Chapter 4

Presentation of
Financial Statements
 Annual reports as a
communication tool

Top source of information for shareholders,

lenders, potential investors etc.

Provide information about the company from

company visions, goals to financial information
and changes in strategy.

Substance over form

Typical structure of an
annual report

Corporate Analysis and

information commentaries

Other
Financial
statements or
statements
disclosures
 Corporate Information
• Short history of company
• Members of board of directors and key
management personnel
• Organization structure
• Awards and accolades
• Key markets and products
• Operating Statistics and financial highlights
 Analysis and
commentaries

5
Other statements and
disclosure
 Financial Statements
Acknowledgement of responsibility for preparing
financial statements by management

Auditor’s report

3 types of opinions:

u Unqualified

u Qualified

u Adverse
 Complete set of financial
statements
Statement of Statement of Statement of
financial comprehensive changes in
position income equity

Statement of
Notes
cash flows
Proper labeling of financial
statements
Name of reporting entity

If consolidated or individual entity’s account

Date of the end of reporting period

Presentation currency used

Level of rounding
Fair presentation and
compliance with IFRS

Faithful representation of effects of transactions

Cannot selectively apply standards and

proclaim compliance with IFRS

Cannot rectify inappropriate policies

By notes or explanatory material

Accrual basis and going
concern

Going concern: Entity intends to, and has ability

to, operate into the foreseeable future.

All financial statements, except cash flow info, to

be prepared using accrual basis.
 Materiality and
Aggregation
Accounts can be aggregated if they are immaterial

An item is material when its omission or misstatement

can influence the economic decisions of users based on
financial statements.
 Offsetting

Not allowed to offset assets and liabilities,

income and expenses

Offsetting is different from netting

Frequency of reporting

Entities are to present financial info at least

annually

Listed companies might have to publish interim

reports
Comparative information
and Consistency of
presentation
Numbers from previous periods must be
disclosed

u Minimum 2 years of information

u Under certain situations, 3 ears

u Comparatives made in narrative and

descriptive information

Firms are expected to maintain presentation and

classification of items period to period
Statement of Financial Position
Statement of Financial Position

Liquidity

Current assets and current liabilities

Statement of financial
postion
Account format

Liabilities
Assets
Equities

Report format Assets

Liabilities
Equities
 Statement of
comprehensive income
Categorizing Expenses
by Nature
Categorizing Expenses by
Function
Key reconciling items
 Accounting changes

Dealt with in IAS 8

Changes due to new accounting standards or

pronouncements

Changes in accounting estimates

Changes in accounting policies

Prior-period errors
Notes to the accounts