IAS1PRESENTATIONOFFINANCIALSTATEMENTS2

1、ias 1 presentation of financial statements (2)ias 1 presentation of financial statements objective ?to prescribe the basis for presentation of general purpose financial statements by setting out ?overall considerations ?guidelines for structure ?minimum requirements for content. scope financial over

2、all statements considerations structure and businessreportingcontent on the internet balance sheets income statements g4+1 discussion paper on reporting financial performance changes in equity notes to financial statements copyright atc ltd 0501 ias 1 presentation of financial statements 1 scope 1.1

3、 objective ?to prescribe the content of general purpose financial statements in order to ensure comparability with the enterprises own financial statements, and financial statements of other enterprises. 1.2 general purpose financial statements ?means fs intended to meet the needs of users who are n

4、ot in a position to demand reports tailored to specific information needs. ?ias 1 applies to all fs of enterprises with a profit objective. 2 financial statements 2.1 objectives of financial statements (see the framework) ?to provide information, useful to a wide range of users in making economic de

5、cisions about: ?financial position ?performance ?cash flows ?to show the results of managements stewardship. ?to meet this objective financial statements provide information about an enterprises assets, liabilities, equity, income and expenses including gains and losses and cash flows. ?to achieve t

6、his fs are a structured financial representation of financial position of, and transactions undertaken by an enterprise. ?a complete set of fs includes ?balance sheet (bs) ?income statement (is) or profit and loss account (p&l a/c) ?a statement of changes in equity or ?cash flow statement (cfs)

7、?accounting policies and explanatory notes ?the preparation and presentation of fs is the responsibility of the board of directors and/or governing body of an enterprise. 2.4 supplementary statements ?enterprises are encouraged to present additional information, eg ?a financial review by management

8、?environmental reports ?value added statements. copyright atc ltd 0502 ias 1 presentation of financial statements 3 overall considerations 3.1 fair presentation and compliance with iass ?fs should “present fairly” the financial position, financial performance and cash flows an enterprise. ?this is a

9、chieved by appropriate application of iass. compliance with iass should be disclosed. ?in extremely rare circumstances, if compliance would be misleading, and therefore departure from a standard is necessary to achieve a fair presentation, the enterprise must disclose ?that management has concluded

10、that the financial statements fairly present the enterprises financial position, performance and cash flows. ?that it has complied in all material respects with applicable iass except that it has departed from a standard in order to achieve a fair presentation. ?the standard from which the enterpris

11、e has departed, the nature of departure, including the treatment that the standard would require together with the reason why that treatment would be misleading in the circumstances and the treatment adopted. ?the financial impact of the departure on the enterprises net profit or loss, assets, liabi

12、lities, equity and cash flows for each period presented. 3.2 accounting policies ?these are specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting fs. ?accounting policies should be selected and applied so that ?fs comply with iass (where ap

13、plicable) ?where there is no specific requirement, fs are ? relevant to users ? reliable, ie 3.3 going concern ?management should ?assess the enterprises ability to continue as a going concern (considering all info available for the foreseeable future) ?prepare fs on a going concern basis (unless ma

14、nagement it is probable that the enterprise will be liquidated/cease trading) ?disclose material uncertainties which may affect the going concern concept. copyright atc ltd 0503 ias 1 presentation of financial statements 3.4 accrual basis of accounting ?an enterprise should prepare its fs (except cf

15、s) under the accrual basis of accounting. (“the matching concept”). ?this means that assets, liabilities, equity, income and expenses are ?recognised when they occur (not as cash or its equivalent is received or paid) and ?recorded in the accounting records and reported in the fs of the periods to w

16、hich they relate. ?expenses are recognised on the basis of a direct association between ? costs incurred and ? earning of specific items of income. 3.6 consistency of presentation ?presentation and classification of items in fs should be retained from one period to the next. ?a change is only allowe

17、d if it ?will result in a more appropriate presentation; or, ?it is required by an ias or a sic interpretation. 3.7 materiality and aggregation ?information is material if its non-disclosure could influence the economic decisions of users taken on the basis of fs. ?materiality depends on the size an

18、d nature of the item judged in the particular circumstances of its omission. both must be considered together when making a decision about the materiality of an item. ?materiality provides that the specific disclosure requirements of iass need not be met if a transaction is not material 3.8 offsetti

19、ng ?assets and liabilities should not be offset except when required or permitted by another ias. ?items of income and expense should be offset when ?required or permitted by an ias ?gains, losses and related expenses arising from the same or similar transactions and events are not material. such am

20、ounts should be aggregated and presented as above (see immaterial amounts). ?offsetting, except when it reflects the substance of the transaction or event, detracts from the ability of users to understand the transactions undertaken and to assess the future cash flows of the enterprise. (reporting o

