IAS 1
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
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March 1974
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Exposure Draft E1 Disclosure of Accounting
Policies
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January 1975
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IAS 1 Disclosure of Accounting Policies
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June 1975
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E5 Information to Be Disclosed in Financial
Statements
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October 1976
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IAS 5 Information to Be Disclosed in Financial
Statements
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July 1978
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E14 Current Assets and Current Liabilities
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November 1979
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IAS 13 Presentation of Current Assets and Current
Liabilities
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1994
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IAS 1, IAS 5, and IAS 13 were reformatted
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July 1996
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E53 Presentation of Financial Statements
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August 1997
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IAS 1 (1997) Presentation of Financial Statements superseded
IAS 1 (1975), IAS 5, and IAS 13 (1979)
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1 July 1998
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Effective date of IAS 1 (1997)
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18 December 2003
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Revised version of IAS 1 (2003) issued by the IASB
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1 January 2005
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Effective date of IAS 1 (2003)
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18 August 2005
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IAS 1 amended to add disclosures about capital. Click
for Summary of the Amendments. Click
for IASB Press Release (PDF
57k).
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16 March 2006
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1 January 2007
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Effective date of August 2005 amendments to IAS 1
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6 September 2007
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Revised IAS 1 (2007) issued
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1 January 2009
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IAS 1 (2007) is effective for annual periods beginning on
or after 1 January 2009
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22 June 2006
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Exposure Draft of proposed amendments to IAS 32 relating
to Puttable Instruments and Obligations Arising on
Liquidation would add new disclosure requirements to IAS 1
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14 February 2008
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IAS 1 amended to add New Disclosure Requirements for
puttable instruments and obligations arising on liquidation
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1 January 2009
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Effective date of February 2008 amendments for puttable
instruments and obligations arising on liquidation
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22 May 2008
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IAS 1 amended for Annual Improvements to IFRSs
2007 in regards to classification of derivatives as current or
non-current
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1 January 2009
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Effective date of May 2008 amendment to IAS 1
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16 April 2009
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1 January 2010
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Effective date of the April 2009 revisions to IAS 1
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6 May 2010
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27 May 2010
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1 January 2011
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Effective date of May 2010 amendment to IAS 1
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16 June 2011
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17 May 2012
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Amendments resulting from Annual Improvements
2009-2011 Cycle(comparative information). Click for More
Information
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1 July 2012
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Effective date of June 2011 amendments to IAS 1
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1 January 2013
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Effective date of May 2012 amendments (Annual
Improvements 2009-2011 Cycle)
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Related Interpretations
Amendments under consideration by
IASB
Summary of IAS 1
Objective 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
Applies to all general purpose
financial statements based on International Financial Reporting Standards. [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]
o
assets
o
liabilities
o
equity
o
income and expenses, including gains
and losses
o
contributions by and distributions
to owners
o
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 should include: [IAS 1.10]
o
a statement of financial position
(balance sheet) at the end of the period
o
a statement of comprehensive income
for the period (or an income statement and a statement of comprehensive income)
o
a statement of changes in equity for
the period
o
a statement of cash flows for the
period
o
notes, comprising a summary of
accounting policies and other explanatory notes
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.
An entity may use titles for the
statements other than those stated above.
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 that an entity whose
financial statements comply with IFRSs make an explicit and unreserved
statement of such compliance in the notes. Financial statements shall not be
described as complying with IFRSs unless they comply with all the requirements
of IFRSs (including 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 1.16]
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 1.19-20]
Going concern
An entity preparing IFRS financial
statements is presumed to be a going concern. If management has significant
concerns about the entity's ability to continue as a going concern, the
uncertainties must be disclosed. If management concludes that the entity is not
a going concern, the financial statements should not be prepared on a going
concern basis, in which case IAS 1 requires a series of disclosures. [IAS 1.25]
Accrual basis of accounting
IAS 1 requires that an entity
prepare its financial statements, except for cash flow information, using the
accrual basis of accounting. [IAS 1.27]
Consistency of presentation
The presentation and classification
of items in the financial statements shall be retained from one period to the
next unless a change is justified either by a change in circumstances or a
requirement of a new IFRS. [IAS 1.45]
Materiality and aggregation
Each material class of similar items
must be presented separately in the financial statements. Dissimilar items may
be aggregated only if the are individually immaterial. [IAS 1.29]
Offsetting
Assets and liabilities, and income
and expenses, may not be offset unless required or permitted by an IFRS. [IAS
1.32]
Comparative information
IAS 1 requires that comparative
information shall be disclosed in respect of the previous period for all
amounts reported in the financial statements, both face of financial statements
and notes, unless another Standard requires otherwise. [IAS 1.38]
If comparative amounts are changed
or reclassified, various disclosures are required. [IAS 1.41]
Structure and content of financial
statements in general
Clearly identify: [IAS 1.50]
o
the financial statements
o
the reporting enterprise
o
whether the statements are for the
enterprise or for a group
o
the date or period covered
o
the presentation currency
o
the level of precision (thousands,
millions, etc.)
