Financial Statement Presentation: Prepared by Kent Wilson

Chapter 18
Financial Statement
Presentation
Prepared by
Kent Wilson
Objectives
1. Describe the main components of financial

statements
2. General features of financial statements
3. Classification and presentation requirements for

the statement of financial position
4. Presentation requirements for the statement of

profit or loss and other comprehensive income
Objectives
5.Presentation requirements for the statement of

changes in equity
6.Overview other disclosures required by IAS 1 in

the notes of the financial statements
Components of Financial
Statements
 A complete set of financial statements

comprises:
 Statement of Financial Position
 Statement of Profit or Loss and Other Comprehensive Income
 Statement of Changes in Equity
 Statement of Cash flows
 Notes
(IAS 1 para 10)

General Features of Financial
Statements
 As per IAS 1, the following considerations must be

followed in the presentation of a financial report:
1. Fair presentation and compliance with IFRSs
2. Going concern
3. Accrual basis of accounting
4. Materiality and aggregation
5. Offsetting
6. Frequency of reporting
7. Comparative information
8. Consistency of presentation
Statements
Fair presentation & compliance with IFRSs

 A set of financial statements are required to present
fairly an entity’s financial performance, financial position
and cash flows
 Applying IFRSs (with additional disclosures where

necessary) is presumed to result in a fair presentation
(IAS 1 para 15-19)

Statements
Going concern
 There is an assumption that all entities adopt the
going concern basis of accounting
 Exception applies where management intends to
liquidate or cease trading
(IAS 1 Para 25)
Accrual basis of accounting

 Except for cash flow information, the financial
statements are required to be presented using the
accruals basis of accounting
Statements
Materiality and aggregation

 Each material class of similar items must be presented separately
 Items of a dissimilar nature or function must be presented
separately, unless they are immaterial
(IAS 1 para 7)
Offsetting
 Assets & liabilities and income & expenses are not to be offset,
unless required or permitted by another accounting standard
 Offsetting detracts from the ability of the users to understand the
entity’s transactions
 Offsetting is appropriate when netting any income with related
expenses arising from the same transaction
(IAS 1 para 32, 34-35)

Statements
Comparative information
 Comparative information for the immediately preceding reporting period
must be disclosed for all amounts
(IAS 1 para 38)
Consistency of presentation
 Financial information must be consistently presented from one period to
the next unless:
 There has been a significant change in the entity’s operations
 A change in presentation or classification will provide more relevant
information
 An IFRS requires a change in presentation
(IAS 1 para 45)
Statement of Financial
Position
 Summarises the elements directly related to the

measurement of financial position
 Provides the basic information for evaluating an

entity’s capital structure and analysing its liquidity,
solvency and financial flexibility
 Provides a basis for computing rates of return

Position Classifications
No prescribed format in IAS 1, but assets and

liabilities to be classified on basis of:
 Current/non-current
 In order of their liquidity
Assets are classified as current or non-current

depending on whether they are expected to be sold,
consumed or realised as part of the normal operating
cycle within 12 months of balance date
Position Classifications
 Conditions at balance date determine if liabilities are

classified current or non-current
 IAS 1 outlines the minimum line items to be disclosed
 Requires inclusion of additional items, headings and

sub-totals, if relevant, based on assessment of:
 The nature and liquidity of assets
 The function of assets
 The amounts, nature and timing of liabilities
Statement of Profit or Loss &
Other Comprehensive Income
 A prime source of information about an entity’s

performance
 Income, expenses and other comprehensive

income are included
 Total comprehensive income has two

components:
1. Profit or loss (P&L)
2. Other comprehensive income (OCI)
Profit or loss
 IAS 1 adopts an “all-inclusive” approach to the
determination of a company’s profit or loss
 All items of income and expense recognised into period

must be included in the company’s profit or loss. The
only exclusions relate to
 Corrections of errors and the effects of changes in accounting
policies
 Provisions within other AASBs that require or permit
components of other comprehensive income to be excluded
from profit or loss
Other Comprehensive Income (OCI)
 OCI comprises items of income and expense that are

not recognised in profit or loss
 Components of OCI comprise:

 Changes in a revaluation surplus
 Actuarial gains and losses on defined benefit plans
 Gains and losses arising from the translation of financial
statements of foreign operations
 Gains and losses on remeasuring available-for-sale financial
assets
 The effective portion of gains and losses on hedging
instruments in a cash flow hedge
 To enhance understandability of the statement IAS 1

requires separate disclosure of the nature and amount
of certain material income and expense items including:
 Inventory and PPE write-downs
 Cost of restructuring
 Disposals of PPE & other investments
 Profit/(losses) re discontinuing operations
 Litigation settlements
 Reversals of provisions
 Such disclosures can be made either in the statement

or in the notes
Statement of Changes in
Equity
The following is disclosed in this statement:
 Total comprehensive income for the period attributable to:

 Equity holders of parent
 Non controlling interests
 For each component of equity

 Changes in accounting policies
 Corrections of errors required by IAS 8
 For each component of equity a reconciliation between

opening and closing balances showing changes resulting from
 Profit/(Loss)
 OCI
 Transactions with equity holders, showing separately distributions to
equity holders
Notes
 Notes enhance the understandability of the other

statements
 Each item in the statements is cross-referenced to any

related information in the notes
 The order of notes is:

 Summary of accounting policies
 Supporting information for items in statements
 Other disclosures:
 Dividends
 Company details
 Auditor remuneration
Sources Of Estimation
Uncertainty
 “an entity shall disclose in notes key assumptions

about the future of estimation uncertainty that is
material” (IAS 1 para 125)
 Notes shall include details of:

 Their nature
 Their carrying amount as at the reporting date
 Examples include:
 Future interest rates
 Useful lives of non-current assets
Accounting Policies, Changes in
Accounting Estimates & Errors
 IAS 8 deals with:

 Selecting and changing accounting policies
 Changes in accounting estimates
 Correction of errors
 Selecting and changing policies

 The concept of substance over form is particularly important
 IAS 8 requires extensive disclosures when an entity

changes its accounting policy
Events After the Reporting
Period
 “An event after the reporting date is one that

occurs after the end of the reporting period
but before the date on which the financial
statements are authorised for issue”
(IAS 10 para 3)
 Adjusting Events
 Refer IAS 10 para 8
 Non adjusting events

 Refer IAS 10 para 10

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Chapter 18

1. Describe the main components of financial

2. General features of financial statements

3. Classification and presentation requirements for

4. Presentation requirements for the statement of

5.Presentation requirements for the statement of

6.Overview other disclosures required by IAS 1 in

 A complete set of financial statements

(IAS 1 para 10)

 As per IAS 1, the following considerations must be

Fair presentation & compliance with IFRSs

 Applying IFRSs (with additional disclosures where

(IAS 1 para 15-19)

Accrual basis of accounting

Materiality and aggregation

(IAS 1 para 32, 34-35)

 Summarises the elements directly related to the

 Provides the basic information for evaluating an

 Provides a basis for computing rates of return

No prescribed format in IAS 1, but assets and

Assets are classified as current or non-current

 Conditions at balance date determine if liabilities are

 IAS 1 outlines the minimum line items to be disclosed

 Requires inclusion of additional items, headings and

 A prime source of information about an entity’s

 Income, expenses and other comprehensive

 Total comprehensive income has two

 All items of income and expense recognised into period

 OCI comprises items of income and expense that are

 Components of OCI comprise:

 To enhance understandability of the statement IAS 1

 Such disclosures can be made either in the statement

 Total comprehensive income for the period attributable to:

 For each component of equity

 For each component of equity a reconciliation between

 Notes enhance the understandability of the other

 Each item in the statements is cross-referenced to any

 The order of notes is:

 “an entity shall disclose in notes key assumptions

 Notes shall include details of:

 IAS 8 deals with:

 Selecting and changing policies

 IAS 8 requires extensive disclosures when an entity

 “An event after the reporting date is one that

 Non adjusting events

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