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Objective of IAS 1<=
span
style=3D'font-size:9.0pt;font-family:Arial;color:black'>
The
objective of IAS 1 (revised 1997) is to prescribe the basis for
presentation of general purpose financial statements, to ensure
comparability both with the entity's financial statements of previous
periods and with the financial statements of other entities. IAS 1 sets=
out
the overall framework and responsibilities for the presentation of
financial statements, guidelines for their structure and minimum
requirements for the content of the financial statements. Standards for=
recognising, measuring, and disclosing specific
transactions are addressed in other Standards and Interpretations.
Scope
Applie=
s to
all general purpose financial statements based on International Financi=
al
Reporting Standards. [IAS 1.2]
General
purpose financial statements are those intended to serve users who do n=
ot
have the authority to demand financial reports tailored for their own
needs. [IAS 1.3]
Objective of Financial Statemen=
ts
The
objective of general purpose financial statements is to provide informa=
tion
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. To meet that objective, financial statements provide informa=
tion
about an entity's: [IAS 1.7]
- Assets.
- Liabilities.
- Equity.
- Income and expenses,
including gains and losses.
- Other changes in equit=
y.
- Cash flows.
That
information, along with other information in the notes, assists users of
financial statements in predicting the entity's future cash flows and, =
in
particular, their timing and certainty.
Components of Financial Stateme=
nts
A comp=
lete
set of financial statements should include: [IAS 1.8]
- a balance sheet, =
- income statement,
- a statement of changes=
in
equity showing either:
- all changes in equity=
, or
- changes in equity oth=
er
than those arising from transactions with equity holders acting in
their capacity as equity holders;
- cash flow statement, a=
nd
- notes, comprising a summary=
of
accounting policies and other explanatory notes.
Report=
s that
are presented outside of the financial statements -- including financial
reviews by management, environmental reports, and value added statement=
s --
are outside the scope of IFRSs. [IAS 1.9-10=
]
Fair Presentation and Complianc=
e with
IFRSs
The fi=
nancial
statements must "present fairly" the financial position,
financial performance and cash flows of an entity. Fair presentation
requires the faithful representation of the effects of transactions, ot=
her
events, and conditions in accordance with the definitions and recogniti=
on
criteria for assets, liabilities, income and expenses set out in the
Framework. The application of IFRSs, with
additional disclosure when necessary, is presumed to result in financial
statements that achieve a fair presentation. [IAS 1.13]
IAS 1
requires that an entity whose financial statements comply with IFRSs make an explicit and unreserved statement o=
f such
compliance in the notes. Financial statements shall not be described as
complying with IFRSs unless they comply wit=
h all
the requirements of IFRSs (including
Interpretations). [IAS 1.14]
Inappr=
opriate
accounting policies are not rectified either by disclosure of the
accounting policies used or by notes or explanatory material. [IAS 1.16=
]
IAS 1
acknowledges that, in extremely rare circumstances, management may conc=
lude
that compliance with an IFRS requirement would be so misleading that it
would conflict with the objective of financial statements set out in the
Framework. In such a case, the entity is required to depart from the IF=
RS
requirement, with detailed disclosure of the nature, reasons, and impac=
t of
the departure. [IAS 1.17-18]
Going Concern
An ent=
ity
preparing IFRS financial statements is presumed to be a going concern. =
If
management has significant concerns about the entity's ability to conti=
nue
as a going concern, the uncertainties must be disclosed. If management
concludes that the entity is not a going concern, the financial stateme=
nts
should not be prepared on a going concern basis, in which case IAS 1 re=
quires
a series of disclosures. [IAS 1.23]
Accrual Basis of Accounting
IAS 1
requires that an entity prepare its financial statements, except for ca=
sh
flow information, using the accrual basis of accounting. [IAS 1.25]
Consistency of Presentation
The pr=
esentation
and classification of items in the financial statements shall be retain=
ed
from one period to the next unless a change is justified either by a ch=
ange
in circumstances or a requirement of a new IFRS. [IAS 1.27] =
Materiality and Aggregation
Each m=
aterial
class of similar items must be presented separately in the financial
statements. Dissimilar items may be aggregated only if the are individu=
ally
immaterial. [IAS 1.29]
Offsetting> Assets and
liabilities, and income and expenses, may not be offset unless required=
or
permitted by a Standard or an Interpretation. [IAS 1.32]
Comparative Information<=
/em>
IAS 1
requires that comparative information shall be disclosed in respect of =
the
previous period for all amounts reported in the financial statements, b=
oth face
of financial statements and notes, unless another Standard requires
otherwise. [IAS 1.36]
If
comparative amounts are changed or reclassified, various disclosures are
required. [IAS 1.38]
Structure and Content of Financ=
ial
Statements in General
Clearly
identify: [IAS 1.46]
- the financial statemen=
ts
- the reporting enterpri=
se
- whether the statements=
are
for the enterprise or for a group
- the date or period cov=
ered
- the presentation curre=
ncy
- the level of precision
(thousands, millions, etc.)
