Popular in Course
verified elite notetaker
Popular in Accounting
This 82 page Document was uploaded by an elite notetaker on Friday December 18, 2015. The Document belongs to a course at a university taught by a professor in Fall. Since its upload, it has received 10 views.
Reviews for standards
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 12/18/15
IAS 1 International Accounting Standard 1 Presentation of Financial Statements This version includes amendments resulting from IFRSs issued up to 17 January 2008. IAS 1 Presentation of Financial Statementswas issued by the International Accounting Standards Committee in Septembe r 1997. It replaced IAS 1 Disclosure of Accounting Policies (originally approved in 1974), IAS 5Information to be Disclosed in Financial Statements(originally approved in 1977) and IAS 13 Presentation of Current Asse ts and Current Liabilities (originally approved in 1979). In April 2001 the International Accounting Standards Board (IASB) resolved that all Standards and Interpretation s issued under previous Co nstitutions continued to be applicable unless and until they were amended or withdrawn. In December 2003 the IASB issued a revi sed IAS 1, and in August 2005 issued an Amendment to IAS 1—Capital Disclosures. IAS 1 and its accompanying documents were also amended by the following IFRSs: 5S R F• I Non-current Assets Held for Sale and Discontinued Operations (issued March 2004) • Amendments to IAS 19—Actuarial Gains and Losses, Group Plans and Disclosures (issued December 2004) 7S R F• I Financial Instruments: Disclosures (issued August 2005) 3 2S A• I Borrowing Costs (as revised in March 2007). In September 2007 the IASB issued a revised IAS 1. The following Interpretations refer to IAS 1: 7 - C •I S Introduction of the Euro (issued May 1998 and subsequently amended) 5 1 - C •I S Operating Leases—Incentives (issued December 1998 and subsequently amended) 5 2 - C •I S Income Taxes—Changes in the Tax Status of an Entity or its Shareholders (issued December 1998 and subsequently amended) 9 2 - C •I S Service Concession Arrangements: Disclosures (issued December 2001 and subsequently amended) 2 3 - C •I S Intangible Assets—Web Site Costs (issued March 2002 and subsequently amended) 1C I R F• I Changes in Existing Decommissioning, Restoration and Similar Liabilities (issued May 2004) 4 1C I R F• I IAS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (issued July 2007). © IASCF 879 IAS 1 C ONTENTS paragraphs INTRODUCTION IN1–IN16 INTERNATIONAL ACCOUNTING STANDARD 1 PRESENTATION OF FINANCIAL STATEMENTS OBJECTIVE 1 SCOPE 2–6 DEFINITIONS 7–8 FINANCIAL STATEMENTS 9–46 Purpose of financial statements 9 Complete set of financial statements 10–14 General features 15–46 Fair presentation and compliance with IFRSs 15–24 Going concern 25–26 Accrual basis of accounting 27–28 Materiality and aggregation 29–31 Offsetting 32–35 Frequency of reporting 36–37 Comparative information 38–44 Consistency of presentation 45–46 STRUCTURE AND CONTENT 47–138 Introduction 47–48 Identification of the financial statements 49–53 Statement of financial position 54–80 Information to be presented in the statement of financial position 54–59 Current/non-current distinction 60–65 Current assets 66–68 Current liabilities 69–76 Information to be presented either in the statement of financial position or in the notes 77–80 Statement of comprehensive income 81–105 Information to be presented in the statement of comprehensive income 82–87 Profit or loss for the period 88–89 Other comprehensive income for the period 90–96 Information to be presented in the statement of comprehensive income or in the notes 97–105 Statement of changes in equity 106–110 Statement of cash flows 111 © 880 IASCF IAS 1 Notes 112–138 Structure 112–116 Disclosure of accounting policies 117–124 Sources of estimation uncertainty 125–133 Capital 134–136 Other disclosures 137–138 TRANSITION AND EFFECTIVE DATE 139-139A WITHDRAWAL OF IAS 1 (REVISED 2003) 140 APPENDIX Amendments to other pronouncements APPROVAL OF IAS 1 BY THE BOARD BASIS FOR CONCLUSIONS APPENDIX Amendments to the Basis for Conclusions on other IFRSs DISSENTING OPINIONS IMPLEMENTATION GUIDANCE APPENDIX Amendments to guidance on other IFRSs TABLE OF CONCORDANCE ©IASCF 881 IAS 1 International Accounting Standard 1 Presentation of Financial Statements (IAS 1) is set out in paragraphs 1–140 and the Appendix. All the paragraphs have equal authority. IAS 1 should be read in the context of its objective and the Basis for Conclusions, the Preface to International Financial Reporting Standards and theFramework for the Preparation and Presentation of Financial Statements . IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance. 882 © IASCF IAS 1 Introduction IN1 International Accounting Standard 1 Presentation of Financial Statements (IAS 1) replaces IAS 1Presentation of Financial Statements(revised in 2003) as amended in 2005. IAS 1 sets overall requirements for the presentation of fi nancial statements, guidelines for their structure and minimum requirements for their content. Reasons for revising IAS 1 IN2 The main objective of the Internationa l Accounting Standards Board in revising IAS 1 was to aggregate information in th e financial statements on the basis of shared characteristics. With this in mind, the Board considered it useful to separate changes in equity (net assets) of an entity during a period arising from transactions with owners in their capacity as owners from other changes in equity. Consequently, the Board decided that all owner changes in equity should be presented in the statement of change s in equity, separately from non-owner changes in equity. IN3 In its review, the Board also co nsidered FASB Statement No. 130 Reporting Comprehensive Income (SFAS 130) issued in 1997. The requirements in IAS 1 regarding the presentation of the statement of comprehensive income are similar to those in SFAS 130; however, some differences