard is first applied. At the beginning of
the financial period in which this Standard is first applied, any amount
recognised outside profit or loss (in other comprehensive income or directly

in equity) for a hedge of a firm commitment that under this Standard is
accounted for as a fair value hedge shall be reclassified as an asset or
liability, except for a hedge of foreign currency risk that continues to be
treated as a cash flow hedge.
Appendix A Application guidance is amended as described below.
In paragraph AG4E(d)(i), ‘changes reported in equity’ is amended to ‘changes recognised

in other comprehensive income’.
In paragraph AG25, ‘each subsequent balance sheet date’ is amended to ‘the end of each
subsequent reporting period’.
In paragraph AG51(a), ‘on its balance sheet’ is amended to ‘in its statement of financial
position’.
In paragraph AG67, 'The next financial reporting date' is amended to 'The end of the
reporting period'.
Paragraph AG99B is amended as follows:
AG99B If a hedge of a forecast intragroup transaction qualifies for hedge accounting, any
gain or loss that is recognised in other comprehensive income directly in equity in
accordance with paragraph 95(a) shall be reclassified into from equity to profit or
loss as a reclassification adjustment in the same period or periods during which
the foreign currency risk of the hedged transaction affects consolidated profit or
loss.
In paragraph AG129, ‘on the balance sheet’ is amended to ‘in the statement of financial
position’.
HKAS 40 Investment Property

A30 In HKAS 40, paragraph 62 is amended as follows:
62 Up to the date … In other words:
(a) any resulting decrease in the carrying amount of the property is

recognised in profit or loss. However, to the extent that an amount is
included in revaluation surplus for that property, the decrease is charged
against that recognised in other comprehensive income and reduces the
revaluation surplus within equity.
(b) any resulting increase in the carrying amount is treated as follows:
(i) …
(ii) any remaining part of the increase is credited directly in equity in

recognised in other comprehensive income and increases the
revaluation surplus within equity. On subsequent …
85A HKAS 1 Presentation of Financial Statements (as revised in 2007) amended

the terminology used throughout HKFRSs. In addition it amended paragraph
HKAS 41 Agriculture
A31 In paragraph 24(a) of HKAS 41, ‘a balance sheet date’ is amended to ‘the end of a
HK(IFRIC)-Int 1 Changes in Existing Decommissioning,

Restoration and Similar Liabilities
A32 HK(IFRIC)-Int 1 is amended as described below.
In the ‘References’ section, ‘HKAS 1 Presentation of Financial Statements is amended

to ‘HKAS 1 Presentation of Financial Statements (as revised in 2007)’.
6 If the related asset is measured using the revaluation model:
(a) changes in the liability … so that:
(i) a decrease in the liability shall (subject to (b)) be credited directly

to recognised in other comprehensive income and increase the
revaluation surplus within equity, … ;
(ii) an increase in the liability shall be recognised in profit or loss,

except that it shall be debited directly to recognised in other
comprehensive income and reduce the revaluation surplus within
equity to the extent ...
(b) ...
(c) a change ... Any such revaluation shall be taken into account in
determining the amounts to be taken to profit or loss and equity
recognised in profit or loss or in other comprehensive income under (a). If
a revaluation is necessary, all assets of that class shall be revalued.
(d) HKAS 1 requires disclosure on the face of in the statement of changes in

equity comprehensive income of each item component of other
comprehensive income or expense that is recognised directly in equity. In
complying with this requirement, the change in the revaluation surplus
arising from a change in the liability shall be separately identified and
disclosed as such.
earlier period.
HK(IFRIC)-Int 7 Applying the Restatement Approach under

HKAS 29 Financial Reporting in Hyperinflationary
Economies
In paragraph 3, ‘closing balance sheet date of the reporting period’ is amended to ‘end of
the reporting period’.
In paragraph 4, ‘closing balance sheet date’ is amended to ‘end of the reporting period’
and ‘closing balance sheet date of that period’ is amended to ‘end of that reporting period’.
HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment

In paragraph 1, ‘every reporting date’ is amended to ‘the end of each reporting period’,
‘every balance sheet date’ is amended to ‘the end of each reporting period’ and ‘a
subsequent reporting or balance sheet date’ is amended to ‘the end of a subsequent
In paragraph 7, ‘a subsequent balance sheet date’ is amended to ‘at the end of a

subsequent reporting period’.
HK(IFRIC)-Int 14 HKAS 19—The Limit on a Defined Benefit Asset,

Minimum Funding Requirements and their Interaction
A34A HK(IFRIC)-Int 14 is amended as described below.
In paragraph 10, 'net balance sheet asset or liability' is amended to 'net asset or liability
recognised in the statement of financial position'.
In paragraph 26(b), 'the statement of recognised income and expense' is amended to

'other comprehensive income'.
Paragraph 27A is added as follows.
earlier period.
A35 [Not used].
HK(SIC)-Int 10 Government Assistance—No Specific Relation

to Operating Activities
A36 In HK(SIC)-Int 10, in paragraph 3, ‘equity’ is amended to ‘shareholders’ interests’.
HK(SIC)-Int 13 Jointly Controlled Entities—Non-Monetary

Contributions by Venturers
A37 In HK(SIC)-Int 13, in paragraph 3(a), ‘the income statement’ is amended to ‘profit or loss’.
HK(SIC)-Int 15 Operating Leases—Incentives

A38 In HK(SIC)-Int 15, in the ‘References’ section, ‘HKAS 1 Presentation of Financial
Statements ’ is amended to ‘HKAS 1 Presentation of Financial Statements (as revised in
2007)’.
HK(SIC)-Int 25 Income Taxes—Changes in the Tax Status of an

Entity or its Shareholders
A39 HK(SIC)-Int 25 is amended as described below.
In the ‘References’ section, ‘HKAS 1 Presentation of Financial Statements (as revised in

2007)’ is added.
4 A change in the tax status of an entity or its shareholders does not give rise to
increases or decreases in amounts recognised directly in equity outside profit or
loss. The current and deferred tax consequences of a change in tax status shall
be included in profit or loss for the period, unless those consequences relate to
transactions and events that result, in the same or a different period, in a direct
credit or charge to the recognised amount of equity or in amounts recognised in
other comprehensive income. Those tax consequences that relate to changes in
the recognized amount of equity, in the same or a different period (not included in
profit or loss), shall be charged or credited directly to equity. Those tax
consequences that relate to amounts recognised in other comprehensive income
shall be recognised in other comprehensive income.
Under the heading ‘Effective date’ a new paragraph is added after ‘HKAS 8’ as follows:
HKAS 1 (as revised in 2007) amended the terminology used throughout HKFRSs. In
addition it amended paragraph 4. An entity shall apply those amendments for annual
periods beginning on or after 1 January 2009. If an entity applies HKAS 1 (revised 2007)
for an earlier period, the amendments shall be applied for that earlier period.
HK(SIC)-Int 29 Service Concession Arrangements: Disclosures

A40 In HK(SIC)-Int 29, in the ‘References’ section, ‘HKAS 1 Presentation of Financial
Statements’ is amended to ‘HKAS 1 Presentation of Financial Statements (as revised in
2007)’.
HK(SIC)-Int 32 Intangible Assets—Web Site Costs

A41 HK(SIC)-Int 32 is amended as described below.
In the ‘References’ section, ‘HKAS 1 Presentation of Financial Statements (as revised in

2003)’ is amended to ‘HKAS 1 Presentation of Financial Statements (as revised in 2007)’.
5 This Interpretation … Additionally, when an entity incurs expenditure on an

Internet service provider hosting the entity’s web site, the expenditure is
recognised as an expense under HKAS 1.78 88 and the Framework when the
services are received.
Under the heading ‘Effective date’ a second paragraph is added as follows:
HKAS 1 (as revised in 2007) amended the terminology used throughout HKFRSs. In
addition it amended paragraph 5. An entity shall apply those amendments for annual
periods beginning on or after 1 January 2009. If an entity applies HKAS 1 (revised 2007)
for an earlier period, the amendments shall be applied for that earlier period.
Appendix B
Comparison with International Accounting Standards
This comparison appendix, which was prepared as at December 2007 and deals only with
significant differences in the standards extant, is produced for information only and does not form
part of the standards in HKAS 1.
The International Accounting Standard comparable with HKAS 1 is IAS 1 Presentation of

Financial Statements.
The following sets out the major textual difference between HKAS 1 and IAS 1 and the reason for
the difference.
Difference Reason for the differences
(i) IAS 1 paras 15-24 vs HKAS 1 paras

15-24
To match with the terms used in the Hong
The terms 'fair presentation' and 'present Kong Companies Ordinance
fairly' used in IAS 1 are replaced by the
terms 'true and fair view' and 'achieve a
true and fair view' in HKAS 1
Appendix C
Notes on Legal Requirements in Hong Kong
This appendix accompanies, but is not part of, HKAS 1.
The following sets out the legal requirements in Hong Kong that are pertinent to each Hong Kong
Accounting Standards or Hong Kong Financial Reporting Standards. The references to “the
Schedule” below are to the Tenth Schedule to the Companies Ordinance (“CO”).
1. HKAS 1 Presentation of Financial Statements
Sections 122 and 123 of the CO requires the directors of a company to prepare a profit
and loss account for each financial year, and a balance sheet as at the last day of that
year. The accounts must give a true and fair view of the profit or loss and of the state of
affairs of the company, and comply with the requirements of the Schedule.
Sections 124 to 126 of the CO requires, where a company has a subsidiary at the end
of its financial year, the directors of a company to prepare group accounts unless the
company is, at the end of its financial year, a wholly owned subsidiary of another body
corporate. Group accounts, which normally comprise a consolidated balance sheet and
a consolidated profit and loss account, must give a true and fair view of the state of
affairs and profit or loss of the company and its subsidiaries.
Section 129D of the CO requires a directors’ report to be attached to every balance

sheet laid before a company in general meeting. The legal requirements with regard
to the content of a directors’ report are dealt with in Sections 129D, 129E and 141C of
the CO.
Section 122 of the CO requires a company’s accounts, together with the directors’
report and auditors’ reports to be laid before the company at its annual general meeting
and the accounts of private companies (other than a private company which is a
member of a group of companies which includes a non-private company) and
companies limited by guarantee, and all other companies to be made up to not more
than 9 and 6 months, respectively, prior to the meeting.
Section 111 of the CO requires that, unless approved by the Registrar of Companies,
no more than 15 months should elapse between the date of one annual general
meeting and the next, and that the first annual general meeting of the company must be
held within 18 months of its incorporation.
In general terms the legal requirements with regard to the form and content of the
accounts are dealt with, inter alia, in Section 122 to 129A and Sections 161 to 161C of
the CO and the Schedule.
2 HKAS 2 Inventories
Paragraph 12(13) of the Schedule requires the disclosure of the manner in which the
carrying amount of stock in trade or work in progress has been calculated.
3 HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
Paragraph 17(6)* of the Schedule requires disclosure of the following:
"Any material respects in which any items shown in the profit and loss account are
affected –
a. by transactions of a sort not usually undertaken by the company or

otherwise by circumstances of an exceptional or non-recurrent nature; or
b. by any change in the basis of accounting."
4 HKAS 10 Events After the Reporting Period
Paragraph 9(1)(e) of the Schedule requires the disclosure of the aggregate amount
which is recommended for distribution by way of dividend in the balance sheet.
Paragraph 13(1)(j) of the Schedule requires the disclosure of the aggregate amount of
the dividend paid and proposed in the profit and loss account.
5 HKAS 11 Construction Contracts
Paragraph 12(13) of the Schedule requires the disclosure of the manner in which the
carrying amount of stock in trade or work in progress has been calculated.
6 HKAS 12 Incomes Taxes
Paragraph 8* of the Schedule requires that if an amount is set aside for the purpose of
its being used to prevent undue fluctuations in charges for taxation, it shall be stated.
Paragraph 12(12)* the Schedule requires that, if such amount has been used during
the financial year for another purpose, the amount thereof and the fact that it has been
so used shall be stated.
Paragraph 12(15) of the Schedule requires disclosure of the basis on which the
amount, if any, set aside for Hong Kong profits tax is computed.
Paragraph 13(1)(c)* of the Schedule requires disclosure of the amount of the charge to
revenue for taxes imposed by the Inland Revenue Ordinance and, if that amount would
have been greater but for relief from double taxation, the amount which it would have
been but for such relief, and the amount of the charge for taxation imposed outside
Hong Kong of profits, income and (so far as charged to revenue) capital gains.
Paragraph 17(3)* of the Schedule requires that the basis on which the charge for Hong
Kong profit tax is computed shall be stated. Particulars are required of any special
circumstances affecting the tax liability for the financial year or succeeding financial
years (paragraph 17(4) of the Schedule).
7 HKAS 16 Property, Plant and Equipment
Paragraph 4g of the Schedule requires that fixed assets, current assets and assets that
are neither fixed nor current shall be separately identified, and that the method used to
arrive at the amount of fixed assets under each heading should be stated.
Paragraph 5*g of the Schedule requires disclosure of the aggregate amount of the cost
or valuation of fixed assets under appropriate headings and of the aggregate amount
provided or written off since the date of acquisition or valuation for depreciation or
diminution in value.
Paragraph 10 of the Schedule requires that where any liability of the company is
secured otherwise than by operation of law on any assets of the company, the fact that
that liability is so secured shall be stated, but it shall not be necessary to specify the
assets on which the liability is secured.
Paragraph 12(4)g of the Schedule requires disclosure of particulars of any charge on

the assets of the company to secure the liabilities of any other person, including, where
practicable, the amount secured.
Paragraph 12(6) of the Schedule requires disclosure of, where practicable, the
aggregate amount or estimated amount, if it is material, of contracts for capital
expenditure, so far as not provided for and the aggregate amount or estimated amount,
if it is material, of capital expenditure authorised by the directors which has not been
contracted for.
Paragraph 12(7)*g of the Schedule requires disclosure of the years in which fixed
assets were severally valued and their respective values, and in the case of assets
valued during the financial period:
a. the names of the persons who valued them or particulars of their qualifications
for doing so; and
b. the bases of valuation used by such persons.
Paragraph 12(8)* of the Schedule requires disclosure of the amounts of fixed assets
acquired or disposed of during the year under each heading. Where fixed assets
include land, paragraph 12(9)* requires separate disclosure of the amounts ascribable
to:
a. land in Hong Kong held on long lease (not less than 50 years), medium-term
lease (10 to 50 years) and short lease (under 10 years) respectively; and
b. land outside Hong Kong held freehold, on long lease, medium-term lease and
short lease respectively.
Under paragraph 13(1)(a)*g of the Schedule disclosure must be made of the amount
charged to revenue by way of provision for depreciation, renewals or diminution in
value of fixed assets.
8 HKAS 17 Leases
Paragraph 13(1)(i)*g of the Schedule requires disclosure of the amount, if material,

charged to revenue in respect of sums payable in respect of the hire of plant and
machinery.
9 HKAS 18 Revenue
Paragraph 13(1)(g)*g of the Schedule requires disclosure of the amounts respectively of

income from listed investments and income from unlisted investments.
Paragraph 13(1)(h)g requires disclosure of rents from land and buildings (after
deduction of ground rents, rates and other out-going) if a substantive part of the
company’s revenue for the financial year consists of such rents.
Paragraph 16 of the Schedule requires disclosure of turnover and the method by which
it is arrived at.
10 HKAS 19 Employee Benefits
The legal requirements as regards the disclosure of directors' emoluments, rights to

acquire shares or debentures and other benefits are dealt with in the section below
concerning HKAS 24 Related Party Disclosures.
Under the Employment Ordinance, an enterprise is required to make long service

payments to its employees upon the termination of their employment or retirement
when the employee fulfils certain conditions and the termination meets the required
circumstances. However, where an employee is simultaneously entitled to a long
service payment and to a retirement scheme payment, the amount of the long service
payment may be reduced by certain benefits arising from the retirement scheme. Based
on the enterprise's past experience and the directors' knowledge of the business and
work force, it is probable that the enterprise will have to make long service payments to
some employees on termination of their employment or retirement. Such long service
payments are accounted for as "post-employment benefits: defined benefit plans".
Paragraph 30(1) of the Schedule defines "provision" as any amount written off or
retained by way of providing for depreciation, renewals or diminution in value of assets
or any amount retained by way of providing for any known liability of which the amount
cannot be determined with substantial accuracy. The amount provided for certain
employee benefits (e.g. pensions) falls within this definition.
Paragraph 4(1)g of the Schedule requires the classification of provisions under

headings appropriate to the company's business.
Paragraph 6*g of the Schedule requires the disclosure of the aggregate amount of
provisions (other than provisions for depreciation, renewals and diminution in value of
assets) under separate headings.
Paragraph 7*g of the Schedule requires the disclosure of the source of any increase
and the application of any decrease in each sub-heading of provisions.
Paragraph 13(1)(f)*g of the Schedule requires the disclosure of the amount set aside to
assets) or the amount withdrawn from such provisions and not applied for the purposes
of the provisions, if its is material.
Paragraph 12(5)*g of the Schedule requires the disclosure of the general nature of any
other contingent liabilities not provided for, and, when practicable, the aggregate
amount or estimated amount of those liabilities, if it is material.
11 HKAS 20 Accounting for Government Grants and Disclosure of Government

Assistance
Paragraph 4g of the Schedule requires that the method used to arrive at the amount of
fixed assets under each heading should be stated.
Paragraph 12(5)*g of the Schedule requires disclosure of the general nature of any
12 HKAS 21 The Effects of Changes in Foreign Exchange Rates
Paragraph 12(14)* of the schedule requires disclosure of the basis on which other
currencies have been converted into currency in which the balance sheet is expressed,
where the amount of the assets or liabilities affected is material.
13 HKAS 22 Business Combinations
The legal requirements in Hong Kong with regard to the form and content of group
accounts and other matters relating to subsidiaries of a company are dealt with in the
section below concerning HKAS 27 Consolidated and Separate Financial Statements.
The Schedule contains the following disclosure requirements for goodwill:
a. Balance sheet
Paragraph 9(1)(b) of the Schedule requires the disclosure of the unamortised

balance of goodwill either as a separate item or aggregated with any
unamortised balances on patents and trademarks. This requirement applies
whether the goodwill is carried as a separate balance in the books or can only
be ascertained from contracts or documents.
b. Profit and loss account
The amortisation treatment involves the allocation of cost of purchased goodwill

over its useful life and can be regarded as depreciation within the meaning of
the Schedule. Therefore the disclosure requirements of paragraph 13(1)(a)*g of
that Schedule apply and the amount charged to revenue for amortisation of
goodwill should be disclosed.
14 HKAS 23 Borrowing Costs
Paragraph 13(1)(b)* of the Schedule requires disclosure of the following:
"the amount of the interest on loans of the following kinds made to the company
(whether on the security of debentures or not), namely, bank loans, overdrafts and
loans which, not being bank loans or overdrafts,
i. are repayable otherwise than by instalments and fall due for repayment before
the expiration of the period of 5 years beginning with the day next following the
expiration of the financial year; or
ii. are repayable by instalments the last of which falls due for payment before the
expiration of that period;
and the amount of the interest on loans of other kinds so made (whether on the security
of debentures or not)".
15 HKAS 24 Related Party Disclosures
Section 128 of the CO requires that if at the end of its financial year, a company has
subsidiaries, the following should be disclosed in the accounts:
a. the subsidiary's name;

b. its country of incorporation; and
c. in relation to shares of each class of the subsidiary held by the company, the
identity of the class and the proportion of the nominal value of the issued
shares of that class represented by the shares held.
Section 129 of the CO requires, subject to certain exemption set out in sections 129(3)
to 129(5) that if at the end of its financial year, a company holds more than 20% of any
class of issued shares of another body corporate (not being a subsidiary), or the
shareholding in another body corporate (not being a subsidiary) exceeds 10% of the
total assets of the company, the following should be disclosed:
a. the name of that other body corporate;

c. the identity of the class and the proportion of the nominal value of the issued
Section 129A of the CO requires disclosure of the name and country of incorporation of
the body corporate regarded by the directors as being the company's ultimate holding
company.
Section 129D(3)(i) of the CO requires disclosure in the directors' report of the names of
the persons who, at any time during the financial year, were directors of the company.
Section 129D(3)(ia) of the CO requires disclosure in the directors' report of a statement

of the existence and duration of any contract in force during the year for the
management and administration of the whole or any substantial part of the company's
business, together with the name of any director interested therein.
Section 129D(3)(j) of the CO requires disclosure in the directors' report of any interest
of a director in a contract with the company or its subsidiary, holding company or fellow
subsidiary, if, in the opinion of the directors, the contract is significant in relation to the
company's business and the director's interest is material, whether directly or indirectly,
at any time in the year, stating:
a. the fact that the contract subsists or subsisted;

b. the names of the parties involved (other than the company);
c. the name of the director (if not a party);
d. the nature of the contract; and
e. the nature of the director's interest.
This does not apply to directors' service contracts nor to contracts between the
company and another body corporate where a director's only interest is by virtue of his
being a director of that other body.
Section 129D(3)(k) of the CO requires disclosure in the directors' report of any

directors' rights to acquire shares or debentures, in the company or any other body
corporate, under any arrangement to which the company or its subsidiary, holding
company or fellow subsidiary is a party, explaining the effects of the arrangement and
giving the names of all directors during the year who held shares or debentures
acquired pursuant to the arrangement.
Section 161 of the CO requires disclosure of the following, distinguishing between

emoluments in respect of services as director (of the company or its subsidiary) and
other emoluments:
a. the aggregate amount of directors' emoluments;

b. the aggregate amount of directors' or past directors' pensions; and
c. the aggregate amount of any compensation to directors or past directors in
respect of loss of office, distinguishing between sums paid by or receivable
from the company, its subsidiaries and any other persons.
Ф
Section 161B of the CO requires the accounts to contain certain particulars of every
relevant transaction, being a loan, quasi-loan or credit transaction, entered into by the
company during that financial year or, if made or entered into before it, is outstanding at
any time during that financial year to the following parties:
a. a director or an officer of the company;

b. a director of its holding company;
c. a body corporate controlled by a director of the company; or
d. persons etc. connected with a director of the company or of its holding
company;
Paragraph 9(1)(c) of the Schedule requires disclosure of loans to employees, or to

trustees for employees (including salaried directors), to purchase fully paid shares in
the company or in its holding company.
Paragraph 18(2)* of the CO of the Schedule requires the aggregate amounts of shares
in, and the amounts owing from (and indebtedness to) the company's subsidiaries to be
set out separately from all other assets (and liabilities) of the company.
Paragraph 18(3)* of the CO requires disclosure of the number, description and amount
of the shares in and debentures of the company held by its subsidiaries or their
nominees except where the subsidiaries or their nominees hold the shares as trustees
and neither the company nor the subsidiaries have any beneficial interest in those
shares.
Paragraph 19(1)* of the CO of the Schedule requires disclosure of the aggregate

amounts owing from and indebtedness to the company's holding companies and fellow
subsidiaries, and the aggregate amount of assets consisting of shares in fellow
subsidiaries.
16 HKAS 27 Consolidated and Separate Financial Statements
Under section 2(4) of the CO, a company shall be deemed to be a subsidiary of another
company, if:
a. that other company:
i. controls the composition of the board of directors of the first mentioned

company; or
ii. controls more than half of the voting power of the first mentioned
company; or
iii. holds more than half of the issued share capital of the first mentioned
company (excluding any part of it which carries no right to participate
beyond a specified amount in a distribution of either profits or capital);
or
b. the first mentioned company is a subsidiary of any company which is that other
company's subsidiary.
For the purposes of defining a subsidiary under section 2(4) of the CO, section 2(5) of
the CO states that the composition of a company's board of directors shall be deemed
to be controlled by another company if that other company by the exercise of some
power exercisable by it, without the consent of any other person, can appoint or remove
all or a majority of the directors, and, for the purposes of this provision, that other
company shall be deemed to have power to make such an appointment if:
a. a person cannot be appointed as a director without the exercise in his favour by

that other company of such a power; or
b. a person's appointment as a director follows necessarily from his being a

director or other officer of that other company.
The Companies (Amendment) Ordinance 2005 introduced a definition of "parent

undertaking" and "subsidiary undertaking". A provision to deem a holding company to
include a parent company and a subsidiary to include a subsidiary undertaking was
added in Section 2B. In essence, this enable Hong Kong incorporated companies to
use the definition of subsidiary in HKAS 27 for the purpose of preparing group
accounts. Parent undertaking and subsidiary undertaking are defined in Schedule 23
as follows:
(1) An undertaking is a parent undertaking ("parent undertaking") in relation to

another undertaking ("subsidiary undertaking") if—
(a) (i) in the case where both the parent undertaking and the subsidiary
undertaking are bodies corporate, the subsidiary undertaking is a
subsidiary of the parent undertaking by virtue of section 2(4), (5), (6)
and (7) of the CO; or
(ii) in any other case, the parent undertaking—

