IAS 1
Presentation of Financial Statements
AGN WAA Region Meeting-Damascus
22nd November 2008
CA R. BUPATHY 1
Objective
• IAS 1 has been recently revised and reissued in 2007 -
with the objective of
1. Basis for presentation of General Purpose Financial
Statements (aim: comparability within and outside)
2. 140 paragraphs – 106 paragraphs of BC – four
members dissenting (4/14)
CA R. BUPATHY AGN WAA Region Meeting-Damascus 22nd November 2008
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IAS 1
Two broad components
First of the two
Purpose of FS and how that purpose can be achieved
Fair presentation
GCA, Materiality, Aggregation, Selection and
application of accounting policies, off-setting,
comparatives, etc
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 2008
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IAS 1
Two broad components
Second of the two
Guidelines for the structure and content of FS What
constitutes Financial Statements?
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 2008
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CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 2008
• Provide information about the financial position, performance & cash flows of an entity
• Useful to a wide range of users in making economic decisions
Purpose of financial statements
Assumption as regards user - para 25 of frame work
“users are assumed to have a reasonable knowledge of
business & economic activities & accounting & a
willingness to study the information with reasonable
diligence “
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Guideline for structure
1. Statement of Financial Position (end of)2. Statement of Comprehensive Income (for ) 3. Statement of changes in equity (for )4. Statement of Cash Flows (for )5. Notes comprising a summary of significant
accounting policies and other explanatory information
6. In addition, a statement of financial position as at the beginning of earliest accounting period should also be presented when there is an accounting policy change or reclassification or restatement
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 2008
• Entities must present a complete set of FS• Complete Set comprises of following components
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Equal prominence
All of (six) components of the financial statements must
be presented with equal prominence
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 20087
Financial Statements
• As it exists
• Balance Sheet
• Income Statement
• Statement of changes in equity
– Either all changes in equity
– Or, changes in equity other than transactions with owners
• Cash Flow, + Notes
• Already revised 1-1-09• Balance Sheet• Income Statement
– Single Statement– Two statements (i)
separate income alone, and (ii) statement of comprehensive income beginning with Profit / loss + other comprehensive income
• Statement of Changes in equity.
• Cash Flow, + NotesCA R. BUPATHY AGN WAA Region Meeting-Damascus
22nd November 20088
Minimum content in BS
1. Minimum line items
2. Current & Non-current assets or liabilities
3. Sub-classification (e.g. debtors into trade/non-trade) to
reflect entity specific circumstances and needs
4. Share capital related disclosures (Objectives, policies
and processes for managing capital!)
Preferred approach
Current, non-current classification of assets and
liabilitiesCA R. BUPATHY AGN WAA Region Meeting-Damascus
22nd November 20089
Current Assets• An asset shall be classified as current when it satisfies
any of the following criteria:– It is expected to be realized in, or is intended for
sale or consumption in, the entity’s normal operating cycle
– It is held primarily for the purpose of being traded– It is expected to be realized within 12 months after
BS date– It is cash or cash equivalent (as defined in IAS 7)
unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the BS date
• All other assets shall be classified as non-currentCA R. BUPATHY AGN WAA Region Meeting-Damascus
22nd November 200810
Current Liabilities• A liability shall be classified as current when it satisfies
any of the following criteria:
– It is expected to be settled in the entity’s normal
operating cycle
– It is held primarily for the purpose of being traded
– It is due to be settled within 12 months after BS date
– The entity does not have an unconditional right to defer
the settlement of the liabilities for at least 12 after the
BS date
• All other liabilities shall be classified as non-currentCA R. BUPATHY AGN WAA Region Meeting-Damascus
22nd November 200811
Current/non current or Liquidity?