remain and those are identified in paragraph BC106 of the Basis for Conclusions. IN4 In addition, the Bo ard’s intention in revising IA S 1 was to improve and reorder sectionsofIAS1tomakeiteasierto read. The Board’s objective was not to reconsider all the requirements of IAS 1. Main features of IAS 1 IN5 IAS 1 affects the presentation of owne r changes in equity and of comprehensive income. It does not change the reco gnition, measurement or disclosure of specific transactions and other events required by other IFRSs. IN6 IAS 1 requires an entity to present, in a statement of changes in equity, all owner changes in equity. All non-owner changes in equity (ie comprehensive income) are required to be presented in one statement of comprehensive income or in two statements (a separate income statement and a st atement of comprehensive income). Components of comprehens ive income are not permitted to be presented in the statement of changes in equity. IN7 IAS 1 requires an entity to present a statement of financial position as at the beginning of the earliest comparative pe riod in a complete set of financial statements when the entityapplies an accounting policy retrospectively or makes a retrospective restatemen t, as defined in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, or when the entity reclassifies items in the financial statements. © IASCF 883 IAS 1 IN8 IAS 1 requires an entity to disclose reclassification adjustments and income tax relating to each component of other comprehensive income. Reclassification adjustments are the amounts reclassified to profit or loss in the current period that were previously recognised in other comprehensive income. IN9 IAS 1 requires the presentation of dividends recognised as distributions to owners and related amounts per shar e in the statement of changes in equity or in the notes. Dividends are distributions to owners in their capacity as owners and the statement of changes in equity presents all owner changes in equity. Changes from previous requirements IN10 The main changes from the previous version of IAS 1 are described below. A complete set of financial statements IN11 The previous version of IAS 1 used th e titles ‘balance sh eet’ and ‘cash flow statement’ to describe two of the statem ents within a complete set of financial statements. IAS 1 uses ‘statement of fi nancial position’ and ‘statement of cash flows’ for those statements. The new titles reflect more closely the function of those statements, as described in theFramework (see paragraphs BC14–BC21 of the Basis for Conclusions). IN12 IAS1requiresanentitytodisclose comparative information in respect of the previous period, ie to disclose as a mi nimum two of each of the statements and related notes. It introduces a requir ement to include in a complete set of financial statements a statement of financial position as at the beginning of the earliest comparative period whenever the entity retrospectively applies an accounting policy or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements. The purpose is to provide information that is useful in analysing an entity’s financial statements (see paragraphs BC31 and BC32 of the Basis for Conclusions). Reporting owner changes in equity and comprehensive income IN13 The previous version of IAS 1 required the presentation of an income statement that included items of income and ex pense recognised in profit or loss. It required items of income and expense no t recognised in profit or loss to be presented in the statement of changes in equity, together with owner changes in equity. It also labelled the statement of changes in equity comprising profit or loss, other items of income and expense and the effects of changes in accounting policies and correction of errors as ‘statement of recognised income and expense’. IAS 1 now requires: (a) all changes in equity arising from transactions with owners in their capacity as owners (ie owner changes in equity) to be presented separately from non-owner changes in equity. An entity is not permitted to present components of comprehensive income (ie non-owner changes in equity) in the statement of changes in equity. The purpose is to provide better 884 © IASCF IAS 1 information by aggregating items with shared characteristics and separating items with different characteristics (see paragraphs BC37 and BC38 of the Basis for Conclusions). (b) income and expenses to be presented in one statement (a statement of comprehensive income) or in two statements (a separate income statement and a statement of comprehensive income), separately from owner changes in equity (see paragraphs BC49–BC54 of the Basis for Conclusions). (c) components of other comprehensive income to be displayed in the statement of comprehensive income. (d) total comprehensive income to be presented in the financial statements. Other comprehensive income—reclassification adjustments and related tax effects IN14 IAS 1 requires an entity to disclose income tax relating to each component of other comprehensive income. The previous version of IAS 1 did not include such a requirement. The purpose is to provid e users with tax information relating to these components because the components often have tax ra tes different from those applied to profit or loss (see paragraphs BC65–BC68 of the Basis for Conclusions). IN15 IAS 1 also requires an entity to disclo se reclassification adjustments relating to components of other comp rehensive income. Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in previous periods. The purpose is to provide users with information to as sess the effect of such re classifications on profit or loss (see paragraphs BC69–BC73 of the Basis for Conclusions). Presentation of dividends IN16 The previous version of IAS 1 permitte d disclosure of the amount of dividends recognised as distributions to equity holders (now referred to as ‘owners’) and the related amount per share in the income statement, in the statement of changes in equity or in the notes. IAS 1 requires dividends recognised as distributions to owners and related amount s per share to be presented in the statement of changes in equity or in the notes. The presentation of such disclosures in the statement of comprehensive income is not permitted (see paragraph BC75 of the Basis for Conclusions). The purpose is to ensure that owner changes in equity (in this case, distributions to owners in the form of dividends) are presented separately from non-owner changes in equity (presented in the statement of comprehensive income). © IASCF 885 IAS 1 International Accounting Standard 1 Presentation of Financial Statements Objective 1 This Standard prescribes the basis for pr esentation of general purpose financial statements to ensure comparability both with the entity’s financial statements of previous periods and with the financial st atements of other entities. It sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. Scope 2 An entity shall apply this Standard in preparing and presenting general purpose financial statements in accordance with International Financial Reporting Standards (IFRSs). 3 Other IFRSs set out the recognition, measurement and disclosure requirements for specific transactions and other events. 4 This Standard does not apply to the st ructure and content of condensed interim financial statements preparedin accordance with IAS 34Interim Financial Reporting. However, paragraphs 15–35 apply to such financial st atements. This Standard applies equally to all entities, including those that present consolidated financial statements and those that present separa te financial statements as defined in IAS 27 Consolidated and Separate Financial Statements. 5 This Standard uses termin ology that is suitable fo r profit-oriented entities, including public sector business entities. If entities with not-for-profit activities in the private sector or the public sector apply th is Standard, they may need to amend the descriptions used for particular line items in the financial statements and for the financial statements themselves. 6 Similarly, entities that do not have equity as defined in IAS 32Financial Instruments: Presentation (eg some mutual funds) and entities whose share capital is not equity (eg some co-operative entities) may ne ed to adapt the financial statement presentation of members’ or unitholders’ interests. Definitions 7 The following terms are used in this Standard with the meanings specified: General purpose financial statements(referred to as ‘financial statements’) are those intended to meet the needs of users who are not in a positionto require an entity to prepare reports tailored to their particular information needs. Impracticable Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. © 886 IASCF IAS 1 International Financial Reporting Standards (IFRSs) are Standards and Interpretations adopted by the International Accounting Standards Board (IASB). They comprise: (a) International Financial Reporting Standards; (b) International Accounting Standards; and (c) Interpretations developed by th e International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC). Material Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements. 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. Assessing whether an omis sion or misstatement could influence economic decisions of users, and so be material, requires consideration of the characteristics of those users. The Framework for the Preparation and Presentation of Financial Statements states in paragraph 25 that ‘users are assumed to have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence.’ Therefore, the assessment needs to take into account how users with such attributes could reasonably be expected to be influenced in making economic decisions. Notes contain information in addition to that presented in the statement of financial position, statement of comprehensive income, separate income statement (if presented), statement of ch anges in equity and statement of cash flows. Notes provide narrative descriptions or disaggregations of items presented in those statements and information about items that do not qualify for recognition in those statements. Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other IFRSs. The components of other comprehensive income include: (a) changes in revaluation surplus (see IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets); (b) actuarial gains and losses on defined benefit plans recognised in accordance with paragraph 93A of IAS 19 Employee Benefits; (c) gains and losses arising from tran slating the financial statements of a foreign operation (see IAS 21 The Effects of Changes in Foreign Exchange Rates); (d) gains and losses on remeasuring available-for-sale financial assets (see IAS 39 Financial Instruments: Recognition and Measurement); (e) the effective portion of gains and losses on hedging instruments in a cash flow hedge (see IAS 39). Owners are holders of instruments classified as equity. ©IASCF 887 IAS 1 Profit or loss is the total of income less expe nses, excluding the components of other comprehensive income. Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods. Total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income comprises all components of ‘profit or loss’ and of ‘other comprehensive income’. 