Chapter 2: Complete set of financial statements

A complete set of IFRS financial statements comprises the following statements, all of which should be presented with equal prominence:

• A statement of financial position (balance sheet) as at the end of the period.
• A statement of profit or loss and other comprehensive income for the period.
• A statement of changes in equity for the period.
• A statement of cash flows for the period.
• Notes, comprising significant accounting policies and other explanatory information.
• Comparative information in respect of the preceding period, including narrative disclosures where these are relevant to understanding the current period’s financial statements.
• A balance sheet as at the beginning of the preceding period, where an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or where it reclassifies items in its financial statements. This information is only required where the opening balance sheet is materially affected by the restatement.

Choice of presentation for statement of profit or loss and other comprehensive income

An entity presents the ‘statement of profit or loss and other comprehensive income’ as a single statement or as two statements. In a single statement, the entity presents profit or loss and other comprehensive income in separate sections.

The profit or loss section is presented first, followed directly by the other comprehensive income section.

If an entity presents two statements, it presents the profit or loss section in a separate statement of profit or loss (that is, as an income statement). This should immediately precede the statement presenting comprehensive income. So, all income and expenses should be included in a ‘performance statement’.

An entity can use other titles for the statement(s), such as ‘statement of comprehensive income’ instead of ‘statement of profit or loss and other comprehensive income’, or ‘income statement’ where this is separately presented.

Similarly, an entity can, for example, present a ‘balance sheet’ rather than a ‘statement of financial position’. In this chapter, references to the ‘income statement’ include the profit and loss section of the statement of profit or loss and other comprehensive income.

Notes contain information in addition to that presented in the statement of financial position, statement(s) of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows. Notes provide narrative descriptions or disaggregation of items presented in those statements and information about items that do not qualify for recognition in those statements.

Reports and statements presented outside the financial statements are outside the scope of IFRS.

IFRS 7 permits specified disclosures (such as the nature and extent of risks arising from financial instruments and the entity’s approach to managing those risks) to be presented in statements such as a separate management commentary or business review accompanying the financial statements. These disclosures are incorporated by cross-reference in the financial statements to that other statement.

The Board’s practice statement, ‘Management commentary’, provides non-mandatory guidance for the presentation of such a commentary.

Separate statements of profit or loss and other comprehensive income may be presented on separate pages

The requirement under IAS 1 states that a separate statement of profit or loss should ‘immediately precede’ the statement presenting comprehensive income does not prevent the statements from being presented on separate pages, although the statement of comprehensive income should be on the page immediately following the statement of profit or loss and given equal prominence.

The requirement to present all of the financial statements with equal prominence

In a complete set of financial statements, all of the financial statements should be presented with equal prominence.

Impact of the requirement to present all financial statements with equal prominence

IAS 1 explains that the reason for the requirement is that “the financial performance of an entity can be assessed only after all aspects of the financial statements are taken into account and understood in their entirety“. In practice, the most significant effects of this requirement are that:

• when an entity elects to present the components of profit or loss in a separate statement as permitted by IAS 1, that statement and the statement of comprehensive income should be presented with equal prominence; and
• the statement of changes in equity, which presents contributions from and distributions to owners, should be presented with equal prominence as the other statements.

Management commentary presented outside of the financial statements

IAS 1 notes that many entities present, outside of the financial statements, a review by management that describes and explains the main features of the entity’s financial performance and financial position together with the principal uncertainties that it faces (generally referred to in international accounting literature as Management Commentary (MC)).

Many entities also present, outside the financial statements, other statements, such as environmental reports and corporate governance statements. Reports and statements presented outside the financial statements are outside the scope of IFRS Standards.

Disclosure in management commentary is not a substitute for disclosure in financial statements

Information presented in the MC, or other supplementary statements, may repeat information in the financial statements. All information required under IFRS Standards should be presented in the notes or elsewhere in the financial statements. The omission of a disclosure in the financial statements because it is included in the MC or a similar statement, is not permitted.

However, a disclosure may be included by way of cross-reference if allowed by specific Standards (e.g., IFRS 7 or, for entities that have not yet adopted IFRS 9).