International Accounting and Financial Reporting 1 Ass. Prof. Mohammed ALASHI Prepared by: Mohammed ALASHI
Presentation of Financial Statements 2 Introduction Scope Definitions of Terms Financial Statements Objective Purpose of Financial Statements General Features Fair Presentation and Compliance with IFRSs Going concern Accrual basis of accounting Materiality and aggregation Offsetting Prepared by: Mohammed ALASHI
Presentation of Financial Statements 3 Frequency of reporting Comparative information Consistency of presentation Structure and Content Complete Set of Financial Statements Notes Statement of compliance with IFRS Accounting policies Fairness exception under IAS 1 Other disclosures required by IAS 1 Future Developments Illustrative Financial Statements US GAAP Comparison Prepared by: Mohammed ALASHI
INTRODUCTION 4 The revised IAS 1 presented in this chapter resulted from the IASB’s deliberations on Phase A of the Financial Statement Presentation project and brings IAS 1 largely into line with the corresponding US standard — Statement of Financial Accounting Standards 130 (FAS 130), Reporting Comprehensive Income (codified in ASC 220). Prepared by: Mohammed ALASHI
INTRODUCTION 5 The revised IAS 1 was effective for annual periods beginning on or after January 1, 2009. Prepared by: Mohammed ALASHI
INTRODUCTION 6 The amendment improves the consistency and clarity of items recorded in other comprehensive income. Prepared by: Mohammed ALASHI
INTRODUCTION 7 The name of the statement of comprehensive income is changed to statement of profit or loss and other comprehensive income. Prepared by: Mohammed ALASHI
INTRODUCTION 8 In December 2014, the IASB issued Disclosure Initiative (Amendments to IAS 1) , which made a number of amendments to IAS 1. In relation to materiality, the amendments clarify firstly that information should not be obscured by aggregating or by providing immaterial information, secondly that materiality considerations apply to all parts of the financial statements, and thirdly that even when a standard requires a specific disclosure, materiality considerations do apply. Prepared by: Mohammed ALASHI
INTRODUCTION 9 In relation to the Statement of Financial Position and Statement of Profit or Loss and Other Comprehensive Income, the amendments firstly introduce a clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant and provide additional guidance on subtotals in these statements, and secondly clarify that an entity’s share of OCI of equity -accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss. Prepared by: Mohammed ALASHI
INTRODUCTION 10 In relation to the notes to the financial statements, the amendments add additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered when determining the order of the notes, and to demonstrate that the notes need not be presented in the order so far listed in IAS 1. Prepared by: Mohammed ALASHI
SCOPE 11 IAS 1, Presentation of Financial Statements , is applicable to all general- purpose financial statements prepared and presented in accordance with IFRS. IAS 1 is applicable both to consolidated and separate financial statements, but is not applicable to the structure and content of interim financial statements (see Chapter 34). Prepared by: Mohammed ALASHI
SCOPE 12 IAS 1 is developed for profit-orientated entities. Entities with not-for-profit activities or public sector entities may apply the standard, provided that appropriate adjustments are made to particular line items in the financial statements. Prepared by: Mohammed ALASHI
DEFINITIONS OF TERMS 13 General-purpose financial statements. Impracticable International Financial Reporting Standards (IFRS). Material omissions or misstatements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor. Prepared by: Mohammed ALASHI
DEFINITIONS OF TERMS 14 Other comprehensive income. 1. Changes in revaluation surplus (IAS 16 and IAS 38); 2. Remeasurements of defined benefit plans (IAS 19); 3. Gains and losses arising from translating the financial statements of a foreign operation (IAS 21); 4. Gains and losses on remeasuring of investments in equity instruments designated and financial assets measured at fair value through other comprehensive income (IFRS 9);and 5. The effective portion of gains and losses on hedging instruments in a cash flow hedge (IFRS 9). Prepared by: Mohammed ALASHI
FINANCIAL STATEMENTS 15 Objective IAS 1 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. In revising IAS 1, the IASB’s main objective was to aggregate information in the financial statements on the basis of shared characteristics. Prepared by: Mohammed ALASHI
FINANCIAL STATEMENTS 16 Purpose of Financial Statements IAS 1 refers to financial statements as “a structured representation of the financial position and financial performance of an entity” and goes on to explain that the objective of financial statements is to provide information about an entity’s financial position, its financial performance and its cash flows, which is then utilised by a wide spectrum of end users in making economic decisions. Prepared by: Mohammed ALASHI
FINANCIAL STATEMENTS 17 Purpose of Financial Statements In addition, financial statements show the results of management’s stewardship of the resources entrusted to it. Prepared by: Mohammed ALASHI
FINANCIAL STATEMENTS 18 Purpose of Financial Statements complete set of financial statements which provide information about an entity’s: 1. Assets; 2. Liabilities; 3. Equity; 4. Income and expenses, including gains and losses; 5. Contributions by and distributions to owners in their capacity as owners; and 6. Cash flows. Prepared by: Mohammed ALASHI
FINANCIAL STATEMENTS 19 Purpose of Financial Statements All of this information, and other information presented in the notes, helps users of financial statements to predict the entity’s future cash flows and their timing and certainty. Prepared by: Mohammed ALASHI
GENERAL FEATURES 20 Fair Presentation and Compliance with IFRSs financial statements should present fairly the financial position, financial performance and cash flows of an entity. Prepared by: Mohammed ALASHI
GENERAL FEATURES 21 Fair Presentation and Compliance with IFRSs However, in extremely rare circumstances where management concludes that compliance with a requirement in an IFRS would be so misleading that it would conflict with the objective of financial statements as set out in the Framework , the entity can depart from that requirement if the relevant regulatory framework requires, or otherwise does not prohibit, such a departure, and the entity discloses all of the following: Prepared by: Mohammed ALASHI
GENERAL FEATURES 22 Fair Presentation and Compliance with IFRSs 1. Management has concluded that the financial statements present fairly the entity’s financial position, financial performance and cash flows; 2. The entity has complied with all applicable IFRSs, except that it has departed from a particular requirement in order to achieve fair presentation; 3. The title of the IFRS from which the entity has departed, the nature of the departure, including the treatment that the IFRS would require, the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in the Framework and the treatment adopted; and 4. For each period presented, the financial effect of the departure on each item in the financial statements which would have been reported in complying with the requirement. Prepared by: Mohammed ALASHI
GENERAL FEATURES 23 Fair Presentation and Compliance with IFRSs The standard notes that deliberately departing from IFRS might not be permissible in some jurisdictions, in which case the entity should comply with the standard in question and disclose in the notes that it believes this to be misleading, and show the adjustments which would be necessary to avoid this distorted result. Prepared by: Mohammed ALASHI
GENERAL FEATURES 24 Fair Presentation and Compliance with IFRSs (Going concern) Financial statements should be prepared 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. Prepared by: Mohammed ALASHI
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