(A) holds a majority of the voting rights in the subsidiary
undertaking;
(B) is a member of the subsidiary undertaking and has the right to
appoint or remove a majority of its board of directors; or
(C) is a member of the subsidiary undertaking and controls alone,
pursuant to an agreement with other shareholders or
members, a majority of the voting rights in the subsidiary
undertaking; or
(b) the parent undertaking has the right to exercise a dominant influence
over the subsidiary undertaking by virtue of—
(i) the provisions contained in the subsidiary undertaking's
memorandum or articles or equivalent constitutional
documents; or
(ii) a control contract.
(2) For the purposes of subsection (1)(a)(ii), an undertaking shall be treated as a

member of another undertaking ("the relevant undertaking"), if—
(a) any of its subsidiary undertakings is a member of the relevant

undertaking; or
(b) any shares in the relevant undertaking are held by a person acting on
behalf of the first-mentioned undertaking or any of its subsidiary
undertakings.
(3) An undertaking shall be treated as the parent undertaking of another

undertaking if a subsidiary undertaking of the first-mentioned undertaking is, or
is to be treated as, the parent undertaking of that other undertaking; and
references to a subsidiary undertaking of the first-mentioned undertaking shall
be construed accordingly.
The obligation to lay group accounts before the members of a holding company in
general meeting is set out in section 124(1) of the CO. In general terms the form and
content of group accounts are dealt with inter alia in sections 125 and 126 of the CO
and in the Schedule.
Under section 124(2)(a) of the CO group accounts shall not be required where the
holding company is at the end of its financial year the wholly-owned subsidiary of
another body corporate.
Section 124(2)(b) of the Companies Ordinance also allows group accounts (subject to
approval of the Financial Secretary in certain instances) not to deal with a subsidiary if
the company's directors are of the opinion that:
a. it is impracticable, or would be of no real value to members of the company, in

view of the insignificant amount involved, or would involve expense or delay out
of proportion to the value to members of the company; or
b. the result would be misleading, or harmful to the business of the company or

any of its subsidiaries; or
c. the business of the holding company and that of the subsidiary are so different
that they cannot reasonably be treated as a single undertaking.
It should be noted that HKAS 27 takes the view that all subsidiaries should be included
in the consolidated financial statements. except for a subsidiary where there is
evidence that (a) control is intended to be temporary because the subsidiary is acquired
and held exclusively with a view to its disposal within twelve months from acquisition
and (b) management is actively seeking a buyer.
In general, section 125 of the CO requires group accounts to be presented in the form
of consolidated accounts and should comprise a consolidated balance sheet and a
consolidated profit and loss account dealing with the state of affairs and profit or loss of
the company and its subsidiaries. However, section 125 of the CO also accepts that
group accounts may be presented in a form other than a single set of consolidated
accounts under certain conditions. It is generally accepted that consolidated financial
statements are usually the best means of achieving the objective of giving a true and
fair view of the profit or loss and of the state of affairs of the group. It should be noted
that, where subsidiaries are not dealt with in group accounts or are being dealt with in a
form of group accounts other than consolidated financial statements, information may
still be required by law about the results of these subsidiaries and the extent to which
they have been dealt with in the accounts of the holding company (paragraphs 18(4)
and 24 of the Schedule).
Section 127(1) of the of the CO states that a holding company's directors shall secure
that, except where in their opinion there are good reasons against it, the financial year
of each of its subsidiaries shall coincide with the company's own financial year.
Section 126(2) of the CO requires that, if the financial year of a subsidiary is not
co-terminous with that of the holding company, the group accounts shall deal with the
subsidiary's results and state of affairs as of the last financial year ending on or before
the date of the holding company's balance sheet. It also requires the disclosure of the
reasons why the financial year of a subsidiary does not coincide with that of the
holding company.
Paragraph 18(2) and 19(1) of the Schedule require disclosure of the aggregate
amounts of shares in, and the amounts owing from and indebtedness to, the
subsidiaries and fellow subsidiaries.
Paragraphs 18(4), 18(5) and 24(b) of the Schedule require disclosure of the following
information where group accounts are not submitted:
a. the reasons why subsidiaries are not dealt with in group accounts;
b. the net aggregate amount attributable to the holding company of the profits less
losses of such subsidiaries, dealt with this year and not dealt with, in the
company’s accounts, both for:
− the financial years of subsidiaries ending with or during the financial year of
the company; and
− their previous financial years since acquisition; and
c. any material qualifications in the auditors’ report and any note to the accounts
disclosing a matter which, in the absence of such disclosure, would have been
referred to in an audit report qualification, to the extent that the matter is not
referred to in the holding company’s audit report and is material from the point
of view of its members.
Paragraphs 18(6) and 25 of the Schedule requires disclosure of the following

information where group accounts are not submitted and the subsidiaries’ financial year
did not end with that of the company:
a. the reasons why the company’s directors consider that the subsidiaries’
financial years should not end with that of the company; and
b. the dates on which the subsidiaries’ financial years ending last before that of
the company respectively ended or the earliest and latest of those dates.
The Companies (Amendment) Ordinance 2005, in general, redefines the definition of

“subsidiary” for the purpose of preparing group accounts to include a subsidiary
undertaking as defined in the new Schedule 23 and includes a true and fair overriding
provision. In essence, this would enable Hong Kong incorporated companies to use
the definition of subsidiary in HKAS 27 for the purpose of preparing group accounts.
17 HKAS 28 Investment in Associates
Section 129 of the Companies Ordinance requires that if at the balance sheet date, a
company holds more than 20% of any class of issued shares of another company, or
the shareholding in another company exceeds 10% of the total assets of the investing
company, the following should be disclosed subject to sections 129(3) to 129(5) of the
CO:
a. the name of that other company;

share of that class represented by the shares held.
In the case of an investee company which is either incorporated outside Hong Kong or
carries on business outside Hong Kong, section 129(3) of the Companies Ordinance
provides that disclosure of the company's name and other particulars need not be
made if in the opinion of the directors and with the concurrence of the Financial
Secretary such disclosure would be harmful.
Paragraph 9(1)(a)g of the Schedule requires separate disclosure of the aggregate

amounts respectively of listed investments and unlisted investments.
Paragraph 9(3)g of the Schedule requires that the amount of listed investments in the
balance sheet should be analysed into those listed in Hong Kong and those listed
outside Hong Kong.
Paragraph 12(5)g of the Schedule requires disclosure of the general nature of any other
contingent liabilities not provided for and, where practicable, the aggregate amount or
estimated amount of those liabilities, if it is material.
contracted for.
Paragraph 13(1)(g)*g of the Schedule requires disclosure of the amounts respectively

of income from listed investments and income from unlisted investments.
18 HKAS 31 Interests in Joint Ventures
company, the following should be disclosed:

In the case of an investee company which is either incorporated outside Hong Kong or
carries on business outside Hong Kong, section 129(3) of the Companies Ordinance
provides that disclosure of a company's name and other particulars need not be made if
in the opinion of the directors and with the concurrence of the Financial Secretary such
disclosure would be harmful.
Paragraph 9(1)(a)g of the Schedule requires separate disclosure of the aggregate

Paragraph 9(3)g of the Schedule requires that the amount of listed investments in the
balance sheet should be analysed into those listed in Hong Kong and those listed
outside Hong Kong.
Paragraph 12(5)g of the Schedule requires disclosure of the general nature of any other
contingent liabilities not provided for and, where practicable, the aggregate amount or
estimated amount of those liabilities, if it is material.
contracted for.

19 HKAS 36 Impairment of Assets
or retained by way of providing for any known liability of which the amount cannot be
determined with substantial accuracy. This covers the definition of "impairment loss" in
paragraph 5 of HKAS 36.

20 HKAS 37 Provisions, Contingent Liabilities And Contingent Assets
or any amount retained by way of providing for any known liability of which the amount
cannot be determined with substantial accuracy. This definition is wider in scope than
the definition in HKAS 37.

Paragraph 6*g of the Schedule requires the disclosure of the aggregate amount of
assets) under separate headings.
Paragraph 13(1)(f)*g of the Schedule requires the disclosure of the amount set aside to
assets) or the amount withdrawn from such provisions and not applied for the purposes
of the provisions, if it is material.
Paragraph 12(4)g of the Schedule requires the disclosure of particulars of any charge
on the assets of the company to secure the liabilities of any other person, including,
where practicable, the amount secured.
Paragraph 12(5)g of the Schedule requires the disclosure of the general nature of any
21 HKAS 38 Intangible Assets
Paragraph 9(1)(b) of the Schedule requires the disclosure of the unamortised balances
on patents and trademarks either as separate items or aggregated with any
unamortised balance of goodwill. This requirement applies whether the patents and
trademarks are carried as balances in the books or can only be ascertained from
contracts or documents.
The amortisation treatment involves the allocation of the depreciable amount of an

intangible asset over the best estimate of its useful life and can be regarded as
depreciation within the meaning of the Schedule. Therefore, the disclosure
requirements of paragraph 13(1)(a)*g of the Schedule apply and the amount charged to
revenue for amortisation of an intangible asset should be disclosed.
22 HKAS 40 Investment Property
Paragraph 10 of the Schedule requires that where any liability of the company is
secured otherwise than by operation of law on any assets of the company, the fact that
that liability is so secured shall be stated, but it shall not be necessary to specify the
assets on which the liability is secured.
Paragraph 12(4)g of the Schedule requires disclosure of particulars of any charge on

the assets of the company to secure the liabilities of any other person, including, where
practicable, the amount secured.
a. the name of the persons who valued them or particulars of their qualifications
for doing so; and
Paragraph 12(8)*g of the Schedule requires disclosure of the aggregate amounts of

fixed assets acquired or disposed of during the year under each heading. Where fixed
assets include land, paragraph 12(9)* requires separate disclosure of the amounts
ascribable to:
a. land in Hong Kong held on long lease, medium-term lease and short lease
respectively; and
b. land outside Hong Kong held freehold, on long lease, medium-term lease and
short lease respectively.
Paragraph 13(1)(h)g of the Schedule requires disclosure of rental income from land and
buildings (after deduction of ground rents, rates and other out-goings) if a substantive
part of the company’s revenue for the financial year consists of such rents.
23 HKAS 41 Agriculture
Paragraph 12(5)g of the Schedule requires disclosure of the general nature of any
a. the names of the persons who valued them or particulars of their qualifications
for doing so; and
24 HKFRS 7 Financial Instruments: Disclosures
company, the following should be disclosed:

Paragraph 4(2)g of the Schedule requires fixed assets, current assets and assets that
are neither fixed nor current to be separately identified.
Paragraph 5*g of the Schedule requires that where the directors' valuation of unlisted
investments is not given and such investments are classified as fixed assets, the
following should be stated:
a. cost or valuation as shown in the company's books; and

b. any amount provided or written off for diminution in value.
Paragraph 9(1)(a) of the Schedule requires separate disclosure of the aggregate

Paragraph 9(1)(d) requires disclosure of the aggregate amount of banks loans and
overdrafts and the aggregate amount of loans (other than bank loans and overdrafts)
repayable wholly in part more than five years from the balance sheet date.
Paragraph 9(3)g of the Schedule requires that the carrying amounts of listed
investments in the balance sheet should be analysed into those listed in Hong Kong
and those listed outside Hong Kong.
Paragraph 9(4) of the Schedule requires disclosure of the terms of repayments and the
rate of interests for each loan, other than a bank loan or an overdraft, specified in
paragraph 9(1)(d) of the Schedule
Paragraph 12(10) of the Schedule requires that, if in the opinion of the directors, the
realisable value of any current assets is less than the balance sheet value, a statement
of that fact should be included in the accounts.
Paragraph 12(11)*g of the Schedule requires disclosure of the aggregate market value
of listed investments where it differs from the carrying amounts in the balance sheet. If
the aggregate market value is higher than the Stock Exchange value, the Stock
Exchange value should also be disclosed.
Paragraph 13(1)(a)*g of the Schedule requires disclosure of the amount charged to

revenue by way of provision for depreciation, renewals or diminution in value of fixed
assets.

Notes: * These requirements do not apply to banking companies that are entitled to certain
disclosure exemptions under Part III of the Schedule.
g
These requirements do not apply to insurance companies that are entitled to certain
disclosure exemptions under Part III of the Schedule.
Ф
This revised S161B of the CO came into operation for relevant transactions entered
into by the company after 13 February 2004.
Appendix D
Amendments to HKAS 32 and HKAS 1 Puttable Financial

Instruments and Obligations Arising on Liquidation (issued in
June 2008) - effective for annual periods beginning on or after 1
January 2009
The following sets out amendments required for this Standard resulting from amendments to
HKAS 32 and HKAS 1 that are not yet effective. Once effective, the amendments set out below will
be incorporated into the text of this Standard and this appendix will be deleted. In the amended
paragraphs shown below, new text is underlined and deleted text is struck through.
Definitions
After paragraph 8, paragraph 8A is added.
8A The following terms are described in HKAS 32 Financial Instruments: Presentation and are
used in this Standard with the meaning specified in HKAS 32:
(a) puttable financial instrument classified as an equity instrument (described in

paragraphs 16A and 16B of HKAS 32)
(b) an instrument that imposes on the entity an obligation to deliver to another party a
pro rata share of the net assets of the entity only on liquidation and is classified as
an equity instrument (described in paragraphs 16C and 16D of HKAS 32).
Information to be presented either in the statement of financial position or in the notes
After paragraph 80, paragraph 80A is added.
80A If an entity has reclassified
(a) a puttable financial instrument classified as an equity instrument, or
(b) an instrument that imposes on the entity an obligation to deliver to another

party a pro rata share of the net assets of the entity only on liquidation and
is classified as an equity instrument
between financial liabilities and equity, it shall disclose the amount reclassified into
and out of each category (financial liabilities or equity), and the timing and reason
for that reclassification.
After paragraph 136, a heading and paragraph 136A are inserted. Paragraph 138 is amended
(new text is underlined and deleted text is struck through).
Puttable financial instruments classified as equity
136A For puttable financial instruments classified as equity instruments, an entity shall
disclose (to the extent not disclosed elsewhere):
(a) summary quantitative data about the amount classified as equity;
(b) its objectives, policies and processes for managing its obligation to
repurchase or redeem the instruments when required to do so by the
instrument holders, including any changes from the previous period;
© Copyright 76A HKAS 1 (March June 2008)

(c) the expected cash outflow on redemption or repurchase of that class of

financial instruments; and
(d) information about how the expected cash outflow on redemption or

repurchase was determined.
Other disclosures
138 An entity shall disclose the following, if not disclosed elsewhere in information
published with the financial statements:
(a) the domicile and legal form of the entity, its country of incorporation and the
address of its registered office (or principal place of business, if different
from the registered office);
(b) a description of the nature of the entity’s operations and its principal
activities; and
(c) the name of the parent and the ultimate parent of the group.; and
(d) if it is a limited life entity, information regarding the length of its life.
After paragraph 139A, paragraph 139B is added.

139B Puttable Financial Instruments and Obligations Arising on Liquidation (Amendments to
HKAS 32 and HKAS 1), issued in June 2008, amended paragraph 138 and inserted
paragraphs 8A, 80A and 136A. An entity shall apply those amendments for annual periods
beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies
the amendments for an earlier period, it shall disclose that fact and apply the related
amendments to HKAS 32, HKAS 39, HKFRS 7 and HK(IFRIC)-Int 2 Members’ Shares in
Co-operative Entities and Similar Instruments at the same time.
© Copyright 76B HKAS 1 (June 2008)

Appendix DE
Amendments resulting from other HKFRSs

The following sets out amendments required for this Standard resulting from other newly issued
HKFRSs that are not yet effective. Once effective, the amendments set out below will be
incorporated into the text of this Standard and this appendix will be deleted. In the amended
paragraphs, new text is underlined and deleted text is struck through.
HKAS 27 Consolidated and Separate Financial Statements (issued in March

2008) - effective for annual periods beginning on or after 1 July 2009
References to ‘[a] minority interest’ or ‘minority interests’ are amended to ‘non-controlling interests’
in paragraphs 54(q), 83(a)(i), and 83(b)(i).
Paragraph 106 of HKAS 1 (as revised in 2007) is amended as follows:
106 An entity shall present a statement of changes in equity showing in the

statement:
(a) total comprehensive income for the period, showing separately the
total amounts attributable to owners of the parent and to
non-controlling minority interests;
(b) for each component of equity, the effects of retrospective

application or retrospective restatement recognised in accordance
with HKAS 8; and
(c) [deleted] the amounts of transactions with owners in their capacity

as owners, showing separately contributions by and distributions to
owners; and
(d) for each component of equity, a reconciliation between the carrying

amount at the beginning and the end of the period, separately
disclosing each changes resulting from:
(i) profit or loss;
(ii) each item of other comprehensive income; and
(iii) transactions with owners in their capacity as owners,

showing separately contributions by and distributions to
owners and changes in ownership interests in subsidiaries
that do not result in a loss of control.
139A HKAS 27 (as amended in 2008) amended paragraph 106. An entity shall
apply that amendment for annual periods beginning on or after 1 July 2009.
If an entity applies HKAS 27 (amended 2008) for an earlier period, the
amendment shall be applied for that earlier period. The amendment shall be
applied retrospectively.
© Copyright 76C HKAS 1 (June 2008)

Basis for Conclusions on

HKAS 1 Presentation of Financial Statements
This Basis for Conclusions accompanies, but is not part of, HKAS 1.
HKAS 1 is based on IAS 1 Presentation of Financial statements. In approving HKAS 1, the Council
of the Hong Kong Institute of Certified Public Accountants considered and agreed with the IASB’s
Basis for Conclusions on IAS 1. Accordingly, there are no significant differences between HKAS 1
and IAS 1. The IASB’s Basis for Conclusions is reproduced below. The paragraph numbers of IAS
1 referred to below generally correspond with those in HKAS 1.
CONTENTS
paragraphs
INTRODUCTION BC1–BC10
BASIS FOR CONCLUSIONS ON
IAS 1 PRESENTATION OF FINANCIAL STATEMENTS
The Improvements project—revision of IAS 1 (2003) BC2–BC4

Amendment to IAS 1—Capital Disclosures (2005) BC5–BC6
Financial statement presentation—Joint project BC7–BC10
DEFINITIONS BC11–BC13
General purpose financial statements BC11–BC13
FINANCIAL STATEMENTS BC14–BC38
Complete set of financial statements BC14–BC22
Titles of financial statements BC14–BC21
Equal prominence BC22
Departures from IFRSs BC23–BC30
Comparative information BC31–BC36
A statement of financial position as at the beginning of the earliest BC31–BC32
comparative period
IAS 34 Interim Financial Reporting BC33
Criterion for exemption from requirements BC34–BC36
Reporting owner and non-owner changes in equity BC37–BC38
STATEMENT OF FINANCIAL POSITION BC39–BC48
Effect of events after the reporting period BC39–BC48
on the classification of liabilities
STATEMENT OF COMPREHENSIVE INCOME BC49–BC73
Reporting comprehensive income BC49–BC54
Results of operating activities BC55–BC56
Subtotal for profit or loss BC57–BC58
Minority interest BC59
Extraordinary items BC60–BC64
Other comprehensive income—related tax effects BC65–BC68
Reclassification adjustments BC69–BC73
© Copyright 77 HKAS 1 BC
STATEMENT OF CHANGES IN EQUITY BC74–BC75

Effects of retrospective application or retrospective restatement BC74
Presentation of dividends BC75
STATEMENT OF CASH FLOWS BC76
IAS 7 Cash Flow Statements BC76
NOTES BC77–BC104
Disclosure of the judgements that management has made in BC77–BC78
the process of applying the entity’s accounting policies
Disclosure of major sources of estimation uncertainty BC79–BC84
Disclosures about capital BC85–BC89
Objectives, policies and processes for managing capital BC90–BC91
Externally imposed capital requirements BC92–BC97
Internal capital targets BC98–BC100
Presentation of measures per share BC101–BC104
TRANSITION AND EFFECTIVE DATE BC105
DIFFERENCES FROM SFAS 130 BC106
Basis for Conclusions on

