IFRS Training IAS 1 – Presentation of Financial Statements www.ccsintl.net Professional Advisory Services
Table of Contents Section 1 Overview 2 Objectives Scope 3 Purpose of Financial Statements 4 Frequency of Reporting and Period Covered 5 Components of Financial Statements 6 General Features 7 www.ccsintl.net Structure and Content 8 Professional Advisory Services
Section 1 Overview
Overview Presentation of Financial Statements Structure General Features and IAS 7 Contents Notes to the SOFP SOCIE Financial www.ccsintl.net SOCI Statements Professional Advisory Services
Section 2 Objectives
Objectives 1 Basis of presentation of general purpose financial statements 2 Ensure comparability (Internally and externally) To meet the needs of users who are not in a position to demand reports tailored to meet 3 their particular information www.ccsintl.net Professional Advisory Services
Objectives To prescribe the basis for presentation of general purpose financial statements by setting out: Overall requirements for presentation of financial statements Guidelines for their Minimum content structure (order) requirements www.ccsintl.net The recognition, measurement and disclosure of specific transactions and other events are dealt with in other standards Professional Advisory Services
Section 3 Scope
Scope IAS 1 applies to: Individual entities as well as consolidated accounts All entities with a profit objective All types of commercial entities (public or private), including: Banks and other financial institutions Insurance entities Public sector business entities with a profit objective 1- IAS 1 does not apply to the structure and content of condensed interim financial statements prepared in accordance with IAS 34 or other special purpose financial reports (prospectus) 2- IAS 1 (not for specific industry) also applies to mutual funds – no equity or shareholders 3- IAS 1 prescribes only minimum content requirements www.ccsintl.net Professional Advisory Services
Section 4 Purpose of Financial Statements
Purpose of Financial Statements Useful to a wide range of Financial Position users in The objective making of economic financial decisions statements Show the is to provide information results of about: management stewardship of the entity's Financial resources Cash flows Performance www.ccsintl.net Professional Advisory Services
Section 5 Frequency of Reporting and Period Covered
Frequency of Reporting and Period Covered In exceptional Frequency of circumstances reporting and where there is a period covered change in the end of the reporting period For a period longer At least or shorter than annually one year Requires disclosure The fact that amounts For the reason of using www.ccsintl.net presented in the a longer or shorter financial statements are period not entirely comparable Professional Advisory Services
Section 6 Components of Financial Statements
Components of Financial Statements Components SOFP SOCI SOCIE SOCF SOFP as at the earliest comparative period (IAS 8) when: An accounting policy has been applied retrospectively A retrospective restatement has been made Items have been reclassified www.ccsintl.net Professional Advisory Services
Components of Financial Statements Significant accounting policies and other explanatory notes (the notes are an integral part of the financial statements and as important as the four primary financial statements). They may be presented as a separate statement or incorporated within the notes. There are many items of information which may be presented either in a primary statement or in the notes Entities are encouraged to present additional (voluntary) information (outside the scope of IFRS) , such as: financial review by management, environmental reports or value added statements Other titles may be used for financial statements: Statement of Financial Position or Balance Sheet Statement of Comprehensive Income or Statement of Profit or Loss and Other Comprehensive Income www.ccsintl.net Professional Advisory Services
Components of Financial Statements The preparation and presentation of financial statements is the responsibility of the board of directors and/or governing body of an entity; including the selection and application of accounting policies www.ccsintl.net Professional Advisory Services
Section 7 General Features
Fair Presentation Financial statements should " present fairly" the: Financial position Financial performance Cash flows of an entity Fair presentation includes the selection and application of appropriate accounting policies The following points made by IAS 1 expand on this principle: Compliance with IFRS should be disclosed All relevant IFRS must be followed if compliance with IFRS is disclosed Use of inappropriate accounting treatment cannot be rectified either by disclosure of www.ccsintl.net accounting policies or notes/explanatory material Professional Advisory Services
Fair Presentation When assessing whether the complying with specific IFRS would be misleading , IAS 1 requires consideration of: Why the objective of the financial statements is not achieved in the particular circumstances How the entity's circumstances differ from those of other entities that comply with the requirement (if other entities comply then you should comply) If there is a legitimate need to override a requirement of an IAS, the financial statements can still be described as complying with IFRS Conflicting national requirements do not justify a departure from standards www.ccsintl.net Professional Advisory Services
Fair Presentation In the extremely rare cases in which management concludes that compliance with a requirement in an IFRS standard would be so misleading , IAS 1 requires departure from the requirement (this is only permitted if the relevant regulatory framework requires, or otherwise does not prohibit such a departure) as follows: Management concluded that the financial statements present fairly the entity's financial position, financial performance and cash flows That it has complied in all material respects with applicable IFRS except that it has departed from a standard in order to achieve a fair presentation The standards from which the entity has departed Details of the nature of the departure: The treatment that the IFRS would require The reason why the treatment would be so misleading in the circumstances www.ccsintl.net The treatment adopted For each period presented, the financial impact of the departure on each item in the financial statements Professional Advisory Services
Going Concern IAS 1 requires management to: Assess the entity's ability to continue as a going concern (considering all information available for the foreseeable future) Prepare financial statements on a going concern basis ; unless management: Intends to liquidate the entity Cease trading Disclose material uncertainties which may affect the going concern concept When financial statements are not prepared on a going concern basis, that fact should be disclosed, together with: The basis on which the financial statements are prepared www.ccsintl.net The reason why the enterprise is not considered to be a going concern Professional Advisory Services
Going Concern If a company is not a going concern the financial statements should be prepared on a break- up basis Going concern assessment includes: Ready access to financial History of profitable operation resources Current and expected Debt repayment schedule www.ccsintl.net profitability Professional Advisory Services
Accrual Basis An enterprise should prepare its financial statements, except for cash flow information, under the accrual basis of accounting Accrual basis / Matching principle Revenues Expenses Cash Basis When Collected When Paid Accrual Basis When Recognized When Incurred www.ccsintl.net Professional Advisory Services
Consistency of Presentation The presentation and classification of items in the financial statements should be retained from one period to the next unless: A review of its financial statement presentation demonstrates that the change will result in a more appropriate presentation (a significant change in the nature of the entity's operations) A requirement by IFRS (such as IFRS 3) Change is acceptable with a condition that the change will provide information that is reliable and more relevant and comparability will not be impaired www.ccsintl.net Professional Advisory Services
Materiality and Aggregation Material Immaterial Items • Present separately • Aggregate with amounts of similar nature and function • Need not present separately 1- Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions of the users of the financial statements www.ccsintl.net 2- Materiality depends on both the size and the nature of the omission or the misstatement Professional Advisory Services
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