IAS 1 Summary Notes

IAS 1 Presentation of Financial Statements

COMPLETE SET OF FINANCIAL STATEMENTS

A complete set of financial statements comprises:

1. a statement of financial position
2. a statement of profit or loss and other comprehensive income
3. a statement of changes in equity
4. a statement of cash flows (covered separately under IAS 7)
5. Notes to financial statements including accounting policies (not examined)

IAS 1 does not make it mandatory to use the above titles. It is likely in practice that many
companies will continue to use the previous terms of balance sheet etc.

COMPREHENSIVE FORMAT – BASIC LEVEL UNCONSOLIDATED

ABC PLC
Statement of profit or loss and other comprehensive income
For the year ended 31 December ______
$
Revenue IFRS 15 XXX
Cost of sales (XXX)
Gross profit XX
Administrative expenses (XX)
Distribution expenses (XX)
Exceptional items IAS 1 (XX)
Operating profit XX
Finance cost (XX)
Other income X
Profit before tax XXX
Taxation IAS 12 (X)
Profit after tax XXX
Profit (loss) on discontinued operations IFRS 5 XX
Profit for the period XX

Other comprehensive income

Gain (loss) on revaluation IAS XX
16/38
Gain (loss) on investments (FVTOCI) IFRS 9 XX
Other comprehensive income XX
Total comprehensive income XXX

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IAS 1 Summary Notes

ABC PLC
Statement of Changes in equity
For the year ended 31 December ______
Share Share Revaluation Other Retained
Total
Capital premium surplus reserves earnings
$ $ $ $ $ $
Balance as at 1 January XX XX XX XX XX XXX
Correction of prior period error (IAS 8) (X)
Change in accounting policy (IAS 8) X
XX XX XX XX XX XXX
Issue of shares XX XX XX
Total comprehensive income XX XX XX XX
Incremental depreciation (IAS 16/38) (XX) XX
Dividends (XX) (XX)
Balance as at 31 December XXX XXX XX XX XX XXX

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IAS 1 Summary Notes

ABC PLC
Statement of Financial Position
As at 31 December ______
Non-current assets $
Property, plant and equipment IAS 16 XX
Investment property IAS 40 XX
Investments (esp. FVTOCI) IFRS 9 XX
Intangible assets IAS 38 XX
Deferred tax asset IAS 12 XX
XXX
Current assets
Non-current assets held for sale IFRS 5 XX
Inventories IAS 2 XX
Due from customers under construction contract IAS 11 XX
Trade receivables XX
Cash and bank balances XX
XXX
Total assets XXX

Equity
Share capital XX
Share premium XX
Revaluation Surplus IAS XX
16/38
Other reserves IFRS 9 XX
Retained earnings XX
XXX
Non-current liabilities
Loan notes, redeemable preference shares & long term loans IFRS 9 XX
Deferred government grant IAS 20 XX
Finance lease obligation IAS 17 XX
Long term provisions IAS 37 XX
Deferred tax liability IAS 12 XX
XXX
Current liabilities
Trade and other payables XX
Deferred government grant IAS 20 XX
Finance lease obligation IAS 17 XX
Due to customers under construction contract IAS 11 XX
Current tax payable IAS 12 XX
Short term provisions IAS 37 XX
Short term borrowings / Bank overdraft XX
XXX
Total equity and liabilities XXX

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IAS 1 Summary Notes

IMPORTANT POINTS
An asset or liability is classified as current if:
Current vs.
 It will be settled within 12 months of the reporting date
non-current
 It is part of the entity’s normal operating cycle.
Statement of This provides a summary of all changes in equity arising from transactions with
changes in owners in their capacity as owners.
equity

EXCEPTIONAL ITEMS
These are material items of income and expense of such size or nature that
Definition
disclosure is necessary to understand entity’s financial performance.
Generally, these items are included in standard income statement line and their
Accounting nature and amount is disclosed in notes.
treatment However, in some cases, it may be more appropriate to show the item separately on
the face of income statement.
 Write down to NRV  Restructuring  Litigation settlement
Examples  Impairment loss  Gain / loss on  Reversal of provisions
disposal

HOW TO SOLVE EXAM QUESTION

Step 1 Prepare the format
Step 2 Post the trial balance figures (as per TB sequence) in the formats
Step 3 Pass and post the journal entries for adjustments in the format
Step 4 Calculate sub totals and totals.

