IAS1

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History of IAS 1
 IAS 1 was issued in the set of improved Standards
effective for annual periods beginning on or after 1
January 2005.
- it was revised in 2007 to improve owner equity
disclosures and
- in 2011 to improve OCI disclosure.
- it was revised in 2014 as part of the Disclosure
Initiative.

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History of IAS 1
 N.B.
- The IASB’s Disclosure Initiative consists of research
& implementation projects that address how the
effectiveness of disclosures in IFRS financial
statements can be improved.

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Background
 Purpose of IAS 1
- prescribe basis for presentation of GP FSs to
ensure comparability
- sets out general features of FS as well as guide
lines for structure & content of FS
- N.B. IAS 1 explains how to present FS,
recognition, measurement & disclosure are
explained in other relevant IFRSs.

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Objective of financial statements

- provide information about the financial position,

performance & cash flows
- that is useful to a wide range of users in making
economic decisions; &
- also shows the results of management’s
stewardship of resources entrusted to it.

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Objective of financial statements

- GP FS are those intended to meet the needs of users

. who are not in a position to require an entity
. to prepare reports tailored to their particular
information needs

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Objective of financial statements

- IAS 1 does not apply to interim financial

statements, (see IAS 34). IAS 1 uses terminology
that is suitable for profit-oriented undertakings,
including public-sector business undertakings.

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Complete set of financial statements

 a statement of financial position (SFOP)

 A statement of profit or loss & other comprehensive
income (SPLOCI)
 A statement of changes in equity (SOCIE)
 A statement of cash flows (SOCF)

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Complete set of financial statements

 Notes to the financial statements (Notes)

 A statement of financial position
- at the beginning of the preceding period

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Complete set of financial statements

- when an entity applies

- an accounting policy retrospectively or
- retrospectively restates of items in FS, or
- when items in FSs are reclassified

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General features
 Fair presentation & compliance with IFRS
- achieved by
. application of IFRSs
. extra disclosure if needed
- disclosure regarding compliance with IFRSs
. must be made in FS, if
. FSs absolutely comply will all IFRSs

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General features

- departure from IFRSs when:

. compliance with IFRS results in misleading
FS (very rare) &
. regulatory environment does not prohibit.

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General features
- if there has been departure,
. disclose that management has concluded that
FS present fairly
. confirm compliance except for departure
. indicate IFRS departed from
. disclose financial effects of departure

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General features
 Going concern
- FSs should be prepared on a going concern basis
unless management intends to liquidate, cease
trading or has no realistic alternative but to do so.
- IAS 1 requires management to make an assessment
of an entity`s ability to continue as a going concern
at the time of the preparation of FSs.

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General features
- in assessing whether the going-concern assumption
is appropriate;
* management takes into account all available
information about the future,
* which is at least 12 months from the end of the
reporting period.
- any uncertainties about the entity`s ability to
continue as a going concern must be disclosed.

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General features
- If it is concluded that the entity is not a going
concern , disclose:
* the fact that FSs not on going concern basis
* basis on which FSs have been prepared
* reasons why entity not considered going
concern

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General features
 Accrual basis of accounting
- FSs except for cash flow information, should be
prepared using the accrual basis of accounting.
- This leads assets, liabilities, equity, income and
expenses (i.e. elements FSs) being recognised;
* when they satisfy the definitions & recognition
criteria per The Conceptual Framework.
* This would be when the event occurs and not
when cash is received or paid.
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General features
 Materiality & aggregation
- Information is material if :
* omitting, misstating or obscuring it
* could reasonably be expected to influence
* the decisions that the primary users
* of general purpose FSs make
* on the basis of those FSs,
* which provide financial information
* about a specific reporting entity.
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General features
- IAS1 requires entities to separately disclose each
material class of similar items
- items of dissimilar nature or function are disclosed
separately unless immaterial
- aggregate immaterial dissimilar items

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General features
 Offsetting
- should not occur unless an IFRS
. requires offsetting or permits offsetting,
. if this will reflect the substance of
. the transaction
- offsetting, except when this reflects the substance
of the transaction, detracts from the ability of
users both to understand the transactions that have
occurred, & to assess future cash flows.
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General features
 N.B.
- when measuring assets,
. net of valuation allowances or
. obsolescence allowances on inventories, or
. doubtful debts allowances on receivables
- is not offsetting.

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General features (8)
 Frequency of reporting
- produce FS at least annually
- if year –end changed resulting reporting period
longer or shorter than a year;
- disclose
. reason for a longer or shorter period &
. the fact that current year figures are not
entirely comparable with prior periods

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General features (8)
 N.B. current year SOFP figures will be
entirely comparable to prior year because of
‘at’ but SPLOCI would not be comparable
because of ‘for’

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General features (8)
 Comparable information
- numerical information presented must be
accompanied by
- comparative information for the preceding period
- same applies to narrative & descriptive information
- thus entity should present, as a minimum, 2 SFP,
2 SPLOC1; 2 SCF; 2 SCE; & related notes.

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General features
- When an entity:
* applies an accounting policy retrospectively or
* makes a retrospective restatement of items in
its FSs or
* when it reclassifies items in its FSs,
* it shall present, as a minimum,
* 3SFP, 2 SPLOC1; 2 SCF; 2 SCE; & related
notes.