IAS 1 Presentation of Financial Statements
The International Accounting Standards Board revised IAS 1 Presentation of Financial Statements
in 2007 as part of its project on financial statement presentation. It was not the Board’s intention to
reconsider as part of that project all the requirements in IAS 1.
For convenience, the Board has incorporated into this Basis for Conclusions relevant material from
the Basis for Conclusions on the revision of IAS 1 in 2003 and its amendment in 2005. Paragraphs
have been renumbered and reorganised as necessary to reflect the new structure of the Standard.
Introduction
BC1 The International Accounting Standards Committee (IASC) issued the first version of IAS 1
Disclosure of Accounting Policies in 1975. It was reformatted in 1994 and superseded in
1997 by IAS 1 Presentation of Financial Statements. * In 2003 the International Accounting
Standards Board revised IAS 1 as part of the Improvements project and in 2005 the Board
amended it as a consequence of issuing IFRS 7 Financial Instruments: Disclosures. In
2007 the Board revised IAS 1 again as part of its project on financial statement
presentation. This Basis for Conclusions summarises the Board’s considerations in
reaching its conclusions on revising IAS 1 in 2003, on amending it in 2005 and revising it in
2007. It includes reasons for accepting some approaches and rejecting others. Individual
Board members gave greater weight to some factors than to others.
The Improvements project—revision of IAS 1 (2003)
BC2 In July 2001 the Board announced that, as part of its initial agenda of technical projects, it
would undertake a project to improve a number of standards, including IAS 1. The project
was undertaken in the light of queries and criticisms raised in relation to the standards by
securities regulators, professional accountants and other interested parties. The
objectives of the Improvements project were to reduce or eliminate alternatives,
redundancies and conflicts within standards, to deal with some convergence issues and to
make other improvements. The Board’s intention was not to reconsider the fundamental
approach to the presentation of financial statements established by IAS 1 in 1997.
BC3 In May 2002 the Board published an exposure draft of proposed Improvements to
International Accounting Standards, which contained proposals to revise IAS 1. The Board
received more than 160 comment letters. After considering the responses the Board
issued in 2003 a revised version of IAS 1. In its revision the Board’s main objectives were:
(a) to provide a framework within which an entity assesses how to present fairly the
effects of transactions and other events, and assesses whether the result of
complying with a requirement in an IFRS would be so misleading that it would not
give a fair presentation;
(b) to base the criteria for classifying liabilities as current or non-current solely on the
conditions existing at the balance sheet date;
(c) to prohibit the presentation of items of income and expense as ‘extraordinary

items’;
(d) to specify disclosures about the judgements that management has made in the
process of applying the entity’s accounting policies, apart from those involving
estimations, and that have the most significant effect on the amounts recognised
in the financial statements; and
*
IASC did not publish a Basis for Conclusions.
(e) to specify disclosures about sources of estimation uncertainty at the balance

sheet date that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
BC4 The following sections summarise the Board’s considerations in reaching its conclusions
as part of its Improvements project in 2003:
(a) departures from IFRSs (paragraphs BC23–BC30)
(b) criterion for exemption from requirements (paragraphs BC34–BC36)
(c) effect of events after the reporting period on the classification of liabilities
(paragraphs BC39–BC48)
(d) results of operating activities (paragraphs BC55 and BC56)
(e) minority interest (paragraph BC59)
(f) extraordinary items (paragraphs BC60–BC64)
(g) disclosure of the judgements management has made in the process of applying
the entity’s accounting policies (paragraphs BC77 and BC78)
(h) disclosure of major sources of estimation uncertainty (paragraphs BC79–BC84).
Amendment to IAS 1—Capital Disclosures (2005)

BC5 In August 2005 the Board issued an Amendment to IAS 1—Capital Disclosures. The
amendment added to IAS 1 requirements for disclosure of:
(a) the entity’s objectives, policies and processes for managing capital.
(b) quantitative data about what the entity regards as capital.
(c) whether the entity has complied with any capital requirements; and if it has not
complied, the consequences of such non-compliance.
as part of its amendment to IAS 1 in 2005:
(a) disclosures about capital (paragraphs BC85–BC89)
(b) objectives, policies and processes for managing capital (paragraphs BC90 and
BC91)
(c) externally imposed capital requirements (paragraphs BC92–BC97)
(d) internal capital targets (paragraphs BC98–BC100).
Financial statement presentation—Joint project

BC7 In September 2001 the Board added to its agenda the performance reporting project (in
March 2006 renamed the ‘financial statement presentation project’). The objective of the
project was to enhance the usefulness of information presented in the income statement.
The Board developed a possible new model for reporting income and expenses and
conducted preliminary testing. Similarly, in the United States, the Financial Accounting
Standards Board (FASB) added a project on performance reporting to its agenda in
October 2001, developed its model and conducted preliminary testing. Constituents raised
concerns about both models and about the fact that they were different.
BC8 In April 2004 the Board and the FASB decided to work on financial statement presentation
as a joint project. They agreed that the project should address presentation and display
not only in the income statement, but also in the other statements that, together with the
income statement, would constitute a complete set of financial statements—the balance
sheet, the statement of changes in equity, and the cash flow statement. The Board
decided to approach the project in two phases. Phase A would address the statements
that constitute a complete set of financial statements and the periods for which they are
required to be presented. Phase B would be undertaken jointly with the FASB and would
address more fundamental issues relating to presentation and display of information in the
financial statements, including:
(a) consistent principles for aggregating information in each financial statement.
(b) the totals and subtotals that should be reported in each financial statement.
(c) whether components of other comprehensive income should be reclassified to

profit or loss and, if so, the characteristics of the transactions and events that
should be reclassified and when reclassification should be made.
(d) whether the direct or the indirect method of presenting operating cash flows
provides more useful information.
BC9 In March 2006, as a result of its work in phase A, the Board published an exposure draft of
proposed amendments to IAS 1—A Revised Presentation. The Board received more than
130 comment letters. The exposure draft proposed amendments that affected the
presentation of owner changes in equity and the presentation of comprehensive income,
but did not propose to change the recognition, measurement or disclosure of specific
transactions and other events required by other IFRSs. It also proposed to bring IAS 1
largely into line with the US standard—SFAS 130 Reporting Comprehensive Income. After
considering the responses to the exposure draft the Board issued a revised version of IAS
1. The FASB decided to consider phases A and B issues together, and therefore did not
publish an exposure draft on phase A.
as part of its revision in 2007:
(a) general purpose financial statements (paragraphs BC11–BC13)
(b) titles of financial statements (paragraphs BC14–BC21)
(c) equal prominence (paragraph BC22)
(d) a statement of financial position as at the beginning of the earliest comparative

period (paragraphs BC31 and BC32)
(e) IAS 34 Interim Financial Reporting (paragraph BC33)
(f) reporting owner and non-owner changes in equity (paragraphs BC37 and BC38)
(g) reporting comprehensive income (paragraphs BC49–BC54)
(h) subtotal for profit or loss (paragraphs BC57 and BC58)
(i) other comprehensive income-related tax effects (paragraphs BC65– BC68)
(j) reclassification adjustments (paragraphs BC69–BC73)
(k) effects of retrospective application or retrospective restatement (paragraph BC74)
(l) presentation of dividends (paragraph BC75)
(m) IAS 7 Cash Flow Statements (paragraph BC76)
(n) presentation of measures per share (paragraphs BC101–BC104)
(o) effective date and transition (paragraph BC105)
(p) differences from SFAS 130 (paragraph BC106).
Definitions
General purpose financial statements (paragraph 7)

BC11 The exposure draft of 2006 proposed a change to the explanatory paragraph of what
‘general purpose financial statements’ include, in order to produce a more generic
definition of a set of financial statements. Paragraph 7 of the exposure draft stated:
General purpose financial statements include those that are presented separately or within
other public documents such as a regulatory filing or report to shareholders. [emphasis
added]
BC12 Respondents expressed concern about the proposed change. They argued that it could be
understood as defining as general purpose financial statements any financial statement or
set of financial statements filed with a regulator and could capture documents other than
annual reports and prospectuses. They saw this change as expanding the scope of IAS 1
to documents that previously would not have contained all of the disclosures required by
IAS 1. Respondents pointed out that the change would particularly affect some entities
(such as small private companies and subsidiaries of public companies with no external
users of financial reports) that are required by law to place their financial statements on a
public file.
BC13 The Board acknowledged that in some countries the law requires entities, whether public
or private, to report to regulatory authorities and include information in those reports that
could be beyond the scope of IAS 1. Because the Board did not intend to extend the
definition of general purpose financial statements, it decided to eliminate the explanatory
paragraph of what ‘general purpose financial statements’ include, while retaining the
definition of ‘general purpose financial statements’.
Financial statements
Complete set of financial statements

Titles of financial statements (paragraph 10)
BC14 The exposure draft of 2006 proposed changes to the titles of some of the financial
statements—from ‘balance sheet’ to ‘statement of financial position’, from ‘income
statement’ to ‘statement of profit or loss’ and from ‘cash flow statement’ to ‘statement of
cash flows’. In addition, the exposure draft proposed a ‘statement of recognised income
and expense’ and that all owner changes in equity should be included in a ‘statement of
changes in equity’. The Board did not propose to make any of these changes of
nomenclature mandatory.
BC15 Many respondents opposed the proposed changes, pointing out that the existing titles had
a long tradition and were well understood. However, the Board reaffirmed its view that the
proposed new titles better reflect the function of each financial statement, and pointed out
that an entity could choose to use other titles in its financial report.
BC16 The Board reaffirmed its conclusion that the title ‘statement of financial position’ not only
better reflects the function of the statement but is consistent with the Framework for the
Preparation and Presentation of Financial Statements, which contains several references
to ‘financial position’. Paragraph 12 of the Framework states that the objective of financial
statements is to provide information about the financial position, performance and
changes in financial position of an entity; paragraph 19 of the Framework states that
information about financial position is primarily provided in a balance sheet. In the Board’s
view, the title ‘balance sheet’ simply reflects that double entry bookkeeping requires debits
to equal credits. It does not identify the content or purpose of the statement. The Board
also noted that ‘financial position’ is a well-known and accepted term, as it has been used
in auditors’ opinions internationally for more than 20 years to describe what the ‘balance
sheet’ presents. The Board decided that aligning the statement’s title with its content and
the opinion rendered by the auditor would help the users of financial statements.
BC17 As to the other statements, respondents suggested that renaming the balance sheet the
‘statement of financial position’ implied that the ‘cash flow statement’ and the ‘statement of
recognised income and expense’ do not also reflect an entity’s financial position. The
Board observed that although the latter statements reflect changes in an entity’s financial
position, neither can be called a ‘statement of changes in financial position’, as this would
not depict their true function and objective (ie to present cash flows and performance,
respectively). The Board acknowledged that the titles ‘income statement’ and ‘statement of
profit or loss’ are similar in meaning and could be used interchangeably, and decided to
retain the title ‘income statement’ as this is more commonly used.
BC18 The title of the proposed new statement, the ‘statement of recognised income and
expense’, reflects a broader content than the former ‘income statement’. The statement
encompasses both income and expenses recognised in profit or loss and income and
expenses recognised outside profit or loss.
BC19 Many respondents opposed the title ‘statement of recognised income and expense’,
objecting particularly to the use of the term ‘recognised’. The Board acknowledged that the
term ‘recognised’ could also be used to describe the content of other primary statements
as ‘recognition’, explained in paragraph 82 of the Framework, is ‘the process of
incorporating in the balance sheet or income statement an item that meets the definition of
an element and satisfies the criteria for recognition set out in paragraph 83.’ Many
respondents suggested the term ‘statement of comprehensive income’ instead.
BC20 In response to respondents’ concerns and to converge with SFAS 130, the Board decided
to rename the new statement a ‘statement of comprehensive income’. The term
‘comprehensive income’ is not defined in the Framework but is used in IAS 1 to describe
the change in equity of an entity during a period from transactions, events and
circumstances other than those resulting from transactions with owners in their capacity as
owners. Although the term ‘comprehensive income’ is used to describe the aggregate of
all components of comprehensive income, including profit or loss, the term ‘other
comprehensive income’ refers to income and expenses that under IFRSs are included in
comprehensive income but excluded from profit or loss.
BC21 In finalising its revision, the Board confirmed that the titles of financial statements used in
this Standard would not be mandatory. The titles will be used in future IFRSs but are not
required to be used by entities in their financial statements. Some respondents to the
exposure draft expressed concern that non-mandatory titles will result in confusion.
However, the Board believes that making use of the titles non-mandatory will allow time for
entities to implement changes gradually as the new titles become more familiar.
Equal prominence (paragraphs 11 and 12)
BC22 The Board noted that the financial performance of an entity is not assessed by reference
to a single financial statement or a single measure within a financial statement. The Board
believes that the financial performance of an entity can be assessed only after all aspects
of the financial statements are taken into account and understood in their entirety.
Accordingly, the Board decided that in order to help users of the financial statements to
understand the financial performance of an entity comprehensively, all financial
statements within the complete set of financial statements should be presented with equal
prominence.
Departures from IFRSs (paragraphs 19–24)

BC23 IAS 1 (as issued in 1997) permitted an entity to depart from a requirement in a Standard ‘in
the extremely rare circumstances when management concludes that compliance with a
requirement in a Standard would be misleading, and therefore that departure from a
requirement is necessary to achieve a fair presentation’ (paragraph 17, now paragraph 19).
When such a departure occurred, paragraph 18 (now paragraph 20) required extensive
disclosure of the facts and circumstances surrounding the departure and the treatment
adopted.
BC24 The Board decided to clarify in paragraph 15 of the Standard that for financial statements
to present fairly the financial position, financial performance and cash flows of an entity,
they must represent faithfully the effects of transactions and other events in accordance
with the definitions and recognition criteria for assets, liabilities, income and expenses set
out in the Framework.
BC25 The Board decided to limit the occasions on which an entity should depart from a
requirement in an IFRS to the extremely rare circumstances in which management
concludes that compliance with the requirement would be so misleading that it would
conflict with the objective of financial statements set out in the Framework. Guidance on
this criterion states that an item of information would conflict with the objective of financial
statements when it does not represent faithfully the transactions, other events or
conditions that it either purports to represent or could reasonably be expected to represent
and, consequently, it would be likely to influence economic decisions made by users of
financial statements.
BC26 These amendments provide a framework within which an entity assesses how to present
fairly the effects of transactions, other events and conditions, and whether the result of
complying with a requirement in an IFRS would be so misleading that it would not give a
fair presentation.
BC27 The Board considered whether IAS 1 should be silent on departures from IFRSs. The
Board decided against making that change, because it would remove the Board’s
capability to specify the criteria under which departures from IFRSs should occur.
BC28 Departing from a requirement in an IFRS when considered necessary to achieve a fair
presentation would conflict with the regulatory framework in some jurisdictions. The
revised IAS 1 takes into account the existence of different regulatory requirements. It
requires that when an entity’s circumstances satisfy the criterion described in paragraph
BC25 for departure from a requirement in an IFRS, the entity should proceed as follows:
(a) When the relevant regulatory framework requires—or otherwise does not
prohibit—a departure from the requirement, the entity should make that departure
and the disclosures set out in paragraph 20.
(b) When the relevant regulatory framework prohibits departure from the requirement,
the entity should, to the maximum extent possible, reduce the perceived
misleading aspects of compliance by making the disclosures set out in paragraph
23.
This amendment enables entities to comply with the requirements of IAS 1 when the
relevant regulatory framework prohibits departures from accounting standards, while
retaining the principle that entities should, to the maximum extent possible, ensure that
financial statements provide a fair presentation.
BC29 After considering the comments received on the exposure draft of 2002, the Board added
to IAS 1 a requirement in paragraph 21 to disclose the effect of a departure from a
requirement of an IFRS in a prior period on the current period’s financial statements.
Without this disclosure, users of the entity’s financial statements could be unaware of the
continuing effects of prior period departures.
BC30 In view of the strict criteria for departure from a requirement in an IFRS, IAS 1 includes a
rebuttable presumption that if other entities in similar circumstances comply with the
requirement, the entity’s compliance with the requirement would not be so misleading that
it would conflict with the objective of financial statements set out in the Framework.
Comparative information
A statement of financial position as at the beginning of the earliest comparative
period (paragraph 39)
BC31 The exposure draft of 2006 proposed that a statement of financial position as at the
beginning of the earliest comparative period should be presented as part of a complete set
of financial statements. This statement would provide a basis for investors and creditors to
evaluate information about the entity’s performance during the period. However, many
respondents expressed concern that the requirement would unnecessarily increase
disclosures in financial statements, or would be impracticable, excessive and costly.
BC32 By adding a statement of financial position as at the beginning of the earliest comparative
period, the exposure draft proposed that an entity should present three statements of
financial position and two of each of the other statements. Considering that financial
statements from prior years are readily available for financial analysis, the Board decided
to require only two statements of financial position, except when the financial statements
have been affected by retrospective application or retrospective restatement, as defined in
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, or when a
reclassification has been made. In those circumstances three statements of financial
position are required.
IAS 34 Interim Financial Reporting
BC33 The Board decided not to reflect in paragraph 8 of IAS 34 (ie the minimum components of
an interim financial report) its decision to require the inclusion of a statement of financial
position as at the beginning of the earliest comparative period in a complete set of financial
statements. IAS 34 has a year-to-date approach to interim reporting and does not replicate
the requirements of IAS 1 in terms of comparative information.
Criterion for exemption from requirements (paragraphs 41–44)
BC34 IAS 1 as issued in 1997 specified that when the presentation or classification of items in
the financial statements is amended, comparative amounts should be reclassified unless it
is impracticable to do so. Applying a requirement is impracticable when the entity cannot
apply it after making every reasonable effort to do so.
BC35 The exposure draft of 2002 proposed a different criterion for exemption from particular
requirements. For the reclassification of comparative amounts, and its proposed new
requirement to disclose key assumptions and other sources of estimation uncertainty at
the end of the reporting period (discussed in paragraphs BC79–BC84), the exposure draft
proposed that the criterion for exemption should be that applying the requirements would
require undue cost or effort.
BC36 In the light of respondents’ comments on the exposure draft, the Board decided that an
exemption based on management’s assessment of undue cost or effort was too subjective
to be applied consistently by different entities. Moreover, balancing costs and benefits was
a task for the Board when it sets accounting requirements rather than for entities when
they apply them. Therefore, the Board retained the ‘impracticability’ criterion for exemption.
This affects the exemptions now set out in paragraphs 41–43 and 131 of IAS 1.
Impracticability is the only basis on which IFRSs allow specific exemptions from applying
*
particular requirements when the effect of applying them is material .
Reporting owner and non-owner changes in equity

BC37 The exposure draft of 2006 proposed to separate changes in equity of an entity during a
period arising from transactions with owners in their capacity as owners (ie all owner
changes in equity) from other changes in equity (ie non-owner changes in equity). All
owner changes in equity would be presented in the statement of changes in equity,
separately from non-owner changes in equity.
BC38 Most respondents welcomed this proposal and saw this change as an improvement of
financial reporting, by increasing the transparency of those items recognised in equity that
are not reported as part of profit or loss. However, some respondents pointed out that the
terms ‘owner’ and ‘non-owner’ were not defined in the exposure draft, the Framework or
elsewhere in IFRSs, although they are extensively used in national accounting standards.
They also noted that the terms ‘owner’ and ‘equity holder’ were used interchangeably in
the exposure draft. The Board decided to adopt the term ‘owner’ and use it throughout IAS
1 to converge with SFAS 130, which uses the term in the definition of ‘comprehensive
income’.
*
In 2006 the IASB issued IFRS 8 Operating Segments. As explained in paragraphs BC46 and BC47 of the Basis for
Conclusions on IFRS 8, that IFRS includes an exemption from some requirements if the necessary information is not
available and the cost to develop it would be excessive.
Statement of financial position
Effect of events after the reporting period on the classification of

liabilities (paragraphs 69–76)
BC39 Paragraph 63 of IAS 1 (as issued in 1997) included the following:
An enterprise should continue to classify its long-term interest-bearing liabilities as

non-current, even when they are due to be settled within twelve months of the balance
sheet date if:
(a) the original term was for a period of more than twelve months;
(b) the enterprise intends to refinance the obligation on a long-term basis; and
(c) that intention is supported by an agreement to refinance, or to reschedule

payments, which is completed before the financial statements are authorised for
issue.
BC40 Paragraph 65 stated:
Some borrowing agreements incorporate undertakings by the borrower (covenants) which

have the effect that the liability becomes payable on demand if certain conditions related to
the borrower’s financial position are breached. In these circumstances, the liability is
classified as non-current only when:
(a) the lender has agreed, prior to the authorisation of the financial statements for
issue, not to demand payment as a consequence of the breach; and
(b) it is not probable that further breaches will occur within twelve months of the
balance sheet date.
BC41 The Board considered these requirements and concluded that refinancing, or the receipt
of a waiver of the lender’s right to demand payment, that occurs after the reporting period
should not be taken into account in the classification of a liability.
BC42 Therefore, the exposure draft of 2002 proposed:
(a) to amend paragraph 63 to specify that a long-term financial liability due to be

settled within twelve months of the balance sheet date should not be classified as
a non-current liability because an agreement to refinance, or to reschedule
payments, on a long-term basis is completed after the balance sheet date and
before the financial statements are authorised for issue. This amendment would
not affect the classification of a liability as non-current when the entity has, under
the terms of an existing loan facility, the discretion to refinance or roll over its
obligations for at least twelve months after the balance sheet date.
(b) to amend paragraph 65 to specify that a long-term financial liability that is payable
on demand because the entity breached a condition of its loan agreement should
be classified as current at the balance sheet date even if the lender has agreed
after the balance sheet date, and before the financial statements are authorised
for issue, not to demand payment as a consequence of the breach. However, if
the lender has agreed by the balance sheet date to provide a period of grace
within which the entity can rectify the breach and during which the lender cannot
demand immediate repayment, the liability is classified as non-current if it is due
for settlement, without that breach of the loan agreement, at least twelve months
after the balance sheet date and:
(i) the entity rectifies the breach within the period of grace; or
(ii) when the financial statements are authorised for issue, the period of grace
is incomplete and it is probable that the breach will be rectified.
BC43 Some respondents disagreed with these proposals. They advocated classifying a liability
as current or non-current according to whether it is expected to use current assets of the
entity, rather than strictly on the basis of its date of maturity and whether it is callable at the
end of the reporting period. In their view, this would provide more relevant information
about the liability’s future effect on the timing of the entity’s resource flows.
BC44 However, the Board decided that the following arguments for changing paragraphs 63 and
65 were more persuasive:
(a) refinancing a liability after the balance sheet date does not affect the entity’s
liquidity and solvency at the balance sheet date, the reporting of which should
reflect contractual arrangements in force on that date. Therefore, it is a
non-adjusting event in accordance with IAS 10 Events after the Balance Sheet
Date and should not affect the presentation of the entity’s balance sheet.
(b) it is illogical to adopt a criterion that ‘non-current’ classification of short-term

obligations expected to be rolled over for at least twelve months after the balance
sheet date depends on whether the rollover is at the discretion of the entity, and
then to provide an exception based on refinancing occurring after the balance
sheet date.
(c) in the circumstances set out in paragraph 65, unless the lender has waived its
right to demand immediate repayment or granted a period of grace within which
the entity may rectify the breach of the loan agreement, the financial condition of
the entity at the balance sheet date was that the entity did not hold an absolute
right to defer repayment, based on the terms of the loan agreement. The granting
of a waiver or a period of grace changes the terms of the loan agreement.
Therefore, an entity’s receipt from the lender, after the balance sheet date, of a
waiver or a period of grace of at least twelve months does not change the nature
of the liability to non-current until it occurs.
BC45 IAS 1 now includes the amendments proposed in 2002, with one change. The change
relates to the classification of a long-term loan when, at the end of the reporting period, the
lender has provided a period of grace within which a breach of the loan agreement can be
rectified, and during which period the lender cannot demand immediate repayment of the
loan.
BC46 The exposure draft proposed that such a loan should be classified as non-current if it is
due for settlement, without the breach, at least twelve months after the balance sheet date
and:
(a) the entity rectifies the breach within the period of grace; or
(b) when the financial statements are authorised for issue, the period of grace is
incomplete and it is probable that the breach will be rectified.
BC47 After considering respondents’ comments, the Board decided that the occurrence or
probability of a rectification of a breach after the reporting period is irrelevant to the
conditions existing at the end of the reporting period. The revised IAS 1 requires that, for
the loan to be classified as non-current, the period of grace must end at least twelve
months after the reporting period (see paragraph 75). Therefore, the conditions (a) and (b)
in paragraph BC46 are redundant.
BC48 The Board considered arguments that if a period of grace to remedy a breach of a
long-term loan agreement is provided before the end of the reporting period, the loan
should be classified as non-current regardless of the length of the period of grace. These
arguments are based on the view that, at the end of the reporting period, the lender does
not have an unconditional legal right to demand repayment before the original maturity
date (ie if the entity remedies the breach during the period of grace, it is entitled to repay
the loan on the original maturity date). However, the Board concluded that an entity should
classify a loan as non-current only if it has an unconditional right to defer settlement of the
loan for at least twelve months after the reporting period. This criterion focuses on the
legal rights of the entity, rather than those of the lender.
Statement of comprehensive income
Reporting comprehensive income (paragraph 81)

