This document summarises the purpose and objective of IAS 1. The General features of financial reports are discussed, along with examples of the different statements and what they would look like.
IAS 1: Presentation of Financial
statements (Ch 6)
Objective:
• Prescribes the basis for presentation of general purpose financial statements
• To ensure: comparability
• Both with the entity's financial statements of previous periods (trends)
• And of other entities
• Sets out overall requirements for the presentation of financial statements,
• Guidelines for their structure
• Minimum requirements for their content.
The objective of 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.
An entity shall apply this Standard in preparing and presenting general purpose financial
statements in accordance with IFRS.
Definitions:
General purpose financial statements: those intended to meet the needs of users who are
not in a positions to 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.
Material: info is material if omitting, misstating or obscuring it could be expected to
influence decisions that the primary users of general purpose financial statements make on
the basis of those financial statements, which provide financial info about a specific
reporting entity.
• Depends on nature / magnitude of info / both
Purpose of financial statements:
Financial statements = structured representation of the financial position and financial
performance of an entity.
• The objective is to provide info about:
o The financial position and performance and cash flows of an entity that is
useful to a wide range of users in making economic decisions.
, o Shows the results of management's stewardship of the resources entrusted
to it.
• Investors identify if management takes care of its resources.
To meet the objective, financial statements provide info about:
• Assets
• Liabilities
• Equity
• Income and expenses (gains and losses)
• Contributions and distributions
• Cash flows
This info + info in the notes = assists users in predicting entity's future cash flows (timing and
certainty).
Complete set of financial statements:
a. a statement of financial position as at the end of the period;
b. a statement of profit or loss and other comprehensive income for the period;
c. a statement of changes in equity for the period;
d. a statement of cash flows for the period;
e. notes, comprising significant accounting policies and other explanatory information;
f. comparative information in respect of the preceding period
g. a statement of financial position as at the beginning of the preceding 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 in accordance with paragraphs 40A–40D.
General features:
Fair presentation and compliance with IFRS (15) -
• Financial statements shall present fairly the financial position, performance and cash
flows of an entity.
• Requires the faithful representation of the effects of transactions (definitions and
recognition criteria).
• Complete, neutral and free from error.
How to achieve fair representation?
, • Application of IFRS, with additional disclosure when necessary, is presumed to result
in financial statements that achieve faithful representation.
When and where should an entity declare that it complies with IFRS?
• Comply with all the requirements of IFRS.
• Explicit and unreserved statement of such compliance in the notes.
• Not justified by disclosure or explanation.
Extremely rare circumstances (19):
• Managements concludes that compliance is misleading to the users and conflicts
with the objective of financial statements.
Entity shall disclose (20):
• Management has concluded that the AFS present fairly.
• Complied with all IFRS except the departure
• Title, nature, treatment, reason, and treatment adopted
• Financial effect of the departure.
Going concern (25) -
• Management shall make an assessment annually of an entity's ability to continue as
a going concern (at least 12 months)
• Entity shall prepare financial statements on a going concern basis unless
management either intends to liquidate / cease trading.
• Assumes entity continues operations in the foreseeable future.
• SOFP reports values of their cost, CA, FV or RCA not liquidation values.
• Disclose material uncertainties.
• AFS not prepared on going concern basis disclose fact, basis of preparation and
reason.
• SOFP reports values on their liquidation values (amounts expected to be received or
settled on liquidation).
Accrual basis of accounting (27) -
• An entity shall prepare its financial statements, except cash flow info, using the
accrual basis of accounting.
• Recognizes transactions in the financial statements when they satisfy the definitions
and recognition criteria per the conceptual framework.
Materiality and aggregation (29) -
• Material if it could individually / collectively influence a decision.
• Depends on magnitude / size / nature
• Present info separately
o Each material class of similar items
o Items that are dissimilar unless immaterial
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