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General features
- Sometimes entities change presentation or
classification in their FSs, then
* comparative amounts should be reclassified,
unless impracticable (see IAS 8).
* When comparative amounts are reclassified, an
entity should disclose:
> the nature of the reclassification;
> the amount of each item (or class of
items) that is reclassified; &
> the reason for the reclassification.
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General features
- When it is impracticable to reclassify comparative
amounts, the shall disclose:
* reason for not reclassifying amounts; &
* nature of the adjustments, that would have
been made, if the amounts had been
reclassified.

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General features
 Consistency of presentation
- retain presentation &classification
- between periods

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Structure & content: FS in general
 An entity’s annual report include
- FS & other information, e.g.
. audit report (legal requirement)
. value-added statement (voluntary)
. environmental report (community
concerns)
- IFRSs apply to FS only
- as such FS must be clearly identified

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Structure & content: FS in general
- in addition to identification of each statement,
- prominently display
. name of reporting entity including (any change
from a previous name);
. whether FS are for individual entity or group;
. reporting period;
. presentation currency &
. level of rounding off used

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Structure & content: SFP
 Current versus non-current
- As &Ls should be presented as either:
* current or non-current except when
* presentation based on liquidity provides
info. that is more relevant (financial institutions)
- When the exception applies, all As & Ls should be
presented broadly in order of liquidity.
 If line item combines items to be recovered (or settled)

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Structure & content: SFP
- If line item combines
* items to be recovered (or settled) in less than
12 months &
* items to be recovered or settled in more than
12 months,
* the amount expected to be recovered (or
settled) after more than twelve months should
be disclosed.

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Structure & content: SFP
 Current assets are those
- expected to be realised within 12 months of RD
- held primarily for purpose of being traded
- expected to be used/realised/sold within OC
- that are cash or CE (unless use restricted)
N.B. operating cycles is the time between acquisition of raw materials &
their realisation into cash or cash equivalents
 Non-current assets are those that are not current assets

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Structure & content: SFP
 Current liabilities are those:
- expected to be settled within 1 yr of RD
- are held mainly to trade
- expected to be settled within OC or
- entity does not have an unconditional right
to defer settlement beyond 1 yr of RD

 Non-current liabilities are those that are not current

liabilities

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Structure & content: SFP
- entity does not have an unconditional right
to defer settlement beyond 1 yr of RD
 Non-current liabilities are those that are not current
liabilities
 Refinancing a liability (can affect current /non current class.)
- means postponing due date for repayment
- there are 2 instances where possibility of
refinancing used to avoid classifying as current

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Structure & content: SFP
* existing loan agreement includes option to
refinance where:
> delay at least 12 months post RD
> option at entity’s discretion (e.g. not bank)
> entity expects to refinance or roll
> classify as noncurrent.
* agreement before yr end allowing repayment
delay beyond 1yr after RD = noncurrent

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Structure & content: SPLOCI
 Present all recognised items of I/E either
- in a single statement or
- two separate statements
- classify expenditure items by nature (raw
material, staffing costs, depreciation etc.) or
- function (cost of sales, selling, administrative etc.)

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Structure & content: SPLOCI

- If by function, then disclose additional information

on the nature of expenses ; at a minimum
* depreciation,
* amortisation &
* employee benefit expenses

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Structure & content: SPLOCI
- When items of I/E are material, their nature &amnt
should be disclosed separately. e.g
* write-downs of inventories to NRV, or of
PPE to RA (as well as reversals);
* restructurings of the activities of entity (and
reversals of any provisions for the costs of
restructuring);
* disposals of items of PPE
* disposals of investments;
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Structure & content: SPLOCI

* disposals of items of PPE

* disposals of investments;
* discontinuing operations;
* litigation settlements; &
* other reversals of provisions

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Structure & content: SPLOCI

 Other comprehensive income

- comprises items of I/E not recognised in P/L e.g.
* revaluation surplus relating to PPE
* remeasurement of defined benefit plans
* gains /losses on translating FSs of foreign
operations.

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Structure & content: SPLOCI

- reclassification adjustments
* are amnts reclassified to P/L current period
* previously recognised in OCI

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Structure & content: SPLOCI
- total comprehensive income is:
* change in equity during period
* resulting from transactions & other events
* other than those changes resulting from
* transactions with owners as owners

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Structure & content: SPLOCI
- classify OCI items as either
* not to subsequently be reclassified to P/L e.g.
> gains on property revaluation
> remeasurement of defined benefit plans
> gains or losses on FA at FVOCI
> income tax relating to items that will
not be reclassified.
OR

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Structure & content: SPLOCI

* subsequently to be reclassified to P/L e.g.

