PRESENTATION OF FINANCIAL STATEMENTS

2.1 INTRODUCTION

IAS 1 (Presentation of Financial Statements) establishes guidelines for preparing general-purpose financial statements.

Objective: Ensures comparability of financial information across different entities and periods.
Provisions include:

Overall requirements for financial statement presentations.
Guidance on financial statement structure.
Minimum content requirements.

Components that constitute a complete set of financial statements include:

Statement of financial position (balance sheet).
Statement of profit or loss and other comprehensive income.
Statement of changes in equity.
Statement of cash flows.
Notes, summarizing significant accounting policies and other explanatory notes.

2.2 SCOPE

The scope of IAS 1 covers:

General-purpose financial statements: These are intended for users who do not have the ability to demand tailored reports.

IAS 1 does not apply to:

Financial statements prepared under IAS 34 (Interim Financial Reporting).

However, it applies to all entities preparing consolidated financial statements.

2.3 COMPLETE SET OF FINANCIAL STATEMENTS

Financial statements are structured representations of an entity's financial position and results of operations.

General-purpose financial statements cater to the common needs of a wide range of external users.

Components of a complete set of financial statements:

Statement of financial position at period-end.
Statement of profit or loss and other comprehensive income presented in one or two statements.
Statement of changes in equity.
Statement of cash flows.
Notes including accounting policies and explanations.
Comparative information as mandated by standards.

Important Note: If an entity retrospectively applies an accounting policy or makes a restatement, it must present a statement of financial position at the beginning of the earliest comparative period.

2.4 OVERALL CONSIDERATIONS

Fair Presentation and Compliance with IFRS:

Financial statements must present fairly the financial position, performance, and cash flows.
IAS 1 mandates a clear compliance statement in the notes.
If management finds compliance misleading in rare cases, they may depart from certain IFRS requirements:

Must disclose:

Management's conclusion on fair presentation.
Compliance with IFRSs except for the particular requirement departed from.
The IFRS title from which they departed.
The nature of the departure and its reason.
The financial effect of the departure.

GOING CONCERN

Financial statements must be prepared on a going concern basis, reflecting the entity's ability to continue operations:

If management has concerns about future viability, it must disclose relevant uncertainties.
Assessment considers information available for at least 12 months from the balance sheet date.

ACCRUAL BASIS OF ACCOUNTING

Entities should use the accrual basis of accounting, with cash flow information as an exception.

CONSISTENCY

Entities must maintain presentation and classification consistency across periods:

Changes are permitted if:

A significant operational change occurs.
An IFRS mandates a change.

If comparative amounts are altered, the following must be disclosed:

The nature of reclassification.
The amount involved.
The reason for the reclassification.

MATERIALITY AND AGGREGATION

Materiality is determined through professional judgment; similar and dissimilar items must be presented separately.

OFFSETTING

Offsetting assets against liabilities is not permitted unless required by specific IFRSs. Measuring net of valuation allowances is not considered offsetting.

COMPARATIVE INFORMATION

Comparative information needs to be reported alongside current disclosures unless specified otherwise:

Minimum of two statements each period.
If classification changes, comparative data should be reclassified unless impracticable.

Additional disclosures include:

The periods covered by financial statements.
The rationale for any reporting period adjustments.
Changes requiring disclosure must be justified with specifics.

2.5 STRUCTURE AND CONTENT

IDENTIFICATION OF FINANCIAL STATEMENTS

Financial statements should be clearly identified:

Name of the reporting entity.
Scope: individual entity or group.
Date or period covered.
Presentation currency.
Level of rounding.

Financial statements must be prepared at least annually. If there is a change:

Reason for the change must be disclosed.
Statement of comparable amounts should accompany.

Assets and liabilities should be classified as current and non-current:

Current assets:

Expected to be realized or consumed in normal operating cycle.
Held for trading.
To be realized within 12 months from the reporting date.
Cash or cash equivalents.

Non-current assets comprise any other remaining items.

CURRENT LIABILITIES

Expected to be settled in normal operating cycle.
Held for trading.
Due to be settled within 12 months.
Lack of unconditional right to defer settlement for at least 12 months; otherwise classified as non-current.

2.7 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

IAS 1 permits presenting income and expenses in one of two formats:

Single Statement: Comprehensive income, net income, and other comprehensive income presented together.
Two Statements: Profit or loss in one statement and other comprehensive income in another.

Reporting Guidelines:

Both formats present the same information and do not represent a change in accounting principles.
Statements must present:

Profit or loss overall.
Exclusions from profit calculation:

Prior period errors.
Changes in accounting policies.
Transactions with owners (dividends, etc.).

Included in Profit or Loss:

Revenue (including interest revenue).
Finance costs.
Gains/losses from derecognition of financial assets.
Impairment losses and gains.
Share in profits/loss of associates.
Tax expenses and discontinued operations

Disclosures for Specific Circumstances:

Must separately disclose write-downs, restructuring, disposals, and litigation settlements.

Total Other Comprehensive Income:

Includes income and expense components not recognized in profit or loss.
These items usually accumulate in equity.

Reclassification Adjustments:

Established as amounts reclassified to profit or loss from other comprehensive income.

Categories:

OCI items that are not recyclable:

Changes in revaluation surplus.
Net benefit liabilities and assets.
Changes in fair value of equity instruments.

OCI items that are recyclable:

Changes in fair value of debt instruments.
Foreign currency translation differences.
Gains/losses on cash flow hedge instruments.

Total Comprehensive Income:

Represents all changes in equity during the period except transactions with owners.

Allocation of Income:

Contribution between non-controlling interests and owners of the parent must be reported.

Expense Recognition:

Expenses should be categorized by either nature (e.g., employee benefits) or function (e.g., cost of sales).

Nature of Expense Method:

Aggregates expenses by their nature (e.g., depreciation, materials costs) without functional details.

Function of Expense Method:

Categorizes expenses based on their function (cost of sales, distribution, administration).
Requires additional disclosures on the nature of expenses if used.

Comprehensive Overview of IAS 1 Presentation of Financial Statements

Comprehensive Overview of IAS 1 Presentation of Financial Statements