8 Although this Standard uses the terms ‘other comprehensive income’, ‘profit or loss’ and ‘total comprehensive income’, an entity may use other terms to describe the totals as long as the meaning is clear. For example, an entity may use the term ‘net income’ to describe profit or loss. Financial statements Purpose of financial statements 9 Financial statements are a structured representationof the financial position and financial performance of an entity. The objective of financial statements is to provide information about the financialposition, financial performance and cash flows of an entity that is useful to a wide range of user s in making economic decisions. Financial statements also show the results of the management’s stewardship of the resources entrusted to it. To meet this objective, financial statements provide information about an entity’s: (a) assets; (b) liabilities; (c) equity; (d) income and expenses, including gains and losses; (e) contributions by and distributions to owners in their capacity as owners; and (f) cash flows. This information, along with other info rmation in the notes, assists users of financial statements in predicting the entity’s future cash flows and, in particular, their timing and certainty. Complete set of financial statements 10 A complete set of financial statements comprises: (a) a statement of financial position as at the end of the period; (b) a statement of comprehensive income for the period; 888 © IASCF IAS 1 (c) a statement of changes in equity for the period; (d) a statement of cash flows for the period; (e) notes, comprising a summary of significant accounting policies and other explanatory information; and (f) a statement of financ ial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospe ctive restatement of items in its financial statements, or when it reclassifies items in its financial statements. An entity may use titles for the statementsother than those used in this Standard. 11 An entity shall present with equal prominence all of the financial statements in a complete set of financial statements. 12 As permitted by paragraph 81, an entity may present the components of profit or loss either as part of a single statement of comprehensive income or in a separate incomestatement. Whenanincomestatementispresenteditispartofa complete set of financial statements and shall be displayed immediately before the statement of comprehensive income. 13 Many entities present, outside the fi nancial statements, a financial review by management that describe s and explains the main features of the entity’s financial performance and financial posi tion, and the principal uncertainties it faces. Such a report may include a review of: (a) the main factors and influences determining financial performance, including changes in the environment in which the entity operates, the entity’s response to those changes and their effect, and the entity’s policy for investment to maintain and enhance financial performance, including its dividend policy; (b) the entity’s sources of funding and its targeted ratio of liabilities to equity; and (c) the entity’s resources not recognised in the statement of financial position in accordance with IFRSs. 14 Many entities also present, outsid e the financial statements, reports and statements such as environmental reports and value added statements, particularly in industries in which environmental factors are significant and when employees are regarded as an important user group. Reports and statements presented outside financial statements are outside the scope of IFRSs. General features Fair presentation and compliance with IFRSs 15 Financial statements shall present fa irly the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transa ctions, other events and conditions in accordance with the definitions and reco gnition criteria for assets, liabilities, © IASCF 889 IAS 1 income and expenses set out in the Framework. The application of IFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. 16 An entity whose financial statements comply with IFRSs shall make an explicit and unreserved statement of such complian ce in the notes. An entity shall not describe financial statements as complyingwith IFRSs unless they comply with all the requirements of IFRSs. 17 In virtually all circumstances, an entity achieves a fair presentation by compliance with applicable IFRSs. A fair presentation also requires an entity: (a) to select and apply accounting po licies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. IAS 8 sets out a hierarchy of authoritative guidance that manageme nt considers in the absence of an IFRS that specifically applies to an item. (b) to present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information. (c) to provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance. 18 An entity cannot rectify inappropriate accounting policies either by disclosure of the accounting policies used or by notes or explanatory material. 19 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 in the manner set out in paragraph 20 if the relevant regulatory framework re quires, or otherwise does not prohibit, such a departure. 20 WhenanentitydepartsfromarequirementofanIFRSinaccordancewith paragraph 19, it shall disclose: (a) that management has concluded that the financial statements present fairly the entity’s financial position, financial performance and cash flows; (b) that it has complied with applicable IFRSs, except that it has departed from a particular requirement to achieve a fair presentation; (c) 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 (d) for each period presented, the financial effect of the departure on each item in the financial statements that would have been reported in complying with the requirement. 890 ©IASCF IAS 1 21 When an entity has departed from a requirement of an IFRS in a prior period, and that departure affects the amounts recognised in the financial statements for the current period, it shall make the disclosures set out in paragraph 20(c) and (d). 22 Paragraph 21 applies, for example, whenan entity departed in a prior period from a requirement in an IFRS for the measur ement of assets or liabilities and that departure affects the measurement of changes in assets and liabilities recognised in the current period’s financial statements. 