ACBP6221 LU2
ACBP6221 LU2 – Presentation of
Financial Statements
2.1 Introduction
Objective of preparing financial statements – present info in such a way that will satisfy the
info needs of stakeholders so that they can make decisions regarding the extent and nature
of their interaction with the entity.
International Accounting Standard (IAS1) is the basis for the presentation of general-purpose
financial statements.
By complying with IAS1, an entity meets the qualitative characteristics and there will be fair
representation.
2.2 Objectives and scope
2.2.1 Objectives
Objective of IAS1 – set out the basis for the presentation of general-purpose financial
statements to ensure compatibility with:
- Entity’s prior period financial statements
- Financial statements of other entities
IAS1 sets out the overall requirements for presentation of financial statements including
structural guidelines and the min content requirements
2.2.2 Scope
IAS1 applies to all general-purpose financial statements prepared and presented in
accordance with IFRS.
Other IFRSs set out recognition, measurement and disclosure requirements for specific
transactions and other events.
IAS1 does not apply to preparation of financial statements in accordance with IAS34 Interim
Financial Reporting
IAS1 applies to all entities including those that present consolidated financial statements in
accordance with IFRS10 and IAS27.
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,ACBP6221 LU2
2.3 Key terms
General purpose financial statements = financial statements intended to meet the needs
of users who are not in a position to require an entity to prepare reports tailored to their
specific info needs.
Impracticable = an entity cannot apply a requirement of an IFRS after making every
reasonable effort to do so
IFRS = Standards and Interpretations issued by the International Accounting Standards
Board (IASB). They comprise the following:
- International Financial Reporting - IFRIC Interpretations
Standards - SIC Interpretations
- International Accounting Standards
Material omissions or misstatements = omissions or misstatements that could,
individually or collectively influence the economic decisions that users make on the basis of
financial statements
Notes to the financial statements = Notes provide additional information to that presented
in the statement of financial position, statements of profit or loss and other comprehensive
income, statement of changes in equity and statement of cash flows.
Other comprehensive income = items of income and expense (including reclassification
adjustments) that are not recognized in p/l as required or permitted by other IFRS.
Components:
- Changes in revaluation surplus
- Gains and losses on the effective portion of cash flow hedges
- Remeasurements of defined benefit plans
- Exchange differences on translation of the financial statements of foreign operations
- Gains and losses from available for sale financial instruments
Profit or loss = total of income less expenses, excluding the components of other
comprehensive income
Total comprehensive income = change in equity during a period resulting from transaction
and other events, other than those changes resulting from transactions with owners in their
capacity as owners.
Total comprehensive income comprises all components of “profit / loss” and of “other
comprehensive income”
Reclassification adjustments = amounts reclassified to p/l in the current period that were
recognized in other comprehensive income in the current or previous periods
Owners = holders of instruments classified as equity
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, ACBP6221 LU2
2.4 Financial statements
2.4.1 Purpose of financial statements
Financial statements = structured representation of the financial position and financial
performance of an entity
Objective of financial statements = provide info 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.
Financial statements provide info about an entity’s
- Assets
- Liabilities
- Equity
- Income and expenses
- Contributions by and distributions to owners in their capacity as owners
- Cash flows
This info & info in notes helps users predict the timing and certainty of an entity’s future cash
flows
2.4.2 Complete Set of Financial Statements
- Statement of financial position
- Statement of profit or loss and other comprehensive income
- Statement of changes in equity
- Statement of cash flows
- Notes (including significant accounting policies and other explanatory info)
- Comparative info in respect of the preceding period
Financial statement Financial statement element
Statement of financial position Assets, liabilities and equity
Statement of profit or loss and other Income and expenses, including gains and
comprehensive income losses
Statement of changes in equity Equity, contribution by and distributions to
owners
Statement of cash flows Cash flows
Notes to financial statements Accounting policies and other explanatory
info
An entity can elect to present either:
- A single statement of profit or loss and other comprehensive income
- Two separate statements
o Statement of profit or loss and a separate statement of comprehensive
income
o Where there are 2 separate statements presented, the separate statement of
profit or loss must immediately precede the separate statement of
comprehensive income. The separate statement of comprehensive income
must begin with profit or loss
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ACBP6221 LU2 – Presentation of
Financial Statements
2.1 Introduction
Objective of preparing financial statements – present info in such a way that will satisfy the
info needs of stakeholders so that they can make decisions regarding the extent and nature
of their interaction with the entity.
