IAS 1: Presentation of Financial

Statements
Content
1 Objective and Scope

2 Components

3 Structure

4 Key principles

5 Key differences
Objective and Scope

Objective

► Prescribes the basis for presentation of financial statements to ensure comparability both with:
► Entity’s own financial statements of previous periods; and
► Financial statements of other entities

► Sets out overall requirement for the:

► Presentation of financial statements
► Guidelines for their structure
► Minimum requirement for their content

Scope

Presenting general purpose financial statements in accordance with IFRS to entities with a profit objective

IAS 1 does not apply to structure and content of condensed interim financial statements prepared in accordance with
IAS 34
 Components of financial statements

Statement of financial Statement of Statement of changes

position (SOFP) comprehensive income in equity (SOCIE)
(SOCI)

Statement of cash flows Disclosures

Supplementary statements

Entities may present additional information on a voluntary basis, for example:

Environmental reports

Value added statements

Review by management including financial and other commentary

Reports and statements presented outside financial statements are outside the scope of IFRS
Statement of financial position

At a minimum, the face of the statement of financial position should include line items that present the following amounts:

a. Property, plant and equipment

b. Investment property
c. Intangible assets
d. Financial assets (excluding amounts under “(e), (h) and (j)” items below)
e. Investments accounted for under the equity method
f. Biological assets
g. Inventories
h. Trade and other receivables
i. Held for sale non-current assets and disposal groups
j. Cash and cash equivalents
Statement of financial position

At a minimum, the face of the statement of financial position should include line items that present the following amounts:

k. Trade and other payables

l. Provisions
m. Financial liabilities (excluding amount under “k” and “l” items above)
n. Current tax liabilities and assets
o. Deferred tax liabilities and assets
p. Liabilities included in held for sale disposal groups
q. Non-controlling interests (presented as part of equity)
r. Issued equity capital and reserves (attributable to owners of the parent)
Statement of financial position

► Present asset and liability in statement of financial position:

► Current/Non-Current asset or liability; or
► In order of liquidity if reliable and more relevant
► 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.
► Deferred tax asset or liabilities are never classified as current.
Statement of financial position

Assets current if:

Current Assets
► Expected to be realized, or is intended
for sale or consumption in the normal All other assets are
classified as Non Current

Non Current Assets

course of the operating cycle
► Held for trading purposes
► Expected to be realized within 12 months
after the reporting period.
► Cash or a cash equivalent which is not
restricted in use.
Statement of financial position

Liabilities current if:

Current Liabilities ► Expected to be settled in the normal All other liabilities are

Non Current Liabilities

course of the operating cycle classified as Non Current
► Held for trading purposes.
► To be settled within 12 months
► No unconditional right to defer settlement
for at least 12 months after the reporting
period.
Case study 2

► An entity has a long term loan arrangement containing a debt covenant. The specific requirements in the debt covenant have
to be met as at 31st December every year.
► The loan is due in more than 12 months. The entity breaches the debt covenant at or before the period end. As a result, the
loan becomes payable on demand.

➢ How should the loan be classified at year end?

Solution

► If the entity has an unconditional right to defer the settlement of the liability for at least 12 months- the debt should be classified
as Non- current liability.
► In the given case, liability becomes payable on demand, therefore it will be classified as current even if the lender agreed after
reporting date and before authorisation of financials for issue, not to demand payment as a consequence.
► However, the liability can be classified as Non-current if the lender agreed before the end of reporting period to provide a grace
period of minimum 12 months after the reporting period within which breach can be rectified and the lender cannot demand
immediate repayment.
Breach of material provision

► As compared to IFRS, Ind AS classifies long term loan as current in case there is breach of a material provision except:
► Where before the approval of the financial statements for issue, the lender had agreed not to demand payment as a
consequence of the breach.
Statement of profit or loss and other comprehensive income

IAS 1 requires that all items of income and expense recognised in a period must be presented either:
► In a single statement of profit and loss and other comprehensive income; or
► In two separate statements:
► A statement of profit or loss ; and
► A statement of comprehensive income beginning with profit or loss and containing components of other comprehensive
income
► Both profit or loss and total comprehensive income must be attributed, separately, to:
► Non-controlling interests; and
► Owners of the parent.

As per Ind AS 1, an entity can prepare only a single statement of profit and loss
Statement of profit or loss and other comprehensive income

► An entity shall present an analysis of expenses recognised in profit or loss using a classification based:
► On either their nature or their function within the entity,
► Whichever provides information that is reliable and more relevant.

► Classification based on nature is more objective, simple to apply and requires less judgement. For example:
► Depreciation and amortisation expense
► Materials consumed
► Employee benefit expense

As per Ind AS 1, classification based only on nature of expense is permitted.

Statement of profit or loss and other comprehensive income

► Classification based on function provides more relevant information to the users. For example:
► Cost of sales

► Distribution

► Administrative activities

► No definition of “exceptional” or “unusual” events or items of income or expense given in IFRS. Classified in similar way as
other items of profit or loss.
Statement of profit or loss and other comprehensive income (contd.)