23 In the extremely rare circumstance s 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, but the relevant regulatory framework proh ibits departure from the requirement, the entity shall, to the maximum extentpossible, reduce the perceived misleading aspects of compliance by disclosing: (a) the title of the IFRS in question, the nature of the requirement, and the reason why management has concluded that complying with that requirement is so misleading in the circumstances that it conflicts with the objective of financial statements set out in theramework; and (b) for each period presented, the adjustments to each item in the financial statements that management has concluded would be necessary to achieve a fair presentation. 24 For the purpose of paragraphs 19–23, an item of information would conflict with the objective of financial statements when it does not represent faithfully the transactions, other events and conditions that it either purports to represent or could reasonably be expected to representand, consequently, it would be likely to influence economic decisi ons made by users of financial statements. When assessing whether complying with a specific requirement in an IFRS would be so misleading that it would conflict with the objective of financial statements set out in the Framework, management considers: (a) why the objective of financial statements is not achieved in the particular circumstances; and (b) how the entity’s circumstances differ from those of other entities that comply with the requirement. If other entities in similar circumstances comply with the requirement, there is a rebuttable presumption that the entity’s compliance with the requirement would not be so misleading that it would conflict with the objective of financial statements set out in the Framework. Going concern 25 When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a goingconcern. An entityshall prepare financial statements 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. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concer n, the entity shall disclose those © IASCF 891 IAS 1 uncertainties. When an entity does no t prepare financial statements on a going concern basis, it shall disclose that fact, together with the basis on which it prepared the financial statements and the reason why the entity is not regarded as a going concern. 26 In assessing whether the going concern assumption is appropriate, management takes into account all available informat ion about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. The degree of consideration depends on the facts in each case. When an entity has a history of profitable operations and re ady access to financial resources, the entity may reach a conclusion that the going concern basis of accounting is appropriate without detailed analysis. In other cases, management may need to consider a wide range of factors relating to current and expected profitability, debt repayment schedules and potential sources of replacement financing before it can satisfy itself that the going concern basis is appropriate. Accrual basis of accounting 27 An entity shall prepare its financial statements, except for cash flow information, using the accrual basis of accounting. 28 When the accrual basis of accounting is used, an entity recognises items as assets, liabilities, equity, income and expenses (the elements of financial statements) when they satisfy the definitions and recognition criteria for those elements in the Framework. Materiality and aggregation 29 An entity shall present separately each material class of similar items. An entity shall present separately items of a dissimilar nature or function unless they are immaterial. 30 Financial statements result from processing large numbers of transactions or other events that are aggr egated into classes acco rding to their nature or function. The final stage in the process of aggregation and classification is the presentation of condensed and classified data, which form line items in the financial statements. If a line item is no t individually material, it is aggregated with other items either in those statements or in the notes. An item that is not sufficiently material to warrant separate presentati on in those statements may warrant separate presentation in the notes. 31 An entity need not provide a specific disclosurerequiredbyanIFRSifthe information is not material. Offsetting 32 An entity shall not offset assets and liabilities or income and expenses, unless required or permitted by an IFRS. 33 An entity reports separately both assets and liabilities, and income and expenses. Offsetting in the statements of comprehensive income or financial position or in the separate income statement (if presented), except when offsetting reflects the substance of the transactionor other event, detracts from the ability of users both 892 ©IASCF IAS 1 to understand the transactions, other ev ents and conditions that have occurred and to assess the entity’s future cash fl ows. Measuring assets net of valuation allowances—for example, obsolescence allowances on inventories and doubtful debts allowances on receivables—is not offsetting. 34 IAS 18 Revenue defines revenue and requires an entity to measure it at the fair value of the consideration received or receivable, taking into account the amount of any trade discounts and volume re bates the entity allows. 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. An entity presents the results of such transactions, when this presentation reflects the substance of the transactio n or other event, by netting any income with related expenses arising on the same transaction. For example: (a) an entity presents gains and losses on the disposal of non-current assets, including investments and operatin g assets, by deducting from the proceeds on disposal the carrying amou nt of the asset and related selling expenses; and (b) an entity may net expenditure related to a provision that is recognised in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and reimbursed under a contractua l arrangement with a third party (for example, a supplier’s warranty agreement) against the related reimbursement. 