IAS 1 Presentation of Financial Statements


The objective of IAS 1 (2007):

– IAS 1 (2007) aims to establish a framework for presenting general-purpose financial statements.

– The primary goal is to ensure comparability across different periods and other entities’ financial statements.

Scope of Application:

– IAS 1 applies to all general-purpose financial statements prepared according to International Financial Reporting Standards (IFRSs).

– These statements serve users without specific information needs.

The objective of Financial Statements:

– General-purpose financial statements offer information about:

  – Financial position

  – Financial performance

  – Cash flows of an entity

– The information assists a broad range of users in making economic decisions.

Components of Financial Statements:

– A complete set of financial statements includes:

  – Statement of financial position (balance sheet)

  – Statement of profit or loss and other comprehensive income

  – Statement of changes in equity

  – Statement of cash flows

  – Notes providing explanations and policies

  – Comparative information for standard compliance

Fair Presentation and Compliance with IFRSs:

– Financial statements must “fairly present” an entity’s financial position, performance, and cash flows.

– This involves faithful representation of transactional effects and conditions as per recognition criteria in the Framework.

– Application of IFRSs, with additional disclosure, ensures fair presentation.

Departure from IFRSs:

– Rarely, management might find IFRS compliance misleading.

– In such cases, a departure from IFRS is allowed with detailed disclosure of reasons and impact.

Going Concern:

– Financial statements assume the entity’s continuation as a going concern.

– If concerns arise, disclosures are necessary.

– If the entity is not a going concern, related disclosures are required.

Accrual Basis of Accounting:

– Financial statements, except cash flow data, follow an accrual basis.

Consistency of Presentation:

– Presentation and classification maintained unless new IFRS or changed circumstances warrant alteration.

Materiality and Aggregation:

– Material information influences user decisions.

– Material classes are presented separately, and immaterial items are aggregated.

– Materiality applies to all financial statement parts.


– Offsetting of assets, liabilities, income, and expenses per IFRS only.

Comparative Information:

– Prior period comparison is essential for reported amounts and narrative data.

– Enhances understanding of current period financial statements.

Structure and Content of Financial Statements:

– Financial statements and notes clearly identified.

– Notes ordered systematically, covering policies, disclosures, and supporting information.

Statement of Financial Position (Balance Sheet) – Classification:

– Normally present classified balance sheet (financial position) with current and non-current assets and liabilities.
– If reliable, liquidity-based presentation can replace current/non-current classification.
– For assets/liabilities with both long-term and short-term amounts, notes should differentiate.
– Current assets: realized within the operating cycle, held for trading, or <12 months.
– Non-current assets: all other.
– Current liabilities: settled within the operating cycle, held for trading, or <12 months.
– Non-current liabilities: all other.
– Long-term debt refinanced under the existing facility is non-current.
– Liability due to breach is current unless the lender agreed to a grace period of>12 months.

Line Items:

– List of items for balance sheet presentation including property, investments, assets for sale, etc.
– Additional line items or subtotals as needed for clear representation.

Format of Statement:

– No fixed format for balance sheet presentation.
– Asset sequence (current or non-current) and liability/equity order (current, non-current, equity) flexible.
– Net asset presentation allowed.
– Long-term financing approach (UK) acceptable.

Share Capital and Reserves:

– Disclose authorized, issued, and paid shares.
– Explain par value or no par value.
– Reconciliation of outstanding shares.
– Share rights, preferences, and limitations.
– Treasury shares details.
– Shares reserved for options/contracts.
– Purpose of equity reserves explained.

Statement of Profit or Loss and Other Comprehensive Income:

– Profit or loss and comprehensive income defined.
– Generally, all items are recognized in profit or loss unless IFRS allows otherwise.
– Examples of items recognized outside profit or loss listed.

Statement of Changes in Equity:

– Separate statement showing total comprehensive income for the period.
– Attributions to owners and non-controlling interests.
– Effects of accounting policy changes/restatements included.
– Equity components, contributions, distributions, and ownership changes displayed.

Notes to Financial Statements:

– Basis of preparation and accounting policies explained.
– IFRS-required information not elsewhere disclosed.
– Additional relevant information provided.
– Notes systematically cross-referenced.

Other Disclosures:

– Judgements apart from estimations disclosed.
– Key estimation uncertainties identified.
– Capital management info includes objectives, policies, and processes.
– For entities with puttable instruments, equity amount and repurchase details are disclosed.
– Domicile, legal form, and parent company info mentioned.

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