IAS 1 – PRESENTATION OF FINANCIAL STATEMENTS

Complete set of financial statements

IAS 1 states that a complete set of financial statements comprises:

·         Statement of financial position

·         Statement of profit or loss and other comprehensive income

·         Statement of changes in equity

·         Statement of cash flows

·         Accounting policies and explanatory notes

Note that IAS 1 states that:

·         all of the financial statements are to be given equal prominence

·         the statement of profit or loss and other comprehensive income can be presented:

Ø either as a single statement

Ø or as a profit or loss section, immediately followed by a separate statement of comprehensive income

Overall considerations

The financial statements must present fairly the financial position, financial performance, and cash flows of an entity. The application of international financial reporting standards – supported by appropriate additional IAS 1 specifies disclosures of certain items in certain ways.

disclosures – is presumed to result in financial statements that achieve a fair presentation.

IAS 1 requires that an entity whose financial statements comply with the standards should make an explicit and unreserved statement of such compliance in the notes.

IAS 1 requires compliance with a number of accounting concepts (see also pages 20-21) and other considerations:

·         going concern – when an entity’s financial statements are prepared in accordance with international financial reporting standards, the presumption is that the entity is a going concern, ie it will not cease to trade in the immediate future

·         accrual basis of accounting – financial statements, except for cash flow information, are prepared under the accruals concept, ie income and expenses are matched to the same accounting period

·         materiality and aggregation – each material class of similar items is to be presented separately in the financial statements, eg the classification of assets as non-current and current

·         offsetting – generally it is not permitted to set off assets and liabilities, or income and expenses against each other in order to show a net figure, eg cash at bank is not netted off against a bank overdraft

·         frequency of reporting – financial statements are prepared at least annually; however, when the reporting period changes, the financial statements will be for a period longer or shorter than one year and the entity must give the reason for the change and disclose that the amounts in the financial statements are not entirely comparable with those of previous periods

·         comparative information – a requirement to show the figures from previous periods for all amounts shown in the financial statements in order to help users of the statements

IAS 1 sets out the detailed disclosures to be shown on the face of the statement of profit or loss and other comprehensive income, statement of financial position, and statement of changes in equity.

There are some general principles that the standard requires. These include the identification of:

·         Some items must appear on the face of the statement of financial position or statement of profit or loss

·         Other items can appear in a note to the financial statements instead

·         Recommended formats are given which entities may or may not follow, depending on their circumstances

Obviously, disclosures specified by other standards must also be made. Disclosures in both IAS 1 and other standards must be made either on the face of the statement or in the notes unless otherwise stated, ie disclosures cannot be made in an accompanying commentary or report.

structure and content – general principles

IAS 1 sets out the detailed disclosures to be shown on the face of the statement of profit or loss and other comprehensive income, statement of financial position, and statement of changes in equity.

There are some general principles that the standard requires. These include the identification of:

·         The financial statements, which are to be distinguished from other information in the corporate report

·         The name of the reporting entity

·         Whether the financial statements are for an individual entity or for a group

·         The period covered by the financial statements, eg for the year ended 31 december 20-6

·         The currency of the financial statements, £s, €s, etc

·         The level of rounding used for money amounts, thousands, millions, etc