> exchange differences
> cash flow hedges
> income tax relating to items that may be
reclassified to P/L

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Structure & content: SPLOCI
- classify OCI items as either
* net of related tax effect or
* before related tax , then separately aggregate
related tax
- reclassification adjustments either on face or in
the notes
- notion of extraordinary items has been abandoned

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Structure & content: SPLOCI
 Dividends paid & related dividends per share
should be presented either:
. on the face or
. in the notes

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Structure & content: SCE
 Reconciliation of equity at the beginning & end of the
reporting period
 Includes
- TCI for period separated between amounts:
* attributed to the owners of the parent &
* non-controlling interest
- effect of retrospective restatements &;
- transactions with owners in that capacity
. e.g. issue of shares, dividends paid

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Structure & content: SCF
 IAS 1 does not cover SCF as it is dealt with in its own
standard IAS7

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Structure & content: Notes
 Basis of preparation of FS
 Specific accounting policies applied
 Present info required by IFRS not already presented
elsewhere
 Supporting info for items presented in FS
 Additional info on items not presented in FS
 Sources of estimation uncertainty
 Disclosures regarding capital

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Changes

 The IASB has amended the definition of material

effective for annual periods beginning on or after 1
January 2020, with earlier application permitted.
 References to the Conceptual Framework
- have been amended to refer to Framework 2018.
- the amendment is effective for annual periods
- beginning on or after 1 January 2020,
- with earlier application permitted.

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Changes

 IAS 1 is also being reviewed by the IASB

- as part of the Disclosure Initiative & Primary
Financial Statement projects.

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Discussion questions

 QUESTION
a. Comfort Fly Ltd builds planes for the airlines industry. It
takes approximately 15 months to build a plane. Comfort Fly
Ltd’s management presents a classified statement if financial
position to distinguish its current and non-current assets and
liabilities. The entity carries inventories that it expects to
realize in 15 months as current.

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Discussion questions

Required
Explain whether an entity can carry inventories that it does
not expect to realize within 12 months as current assets in its
statement of financial position

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Discussion questions
b. Are the following statements true or false? Where
necessary, elaborate.
i. IAS 1 – Presentation of financial statements –
applies to all financial statements prepared and
presented in accordance with IFRS’s

ii. Profit or loss is the total income less expenses,

excluding the components of other comprehensive
income.

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Discussion questions
iii. Total comprehensive income comprises of all
components of ‘profit or loss’ and ‘other comprehensive
income’.
iv. An entity may present the components of profit or loss
either as part of a single statement of comprehensive
income or in a separate statement.
v. When an entity applies an accounting policy
retrospectively it shall present as a minimum three
statements of financial position, two of each of the other
statements and related notes.

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Discussion questions
vi. Deferred tax assets (liabilities) are classified as
current assets (liabilities) in the statement of financial
position.
vii. When an entity breaches a provision of a long-term
arrangement on or before end of reporting period with
the effect the liability becomes payable on demand, it
classifies the liability as current, even if the lender
agreed, after the reporting period and before authorization
of the financial statements for issue, not to demand
payment as a consequence of the breach.

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Discussion questions
viii. A description of the nature and purpose of each
reserve with equity shall be disclosed either in the
statement of changes in equity or in the notes
xi. Income and expenses of an extraordinary nature can be
disclosed as extraordinary items in the notes.
x. Reclassification adjustments are amounts reclassified
to profit or loss in the current period that were
recognised in other comprehensive income in the
current or previous periods.

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Discussion questions
xi. An entity shall present the amount of dividends
recognised as distributions to the owners and the
related amount per share in the statement of profit or
loss and other comprehensive income.
xii. An entity shall disclose information about the
assumptions it makes about future, and major
sources of uncertainty at the end of the reporting
period.

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Discussion questions
xiii. An entity shall disclose information that enables users of
its financial statements to evaluate the entity’s objectives,
policies and process of managing capital.
xiv. An entity may present an analysis of expenses
recognised in profit or loss using a classification based
on either their nature or their function within the
entity, whichever provides information that is
reliable and more relevant.
xv. Discuss the disclosure requirement regarding ‘other
comprehensive income’

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Discussion questions

Solutions
a) Yes. Comfort Fly Ltd should classify the inventories as current
assets, as its expects to realise the receivables in the normal
course of its 15 months operating cycle. Operating cycle means
the period between purchasing the asset and converting it into
cash or cash equivalent.

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Discussion questions
b)
i. False. IAS1is designed for general purpose financial
statements and is not applicable to all financial statements,
e.g. interim financial statements.
ii. True
iii. True
iv. True
v. True
vi. False. Deferred tax assets (liabilities) shall not be classified
as current assets (liabilities) in the statement of financial
position.

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Discussion questions
vii. True. This would be a non-adjusting event after reporting
date.
viii. False. The description of the nature and purpose of each
reserve within equity shall be disclosed either in the
statement of financial position or statement of changes in
equity
ix. False. An entity shall not present items of income or expense
as extraordinary items, in the statement of profit or loss and
other comprehensive income. Or in notes.

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Discussion questions

x. True.
xi. False. The entity shall present the amount of dividends
recognise as distributions to the owners during the period and
related amount per share in the statement of changes in
equity or in notes.
xii. True
xiii. True
xiv. True

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Discussion questions

xv. IAS1 requires an entity to disclose the amount of income tax

relating to each component of other comprehensive income,
including reclassification adjustments, either in the statement
of profit or loss and other comprehensive income or in the
notes.

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