Application of IAS 1

Presentation of
Financial Statements
IAS 1 Presentación de Estados Financieros 1
Alcance

IAS 1 (2007) applies from 2009 (for entities with calendar year) with early application
allowed.

Applies to general purpose FS based on IFRS.

IFRS requirements apply to individual and consolidated EF.

<IAS 1.1 y 2>

IFRS does not prohibit the presentation of consolidated EF under IFRS and EF of the parent under local
regulations in the same document, when the basis of preparation is clearly disclosed in accounting
policies.

<iGAAP 2014 A4, 2.2.2>

IAS 1 Presentación de Estados Financieros 2

Components of FS

A complete set of FS under IFRS must include: Some entities present other information
outside the FS, such as:
• Statement of financial position.
• MD&A
• Income statement and other comprehensive
income. • Other states or certificates.

• Such information is outside the scope of IFRS.

- It can occur in only one state or in two.
• Statement of changes in equity.
<IAS 1.13 y 14>
• Statement of cash flows.

• Notes to the financial statements.

• Comparative information.

• Initial statement of financial position for the first period

presented.

- When a change is applied retrospectively accounting, error

correction or reclassification.

<IAS 1.10>

IAS 1 Presentación de Estados Financieros 3

General considerations

General considerations when preparing FS:

• Reasonable presentation and compliance with
IFRS.

• Business in progress.

• Accounting accrual .

• Materiality and grouping.

• Compensation.

• Frequency of preparation.

• Comparative information.

• Presentation consistency

<IAS 1.15 a 46>

IAS 1 Presentación de Estados Financieros 4

General considerations
Reasonable presentation and compliance with IFRS

Application of IFRS together with appropriate disclosures results in :

• Reasonable presentation.

Include in notes an explicit and unreserved statement of compliance with IFRS.

• Not disclose compliance if all standards and interpretations are not met.

The use of inappropriate accounting policies is not remedied with disclosures or explanations.

<IAS 1.15, 16 y 18>

IAS 1 Presentación de Estados Financieros 5

General considerations
Business on the move

When developing FS: When FS are not prepared under an ongoing

business base, it must be disclosed:
• Evaluate ability to continue as a business in
progress.
• Reason not to use it.
• At least, but not limited to 12 months after the
date of the balance. • Base used.

• Use an ongoing business base, unless:

<IAS 1.25 y 26>
− There is an intention to liquidate the entity or
cease operations.

− There is no other realistic alternative

− There is an intention to stop trading on the stock

exchange.

Reveal uncertainties that result in

substantial doubt about continuity as an
ongoing business.

IAS 1 Presentación de Estados Financieros 6

General considerations
Accounting accrual

Prepare FS on the basis of accounting accrual.

• Does not apply in the statement of cash flows.

<IAS 1.27>

IAS 1 Presentación de Estados Financieros 7

General considerations
Materiality and grouping

The two rules to follow to determine if some items can be grouped or not, are:

• Separate presentation of each material class of similar items.

• Grouping of intangible amounts with different heading types.

− The disclosure requirements of IFRS and Interpretations do not need to be met if the information is
immaterial.

<IAS 1.29 a 31>

General Rule:

Intangible
Material items = amounts= Grouped
Presentation separately in similar concepts.

IAS 1 Presentación de Estados Financieros 8

General considerations
Compensation

Do not compensate items unless allowed or required by a specific rule.

• May decrease the ability to understand transactions and evaluate future flows.

It is not considered compensation:

• Net assets of valuation reserves, e.g.

− Estimates of uncollectible or low inventory value.

• Discounts and rebates on purchase or sales prices.

• Income and costs of incidental operations, e.g.

− Asset Sales.

− Provisions (IAS 37) reimbursed contractually by a third party.

• Gains and losses of similar transactions, e.g.

− Currency fluctuations.
− Gains and losses of financial instruments of negotiation.

<IAS 1.32 a 35>

IAS 1 Presentación de Estados Financieros 9
General considerations
Frequency of preparation

FS at least annually.

When the closing date is changed and FS is drawn up for a

period greater or less than one year, disclose:

• Reason to use this period.

• The fact that the figures are not fully comparable.

<IAS 1.36>

IAS 1 Presentación de Estados Financieros 10

General considerations
Comparative information

Regarding the previous period. If there are reclassifications, reveal:

• Quantitative information.
• Nature and reason of reclassification.
• Narrative and descriptive information.
• Amount of each reclassified item.

• If it is not practical, reveal:

When the presentation or classification is
modified, reclassify comparative amounts − Reason not to reclassify.
− The nature of the adjustments that had
been made.

<IAS 1.38, 41 y 42>

IAS 1 Presentación de Estados Financieros 11

General considerations
Consistency in the presentation

Same presentation and classification of games from one period to the next,
unless:
• There is a change in the nature of operations.

• An FS review shows that a change is more appropriate.

• The change is required by IFRS or interpretation.