BC49 The exposure draft of 2006 proposed that all non-owner changes in equity should be
presented in a single statement or in two statements. In a single-statement presentation,
all items of income and expense are presented together. In a two-statement presentation,
the first statement (‘income statement’) presents income and expenses recognised in
profit or loss and the second statement (‘statement of comprehensive income’) begins with
profit or loss and presents, in addition, items of income and expense that IFRSs require or
permit to be recognised outside profit or loss. Such items include, for example, translation
differences related to foreign operations and gains or losses on available-for-sale financial
assets. The statement of comprehensive income does not include transactions with
owners in their capacity as owners. Such transactions are presented in the statement of
changes in equity.
BC50 Respondents to the exposure draft had mixed views about whether the Board should
permit a choice of displaying non-owner changes in equity in one statement or two
statements. Many respondents agreed with the Board’s proposal to maintain the
two-statement approach and the single-statement approach as alternatives and a few
urged the Board to mandate one of them. However, most respondents preferred the
two-statement approach because it distinguishes profit or loss and total comprehensive
income; they believe that with the two-statement approach, the ‘income statement’
remains a primary financial statement. Respondents supported the presentation of two
separate statements as a transition measure until the Board develops principles to
determine the criteria for inclusion of items in profit or loss or in other comprehensive
income.
BC51 The exposure draft of 2006 expressed the Board’s preference for a single statement of all
non-owner changes in equity. The Board provided several reasons for this preference. All
items of non-owner changes in equity meet the definitions of income and expenses in the
Framework. The Framework does not define profit or loss, nor does it provide criteria for
distinguishing the characteristics of items that should be included in profit or loss from
those items that should be excluded from profit or loss. Therefore, the Board decided that
it was conceptually correct for an entity to present all non-owner changes in equity (ie all
income and expenses recognised in a period) in a single statement because there are no
clear principles or common characteristics that can be used to separate income and
expenses into two statements.
BC52 However, in the Board’s discussions with interested parties, it was clear that many were
strongly opposed to the concept of a single statement. They argued that there would be
undue focus on the bottom line of the single statement. In addition, many argued that it
was premature for the Board to conclude that presentation of income and expense in a
single statement was an improvement in financial reporting without also addressing the
other aspects of presentation and display, namely deciding what categories and line items
should be presented in a statement of recognised income and expense.
BC53 In the light of these views, although it preferred a single statement, the Board decided that
an entity should have the choice of presenting all income and expenses recognised in a
period in one statement or in two statements. An entity is prohibited from presenting
components of income and expense (ie non-owner changes in equity) in the statement of
changes in equity.
BC54 Many respondents disagreed with the Board’s preference and thought that a decision at
this stage would be premature. In their view the decision about a single-statement or
two-statement approach should be subject to further consideration. They urged the Board
to address other aspects of presentation and display, namely deciding which categories
and line items should be presented in a ‘statement of comprehensive income’. The Board
reaffirmed its reasons for preferring a single-statement approach and agreed to address
other aspects of display and presentation in the next stage of the project.
Results of operating activities

BC55 IAS 1 omits the requirement in the 1997 version to disclose the results of operating
activities as a line item in the income statement. ‘Operating activities’ are not defined in
IAS 1, and the Board decided not to require disclosure of an undefined item.
BC56 The Board recognises that an entity may elect to disclose the results of operating activities,
or a similar line item, even though this term is not defined. In such cases, the Board notes
that the entity should ensure that the amount disclosed is representative of activities that
would normally be regarded as ‘operating’. In the Board’s view, it would be misleading and
would impair the comparability of financial statements if items of an operating nature were
excluded from the results of operating activities, even if that had been industry practice.
For example, it would be inappropriate to exclude items clearly related to operations (such
as inventory write-downs and restructuring and relocation expenses) because they occur
irregularly or infrequently or are unusual in amount. Similarly, it would be inappropriate to
exclude items on the grounds that they do not involve cash flows, such as depreciation
and amortisation expenses.
Subtotal for profit or loss (paragraph 82)

BC57 As revised, IAS 1 requires a subtotal for profit or loss in the statement of comprehensive
income. If an entity chooses to present comprehensive income by using two statements, it
should begin the second statement with profit or loss—the bottom line of the first
statement (the ‘income statement’)—and display the components of other comprehensive
income immediately after that. The Board concluded that this is the best way to achieve
the objective of equal prominence (see paragraph BC22) for the presentation of income
and expenses. An entity that chooses to display comprehensive income in one statement
should include profit or loss as a subtotal within that statement.
BC58 The Board acknowledged that the items included in profit or loss do not possess any
unique characteristics that allow them to be distinguished from items that are included in
other comprehensive income. However, the Board and its predecessor have required
some items to be recognized outside profit or loss. The Board will deliberate in the next
stage of the project how items of income and expense should be presented in the
statement of comprehensive income.
Minority interest (paragraph 83)

BC59 IAS 1 requires the ‘profit or loss attributable to minority interest’ and ‘profit or loss
attributable to owners of the parent’ each to be presented in the income statement in
accordance with paragraph 83. These amounts are to be presented as allocations of profit
or loss, not as items of income or expense. A similar requirement has been added for the
statement of changes in equity, in paragraph 106(a). These changes are consistent with
IAS 27 Consolidated and Separate Financial Statements, which requires that in a
consolidated balance sheet (now called ‘statement of financial position’), minority interest
is presented within equity because it does not meet the definition of a liability in the
Framework.
Extraordinary items (paragraph 87)

BC60 IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting
Policies (issued in 1993) required extraordinary items to be disclosed in the income
statement separately from the profit or loss from ordinary activities. That standard defined
‘extraordinary items’ as ‘income or expenses that arise from events or transactions that
are clearly distinct from the ordinary activities of the enterprise and therefore are not
expected to recur frequently or regularly’.
BC61 In 2002, the Board decided to eliminate the concept of extraordinary items from IAS 8 and
to prohibit the presentation of items of income and expense as ‘extraordinary items’ in the
income statement and the notes. Therefore, in accordance with IAS 1, no items of income
and expense are to be presented as arising from outside the entity’s ordinary activities.
BC62 Some respondents to the exposure draft of 2002 argued that extraordinary items should
be presented in a separate component of the income statement because they are clearly
distinct from all of the other items of income and expense, and because such presentation
highlights to users of financial statements the items of income and expense to which the
least attention should be given when predicting an entity’s future performance.
BC63 The Board decided that items treated as extraordinary result from the normal business
risks faced by an entity and do not warrant presentation in a separate component of the
income statement. The nature or function of a transaction or other event, rather than its
frequency, should determine its presentation within the income statement. Items currently
classified as ‘extraordinary’ are only a subset of the items of income and expense that may
warrant disclosure to assist users in predicting an entity’s future performance.
BC64 Eliminating the category of extraordinary items eliminates the need for arbitrary
segregation of the effects of related external events—some recurring and others not—on
the profit or loss of an entity for a period. For example, arbitrary allocations would have
been necessary to estimate the financial effect of an earthquake on an entity’s profit or
loss if it occurs during a major cyclical downturn in economic activity. In addition,
paragraph 97 of IAS 1 requires disclosure of the nature and amount of material items of
income and expense.
Other comprehensive income—related tax effects

(paragraphs 90 and 91)
BC65 The exposure draft of 2006 proposed to allow components of ‘other recognised income
and expense’ (now ‘other comprehensive income’) to be presented before tax effects
(‘gross presentation’) or after their related tax effects (‘net presentation’). The ‘gross
presentation’ facilitated the traceability of other comprehensive income items to profit or
loss, because items of profit or loss are generally displayed before tax. The ‘net
presentation’ facilitated the identification of other comprehensive income Items in the
equity section of the statement of financial position. A majority of respondents supported
allowing both approaches. The Board reaffirmed its conclusion that components of other
comprehensive income could be displayed either (a) net of related tax effects or (b) before
related tax effects.
BC66 Regardless of whether a pre-tax or post-tax display was used, the exposure draft
proposed to require disclosure of the amount of income tax expense or benefit allocated
separately to individual components of other comprehensive income, in line with SFAS
130. Many respondents agreed in principle with this disclosure, because they agreed that
it helped to improve the clarity and transparency of such information, particularly when
components of other comprehensive income are taxed at rates different from those
applied to profit or loss.
BC67 However, most respondents expressed concern about having to trace the tax effect for
each one of the components of other comprehensive income. Several observed that the
tax allocation process is arbitrary (eg it may involve the application of subjectively
determined tax rates) and some pointed out that this information is not readily available for
some industries (eg the insurance sector), where components of other comprehensive
income are multiple and tax allocation involves a high degree of subjectivity. Others
commented that they did not understand why tax should be attributed to components of
comprehensive income line by line, when this is not a requirement for items in profit or
loss.
BC68 The Board decided to maintain the disclosure of income tax expense or benefit allocated
to each component of other comprehensive income. Users of financial statements often
requested further information on tax amounts relating to components of other
comprehensive income, because tax rates often differed from those applied to profit or
loss. The Board also observed that an entity should have such tax information available
and that a disclosure requirement would therefore not involve additional cost for preparers
of financial statements.
Reclassification adjustments (paragraphs 92–96)

BC69 In the exposure draft of 2006, the Board proposed that an entity should separately present
reclassification adjustments. These adjustments are the amounts reclassified to profit or
loss in the current period that were previously recognised in other comprehensive income.
The Board decided that adjustments necessary to avoid double-counting items in total
comprehensive income when those items are reclassified to profit or loss in accordance
with IFRSs. The Board’s view was that separate presentation of reclassification
adjustments is essential to inform users of those amounts that are included as income and
expenses in different periods—as income or expenses in other comprehensive income in
previous periods and as income or expenses in profit or loss in the current period. Without
such information, users may find it difficult to assess the effect of reclassifications on profit
or loss and to calculate the overall gain or loss associated with available-for-sale financial
assets, cash flow hedges and on translation or disposal of foreign operations.
BC70 Most respondents agreed with the Board’s decision and believe that the disclosure of
reclassification adjustments is important to understanding how components recognised in
profit or loss are related to other items recognised in equity in two different periods.
However, some respondents suggested that the Board should use the term ‘recycling’,
rather than ‘reclassification’ as the former term is more common. The Board concluded
that both terms are similar in meaning, but decided to use the term ‘reclassification
adjustment’ to converge with the terminology used in SFAS 130.
BC71 The exposure draft proposed to allow the presentation of reclassification adjustments in
the statement of recognised income and expense (now ‘statement of comprehensive
income’) or in the notes. Most respondents supported this approach.
BC72 Some respondents noted some inconsistencies in the definition of ‘reclassification

adjustments’ in the exposure draft (now paragraphs 7 and 93 of IAS 1). Respondents
suggested that the Board should expand the definition in paragraph 7 to include gains and
losses recognised in current periods in addition to those recognised in earlier periods, to
make the definition consistent with paragraph 93. They commented that, without
clarification, there could be differences between interim and annual reporting, for
reclassifications of items that arise in one interim period and reverse out in a different
interim period within the same annual period.
BC73 The Board decided to align the definition of reclassification adjustments with SFAS 130
and include an additional reference to ‘current periods’ in paragraph 7.
Statement of changes in equity
Effects of retrospective application or retrospective

restatement (paragraph 106(b))
BC74 Some respondents to the exposure draft of 2006 asked the Board to clarify whether the
effects of retrospective application or retrospective restatement, as defined in IAS 8,
should be regarded as non-owner changes in equity. The Board noted that IAS 1 specifies
that these effects are included in the statement of changes in equity. However, the Board
decided to clarify that the effects of retrospective application or retrospective restatement
are not changes in equity in the period, but provide a reconciliation between the previous
period’s closing balance and the opening balance in the statement of changes in equity.
Presentation of dividends (paragraph 107)

BC75 The Board reaffirmed its conclusion to require the presentation of dividends in the
statement of changes in equity or in the notes, because dividends are distributions to
owners in their capacity as owners and the statement of changes in equity presents all
owner changes in equity. The Board concluded that an entity should not present dividends
in the statement of comprehensive income because that statement presents non-owner
changes in equity.
Statement of cash flows
IAS 7 Cash Flow Statements (paragraph 111)

BC76 The Board considered whether the operating section of an indirect method statement of
cash flows should begin with total comprehensive income instead of profit or loss as is
required by IAS 7 Cash Flow Statements. When components of other comprehensive
income are non-cash items, they would become reconciling items in arriving at cash flows
from operating activities and would add items to the statement of cash flows without
adding information content. The Board concluded that an amendment to IAS 7 is not
required; however, as mentioned in paragraph BC14 the Board decided to relabel this
financial statement as ‘statement of cash flows’.
Notes
Disclosure of the judgements that management has made in the

process of applying the entity’s accounting policies (paragraphs
122–124)
BC77 The revised IAS 1 requires disclosure of the judgements, apart from those involving
estimations, that management has made in the process of applying the entity’s accounting
policies and that have the most significant effect on the amounts recognised in the
financial statements (see paragraph 122). An example of these judgements is how
management determines whether financial assets are held-to-maturity investments. The
Board decided that disclosure of the most important of these judgements would enable
users of financial statements to understand better how the accounting policies are applied
and to make comparisons between entities regarding the basis on which managements
make these judgements.
BC78 Comments received on the exposure draft of 2002 indicated that the purpose of the
proposed disclosure was unclear. Accordingly, the Board amended the disclosure
explicitly to exclude judgements involving estimations (which are the subject of the
disclosure in paragraph 125) and added another four examples of the types of judgements
disclosed (see paragraphs 123 and 124).
Disclosure of major sources of estimation uncertainty

(paragraphs 125–133)
BC79 IAS 1 requires disclosure of the assumptions concerning the future, and other major
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. For those assets and liabilities, the proposed disclosures include
details of:
(a) their nature, and
(b) their carrying amount as at the end of the reporting period (see paragraph 125).
BC80 Determining the carrying amounts of some assets and liabilities requires estimation of the
effects of uncertain future events on those assets and liabilities at the end of the reporting
period. For example, in the absence of recently observed market prices used to measure
the following assets and liabilities, future-oriented estimates are necessary to measure the
recoverable amount of classes of property, plant and equipment, the effect of
technological obsolescence of inventories, provisions subject to the future outcome of
litigation in progress, and long-term employee benefit liabilities such as pension
obligations. These estimates involve assumptions about items such as the risk adjustment
to cash flows or discount rates used, future changes in salaries and future changes in
prices affecting other costs. No matter how diligently an entity estimates the carrying
amounts of assets and liabilities subject to significant estimation uncertainty at the end of
the reporting period, the reporting of point estimates in the statement of financial position
cannot provide information about the estimation uncertainties involved in measuring those
assets and liabilities and the implications of those uncertainties for the period’s profit or
loss.
BC81 The Framework states that ‘The economic decisions that are made by users of financial
statements require an evaluation of the ability of an entity to generate cash and cash
equivalents and of the timing and certainty of their generation.’ The Board decided that
disclosure of information about assumptions and other major sources of estimation
uncertainty at the end of the reporting period enhances the relevance, reliability and
understandability of the information reported in financial statements. These assumptions
and other sources of estimation uncertainty relate to estimates that require management’s
most difficult, subjective or complex judgements. Therefore, disclosure in accordance with
paragraph 125 of the revised IAS 1 would be made in respect of relatively few assets or
liabilities (or classes of them).
BC82 The exposure draft of 2002 proposed the disclosure of some ‘sources of measurement
uncertainty’. In the light of comments received that the purpose of this disclosure was
unclear, the Board decided:
(a) to amend the subject of that disclosure to ‘sources of estimation uncertainty at the
end of the reporting period’, and
(b) to clarify in the revised Standard that the disclosure does not apply to assets and
liabilities measured at fair value based on recently observed market prices (see
paragraph 128 of IAS 1).
BC83 When assets and liabilities are measured at fair value on the basis of recently observed
market prices, future changes in carrying amounts would not result from using estimates to
measure the assets and liabilities at the end of the reporting period. Using observed
market prices to measure assets or liabilities obviates the need for estimates at the end of
the reporting period. The market prices properly reflect the fair values at the end of the
reporting period, even though future market prices could be different. The objective of fair
value measurement is to reflect fair value at the measurement date, not to predict a future
value.
BC84 IAS 1 does not prescribe the particular form or detail of the disclosures. Circumstances
differ from entity to entity, and the nature of estimation uncertainty at the end of the
reporting period has many facets. IAS 1 limits the scope of the disclosures to items that
have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year. The longer the future period to which the
disclosures relate, the greater the range of items that would qualify for disclosure, and the
less specific are the disclosures that could be made about particular assets or liabilities. A
period longer than the next financial year might obscure the most relevant information with
other disclosures.
Disclosures about capital (paragraphs 134 and 135)

BC85 In July 2004 the Board published an exposure draft—ED 7 Financial Instruments:
Disclosures. As part of that project, the Board considered whether it should require
disclosures about capital.
BC86 The level of an entity’s capital and how it manages capital are important factors for users
to consider in assessing the risk profile of an entity and its ability to withstand unexpected
adverse events. The level of capital might also affect the entity’s ability to pay dividends.
Consequently, ED 7 proposed disclosures about capital.
BC87 In ED 7 the Board decided that it should not limit the requirements for disclosures about
capital to entities that are subject to external capital requirements (eg regulatory capital
requirements established by legislation or other regulation). The Board believes that
information about capital is useful for all entities, as is evidenced by the fact that some
entities set internal capital requirements and norms have been established for some
industries. The Board noted that the capital disclosures are not intended to replace
disclosures required by regulators. The Board also noted that the financial statements
should not be regarded as a substitute for disclosures to regulators (which may not be
available to all users) because the function of disclosures made to regulators may differ
from the function of those to other users. Therefore, the Board decided that information
about capital should be required of all entities because it is useful to users of general
purpose financial statements. Accordingly, the Board did not distinguish between the
requirements for regulated and non-regulated entities.
BC88 Some respondents to ED 7 questioned the relevance of the capital disclosures in an IFRS
dealing with disclosures relating to financial instruments. The Board noted that an entity’s
capital does not relate solely to financial instruments and, thus, capital disclosures have
more general relevance. Accordingly, the Board included these disclosures in IAS 1, rather
than IFRS 7 Financial Instruments: Disclosures, the IFRS resulting from ED 7.
BC89 The Board also decided that an entity’s decision to adopt the amendments to IAS 1 should
be independent of the entity’s decision to adopt IFRS 7. The Board noted that issuing a
separate amendment facilitates separate adoption decisions.
Objectives, policies and processes for managing capital (paragraph

136)
BC90 The Board decided that disclosure about capital should be placed in the context of a
discussion of the entity’s objectives, policies and processes for managing capital. This is
because the Board believes that such a discussion both communicates important
information about the entity’s capital strategy and provides the context for other
disclosures.
BC91 The Board considered whether an entity can have a view of capital that differs from what
IFRSs define as equity. The Board noted that, although for the purposes of this disclosure
capital would often equate with equity as defined in IFRSs, it might also include or exclude
some components. The Board also noted that this disclosure is intended to give entities
the opportunity to describe how they view the components of capital they manage, if this is
different from what IFRSs define as equity.
Externally imposed capital requirements (paragraph 136)