35 In addition, an entity presents on a net basis gains andlosses arising from a group of similar transactions, for example, fore ign 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 36 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 pe riod covered by the financial statements: (a) the reason for using a longer or shorter period, and (b) the fact that amounts presented in th e financial statements are not entirely comparable. 37 Normally, an entity consistently prep ares 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 38 Except when IFRSs permit or requir e otherwise, an entity shall disclose comparative information in respect of the previous period for all amounts reported in the current period’s financia l statements. An entity shall include comparative information for narrative and descriptive information when it is relevant to an understanding of the current period’s financial statements. © IASCF 893 IAS 1 39 An entity disclosing comparative information shall present, as a minimum, two statements of financial position, two of each of the other statements, and related notes. 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, it shall present,as a minimum, three statements of financial position, two of each of the other statements, and related notes. An entity presents statements of financial position as at: (a) the end of the current period, (b) the end of the previous period (which is the same as the beginning of the current period), and (c) the beginning of the earliest comparative period. 40 In some cases, narrative information provided in the financial statements for the previous period(s) continues to be relevant in the curernt period. For example, an entity discloses in the current period details of a legal dispute whose outcome was uncertain at the end of the immediately preceding reporting period and that is yet to be resolved. Users benefit frominformation that the uncertainty existed at the end of the immediately preceding reporting period, and about the steps that have been taken during the period to resolve the uncertainty. 41 When the entity changes thepresentation or classification of items in its financial statements, the entity shall recl assify comparative amounts unless reclassification is impracticable. Wh en the entity reclassifies comparative amounts, the entity shall disclose: (a) the nature of the reclassification; (b) the amount of each item or class of items that is reclassified; and (c) the reason for the reclassification. 42 When it is impracticable to reclassify comparative amounts, an entity shall disclose: (a) the reason for not reclassifying the amounts, and (b) the nature of the adjustments that would have been made if the amounts had been reclassified. 43 Enhancing the inter-period comparability of information assists users in making economic decisions, especially by allowing the assessment of trends in financial information for predictive purposes. In some circumstances, it is impracticable to reclassify comparative information fo r a particular prior period to achieve comparability with the current period. For example, an entity may not have collected data in the prior period(s) in a way that allows reclassification, and it may be impracticable to recreate the information. 44 IAS 8 sets out the adjustments to co mparative information required when an entity changes an accounting policy or corrects an error. 894 ©IASCF IAS 1 Consistency of presentation 45 An entity shall retain the presentation and classification of items in the financial statements from one period to the next unless: (a) it is apparent, following a significant change in the nature of the entity’s operations or a review of its fi nancial 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 (b) an IFRS requires a change in presentation. 46 For example, a significant acquisition or disposal, or a review of the presentation of the financial statements, might suggest that the financial statements need to be presented differently. An entity changes the presentation of its financial statements only if the changed presentation provides information that is reliable and more relevant to users of the financial statements and the revised structure is likely to continue, so that comparab ility is not impaired. When making such changes in presentation, an entity recl assifies its comparative information in accordance with paragraphs 41 and 42. Structure and content Introduction 47 This Standard requires particular di sclosures in the statement of financial position or of comprehensive income , in the separate income statement (if presented), or in the statement of changes in equity and requires disclosure of other line items either in those statements or in the notes. IAS 7 Statement of Cash Flows sets out requirements for the presentation of cash flow information. 48 This Standard sometimes uses the term ‘disclosure’ in a broad sense, encompassing items presented in the financial statements. Disclosures are also requiredbyotherIFRSs. Unlessspec ified to the contrary elsewhere in this Standard or in another IFRS, such disc losures may be made in the financial statements. Identification of the financial statements 49 An entity shall clearly identify the financial statements and distinguish them from other information in the same published document. 