Reporting period
There is a presumption that
financial statements will be prepared at least annually. If the annual
reporting period changes and financial statements are prepared for a different
period, the entity must disclose the reason for the change and a warning about
problems of comparability. [IAS 1.36]
Statement of Financial Position
(Balance Sheet)
An entity must normally present a
classified statement of financial position, separating current and non-current
assets and liabilities. Only if a presentation based on liquidity provides
information that is reliable and more relevant may the current/non-current
split be omitted. [IAS 1.60] In either case, if an asset (liability) category
combines 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 1.61]
Current assets are cash; cash
equivalent; assets held for collection, sale, or consumption within the
entity's normal operating cycle; or assets held for trading within the next 12
months. All other assets are non-current. [IAS 1.66]
Current liabilities are those
expected to be settled within the entity'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 payment beyond 12 months. Other
liabilities are non-current. [IAS 1.69]
When a long-term debt is expected to
be refinanced under an existing loan facility and the entity has the discretion
the debt is classified as non-current, even if due within 12 months. [IAS 1.73]
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 reporting date, the liability is current, even if
the lender has agreed, after the reporting date and before the authorisation of
the financial statements for issue, not to demand payment as a consequence of
the breach. [IAS 1.74] However, the liability is classified as non-current if
the lender agreed by the reporting date to provide a period of grace ending at
least 12 months after the end of the reporting period, within which the entity
can rectify the breach and during which the lender cannot demand immediate
repayment. [IAS 1.75]
Minimum items on the face of the
statement of financial position [IAS 1.54]
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(a)
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property, plant and equipment
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(b)
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investment property
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(c)
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intangible assets
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(d)
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financial assets (excluding amounts shown under (e), (h),
and (i))
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(e)
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investments accounted for using the equity method
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(f)
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biological assets
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(g)
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inventories
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(h)
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trade and other receivables
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(i)
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cash and cash equivalents
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(j)
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assets held for sale
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(k)
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trade and other payables
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(l)
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provisions
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(m)
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financial liabilities (excluding amounts shown under (k)
and (l))
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(n)
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(o)
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(p)
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liabilities included in disposal groups
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(q)
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non-controlling interests, presented within equity and
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(r)
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issued capital and reserves attributable to owners of the
parent
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Additional line items may be needed
to fairly present the entity's financial position. [IAS 1.54]
IAS 1 does not prescribe the format
of the balance sheet. Assets can be presented current then non-current, or vice
versa, and liabilities and equity can be presented current then non-current
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 = long-term debt plus equity – is
also acceptable.
Regarding issued share capital and
reserves, the following disclosures are required: [IAS 1.79]
o
numbers of shares authorised, issued
and fully paid, and issued but not fully paid
o
par value
o
reconciliation of shares outstanding
at the beginning and the end of the period
o
description of rights, preferences,
and restrictions
o
treasury shares, including shares
held by subsidiaries and associates
o
shares reserved for issuance under
options and contracts
o
a description of the nature and
purpose of each reserve within equity
Statement of Comprehensive Income
Comprehensive income for a period
includes profit or loss for that period plus other comprehensive income
recognised in that period. As a result of the 2003 revision to IAS 1, the
Standard is now using 'profit or loss' rather than 'net profit or loss' as the
descriptive term for the bottom line of the income statement.
