IAS 1 Presentation of financial

statements

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
What are general purpose
financial statements?
• General purpose financial statements are
those intended to meet the needs of users
who are not in a position to demand reports
tailored to meet specific information needs
• General purpose financial statements provide
information about the financial position, the
performance and the cash flow of an entity

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
General purpose financial
statements
• Provide information for decision making
purposes
• Show the results of management’s
stewardship of the resources entrusted to it

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
IFRS financial statements (Par 9)

• Provide information about an entity’s:

– Assets
– Liabilities
– Equity
– Contributions by and distributions to owners in
their capacity as owners
– Income and expenses, including gains and
losses, and
– Cash flows
International Financial Reporting and Analysis, 6 th edition
David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
Contents of the financial
statements (par. 10)
• A statement of financial position
as at the end of the period
• A statement of profit or loss and other
comprehensive income for the period
• A statement of changes in equity for the
period
• A statement of cash flow for the period
• Notes, comprising a summary of significant
accounting policies and other explanatory
information
International Financial Reporting and Analysis, 6 th edition
David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
Contents of the financial
statements (cont’d)

• A statement of financial position as at the

beginning of the earliest comparative period
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

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
Statement of financial position
(balance sheet)

• IAS 1 does not prescribe a layout

• IAS 1 does prescribe a minimum of line items
which need to be presented on the face of the
statement of financial position

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
 Information with regard to
equity
• Either on the face of the balance
sheet/statement of financial position or in the
notes to the accounts

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
Statement of profit or loss and
other comprehensive income

• IAS 1 does not prescribe a layout

• Contents: IAS 1 prescribes that an entity shall
present all items of income and expense
recognised in a period: either on the face of
the Statement of profit or loss and other
comprehensive income, or on the face of a
separate Statement of profit or loss and a
Statement of comprehensive income
International Financial Reporting and Analysis, 6 th edition
David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
• Income Statement

• Statement of Financial Position

Statement of Cash flows

Cash flows from operating (1)

activities
Cash flows from investing activities (2)
Cash flows from financing (3)
activities
Net cash increase or decrease in (4) = (1)+(2)+(3)
cash equivalents
Cash and cash equivalents at the (5)
beginning of the year
Cash and cash equivalents at the (6) = (5) + (4)
end of the year
International Financial Reporting and Analysis, 6 th edition
David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
The notes to the accounts –
function (IAS 1 – par 112)
• Present information about the basis of
preparation of the financial statements and the specific
accounting policies selected and applied for significant
transactions and events
• Disclose the information required by IFRSs that is not
presented elsewhere in the financial statements.
• Provide additional information which is not presented
on the face of the financial statements but that is
relevant to an understanding of those statements

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
 Fair presentation and
compliance with IFRSs
• The application of IFRSs, with additional disclosure
when necessary, is presumed to result in financial
statements that achieve a fair presentation
• IAS 1 recognises in that in rare circumstances the true
and fair override may require the departure from a
Standard or interpretation. In this case disclosure of
nature of the departure, the reason for the departure and
its consequences is required
• Financial statements shall not be described as
complying with IFRSs unless they comply with all the
requirements of IFRS (= all IASs, IFRSs and
interpretations)
International Financial Reporting and Analysis, 6 th edition
David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
 Characteristics of financial
information enumerated in IAS1
• Going concern
• Accrual basis of accounting
• Consistency of presentation
• Materiality and aggregation
– Each material class of similar items shall be presented
separately
– Items of dissimilar nature or function shall be presented
separately
• Offsetting
– Assets and liabilities, income and expenses shall not be
offset unless required or permitted by the standard or an
interpretation
• Comparative information
– Shall be disclosed in respect of the previous period for all
amounts reported in the financial statements
International Financial Reporting and Analysis, 6 th edition
David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
 IAS 8 Accounting policy
changes, changes in
estimates and errors
• The objective of IAS 8 is to enhance comparability of
financial statement data over time within the same firm
and between firms.
• In order to improve comparability IAS 8 focuses on the
criteria for selecting accounting policies, the accounting
treatment and disclosure of changes in accounting
policies, changes in accounting estimates and errors.

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
 Accounting policy

• The first part of IAS 8 deals with how to select

and apply accounting policies
• IAS 8 deals with how a change in accounting
policy needs to be accounted for:
– if the change is required by a standard
– if the change results in order to provide more
reliable and relevant information

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
 International Financial Reporting and Analysis, 6 th edition
David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
Accounting policy changes are
permitted when:

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
Accounting policy changes
arise when:

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
Accounting for policy changes

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
Changes in accounting estimates

• A change in accounting estimate is an adjustment of

the carrying amount of an asset or a liability, or the
amount of the periodic consumption of an asset, that
results from the assessment of the present status of
and expected future benefits and obligations
associated with assets and liabilities.

• Changes in accounting estimates result from new

information or new developments and, accordingly,
are not corrections for errors.

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
 Errors
Prior period errors are omissions from and
misstatements in the entity’s financial statements for
one or more periods arising from a failure to use, or
misuse of, reliable information that:
•was available when financial statements for those
periods were authorised for issue
•could reasonably be expected to have been obtained
and taken into account in the preparation and
presentation of those financial statements

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
 Correction of Errors

The correction of the error has to be accounted for in a

retrospective way, in the first set of financial statements
authorized for issue after their discovery by:
•restating the comparative amounts for the prior
period(s) in which the error occurred
•or, if the error occurred before the earliest period
presented, restating the opening balances of assets,
liabilities and equity for the earliest period presented

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
Disclosure requirements –
Errors

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
 IFRS 1

First time adoption of IFRS

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
 First financial statements
under IFRS, if the entity
• Presented its most recent previous financial statements:
i. under national requirements that are not consistent with IFRSs
in all respects;
ii. in conformity with IFRSs in all respects, except that the financial
statements did not contain an explicit and unreserved statement
that they complied with IFRSs;
iii. containing an explicit statement of compliance with some, but
not all, IFRSs;
iv. under national requirements inconsistent with IFRSs, using
some individual IFRSs to account for items which national
requirements did not exist; or
v. under national requirements, with a reconciliation of some
amounts to the amounts determined under IFRSs;
International Financial Reporting and Analysis, 6 th edition
David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
First financial statements under
IFRS, if the entity (cont’d)

• Prepared financial statements under IFRSs for

internal use only, without making them available to
the entity’s owners or any other external users;
• Prepared a reporting package under IFRSs for
consolidation purposes without preparing a complete
set of financial statements as defined in IAS 1,
Presentation of Financial Statements; or
• Did not present financial statements for previous
periods

International Financial Reporting and Analysis, 6 th edition

David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA
IFRS 1 First time adoption of IFRS

In its opening IFRS balance sheet an entity shall (para 10):

a)recognise all assets and liabilities whose recognition is
required by IFRS
b)not recognise items as assets or liabilities if IFRS does not
permit such recognition
c)reclassify items that it recognised under previous GAAP as
one type of asset, liability or component of equity, but are a
different type of asset, liability or component of equity under
IFRSs; and
d)apply IFRSs in measuring all recognised assets and
liabilities
International Financial Reporting and Analysis, 6 th edition
David Alexander, Anne Britton, Ann Jorissen, Martin Hoogendoorn and Carien van Mourik
ISBN 978-1-4080-7501-2 © 2014 Cengage Learning EMEA