At a minimum, the face of the statement of profit or loss and other comprehensive income should include line
items that present the following amounts:

Statement of Profit or loss: Other comprehensive income:

► Revenue
► Items that will not be reclassified to profit or loss
► Finance costs
► Changes in revaluation surplus
► Share of profits and losses of associates and joint ventures
► Changes in fair value of specified financial
accounted for under the equity method; assets
► Tax expense
► Remeasurement of defined benefit pension
► A single amount for the total of discontinued operations (IFRS 5)
plans
► Items that may be reclassified subsequently to
Profit or loss profit or loss
► Allocation of profit or loss as
► Exchange differences on translating foreign
► Profit or loss attributable to non-controlling interests
operations
► Profit or loss attributable to owners of the parent
► Cash flow hedges

► Income tax related to these items

► Allocation of total comprehensive income as

► Attributable to non-controlling interests
► Attributable to owners of the parent
Reclassification adjustments

► Amounts reclassification from other comprehensive income to profit or loss

► Disclose reclassification adjustments.
► Provide users with information to assess the effect of such reclassifications on profit or loss
► Example:
► On disposal of a foreign operation
► Cash flow forecast hedge affect profit or loss
Statement of changes in equity

Statement of Changes in Equity reconciles the Statement of profit or loss and other comprehensive income with the movements
on equity for the period. It shows:

► Total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling
interests
► For each component of equity, the effects of retrospective application or retrospective restatement (per IAS 8)
► The amounts of transactions with owners in their capacity as owners, showing separately contributions and distributions
► For each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, disclosing each
change separately
► In addition an entity should present, either in this statement or in the notes, dividends recognised as distributions to owners during the
period, and the related amount per share
Statement of cash flows

► IAS 7 sets out requirements for the presentation of the cash flow statement and related disclosures.
► No exemptions from the requirement to prepare a statement of cash flow.
Notes to the financial statements

► Provides information about items that do not qualify for recognition in the financial statements, but is relevant for the understanding or
required by IFRS
► Include narrative descriptions and disaggregations of items disclosed in the financial statements.
► Present information in systematic order and cross reference to statement of financial position, statement of comprehensive income
and statement of cash flows.
► Management’s judgements in applying accounting policies with significant effects on amounts recognised
► Key assumptions concerning the future and key sources of estimation uncertainty that have a significant risk of material adjustment to
carrying amounts of assets and liabilities with next financial year along with nature and carrying value of those assets and liabilities
Notes to the financial statements

► Notes to financial statements shall present:

► Company information- Entity’s domicile, legal form, country of incorporation, address, nature of operations, parent and
ultimate parent’s name
► Basis of presentation of the financial statements
► Statement of compliance with IFRS
► Summary of significant accounting policies
► Supporting information for items presented in financial statements
► Amount of dividend proposed or declared after reporting date but before the financials were authorized for issue, and
related amount per share
► Other disclosures
Key principles

Fair Presentation Compliance with IFRS Going Concern

Accrual Basis of Accounting Materiality and Aggregation Offsetting

Frequency of Reporting Comparative Information Consistency of Presentation

Going concern

► An entity is a going concern unless management either intends to:

► Liquidate the entity or to cease trading, or
► Has no realistic alternative but to do so.
► Management shall make an assessment of an entity’s ability to continue as a going concern
► When financials are not prepared on a going concern basis, the financial statements should disclose that fact together with the
basis on which it prepared the financial statements and the reason why the entity is not a going concern.
Case study 1

► ABC Ltd is a manufacturer of popular noodle brand. The Company is in process of finalising its financial statements for 31 March 2015.
However before the financials could be finalised, the government on the basis of report from food regulatory put an indefinite ban on
manufacture and sale of noodles.
► The government also issued notice to the Company ordering them to pull back all the current stock from the market and destroy.
► The company plans to sue the food regulatory and government decision on ban of noodles.
► The company expects a favourable chance of winning the case and believes that the ban on noodles shall be removed.

Should ABC Ltd prepare its financial statements under the going concern assumption?
Solution

► The company only manufacture’s noodles, hence ban on production and sale of noodles leads to no operations. However that the
company plans to sue and believes that they have favourable chance of winning the case mitigates the risk of going concern.
► Based on these sets of factors—both negative and positive (mitigating) factors—it may be possible for the management of the entity to
argue that the going concern assumption is appropriate and that any other basis of preparation of financial statements would be
unreasonable at the moment. However, if matters deteriorate further instead of improving, then in the future, another detailed
assessment would be needed to ascertain whether the going concern assumption is still valid. Hence a mere disclosure of the event
shall suffice for financial year end March 31, 2015.
Frequency of reporting

