Presentation of Introduction to Financial Statement
PRESENTATION OF INTRODUCTION TO FINANCIAL STATEMENT
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An overview of a company's financial performance, position, cash flows etc. are provided through financial statements. Accounting practice, policy, judgement, presentation and disclosure are materially influenced by laws and accounting standards effectively operational in the reporting jurisdiction, as a result, it is imperative that preparers of financial statements have good working knowledge of the relevant provisions of the applicable laws and accounting standards.
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In 2011, Nigeria joined over 150 countries in the world to adopting IFRS as its substantive accounting standard thus jettisoned the Statement of Accounting Standards (SAS) that was formally in use. As a result, it is suffix to say that Nigeria now use IFRS -GAAP as opposed to the then N-GAAP in preparing financial Statements. What are the pros and cons of this adoption? What out in our subsequent write ups.
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There were 41 IAS and 17 IFRS as at the time of this write. We shall consider few in this write up. It may amaze you that content, component, presentation and disclosures of Financial Statements of company is similar industry are very alike. Yes, it should be. This is because IAS 1- Presentation of Financial Statements, legislative document such as the Company and Allied Matters Act (CAMA) as well as other sectorial legislative documents such as the provisions of NSE Act, Prudential guideline, NAICOM Act, The Lagos State Government Ministry of Commerce, Industry and Cooperative Bye Laws etc, prescribed what should be the format and definition of key terms which preparers of financial statements should religiously adopt.
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IAS 1- Presentation of Financial Statements prescribes the basis for preparation of general-purpose financial statements to ensure comparability both with the entity’s financial statements of previous period and with the financial statements of other entities. It sets out overall requirement for the presentations of financial statements, guidelines for their structure and minimum requirement for their content. It is important to note that revision made to IAS one actually repealed the formal IAS 1 – Disclosure of Accounting Policies (issued in 1975), IAS 5 – Information to be disclosed in Financial Statements (originally approved in 1977) and IAS 13 – presentations of current assets and current liabilities).
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IAS 1 provides guidance to what should constitute component of financial statements, element of an account, meaning of materiality, offset, format for presentations of Statement of financial position, statement of profit or loss and other comprehensive income, Statement of cash flows, Statements of accounting policy, Statements of notes to the account etc. An entity shall apply IAS 1 in preparing and presenting general purpose financial statements in accordance with the International Financial Reporting Standards.
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When preparing a condensed interim financial statement, IAS 1 shall not be applicable rather, IAS 34 – Interim Financial Reporting should be adopted. As stated earlier, IAS 1 provides guidance to preparer of financial statements. It provides certain definition of key terms like:
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??*?General Purpose Financial Statements which is a statements prepared with no interest of a specific user at heart but that which will meet the needs of all foreseeable users or stake holders.
??*?Impracticable. This means that difficulty in applying certain provision of a given standard. It requires preparers of financial statements should explicitly discuss if there is any standard which ordinarily impact of the stewardship report but it is impossible to be adopted. It is therefore important that this disclosure be made.
?*??IFRS which is standards and interpretations issued by the IASB.
?*??Materiality which depicts that preparer of financial statements are required to appraise and ensure that rightful actions are taken in respect of omission, misstatement or obscured disclosure or non-disclosure of certain financial data could cause the user of the financial statements to making wrong decision after placing reliance on the financial statements.
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It also provides instance where aggregation and or disaggregation should be adopted.
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According to the standard, the financial statements shall report on the following element of account:
??*?Asset
???*Liability
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???*Equity
???*Income and expenses including gains and loss
???*Contribution by and distributions to owners in their capacity as owners
???*Cash flows
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Entities may also present outside the financial statements, reports and statements such as environment reports and value-added statements particularly in industries in which environmental factors are significant and when employees are regarded as an important user group, ?
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When preparing financial statements, preparers of financial statements shall make an assessment of an entity’s ability to continue as a going concern. Financial Statements must be prepared on a going concern basis. The complete financial statements shall comprise:
?*??Statements of financial position as at the end of the period
?*?Statement of profit or loss and other comprehensive income
?*??Statement of changes in equity for the period
??*?Statements of cashflows for the period
??*?Notes comprising material accounting policy information and other explanatory notes
*?Comparative information in respect of the proceeding period
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Statement of financial position as at the beginning of the preceding period when an entity applies an accounting policy retrospectively.
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It is therefore important to give attention to the provisions of the Accounting Standard so that the presentations and disclosures as contained in the financial statements would be in consonance with the provisions of the accounting standards which aim is to promote true and fair representation.
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