PAS 1 - PRESENTATION of PRESENTATION of FINANCIAL...

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Unformatted text preview: PRESENTATION of PRESENTATION of FINANCIAL STATEMENTS PAS 1 MODULE OBJECTIVES MODULE OBJECTIVES Update the participants on the basis of the presentation of the financial statements Acquaint participants with the proper balance sheet presentation, using the current and non­current classification of assets and liabilities Acquaint participants with the formats of presenting expenses on the income statement. Present an illustrative format for the presentation of the statement of changes in equity. Enumerate information that are required to be presented in the notes to the financial statements. OBJECTIVE of PAS 1 OBJECTIVE of PAS 1 To prescribe the basis for presentation of general purpose financial statements, to ensure comparability both with financial statements of previous periods and with the financial statements of other entities. OBJECTIVE of PAS 1 OBJECTIVE of PAS 1 The Standard sets out the following: ­ overall requirements for the presentation of financial statements; ­ guidelines for their structure; and ­ minimum requirements for their content. SCOPE SCOPE The Standard shall be applied to all general purpose financial statements prepared and presented in accordance with International Financial Reporting Standards (IFRSs). General purpose financial statements are those that are intended to meet the needs of users who are not in a position to demand reports tailored to meet their particular information needs. PURPOSE OF PURPOSE OF FINANCIAL STATEMENTS 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. COMPONENTS OF COMPONENTS OF FINANCIAL STATEMENTS A complete set of financial statements comprises: (a) a balance sheet; (b) an income statement; (c ) a statement of changes in equity; (d) cash flow statement; (e) notes to the financial statements; IFRS Defined IFRS Defined International Financial Reporting Standards ­ are Standards and Interpretations adopted by the International Accounting Standards Board composed of: *IFRSs *IASs *Interpretations originated by IFRIC or SIC Management’s Responsibility Management’s Responsibility The financial statements are basically the responsibility of the company’s management. Accounting Policies Accounting Policies Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements. Hierarchy of Accounting Policies Hierarchy of Accounting Policies In descending order: (a) requirements of an applicable accounting standard or an interpretation; (b) management judgment/ decision that results to relevant and reliable information, considering (1) requirements and guidance of similar accounting standards and interpretations; and (2) the definitions, recognition criteria and measurement bases in the Framework. OVERALL CONSIDERATIONS OVERALL CONSIDERATIONS Fair Presentation and Compliance with IFRSs Going Concern Accrual Basis of Accounting Consistency of Presentation Materiality and Aggregation Offsetting Comparative Information FAIR PRESENTATION AND FAIR PRESENTATION AND COMPLIANCE WITH IFRS Achieved by: Complying with all the applicable requirements of PFRS; Presenting information that meets the qualitative characteristics Providing additional disclosures, when necessary FAIR PRESENTATION AND FAIR PRESENTATION AND COMPLIANCE WITH IFRS An entity whose financial statements comply with IFRS shall make an explicit and unreserved statement of such compliance in the notes. Financial statements shall not be described as complying with IFRS unless they comply with ALL the requirements of IFRSs. GOING CONCERN GOING CONCERN An entity preparing IFRS financial statements are presumed to be a going concern. If management has significant concerns about the entity’s ability to continue as a going concern, the uncertainties must be disclosed. If management concludes that the entity is not a going concern, the financial statements should not be prepared on a going concern basis, in which case IAS 1 requires a series of disclosures. ACCRUAL BASIS ACCRUAL BASIS OF ACCOUNTING An entity should prepare its financial statements, except for cash flow information, using the accrual basis of accounting. CONSISTENCY CONSISTENCY OF PRESENTATION The presentation and classification of items in the financial statements shall be retained from one period to the next unless a change is justified either by a change in circumstances or a requirement of a new IFRS. MATERIALITY MATERIALITY AND AGGREGATION Each material class of similar items must be presented separately in the financial statements. Dissimilar items may be aggregated only if these are individually immaterial. OFFSETTING OFFSETTING Assets and liabilities, and income and expenses, may not be offset unless required or permitted by a Standard or an Interpretation. COMPARATIVE COMPARATIVE INFORMATION The Standard requires that comparative information shall be disclosed in respect of the previous period for all amounts reported in the financial statements, both on the face of financial statements and notes, unless another Standard requires otherwise. If comparative