All items of income and expense
recognised in a period must be included in profit or loss unless a Standard or
an Interpretation requires otherwise. [IAS 1.88] Some IFRSs require or permit
that some components to be excluded from profit or loss and instead to be
included in other comprehensive income. [IAS 1.89]
The components of other
comprehensive income include:
o
changes in revaluation surplus (IAS
16 and IAS 38)
o
actuarial gains and losses on
defined benefit plans recognised in accordance with IAS 19
o
gains and losses arising from
translating the financial statements of a foreign operation (IAS 21)
o
gains and losses on remeasuring
available-for-sale financial assets (IAS 39)
o
the effective portion of gains and
losses on hedging instruments in a cash flow hedge (IAS 39).
An entity has a choice of
presenting:
o
a single statement of comprehensive
income or
o
two statements:
o
an income statement displaying
components of profit or loss and
o
a statement of comprehensive income
that begins with profit or loss (bottom line of the income statement) and
displays components of other comprehensive income [IAS 1.81]
Minimum items on the face of the
statement of comprehensive income should include: [IAS 1.82]
o
revenue
o
finance costs
o
share of the profit or loss of
associates and joint ventures accounted for using the equity method
o
tax expense
o
a single amount comprising the total
of (i) the post-tax profit or loss of discontinued operations and (ii) the
post-tax gain or loss recognised on the disposal of the assets or disposal
group(s) constituting the discontinued operation
o
profit or loss
o
each component of other
comprehensive income classified by nature
o
share of the other comprehensive
income of associates and joint ventures accounted for using the equity method
o
total comprehensive income
The following items must also be
disclosed in the statement of comprehensive income as allocations for the
period: [IAS 1.83]
o
profit or loss for the period
attributable to non-controlling interests and owners of the parent
o
total comprehensive income
attributable to non-controlling interests and owners of the parent
Additional line items may be needed
to fairly present the entity's results of operations. [IAS 1.85]
No items may be presented in the
statement of comprehensive income (or in the income statement, if separately
presented) or in the notes as 'extraordinary items'. [IAS 1.87]
Certain items must be disclosed
separately either in the statement of comprehensive income or in the notes, if
material, including: [IAS 1.98]
o
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
o
restructurings of the activities of
an entity and reversals of any provisions for the costs of restructuring
o
disposals of items of property,
plant and equipment
o
disposals of investments
o
discontinuing operations
o
litigation settlements
o
other reversals of provisions
Expenses recognised in profit or
loss should be analysed either by nature (raw materials, staffing costs,
depreciation, etc.) or by function (cost of sales, selling, administrative,
etc). [IAS 1.99] If an entity categorises by function, then additional
information on the nature of expenses – at a minimum depreciation, amortisation
and employee benefits expense – must be disclosed. [IAS 1.104]
Statement of Cash Flows
Rather than setting out separate
standards for presenting the cash flow statement, IAS 1.111 refers to IAS 7
Statement of Cash Flows
Statement of Changes in Equity
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 1.106]
o
total comprehensive income for the
period, showing separately amounts attributable to owners of the parent and to non-controlling
interests
o
the effects of retrospective
application, when applicable, for each component
o
reconciliations between the carrying
amounts at the beginning and the end of the period for each component of
equity, separately disclosing:
o
profit or loss
o
each item of other comprehensive
income
o
transactions with owners, showing
separately contributions by and distributions to owners and changes in
ownership interests in subsidiaries that do not result in a loss of control
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 1.107]
o
amount of dividends recognised as
distributions, and
o
the related amount per share
Notes to the Financial Statements
The notes must: [IAS 1.112]
o
present information about the basis
of preparation of the financial statements and the specific accounting policies
used
o
disclose any information required by
IFRSs that is not presented elsewhere in the financial statements and
o
provide additional information that
is not presented elsewhere in the financial statements but is 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 1.113]
IAS 1.114 suggests that the notes
should normally be presented in the following order:
o
a statement of compliance with IFRSs
o
a summary of significant accounting
policies applied, including: [IAS 1.117]
o
the measurement basis (or bases)
used in preparing the financial statements
o
the other accounting policies used
that are relevant to an understanding of the financial statements
o
supporting information for items
presented on the face of the statement of financial position (balance sheet),
statement of comprehensive income (and income statement, if presented),
statement of changes in equity and statement of cash flows, in the order in
which each statement and each line item is presented
o
other disclosures, including:
o
contingent liabilities (see IAS 37)
and unrecognised contractual commitments
o
non-financial disclosures, such as
the entity's financial risk management objectives and policies (see IFRS 7)
Disclosure 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
those involving estimations, that management has made in the process of
applying the entity's accounting policies that have the most significant effect
on the amounts recognised in the financial statements. [IAS 1.122]
Examples cited in IAS 1.123 include
management's judgements in determining:
o
whether financial assets are
held-to-maturity investments
o
when substantially all the
significant risks and rewards of ownership of financial assets and lease assets
are transferred to other entities
o
whether, in substance, particular
sales of goods are financing arrangements and therefore do not give rise to
revenue; and
o
whether the substance of the
relationship between the entity and a special purpose entity indicates control