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IAS 1 Summary Notes

EXAMPLE 1A
The following trial balance relates to Moon plc, a publicly listed company, at 30 September 2010:
$ $
Revenue (net) 280,000
Inventories at 01 October 2009 54,000
Purchases (net) 175,000
Dividends paid 20,000
Administrative expenses 40,000
Interest paid 5,000
Bank Charges 1,000
Distribution costs 7,000
Other income 2,000
Land 100,000
Building – cost 70,000
Plant and equipment – cost 50,000
Accumulated depreciation – building 47,000
Accumulated depreciation – plant and equipment 20,000
Ordinary share capital of $1 each 150,000
Share premium 15,000
Retained earnings 01 October 2009 17,000
Revaluation Surplus 01 October 2009 5,000
Loan notes (Redemption date October 2015) 50,000
Deferred tax liability 12,000
Trade receivables 53,000
Bank 35,000
Trade payables 12,000
610,000 610,000

The following have not yet been recorded:

(a) The inventory at 30 September 2010 is $ 49,000.
(b) Land has been revalued on 30 September 2010 at $120,000
(c) The building is to be depreciated at 10% of cost using straight line basis. Plant and
equipment are to be depreciated 20% reducing balance method. The 60% depreciation
relates to production and remaining relates to administrative expenses.
(d) The company issued 1 for 3 right shares at end of the year at $1.5 per share but no entry
has been passed.
(e) The current income tax for the year is $18,000. The deferred tax liability need not be
adjusted.

Required:
Prepare the draft statement of profit or loss and other comprehensive income, statement of
changes in equity and statement of financial position along with relevant workings.

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IAS 1 Summary Notes

EXAMPLE 1B
The following trial balance relates to Jupiter Limited at 31 March 2009:
$000 $000
Administrative expenses 170
Interest paid 5
Share capital of $1 each 200
Dividend 6
Cash at bank and in hand 9
Income tax (remaining balance from previous year) 10
Distribution costs 193
Revaluation surplus (1 April 2008) 40
Land and building (Land $110; Building $100) 210
Accumulated depreciation – Land and building 48
Plant and machinery 125
Accumulated depreciation 75
Retained earnings (1 April 2008) 270
Loan 80
Purchases 470
Sales 1,300
Inventory (1 April 2008) 150
Trade payables 60
Trade receivables 725
2,073 2,073

Additional information:
(a) Inventory at 31 March 2009 was valued at $250,000
(b) Buildings and plant and machinery are depreciated on a straight line basis (assuming no
residual value) at the following rates (on cost):
Buildings 5%
Plant and machinery 20%

The depreciation charge is to be apportioned as follows:

Cost of sales 60%
Distribution expenses 20%
Administrative expenses 20%

(c) There were no purchases or sales of property, plant and equipment during the year.
(d) Income taxes for the year to 31 March 2009 are estimated to be $135,000
(e) The previous revalued amount of land was $110,000. However, due to recent slump in
property market the revalued amount at the year-end has been estimated at $95,000 only.
(f) The loan is repayable in five years.

Required:
Prepare the draft statement of profit or loss and other comprehensive income, statement of
changes in equity and statement of financial position along with relevant workings.

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IAS 1 Summary Notes

ANSWER 1A
Moon PLC
Statement of profit or loss and other comprehensive income
For the year ended 30 September 2010
$
Revenue 280,000
Cost of sales $(54,000+175,000 – 49,000 J1 + 7,800 J3) (187,800)
Gross profit 92,200
Administrative expenses $(40,000+5,200 J3) (45,200)
Distribution expenses (7,000)
Finance cost $(5,000 + 1,000) (6,000)
Other income 2,000
Profit before tax 36,000
Taxation J5 (18,000)
Profit after tax 18,000

Other comprehensive income

Gain (loss) on revaluation J2 20,000
Other comprehensive income 20,000
Total comprehensive income 38,000

