FinanceFinancial AccountingIASIFRS

IAS – 01 Presentation of Financial Statements

By December 16, 2018 No Comments

Financialย Statements:

Purpose:

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.

Components:

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
  1. 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.
  2. Statement of comprehensive income: The statement of comprehensive income includes two elements;
    1. Profit or Loss: includes all items of income and expenses.
    2. 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.

  1. Statement of Change in Equity: The statement of change in equity includes;
  2. Total comprehensive income for the period, showing separately attributable to owners and non-controlling interests.
  3. 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.
  1. Analysis of each item of other comprehensive income.
  2. 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;
  3. Cash flow from operating activities
  4. Cash flow from investing activities
  • Cash flow from financing activities
  1. Notes to financial statement: The notes to financial statement includes;
  2. Disclosure of significant accounting policies, estimates, assumptions and judgments
  3. Additional information useful to the users understanding.
  • Statements of compliance with IFRS
  1. Summary of other explanatory information

Overall Considerations:

  1. 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.
  2. 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.
  3. Accrual basis of accounting: IAS-1 requires that entity prepare its financial statement on accrual basis except cash flow statement.
  4. Consistency of presentation: Entity is required to retain consistency of presentation from one period to next.
  5. 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.
  6. Offsetting: Offsetting of assets and liabilities or income and expenses is not permitted unless required by other IFRS.
  7. Comparative information: IAS-1 require at least one year comparative information unless required by other standard.

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