Summary FAC2601 Learning Unit 3- Presentation of annual financial statements.docx

Learning unit 3 – Presentation of annual financial statements – AIS 1


Overview of learning unit:
IAS 1:
 Covers presentation of fin statements – including layout of general-
purpose annual fin statements & considerations
 Objective of accounting standard = prescribe basis of presentation of
general-purpose annual fin statements – to ensure comparability with own
& other entities fin statements
 IAS 1 refers to general purpose annual fin statements & annual fin
statements – forms basis for preparation
 Don’t apply to condensed interim annual fin statements
 Apply equally to individual entities & group annual fin statements
 Responsibility of board of directors or management – prepare & present
annual fin statements


3.1 Purpose of annual financial statements:
Presentation of financial statements:



Purpose of IAS 1  Prescribes basis for presentation of general-
purpose fin statements
 Sets minimum requirements for presentation &
guidelines for structure & content of fin
statements

Objective of fin Provide info about fin position, performance & cash flow
statements that’s useful to wide rage of users in making economic
decisions
Complete set of Structure & content:
fin statements:
Statement of fin  A & L – current or non-current (unless based on
position (SFP) liquidity)
 Line items of face of SFP – property, plant &
equipment, inventory, provisions
 Items on face or in notes – sub classification of
line items & details of share capital
Statement of Income & expenses recognised in a period presented as
profit or loss & either:
other  Single statement of p/l & other comp income or
comprehensive  2 separate statements - one p/l & other comp
income (SPLOCI) income with p/l as opening balance
Expenses classified by function or nature
Line items in p/l section – revenue, finance costs, tax
expenses etc

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, Nature & amount of material items – on face or in notes
Other comp income classified:
 Wont subsequently reclassifying to p/l
 Will be reclassified to p/l

Items of other comp income presented as:
 Net of related tax effects OR
 Before related tax effects – one amount shown
for aggregate income tax amount of those items
Disclosure of reclassification adjustments relating to other
comp income – on face or in notes
Notion of extraordinary items been abandoned
Statement of Recon of E at begin & end of reporting year
changes in equity Includes:
 Total comp income for year
 Effect of retrospective restatements
 Transactions with owners in their capacity as
owners (issue of shares, dividends paid)
Dividends paid * related dividends per share – on face or
in notes
Statements of Later in book
cash flows
Notes  Basis of presentation of fin statements
 Specific accounting policies applied
 Present info required by IFRS not already
presented elsewhere
 Supporting info for items in fin statements
 Additional info on items not presented in fin
statement
 Sources of estimation uncertainty
 Disclosures regarding capital
General features  Fair presentation & compliance with IFRS
for presentation  Prepared on going concern assumption
of fin statements  Accrual basis applied – items satisfy definitions &
recognition criteria of Conceptual Framework
 Materiality & aggregation – each material class
of similar items separately presented
 Offsetting – not allowed unless required/
permitted by IFRS
 Frequency of reporting – annually
 Comparative info – in respect of preceding
period for all amounts
 Consistency of presentation – retain presentation
& classification between periods




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, General purpose financial statements = statements intended to satisfy needs of
group of interested parties not in a position to demand fin statements
The annual financial statements
= are a structured representation of the financial position of the entity and the
results of the operations undertaken by the entity.
The objective of preparing annual financial statements
= is to provide information about the financial position (assets, liabilities and
equity), performance (income and expenses, including gains and losses), and
cash flows of an entity in order to provide useful information to the users of the
annual financial statements in making economic decisions.
 It also serves as proof of the results of management's stewardship of the
resources of the entity.


A complete set of annual financial statements consists of the following:
 a statement of financial position;
 a statement of profit or loss and other comprehensive income;
 a statement of changes in equity;
 a statement of cash flows;
 accounting policies and explanatory notes; and
 a statement of financial position at the beginning of the earliest
comparative period when an entity applies an accounting policy
retrospectively or makes a retrospective restatement of items in its
annual financial statements or when it reclassifies items in its annual
financial statements.
 Comparative information in respect of the preceding periods.


3.2 General features:
When preparing the annual financial statements, the following general features
must be considered:
1. Fair presentation and compliance with IFRSs
 The annual financial statements should fairly present the financial position
(referring to the Statement of financial position),
 financial performance (referring to the Statement of profit or loss and
other comprehensive income) and
 cash flows (referring to the Statement of cash flows) of an entity.


If the IFRS are properly applied, and when in certain circumstances additional
disclosure is necessary and presented, the annual financial statements will
achieve fair presentation.
Concepts of fair presentation:
 Faithful presentation

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