IAS 1R- Presentation of Financial Statements Introduction to IFRS / Ind AS
IAS 1R- Presentation of financial statements
Presentation of financial statements Objective The objective of this Standard is to prescribe 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. To achieve this objective, this Standard sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. Slide 3
Presentation of financial statements Fair presentation and compliance • An entity whose financial statements comply with IFRSs shall make an explicit and unreserved statement of such compliance in the notes. An entity shall not describe financial statements as complying with IFRSs unless they comply with all the requirements of IFRSs. • An entity cannot rectify inappropriate accounting policies either by disclosure of the accounting policies used or by notes or explanatory material. • In the extremely rare circumstances in which management concludes that compliance with a requirement in an IFRS would be so misleading that it would conflict with the objective of financial statements set out in the Framework, the entity shall depart from that requirement. However the entity is required to make specific disclosures prescribed under IAS 1R Slide 4
Presentation of financial statements Comparative information • Comparatives required for all numerical information • Comparatives required for narrative and descriptive information when it is relevant to an understanding of the current period’s financial statement • Additional statement of financial position When an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements, the entity is required to disclose a statement of financial position as at the beginning of the earliest comparative period. Slide 5
Presentation of financial statements Components of financial statements A complete set of financial statements comprises • The primary statements - Statement of financial position for the period end - Statement of comprehensive income for the period - Statement of changes in equity for the period - Statement of cash flows for the period • Notes, including summary of accounting policies and other explanatory information An entity may use titles for the statements other than those prescribed in IAS 1R, however the titles used shall not be misleading. All primary statements of equal prominence Slide 6
Presentation of financial statements Statement of Financial Position Basis of presentation Classified Balance sheet An entity shall present current and non-current asset, and current and non- current liability as separate classification on the face of the statement of financial position Exception to above rule • When a presentation based on liquidity provides information that is reliable and more relevant. • All assets and liabilities are required to be presented in the order of liquidity. Choice driven by type of business Manufacturers and retailers → current/non -current basis • Financial institutions, banks and real estate companies → liquidity basis • Slide 7
Presentation of financial statements Statement of Financial Position Current vs. Non-current Classification Current asset Current liability Expected to be settled within entity’s normal Expected to be realised, sold or consumed within entity’s normal operating cycle operating cycle Held primarily for trading purposes Held primarily for trading purposes Expected to be realised within 12 months after Expected to be settled within 12 months after balance sheet date balance sheet date No unconditional right to defer settlement for Unrestricted cash or cash equivalent at least 12 months after balance sheet date An entity shall classify all An entity shall classify all other assets as other liabilities as non-current. non-current. Slide 8
Presentation of financial statements Statement of Financial Position Operating cycle Definition “the operating cycle of an entity is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents” • Items realised, sold or consumed within operating cycle are current items • Operating cycle may be more than 12 months Slide 9
Presentation of financial statements Statement of Financial Position Minimum line items • Property, plant and equipment • Held for sale assets and assets included in disposal groups • Investment property • Trade and other payables • Intangible assets • Provisions • Financial assets (other than those shown on other line items) • Financial liabilities (other than those shown on other line items) • Investments accounted for using the equity method • Current tax assets and liabilities • Biological assets • Deferred tax assets and liabilities • Inventories • Liabilities included in disposal groups • Trade and other receivables • Minority interest • Cash and cash equivalents • Issued capital and reserves attributable to owners of the parent An entity shall present additional line items, headings and subtotals in the statement of financial position when such presentation is relevant to an understanding of the entity's financial position. Slide 10
Presentation of financial statements Statement of Financial Position Slide 11
Presentation of financial statements Statement of Comprehensive Income Basis of presentation An entity shall present all items of income and expense recognised in a period • in a single statement of comprehensive income, or • in two statements: – a statement displaying components of profit or loss (separate income statement) and – a second statement beginning with profit or loss and displaying components of other comprehensive income (statement of comprehensive income). Slide 12
Presentation of financial statements Statement of Comprehensive Income Application of the requirement to analyse expenses • Choose most relevant presentation analysis method by: Function - usually used by manufacturers, retailers, etc. - Nature - usually used by financial institutions, etc. - • If analysis by function is provided, additional note disclosures analysing the nature of expenses is required Slide 13
Presentation of financial statements Statement of Comprehensive Income Minimum line items • Each component of other • Revenue comprehensive income by nature • Finance costs • Share of other comprehensive • Share of profit or loss of associates income of associates and joint and joint ventures ventures • Tax expense • Total comprehensive income • Discontinued operations attributable to: • Profit or loss Minority interest - Owners of the parent - • Profit or loss attributable to: - Minority interest - Owners of the parent An entity shall not present any items of income or expense as extraordinary items Slide 14
Presentation of financial statements Statement of Comprehensive Income Additional line items, headings and sub-totals • Required when relevant to an understanding of performance • Description and order of line items amended where necessary to explain elements of performance • Framework qualitative characteristics of financial statements Understandability - Relevance - Reliability - Comparability - • Undefined terms may be used where relevant to an understanding (subject to meeting qualitative characteristics) Slide 15
Presentation of financial statements Other Comprehensive Income (‘OCI’) Components of Other Comprehensive Income • Changes in revaluation surplus (on account of PPE and intangibles) • Actuarial gains and losses on defined benefit plans recognised in full in equity, if the entity elects the option available under IAS 19 • Gains and losses arising from translation of a foreign operation • Gains and losses on re-measuring available-for-sale financial assets • Effective portion of gains and losses on hedging instruments in a cash flow hedge. All non-owners change in equity are recognised in OCI Components of OCI shall be presented either net of related taxes or at gross of related tax with one amount representing aggregate amount of income tax relating to those components. Items of income and expense are recognised in profit or loss unless standards prescribe or permit otherwise. Slide 16
Presentation of financial statements Other Comprehensive Income (‘OCI’) ‘Recycling’ of other comprehensive income Reclassifications (‘recycling’) - as required by standards items previously recognised in OCI shall be transferred to Statement of Comprehensive Income Recycled under Items Remarks IFRS? Revaluation of PPE and intangible Decrease can only be recognised in OCI if they No assets reverse previous increments for the same asset Actuarial gains/losses on defined No Immediate recognition in retained earnings benefit plans (optional) FX gains/losses from the translation Yes Transfer to P&L required of foreign operations Gain/losses on revaluation of Yes Transfer to P&L required available-for-sale financial assets Effective portion of gains/losses Transfer to P&L or include in cost/carrying amount Yes from cash flow hedges of non-financial asset or liability (basis adjustment) Slide 17
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