21、f assets net of valuation allowances (eg obsolescence on inventories and doubtful debts on receivables) does not constitute offsetting). copyright atc ltd 0504 ias 1 presentation of financial statements 3.9 comparative information ?numerical information in previous period should be disclosed unless

22、an ias permits/requires otherwise ?narrative & descriptive information from previous period should be included when relevant to understanding current periods fs. ?when the presentation/classification of items in the fs is amended ?if practicable, reclassify comparatives and disclose nature, amou

23、nt and reason for reclassification ?if impracticable, disclose reason for not reclassifying and the nature of the changes that would otherwise have been made. 4 structure and content 4.1 “disclosure” ?ias 1 uses the term in a broad sense, encompassing items presented on the face of each fs as well a

24、s in the notes to the fs. 4.2 identification of financial statements ?fs should be clearly identified and distinguished from other info in the same published document (eg annual report or prospectus). ?iass apply only to the fs and not to other info so users must be able to distinguish info prepared

25、 using iass from other info not subject to accounting requirements. 4.3 reporting date and period ?financial statements should be presented at least annually ?in exceptional circumstances where an enterprises balance sheet date changes and the statements are presented for a period other than a year

26、the enterprise should disclose ?reason for a period other than one year being used ?fact that comparative amounts for the is , changes in equity, cfs and related notes are not comparable. 4.4 timeliness ?this is a matter usually dealt with by legislation and market regulation but an enterprise shoul

27、d be in a position to issue its fs within six months of the reporting date. 4.5 terms used ?the standard applies a terminology that is consistent with all other standards but it does not prohibit the use of other terms as long as the meaning is clear. (eg non -current assets = fixed assets). copyrig

28、ht atc ltd 0505 ias 1 presentation of financial statements 5 balance sheet 5.1 the current/non-current distinction ?an enterprise should determine whether or not to present current and non-current assets and current and non-current liabilities as separate classifications on the face of the bs. ?a se

29、parate classification: ?distinguishes net assets that are continuously circulating as working capital from those used in long-term operations ?highlights assets expected to be realised within the current operating cycle, and liabilities due for settlement in the same period. ?when an enterprise choo

30、ses not to make this classification, assets and liabilities should be presented broadly in line with their liquidity. ?other useful information ?maturity dates of trade and other receivables and payables ?inventories expected to be recovered more than one year from the bs date. 5.2 current assets ?a

31、n asset should be classified as “current” when it is ?expected to be realised, or is held for sale or consumption, in the normal course of the operating cycle, or ?held primarily for trading purposes or for the short-term and expected to be realised within 12 months of the bs date, or ?cash or a cas

32、h equivalent which is not restricted in use. note that this is a combination of two conceptual views of the term current liquidity approach classification of assets and liabilities into current and non current is intended to give an approximate measure of an enterprises liquidity (i.e. its ability t

33、o carry on its activities on a day to day basis without encountering financial stringencies). (criterion: - will items be realised / liquidated in the near future?) operating cycle approach classification is intended to identify those resources and obligations of the enterprise that are continuously

34、 circulating. (criterion: - will items be consumed or settled within the normal operating cycle of the enterprise?) ?all other assets should be classified as “non-current”. 5.3 current liabilities ?a liability should be classified as “current” when it is ?expected to be settled in the normal course

35、of the operating cycle ?due to be settled within 12 months of the bs date. ?all other liabilities should be classified as “non-current”. copyright atc ltd 0506 ias 1 presentation of financial statements 5.4 overall structure ?there is no prescribed format though ias 1 presents a format as an illustr

36、ation. ?there are 2 main types of format found in practice. they differ in respect of which form of the accounting equation that they are an expansion of. ?net assets (assets - liabilities ) = capital ?assets = capital + liabilities illustrations ias 1 suggested format uk format assets$non current a

37、ssets 50 non current assets 50 current assets 40 current assets 40 currentliabilities(30) net current assets 10 total assets less current liabilities 60 non current liabilities (10) total assets 90 50 balances to; balances to; equity and liabilities capital and reserves 50 capital and reserves 50 no

38、n current liabilities 10 current liabilities 30 9050 ?each of the above would be consistent with ias practice. copyright atc ltd 0507 ias 1 presentation of financial statements 5.5 presentation of balance sheet items ?certain items must be shown on the face of the balance sheet. the minimum requirem

39、ents for these line items are as follows (note that the order in which they appear is not specified). ?property, plant and equipment ?intangible assets ?financial assets ?investments accounted for under the equity method ?inventories ?trade and other receivables ?cash and cash equivalents ?trade and