BC92 The Board considered whether it should require disclosure of any externally imposed
capital requirements. Such a capital requirement could be:
(a) an industry-wide requirement with which all entities in the industry must comply; or
(b) an entity-specific requirement imposed on a particular entity by its prudential

supervisor or other regulator.
BC93 The Board noted that some industries and countries have industry-wide capital
requirements, and others do not. Thus, the Board concluded that it should not require
disclosure of industry-wide requirements, or compliance with such requirements, because
such disclosure would not lead to comparability between different entities or between
similar entities in different countries.
BC94 The Board concluded that disclosure of the existence and level of entity-specific capital
requirements is important information for users, because it informs them about the risk
assessment of the regulator. Such disclosure improves transparency and market
discipline.
BC95 However, the Board noted the following arguments against requiring disclosure of
externally imposed entity-specific capital requirements.
(a) Users of financial statements might rely primarily on the regulator’s assessment of
solvency risk without making their own risk assessment.
(b) The focus of a regulator’s risk assessment is for those whose interests the
regulations are intended to protect (eg depositors or policyholders). This emphasis
is different from that of a shareholder. Thus, it could be misleading to suggest that
the regulator’s risk assessment could, or should, be a substitute for independent
analysis by investors.
(c) The disclosure of entity-specific capital requirements imposed by a regulator might

undermine that regulator’s ability to impose such requirements. For example, the
information could cause depositors to withdraw funds, a prospect that might
discourage regulators from imposing requirements. Furthermore, an entity’s
regulatory dialogue would become public, which might not be appropriate in all
circumstances.
(d) Because different regulators have different tools available, for example formal
requirements and moral suasion, a requirement to disclose entity-specific capital
requirements could not be framed in a way that would lead to the provision of
information that is comparable across entities.
(e) Disclosure of capital requirements (and hence, regulatory judgements) could

hamper clear communication to the entity of the regulator’s assessment by
creating incentives to use moral suasion and other informal mechanisms.
(f) Disclosure requirements should not focus on entity-specific capital requirements

in isolation, but should focus on how entity-specific capital requirements affect
how an entity manages and determines the adequacy of its capital resources.
(g) A requirement to disclose entity-specific capital requirements imposed by a

regulator is not part of Pillar 3 of the Basel II Framework developed by the Basel
Committee on Banking Supervision.
BC96 Taking into account all of the above arguments, the Board decided not to require
quantitative disclosure of externally imposed capital requirements. Rather, it decided to
require disclosures about whether the entity complied with any externally imposed capital
requirements during the period and, if not, the consequences of non-compliance. This
retains confidentiality between regulators and the entity, but alerts users to breaches of
capital requirements and their consequences.
BC97 Some respondents to ED 7 did not agree that breaches of externally imposed capital
requirements should be disclosed. They argued that disclosure about breaches of
externally imposed capital requirements and the associated regulatory measures
subsequently imposed could be disproportionately damaging to entities. The Board was
not persuaded by these arguments because it believes that such concerns indicate that
information about breaches of externally imposed capital requirements may often be
material by its nature. The Framework states that ‘Information is material if its omission or
misstatement could influence the economic decisions of users taken on the basis of the
financial statements.’ Similarly, the Board decided not to provide an exemption for
temporary non-compliance with regulatory requirements during the year. Information that
an entity is sufficiently close to its limits to breach them, even on a temporary basis, is
useful for users.
Internal capital targets

BC98 The Board proposed in ED 7 that the requirement to disclose information about breaches
of capital requirements should apply equally to breaches of internally imposed
requirements, because it believed the information is also useful to a user of the financial
statements.
BC99 However, this proposal was criticised by respondents to ED 7 for the following reasons:
(a) The information is subjective and, thus, not comparable between entities. In
particular, different entities will set internal targets for different reasons, so a
breach of a requirement might signify different things for different entities. In
contrast, a breach of an external requirement has similar implications for all
entities required to comply with similar requirements.
(b) Capital targets are not more important than other internally set financial targets,
and to require disclosure only of capital targets would provide users with
incomplete, and perhaps misleading, information.
(c) Internal targets are estimates that are subject to change by the entity. It is not
appropriate to require the entity’s performance against this benchmark to be
disclosed.
(d) An internally set capital target can be manipulated by management. The

disclosure requirement could cause management to set the target so that it would
always be achieved, providing little useful information to users and potentially
reducing the effectiveness of the entity’s capital management.
BC100 As a result, the Board decided not to require disclosure of the capital targets set by
management, whether the entity has complied with those targets, or the consequences of
any non-compliance. However, the Board confirmed its view that when an entity has
policies and processes for managing capital, qualitative disclosures about these policies
and processes are useful. The Board also concluded that these disclosures, together with
disclosure of the components of equity and their changes during the year (required by
paragraphs 106–110), would give sufficient information about entities that are not
regulated or subject to externally imposed capital requirements.
Presentation of measures per share

BC101 The exposure draft of 2006 did not propose to change the requirements of IAS 33
Earnings per Share on the presentation of basic and diluted earnings per share. A majority
of respondents agreed with this decision. In their opinion, earnings per share should be
the only measure per share permitted or required in the statement of comprehensive
income and changing those requirements was beyond the scope of this stage of the
financial statement presentation project.
BC102 However, some respondents would like to see alternative measures per share whenever
earnings per share is not viewed as the most relevant measure for financial analysts (ie
credit rating agencies that focus on other measures). A few respondents proposed that an
entity should also display an amount per share for total comprehensive income, because
this was considered a useful measure. The Board did not support including alternative
measures per share in the financial statements, until totals and subtotals, and principles
for aggregating and disaggregating items, are addressed and discussed as part of the next
stage of the financial statement presentation project.
BC103 Some respondents also interpreted the current provisions in IAS 33 as allowing de facto a
display of alternative measures in the income statement. In its deliberations, the Board
was clear that paragraph 73 of IAS 33 did not leave room for confusion. However, it
decided that the wording in paragraph 73 could be improved to clarify that alternative
measures should be shown ‘only in the notes’. This will be done when IAS 33 is revisited
or as part of the annual improvements process.
BC104 One respondent commented that the use of the word ‘earnings’ was inappropriate in the
light of changes proposed in the exposure draft and that the measure should be
denominated ‘profit or loss per share’, instead. The Board considered that this particular
change in terminology was beyond the scope of IAS 1.

BC105 The Board is committed to maintaining a ‘stable platform’ of substantially unchanged
standards for annual periods beginning between 1 January 2006 and 31 December 2008.
In addition, some preparers will need time to make the system changes necessary to
comply with the revisions to IAS 1. Therefore, the Board decided that the effective date of
IAS 1 should be annual periods beginning on or after 1 January 2009, with earlier
application permitted.
Differences from SFAS 130

BC106 In developing IAS 1, the Board identified the following differences from SFAS 130:
(a) Reporting and display of comprehensive income Paragraph 22 of SFAS 130

permits a choice of displaying comprehensive income and its components, in one
or two statements of financial performance or in a statement of changes in equity.
IAS 1 (as revised in 2007) does not permit display in a statement of changes in
equity.
(b) Reporting other comprehensive income in the equity section of a statement

of financial position Paragraph 26 of SFAS 130 specifically states that the total
of other comprehensive income is reported separately from retained earnings and
additional paid-in capital in a statement of financial position at the end of the
period. A descriptive title such as accumulated other comprehensive income is
used for that component of equity. An entity discloses accumulated balances for
each classification in that separate component of equity in a statement of financial
position, in a statement of changes in equity, or in notes to the financial
statements. IAS 1 (as revised in 2007) does not specifically require the display of
a total of accumulated other comprehensive income in the statement of financial
position.
(c) Display of the share of other comprehensive income items of associates

and joint ventures accounted for using the equity method Paragraph 82 of
IAS 1 (as revised in 2007) requires the display in the statement of comprehensive
income of the investor’s share of the investee’s other comprehensive income.
Paragraph 122 of SFAS 130 does not specify how that information should be
displayed. An investor is permitted to combine its proportionate share of other
comprehensive income amounts with its own other comprehensive income items
and display the aggregate of those amounts in an income statement type format
or in a statement of changes in equity.
Appendix
Amendments to the Basis for Conclusions on other HKFRSs
This appendix contains amendments to the Basis for Conclusions on other IFRSs accompanying
the equivalent converged HKFRSs that are necessary in order to ensure consistency with the
revised IAS 1. Amended paragraphs are shown with the new text underlined and deleted text
struck through.
IFRS 1 First-time Adoption of International Financial Reporting

Standards
BCA1 The Basis for Conclusions on IFRS 1 is amended as described below.
The rubric preceding the Basis for Conclusions is amended as follows:
This Basis for Conclusions accompanies, but is not part of, IFRS 1.
In this Basis for Conclusions the terminology has not been amended to reflect the
changes made by IAS 1 Presentation of Financial Statements (as revised in
2007).
Paragraphs BC84 and BC89A are footnoted as follows:
BC84 An entity ... Some of those events might qualify as adjusting events under IAS 10
Events after the Balance Sheet Date.* However, if the entity made those
estimates on a basis consistent with IFRSs
...
* In September 2007 the IASB amended the title of IAS 10 from Events after the
Balance Sheet Date to Events after the Reporting Period as a consequence of
the revision of IAS 1 Presentation of Financial Statements in 2007.
BC89A Nevertheless …. The disclosures in paragraph 36A* inform users of the lack of
comparability.
* As a consequence of the revision of IAS 1 Presentation of Financial Statements

in 2007, paragraph 36A has been deleted.
Paragraph BC92 is amended and paragraphs BC92A–BC92C are added as follows:
BC92 Paragraph 39(a) and (b) of the IFRS requires reconciliations of equity and profit or
loss total comprehensive income. The Board concluded that users would also find
it helpful to have information about the other adjustments that affect the opening
IFRS balance sheet but do not appear in these reconciliations. Because a
reconciliation could be voluminous, the IFRS requires disclosure of narrative
information about these adjustments, as well as about adjustments to the cash
flow statement (paragraph 40 of the IFRS).
BC92A The Board decided to require a first-time adopter to include in its first IFRS
financial statements a reconciliation of total comprehensive income (or, if an entity
did not report such a total, profit or loss) in accordance with previous GAAP to
total comprehensive income in accordance with IFRSs for the latest period
reported in accordance with previous GAAP.
BC92B The Board observed that the amendments to IAS 1 in 2007 regarding the
presentation of income and expense might result in users having to change their
analytical models to include both income and expense that are recognised in profit
or loss and those recognised outside profit or loss. Accordingly, the Board
concluded that it would be helpful to those users to provide information on the

effect and implication of the transition to IFRSs on all items of income and
expense, not only those recognised in profit or loss.
BC92C The Board acknowledged that GAAP in other jurisdictions might not have a notion
of total comprehensive income. Accordingly, it decided that an entity should
reconcile to total comprehensive income in accordance with IFRSs from the
previous GAAP equivalent of total comprehensive income. The previous GAAP
equivalent might be profit or loss.
IFRS 4 Insurance Contracts

The first footnote to paragraph BC138 is amended as follows:
If embedded values are recognised in the statement of financial position balance

sheet, they are typically presented as two components: an insurance liability and a
separate intangible asset. This is similar to the expanded presentation that the
IFRS permits in a business combination or portfolio transfer.
In paragraph BC160, ‘accumulated profits’ is amended to ‘retained earnings’.
Paragraph BC211 is footnoted as follows:
BC211 The first disclosure principle in the IFRS requires disclosure of amounts in an
insurer’s balance sheet* and income statement that arise from insurance
contracts (paragraph 36 of the IFRS). ...
* IAS 1 Presentation of Financial Statements (as revised in 2007) replaced the

term ‘balance sheet’ with ‘statement of financial position’.
IAS 1 (revised 2007) requires an entity to present all income and expense items
in one statement of comprehensive income or in two statements (a separate
income statement and a statement of comprehensive income).
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

BC37 When an asset or a disposal group held for sale is part of a foreign operation with
a functional currency that is different from the presentation currency of the group,
an exchange difference will have been recognised in equity* arising from the
translation of the asset or disposal group into the presentation currency of the
group. IAS 21 …

(as revised in 2007) such a difference is recognised in other comprehensive
income.

The footnote to paragraph BC54 is amended as follows:
Greater disaggregation of the disposal group on the face of in the statement of

financial position balance sheet is permitted but not required.
BC76 The Board believes … The IFRS therefore permits an analysis of the single net
amount to be presented either in the notes or on the face of in the income
statement.*
* IAS 1 Presentation of Financial Statements (as revised in 2007) requires an

entity to present all income and expense items in one statement of
comprehensive income or in two statements (a separate income statement and
a statement of comprehensive income).
In paragraph BC85, a footnote is added as follows:
Measurement Converged, other than cumulative exchange differences recognised

on initial directly in equity* that are included in the carrying amount of the asset
classification (or disposal group) under US GAAP but are not under IFRS 5.

(as revised in 2007) such differences are recognised in other comprehensive
income.
IFRS 6 Exploration for and Evaluation of Mineral Resources

BCA4 In the Basis for Conclusions on IFRS 6, paragraphs BC57 and BC65A are amended and a
footnote added as follows:
BC57 The Board … It noted that if the project is significant, paragraph 103 112(c) of IAS
1 already requires its disclosure, ie as additional information that is necessary for
an understanding of the financial statements.
BC65A In June 2005 the Board made a minor amendment to IFRS 1 First-time Adoption
of International Financial Reporting Standards paragraph 36B* to clarify its
intention that the exemption provided in this paragraph applies to the recognition
and measurement requirements of IFRS 6, as well as the disclosure
requirements.

in 2007, paragraph 36B of IFRS 1 was deleted.
IFRS 7 Financial Instruments: Disclosures

BCA5 The rubric preceding the Basis for Conclusions on IFRS 7 is amended as follows:
This Basis for Conclusions accompanies, but is not part of, IFRS 7.
In this Basis for Conclusions the terminology has not been amended to reflect the changes
made by IAS 1 Presentation of Financial Statements (as revised in 2007).

IAS 8 Accounting Policies, Changes in Accounting Estimates and

Errors
BCA6 The Basis for Conclusions on IAS 8 is amended as described below.
In paragraph BC29, ‘a Standard or an Interpretation’ is amended to ‘an IFRS’.
In paragraphs BC29 and BC30, ‘Standard or Interpretation’ is amended to ‘IFRS’.
In paragraphs BC14, BC17, BC24 and the heading above paragraph BC30, ‘Standards
and Interpretations’ is amended to ‘IFRSs’.
Paragraphs BC20 and BC22 are amended as follows:
BC20 The Standard … includes a definition of material omissions or misstatements,

which is based on the description of materiality in the previous version of IAS 1
Presentation of Financial Statements (as issued in 1997) and in the Framework.
BC22 The application of the concept of materiality is set out in two Standards. The
revised IAS 1 Presentation of Financial Statements (as revised in 2007) continues
to specify its application to disclosures. IAS 8 …
In paragraph BC24, the last sentence is footnoted as follows:
In 2006 the IASB issued IFRS 8 Operating Segments. As explained in paragraphs

BC46 and BC47 of the Basis for Conclusions on IFRS 8, that IFRS includes an
exemption from some requirements if the necessary information is not available
and the cost to develop it would be excessive.
IAS 10 Events after the Reporting Period

The title is amended to ‘Basis for Conclusions on IAS 10 Events after the Reporting
Period’ and footnoted as follows:
In September 2007 the IASB amended the title of IAS 10 from Events after the
Balance Sheet Date to Events after the Reporting Period as a consequence of the
amendments in IAS 1 Presentation of Financial Statements (as revised in 2007).
BC4 For this limited clarification of IAS 10 the main change made is in paragraphs 12
and 13 (paragraphs 11 and 12 of the previous version of IAS 10). As revised,
those paragraphs state that if dividends are declared after the balance sheet
date,* an entity shall not recognise those dividends as a liability at the balance
sheet date. …
* IAS 1 Presentation of Financial Statements (as revised in 2007) replaced the

term ‘balance sheet date’ with ‘end of the reporting period’.

IAS 19 Employee Benefits

[The original text has been marked up to reflect the revision of IAS 39 Financial
Instruments: Recognition and Measurement (as revised in 2003) and
subsequently the issue of IFRS 2 Share-based Payment in 2004; new text is
underlined and deleted text is struck through. The terminology has not been
amended to reflect the changes made by IAS 1 Presentation of Financial
Statements (as revised in 2007).]
...
Paragraph 38 is footnoted as follows:
38 The Board considered five methods of accounting for actuarial gains and losses:
(a) …
(b) immediate recognition both in the balance sheet and outside the income
statement in equity (IAS 1 Presentation of Financial Statements sets out
requirements for the presentation or disclosure of such movements in
equity)* (see paragraphs 40 and 41 below); …
* IAS 1 (as revised in 2007) requires non-owner transactions to be presented

separately from owner transactions in a statement of comprehensive income.
Paragraph 48H is amended and footnoted as follows:
48H IAS 1 Presentation of Financial Statements (as revised in 2003) requires income
and expense recognised outside profit or loss to be presented in a statement of
changes in equity.* The statement of changes in equity must present the total
income and expense for the period, being the profit or loss for the period and each
item of income and expense for the period that, as required or permitted by other
Standards or Interpretations IFRSs, is recognised directly in equity (IAS 1
paragraph 96(a)-(c)). IAS 1 also permits these items, together with the effect of
changes in accounting policies and the correction of errors, to be the only items
shown in the statement of changes in equity.
* IAS 1 Presentation of Financial Statements (as revised in 2007) requires

non-owner transactions to be presented separately from owner transactions in a
statement of comprehensive income.
IAS 21 The Effects of Changes in Foreign Exchange Rates

This Basis for Conclusions accompanies, but is not part of, IAS 21.
Paragraph BC1 was amended and paragraphs BC25A–BC25F were added in

relation to the amendment to IAS 21 issued in December 2005.
2007).
Paragraphs BC25A, BC25B, BC25D and BC25E are footnoted as follows:

BC25A The principle in paragraph 32 is that exchange differences arising on a monetary

item that is, in substance, part of the reporting entity’s net investment in a foreign
operation are initially recognised in a separate component of equity* in the
consolidated financial statements of the reporting entity. Among…
BC25B The requirements … IAS 21 (as revised in 2003) requires the exchange
differences arising on the loan to be recognised in profit or loss in the consolidated
financial statements of Parent P, whereas those differences would be recognised
initially in equity* in the consolidated financial statements of Parent P, if the loan
were to be denominated in sterling or Mexican pesos.
BC25D The Board noted … Therefore, the principle in paragraph 32 to recognise

exchange differences arising on a monetary item initially in a separate component
of equity* effectively results in the monetary item being accounted for in the same
way as an equity investment in the foreign operation when consolidated financial
statements are prepared. The Board …
BC25E Accordingly … The amendment requires exchange differences arising on a

monetary item that forms part of a reporting entity’s net investment in a foreign
operation to be recognised initially in a separate component of equity* in the
consolidated financial statements. This …

in 2007 such differences are recognised in other comprehensive income.
IAS 32 Financial Instruments: Presentation

BCA10 In the Basis for Conclusions on IAS 32, paragraphs BC8 and BC22 are footnoted as
follows:
BC8 The Board … also agreed that it should provide examples of how such entities
might present their income statement* and balance sheet (see Illustrative
Examples 7 and 8).

comprehensive income or in two statements (a separate income statement and
a statement of comprehensive income).
IAS 1 (revised 2007) replaced the term ‘balance sheet’ with ‘statement of financial
position’.
BC22 The Standard requires the separate presentation on in an entity’s balance sheet*
of liability and equity components of a single financial instrument. …
* IAS 1 (as revised in 2007) replaced the term ‘balance sheet’ with ‘statement of

IAS 36 Impairment of Assets

At the end of the rubric preceding the Introduction a paragraph is added as follows:
2007).
Paragraph BCZ108 is footnoted as follows:
BCZ108 IAS 36 requires that an impairment loss on a revalued asset should be

recognised as an expense in the income statement* immediately, except that it
should be recognised directly in equity to the extent that it reverses a previous
revaluation on the same asset.

comprehensive income or in two statements (a separate income statement
and a statement of comprehensive income).
As a consequence of the revision of IAS 1 (revised 2007) an impairment loss

is recognised in other comprehensive income.
IAS 39 Financial Instruments: Recognition and Measurement

This Basis for Conclusions accompanies, but is not part of, IAS 39.
2007).
Paragraphs BC75, BC125, BC155, BC167, BC221(c) and BC222(p) and (s)(iii) are
footnoted as follows:
BC75 IAS 39 … It requires some gains and losses to be recognised in profit or loss, and
others to be recognised initially as a component of equity.* This combination of
measurement and recognition requirements can result in inconsistencies, which
some refer to as ‘accounting mismatches’, between the accounting for an asset
(or group of assets) and a liability (or group of liabilities). The notion …

in 2007 these other gains and losses are recognized in other comprehensive
income.
BC125 In the Exposure Draft … The Board noted that this was consistent with the
recognition of changes in the fair value of available-for-sale financial assets
directly in equity* (see paragraph 55(b)).

in 2007 such changes are recognised in other comprehensive income.
BC155 The question … The entity enters into a derivative to hedge against possible
future changes in the US dollar/euro exchange rate. Such a hedge is classified as

a cash flow hedge under IAS 39, with the effect that gains and losses on the
hedging instrument (to the extent that the hedge is effective) are initially
recognised in equity.* The question …

in 2007 such gains and losses are recognised in other comprehensive income.
BC167 If the internal swap … This is because the gains and losses on the internal swap in
the banking book would be recognised in equity* to the extent the hedge is
effective and the gains and losses on the internal swap in the trading book would
be recognised in profit or loss.

BC221(c) The Board decided to eliminate the option to recognise in profit or loss gains and
losses on available-for-sale financial assets (IAS 39, paragraph 55(b)), and thus
require such gains and losses to be recognised in equity.* The change …

BC222 The main changes from the Exposure Draft’s proposals are as follows:
...
(p) The Exposure Draft … Impairment losses recognised on

available-for-sale equity instruments cannot be reversed through profit or
loss, ie any subsequent increase in fair value is recognised in equity.*
* As a consequence of the revision of IAS 1 Presentation of Financial

Statements in 2007 such an increase is recognised in other
(s) The Exposure Draft ...
(iii) it is consistent with paragraphs 97 and 98 that any gain or loss

that is recognised directly in equity* in a cash flow hedge of a
forecast intragroup transaction should be reclassified into
consolidated profit or loss in the same period or periods during
which the foreign currency risk of the hedged transaction affects
consolidated profit or loss.
* As a consequence of the revision of IAS 1 Presentation of Financial

Statements in 2007 such a gain or loss is recognised in other
IAS 40 Investment Property

BCA13 In the IASC Basis for Conclusions on IAS 40 (2000), the following footnote to paragraph
B63 is deleted:
‘Under IAS 1 Presentation of Financial Statements, all such changes reported in equity are
presented in a statement showing changes in equity.’