Reporting Period
There =
is a
presumption that financial statements will be prepared at least annuall=
y.
If the annual reporting period changes and financial statements are
prepared for a different period, the enterprise must disclose the reason
for the change and a warning about problems of comparability. [IAS 1.49=
]
Balance Sheet
An ent=
ity
must normally present a classified balance sheet, separating current an=
d noncurrent assets and liabilities. Only if a
presentation based on liquidity provides information that is reliable a=
nd
more relevant may the current/noncurrent sp=
lit be
omitted. [IAS 1.51] In either case, if an asset (liability) category
commingles amounts that will be received (settled) after 12 months with
assets (liabilities) that will be received (settled) within 12 months, =
note
disclosure is required that separates the longer-term amounts from the
12-month amounts. [IAS 1.52]
Cur=
rent
assets
are cash; cash equivalent; assets held for collection, sale, or consump=
tion
within the enterprise's normal operating cycle; or assets held for trad=
ing
within the next 12 months. All other assets are no=
ncurrent.
[IAS 1.57]
Cur=
rent
liabilities are those to be settled within the enterprise's normal
operating cycle or due within 12 months, or those held for trading, or =
those
for which the entity does not have an unconditional right to defer paym=
ent
beyond 12 months. Other liabilities are noncurrent=
.
[IAS 1.60]
Long-t=
erm
debt expected to be refinanced under an existing loan facility is noncurrent, even if due within 12 months. [IAS 1.=
64]
If a
liability has become payable on demand because an entity has breached an
undertaking under a long-term loan agreement on or before the balance s=
heet
date, the liability is current, even if the lender has agreed, after the
balance sheet date and before the authorisation
of the financial statements for issue, not to demand payment as a
consequence of the breach. [IAS 1.65] However, the liability is classif=
ied
as non-current if the lender agreed by the balance sheet date to provid=
e 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 len=
der
cannot demand immediate repayment. [IA 1.66]
Minimum
items on the face of the balance sheet [IAS 1.68]
- (a) property, plant and
equipment;
- (b) investment propert=
y;
- (c) intangible assets;=
- (d) financial assets
(excluding amounts shown under (e), (h) and (=
i));
- (e) investments accoun=
ted
for using the equity method;
- (f) biological assets;=
- (g) inventories; =
- (h) trade and other
receivables;
- (=
i)
cash and cash equivalents;
- (j) trade and other
payables;
- (k) provisions; <=
/o:p>
- (l) financial liabilit=
ies
(excluding amounts shown under (j) and (k));
- (m) liabilities and as=
sets
for current tax, as defined in IAS 12;
- (n) deferred tax liabi=
lities
and deferred tax assets, as defined in IAS 12; <=
/li>
- (o) minority interest,
presented within equity; and
- (p) issued
capital and reserves attributable to equity holders of the parent.=
Additi=
onal
line items may be needed to fairly present the entity's financial posit=
ion.
[IAS 1.69]
IAS 1 =
does
not prescribe the format of the balance sheet. Assets can be presented
current then noncurrent, or vice versa, and
liabilities and equity can be presented current then noncurrent
then equity, or vice versa. A net asset presentation (assets minus
liabilities) is allowed. The long-term financing approach used in UK =
and
elsewhere – fixed assets + current assets - short term payables =
=3D
long-term debt plus equity – is also acceptable.
Regard=
ing
issued share capital and reserves, the following disclosures are requir=
ed:
[IAS 1.76]
- numbers of shares authorised, issued and fully paid, and issue=
d but
not fully paid
- par value <=
/span>
- reconciliation of shar=
es
outstanding at the beginning and the end of the period =
- description of rights,
preferences, and restrictions
- treasury shares, inclu=
ding
shares held by subsidiaries and associates
- shares reserved for is=
suance
under options and contracts
- a description of the n=
ature
and purpose of each reserve within owners' equity
Income Statement
In the=
2003
revision to IAS 1, the IASB is now using "profit or loss" rat=
her
than "net profit or loss" as the descriptive term for the bot=
tom
line of the income statement.
All it=
ems of
income and expense recognised in a period m=
ust be
included in profit or loss unless a Standard or an Interpretation requi=
res
otherwise. [IAS 1.78]
Minimum
items on the face of the income statement should include: [IAS 1.81]
- (a) revenue;
- (b) finance costs;
- (c) share of the profi=
t or
loss of associates and joint ventures accounted for using the equi=
ty
method;
- (d) a single amount
comprising the total of (i) the post-t=
ax
profit or loss of discontinued operations and (ii) the post-tax ga=
in
or loss recognised on the disposal of =
the
assets or disposal group(s) constituting the discontinued operatio=
n;
and;
- (e) tax expense; and <=
o:p>
- (f) profit
or loss.