► As per IAS 1, a complete set of financial statements (including comparative information) should be presented at least annually (or for
practical reason for a period of 52 weeks).
► When entity changes the end of its reporting period and presents financial statements for a period longer or shorter than one year, an
entity should disclose, in addition to the period covered by financial statements:

The fact that the amounts

Reason for using a longer
presented in the financials
or shorter period
are not entirely comparable

Ind AS 1 does not permits periodicity for a period of 52 weeks

Key points

► IAS 1 requires the following information:

► Identify each financial statement and the notes presented (e.g., statement of financial position)
► Display following information prominently and repeat it when necessary:
► Name of reporting entity
► Whether financial statements relate to an individual entity or a group of entities
► Reporting date and reporting period
► Presentation currency
► Level of rounding used (e.g. ‘000s)
Key differences

Issue IAS 1 IGAAP

Format IAS 1 doesn’t prescribe any format. It Specifies the Schedule III prescribes the minimum requirements
line items to be presented in the statement of for disclosure on the face of the balance sheet and
financial position, statement of profit or loss and statement of profit and loss and notes.
other comprehensive income and statement of
changes in equity.

Statement of IAS 1 requires the presentation of Statement of A statement of changes in equity is

changes in equity changes in Equity. currently not presented.

Statement of IAS 1 requires the presentation of Statement of A statement of other comprehensive income is
Other Comprehensive income other comprehensive income currently not required.
Key differences

Issue IAS 1 IGAAP

Classification of Current, even if the agreement to refinance or Schedule III specifies that financial liabilities where the
financial liabilities reschedule payments on a long-term basis is company does not have an unconditional right to defer
under refinancing completed after the end of the reporting period settlement of the liability for at least 12 months after the
arrangements and before the financial statements are reporting date will be classified as current liabilities.
authorised for issue.
Classification of If the entity breaches a covenant on or before No guidance in AS 1. Schedule III specifies that financial
financial liabilities upon the end of the reporting period, with the effect liabilities where the company does not have an unconditional
breach of covenants that the liability becomes payable on demand, right to defer settlement of the liability for at least 12 months
it classifies the liability as current, even if the after the reporting date will be classified as current liabilities.
lender agreed after the reporting period and
before the authorisation of the financial Under Indian scenario, practical implication of minor breach
statements for issue, not to demand payment are negligible. Hence, entity can continue to classify loan as
as a consequence of the breach. “Non-current”.

Ind AS 1 permits the loan to be classified as non-current

Key differences

Issue IAS 1 IGAAP

Statement of profit or loss and All items of income and expense (including Statement of profit and loss is the IGAAP equivalent of
other comprehensive gains and losses) are presented either in: separate statement of profit or loss under IAS 1. Some
income (statement of ► A single statement items such as revaluation surplus which are treated in
comprehensive income) ► Separate statements OCI in IFRS are recognised directly in equity under
IGAAP.

Extraordinary Presentation of any items of income or Extraordinary items are disclosed separately in the
Items expense as extraordinary is prohibited. statement of profit and loss and are included in the
determination of net profit or loss for the period.

Definition of “material” and Omissions or misstatements are material if Financial statements should disclose all “material” items,
disclosure of individually or collectively they could i.e. items, the knowledge of which might influence the
material information influence the economic decisions that users decisions of the user of the financial statements.
take on the basis of financial statements.
Key differences

Issue IAS 1 IGAAP

Reclassification When comparative amounts are reclassified, nature, A disclosure is made in financial statements that
amount and reason for reclassification are disclosed. comparative amounts have been reclassified to confirm
Also, an opening balance sheet may also be to the presentation in the current period.
required

Critical IAS 1 requires disclosure of critical judgements AS 1 does not specifically require disclosure of
Judgements made by management in applying accounting judgements that management has made in the
policies. summary of significant accounting policies or other
notes.

Estimation Requires disclosure of key sources of estimation AS 1 does not specifically require an entity to disclose
Uncertainty uncertainty at the end of the reporting period, that information about the assumptions that it makes about
have significant risk of material adjustment to the future and other major sources of estimation
carrying amounts of assets and liabilities within next uncertainty.
financial year.
Key differences

Issue IAS 1 IGAAP

Capital Requires disclosure of information about management AS 1 does not require an entity to disclose
of capital and compliance with externally imposed information that enables users of its financial
capital requirements, if any. statements to evaluate the entity’s
objectives, policies and processes of
managing capital.

Presentation of statement of profit An analysis of expenses is presented using a Schedule III requires an analysis of expense
or loss and other comprehensive classification based on either the nature of expenses or by nature.
income their function.

Presentation of profit or loss Profit or loss attributable to non-controlling interests As per AS 21, profit or loss attributable to
attributable to non-controlling and equity holders of the parent are disclosed in the minority interests is disclosed as deduction
interests (minority interests) statement of profit or loss and other comprehensive from the profit or loss for the period as an
income as allocations for the period. item of income or expense.
Thank You