IAS 01 Presentation of FS

Requirement : It is recommended that you have read Framework for The Preparation and Presentation of FS
ISA 1 sets out the :
 Purpose and overall consideration of FS
 Guidelines for the structure of FS
 Minimum requirement fot the contents of FS

Components of FS – a complete set of IFRS compliant FS must include :
 A statement of financial position as at the end of the period
 A statement of comprehensive income for the period
 A statement of changes in equity for the period
 A statement of cash flow for the period
 Notes, comprising a summary significant accounting policies and other explanatory information
 A statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting polici retrospectively or makes a retrospective restatement of items in its FS, or when it reclassifies item in FS

IAS 1 prescribes consideration that need to be met when preparing FS :
1. Fair presentation and compliance with IFRS – An entity whose FS comply with IFRS shall make an explicit and unreserved statement of such compliance in the notes. However, an entity cannot claim compliance with IFRS unless the FS comply with all the requirement of IFRSs.

 Non-compliance with IFRS
In extremely rare circumstances management may conclude that compliance with a requirement is a standard or interpretation of standard would be so misleading that it would conflict with the objective of FS as set out in the framework. In these circumstances an entity can depart from requirement if the relevant regulatory framework requires or does no prohibit the departure. For certain disclosure requirement please refer to paragraph 20 of IAS.
 Departure is prohibited
If the relevant regulatory prohibit the departure from standard, the entity must reduce the misleading effects of compliance by disclosing :
 The title of IFRS in question,
 The nature of the requirement, and
 The reason why management has concluded that complying with requirement is so misleading.
The adjustment to each item in the FS that is deemed necessary to achieve fair presentation must also be disclosed.

2. Going concern - FS must be prepared on a going concern basis unless management :
 Intend to liquidate the entity or cease trading
 Has no realistic alternative but to liquidate the entity or cease trading
Any uncertainties about an entity’s ability to continue as a going concern should be disclosed. When the FS are not prepared on a going concern basis this fact must be disclosed :
 Basis on which they are prepared
 Reason why the entity is not regarded as a going concern

3. Accrual basis accounting – The only component this doesn’t apply to is the cash flow information.

4. Consistency of presentation – The presentation and classification of items in the FS must be the same from one period to the next unless :
 There is significant change in nature of operation of the entity, or a review of its FS demonstrates that a change in presentation in more appropriate, or
 A change in presentation is required by an IFRS.

5. Materiality and aggregation – General rules to be apply :
 Material items : separate presentation
 Dissimilar item (unless immaterial) : separate presentation
 Immaterial amount : aggregated

6. Offsetting
 Assets and liabilities can be offset only when required or permitted by another IFRS
 Items of income and expense can be offset only when an IFRS requires or permit it.
 The following is not classified as offsetting :
 The reporting of assets net valuation allowances – Ex. Doubtfull debt allowance on receivables.
 Gains and losses arising from a group of similar transaction reported on a net basis – Ex. Forex gains and losses arising on financial instrument held for trading purposes.

7. Frequency of reporting

8. Comparative information – must disclosed :
 In respect of the previous period for all amounts reported in the FS, unless an IFRS permits or requires otherwise
 For narrative dan descriptive information when it is relevant to an understanding of the current period’s FS.

 When the presentation or classification of items in FS is amended, comparative amount must be reclassified unless the reclassification is impracticable.
 Disclosure if practicable :
Nature of reclassification
Amount of each item, or class of items, that has been reclassified
Reason for reclassification
 Disclosure if impracticable :
Reason for not reclassifying the amount
Nature of adjustment that would have been made if the amount were reclassified
Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. For particular priod period, it is impracticable to apply a change in an accounting policy retrospectively or to make a retrospective restatement to correct an error if :
a. The effect of the retrospective application or retrospective restatement are not determinable,
b. The effect of the retrospective application or retrospective restatement requires assumption about what management’s intent would have been in that period, or
c. The effect of the retrospective application or retrospective restatement requires significant estimates of amounts and it is imposible to distinguish objectively information about those estimates that :
i. Provides evidence of circumtances that existed on the date(s) as at which those amount are to be recognized, measured, or disclosed; and
ii. Would have been available when the FS for that prior period were authorized for issue from other information