amounts are changed or reclassified, generally restatement and various disclosures are required. STRUCTURE AND CONTENT STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS Identification of the Financial Statements The financial statements shall be identified clearly and distinguished from other information in the same published document. STRUCTURE AND CONTENT STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS Reporting Period Financial statements shall be presented at least annually. PRESENTATION OF ASSETS PRESENTATION OF ASSETS AND LIABILITIES ON THE BS An entity shall present current and non­current classification of assets and liabilities, except when a presentation based on liquidity provides information that is reliable and is more relevant. When exception applies, all assets and liabilities shall be presented broadly in the order of liquidity. NORMAL OPERATING CYCLE NORMAL OPERATING CYCLE When an entity’s normal operating cycle is not clearly identifiable, its duration is assumed to be twelve months. Current Assets Defined Current Assets Defined Assets falling under any of the following: Expected to be realized in, or for sale or consumption in, the entity’s normal operating cycle; Held primarily for the purpose of being traded; Expected to be realized within twelve months of the balance sheet date; Cash or cash equivalent, unless restricted from being used or exchanged to settle a liability for at least twelve months after the balance sheet date. Current Liabilities Current Liabilities An obligation meeting 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 twelve months after the balance sheet date The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date Current and Non­Current Liabilities Current and Non­Current Liabilities When an entity breaches an undertaking under a long­term agreement on or before the balance sheet date with the effect that the liability becomes payable on demand, the liability is classified as current, even if the lender has agreed, after the balance sheet date and before the authorization of the financial statements for issue not to demand payment as a consequence of the breach. Current and Non­current Liabilities Current and Non­current Liabilities The liability is classified as non­current if the lender agreed by the balance sheet date to provide a period of grace ending at least 12 months after the balance sheet date, within which the entity can rectify the breach and during which the lender cannot demand immediate payment. INFORMATION ON THE FACE INFORMATION ON THE FACE OF THE BALANCE SHEET • • • • • • • • • Property, Plant and Equiipment Investment property Intangible assets Financial assets, excluding cash, receivables and investment under equity method Investments accounted for using the equity method Biological assets Inventories Trade and other receivables Cash and cash equivalents INFORMATION ON THE FACE INFORMATION ON THE FACE OF THE BALANCE SHEET • • • • • • • Trade and other payables Provisions Financial liabilities, excluding trade and other payables and provisions Liabilities and assets for current tax Deferred tax liabilities and assets Minority interest, which is presented within equity (for consolidated balance sheet) and Issued capital and reserves attributable to equity holders of the parent. INCOME STATEMENT INCOME STATEMENT INFORMATION TO BE PRESENTED ON THE FACE OF THE INCOME STATEMENT Revenue Finance Costs Share of the profit or loss accounted for using the equity method Discontinued Operations Tax Expense Profit or loss INCOME STATEMENT INCOME STATEMENT The following items shall be disclosed on the face of the income statement as allocations of profit or loss for the period: (for consolidated FS) Profit or loss attributable to minority interest; and Profit or loss attributable to equity holders of the parent INCOME STATEMENT INCOME STATEMENT Expenses should be analyzed and presented either by nature (raw materials, staffing costs, depreciation, etc.) or by function (cost of sales, selling, administrative, etc.). If an enterprise categorizes by function, additional information on the nature of expenses, at a minimum ­ depreciation, amortization, and staff costs, must be disclosed. INCOME STATEMENT INCOME STATEMENT An entity shall not present any items of income and expense as extraordinary items, either on the face of the income statement or in the notes. Income Statement Format – Nature Income Statement Format – Nature of Expense Revenues Pxx Other Income xx Total Income Pxx Expenses: Net Purchases Pxx (Increase) decrease in inventory xx Salaries and wages xx Depreciation xx Taxes xx Impairment of PPE xx Other Operating Expenses xx Total Operating Expenses xx Profit Before Interest and Tax Pxx Income Statement Format­ Nature Income Statement Format­ Nature of Expense Method (Continued) Profit before interest and tax Pxx Interest expense and finance costs (xx) Profit before income tax Pxx Income tax xx Profit from continuing operations Pxx Discontinued operations, net of income tax of Pxx xx Profit Pxx Earnings per share Basic Diluted Continuing Operations Px.x Px.x Discontinued