IFRIC 1 Changes in Existing Decommissioning, Restoration and

Similar Liabilities
BCA14 In the Basis for Conclusions on IFRIC 1, the rubric preceding the Introduction and
paragraphs BC3, BC25 and BC29 are amended as follows:
This Basis for Conclusions accompanies, but is not part of, IFRIC 1.
The original text has been marked up to reflect the revision of IAS 1 Presentation
of Financial Statements in 2007: new text is underlined and deleted text is struck
through.
BC3 IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires that the
measurement of the liability, both initially and subsequently, should be the
estimated expenditure required to settle the present obligation at the balance
sheet date end of the reporting period and should reflect a current market-based
discount rate. It requires provisions to be reviewed at each balance sheet date the
end of each reporting period and adjusted to reflect the current best estimate.
Hence, ...
BC25 Several responses to the draft Interpretation sought clarification of how it should
be applied to revalued assets. The IFRIC noted that:
(a) if the entity chooses the revaluation model, IAS 16 requires the valuation
to be kept sufficiently up to date that the carrying amount does not differ
materially from that which would be determined using fair value at the
balance sheet date.* This …
(b) … Under the revaluation model set out in IAS 16, cumulative revaluation
surpluses for an asset are accounted for in equity, and cumulative
revaluation deficits are accounted for in profit or loss. The IFRIC …
* IAS 1 Presentation of Financial Statements (revised 2007) replaced the term

‘balance sheet date’ with ‘end of the reporting period’.
As a consequence of the revision of IAS 1 in 2007 the increase is recognised in

other comprehensive income and accumulated in equity under the heading of
revaluation surplus.
BC29 However, … These changes reflect an event of significance to users, and the
IFRIC agreed that they should be given prominence by being separately disclosed
and described as such in the statement of changes in equity.*

in 2007 such changes are presented in the statement of comprehensive income.
IFRIC 5 Rights to Interests arising from Decommissioning,

Restoration and Environmental Rehabilitation Funds
BCA15 In the Basis for Conclusions on IFRIC 5, the rubric preceding the Introduction and
paragraph BC16 are amended as follows:
through.

BC16 The IFRIC noted that the right to reimbursement relates to a decommissioning
obligation for which a provision would be recognised and measured in accordance
with IAS 37. Paragraph 36 of IAS 37 requires such provisions to be measured at
‘the best estimate of the expenditure required to settle the present obligation at the
balance sheet date end of the reporting period’. The IFRIC …
IFRIC 7 Applying the Restatement Approach under IAS 29 Financial

Reporting in Hyperinflationary Economies
BCA16 The Basis for Conclusions on IFRIC 7 is amended as described below.
2007).
BC24 The IFRIC observed that paragraph 18 of Appendix A to IAS 12 explains:*
Non-monetary assets are restated in terms of the measuring unit current at the
balance sheet date (see IAS 29 Financial Reporting in Hyperinflationary
Economies) and no equivalent adjustment is made for tax purposes. (notes: (1)

the deferred tax is charged in the income statement; and (2) if, in addition to the
restatement, the non-monetary assets are also revalued, the deferred tax relating
§
to the revaluation is charged to equity and the deferred tax relating to the
restatement is charged in the income statement.)
* Paragraph 18 has been amended as a consequence of the changes made by

IAS 1 Presentation of Financial Statements (as revised in 2007).

IAS 1 (revised 2007) requires an entity to present all income and expense items
in one statement of comprehensive income or in two statements (a separate
income statement and a statement of comprehensive income).
§
Under IAS 1 (revised 2007), such effect is recognised in other comprehensive
income.
IFRIC 14 IAS 19—The Limit on a Defined Benefit Asset, Minimum

Funding Requirements and their Interaction
BCA16A The Basis for Conclusions on IFRIC 14 is amended as described below.
through.
References to 'balance sheet date' are amended to 'end of the reporting period'.
In paragraph BC33, 'the balance sheet asset or increase the liability' is amended to 'the
asset or increase the liability recognised in the statement of financial position'.

In paragraph BC36, 'the balance sheet' is amended to 'the asset recognised in the
statement of financial position'.
In paragraph BC37, 'balance sheet asset or liability' is amended to 'asset or liability

recognised in the statement of financial position'.
BCA17 [not used].
SIC-15 Operating Leases—Incentives

BCA18 In the Basis for Conclusions on SIC-15, the rubric preceding paragraph 7 and paragraphs
8 and 11 are amended as follows:
The original text has been marked up to reflect the revision of IASs 1, 8 and 17 in 2003
and of IAS 1 in 2007: new text is underlined and deleted text is struck through.
8 Paragraph 22 of the Framework and IAS 1.2527 require the preparation of

financial statements under the accrual basis of accounting. IAS 17.3325 and IAS
17.5042 specify the basis on which lessees and lessors respectively should
recognise amounts payable or receivable under operating leases.
11 Costs incurred by the lessee on its own behalf are accounted for using the
applicable recognition requirements. For example, relocation costs are recognised
as an expense in profit or loss the income statement in the period in which they
are incurred. The accounting …
SIC-25 Income Taxes—Changes in the Tax Status of an Entity or its

Shareholders
5–8 are amended, and paragraph 5A is added, as follows:
The original text has been marked up to reflect the amendment to IAS 12 in 2003, and the
revision of IAS 38 Intangible Assets in 2004 and IAS 1 Presentation of Financial
Statements in 2007: new text is underlined and deleted text is struck through.
5 IAS 12.58 requires current and deferred tax to be included in the net profit or loss
for the period, except to the extent the tax arises from a transaction or event that is
recognised outside profit or loss either in other comprehensive income or directly
in equity, in the same or a different period, (or arises from a business combination
that is an acquisition). IAS 12.61A requires that current and deferred tax to be
recognised outside profit or loss charged or credited directly to equity if the tax
relates to items that are recognised credited or charged, in the same or a different
period, outside profit or loss directly to equity.
5A IAS 12.62 identifies examples of circumstances in which a transaction or event is

recognised in other comprehensive income as permitted or required by another
IFRS. All of these circumstances result in changes in the recognised amount of
equity through recognition in other comprehensive income.
6 IAS 12.62A identifies examples of circumstances in which a transaction or event is

recognised directly in equity as is permitted or required by another IFRS
International Financial Reporting Standard. All of these circumstances result in
changes in the recognised amount of equity through recognition of a credit or
charge directly to equity.
7 IAS 12.65 explains that where the tax base of a revalued asset changes, any tax
consequence is recognised in other comprehensive income directly in equity only

to the extent that a related accounting revaluation was or is expected to be

recognised in other comprehensive income directly in equity (revaluation surplus).
8 Because tax consequences recognised outside profit or loss, whether in other

comprehensive income or directly in equity, must relate to a transaction or event
recognised outside profit or loss directly in equity in the same or a different period,
the cumulative amount of tax charged or credited directly to equity recognised
outside profit or loss can be expected to be the same amount that would have
been recognised outside profit or loss charged or credited directly to equity if the
new tax status had applied previously. IAS 12.63(b) acknowledges that
determining the tax consequences of a change in the tax rate or other tax rules
that affects a deferred tax asset or liability and relates to an item previously
recognised outside profit or loss charged or credited to equity may prove to be
difficult. Because of this, IAS 12.63 suggests that an allocation may be necessary.
SIC-29 Service Concession Arrangements: Disclosures

8 and 10 are amended, and a new rubric added before paragraph 10, as follows:
The original text of paragraphs 8 and 9 has been marked up to reflect the revision of IAS 1
in 2003 and 2007 and the issue of IFRIC 12 in 2006: new text is underlined and deleted
text is struck through.
8 Paragraph 15 of the Framework states that the economic decisions taken by users
of financial statements require an evaluation of the ability of the entity to generate
cash and cash equivalents and of the timing and certainty of their generation.
Paragraph 21 of the Framework states that financial statements also contain
notes and supplementary schedules and other information. For example, they
may contain additional information that is relevant to the needs of users about the
items in the statement of financial position balance sheet and statement of
comprehensive income statement. They may also include disclosures about the
risks and uncertainties affecting the entity and any resources and obligations not
recognised in the statement of financial position balance sheet.
The text of paragraph 10 has been marked up to reflect the revision of IAS 1 in 2007.
Previous amendments to the paragraph, reflecting the revision of IAS 1 in 2003, have
been incorporated into the text to avoid confusion with the new amendments in 2007.
10 IAS 1.112(c)103(c) requires an entity’s notes to provide additional information that

is not presented elsewhere in the financial statements on the face of the balance
sheet, income statement, statement of changes in equity or cash flow statement,
but is relevant to an understanding of any of them. The definition of notes in IAS
1.711 indicates that notes provide narrative descriptions or disaggregations of
items disclosed in the statement of financial position balance sheet, statement of
comprehensive income, separate income statement (if presented), statement of
changes in equity and statement of cash flows statement, as well as information
about items that do not qualify for recognition in those statements.

Appendix
Amendments to Basis for Conclusions on HKAS 32 and HKAS 1

Puttable Financial Instruments and Obligations Arising on
Liquidation (issued in June 2008) - effective for annual periods
beginning on or after 1 January 2009
The following sets out amendments required for this Basis for Conclusions resulting from
amendments to HKAS 32 and HKAS 1 that are not yet effective. Once effective, the amendments
set out below will be incorporated into the text of this Conclusions and this appendix will be deleted.
In the amended paragraphs shown below, new text is underlined and deleted text is struck
through.
In the Basis for Conclusions, after paragraph BC6, a heading and paragraph BC6A are added.
After paragraph BC100, a heading and paragraphs BC100A and BC100B are added.
Amendments to IAS 32 and IAS 1 –Puttable Financial Instruments and

Obligations Arising on Liquidation (2008)
BC6A In July 2006 the Board published an exposure draft of proposed amendments to IAS 32
and IAS 1 relating to the classification of puttable instruments and instruments with
obligations arising only on liquidation. The Board subsequently confirmed the proposals
and in February 2008 issued an amendment that now forms part of IAS 1.
Puttable financial instruments and obligations arising on liquidation

BC100A The Board decided to require disclosure of information about puttable instruments and
instruments that impose on the entity an obligation to deliver to another party a pro rata
share of the net assets of the entity only on liquidation that are reclassified in accordance
with paragraphs 16E and 16F of IAS 32. This is because the Board concluded that this
disclosure allows users of financial statements to understand the effects of any
reclassifications.
BC100B The Board also concluded that entities with puttable financial instruments classified as
equity should be required to disclose additional information to allow users to assess any
effect on the entity’s liquidity arising from the ability of the holder to put the instruments to
the issuer. Financial instruments classified as equity usually do not include any obligation
for the entity to deliver a financial asset to another party. Therefore, the Board concluded
that additional disclosures are needed in these circumstances. In particular, the Board
concluded that entities should disclose the expected cash outflow on redemption or
repurchase of those financial instruments that are classified as equity and information
about how that amount was determined. That information allows liquidity risk associated
with the put obligation and future cash flows to be evaluated.
© Copyright 111A HKAS 1 BC (MarchJune 2008)

Appendix
Amendments resulting from other Basis for Conclusions

The following sets out amendments required for this Basis for Conclusions resulting from other
newly issued HKFRSs that are not yet effective. Once effective, the amendments set out below will
be incorporated into the text of this Basis for Conclusions and this appendix will be deleted. In the
amended paragraphs shown below, new text is underlined and deleted text is struck through.

Paragraph BC 4(e) and the heading above paragraph BC 59 are footnoted as follows:
In January 2008 the IASB issued an amended IAS 27 Consolidated and Separate
Financial Statements, which amended ‘minority interest’ to ‘non-controlling interests’.
© Copyright 111B HKAS 1 BC (June 2008)

Dissenting opinions
Dissent of Mary E Barth, Anthony T Cope, Robert P Garnett and
James J Leisenring
DO1 Professor Barth and Messrs Cope, Garnett and Leisenring voted against the issue of IAS 1
Presentation of Financial Statements in 2007. The reasons for their dissent are set out
below.
DO2 Those Board members agree with the requirement to report all items of income and
expense separately from changes in net assets that arise from transactions with owners in
their capacity as owners. Making that distinction clearly is a significant improvement in
financial reporting.
DO3 However, they believe that the decision to permit entities to divide the statement of
comprehensive income into two separate statements is both conceptually unsound and
unwise.
DO4 As noted in paragraph BC51, the Framework does not define profit or loss, or net income.
It also does not indicate what criteria should be used to distinguish between those items of
recognised income and expense that should be included in profit or loss and those items
that should not. In some cases, it is even possible for identical transactions to be reported
inside or outside profit or loss. Indeed, in that same paragraph, the Board acknowledges
these facts, and indicates that it had a preference for reporting all items of income and
expense in a single statement, believing that a single statement is the conceptually correct
approach. Those Board members believe that some items of income and expense that will
potentially bypass the statement of profit and loss can be as significant to the assessment
of an entity’s performance as items that will be included. Until a conceptual distinction can
be developed to determine whether any items should be reported in profit or loss or
elsewhere, financial statements will lack neutrality and comparability unless all items are
reported in a single statement. In such a statement, profit or loss can be shown as a
subtotal, reflecting current conventions.
DO5 In the light of those considerations, it is puzzling that most respondents to the exposure
draft that proposed these amendments favoured permitting a two-statement approach,
reasoning that it ‘distinguishes between profit and loss and total comprehensive income’
(paragraph BC50). Distinguishing between those items reported in profit or loss and those
reported elsewhere is accomplished by the requirement for relevant subtotals to be
included in a statement of comprehensive income. Respondents also stated that a
two-statement approach gives primacy to the ‘income statement’; that conflicts with the
Board’s requirement in paragraph 11 of IAS 1 to give equal prominence to all financial
statements within a set of financial statements.
DO6 Those Board members also believe that the amendments are flawed by offering entities a
choice of presentation methods. The Board has expressed a desire to reduce alternatives
in IFRSs. The Preface to International Financial Reporting Standards, in paragraph 13,
states: ‘the IASB intends not to permit choices in accounting treatment … and will continue
to reconsider … those transactions and events for which IASs permit a choice of
accounting treatment, with the objective of reducing the number of those choices.’ The
Preface extends this objective to both accounting and reporting. The same paragraph
states: ‘The IASB’s objective is to require like transactions and events to be accounted for
and reported in a like way and unlike transactions and events to be accounted for and
reported differently’ (emphasis added). By permitting a choice in this instance, the IASB
has abandoned that principle.
DO7 Finally, the four Board members believe that allowing a choice of presentation at this time
will ingrain practice, and make achievement of the conceptually correct presentation more
difficult as the long-term project on financial statement presentation proceeds.

Guidance on implementing
HKAS 1 Presentation of Financial Statements
This guidance accompanies, but is not part of, HKAS 1.
Illustrative financial statement structure

IG1 HKAS 1 sets out the components of financial statements and minimum requirements for
disclosure in the statements of financial position, comprehensive income and changes in
equity. It also describes further items that may be presented either in the relevant financial
statement or in the notes. This guidance provides simple examples of ways in which the
requirements of HKAS 1 for the presentation of the statements of financial position,
comprehensive income and changes in equity might be met. An entity should change the
order of presentation, the titles of the statements and the descriptions used for line items
when necessary to suit its particular circumstances.
IG2 The guidance is in three sections. Paragraphs IG3–IG6 provide examples of the
presentation of financial statements. Paragraphs IG7–IG9 provide an example of the
determination of reclassification adjustments for available-for-sale financial assets in
accordance with HKAS 39 Financial Instruments: Recognition and Measurement.
Paragraphs IG10 and IG11 provide examples of capital disclosures.
IG3 The illustrative statement of financial position shows one way in which an entity may present
a statement of financial position distinguishing between current and non-current items. Other
formats may be equally appropriate, provided the distinction is clear.
IG4 The illustrations use the term ‘comprehensive income’ to label the total of all components of
comprehensive income, including profit or loss. The illustrations use the term ‘other
comprehensive income’ to label income and expenses that are included in comprehensive
income but excluded from profit or loss. HKAS 1 does not require an entity to use those
terms in its financial statements.
IG5 Two statements of comprehensive income are provided, to illustrate the alternative
presentations of income and expenses in a single statement or in two statements. The single
statement of comprehensive income illustrates the classification of income and expenses
within profit or loss by function. The separate statement (in this example, ‘the income
statement’) illustrates the classification of income and expenses within profit by nature.
IG6 The examples are not intended to illustrate all aspects of HKFRSs, nor do they constitute a
complete set of financial statements, which would also include a statement of cash flows, a
summary of significant accounting policies and other explanatory information.
© Copyright 113 HKAS 1 IG

Part I: Illustrative presentation of financial statements
XYZ Group – Statement of financial position as at 31 December 20X7
(in thousands of currency units)
31 Dec 31 Dec
20X7 20X6
ASSETS
Non-current assets
Property, plant and equipment 350,700 360,020
Goodwill 80,800 91,200
Other intangible assets 227,470 227,470
Investments in associates 100,150 110,770
Available-for-sale financial assets 142,500 156,000
901,620 945,460
Current assets
Inventories 135,230 132,500
Trade receivables 91,600 110,800
Other current assets 25,650 12,540
Cash and cash equivalents 312,400 322,900
564,880 578,740
Total assets 1,466,500 1,524,200
continued...

...continued
XYZ Group – Statement of financial position as at 31 December 20X7
31 Dec 31 Dec
20X7 20X6
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 650,000 600,000
Retained earnings 243,500 161,700
Other components of equity 10,200 21,200
903,700 782,900
Minority interest 70,050 48,600
Total equity 973,750 831,500
Non-current liabilities
Long-term borrowings 120,000 160,000
Deferred tax 28,800 26,040
Long-term provisions 28,850 52,240
Total non-current liabilities 177,650 238,280
Current liabilities
Trade and other payables 115,100 187,620
Short-term borrowings 150,000 200,000
Current portion of long-term borrowings 10,000 20,000
Current tax payable 35,000 42,000
Short-term provisions 5,000 4,800
Total current liabilities 315,100 454,420
Total liabilities 492,750 692,700
Total equity and liabilities 1,466,500 1,524,200

XYZ Group – Statement of comprehensive income for the year ended 31 December 20X7
(illustrating the presentation of comprehensive income in one statement and the
classification of expenses within profit by function)
20X7 20X6
Revenue 390,000 355,000
Cost of sales (245,000) (230,000)
Gross profit 145,000 125,000
Other income 20,667 11,300
Distribution costs (9,000) (8,700)
Administrative expenses (20,000) (21,000)
Other expenses (2,100) (1,200)
Finance costs (8,000) (7,500)
(a)
Share of profit of associates 35,100 30,100
Profit before tax 161,667 128,000
Income tax expense (40,417) (32,000)
Profit for the year from continuing operations 121,250 96,000
Loss for the year from discontinued operations – (30,500)
PROFIT FOR THE YEAR 121,250 65,500
Other comprehensive income:
Exchange differences on translating foreign
operations(b) 5,334 10,667
(b)
Available-for-sale financial assets (24,000) 26,667
Cash flow hedges(b) (667) (4,000)
Gains on property revaluation 933 3,367
Actuarial gains (losses) on defined benefit
pension plans (667) 1,333
Share of other comprehensive income of
associates(c) 400 (700)
Income tax relating to components of other
comprehensive income(d) 4,667 (9,334)
Other comprehensive income for the year,
net of tax (14,000) 28,000
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR 107,250 93,500
continued..

...continued
(illustrating the presentation of comprehensive income in one

statement and the classification of expenses within profit by function)
20X7 20X6
Profit attributable to:
Owners of the parent 97,000 52,400
121,250 65,500
Total comprehensive income attributable to:

107,250 93,500
Earnings per share (in currency units):

Basic and diluted 0.46 0.30
continued..

...continued
(illustrating the presentation of comprehensive income in one statement and the

classification of expenses within profit by function)
Alternatively, components of other comprehensive income could be presented in the statement of

comprehensive income net of tax:

after tax: 20X7 20X6
Exchange differences on translating foreign
operations 4,000 8,000
Cash flow hedges (500) (3,000)
associates 400 (700)
net of tax(d) (14,000) 28,000
(a) This means the share of associates’ profit attributable to owners of the associates, ie it is after tax and
minority interests in the associates.
(b) This illustrates the aggregated presentation, with disclosure of the current year gain or loss and
reclassification adjustment presented in the notes. Alternatively, a gross presentation can be used.
(c) This means the share of associates’ other comprehensive income attributable to owners of the
associates, ie it is after tax and minority interests in the associates.
(d) The income tax relating to each component of other comprehensive income is disclosed in the notes.

XYZ Group – Income statement for the year ended 31 December 20X7
(illustrating the presentation of comprehensive income in two statements and classification

of expenses within profit by nature)
20X7 20X6
Revenue 390,000 355,000
Other income 20,667 11,300
Changes in inventories of finished goods and
work in progress (115,100) (107,900)
Work performed by the entity and capitalised 16,000 15,000

Raw material and consumables used (96,000) (92,000)
Employee benefits expense (45,000) (43,000)
Depreciation and amortisation expense (19,000) (17,000)
Impairment of property, plant and equipment (4,000) –
Other expenses (6,000) (5,500)
Finance costs (15,000) (18,000)
Share of profit of associates(e) 35,100 30,100
Profit before tax 161,667 128,000
Income tax expense (40,417) (32,000)
Profit for the year from continuing
operations 121,250 96,000
Loss for the year from discontinued operation – (30,500)

PROFIT FOR THE YEAR 121,250 65,500
Profit attributable to:

121,250 65,500
Earnings per share (in currency units):

Basic and diluted 0.46 0.30
(e) This means the share of associates’ profit attributable to owners of the associates, ie it is after tax and
minority interests in the associates.

(illustrating the presentation of comprehensive income in two statements)
20X7 20X6
Profit for the year 121,250 65,500
Exchange differences on translating foreign operations 5,334 10,667
Cash flow hedges (667) (4,000)


associates(f) 400 (700)
Income tax relating to components of other

comprehensive income(g) 4,667 (9,334)

net of tax (14,000) 28,000
TOTAL COMPREHENSIVE INCOME FOR

THE YEAR 107,250 93,500
Total comprehensive income attributable to:

107,250 93,500
Alternatively, components of other comprehensive income could be presented, net of tax. Refer to
the statement of comprehensive income illustrating the presentation of income and expenses in one
statement.
(f) This means the share of associates’ other comprehensive income attributable to owners of the
associates, ie it is after tax and minority interests in the associates.
(g) The income tax relating to each component of other comprehensive income is disclosed in the notes.

XYZ Group
Disclosure of components of other comprehensive income(h)
Notes
Year ended 31 December 20X7
20X7 20X6
Exchange differences on
translating foreign operations(i) 5,334 10,667
Available-for-sale financial assets:

Gains arising during the year 1,333 30,667
Less: Reclassification
adjustments for gains
included in profit or loss (25,333) (24,000) (4,000) 26,667
Cash flow hedges:
Gains (losses) arising during
the year (4,667) (4,000)
Less: Reclassification
adjustments for gains
(losses) included in profit or
loss 3,333 –
Less: Adjustments for
amounts transferred to initial
carrying amount of hedged
items 667 (667) – (4,000)
continued...