The Statement of Financial Position
 IAS 1 requires that :
 FS must be clearly identifiable
 FS must be easily distinguishable from any other information in the same published document
 Current assets – an assets is classified as current when it is :
 Expected to be realized in, or is held for sale or consumption in the normal course of the entity’s operating cycle (time between the acquisition of assets for processing and their realization in cash or cash equivalent)
 Held primarily for trading purposes
 Expected to be realized within 12 months after the reporting period
 Cash or a cash equivalent assets that is not restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.
 Current Liabilities – a liability classified as current when it is :
 Expected to be settled in the entity’s normal operating cycle
 Held primarily for the purpose of being traded
 Due to be settled within 12 month
 Entity does not have an unconditional right to defer settlement of liability for at least 12 month after the reporting period
 Specific situations :
Classifying long-term liabilities as current – if due to be settled within 12 months after reporting period even if the an agreement to refinance or to reschedule payment is completed after the reporting period and before the FS are authorized for use.
Breach of long-term loan agreements that effect the liability becomes payable on demand is classified as current even if the lender agrees after the reporting period and before the authorization of FS not to demand payment.
Exceptions to breach of long-term loan agreement – if the lender has agreed, by the date of the end of the reporting period, to provide a period of grace ending at least 12 months after the reporting period, withing which the entity can rectify the breach and during which the lender cannot demand immediate repayment, then the liability is classified as non-current

The Statement of Comprehensive Income
An entity shall present all items of income and expense recognized in a period :
 In a single statement of comprehensive income, or
 In two statement :
 A statement displaying component of profit or loss
 A statement beginning with profit or loss and displaying components of other comprehensive income
 Other comprehensive income – comprises items of income and expense (including reclassification adjustment) that are not recognized in profit or loss as required or permitted by other IFRS, include :
 Changes in revaluation surpluss (see IAS 16 Property, Plant, and Equipment and IAS 38 Intangible Assets
 Actuarial gains and losses on defined benefit plans recognized in accordance with IAS 19 Employee Benefits
 Gains and losses arising from translating the FS of a foreign operation (see IAS 21 The Effect of Changes in Foreign Exchange Rates)
 Gains and losses on remeasuring available-for-sale financial assets (see IAS 39 Financial Instrument : Recognition and Measurement)
 The effective portion of gains and losses on hedging instrument in cash flow hedge (see IAS 39)
 The entity shall disclosure :
 Profit or loss for the period attributable to non-controlling interest and owner of the parent
 Total comprehensive income for the period attributable to non-controlling interest and owner of the parent
 Amount of income tax relating to each component of other comprehensive income, including reclassification adjustment, either in the statement of comprehensive income or in the notes
 Presentation of expense by :
 Nature of expense – Ex. Depreciation, Wage & Salaries, etc. OR
 Function of expense – Administrative activities, Distribution activities, etc.

Statement of Changes in Equity – An entity shall present :
 Total comprehensive income for the period, showing separately the total amount attributable to owner of the parent and to non-controlling interest;
 For each component of equity, the effect of retrospective application or retrospective restatement recognized in accordance with IAS 8; and
 For each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from :
i. Profit or loss
ii. Each item of comprehensive income; and
iii. Transaction with owner in their capacity as owner, showing separately contributions by and distributions to owners and changes in ownership interest in subsidiaries that do not result in a loss of control
 The amount of dividends recognized as distributions to owners during ther period, and the related amount per share

Cash Flow and Notes
 The statement of cash flows – IAS 7 Statement of Cash Flow
 The notes – comprises the following components :
 Structure
1. Present information about the basis of preparation
2. Present information about the specific accounting policies used
3. Disclose information required by IFRS that is not presented elsewhere in the FS
4. Provide addition information that is not presented elsewhere in the FS but is relevant to an understanding of the FS
5. Requirement of IFRS 7 :
The entity’s objebtives, policies and processes for managing
Quantitative data about what the entity regards as capital
Whether the entity has complied with any capital requirements
If it has not complied, the consequences of non-compliance
 Disclosure of accounting policies
 Measurement basis used in preparing the FS
 Other accounting policies used that are relevant to an understanding of FS
 Key sources of estimation uncertainty - An entity should disclose key information regarding assumption about the future and other sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year
 Other disclosure
 The amount of dividend proposed or declared before the FS were authorized for issue but not recognized as a distribution to owner during the period
 The related amount per share
 The amount of any cumulative preference dividend not recognized
 The domicile and legal form of the entity