• Preferred approach – Current, non current approach
• Except – more relevant reliable information
• When exception applies, then present in the order of
liquidity
• In any case > < 12 months for each line item should be
given as a part of disclosures -
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200812
Two types of income statement• Nature of expense• Revenue• Other income
– Inventory/WIP Changes– RM & Consumables– Employee benefit
expenses– Depreciation and
amortisation– Other expenses– Total expense
• PBT
• Function base
• Revenue
• Less cost of sales
• GP
• Other income
• Distribution costs
• Admn expenses
• Other expenses
• PBTCA R. BUPATHY AGN WAA Region Meeting-Damascus
22nd November 200813
Components of income statement
Function basis – or nature of expenses basis
• Can be on the face of P&L
• If function basis adopted – disclosure of additional
information as regards nature of expenses, including
depreciation & amortisation expense and employee
benefits expense CA R. BUPATHY AGN WAA Region Meeting-Damascus
22nd November 200814
•Minimum line items
•Revenue
•Finance costs
•Share of profit or loss of associates & JV accounted for
using equity method
•Tax expense
•Post – tax gain or loss of discontinued operations
•Profit or loss
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 2008
Statement of comprehensive income
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•Each component of other comprehensive income
classified by nature excluding share of other
comprehensive income of associates & JV
•Total comprehensive income
•Profit or loss – segregated to show (i) attributable to non-
controlling interests and (ii) owners of the parent
•Total comprehensive income for the period segregated to
show (i) attributable to non-controlling interests and (ii)
owners of the parent
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 2008
Statement of comprehensive income
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Other comprehensive income
• Exchange differences on translation of foreign operations
• Fair value changes in available for sale financial assets
• Gains on property revaluation etc
• Tax effect of above items
• Reclassification adjustments
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200817
•Total comprehensive income showing separately – total
amount attribute to owners of parent & to non controlling
interests
•For each component of equity, the effects of retrospective
application or retrospective restatements recognised in
accordance with IAS 8
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 2008
Statement of Changes in equity
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•For each component of equity a reconciliation between the
carrying amount at the beginning and end of the period,
separately disclosing changes resulting from –
•Profit or loss
•Each item of other comprehensive income
•Transaction with owners in their capacity as owners, showing
separately contributions by and distribution to owners and changes in
ownership interest in subsidiaries that do not result in a loss of control
•Amount of dividends recognised as distribution to owners
during the period, and the related amount per share
Statement of Changes in equity
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200819
A word about Extraordinary items
An entity shall not present any items of income
or expense as extraordinary items in the
statement of comprehensive income or
separate income statement (if presented) or in
the notes
Also refer to para 112 (c)
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200820
Optional items
• A review of performance
• Value added statement
• Resources not recognized in financial position
• The optional disclosures are outside the scope of
IFRSs
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200821
Content - Fair Presentation
• Financial statements should present fairly the financial
position, performance and cash flows of an entity.
• How is this is different from True and Fair View
presentation?
• What would be the audit certification?
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 2008
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How is fair presentation achieved?
• By selecting and applying appropriate accounting policies
• By presenting information in a manner that is relevant,
reliable, comparable and which is representationally
faithful
• By providing additional information, when compliance
with IFRS alone is considered insufficient
• Detailed guidance in IAS 8
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200823
Accounting policies
Selection and application of inappropriate
accounting policies are not rectified either by
disclosure of the accounting policies used or by
notes or explanatory material
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200824
Statement of Compliance
• Entities whose FS comply with IFRSs must make an
explicit and unreserved statement of compliance with
IFRSs
• An entity shall not describe FS as complying with IFRSs
unless the entity complies with all the requirements of
IFRSsCA R. BUPATHY AGN WAA Region Meeting-Damascus
22nd November 200825
Departure from IFRS
Yes – but conditionally
Exceptionally rare circumstances
Only when relevant regulatory framework requires or
otherwise does not prohibit
If an entity should conclude that compliance with a
requirement in a Standard or Interpretation would be so
misleading that it would conflict with objective of FS –
then depart (but disclose)
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200826
When regulatory framework requires
The entity shall – to the maximum extent possible reduce the
perceived misleading aspects of compliance by disclosing
Title, nature, etc. and the reason why the entity has
concluded that complying with that requirement is so
misleading that it conflicts with the objective of FS as laid
down in Framework
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200827
Structure and Content - Notes to Accounts
• Identification of FS (domicile, legal form, name,
address Registered office, principal places of business,
principal activities, stand-alone or CFS, reporting
period/date, presentation currency, extent of rounding
off,, name of parent and ultimate parent of the group)
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200828
Structure and Content - Notes to Accounts
• Basis of preparation of financial statements
• Significant Accounting policies that
(a) impact the measurement basis; and
(b) are relevant to an understanding of
financial statements
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200829
• Key sources of estimation uncertainty
• Unrecognized proposed/declared equity dividend and
cumulative preference dividend
• Information required by the IFRS that is not presented
on the face of the financial statements (+ other
information that is relevant to understanding the FS)
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 2008
Structure and Content - Notes to Accounts
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Off settingAssets and liabilities, and, income and expenses shall not be
off-set unless required or permitted by a Standard or an
Interpretation.
Consider a few situations Gains and losses on disposal of
non-current assets
Provision and reimbursements recognised as assets
Foreign exchange gains or losses
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200831
Comparatives
Comparatives should be presented for at least one Previous
Period.
Comparative information shall also be presented for narrative
and descriptive information where needed
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200832
Comparatives
Where needed, comparative information should be
reclassified, unless it is impracticable to do so.
If it is impracticable, then, reason for not reclassifying, had it
been reclassified, what would have been the nature of
adjustments?
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 200833
Components 5 + 1
BS Current – Non-C, MM line items (set-off principle)
Income statement = +/- Other Comprehensive income
Changes in Owner Equity
Statement of Cash Flows
Notes – Identifying the Entity, the BS, Impact on
Assumptions on P&L and in BS etc.
CA R. BUPATHY AGN WAA Region Meeting-Damascus22nd November 2008
Recap
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