Disclosure 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 assumptions concerning
the future, and other key sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial
year. [IAS 1.125] These disclosures do not involve disclosing budgets or
forecasts. [IAS 1.130]
The following other note disclosures
are required by IAS 1.126 if not disclosed elsewhere in information published
with the financial statements:
o
domicile and legal form of the
entity
o
country of incorporation
o
address of registered office or
principal place of business
o
description of the entity's
operations and principal activities
o
if it is part of a group, the name
of its parent and the ultimate parent of the group
o
if it is a limited life entity,
information regarding the length of the life
Other disclosures
Disclosures about dividends
In addition to the distributions
information in the statement of changes in equity (see above), the following
must be disclosed in the notes: [IAS 1.137] " the amount of dividends
proposed or declared before the financial statements were authorised for issue
but not recognised as a distribution to owners during the period, and the
related amount per share and " the amount of any cumulative preference
dividends not recognised.
An entity should disclose information
about its objectives, policies and processes for managing capital. [IAS 1.134]
To comply with this, the disclosures include: [IAS 1.135]
o
qualitative information about the
entity's objectives, policies and processes for managing capital, including>
o
description of capital it manages
o
nature of external capital
requirements, if any
o
how it is meeting its objectives
o
quantitative data about what the
entity regards as capital
o
changes from one period to another
o
whether the entity has complied with
any external capital requirements and
o
if it has not complied, the
consequences of such non-compliance.
IAS 1.136A requires the following
additional disclosures if an entity has a puttable instrument that is
classified as an equity instrument:
o
summary quantitative data about the
amount classified as equity
o
the entity's objectives, 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
o
the expected cash outflow on
redemption or repurchase of that class of financial instruments and
o
information about how the expected
cash outflow on redemption or repurchase was determined.
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."
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Term before 2007 revision of IAS 1
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Term as amended by IAS 1 (2007)
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balance sheet
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statement of financial position
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cash flow statement
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statement of cash flows
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income statement
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statement of comprehensive income (income statement is
retained in case of a two-statement approach)
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recognised in the income statement
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recognised in profit or loss
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recognised [directly] in equity (only for OCI components)
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recognised in other comprehensive income
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recognised [directly] in equity (for recognition both in
OCI and equity)
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recognised outside profit or loss (either in OCI or
equity)
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removed from equity and recognised in profit or loss
('recycling')
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reclassified from equity to profit or loss as a
reclassification adjustment
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Standard or/and Interpretation
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IFRSs
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on the face of
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in
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equity holders
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owners (exception for 'ordinary equity holders')
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balance sheet date
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end of the reporting period
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reporting date
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end of the reporting period
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after the balance sheet date
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after the reporting period
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On 16 June 2011, the IASB published
amendments to IAS 1 Presentation of Financial Statements. The amendments to IAS
1 retain the 'one or two statement' approach at the option of the entity and
only revise the way other comprehensive income is presented: requiring separate
subtotals for those elements which may be 'recycled' (e.g. cash-flow hedging,
foreign currency translation), and those elements that will not (e.g. fair
value through OCI items under IFRS 9).
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Amendments to IAS 1 Presentation of Financial
Statements
o
Preserve the amendments made to
IAS 1 in 2007 to require profit or loss and OCI to be presented together,
i.e. either as a single statement of comprehensive income, or separate income
statement and a statement of comprehensive income — rather than requiring a
single continuous statement as was proposed in the exposure draft
o
Require entities to group items
presented in OCI based on whether they are potentially reclassifiable to
profit or loss subsequently. i.e. those that might be reclassified and those
that will not be reclassified
o
Require tax associated with items
presented before tax to be shown separately for each of the two groups of OCI
items (without changing the option to present items of OCI either before tax
or net of tax)
o
Applicable to annual periods
beginning on or after 1 July 2012, with early adoption permitted.
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Source: http://www.iasplus.com/