...continued
XYZ Group
Disclosure of components of other comprehensive income
Notes
20X7 20X6
Actuarial gains (losses) on

defined benefit pension plans (667) 1,333
Share of other comprehensive

income of associates 400 (700)
Other comprehensive income (18,667) 37,334
Income tax relating to

components of other
comprehensive income(j) 4,667 (9,334)
Other comprehensive income

for the year (14,000) 28,000
(h) When an entity chooses an aggregated presentation in the statement of comprehensive income, the
amounts for reclassification adjustments and current year gain or loss are presented in the notes.
(i) There was no disposal of a foreign operation. Therefore, there is no reclassification adjustment for the
years presented.
(j) The income tax relating to each component of other comprehensive income is disclosed in the notes.

XYZ Group
Disclosure of tax effects relating to each component of other comprehensive income
Notes
20X7 20X6
Tax Tax
Before-tax (expense) Net-of-tax Before-tax (expense) Net-of-tax
amount benefit amount amount benefit amount
Exchange
differences on
translating
foreign
operations 5,334 (1,334) 4,000 10,667 (2,667) 8,000
Available-for-
sale financial
assets (24,000) 6,000 (18,000) 26,667 (6,667) 20,000
Cash flow
hedges (667) 167 (500) (4,000) 1,000 (3,000)
Gains on
property
revaluation 933 (333) 600 3,367 (667) 2,700
Actuarial gains
(losses) on
defined
benefit pension
plans (667) 167 (500) 1,333 (333) 1,000
Share of other
comprehensive
income of
associates 400 – 400 (700) – (700)
Other
comprehensive
income (18,667) 4,667 (14,000) 37,334 (9,334) 28,000

XYZ Group – Statement of changes in equity for the year ended 31 December 20X7
Share Retained Translation Available- Cash flow Revaluation Total Minority Total
capital earnings of foreign for-sale hedges surplus interest equity
operations financial
assets
Balance at
1 January 20X6 600,000 118,100 (4,000) 1,600 2,000 – 717,700 29,800 747,500
Changes in
accounting
policy – 400 – – – – 400 100 500
Restated
balance 600,000 118,500 (4,000) 1,600 2,000 – 718,100 29,900 748,000
Changes in
equity for 20X6
Dividends – (10,000) – – – – (10,000) – (10,000)
Total
comprehensive
income for the
(k)
year – 53,200 6,400 16,000 (2,400) 1,600 74,800 18,700 93,500
Balance at
31 December
20X6 600,000 161,700 2,400 17,600 (400) 1,600 782,900 48,600 831,500
Changes in
equity for 20X7
Issue of share
capital 50,000 – – – – – 50,000 – 50,000
Dividends – (15,000) – – – – (15,000) – (15,000)
Total
comprehensive
income for the
(l)
year – 96,600 3,200 (14,400) (400) 800 85,800 21,450 107,250
Transfer to
retained
earnings – 200 – – – 200 – – –
Balance at
31 December
20X7 650,000 243,500 5,600 3,200 (800) 2,200 903,700 70,050 973,750
continued...

...continued
(k) The amount included in retained earnings for 20X6 of 53,200 represents profit attributable to
owners of the parent of 52,400 plus actuarial gains on defined benefit pension plans of 800
(1,333, less tax 333, less minority interest 200).
The amount included in the translation, available-for-sale and cash flow hedge reserves
represent other comprehensive income for each component, net of tax and minority interest,
eg other comprehensive income related to available-for-sale financial assets for 20X6 of
16,000 is 26,667, less tax 6,667, less minority interest 4,000.
The amount included in the revaluation surplus of 1,600 represents the share of other
comprehensive income of associates of (700) plus gains on property revaluation of 2,300
(3,367, less tax 667, less minority interest 400). Other comprehensive income of associates
relates solely to gains or losses on property revaluation.
(l) The amount included in retained earnings for 20X7 of 96,600 represents profit attributable to
owners of the parent of 97,000 plus actuarial losses on defined benefit pension plans of 400
(667, less tax 167, less minority interest 100).
The amount included in the translation, available-for-sale and cash flow hedge reserves
represent other comprehensive income for each component, net of tax and minority interest,
eg other comprehensive income related to the translation of foreign operations for 20X7 of
3,200 is 5,334, less tax 1,334, less minority interest 800.
The amount included in the revaluation surplus of 800 represents the share of other
comprehensive income of associates of 400 plus gains on property revaluation of 400 (933,
less tax 333, less minority interest 200). Other comprehensive income of associates relates
solely to gains or losses on property revaluation.

Part II: Illustrative example of the determination of reclassification

adjustments
IG7 The Standard requires an entity to disclose reclassification adjustments relating to
each component of other comprehensive income.
IG8 This guidance provides an illustration of the calculation of reclassification

adjustments for available-for-sale financial assets recognised in accordance with
HKAS 39.
IG9 On 31 December 20X5, XYZ Group purchased 1,000 shares (equity instruments) at
10 currency units (CU) per share, classified as available for sale. The fair value of
the instruments at 31 December 20X6 was CU12; at 31 December 20X7 the fair
value had increased to CU15. All of the instruments were sold on 31 December
20X7; no dividends were declared on those instruments during the time that they
were held by XYZ Group. The applicable tax rate in accordance with HKAS 12
Income Taxes is 30 per cent.
Calculation of gains
(in currency units)
Before Income Net of

tax tax tax
Gains recognised in other

comprehensive income:
Year ended 31 December 20X6 2,000 (600) 1,400
Year ended 31 December 20X7 3,000 (900) 2,100
Total gain 5,000 (1,500) 3,500

Amounts reported in profit or loss and other comprehensive income for the years ended 31
December 20X6 and 31 December 20X7
20X7 20X6
Profit or loss:
Gain on sale of instruments 5,000
Income tax expense (1,500)
Net gain recognised in profit or loss 3,500
Gain arising during the year, net of tax 2,100 1,400
Reclassification adjustment, net of tax (3,500) –
Net gain (loss) recognised in other

comprehensive income (1,400) 1,400
2,100 1,400
Alternatively, components of other comprehensive income may be shown gross of

tax with a separate line item for tax effects:
20X7 20X6
Profit or loss:
Gain on sale of instruments 5,000
Income tax expense (1,500)
Net gain recognised in profit or loss 3,500
Gain arising during the year 3,000 2,000
Reclassification adjustment (5,000) –
Income tax relating to other comprehensive

income 600 (600)
Net gain (loss) recognised in other

comprehensive income (1,400) 1,400
2,100 1,400

Part III: Illustrative examples of capital disclosures (paragraphs

134–136)
An entity that is not a regulated financial institution

IG10 The following example illustrates the application of paragraphs 134 and 135 for an entity that
is not a financial institution and is not subject to an externally imposed capital requirement. In
this example, the entity monitors capital using a debt-to-adjusted capital ratio. Other entities
may use different methods to monitor capital. The example is also relatively simple. An entity
decides, in the light of its circumstances, how much detail it provides to satisfy the
requirements of paragraphs 134 and 135.
Facts
Group A manufactures and sells cars. Group A includes a finance subsidiary that
provides finance to customers, primarily in the form of leases. Group A is not subject to
any externally imposed capital requirements.
Example disclosure
The Group’s objectives when managing capital are:
• to safeguard the entity’s ability to continue as a going concern, so that it can

continue to provide returns for shareholders and benefits for other stakeholders,
and
• to provide an adequate return to shareholders by pricing products and services

commensurately with the level of risk.
The Group sets the amount of capital in proportion to risk. The Group manages the capital
structure and makes adjustments to it in the light of changes in economic conditions and
the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares, or sell assets to reduce debt.
Consistently with others in the industry, the Group monitors capital on the basis of the
debt-to-adjusted capital ratio. This ratio is calculated as net debt ÷ adjusted capital. Net
debt is calculated as total debt (as shown in the statement of financial position) less cash
and cash equivalents. Adjusted capital comprises all components of equity (ie share
capital, share premium, minority interest, retained earnings, and revaluation reserve)
other than amounts accumulated in equity relating to cash flow hedges, and includes
some forms of subordinated debt.
continued...

...continued
During 20X4, the Group’s strategy, which was unchanged from 20X3, was to maintain the
debt-to-adjusted capital ratio at the lower end of the range 6:1 to 7:1, in order to secure access
to finance at a reasonable cost by maintaining a BB credit rating. The debt-to-adjusted capital
ratios at 31 December 20X4 and at 31 December 20X3 were as follows:
31 Dec 31 Dec
20X4 20X3
CU CU
million million
Total debt 1,000 1,100
Less: cash and cash equivalents (90) (150)
Net debt 910 950
Total equity 110 105
Add: subordinated debt instruments 38 38
Less: amounts accumulated in equity relating to

cash flow hedges (10) (5)
Adjusted capital 138 138
Debt-to-adjusted capital ratio 6.6 6.9
The decrease in the debt-to-adjusted capital ratio during 20X4 resulted primarily from the
reduction in net debt that occurred on the sale of subsidiary Z. As a result of this reduction in net
debt, improved profitability and lower levels of managed receivables, the dividend payment was
increased to CU2.8 million for 20X4 (from CU2.5 million for 20X3).

An entity that has not complied with externally imposed capital

requirements
IG11 The following example illustrates the application of paragraph 135(e) when an entity has not
complied with externally imposed capital requirements during the period. Other disclosures
would be provided to comply with the other requirements of paragraphs 134 and 135.
Facts
Entity A provides financial services to its customers and is subject to capital requirements
imposed by Regulator B. During the year ended 31 December 20X7, Entity A did not
comply with the capital requirements imposed by Regulator B. In its financial statements for
the year ended 31 December 20X7, Entity A provides the following disclosure relating to its
non-compliance.
Example disclosure
Entity A filed its quarterly regulatory capital return for 30 September 20X7 on 20 October
20X7. At that date, Entity A’s regulatory capital was below the capital requirement imposed
by Regulator B by CU1 million. As a result, Entity A was required to submit a plan to the
regulator indicating how it would increase its regulatory capital to the amount required.
Entity A submitted a plan that entailed selling part of its unquoted equities portfolio with a
carrying amount of CU11.5 million in the fourth quarter of 20X7. In the fourth quarter of
20X7, Entity A sold its fixed interest investment portfolio for CU12.6 million and met its
regulatory capital requirement.

Appendix
Amendments to guidance on other HKFRSs
The following amendments to guidance on other HKFRSs are necessary in order to ensure
consistency with the revised HKAS 1. In the amended paragraphs, new text is underlined and
deleted text is struck through.
IGA1 In the guidance on Hong Kong Financial Reporting Standards, the following references are
amended as described below, unless otherwise stated in this appendix.
• ‘on the face of’ is amended to ‘in’.
• ‘income statement’ is amended to ‘statement of comprehensive income’.
• ‘balance sheet’ is amended to ‘statement of financial position’.
• ‘cash flow statement’ is amended to ‘statement of cash flows’.
• ‘balance sheet date’ is amended to ‘end of the reporting period’.
• ‘subsequent balance sheet date’ is amended to ‘end of the subsequent

• ‘each balance sheet date’ is amended to ‘the end of each reporting period’.
• ‘after the balance sheet date’ is amended to ‘after the reporting period’.
• ‘reporting date’ is amended to ‘end of the reporting period’.
• ‘each reporting date’ is amended to ‘the end of each reporting period’.
• ‘at annual reporting dates’ is amended to ‘at the end of annual reporting
periods’.
• ‘at interim reporting dates’ is amended to ‘at the end of interim reporting
periods’.
• ‘equity holders’ is amended to ‘owners’ (except in HKAS 33 Earnings per Share).
• ‘removed from equity and recognised in profit or loss’ and ‘removed from equity and
included in profit or loss’ are amended to ‘reclassified from equity to profit or loss as
a reclassification adjustment’.
• ‘Standard or Interpretation’ is amended to ‘HKFRS’.
• ‘a Standard or an Interpretation’ is amended to ‘a HKFRS’.
• ‘Standards and Interpretations’ is amended to ‘HKFRSs’.

HKFRS 1 First-time Adoption of International Financial

Reporting Standards
IGA2 The Guidance on Implementing HKFRS 1 is amended as described below.
In IG Examples 1–4, 201 and 202, ‘Entity [X]’s [An entity’s] first HKFRS financial statements
have a reporting date of’ is amended to ‘Entity [X]’s [An entity’s] first HKFRS financial
statements are for a period that ends on’.
In IG Examples 1–4, 6–11 and 201, references to the years ‘2001’ to ‘2007’ are amended to
‘20X1’ to ‘20X7’ respectively.
In the heading above paragraph IG2 and in IG Example 1 (Assumption 2), ‘HKAS 10 Events
after the Balance Sheet Date’ is amended to ‘HKAS 10 Events after the Reporting Period’.
In paragraph IG2(b), ‘balance sheet’ is deleted.
In paragraph IG21, ‘the reporting date’ is amended to ‘the end of the first HKFRS reporting
period’.
In paragraph IG31, ‘post-balance sheet events review’ is amended to ‘review of events after
the reporting period’.
In paragraph IG36, ‘reporting date for its first HKFRS financial statements’ is amended to
‘end of its first HKFRS reporting period’.
IG Example 10 is amended as follows:
IG Example 10 Interim financial reporting
Background
Entity R's first HKFRS financial statements have are for a reporting date of period that ends
on 31 December 20X5 2005, and its first interim financial report under HKAS 34 is for the
quarter ended 31 March 20X5 2005. Entity R prepared previous GAAP annual financial
statements for the year ended 31 December 20X4 2004, and prepared quarterly reports
throughout 20X4 2004.
Application of requirements
In each quarterly interim financial report for 20X5 2005, entity R includes reconciliations of:
(a) its equity under previous GAAP at the end of the comparable quarter of 20X4 2004 to
its equity under HKFRSs at that date; and
(b) its total comprehensive income (or, if it did not report such a total, profit or loss) under
previous GAAP for the comparable quarter of 20X4 2004 (current and year-to-date)
to its total comprehensive income profit or loss under HKFRSs.
continued…

…continued
In addition to the reconciliations required by (a) and (b) and the disclosures required by
HKAS 34, entity R’s interim financial report for the first quarter of 20X5 2005 includes
reconciliations of (or a cross reference to another published document that includes these
reconciliations):
(a) its equity under previous GAAP at 1 January 20X4 2004 and 31 December 20X4
2004 to its equity under HKFRSs at those dates; and
(b) its total comprehensive income (or, if it did not report such a total, profit or loss) for
20X4 2004 under previous GAAP to its profit or loss total comprehensive income for
20X4 2004 under HKFRSs. …
In paragraph IG43, ‘the income statement’ is amended to ‘profit or loss’.
Paragraphs IG52, IG59 and IG60B are amended as follows:
IG52 An entity recognises and measures all financial assets and financial liabilities in its opening
HKFRS balance sheet statement of financial position in accordance with HKAS 39, except
as specified in paragraphs 27–30 of the HKFRS, which address derecognition and hedge
accounting, and paragraph 36A, which permits an exemption from restating comparative
information.
IG59 An entity may, under its previous GAAP, have measured investments at fair value and
recognised the revaluation gain directly in equity outside profit or loss. If an investment is
classified as at fair value through profit or loss, the pre-HKAS 39 revaluation gain that had
been recognised in equity outside profit or loss is reclassified into retained earnings on initial
application of HKAS 39. If, on initial application of HKAS 39, an investment is classified as
available for sale, then the pre-HKAS 39 revaluation gain is recognised in a separate
component of equity. Subsequently, the entity recognises gains and losses on the
available-for-sale financial asset in other comprehensive income and accumulates the
cumulative gains and losses in that separate component of equity until the investment is
impaired, sold, collected or otherwise disposed of. On subsequent derecognition or
impairment of the available-for-sale financial asset, the entity transfers reclassifies to profit
or loss the cumulative gain or loss remaining in equity (HKAS 39, paragraph 55(b)).
IG60B An entity … Any net cumulative gain or loss that has been reclassified to equity on initial
application of HKAS 39 remains in equity until (a) the forecast transaction subsequently
results in the recognition of a non-financial asset or non-financial liability, (b) the forecast
transaction affects profit or loss or (c) subsequently circumstances change and the forecast
transaction is no longer expected to occur, in which case any related net cumulative gain or
loss that had been recognised directly in equity is recognised in is reclassified from equity to
profit or loss. If …

Paragraph IG63 and IG Example 11 are amended as follows:
IG63 Paragraphs 39(a) and (b), 40 and 41 of the HKFRS require a first-time adopter to disclose
reconciliations that give sufficient detail to enable users to understand the material
adjustments to the balance sheet, income statement of financial position, statement of
comprehensive income and, if applicable, cash flow statement of cash flows. Paragraph
39(a) and (b) requires specific reconciliations of equity and profit or loss total
comprehensive income. IG Example 11 shows one way of satisfying these requirements.
IG Example 11 Reconciliation of equity and profit or loss total comprehensive

income
...
Reconciliation of profit or loss total comprehensive income for 200420X4
Note Previous Effect of HKFRSs

GAAP transition
to HKFRSs
Revenue 20,910 0 20,910
1,2,3 Cost of sales (15,283) (97) (15,380)
Gross profit 5,627 (97) 5,530
1 Distribution costs (1,907) (30) (1,937)
1,4 Administrative expenses (2,842) (300) (3,142)
Finance income 1,446 0 1,446
Finance costs (1,902) 0 (1,902)
Profit before tax 422 (427) (5)
5 Tax expense (158) 128 (30)
Profit (loss) for the year 264 (299) (35)
6 Available-for-sale
financial assets 0 150 150
7 Cash flow hedges 0 (40) (40)
8 Tax relating to other

comprehensive income 0 (29) (29)
Other
comprehensive income 0 81 81
Total
comprehensive income 264 (218) 46
continued...

...continued
Notes to the reconciliation of profit or loss total comprehensive income for 2004
20X4:
6 Available-for-sale financial assets carried at fair value under HKFRSs increased in

value by 180 during 20X4. They were carried at cost under previous GAAP. The
entity sold available-for-sale financial assets during the year, recognising a gain of
40 in profit or loss. Of that realised gain 30 had been included in the revaluation
reserve as at 1 January 20X4 and is reclassified from revaluation reserve to profit
or loss (as a reclassification adjustment).
7 The fair value of forward foreign exchange contracts that are effective hedges of
forecast transactions decreased by 40 during 20X4.
8 Adjustments 6 and 7 above lead to an increase of 29 in deferred tax expense.
...
In IG Example 202, references to ‘1995’ are amended to ‘20X5’ and references to the years ‘2000’
to ‘2007’ are amended to ‘20Y0’ to ‘20Y7’ respectively.
HKFRS 2 Share-based Payment

IGA3 In the Guidance on Implementing HKFRS 2, in the last paragraph of IG Example 11, ‘of
users taken’ is amended to ‘that users make’.
HKFRS 4 Insurance Contracts

IG Example 4 is amended as follows:
IG Example 4: Shadow accounting

Background
[Third paragraph] … Before adopting HKFRSs for the first time in 20X5 2005, insurer A
measured financial assets on a cost basis. … Thus, insurer A measures the assets at
fair value and recognises changes in their fair value directly in equity, through the
statement of changes in equity in other comprehensive income. In 20X5 2005, insurer A
recognises unrealised gains …
In 20X6 2006, insurer A sells the assets for an amount equal to their fair value at the end
of 20X5 2005 and, to comply with HKAS 39, transfers reclassifies the now-realised gain
of CU10 from equity to profit or loss as a reclassification adjustment.
continued...

.
...continued
Application of paragraph 30 of the HKFRS
[First paragraph] … If insurer A adopts shadow accounting, it amortises DAC in 20X5

2005 by an additional CU2 … Because insurer A recognised the change in their fair
value in equity in other comprehensive income, it recognises the additional amortisation
of CU2 directly in equity, through the statement of changes in equity in other
When insurer A sells the assets in 20X6 2006, it makes no further adjustment to DAC,
but transfers reclassifies DAC amortisation of CU2, relating to the now-realised gain,
from equity to profit or loss as a reclassification adjustment.
In summary, shadow accounting treats an unrealised gain in the same way as a realised
gain, except that the unrealised gain and resulting DAC amortisation are (a) recognised
in equity in other comprehensive income rather than in profit or loss and (b) transferred
reclassified from equity to profit or loss when the gain on the asset becomes realised. …
In paragraph IG15, in the quotation from HKAS 1, ‘of users taken’ is amended to ‘that
users make’.
In paragraph IG24, ‘disclose’ is amended to ‘present’.
Paragraph IG27 is amended as follows:
IG27 Some insurers present a detailed analysis of the sources of their earnings from
insurance activities either in the income statement of comprehensive income or in
the notes as a complement to an income statement presented in a more traditional
format. Such …
Paragraph IG32(h) is amended as follows:
IG32 (h) the nature and extent of uncertainties affecting specific assumptions. In
addition, to comply with paragraphs 116–122 125–131 of HKAS 1, ...
Paragraph 120 129 of HKAS 1 gives further guidance on this disclosure.
In paragraph IG46, ‘on the balance sheet’ is amended to ‘in the statement of financial
position’.
HKFRS 5 Non-current Assets Held for Sale and

Discontinued Operations
In Example 11, the title is amended as follows:
‘XYZ GROUP – INCOME STATEMENT OF COMPREHENSIVE INCOME FOR THE

YEAR ENDED 31 DECEMBER 20X2 (illustrating the classification of expenses by
function)’

Example 11 is footnoted as follows:
‘(b) The entity did not recognise any components of other comprehensive income in
the periods presented.’
In Example 12, in footnote (a) and in the statement of financial position, ‘directly in equity’
is amended to ‘in other comprehensive income and accumulated in equity’.
HKFRS 7 Financial Instruments: Disclosures

In paragraph IG3, in the quotation from HKAS 1, ‘of users taken’ is amended to ‘that users
make’.
Paragraphs IG6 and IG13 are amended as follows:
IG6 Paragraph 15 17(c) of HKAS 1 requires an entity …
IG13 The total interest income and total interest expense disclosed in accordance with
paragraph 20(b) is a component of the finance costs, which paragraph 81 82(b) of
HKAS 1 requires to be presented separately on the face of in the income
statement of comprehensive income. The line item …
In the example in paragraph IG36, ‘other components of equity’ is amended to ‘other

comprehensive income’ (four times).
In the table after paragraph IG41, footnote (a) is deleted and footnote (b) is amended as
follows:
‘(b)(a) See paragraph 44 of HKFRS 7’
HKAS 7 Statement of Cash Flows

IGA7 Appendix A accompanying HKAS 7 is amended as described below.
The table heading ‘Consolidated income statement for the period ended 20X2’ is
amended to ‘Consolidated statement of comprehensive income for the period ended
20X2’ and footnoted as follows: ‘The entity did not recognise any components of other
comprehensive income in the period ended 20X2’.
In note C (Cash and cash equivalents), ‘balance sheet amounts’ is amended to ‘amounts
in the statement of financial position’.
HKAS 12 Income Taxes

IGA8 Appendix A accompanying HKAS 12 is amended as described below.
In the headings above paragraph 1 of Section A and above paragraph 1 of Section B, ‘the
In paragraph 11 of Section A, ‘paragraph 61’ is amended to ‘paragraph 61A’ and ‘charged

directly to equity’ is amended to ‘recognised in other comprehensive income’.

