IAS1 — Presentation of Financial Statements
Overview
IAS 1 Presentation of Financial Statements sets out the overall requirements for financial statements, including how they should be structured, the minimum requirements for their content and overriding concepts such as going concern, the accrual basis of accounting and the current/non-current distinction. The standard requires a complete set of financial statements to comprise a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity and a statement of cash flows.
IAS 1 was reissued in September 2007 and applies to annual periods beginning on or after 1 January 2009.
History of IAS 1
| Date | Development | Comments |
| March 1974 | Exposure Draft E1 Disclosure of Accounting Policies | |
| January 1975 | IAS 1 Disclosure of Accounting Policies issued | Operative for periods beginning on or after 1 January 1975 |
| June 1975 | Exposure Draft E5 Information to Be Disclosed in Financial Statements published | |
| October 1976 | IAS 5 Information to Be Disclosed in Financial Statements issued | Operative for periods beginning on or after 1 July 1998 |
| 18 December 2003 | IAS 1 Presentation of Financial Statements (2003) issued | Effective for annual periods beginning on or after 1 January 2005 |
| 18 August 2005 | Amended by Amendment to IAS 1 — Capital Disclosures | Effective for annual periods beginning on or after 1 January 2007 |
| 16 March 2006 | Exposure Draft Proposed Amendments to IAS 1 – A Revised Presentation published | Comment deadline 17 July 2006 |
| 22 June 2006 | Exposure Draft Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation published | Comment deadline 23 October 2006 |
| 6 September 2007 | IAS 1 Presentation of Financial Statements (2007) issued | Effective for annual periods beginning on or after 1 January 2009 |
Related Interpretations
- IFRIC 17 Distributions of Non – Cash Assests to owners
- SIC 12 Consolidation – Special Purpose Entities
Amendments under consideration
Summary of IAS 1
Objectives of IAS 1
The objective of IAS 1 (2007) 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 requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. [IAS 1.1] Standards for recognising, measuring, and disclosing specific transactions are addressed in other Standards and Interpretations. [IAS 1.3]
Scope
IAS 1 applies to all general purpose financial statements that are prepared and presented in accordance with International Financial Reporting Standards (IFRSs). [IAS 1.2]
General purpose financial statements are those intended to serve users who are not in a position to require financial reports tailored to their particular information needs. [IAS 1.7]
Objective of financial statements
The objective of general purpose financial statements is to provide information 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 information about an entity’s: [IAS 1.9]
- Assets
- liabilities
- equity
- income and expenses, including gains and losses
- contributions by and distributions to owners (in their capacity as owners)
- 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 statements
A complete set of financial statements includes: [IAS 1.10]
- a statement of financial position (balance sheet) at the end of the period
- a statement of profit or loss and other comprehensive income for the period (presented as a single statement, or by presenting the profit or loss section in a separate statement of profit or loss, immediately followed by a statement presenting comprehensive income beginning with profit or loss)
- a statement of changes in equity for the period
- a statement of cash flows for the period
- notes, comprising a summary of significant accounting policies and other explanatory notes
- comparative information prescribed by the standard.
An entity may use titles for the statements other than those stated above. All financial statements are required to be presented with equal prominence. [IAS 1.10]
When an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements, it must also present a statement of financial position (balance sheet) as at the beginning of the earliest comparative period.
Reports that are presented outside of the financial statements – including financial reviews by management, environmental reports, and value added statements – are outside the scope of IFRSs. [IAS 1.14]
.Fair presentation and compliance with IFRSs
The financial 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, other events, and conditions in accordance with the definitions and recognition 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 1.15]
IAS 1 requires an entity whose financial statements comply with IFRSs to make an explicit and unreserved statement of such compliance in the notes. Financial statements cannot be described as complying with IFRSs unless they comply with all the requirements of IFRSs (which includes International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations). [IAS 1.16]
Inappropriate accounting policies are not rectified either by disclosure of the accounting policies used or by notes or explanatory material. [IAS 1.18]
IAS 1 acknowledges that, in extremely rare circumstances, management may conclude 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 IFRS requirement, with detailed disclosure of the nature, reasons, and impact of the departure. [IAS 1.19-21]
Line items
The line items to be included on the face of the statement of financial position are: [IAS 1.54]
- property, plant and equipment
- investment property
- intangible assets
- financial assets (excluding amounts shown under (e), (h), and (i))
- investments accounted for using the equity method
- biological assets
- inventories
- trade and other receivables
- cash and cash equivalents
- assets held for sale
- trade and other payables
- provisions
- financial liabilities (excluding amounts shown under (k) and (l))
- current tax liabilities and current tax assets, as defined in IAS 12
- deferred tax liabilities and deferred tax assets, as defined in IAS 12
- liabilities included in disposal groups
- non-controlling interests, presented within equity
- issued capital and reserves attributable to owners of the parent.
Additional line items, headings and subtotals may be needed to fairly present the entity’s financial position. [IAS 1.55] When an entity presents subtotals, those subtotals shall be comprised of line items made up of amounts recognised and measured in accordance with IFRS; be presented and labelled in a clear and understandable manner; be consistent from period to period; and not be displayed with more prominence than the required subtotals and totals. [IAS 1.55A]*
* Added by Disclosure Initiative (Amendments to IAS 1), effective 1 January 2016.
| Comprehensive income = Profit or loss + Other comprehensive income for the period |
| Examples of items recognised outside of profit or loss |
|
Terminology
The 2007 comprehensive revision to IAS 1 introduced some new terminology. Consequential amendments were made at that time to all of the other existing IFRSs, and the new terminology has been used in subsequent IFRSs including amendments. IAS 1.8 states: “Although this Standard uses the terms ‘other comprehensive income’, ‘profit or loss’ and ‘total comprehensive income’, an entity may use other terms to describe the totals as long as the meaning is clear. For example, an entity may use the term ‘net income’ to describe profit or loss.” Also, IAS 1.57(b) states: “The descriptions used and the ordering of items or aggregation of similar items may be amended according to the nature of the entity and its transactions, to provide information that is relevant to an understanding of the entity’s financial position.”