Operations x.x x.x Earnings per Share Px.x Px.x Income Statement – Function of Income Statement – Function of Expense Method Revenue Pxx Cost of Sales xx Gross Profit Pxx Other Income xx Total Income Pxx Less: Expenses: Distribution Costs Pxx Administrative Expense xx Other Expenses xx Profit before interest and tax Pxx Income Statement Format­ Function Income Statement Format­ Function of Expense Method Profit before interest and tax Pxx Interest expense and finance costs (xx) Profit before income tax Pxx Income tax xx Profit from continuing operations Pxx Discontinued operations, net of income tax of Pxx xx Profit xx Earnings per share Basic Diluted Continuing Operations Px.x Px.x Discontinued Operations x.x x.x Earnings per Share Px.x Px.x STATEMENT OF CHANGES STATEMENT OF CHANGES IN EQUITY The statement must show: * profit or loss for the period; * each item of income and expense for the period that is recognized directly in equity, and total of those items; * total income and expense for the period (calculated as the sum of the first two items), showing separately the total amounts attributable to equity holders of the parent and to minority interest; and * for each component of equity, the effects of changes in accounting policies and corrections of errors recognized in accordance with IAS 8. STATEMENT OF CHANGES IN STATEMENT OF CHANGES IN EQUITY Share Other Retained Capital Reserves Earnings Total Balances, 1/1/05 Pxx Pxx Pxx Pxx Changes in Accounting Policy xx xx Correction of Prior Period Error (xx)_________xx_ Restated Balances, 1/1/05 Pxx Pxx Pxx Pxx Revaluation of PPE xx xx Unrealized Loss on AFSS (xx) (xx) Issue of share capital xx xx xx Profit or Loss for the period xx xx Dividends (xx)________(xx) Balances, 12/31/05 Pxx Pxx Pxx Pxx STATEMENT OF CHANGES IN STATEMENT OF CHANGES IN EQUITY Share Other Retained Capital Reserves Earnings Total Balances, 12/31/05 (brought forward) Pxx Pxx Pxx Pxx 2006 Changes: Revaluation of PPE xx xx Unrealized Gain on AFSS xx xx Issue of share capital xx xx xx Profit or Loss for the period xx xx Dividends (xx)______(xx) Balances, 12/31/06 Pxx Pxx Pxx Pxx ALTERNATIVE METHOD OF ALTERNATIVE METHOD OF PRESENTING CHANGES IN EQUITY An alternative method of presenting changes in equity may be used segregating items taken directly in equity from profit for the period (net income shown on the income statement). This presentation is called Statement of Recognized Income and Expenses. RECOGNIZED INCOME AND RECOGNIZED INCOME AND EXPENSES 2006 2005 Gains on revaluation P xx Pxx Unrealized gains and losses Taken to equity xx xx Transferred to profit or loss (xx) (xx) Cash flow hedges Taken to equity xx xx Transferred to profit or loss (xx) (xx) Transferred to carrying amount of hedged items (xx) (xx) Tax on items taken directly to equity (xx) (xx) Income recognized directly in equity Pxx Pxx RECOGNIZED INCOME AND RECOGNIZED INCOME AND EXPENSES (Continued) 2006 2005 Income taken directly to equity Pxx Pxx Profit for the period xx xx Total recognized income Pxx Pxx Attributable to Equity holders of the parent Pxx Pxx Minority interest xx xx Pxx Pxx NOTES TO THE NOTES TO THE FINANCIAL STATEMENTS The notes must ­ present information about the basis of preparation of the financial statements and the specific accounting policies used; disclose any information required by IFRSs that is not presented on the face of the balance sheet, income statement, statement of changes in equity or cash flow statement; and provide additional information that is not presented on the face of the balance sheet, income statement, statement of changes in equity or cash flow statement that is deemed relevant to an understanding of any of them. NOTES TO THE NOTES TO THE FINANCIAL STATEMENTS Notes should be cross­referenced from the face of the financial statements to the relevant notes. NOTES TO THE NOTES TO THE FINANCIAL STATEMENTS IAS 1 suggests that the notes should normally be presented in the following order: (1) a statement of compliance with IFRSs; (2) a summary of significant accounting policies applied, including (a) the measurement basis bases used in preparing the financial statements; and (b) the other accounting policies used that are relevant to an understanding of the financial statements. NOTES TO THE NOTES TO THE FINANCIAL STATEMENTS (3) supporting information for items presented on the face of the BS, IS, SCE and CFS, in the order in which each statement and each line item is presented; and (4) other disclosures, including ­ (a) contingent liabilities and unrecognized contractual commitments; and (b) nonfinancial disclosures, such as the entity’s financial risk management objectives and policies. NOTES TO THE NOTES TO THE FINANCIAL STATEMENTS New disclosures required in the revised IAS 1: (1) Disclosure of judgments (2) Disclosure of key sources of estimation and (3) Basis for resolving uncertainty. ...
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This note was uploaded on 11/30/2011 for the course ECON 310 taught by Professor Johnsmith during the Spring '11 term at Kentucky.

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