Paragraph 18 of Section A is amended as follows:
18 Non-monetary assets … (notes: (1) the deferred tax is charged in the income statement
recognised in profit or loss; and (2) if, in addition to the restatement, the non-monetary
assets are also revalued, the deferred tax relating to the revaluation is charged to equity
recognised in other comprehensive income and the deferred tax relating to the restatement
is charged recognised in the income statement profit or loss).
Appendix B accompanying HKAS 12 is amended as described below.
In the rubric below the heading, ‘income statements and balance sheets’ is replaced by
‘statements of financial position and statements of comprehensive income’.
In the last paragraph and table in Example 1, ‘income statement is as follows’ is amended
to ‘statement of comprehensive income includes the following’ and ‘Net profit for the
period’ is amended to ‘Profit for the period’.
In the section of Example 2 headed Illustrative disclosure, the heading ‘Aggregate

current and deferred tax relating to items charged or credited to equity (paragraph
81(a))’ is amended to ‘Income tax relating to the components of other comprehensive
income (paragraph 81(ab))’.
At the end of Example 2, ‘the income statement’ is amended to ‘profit or loss’ (twice).
The last paragraph of Example 3 is amended as follows:
If A expects … A credits or charges recognises the deferred tax in other

comprehensive income to equity to the extent that the deferred tax results from
foreign exchange translation differences that which have been recognised in other
comprehensive income charged or credited directly to equity (paragraph 61A of
the Standard). A discloses separately:
(a) the amount of deferred tax that which has been recognised in other
comprehensive income charged or credited directly to equity (paragraph
81(ab) of the Standard); and …
The last paragraph of Example 4 is amended as follows:
Subsequent changes in the deferred tax liability are recognised in the income
statement profit or loss as tax income (see paragraph 23 of the Standard).
Therefore, the entity’s income statement is as follows profit or loss includes the
following:
HKAS 19 Employee Benefits

IGA9 Appendices B and C accompanying HKAS 19 are amended as described below.
In the last paragraph of Appendix B and in the second paragraph of Appendix C, ‘the
HKAS 32 Financial Instruments: Presentation

IGA10 The Illustrative Examples accompanying HKAS 32 are amended as described below.
In paragraphs IE32 and IE33, ‘an income statement and balance sheet format’ is amended
to ‘a format of a statement of comprehensive income and statement of financial position’.
In the statement of financial position following paragraph IE33, ‘RESERVES’ is amended

to ‘OTHER COMPONENTS OF EQUITY’.

In paragraph IE45, ‘income statement’ is amended to ‘profit or loss’.
HKAS 33 Earnings per Share

IGA11 In the Illustrative Examples accompanying HKAS 33, Example 12 is amended as follows:
The heading ‘Example 12 Calculation of basic and diluted earnings per share and
income statement presentation (comprehensive example)’ is amended to ‘Example
12 Calculation and presentation of basic and diluted earnings per share
(comprehensive example)’.
In the paragraph following the first table under Full Year 20X1, ‘on its income statement’ is
amended to ‘in its statement of comprehensive income’.
HKAS 34 Interim Financial Reporting

IGA12 Appendix B accompanying HKAS 34 is amended as described below.
In paragraph B3, ‘the income statement’ is amended to ‘profit or loss’.
In paragraph B10, ‘at interim financial reporting dates’ is amended to ‘at the end of interim
financial reporting periods’, ‘at an interim reporting date’ is amended to ‘at the end of an
interim reporting period’ and ‘at an annual reporting date’ is amended to ‘at the end of an
annual reporting period’.
In paragraph B11, ‘at an interim financial reporting date’ is amended to ‘at the end of an
interim financial reporting period’.
In paragraph B25, ‘any financial reporting date’ is amended to ‘the end of any financial
In paragraph B30, ‘in profit or loss or in equity’ is amended to ‘in profit or loss or in other
HKAS 37 Provisions, Contingent Liabilities and Contingent Assets

IGA12A In Appendix C, Example 6:
'At the balance sheet date of 31 December 1999' is replaced by 'At 31 December 1999,
the end of the reporting period'.
'At the balance sheet date of 31 December 2000' is replaced by 'At 31 December 2000,
the end of the reporting period'.
HKAS 39 Financial Instruments: Recognition and Measurement

IGA13 The Illustrative Example accompanying HKAS 39 is amended as described below.
In paragraphs IE14, IE18, IE24, IE26, IE28 and IE30, ‘income statement’ is amended to
‘profit or loss’.
References to ‘balance sheet line item’ are amended to ‘line item in the statement of
The Guidance on Implementing HKAS 39 is amended as described below.
References to ‘deferred in equity’, ‘reported in equity’, ‘recognised in equity’ and

‘recognised directly in equity’ are amended to ‘recognised in other comprehensive
income’.

In the tables in Questions D.2.1 and D.2.2, ‘changes in equity’ is amended to ‘changes in
In Question E.2.1, ‘on its balance sheet’ is amended to ‘in its statement of financial
position’.
Question E.3.1 is amended as follows:
Entity A holds … On 20 December 2000 20X0, the fair value of the shares is
CU120 and the cumulative gain recognised in other comprehensive income
equity is CU20. … Under HKAS 39.55(b), should Entity A recognise
reclassify the cumulative gain of CU20 recognised in equity in other
comprehensive income from equity to in profit or loss as a reclassification
adjustment?
Yes. The transaction qualifies for derecognition under HKAS 39. HKAS 39.55(b)
requires that the cumulative gain or loss that has been recognised in equity on an
available-for-sale financial asset that has been recognised in other
comprehensive income to be recognised in reclassified from equity to profit or loss
when the asset is derecognised. In the …
For an available-for-sale monetary financial asset, the entity reports

recognises changes in the carrying amount relating to changes in foreign
exchange rates in profit or loss in accordance with HKAS 21.23(a) and HKAS
21.28 and other changes in the carrying amount in other comprehensive
income in equity in accordance with HKAS 39. How is the cumulative gain or
loss that is recognised in equity in other comprehensive income
determined?
...
To illustrate: on 31 December 20X1 2001 Entity A acquires a bond … Entity A

classifies the bond as available for sale, and thus recognises gains and losses in
equity in other comprehensive income. The entity’s …
On 31 December 20X2 2002, the foreign currency has appreciated … In this case,
the cumulative gain or loss to be recognised in other comprehensive income and
accumulated in equity directly in equity is the difference between the fair value and
the amortised cost on 31 December 20X2 2002, ie LC38 (= LC2,120 – LC2,082).
Interest received on the bond on 31 December 20X2 2002 is FC59 (= LC118).

Interest …
Cr Fair value change in equity

other comprehensive income LC38
On 31 December 20X3 2003, the foreign currency has appreciated further … The
cumulative gain or loss to be recognised directly accumulated in equity is the
difference between the fair value and the amortised cost on 31 December 20X3
2003, ie negative LC40 (= LC2,675 – LC2,715). Thus, there is a debit to the
amount recognised in other comprehensive income equity equals to the change in
the difference during 20X3 2003 of LC78 (= LC40 + LC38).

Interest received on the bond on 31 December 20X3 2003 is FC59 (= LC148).

Interest …
Dr Fair value change in

other comprehensive income equity LC78
• the heading ‘E.3.3 HKAS 39 and HKAS 21 Exchange differences arising on

translation of foreign entities: equity or income?’ is amended to ‘E.3.3 HKAS
39 and HKAS 21 Exchange differences arising on translation of foreign
entities: other comprehensive income or profit or loss?’.
• (in the fourth paragraph of the answer) ‘its income statement’ is amended to ‘its
profit or loss’.
• (in the last paragraph of the answer) ‘classified as equity’ is amended to

‘accumulated in equity’.
In Question E.3.4 the answer is amended as follows:
• ‘Income statement’ is amended to ‘Profit or loss’.
• ‘in profit or loss or in equity’ is amended to ‘in profit or loss or in other

• ‘recognises gains and losses on available-for-sale monetary financial assets in

equity’ is amended to ‘recognises gains and losses on available-for-sale monetary
financial assets in other comprehensive income’.
• ‘resulting in a loss in equity’ is amended to ‘resulting in a loss recognised in other

• 'be recognised in profit or loss' is amended to 'be reclassified from equity to

profit or loss as a reclassification adjustment'.
• ‘removed from equity and recognised in profit or loss’ is amended to ‘reclassified

from equity to profit or loss’.
• ‘also recognised in profit or loss’ is amended to ‘also reclassified from equity to

profit or loss’.
In Question F.1.2, in the answer to the second question, ‘future sale is recognised in profit
or loss’ is amended to ‘future sale is reclassified from equity to profit or loss as a
reclassification adjustment’.
In Question F.1.5 the answer is amended as follows:
No. An internal contract designated at the subsidiary level or by a division as a

hedge results in the recognition of changes in the fair value of the item being
hedged in profit or loss (a fair value hedge) or in the recognition of the changes in
the fair value of the internal derivative in equity in other comprehensive income (a
cash flow hedge). There is no basis for changing the measurement attribute of the
item being hedged in a fair value hedge unless the exposure is offset with an
external derivative. There is also no basis for including recognising the gain or
loss on the internal derivative in equity in other comprehensive income for one
entity and recognising it in profit or loss by the other entity unless it is offset with

an external derivative. In cases … It should be noted, however, that there will be

no effect on profit or loss and equity other comprehensive income of reversing …
Just as the internal derivatives offset at the treasury level, their use as fair value
hedges by two separate entities or divisions within the consolidated group will also
result in the offset of the fair value amounts recognised in profit or loss, and their
use as cash flow hedges by two separate entities or divisions within the
consolidated group will also result in the fair value amounts being offset against
each other in other comprehensive income equity. However, there may be an
effect on individual line items in both the consolidated income statement of
comprehensive income and the consolidated balance sheet statement of financial
position, for example when internal derivatives that hedge assets (or liabilities) in a
fair value hedge are offset by internal derivatives that are used as a fair value
hedge of other assets (or liabilities) that are recognised in a different line item in
the statement of financial position balance sheet or statement of comprehensive
income statement line item. In addition, to the extent that one of the internal
contracts is used as a cash flow hedge and the other is used in a fair value hedge,
the effect on profit or loss and equity gains and losses recognised would not offset
since the gain (or loss) on the internal derivative used as a fair value hedge would
be recognised in profit or loss and the corresponding loss (or gain) on the internal
derivative used as a cash flow hedge would be recognised in equity other
In Question F.1.6 the second paragraph of the answer is amended as follows:
'profit or loss or [in] equity' is amended to 'profit or loss or [in] other comprehensive
income'.
• ‘gains and losses that are initially recognised in equity are recognised in profit or
loss’ is amended to ‘gains and losses that are initially recognised in other
comprehensive income are reclassified from equity to profit or loss’.
• ‘profit or loss and equity’ is amended to ‘profit or loss and other comprehensive
income’.
Question F.1.7 is amended as described below.
The following references are amended as described below.
• ‘Dr Equity’ is amended to ‘Dr Other comprehensive income’.
• ‘Cr Equity’ is amended to ‘Cr Other comprehensive income’.
• ‘Income’ is amended to ‘Profit or loss’.
• ‘Equity’ is amended to ‘Other comprehensive income’.
In Case 1, 'the income statements' is amended to 'profit or loss'.
Case 2 is amended as follows:
...
A and B complete the necessary documentation, the hedges are effective, and
both A and B qualify for hedge accounting in their individual financial statements.
A defers recognises the gain of LC20 on its internal derivative transaction in a
hedging reserve in equity other comprehensive income and B defers recognises
the loss of LC50 in its hedging reserve in equity other comprehensive income. TC
does …

Case 3 is amended as follows:
As in cases 1 and 2, A and B apply hedge accounting for their cash flow hedges
and TC measures its derivatives at fair value. A defers recognises a gain of LC20
on its internal derivative transaction in equity in other comprehensive income and
B defers recognises a loss of LC50 on its internal derivative transaction in other
comprehensive income in equity. …
In Questions F.1.7 Case 3 and Case 4, F.5.2, F.5.3 and F.5.6, ‘Cr Equity’ and ‘Dr Equity’
are amended to ‘Cr Other comprehensive income’ and ‘Dr Other comprehensive income’
respectively.
In the answer to Question F.1.10, ‘reports changes in the fair value of the share in equity’
is amended to ‘recognises changes in the fair value of the share in other comprehensive
income’.
In the answers to Questions F.2.4 and F.6.5, ‘recognised directly in equity through the
statement of changes in equity’ is amended to ‘recognised in other comprehensive
income’.
In Question F.3.3, ‘the income statement’ is amended to ‘profit or loss’.
In Question F.3.4, ‘amount recognised directly in equity is transferred to profit or loss’ is

amended to ‘amount recognised in other comprehensive income is reclassified from equity
to profit or loss as a reclassification adjustment’.
In Question F.5.2, ‘it credits the effective portion of the change in fair value of the swap, ie
the net change in fair value of CU49, to equity’ is amended to ‘it recognises the effective
portion of the change in fair value of the swap, ie the net change in fair value of CU49, in
In Question F.5.3, ‘2001’ is amended to ‘20X1, ‘2002’ is amended to ‘20X2’ and ‘it debits
the entire change in fair value of the forward contract (CU80) to equity’ is amended to ‘it
recognises the entire change in fair value of the forward contract (CU80) in other
In Question F.5.6, references to the years ‘2001’ and ‘2002’ are amended to ‘20X1’ and
‘20X2’ respectively and ‘directly in equity’ is amended to ‘in other comprehensive income’
(six times).
Question F.6.2 is amended as described below.
The section ‘Systems considerations’ of Issue (b) is amended as follows:
• ‘the adjustments to equity from changes in the fair value of a hedging instrument
should be recognised in profit or loss’ is amended to ‘the cumulative gains and
losses recognised in other comprehensive income from changes in the fair value
of a hedging instrument should be reclassified to profit or loss’.
• ‘should be recognised in profit or loss’ is amended to ‘should be reclassified from

equity to profit or loss’.
In Issue (f), ‘recognised initially in equity are reclassified out of equity and recognised in
profit or loss’ is amended to ‘recognised initially in other comprehensive income are
reclassified from equity to profit or loss’.

Issue (g) is amended as follows:
• ‘should be recognised in profit or loss’ is amended to ‘should be reclassified from

equity to profit or loss’.
• ‘are recognised in profit or loss’ is amended to ‘are reclassified from equity to profit
or loss’.
In Issue (h), ‘net cumulative gain or loss is recognised in profit or loss’ is amended to ‘net
cumulative gain or loss is reclassified from equity to profit or loss’.
Issue (j) is amended as follows:
• ‘are reclassified into profit or loss’ is amended to ‘are reclassified from equity to
profit or loss’.
• ‘shall reclassify immediately into profit or loss’ is amended to ‘shall reclassify

immediately from equity to profit or loss’.
In Question F.6.3, the section ‘Systems considerations’ in ‘Designation objectives’ is

amended as follows:
• (in the second paragraph) ‘track of deferred derivative gains and losses in equity’
is amended to ‘track of gains and losses recognised in other comprehensive
income’.
• (in the second paragraph, twice) ‘be recognised in profit or loss’ is amended to ‘be
reclassified from equity to profit or loss’.
• (in the second and third paragraphs) ‘be reclassified out of equity’ is amended to
‘be reclassified from equity to profit or loss’.
In Question F.6.4, ‘amounts recognised in equity are released to profit or loss’ is amended
to ‘amounts recognised in other comprehensive income are reclassified from equity to
profit or loss’.
HKAS 41 Agriculture
IGA14 In the appendix accompanying HKAS 41, the rubric above paragraph A1 is amended as
follows:
'This appendix, accompanies, but is not part of, HKAS 41. It has been updated to take
account of the changes made by HKAS 1 Presentation of Financial Statements (as revised
in 2007).'
Example 1 in the appendix is amended as described below.
In the ‘Statement of financial position’ and in the ‘Statement of changes in equity’, the
reference to ‘Accumulated profits’ is amended to ‘Retained earnings’.
The following footnote to the ‘Statement of changes in equity’ is deleted:
‘This is one of several formats for the statement of changes in equity permitted by HKAS
1.’
In the second footnote, ‘HKAS 7 Cash Flow Statements’ is amended to ‘HKAS 7

Statement of Cash Flows’.

HK(IFRIC)-Int 7 Applying the Restatement Approach under HKAS 29

Financial Reporting in Hyperinflationary Economies
IGA15 In the Illustrative Example accompanying HK(IFRIC)-Int 7, in the quotation from HKAS 29
in paragraph IE6, ‘income statement items’ is amended to ‘income and expense items’.
HK(IFRIC)-Int 12 Service Concession Arrangements

IGA16 The Illustrative Examples accompanying HK(IFRIC)-Int 12 are amended as described
below.
In paragraphs IE4, IE6, IE17, IE20, IE33 and IE36, ‘[the] income statement’ is amended to
‘profit or loss’.
In paragraphs IE20 and IE36, ‘The income statement charge each period is’ is amended to
‘The charge recognised each period in profit or loss is’.
In tables 2.3 and 3.6, ‘income statement’ is amended to ‘profit or loss’.
HK(IFRIC)-Int 14 HKAS 19—The Limit on a Defined Benefit Asset,

Minimum Funding Requirements and their Interaction
IGA17 The illustrative examples accompanying HK(IFRIC)-Int 14 are amended as described
below.
In paragraph IE7, 'balance sheet liability of 180' is amended to 'liability of 180 in the
In the tables below paragraphs IE7 and IE20, 'Net balance sheet liability' is amended to
'Net liability recognised in the statement of financial position'.
In paragraphs IE8 and IE21, 'balance sheet asset' is amended to 'asset recognised in the
In paragraph IE20 'balance sheet liability of 244' is amended to 'liability of 244 in the

Appendix
Amendments resulting from other Implementation Guidance

The following sets out amendments required for this Guidance resulting from other newly issued
HKFRSs that are not yet effective. Once effective, the amendments set out below will be
incorporated into the text of this Guidance and this appendix will be deleted. In the amended
paragraphs shown below, new text is underlined and deleted text is struck through.

References to ‘minority interests’ are amended to ‘non-controlling interests’ in paragraphs IG 6 and
IG 10.
© Copyright 145A HKAS 1 IG (March 2008)

Table of Concordance
This table shows how the contents of HKAS 1 and HKAS 1 (revised 2007) correspond.
Paragraphs are treated as corresponding if they broadly address the same matter even though
the guidance may differ.
Superseded HKAS 1 Superseded HKAS 1 Superseded HKAS 1

HKAS 1 (revised HKAS 1 (revised HKAS 1 (revised
paragraph 2007) paragraph 2007) paragraph 2007)
paragraph paragraph paragraph
1 1, 3 42, 43 47, 48 101 None
2 2 44–48 49–53 102 111
3 4,7 49, 50 36, 37 103–107 112–116
4 None 51–67 60–76 108–115 117–124
5 5 68 54 116–124 125–133
6 6 68A 54 124A–124C 134–136
7 9 69–73 55–59 125, 126 137, 138
8 10 74–77 77–80 127 139
9, 10 13, 14 None 81 127A None
11 7 78 88 127B None
12 7 79 89 128 140
None 8 80 89 IG1 IG1
None 11, 12 81 82 None IG2
13–22 15–24 82 83 IG2 IG3
23, 24 25, 26 None 84 None IG4
25, 26 27, 28 83–85 85–87 IG3, IG4 IG5, IG6
27, 28 45, 46 None 90–96 None IG7
29–31 29–31 86–94 97–105 None IG8
32–35 32–35 95 107 None IG9
36 38 None 108 IG5, IG6 IG10, IG11
None 39 96, 97 106, 107
37–41 40–44 98 109

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HKAS 1 (Revised)

Revised October 2008May 2009

Effective for annual periods

Hong Kong Accounting Standard 1 (Revised)

© Copyright 2008 Hong Kong Institute of Certified Public Accountants

Other comprehensive income for the period 90–96

BASIS FOR CONCLUSIONS 77–99

DISSENTING OPINIONS 112

IMPLEMENTATION GUIDANCE 113–130

TABLE OF CONCORDANCE 146

© Copyright 3 HKAS 1 (March June 2008)

Reasons for revising HKAS 1

Main features of HKAS 1

Changes from previous requirements

A complete set of financial statements

Reporting owner changes in equity and comprehensive income

(b) income and expenses to be presented in one statement (a statement of

(c) components of other comprehensive income to be displayed in the statement of

(d) total comprehensive income to be presented in the financial statements.

Other comprehensive income—reclassification adjustments and

IN15 HKAS 1 also requires an entity to disclose reclassification adjustments relating to

Hong Kong Accounting Standard 1

General purpose financial statements (referred to as ‘financial statements’) are those

Impracticable Applying a requirement is impracticable when the entity cannot apply

(a) Hong Kong Financial Reporting Standards;

(b) Hong Kong Accounting Standards; and

Material Omissions or misstatements of items are material if they could, individually

Assessing whether an omission or misstatement could influence economic decisions of

Notes contain information in addition to that presented in the statement of financial

Other comprehensive income comprises items of income and expense (including

The components of other comprehensive income include:

Owners are holders of instruments classified as equity.

Reclassification adjustments are amounts reclassified to profit or loss in the current

Purpose of financial statements

(d) income and expenses, including gains and losses;

(e) contributions by and distributions to owners in their capacity as owners; and

(f) cash flows.

Complete set of financial statements

(a) a statement of financial position as at the end of the period;

(b) a statement of 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

(f) a statement of financial position as at the beginning of the earliest

True and fair view and compliance with HKFRSs *

(b) to present information, including accounting policies, in a manner that provides

18 An entity cannot rectify inappropriate accounting policies either by disclosure of

19 In the extremely rare circumstances in which management concludes that

20 When an entity departs from a requirement of an HKFRS in accordance with

23 In the extremely rare circumstances in which management concludes that

25 When preparing financial statements, management shall make an assessment of an

26 In assessing whether the going concern assumption is appropriate, management takes

Accrual basis of accounting

Materiality and aggregation

(b) an entity may net expenditure related to a provision that is recognised in

36 An entity shall present a complete set of financial statements (including

(a) the reason for using a longer or shorter period, and

38 Except when HKFRSs permit or require otherwise, an entity shall disclose

39 An entity disclosing comparative information shall present, as a minimum, two statements

(a) the end of the current period,