International Accounting Standard 1 Presentation of Financial Statements

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

Purpose of financial statements

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.

Complete set of financial statements

A complete set of financial statements comprises:

• a statement of financial position as at the end of the period;
• a statement of profit or loss and other comprehensive income for the period;
• a statement of changes in equity for the period;
• a statement of cash flows for the period;
• notes, comprising significant accounting policies and other explanatory information

Going concern

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.

Accrual basis of accounting

The accrual basis of accounting means recording elements (assets, liabilities, income, expenses and equity) when the definitions and recognition criteria are met. It results in recognising transactions and events in the periods in which they occur rather than when cash is received or paid.

The accrual basis is applied to all components of a set of financial statements, with the exception of statement of cash flows, which obviously uses the cash basis instead

Materiality and aggregation

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

Offsetting

An entity shall not offset assets and liabilities or income and expenses, unless required or permitted by an IFRS.

An entity reports separately both assets and liabilities, and income and expenses.

Offsetting in the statement(s) of profit or loss and other comprehensive income or financial position, 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.

Frequency of reporting

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:

• the reason for using a longer or shorter period, and
• the fact that amounts presented in the financial statements are not entirely comparable

Comparative information

An entity shall present comparative information in respect of the preceding period for all

amounts reported in the current period’s financial statements. An entity shall include comparative information for narrative and descriptive information if it is relevant to understanding the current period’s financial statements.

An entity shall present, as a minimum, two statements of financial position, two statements of profit or loss and other comprehensive income, two separate statements of profit or loss (if presented), two statements of cash flows and two statements of changes in equity, and related notes

Consistency of presentation

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 IAS 8; or

(b) an IFRS requires a change in presentation.

Statement of financial position

The statement of financial position summarises the trial balance into the three main elements:

? assets;

? liabilities; and

? equity.

These three elements are then categorised under two headings:

? assets; and

? equity and liabilities.

The assets and liabilities are then generally separated into two further categories:

? current; and

? non-current.

Current assets

An entity shall classify an asset as current when:

• it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;
• it holds the asset primarily for the purpose of trading;
• it expects to realise the asset within twelve months after the reporting period; or the asset is cash or a cash equivalent (as defined in IAS 7)
• for at least twelve months after the reporting period.

Current liabilities

An entity shall classify a liability as current when:

• it expects to settle the liability in its normal operating cycle;
• it holds the liability primarily for the purpose of trading;
• the liability is due to be settled within twelve months after the reporting period; or

it does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period

The statement of comprehensive income

The statement of comprehensive income gives information regarding the financial performance of the entity.

Comprehensive income basically includes two parts:

? profit or loss (income and expenses); and

? other comprehensive income (income and expenses that are not required or not permitted

to be recognised in profit or loss).

Profit or loss

Profit or loss includes items that are recognised as income and expense. The net of the income and expenses results in either a profit or loss.

This profit or loss is then included in total comprehensive income.

Other comprehensive income

Other comprehensive income includes items of income and expense that were either not

required or were not permitted to be included in profit or loss. There are five components to other comprehensive income (as defined):

? changes in a revaluation surplus;

? actuarial gains and losses on defined benefit plans;

? gains and losses arising from translating the financial statements of a foreign operation;

? gains and losses on re-measuring available-for-sale financial assets;

? the effective portion of gains and losses on hedging instruments in a cash flow hedge

Statement of Changes in Equity

Statement of Cash Flow