MOON PLC
Statement of Changes in equity
For the year ended 30 September 2010
Share Share Revaluation Retained
Total
Capital premium surplus earnings
$ $ $ $ $
Balance as at 1 October 2009 150,000 15,000 5,000 17,000 187,000
Issue of shares J4 50,000 25,000 75,000
Total comprehensive income 20,000 18,000 38,000
Dividends (20,000) (20,000)
Balance as at 30 September 2010 200,000 40,000 25,000 15,000 280,000

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IAS 1 Summary Notes

MOON PLC
Statement of Financial Position
As at 30 September 2010
Non-current assets $
Property, plant and equipment $100,000+70,000+50,000 – 47,000 – 20,000 +
20,000 J2 – 13,000 J3 160,000

Current assets
Inventories J1 49,000
Trade receivables 53,000
Cash and bank balances $35,000 + 75,000 J4 110,000
212,000
Total assets 372,000

Equity
Share capital 200,000
Share premium 40,000
Revaluation Surplus 25,000
Retained earnings 15,000
280,000
Non-current liabilities
Loan notes 50,000
Deferred tax liability 12,000
62,000
Current liabilities
Trade and other payables 12,000
Current tax payable J5 18,000
30,000
Total equity and liabilities 372,000

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IAS 1 Summary Notes

$
JOURNAL ENTRIES & WORKINGS
Dr. Cr.

Inventories 49,000
(a) 1
COS 49,000
Closing inventory recorded

PPE (Land) 20,000

(b) 2
Gain or revaluation 20,000
Gain on revaluation recognised.

COS (60%) 7,800

(c) 3 Administrative expenses (40%) 5,200
PPE (Accumulated depreciation) 13,000

$
Depreciation on Building $70,000 x 10% 7,000
Depreciation on Plant $50,000 – 20,000 = $30,000 x 6,000
20%
13,000

Bank 75,000
(d) 4 Share capital 50,000
Share premium 25,000
150,000 shares x 1/3 = 50,000 shares
50,000 shares x $1 = $50,000 share capital
50,000 shares x $0.5 = $25,000 share premium
50,000 shares x $1.5 = $75,000 cash received

Income tax expense 18,000

(e) 5
Current tax payable 18,000
The provision for current income tax.

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IAS 1 Summary Notes

ANSWER 1B
Jupiter Limited
Statement of profit or loss and other comprehensive income
For the year ended 31 March 2009
$000
Revenue 1,300
Cost of sales $(470 + 150 – 250 J1 + 18 J2) (388)
Gross profit 912
Administrative expenses $(170 + 6 J2) (176)
Distribution expenses $(193 + 6 J2) (199)
Finance cost (5)
Profit before tax 532
Taxation $(10 + 135 J3) (145)
Profit after tax 387

Other comprehensive income

Loss on revaluation J4 (15)

Total comprehensive income 372

Jupiter Limited
Statement of Changes in equity
For the year ended 31 March 2009
Share Revaluation Retained
Total
Capital surplus earnings
$000 $000 $000 $000
Balance as at 1 April 2008 200 40 270 510
Total comprehensive income (15) 387 372
Dividends (6) (6)
Balance as at 31 March 2009 200 25 651 876

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IAS 1 Summary Notes

Jupiter Limited
Statement of Financial Position
As at 31 March 2009
Non-current assets $000
Property, plant and equipment $210 – 48 + 125 – 75 – 30 J2 – 15 J4 167

Current assets
Inventories J1 250
Trade receivables 725
Cash and bank balances 9
984
Total assets 1,151

Equity
Share capital 200
Revaluation Surplus 25
Retained earnings 651
876
Non-current liabilities
Loan 80

Current liabilities
Trade and other payables 60
Current tax payable J3 135
195
Total equity and liabilities 1,151

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IAS 1 Summary Notes

$000
JOURNAL ENTRIES & WORKINGS
Dr. Cr.

Inventories 250
(a) 1
COS 250
Closing inventory recorded

COS (60%) 18
Distribution costs (20%) 6
(b) 2
Administrative expenses (20%) 6
PPE (Accumulated depreciation) 30

$
Depreciation on Building $100 x 5% 5
Depreciation on Plant $125 x 20% 25
30

Income tax expense 135

(d) 3
Current tax payable 135
The provision for current income tax.

Loss on revaluation 15
(e) 4
PPE (Land) 15
Loss on revaluation recognised $110 – 95 = $15

Dated: 11 August 2016

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