International Accounting Standard (IAS1) is the basis for the presentation of general-purpose
financial statements.
By complying with IAS1, an entity meets the qualitative characteristics and there will be fair
representation.
2.2 Objectives and scope
2.2.1 Objectives
Objective of IAS1 – set out the basis for the presentation of general-purpose financial
statements to ensure compatibility with:
- Entity’s prior period financial statements
- Financial statements of other entities
IAS1 sets out the overall requirements for presentation of financial statements including
structural guidelines and the min content requirements
2.2.2 Scope
IAS1 applies to all general-purpose financial statements prepared and presented in
accordance with IFRS.
Other IFRSs set out recognition, measurement and disclosure requirements for specific
transactions and other events.
IAS1 does not apply to preparation of financial statements in accordance with IAS34 Interim
Financial Reporting
IAS1 applies to all entities including those that present consolidated financial statements in
accordance with IFRS10 and IAS27.
1
,ACBP6221 LU2
2.3 Key terms
General purpose financial statements = financial statements intended to meet the needs
of users who are not in a position to require an entity to prepare reports tailored to their
specific info needs.
Impracticable = an entity cannot apply a requirement of an IFRS after making every
reasonable effort to do so
IFRS = Standards and Interpretations issued by the International Accounting Standards
Board (IASB). They comprise the following:
- International Financial Reporting - IFRIC Interpretations
Standards - SIC Interpretations
- International Accounting Standards
Material omissions or misstatements = omissions or misstatements that could,
individually or collectively influence the economic decisions that users make on the basis of
financial statements
Notes to the financial statements = Notes provide additional information to that presented
in the statement of financial position, statements of profit or loss and other comprehensive
income, statement of changes in equity and statement of cash flows.
Other comprehensive income = items of income and expense (including reclassification
adjustments) that are not recognized in p/l as required or permitted by other IFRS.
Components:
- Changes in revaluation surplus
- Gains and losses on the effective portion of cash flow hedges
- Remeasurements of defined benefit plans
- Exchange differences on translation of the financial statements of foreign operations
- Gains and losses from available for sale financial instruments
Profit or loss = total of income less expenses, excluding the components of other
comprehensive income
Total comprehensive income = change in equity during a period resulting from transaction
and other events, other than those changes resulting from transactions with owners in their
capacity as owners.
Total comprehensive income comprises all components of “profit / loss” and of “other
comprehensive income”
Reclassification adjustments = amounts reclassified to p/l in the current period that were
recognized in other comprehensive income in the current or previous periods
Owners = holders of instruments classified as equity
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, ACBP6221 LU2
2.4 Financial statements
2.4.1 Purpose of financial statements
Financial statements = structured representation of the financial position and financial
performance of an entity
Objective of financial statements = provide info 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.
Financial statements provide info about an entity’s
- Assets
- Liabilities
- Equity
- Income and expenses
- Contributions by and distributions to owners in their capacity as owners
- Cash flows
This info & info in notes helps users predict the timing and certainty of an entity’s future cash
flows
2.4.2 Complete Set of Financial Statements
- Statement of financial position
- Statement of profit or loss and other comprehensive income
- Statement of changes in equity
- Statement of cash flows
- Notes (including significant accounting policies and other explanatory info)
- Comparative info in respect of the preceding period
Financial statement Financial statement element
Statement of financial position Assets, liabilities and equity
Statement of profit or loss and other Income and expenses, including gains and
comprehensive income losses
Statement of changes in equity Equity, contribution by and distributions to
owners
Statement of cash flows Cash flows
Notes to financial statements Accounting policies and other explanatory
info
An entity can elect to present either:
- A single statement of profit or loss and other comprehensive income
- Two separate statements
o Statement of profit or loss and a separate statement of comprehensive
income
o Where there are 2 separate statements presented, the separate statement of
profit or loss must immediately precede the separate statement of
comprehensive income. The separate statement of comprehensive income
must begin with profit or loss
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