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MFRS 101 – PRESENTATION OF
FINANCIAL STATEMENTS
MFRS 107 – STATEMENT OF
CASH FLOWS
MFRS 101
• Prescribes the basis for the presentation of general purpose financial statements in
order to ensure comparability with the entity’s own financial statements of previous
periods and with the financial statements of other entities.
• Sets out the overall considerations for the presentation of financial statements,
guidelines for their structure and minimum requirement for the content of financial
statements.
• Financial statements 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 (Assets, Liabilities, Equity, Income and Expenses,
Contributions by and distribution to owners, Cash flows).
COMPONENTS OF FINANCIAL STATEMENTS
• Statement of financial position at the end of the period
• Statement of profit or loss for the period
• Statement of changes in equity for the period
• Statement of cash flows for the period
• Notes comprising a summary of significant policies and other explanatory
explanation
OVERALL CONSIDERATIONS
• Financial statements shall present fairly the financial position, financial performance
and cash flows of an entity.
• Unlike past practices which relied primarily on historical cost convention (being
more prudent), the application of consideration of fair presentation requires more
professional judgements and estimations.
• An entity whose financial statements comply with MFRSs (100% compliance) shall
make an explicit and unreserved statement of such compliance in the notes (“Basis of
Preparation – The financial statements comply with MFRSs issued by the MASB.”)
• Sometimes, compliance with the specific requirements in MFRSs may not be
sufficient to enable users to understand the impact of particular transactions.
• Voluntary disclosure of additional information may be necessary in such
circumstances.
TRUE AND FAIR VIEW OVER-RIDE
• Is there any room for over-ride of accounting standards?
• In Malaysia, Companies Act 1965 allows for a ‘true and fair view over-ride’ of
accounting standards.
• However, MFRS 101 prescribes that ‘in the extremely rare circumstances in which
management concludes that compliance with a requirement of a Standard or
Interpretation 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 if the relevant regulatory framework requires, or otherwise does not
prohibit such a departure”.
• When an entity departs from a requirement of a Standard/Interpretation, it shall
disclose the following information…. (refer to pg. 77 of text book)
GOING CONCERN BASIS
• MFRS 101 requires that financial statements be prepared 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.
ACCRUAL BASIS OF ACCOUNTING
• MFRS 101 prescribes that “ an entity shall prepare its financial statements except for
cash flow information , using the accrual basis of accounting.
• Accrual basis requires that items are recognised as assets, liabilities, income and
expenses when they satisfy the definition and recognition criteria for those elements
in the framework.
• Revenue is recognised in Profit or Loss when it is earned and not when cash is
received.
• Expenses is recognised in Profit or Loss when it is incurred and not when cash is
paid.
CONSISTENCY OF PRESENTATION
• MFRS 101 requires that the classification and presentation of items in the financial
statements shall be consistent from one period to the next.
• However, there are circumstances that may warrant a change in presentation:
a) The entity concludes that another classification and presentation would be more
appropriate (discretionary change)
b) A Standard/Interpretation requires a change in presentation (mandatory change)
MATERIALITY AND AGGREGATION
• Materiality is concerned with whether an omission or a misstatement can influence
economic decisions of users of financial statements.
• MFRS 101 prescribes that each material class of similar items shall be presented
separately in the financial statements.
• Items of a dissimilar nature or function shall be presented separately unless they are
immaterial.
• In aggregating the items for presentation in the financial statements, care shall be
exercised to ensure that the items aggregated are compatible in terms of their nature
or function.
OFFSETTING
• MFRS 101 prescribes that “assets and liabilities, and income and expenses shall not
be offset unless required or permitted by a Standard or Interpretation”
• Eg. An entity’s bank fixed deposit cannot be offset against its bank overdraft even if
they are both maintained with the same bank.
COMPARATIVE INFORMATION
• MFRS 101 prescribes that “ except when a Standard or Interpretation permits or
requires otherwise, comparative information shall be disclosed in respect of the
previous period for all amounts reported in the financial statements.
• When the presentation or classification of items in the financial statements is
amended, comparative amounts shall be reclassified, unless it is impracticable to do
so.
 Zara Bhd
Trial Balance as at 31 December 2012
RM RM
Revenues 4,800,000
Other distribution cost 500,000
Advertising expenses 336,000
Other administrative expenses 147,600
Salaries and wages 576,000
Printing and stationery expenses 28,800
Sales commission 240,000
Cost of sales 1,656,000
Interest on loan 24,000
Bank 1,384,960
Accounts receivables and payables 264,000 99,000
Director’s remunerations 384,000
Insurance expenses 26,400
Ordinary shares as at 1 January 2012 4,000,000
Share premium as at 1 January 2012 2,000,000
Retained profit as at 1 January 2012 1,092,000
Dividend received 111,000
Dividend paid 222,240
Tax expense 216,000
Bank loan 480,000
Land (cost) 2,400,000
Building (cost) 2,400,000
Plant and machinery (cost) 960,000
Furniture and fittings (cost) 480,000
Accumulated depreciation as at 31 December 2012:
Building 96,000
Plant and machinery 288,000
Furniture and fittings 144,000
Inventories as at 31 December 2012 864,000

13,110,000 13,110,000
Required:

Prepare the following statements in a form suitable for publication and in compliance with the specific
financial reporting standards:
a) A Statement of Profit or Loss and Other Comprehensive Income for the year ended 31
December 2012.
b) A Statement of Changes in Equity for the year ended 31 December 2012.
c) A Statement of Financial Position as at 31 December 2012.
 Zara Bhd
Statement of Profit or Loss and Other Comprehensive Income for the
year ended 31 December 2013
RM
Revenues 4,800,000
Cost of sales (1,656,000)
Gross profit √ 3,144,000
Administrative expenses (1,162,800)
Selling and distribution expenses (1,076,000)
Finance expenses (24,000)
Dividend received 111,000
Profit before taxation 992,200
Tax expenses (216,000)
Profit after taxation 776,200
Workings
Administrative expenses
RM
As per trial balance 147,600 √
Salaries and wages 576,000 √
Printing and stationery expenses 28,800 √
Director’s emoluments 384,000 √
Insurance expenses 26,400 √
1,162,800

Finance expenses
RM
Interest on loan 24,000 √
24,000

Selling and distribution expenses

RM
As per trial balance 500,000 √
Advertising expenses 336,000 √
Sales commission 240,000 √
1,076,000
 Zara Bhd
Statement of Changes in Equity for the year ended 31 December 2013
Share Share Retained
Total
capital premium profit
(RM)
(RM) (RM) (RM)
Balance as at 1 Jan 2013 4,000,000 √ 2,000,000 √ 1,092,000 √ 7,092,000
Net profit after taxation √ - - 776,200 √ 776,200
Dividend paid - - (222,240) √ (222,240)

Balance as at 31 Dec 2013 4,000,000 2,000,000 1,645,960 7,645,960

 Zara Bhd
Statement of Financial Position as at 31 December 2013
RM
Non-current assets
Property, plant and equipment √ 5,712,000

Current assets
Inventories 864,000
Accounts receivables 264,000
Bank 1,384,960
8,224,960

Equity and reserves

Share capital √ 4,000,000
Retained profit √ 1,645,960
Other reserves √ 2,000,000

Non-current liabilities
Bank loan 480,000

Current liabilities
Accounts payables 99,000
8,224,960