The purpose of financial statement is to provide information about financial position, financial performance and cash flow of the entity that is useful for the users to make economics decisions.
A complete set of financial statements includes;
- Statement of financial position
- Statement of comprehensive income
- Statement of changes in equity
- Statement of cash flows
- Notes to financial statement
- Statement of financial position: This statement is also called Balance sheet. IAS-1 required classified financial position where current assets and liabilities are separated from non-current assets and liabilities. Current portion is expected to be recovered or settled within 12 months.
- Statement of comprehensive income: The statement of comprehensive income includes two elements;
- Profit or Loss: includes all items of income and expenses.
- Other Comprehensive income: includes items recognized directly equity or reserves for example changes in revaluation surplus.
An entity has a choice to include all income and expenses in a single statement in Profit or loss or in a two statement profit or loss as well as other comprehensive income.
- Statement of Change in Equity: The statement of change in equity includes;
- Total comprehensive income for the period, showing separately attributable to owners and non-controlling interests.
- The effect of retrospective application or restatement of each component.
- Reconciliation between the carrying amount at the beginning and end of the period of each component.
- Analysis of each item of other comprehensive income.
- Statement of Cash flow: The statement of cash flow summarizes the amount of cash and cash equivalents entering and leaving a company. Cash flow includes the following main components;
- Cash flow from operating activities
- Cash flow from investing activities
- Cash flow from financing activities
- Notes to financial statement: The notes to financial statement includes;
- Disclosure of significant accounting policies, estimates, assumptions and judgments
- Additional information useful to the users understanding.
- Statements of compliance with IFRS
- Summary of other explanatory information
- Fair presentation and compliance with IFRS: Financial statements are required to be presented fairly as set out in the framework and accordance with IFRS and comply with all requirements of IFRS.
- Going Concern: IAS-1 require that financial statement is prepared on going concern basis. If management concludes that entity is not a going concern basis then financial statements should not be prepared on going concern basis.
- Accrual basis of accounting: IAS-1 requires that entity prepare its financial statement on accrual basis except cash flow statement.
- Consistency of presentation: Entity is required to retain consistency of presentation from one period to next.
- Materiality and aggregation: Each material class of similar items must be presented separately in financial statements. Items of dissimilar are aggregated only if they are individually immaterial.
- Offsetting: Offsetting of assets and liabilities or income and expenses is not permitted unless required by other IFRS.
- Comparative information: IAS-1 require at least one year comparative information unless required by other standard.