IAS 1 Presentation of Financial Statements: Summary
IAS 1 Presentation of Financial Statements represents a basis of the whole IFRS reporting, as it sets overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content.
Financial Statements
Purpose of the financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions.
The complete set of financial statements compliant with IFRS comprises 5 elements:
- a statement of financial position as at the end of the period
- a statement of comprehensive income for the period
- a statement of changes in equity for the period
- a statement of cash flows for the period
- notes containing a summary of significant accounting policies and other explanatory information.
If some accounting policy is applied retrospectively, or some retrospective restatements or reclassifications were made, then also a statement of financial position as at the beginning of the earliest comparative period shall be presented.
IAS 1 explains the general features of financial statements, such as fair presentation and compliance with IFRS, going concern, accrual basis of accounting, materiality and aggregation, offsetting, frequency of reporting, comparative information and consistency of presentation.
Structure and Content
IAS 1 requires identification of the financial statements and distinguishing them from other information in the same published document.
Every element of the financial statements shall contain the name of the reporting entity, the information whether the financial statements are of an individual or of a group, the date of the reporting entity and period covered, the presentation currency and the level of rounding (thousands, millions…).
IAS 1 lists the minimum content to be presented in the financial statements, except for the statement of cash flows (subject to IAS 7). So let’s look at it in a detail.
Statement of Financial Position
Before significant amendments of IAS 1, this statement was simply called “balance sheet”, however, it was renamed.
IAS 1 requires presentation of classified statement of financial position where current assets or liabilities are separated from non-current assets or liabilities. Basically, the asset or liability is current when it is expected to be recovered or settled within 12 months after the reporting period.
With regard to a minimum content, the following line items shall be presented:
ASSETS | EQUITY AND LIABILITIES |
---|---|
Property, plant and equipment | Issued capital and reserves attributable to owners of the parent |
Investment property | |
Intangible assets | Non-controlling interests |
Financial assets | Financial Liabilities |
Investments accounted for using equity method | Provisions |
Biological assets | |
Inventories | |
Trade and other receivables | Trade and other payables |
Cash and cash equivalents | |
Totals of assets in accordance with IFRS 5 Non-current assets Held for Sale and Discontinued Operations | Totals of liabilities in accordance with IFRS 5 Non-current assets Held for Sale and Discontinued Operations |
Current tax assets | Current tax liabilities |
Deferred tax assets | Deferred tax liabilities |
Further subclassifications of the line items shall be disclosed either directly in the statement of financial position or in the notes, such as disaggregation of property, plant and equipment into classes, and similar. Also, certain information related to the share capital, reserves and a few others shall be included in the statement of financial position, the statement of changes in equity or in the notes.
IAS 1 does NOT prescribe the precise format of the statement of financial position. Instead, several formats are acceptable if they fulfill all requirements outlined above.
Statement of Comprehensive Income
The statement of comprehensive income has 2 basic elements:
- Profit or loss for the period: here, all items of income and expenses must be recognized.
- Other comprehensive income: items recognized directly to equity or reserves, such as changes in revaluation surplus, gains or losses from subsequent measurement of available-for-sale financial assets, etc.
As a minimum, the statement of comprehensive income must contain the following items:
PROFIT OR LOSS |
---|
Revenue |
Gains and losses arising from the derecognition of financial assets at amortized cost |
Finance costs |
Share of the profit or loss of associates and joint ventures accounted for using the equity method |
Tax expense |
Post-tax profit/gain or loss of operations or assets in accordance with IFRS 5 (Non-current assets Held for Sale and Discontinued Operations) |
Profit or loss |
OTHER COMPREHENSIVE INCOME |
Each component of other comprehensive income classified by nature |
Share of the other comprehensive income of associates and joint ventures accounted for using equity method |
Total comprehensive income |
As opposed to US GAAP, IAS 1 prohibits to report any transaction or item as extraordinary items.
Profit or loss for the period, as well as total comprehensive income shall be both presented in allocation:
- attributable to non-controlling interests and
- attributable to owners of the parent.
The entity might choose to classify expenses recognized in profit or loss for the period by their nature or by their function.
IAS 1 requires disclosure of certain items separately, either in the statement of comprehensive income, or in the notes. These items are as follows: write-downs of inventories and property, plant and equipment, their reversals, restructuring of activities and reversals of related provisions, disposals of property, plant and equipment, disposals of investments, discontinuing operations, litigation settlements and other reversals of provisions.