50 IFRSs apply only to financial statements, and not necessarily to other information presented in an annual report, a regu latory filing, or another document. Therefore, it is important that users can distinguish information that is prepared using IFRSs from other information that may be useful to users but is not the subject of those requirements. © IASCF 895 IAS 1 51 An entity shall clearly identify ea ch financial statement and the notes. In addition, an entity shall display the following information prominently, and repeat it when necessary for the information presented to be understandable: (a) 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; (b) whether the financial statements are of an individual entity or a group of entities; (c) the date of the end of the reporting period or the period covered by the set of financial statements or notes; (d) the presentation currency, as defined in IAS 21; and (e) the level of rounding used in presenting amounts in the financial statements. 52 An entity meets the requirements in paragraph 51 by presenting appropriate headings for pages, statements, notes, columns and the like. Judgement is required in determining the best way of presenting such information. For example, when an entity presents th e financial statements electronically, separate pages are not always used; an entity then presents the above items to ensure that the information included in the financial statements can be understood. 53 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 enti ty discloses the level of rounding and does not omit material information. Statement of financial position Information to be presented in the statement of financial position 54 As a minimum, the statement of financia l position shall include line items that present the following amounts: (a) property, plant and equipment; (b) investment property; (c) intangible assets; (d) financial assets (excluding amounts shown under (e), (h) and (i)); (e) investments accounted for using the equity method; (f) biological assets; (g) inventories; (h) trade and other receivables; (i) cash and cash equivalents; 896 © IASCF IAS 1 (j) the total of assets classified as held for sale and assets included in disposal groupsclassifiedasheldforsaleinaccordancewithIFRS5 Non-current Assets Held for Sale and Discontinued Operations; (k) trade and other payables; (l) provisions; (m) financial liabilities (excluding amounts shown under (k) and (l)); (n) liabilities and assets for current tax, as defined in IAS 12 Income Taxes; (o) deferred tax liabilities and deferred tax assets, as defined in IAS 12; () liabilitiesinclulssifiedasheldforsalein accordance with IFRS 5; (q) non-controlling interests, presented within equity; and (r) issued capital and reserves attributable to owners of the parent. 55 An entity shall present a dditional line items, head ings and subtotals in the statementoffinancialpositionwhensuchpresentationisrelevanttoan understanding of the entity’s financial position. 56 When an entity presents current an d non-current assets , and current and non-current liabilities, as separate clas sifications in its statement of financial position, it shall not classify deferred tax assets (liabilities) as current assets (liabilities). 57 This Standard does not prescribe the order or format in which an entity presents items. Paragraph 54 simply lists items that are sufficiently different in nature or function to warrant separate presentation in the statement of financial position. In addition: (a) 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; and (b) the descriptions used and the orderi ng 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. For example, a financial institution may amend the above descriptions to provide information that is relevant to the operations of a financial institution. 58 An entity makes the judgement about whether to present additional items separately on the basis of an assessment of: (a) the nature and liquidity of assets; (b) the function of assets within the entity; and (c) the amounts, nature and timing of liabilities. © IASCF 897 IAS 1 59 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. For example, different classes of property, plant and equipment can be carried at cost or at revalued amounts in accordance with IAS 16. Current/non-current distinction 60 An entity shall present current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position in accordance with paragraphs 66–76 ex cept when a presentation based on liquidity provides information that is reliable and more relevant. When that exception applies, an entity shall present all assets and liabilities in order of liquidity. 61 Whichever method of presentation is adopted, an entity shall disclose the amount expected to be recovered or settled after more than twelve months for each asset and liability line item that combines amounts expected to be recovered or settled: (a) no more than twelve months after the reporting period, and (b) more than twelve months after the reporting period. 62 When an entity supplies goods or services within a clearly identifiable operating cycle, separate classification of curren t and non-current asse ts and liabilities in the statement of financial position provides useful information by distinguishing the net assets that are continuously ci rculating as working capital from those used in the entity’s long-term operations . It also highlight s assets that are expected to be realised within the current operating cycle, and liabilities that are due for settlement within the same period. 63 For some entities, such as financial in stitutions, a presentation of assets and liabilities in increasing or decreasing order of liquidity provides information that is reliable and more relevantthan a current/non-current presentation because the entity does not supply goods or services within a clearly identifiable operating cycle. 64 In applying paragraph 60, 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 informatio n that is reliable and more relevant. The need for a mixed basis of presentationmight arise when anentity has diverse operations. 