40、 other payables ?tax liabilities and assets as required by ias 12 ?provisions ?non-current interest bearing liabilities ?minority interest ?issued capital and reserves. ?an enterprise should disclose either on the face of the balance sheet or in the notes to the balance sheet further sub classificat

41、ions of the line items presented classified in a manner appropriate to the enterprises operations ?the detail provided in sub classifications depends on specific requirements of other iass and the size, nature and amounts involved. the disclosures will vary for each item. ?typically companies will p

42、resent the main headings on the face of the balance sheet and the detail in the notes to the accounts copyright atc ltd 0508 ias 1 presentation of financial statements 6 income statement 6.1 presentation of income statement items ?certain items must be shown on the face of the income statement. the

43、minimum requirements for these line items are as follows ?revenue ?results of operating activities ?finance costs ?share of profits and losses of associates and joint ventures accounted for under the equity method. ?tax expense ?profit or loss from ordinary activities ?extraordinary items ?minority

44、interest ?net profit or loss for the period. ?an enterprise should provide an analysis of expenses using a classification based on either nature or function. ?this should be performed either on the face of the income statement or in the notes though presentation on the face is encouraged 6.2 structu

45、re of the income statement ?this is determined by the way in which the enterprise chooses to comply with the above requirements to analyse expense items as discussed above. nature of expenditure method function of expenditure method ?expenses are aggregated by nature eg ?classifies expenses as ? dep

46、reciation ? cost of sales ? purchases of materials ? distribution ? transport costs ? administrative activities. ? wages and salaries advantages - nature advantage function ?simple to apply in many small entities ?provides more relevant info to users ?no arbitrary allocations disadvantage function ?

47、more objective ?cost allocation can be arbitrary and involves considerable judgement. ?less judgement required copyright atc ltd 0509 ias 1 presentation of financial statements illustration classification by nature $ classification by function $ revenue xrevenuexother operating income x cost of sale

48、s (x) changes in inventories of finished gross profit/(loss) x goods & wip x/(x) work performed by enterprise and distribution costs (x) capitalised x raw materials and consumables (x) administrative expenses (x) used staff costs (x) depreciation and amortisation expense (x) other operating expe

49、nses (x) other operating expenses (x) finance cost (x) finance cost (x) income from associates x income from associates x profit before tax x profit before tax x income tax expense x income tax expense x profit after tax x profit after tax x minority interest x minority interest x net profit or loss

50、 from ordinary x net profit or loss from ordinary x activities activities extraordinary items x extraordinary items x net profit for the period x net profit for the period x ?enterprises classifying expenses by function should disclose additional information on the nature of expenses, including depr

51、eciation and amortisation expense and staff costs. ?an enterprise should disclose either on the face of the income statement or in the notes, the amount of dividends per share, paid and proposed, for the period covered by the fs. copyright atc ltd 0510 ias 1 presentation of financial statements 7 ch

52、anges in equity 7.1 a separate statement ?an enterprise should present as a separate component of its financial statements, a statement showing ?net profit or loss for the period ?each item of income and expense, gain or loss recognised directly in equity, and total thereof ?cumulative effect of cha

53、nges in accounting policy and the correction of fundamental errors (per ias 8 benchmark treatments). ?in addition an enterprise should present either within this statement or in the notes: ?capital transactions with/distributions to owners ?accumulated profit or loss ? balance at beginning of period

54、 ? balance at bs date ? movements for period ?a reconciliation between carrying amount of the following at the beginning and end of the period ? each class of equity ? share premium ? each reserve. 7.2 function ?change in equity in the period reflects the change in the net assets in the period (ie t

55、he change in wealth) under the particular measurement basis used. ?this change represents the total gains and losses generated by the enterprise in the period together with changes resulting from transactions with shareholders. ?ias 8 requires all items of income and expense to be included in the de

56、termination of the net profit for the period unless an ias permits or requires otherwise. therefore there maybe significant gains and losses which do not appear in the income statement. these disclosures ensure that such items are highlighted for the users of the accounts so that they are in possess

57、ion of all information necessary to judge the performance of the enterprise. copyright atc ltd 0511 ias 1 presentation of financial statements 7.3 structure of notes ?the requirements may be satisfied in a number of ways. ?in many jurisdictions a columnar format is adopted with a separate column for

58、 each element within equity(this is known as a movement on reserves note). shareshare revaluation accumulated total capital premium reserve profit $ $ $ $ $ balance b/f x x x x x change in accounting policy (x) (x) restated balance x x x x x surplus on revaluation of property x x deficit on revaluation of investments (x) (x) net gains and losses not recognised in the income x x statement net profit for the period x x dividends (x) issue of share capital x x balance c/f x x x x x ?an alternative approach would be to present a separate component of the f