IAS 1 :PRESENTATION OF FINANCIAL STATEMENTS

Introduction to IAS 1

The International Accounting Standard 1 (IAS 1), "Presentation of Financial Statements," is a foundational standard that sets out the presentation of financial statements.

Scope of IAS 1

Prescribes the treatment for all general-purpose financial statements that are prepared in accordance with International Financial Reporting Standards.

Components of Financial Statements

IAS 1 outlines the complete set of financial statements that comprise:

1. Statement of Financial Position (Balance Sheet): A snapshot of the entity’s financial position at a specific point in time.
2. Statement of Profit or Loss and Other Comprehensive Income (Income Statement): A report on the entity’s financial performance over a period, including all income and expenses.
3. Statement of Changes in Equity: A report showing how the company’s equity changed over a specific period.
4. Statement of Cash Flows: A report bout the entity’s cash inflows and outflows during a period.
5. Notes to the Financial Statements: Additional. Information that explains and supports financial statements, including significant accounting policies and other explanatory information.

Structure, Content and Disclosure of Financial Statements

IAS 1 provides detailed guidance on the structure and content of financial statements:

1. Statement of Financial Position: Should include line items such as cash, trade receivables, inventories, property, plant and equipment, trade payables, and provisions.
2. Statement of Profit or Loss and Other Comprehensive Income: Entities can present a single statement or two separate statements (a profit or loss statement and a statement of comprehensive income).
3. Statement of Changes in Equity: Should reflect total comprehensive income, transactions with owners, and the reconciliation of the carrying amount of each component of equity.
4. Statement of Cash Flows: Should be prepared using either the direct or indirect method.
5. Notes: Should provide information on the basis of preparation of the financial statements and specific accounting policies, as well as disclosures required by IFRS.

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Key Objectives of IAS 1

IAS 1 aims to provide a clear and structured framework for the presentation of financial statements, ensuring they are understandable, comparable, and transparent. The key objectives include:

1. Fair Presentation and Compliance: Financial statements should fairly present the entity’s financial position, performance, and cash flows.
2. Going Concern: Financial statements should be prepared on a going concern basis unless management intends to liquidate the entity or cease trading.
3. Accrual Basis of Accounting: Entities should prepare financial statements using the accrual basis of accounting, except for cash flow information.
4. Consistency of Presentation: The presentation and classification of items in financial statements should be consistent from one period to the next unless a change is justified.
5. Materiality and Aggregation: Entities should present separately each material class of similar items and aggregate immaterial items.
6. Offsetting: Assets and liabilities, and income and expenses, should not be offset unless required or permitted by an IFRS.
7. Comparative Information: Entities should disclose comparative information in respect of the preceding period for all amounts reported in the current period's financial statements.

Source : Hindolo Anthony Momoh