<IAS 1.45> Consistency

Consistency
2011 v Consistency
2012
2013

IAS 1 Presentación de Estados Financieros 12

Structure and content
Format

IAS 1 does not require a preset EF format.

• It is flexible in this regard.

However, he describes:

• The components and minimum

requirements for presentation and
disclosure.

• Additional games that may be submitted in

the states or their notes.

The implementation guidelines of IAS 1 include

examples, which:

• They are illustrative only.

• They include a presentation order that can be

modified.

<IAS 1.47 y 48, iGAAP 2014 A4, 2.12 p.1>

IAS 1 Presentación de Estados Financieros 13

Status of financial situation

IAS 1 Presentación de Estados Financieros 14

Status of financial situation
Minimum submission requirements

In the body of the balance: In the body of the balance sheet,

statement of changes in
• Property, plant and equipment stockholders' equity or in notes:
• Investment property
• Intangible assets • Subclassifications of items
• Financial assets and liabilities • For each class of action / social part:
• Investments under participation method
‒ Number of authorized actions
• Biological assets
• Inventories ‒ Number of shares issued
• Clients and other CXC ‒ Nominal value of the shares or not
• Cash and equivalents ‒ Reconciliation of shares issued at the
• Assets and liabilities classified as available for beginning and end of the period
sale ‒ Rights, preferences and restrictions
• Suppliers and other CXP
• Provisions ‒ Treasury shares
• Tax payable and receivable ‒ Shares reserved for issuance under options
and other contracts
• Deferred tax assets and liabilities
‒ Nature and purpose of each reserve in
• Non-controlling interest (in capital) equity:
• Issued shares and reserves attributable to the ‒ A suitable name may be enough
shareholders of the parent
• Reclassifications of certain financial
<IAS 1.54> instruments
<IAS 1.79, 80>

IAS 1 Presentación de Estados Financieros 15

Status of financial situation
Classification - Distinction between current and non-current

Exception: liquidity presentation can be used when providing reliable and more relevant
information

Items that meet any of the following are classified as current:

• They are expected to perform, consume or pay in the normal cycle of operations
• They are kept in order to negotiate
• They are expected to be made or your payment is due within 12 months (after the balance
date)
• They are cash or equivalent, unless they are restricted for more than 12 months
• If they are a liability, there is no unconditional right to defer their payment for more than 12
months

<IAS 1.60 y 69>

IAS 1 Presentación de Estados Financieros 16

Status of financial situation
Debt classification

Long-term debt due for breach of a clause is current.

Even if during the subsequent period the creditor agrees not
to make the payment enforceable.

• Unless at the balance sheet date the creditor grants a grace period
of 12 months.

Debt is current:
• Even if it is refinanced in the long term after the date of the
statement of financial position.

<IAS 1.74 a 76>

IAS 1 Presentación de Estados Financieros 17

Status of financial situation
Additional considerations

Additional items may be presented when relevant

Deferred taxes are always presented in the long term

The trial should be used to determine if additional items are

required considering:

• Nature and liquidity of assets

- For example, consider assets that are measured on different bases

• Role of assets within the entity

• Amounts nature and maturity of liabilities

<IAS 1.55 a 58>

IAS 1 Presentación de Estados Financieros 18

Income statement and
other comprehensive
income
IAS 1 Presentación de Estados Financieros 19
Income statement and other comprehensive income
Amendments - Submission of Items of Other Components of
Comprehensive Income (“OCI”)

Background Main changes

• The amendments to IAS 1 are the • Two options are introduced to

result of a joint effort between the
IASB and the FASB to provide
guidance on the presentation of OCI
items and their classifications within
OCI.
present the results and OCI,
such as:
• A single “income statement
and OCI”, or.
• Two separate but
consecutive states.
• The concepts of OCI should be
grouped considering whether
they will be reclassified to
results (“recycled”) or not.
• Similarly, the corresponding tax
must be assigned to the OCI
concepts.

It entered into force for annual periods beginning

July 1, 2012
Retrospective application is required!
IAS 1 Presentación de Estados Financieros 20
Income statement and other comprehensive income
Two Options to Present the Income Statement and OCI

Option 1 Option 2
(Single state) (Two separate but
consecutive states)

Income statement and OCI Statement of income

Results Results

OCI
Results of the OCI year
OCI
Items not recycled *
Items not recycled *
Recycled items *
Recycled items *

* The corresponding tax must be assigned

IAS 1 Presentación de Estados Financieros 21
Income statement and other comprehensive income
Minimum submission requirements
In the body of the state:
• Income
• Financial costs.
• Participation in profit of associates accounted
for by the participation method.
• Tax expense.
• A single line that includes the total discontinued
operations
• Net income for the period *
• Other components of comprehensive income
(OCI)
• Participation in OCI of associates
• Comprehensive utility *
* Segregate in:
‒ Attributable to non-controlling interest
‒ Attributable to owners of the holder
<IAS 1.81B y 82>
In the body of the state or in notes:
• OCI Tax Effect.
• OCI Reclassifications:
− Earnings made from the sale of assets
available for sale.
− Sale of foreign operations.
• Reduction of inventories at their net
Realization value
• Deterioration of property, plant and equipment
• Provisions for restructuring
• Reversal any of the previous items
• Provision of property, plant and equipment or
investments
• Discontinued operations
• Settlement of trials
• Reversal of other provisions
<IAS 1.90, 92, 94 y 98>
IAS 1 Presentación de Estados Financieros 22
Income statement and other comprehensive income
Classification

Sort income and expenses by nature or function

• The one that presents reliable and most relevant information.