The
following items must also be disclosed on the face of the income statem=
ent
as allocations of profit or loss for the period: [IAS 1.82] =
- (a) profit or loss att=
ributable
to minority interest; and
- (b) profit
or loss attributable to equity holders of the parent. <=
/span>
Additi=
onal
line items may be needed to fairly present the enterprise's results of
operations.
No ite=
ms may
be presented on the face of the income statement or in the notes as
"extraordinary items". [IAS 1.85]
Certain
items must be disclosed either on the face of the income statement or in
the notes, if material, including: [IAS 1.87]
- (a) write-downs of
inventories to net realisable value or=
of
property, plant and equipment to recoverable amount, as well as
reversals of such write-downs;
- (b) restructurings of =
the
activities of an entity and reversals of any provisions for the co=
sts
of restructuring;
- (c) disposals of items=
of
property, plant and equipment;
- (d) disposals of
investments;
- (e) discontinuing
operations;
- (f) litigation settlem=
ents;
and
- (g) other
reversals of provisions.
Expens=
es
should be analysed either by nature (raw
materials, staffing costs, depreciation, etc.) or by function (cost of
sales, selling, administrative, etc.) either on the face of the income
statement or in the notes. [IAS 1.88] If an enterprise categorises
by function, additional information on the nature of expenses -- at a
minimum depreciation, amortisation, and sta=
ff
costs -- must be disclosed. [IAS 1.93]
Cash Flow Statement=
Rather=
than
setting out separate standards for presenting the cash flow statement, =
IAS
1.102 refers to I=
AS 7,
Cash Flow Statements
Statement of Changes in Equity<=
/span>
IAS 1
requires an entity to present a statement of changes in equity as a
separate component of the financial statements. The statement must
show: [IAS 1.96]
- (a) profit or loss for=
the
period;
- (b) each item of incom=
e and
expense for the period that is recognised
directly in equity, and the total of those items;
- (c) total income and e=
xpense
for the period (calculated as the sum of (a) and (b)), showing
separately the total amounts attributable to equity holders of the
parent and to minority interest; and
- (d) for
each component of equity, the effects of changes in accounting
policies and corrections of errors recognised=
in accordance with IAS 8.
The
following amounts may also be presented on the face of the statement of
changes in equity, or they may be presented in the notes: [IAS 1.97]
- (a) capital transactio=
ns
with owners;
- (b) the balance of
accumulated profits at the beginning and at the end of the period,=
and
the movements for the period; and
- (c) a
reconciliation between the carrying amount of each class of equity
capital, share premium and each reserve at the beginning and at the
end of the period, disclosing each movement.
Notes to the Financial Statemen=
ts
The no=
tes
must: [IAS 1.103]
- present information ab=
out
the basis of preparation of the financial statements and the speci=
fic
accounting policies used;
- disclose any informati=
on
required by IFRSs that is not presente=
d on
the face of the balance sheet, income statement, statement of chan=
ges
in equity, or cash flow statement; and
- provide<=
span
style=3D'font-size:9.0pt;font-family:Arial'> additional informatio=
n that
is not presented on the face of the balance sheet, income statemen=
t,
statement of changes in equity, or cash flow statement that is dee=
med
relevant to an understanding of any of them.
Notes =
should
be cross-referenced from the face of the financial statements to the
relevant note. [IAS 1.104]
IAS 1.=
105
suggests that the notes should normally be presented in the following
order:
- a statement of complia=
nce
with IFRSs;
- a summary of significa=
nt
accounting policies applied, including: [IAS 1.108]
- the measurement basis=
(or
bases) used in preparing the financial statements; and
- t=
he other accounting pol=
icies
used that are relevant to an understanding of the financial
statements.
- supporting information=
for
items presented on the face of the balance sheet, income statement,
statement of changes in equity, and cash flow statement, in the or=
der
in which each statement and each line item is presented; and =
- other disclosures,
including:
- contingent liabilitie=
s (see
IAS 37) and unrecognised contractual
commitments; and
- n=
on-financial disclosures, such as=
the
entity's financial risk management objectives and policies (see I=
AS
32).
