INTRODUCTION

IAS 1: Presentation of Financial Statements prescribes the basis for preparation of General Purpose Financial Statements of entities complying with the IFRS.

BASIS OF PREPARATION OF FINANCIAL STATEMENTS

Fair presentation & compliance with IFRS Going Concern Accrual basis of accounting Materiality & Aggregation Offsetting Frequency of Reporting Comparative Information Consistency of preparation

Fair Presentation & Compliance with IFRSs

Financial statements should fairly present the entitys Financial Position Financial Performance Cash Flows

GOING CONCERN
An entity is a going concern if the management has neither the intention nor the need to liquidate or to cease its operations within at least 12 months the Statement of Financial Position date.

Case Study
Entity X has incurred losses during the last 5 years of its operation, & its net worth has become negative. The entity has breached its

loan covenants & is also in the process of

negotiating with the banks for extension of

terms of its loans. These factors raise

substantial doubt that the entity will be able to continue as a going concern.

Solution
Disclose details of the uncertainty existing. Give details of the actions proposed to address the situation Disclose the possible effects on the financial position Management should state whether the financial statements include any adjustments that might result from the outcome of these uncertainties

ACCRUAL BASIS OF ACCOUNTING

The accrual basis of accounting has been defined in the framework.

MATERIALITY & AGGREGATION

As per IAS 1, each material class of similar items should be presented separately in the financial statements.

OFFSETTING
IAS 12 requires that the tax liability & tax asset should be offset where there is a legally enforceable right of offset & settlement is on

net basis.
IAS 20 permits offsetting of capital grants against asset as an alternative to setting up of deffered credit

FREQUENCY OF REPORTING
No fixed time period

The entity should present a complete set of account at least annually

COMPARATIVE INFORMATION
An entity should disclose COMPARATIVE INFORMATION

An

entity

shall

include

comparative

information for narrative & descriptive information

CONSISTENCY OF PREPARATION
A significant change in the nature of the entitys operation Identification of a more appropriate presentation The requirements of a new IFRS or SIC