• If chosen by function, The choice depends on the history and factors of the industry and
the nature of the entity

<IAS 1. 99, 104>, 205

For nature By function

Income X Income X
Other income X Sales cost (X)
Variations in inventories of finished X Gross profit X
products and production in process
Other income X
Raw materials and supplies used X Distribution costs (X)
Employee benefits costs X Administration expenses (X)
Depreciation and amortization X Other expenses
Other expenses X (X)
Total expenses (X) Utility X
Utility X

<IAS 1.102> <IAS 1.103>

IAS 1 Presentación de Estados Financieros 23
Income statement and other comprehensive income
Additional considerations

Do not present extraordinary items

Additional items may be presented when relevant

If alternative performance measures are used consider discussion on the basis for
conclusion of
<IAS 1 <BC.56>
• For example, it is not required or prohibited to present operating income.
− If operating income or a similar subtotal not defined by IAS 1 is included,
make sure that it includes ALL items that by their nature are operational, even
if it is an industry practice to exclude them. Do not exclude for example:

o Low inventory value

o Restructuring or relocation expenses
o Depreciation or amortization

<IAS 1.87 y BC.56>

IAS 1 Presentación de Estados Financieros 24

Income statement and other comprehensive income
Case study

Background
MexTelecomunicaciones, is the world's leading company that provides a variety of
telecommunication services and equipment. Its equipment and services allow its clients
to send or receive virtually any type of voice or data transmission.

Questions
• See the income statement results and other comprehensive results of
MexTelecomunicaciones, which is presented below, and answer the following
questions:

• Identify if it is presented by nature or by function

• Identify alternative performance measures (i.e. not required by IAS 1)

• Conclude whether or not the presentation of such alternative performance measures is

appropriate
• Identify any other issue or observation you have

IAS 1 Presentación de Estados Financieros 25

Income statement and other comprehensive income
Case study

MexTelecomunicaciones
Income 16,419
Costs of sale (10,629)
Gross profit 5,790
Administration and sale expenses (2,500)
EBITDA 3,290
Depreciation and amortization (1,804)
Utility operation 1,486
Stock-based payments (86)
Restructuring and impairment expenses of fixed assets (138)
Profit on sale of fixed assets 161
Interest expense (273)
Interest income 211
Participation in the losses of associates (18)
Profit before taxes 1,343
Income tax (130)
NET PROFIT 1,213
Other components of the comprehensive utility:
Asset revaluation gain 450

Tax effects related to other components of comprehensive income (120)

Other components of comprehensive income, net of taxes 330
INTEGRAL UTILITY 1,543
IAS 1 Presentación de Estados Financieros 26
Statement of
changes in capital

IAS 1 Presentación de Estados Financieros 27

Statement of changes in capital
Minimum submission requirements

In the body of the state: In the body of the state or in notes:

• Comprehensive income for the period * • Dividends including dividends by action

• Effects of changes in accounting policy

and error correction (according to IAS 8)
<IAS 1.107>
• Initial, final balance and movement of the
period distinguishing those from:

‒ Results of the period

‒ OCI

‒ Capital transactions with shareholders

* Segregate in:

• Attributable to non-controlling interest

• Attributable to owners of the holder

<IAS 1. 83,106>

IAS 1 Presentación de Estados Financieros 28

Statement of cash flows

IAS 1 Presentación de Estados Financieros 29

Statement of cash flows

IAS 7, Cash Flow Statement, indicates the requirements

for the presentation of the Cash Flow Statement and the
corresponding disclosures.

<IAS 1.111>

IAS 1 Presentación de Estados Financieros 30

Notes

IAS 1 Presentación de Estados Financieros 31

Notes

They must include:

• FS elaboration bases • Other revelations
− IFRS compliance statement − Objectives capital
management processes and
• Accounting policies policies

• Sources of uncertainty in − Post-Closing Dividends

accounting estimates
− Critical accounting judgments and key
assumptions used
• Disclosures required by other IFRS
− For example IFRS 7, financial instrument
disclosures
• Additional disclosures deemed
relevant
− Unrecognized cumulative preferred
dividends
− Domicile and legal form, including
duration of the entity (if limited in
life)
− Name of direct holder and group
holder
They must be presented systematically
• Include cross references
<IAS 1.112, 113, 117, 122, 125, 134,
137 y 138>

IAS 1 Presentación de Estados Financieros 32