Statement of Changes in Equity
As a minimum, the statement of changes in equity must contain the following items:
- total comprehensive income for the period, showing separately amounts attributable to owners of the parent and to non-controlling interests
- the effect of retrospective application or restatement for each component of equity (if applicable)
- the reconciliation between the carrying amount at the beginning and the end of the period for each
component of equity. Here, the following changes shall be disclosed separately:- those resulting from profit or loss
- resulting from other comprehensive income
- resulting from transactions with owners (contributions, distributions and changes in ownership)
Also, IAS 1 prescribes to present amount of dividends recognized as distributions and the related amount per share on the face of the statement of changes in equity or in the notes.
Notes to the Financial Statements
The notes are meant to be the document accompanying numerical financial statements listed above. They should provide additional information not contained in the numbers, the basis of preparation of the financial statements and some additional information that might be relevant.
IAS 1 sets that the notes shall contain a statement of compliance with IFRS, summary of significant accounting policies applied, supporting information for the numbers presented in the financial statements and other disclosures.
You can read more about the notes and how to write them in this article.
IAS 1 is shortly summarized in the following video:
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Thank you for simplifying this standard . It is very helpful in my study and revision . looking forward to the other standards
A speed point machine, is it an asset that needs to be recorded in a business if they are using it?
Dear Silvia,
Are prudence and conservatism concepts still applicable now under the new Conceptual Framework?
Hi
I want to know can we prepare multiyear financials (i.e. 2 years to show I comparatives) as per the international auditing standards
SILIVAIA
I really apprentice the presentation please can i have the ppt.?
Hi Asmera, no sorry, we only provide pdf to our subscribed students of the IFRS Kit.
very good
Hi i have case that we debit the account Other comprehensive income (Re-measurement losses / Gain on defined benefit liability) by amount 12 Million and credit two account one of them is end of service expenses ( P&L item) by 7 Million and other account is provision of end of service by 6 Million
Dr/ Other comprehensive income 12 Million
Cr/ End of service expense ( P&L Item).
Cr/ Provision of end of service ( Balance sheet item).
my question :-
1- Other comprehensive account will be appear in balance sheet and income statement
2- and if it must appear in income statement shall we put total balance of this account 12 Million or just put 6 Million which is came from PL and ignore the 7 Million which came from provision of end of service as it is balance sheet item
This video has made my understanding of IAS 1 more clearly and understandable.I can confidently say I`am ready for the test.
I didn’t see any explanatiins for Cash Flow statement. This is also an element of Financial Statement as whole. Or would that mean it is no longer considered as part the whole reported Financial Statement?
You did not see it because it is not covered by IAS 1 (and, you are reading the article about IAS 1). You should check out IAS 7.
Hello Silvia,
Can you please help me to know as to what is the objective of creating Other Comprehensive Income and how to decide what all items should go to Other comprehensive income and Profit or loss account ?
Hi Diksha, I think this article can give you the answer. S.
hello siliva, help me with tax expense computation when u have provision, some balance due
In my opinion the documents that you share through social media is more attractive and brief to understand. I would like to follow you! Please, would you like to share brief notes and explanation on IFRS 9. By focusing MFI in detail!
Til now, I don’t understand what is the main consideration, if any, the IASB classifies a transaction as profit or loss while another as other comprehensive income. Is there any theoretical foundation or something behind the existence of other comprehensive income items?
Dear Siklus,
I think this article might help. S.
Dear Sylvia, if a Company made a decision to decrease share capital (due to accumulated loss that existed on December 31, 2016) on January 17, should this be treated as an adjusting event?
Thank you very much for your help!
It depends on when the decision was made. If after 31 Dec 2016, then no, it’s non-adjusting event. S.
amazing presentation of statement of financial position but other comprehensive income should elaborate clearly. Over all presentation was very good . I also learn from that.thank you very much
Very lucid explanations. Thanks
Hi Silvia,
The presentation is very knowledgeable. Is it possible for you to mail me the ppt. It would be of great help.
Hi Silvia, is it required by the standard to present the subscribed share capital with the outstanding balance of subscription receivables or a presentation of share capital would be fine?
comprehensive and material indeed
helped me tounderstand the IFRS
dear waseem…we record purchase cost as 110000.coz we did not avail the discout optiom given by the seller.
I have doubt in IAS 2. Lets say for a example, a manufacturer purchased raw material by giving 4 months pd cheque for 110,000. If they had paid by cash, price would be 100,000. What is treatment for this difference?
Can we record this difference of 10,000 as finance charges?
Hey Silvia, I was about to subscribe. But I found that the name of my country (Bangladesh) is not in the list. Please let me know.
thank you for help
wow, made my studies simpler and to make sense…a superb summary indeed.
clearly and comprehensive IAS1 elaborated
Great site and well summarized IASs
very well summarized and it is very good for accounting students. thank you.
Verry good!IAS 1 !
very good indeed.impressed for days
great work………..
Great Vedio…
IT IS WELL ARRANGED OF STATEMENT.
fantastic
Very good!
very good
Excellent summarized information of IAS-1
great vid!