Topic 3: IAS 1

• Presentation of Financial Statements


  This Standard 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.
• Offsetting


  An entity shall not offset assets and liabilities or income and expenses, unless required or permitted by an IFRS
• An entity reports separately both assets and liabilities, and income and expenses
• Offsetting in the statement(s) of profit or loss and other comprehensive income or financial position, except when offsetting reflects the substance of the transaction or other event, detracts from the ability of users both to understand the transactions, other events and conditions that have occurred and to assess the entity's future cash flows
• Measuring assets net of valuation allowances—for example, obsolescence allowances on inventories and doubtful debts allowances on receivables—is not offsetting
• An entity undertakes, in the course of its ordinary activities, other transactions that do not generate revenue but are incidental to the main revenue-generating activities
• Presenting the results of such transactions

  1. By netting any income with related expenses arising on the same transaction

  2. For example: an entity presents gains and losses on the disposal of non-current assets, including investments and operating assets, by deducting from the amount of consideration on disposal the carrying amount of the asset and related selling expenses

  ranty agreement) against the related reimbursement
• An entity presents on a net basis gains and losses arising from a group of similar transactions, for example, foreign exchange gains and losses or gains and losses arising on financial instruments held for trading
• However, an entity presents such gains and losses separately if they are material
• Frequency of reporting


  An entity shall present a complete set of financial statements (including comparative information) at least annually
• When an entity changes the end of its reporting period and presents financial statements for a period longer or shorter than one year, an entity shall disclose, in addition to the period covered by the financial statements: the reason for using a longer or shorter period, and the fact that amounts presented in the financial statements are not entirely comparable
• Normally, an entity consistently prepares financial statements for a one-year period. However, for practical reasons, some entities prefer to report, for example, for a 52-week period. This Standard does not preclude this practice
• Comparative information


  Except when IFRSs permit or require otherwise, an entity shall present comparative information in respect of the preceding period for all amounts reported in the current period's financial statements
• An entity shall include comparative information for narrative and descriptive information if it is relevant to understanding the current period's financial statements
• An entity shall present, as a minimum, two statements of financial position, two statements of profit or loss and other comprehensive income, two separate statements of profit or loss (if presented), two statements of cash flows and two statements of changes in equity, and related notes
• In some cases, narrative information provided in the financial statements for the preceding period(s) continues to be relevant in the current period
• Additional comparative information


  An entity may present comparative information in addition to the minimum comparative financial statements required by IFRSs, as long as that information is prepared in accordance with IFRSs
• When an entity is required to present an additional statement of financial position, it must disclose the information required by IAS 8. However, it need not present the related notes to the opening statement of financial position as at the beginning of the preceding period
• If an entity changes the presentation or classification of items in its financial statements, it shall reclassify comparative amounts unless reclassification is impracticable
• When an entity reclassifies comparative amounts, it shall disclose (including as at the beginning of the preceding period): the nature of the reclassification; the amount of each item or class of items that is reclassified; and the reason for the reclassification
• When it is impracticable to reclassify comparative amounts, an entity shall disclose: the reason for not reclassifying the amounts, and the nature of the adjustments that would have been made if the amounts had been reclassified
• An entity shall retain the presentation and classification of items in the financial statements from one period to the next unless: it is apparent, following a significant change in the nature of the entity's operations or a review of its financial statements, that another presentation or classification would be more appropriate having regard to the criteria for the selection and application of accounting policies in IAS 8; or an IFRS requires a change in presentation
• This Standard requires particular disclosures in the statement of financial position or the statement(s) of profit or loss and other comprehensive income, or in the statement of changes in equity and requires disclosure of other line items either in those statements or in the notes
• An entity shall clearly identify the financial statements and distinguish them from other information in the same published document
• An entity shall clearly identify each financial statement and the notes
• An entity shall display the following information prominently, and repeat it when necessary for the information presented to be understandable: the name of the reporting entity or other means of identification, and any change in that information from the end of the preceding reporting period; whether the financial statements are of an individual entity or a group of entities; the date of the end of the reporting period or the period covered by the set of financial statements or notes; the presentation currency, as defined in IAS 21; and the level of rounding used in presenting amounts in the financial statements
• An entity often makes financial statements more understandable by presenting information in thousands or millions of units of the presentation currency. This is acceptable as long as the entity discloses the level of rounding and does not omit material information
• An entity shall present additional line items (including by disaggregating the line items listed in paragraph 54), headings and subtotals in the statement of financial position when such presentation is relevant to an understanding of the entity's financial position
• Subtotals in the statement of financial position

  Shall be comprised of line items made up of amounts recognised and measured in accordance with IFRS; be presented and labelled in a manner that makes the line items that constitute the subtotal clear and understandable; be consistent from period to period, in accordance with paragraph 45; and not be displayed with more prominence than the subtotals and totals required in IFRS for the statement of financial position
• An entity shall not classify deferred tax assets (liabilities) as current assets (liabilities) when it presents current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position
• This Standard does not prescribe the order or format in which an entity presents items
• An entity makes the judgement about whether to present additional items separately on the basis of an assessment of: the nature and liquidity of assets; the function of assets within the entity; and the amounts, nature and timing of liabilities
• Separate presentation in the statement of financial position

  • Line items are included when the size, nature or function of an item or aggregation of similar items is such that separate presentation is relevant to an understanding of the entity's financial position
  • The descriptions used and the ordering of items or aggregation of similar items may be amended according to the nature of the entity and its transactions, to provide information that is relevant to an understanding of the entity's financial position
• Judgement about whether to present additional items separately

  1. Assessment of the nature and liquidity of assets

  2. The function of assets within the entity

  3. The amounts, nature and timing of liabilities
• The use of different measurement bases for different classes of assets suggests that their nature or function differs and, therefore, that an entity presents them as separate line items
• Current/non-current distinction


  An entity shall present current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position
• When an entity supplies goods or services within a clearly identifiable operating cycle, separate classification of current and non-current assets and liabilities in the statement of financial position provides useful information
• An entity is permitted to present some of its assets and liabilities using a current/non-current classification and others in order of liquidity when this provides information that is reliable and more relevant
• Current asset

  • An asset that the entity expects to realise, or intends to sell or consume, in its normal operating cycle
  • An asset that the entity holds primarily for the purpose of trading
  • An asset that the entity expects to realise within twelve months after the reporting period
  • Cash or a cash equivalent (unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period)
• Non-current asset


  All other assets that are not classified as current assets