Dis=
closure
of judgements. New in the 2003 revision to IAS 1=
, an
entity must disclose, in the summary of significant accounting policies=
or
other notes, the judgements, apart from tho=
se
involving estimations, that management has made in the process of apply=
ing
the entity's accounting policies that have the most significant effect =
on
the amounts recognised in the financial
statements. [IAS 1.113]
Exampl=
es
cited in IAS 1.114 include management's judgements=
in determining:
- whether financial asse=
ts are
held-to-maturity investments;
- when substantially all=
the
significant risks and rewards of ownership of financial assets and
lease assets are transferred to other entities; =
- whether, in substance,
particular sales of goods are financing arrangements and therefore=
do
not give rise to revenue; and
- whether<=
span
style=3D'font-size:9.0pt;font-family:Arial'> the substance of the
relationship between the entity and a special purpose entity indic=
ates
that the special purpose entity is controlled by the entity. =
Dis=
closure
of key sources of estimation uncertainty. Also new in the 2003 revision to =
IAS
1, an entity must disclose, in the notes, information about the key ass=
umptions
concerning the future, and other key sources of estimation uncertainty =
at
the balance sheet date, that have a significant risk of causing a mater=
ial
adjustment to the carrying amounts of assets and liabilities within the
next financial year. [IAS 1.116] These disclosures do not involve
disclosing budgets or forecasts.
The
following other note disclosures are required by IAS 1.126 if not discl=
osed
elsewhere in information published with the financial statements: =
- domicile of the enterp=
rise;
- country of incorporati=
on;
- address of registered =
office
or principal place of business;
- description of the
enterprise's operations and principal activities;
- name of its parent and the
ultimate parent if it is part of a group.
Other Disclosures
Dis=
closures
about Dividends
The
following must be disclosed either on the face of the income statement =
or
the statement of changes in equity or in the notes: [IAS 1.95]
- the amount of dividend=
s recognised as distributions to equity holders
during the period, and
- the related amount per sh=
are.
The
following must be disclosed in the notes: {IAS 1.125]
- the amount of dividends
proposed or declared before the financial statements were authorised for issue but not recognised
as a distribution to equity holders during the period, and the rel=
ated
amount per share; and
- the amount of any cumulat=
ive
preference dividends not recognised. <=
o:p>
Capital Disclosures
In Aug=
ust
2005, as part of its project to develop IFRS 7 Finan=
cial
Instruments: Disclosures, the IASB also amended IAS 1 to add
requirements for disclosures of:
- the entity's objective=
s,
policies and processes for managing capital;
- quantitative data abou=
t what
the entity regards as capital;
- whether the entity has=
complied
with any capital requirements; and
- if it has not complied, =
the
consequences of such non-compliance.
These disclosure requirements apply to all entities, effec=
tive
for annual periods beginning on or after 1 January 2007, with earlier
application encouraged. Illustrative examples are provided as guidance.=
Disclosures about Puttable Sha=
res
and Obligations Arising Only on Liquidaiton=
In Feb=
ruary
2008, the IASB published an amendment to IAS 1 that requires the follow=
ing
additional disclosures if an entity has a puttable=
instrument that is presented as equity:
- summary quantitative d=
ata
about the amount classified as equity;
- the entity's objective=
s,
policies and processes for managing its obligation to repurchase or
redeem the instruments when required to do so by the instrument
holders, including any changes from the previous period;
- the expected cash outf=
low on
redemption or repurchase of that class of financial instruments; a=
nd
- information about how the expecte=
d cash
outflow on redemption or repurchase was determined.
If an
instrument is reclassified into and out of each category (financial
liabilities or equity) the amount, timing and reason for that
reclassification must be disclosed. If an entity is a limited-life enti=
ty,
disclosure is also required regarding the length of its life.
The
foregoing disclosures are required for annual periods beginning on or a=
fter
1 January 2009, with earlier application permitted. <=
/p>
Septembe=
r 2007
Revised IAS 1 Is Issued
On 6
September 2007, the IASB issued a revised IAS 1 Presentation of Financi=
al
Statements. The main changes from the previous version are to require t=
hat
an entity must:
- Present all non-owner
changes in equity (that is, 'comprehensive income' – see box
below) either in one statement of comprehensive income or in two
statements (a separate income statement and a statement of
comprehensive income). Components of comprehensive income may not =
be
presented in the statement of changes in equity.
- Present a statement of
financial position (balance sheet) as at the beginning of the earl=
iest
comparative period in a complete set of financial statements when =
the
entity applies an accounting policy retrospectively or makes a
retrospective restatement.
- Disclose income tax re=
lating
to each component of other comprehensive income.
- Disclose reclassificat=
ion
adjustments relating to components of other comprehensive income. =
IAS 1
changes the titles of financial statements as they will be used in IFRSs:
- 'balance sheet' will b=
ecome
'statement of financial position'
- 'income statement' will
become 'statement of comprehensive income'
- 'c=
ash
flow statement' will become 'statement of cash flows').
Entities are not required to use the new titles in their
financial statements. All existing Standards and Interpretations are be=
ing
amended to reflect the new terminology. The revised IAS 1 resulted in
consequential amendments to 5 IFRSs, 23 IASs, and 10 Interpretations. The revised IAS 1 is
effective for annual periods beginning on or after 1 January 2009. Early
adoption is permitted. Click for Press Releas=
e
(PDF 17k).
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