65 Information about expected dates of realis ation of assets and liabilities is useful in assessing the liquidity and solvency of an entity. IFRS 7 Financial Instruments: Disclosures requires disclosure of the maturity dates of financial assets and financial liabilities. Financial assets include trade and other receivables, and financial liabilities include trade and other payables. Information on the expected date of recovery of non-mone taryassetssuch as inventories and expected date of settlement for liabilit ies such as provisions is also useful, whether assets and liabilities are clas sified as current or as non-current. For example, an entity discloses the amountof inventories that are expected to be recovered more than twelve months after the reporting period. 898 © IASCF IAS 1 Current assets 66 An entity shall classify an asset as current when: (a) it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle; (b) it holds the asset primarily for the purpose of trading; (c) it expects to realise the asset within twelve months after the reporting period; or (d) the asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. An entity shall classify all other assets as non-current. 67 This Standard uses the term ‘non-current’ to include tangible, intangible and financial assets of a long-term nature. It does not prohibit the use of alternative descriptions as long as the meaning is clear. 68 The operating cycle of an entity is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. When the entity’s normal operating cycle is not clearly identifiable, it is assumed to be twelve months. Current assets include assets (such as inventories and trade receivables) that are sold, consumed or realised as part of the normal operating cycle even when they are not expected to be realised within twelve months after the reporting period. Current assets also include assets held primarily for the purpose of trading (financial assets within this category are classified as held for trading in accordance with IAS 39) and the current portion of non-current financial assets. Current liabilities 69 An entity shall classify a liability as current when: (a) it expects to settle the liability in its normal operating cycle; (b) it holds the liability primarily for the purpose of trading; (c) the liability is due to be settled within twelve months after the reporting period; or (d) the entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. An entity shall classify all other liabilities as non-current. 70 Some current liabilities, such as trade payables and some accruals for employee and other operating co sts, are part of the working capital used in the entity’s normal operating cycle. An entity clas sifies such operating items as current liabilities even if they are due to be settled more than twelve months after the reporting period. The same normal operating cycle applies to the classification of an entity’s assets and liabilities. When the entity’s normal operating cycle is not clearly identifiable, it is assumed to be twelve months. © IASCF 899 IAS 1 71 Other current liabilities are not settled as part of the normal operating cycle, but are due for settlement within twelve mo nths after the reporting period or held primarily for the purpose of trading. Ex amples are financial liabilities classified as held for trading in acco rdance with IAS 39, bank overdrafts, and the current portion of non-current financial liabilities, dividends payable, income taxes and other non-trade payables. Financial liabilities that provide financing on a long-term basis (ie are not part of the working capital used in the entity’s normal operating cycle) and are not due for settl ement within twelve months after the reporting period are non-current liabilities, subject to paragraphs 74 and 75. 72 An entity classifies its financial liabilities as current when they are due to be settled within twelve months after the reporting period, even if: (a) the original term was for a period longer than twelve months, and (b) an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorised for issue. 73 If an entity expects, and has the discretion, to refinance or roll over an obligation for at least twelve months after the reporting period under an existing loan facility, it classifies the obligation as non-current, even if it would otherwise be due within a shorter period. However, when refinancing or rolling over the obligation is not at the discretion of the entity (for example, there is no arrangement for refinancin g), the entity does not consider the potential to refinance the obligation and classifies the obligation as current. 74 When an entity breaches a provision of a long-term loan arrangement on or before the end of the report ing period with the effect that the liability becomes payable on demand, it classifies the liability as current, even if the lender agreed, after the reporting period and before the authorisation of the financial statements for issue, not to demand payment as a consequence of the breach. An entity classifies the liability as curr ent because, at the end of the reporting period, it does not have an unconditional right to defer its settlement for at least twelve months after that date. 75 However, an entity classifies the liability as non-current if the lender agreed by the end of the reporting period to provide a period of grace ending at least twelve months after the reporting period, within which the entity can rectify the breach and during which the lender cannot demand immediate repayment. 76 In respect of loans classified as current liabilities, if the following events occur between the end of the reporting period and the date the financial statements are authorised for issue, those events are disclosed as non-adjusting events in accordance with IAS 10 Events after the Reporting Period: (a) refinancing on a long-term basis; (b) rectification of a breach of a long-term loan arrangement; and (c) the granting by the lender of a peri od of grace to rectify a breach of a long-term loan arrangement ending at least twelve months after the reporting period. 900 © IASCF IAS 1 Information to be presented either in the statement of financial
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'