MODULE 3

PAS 1 Presentation of Financial Statements

PAS 1 prescribes the basis for presentation of General Purpose financial statements to improve
comparability both with the entity's financial statements of previous periods (intra-comparability) and
with the financial statements of other entities (inter-comparability).

Financial Statements are the “structured representation of an entity’s financial position and results of
operations”
• General purpose financial statements are those intended to serve users who do not have the
authority to demand financial reports tailored for their own needs. General purpose financial
statements cater to most of the common needs of a wide range of external users. General purpose
financial statements are the subject matter of the Conceptual Framework and the PFRSs.
Complete set of financial statements
1. Statement of financial position
2. Statement of profit or loss and other comprehensive income
3. Statement of changes in equity
4. Statement of cash flows
5. Notes
(5a) comparative information in respect of the preceding period; and
6. Additional statement of Financial position (required only when certain instances occur)

General Features
1. Fair Presentation and Compliance with PFRSs - The application of PFRSs, with additional
disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation.
2. Going concern - An entity is not a going concern if, as of the financial reporting date or prior to the
date of authorization of the financial statements for issue, management either:
a. Intends to liquidate the entity or to cease trading, or
b. Has no realistic alternative but to do so.
• The assessment of going concern is at least 12 months.
3. Accrual Basis of Accounting - An entity shall prepare its financial statements, except for cash flow
information, using the accrual basis of accounting.
4. Materiality & Aggregation - Each material class of similar items must be presented separately in the
financial statements.
5. Offsetting - Assets and liabilities, and income and expenses, shall not be offset unless required or
permitted by a PFRS.
 • Measuring assets net of valuation allowances, for example, obsolescence allowances on
inventories, allowances for doubtful accounts on receivables, and accumulated depreciation on
property, plant, and equipment are not offsetting.

6. Frequency of reporting – An entity shall present a complete set of financial statements (including
comparative information) at least annually.
• When an entity changes the end of its reporting period and presents financial statements for a
period longer or shorter than one year, an entity shall disclose the following:
1. The period covered by the financial statements,
2. The reason for using a longer or shorter period, and
3. The fact that amounts presented in the financial statements are not entirely comparable.

7. Comparative Information
An entity shall present comparative information in respect of the preceding period for all amounts
reported in the current period’s financial statements, unless other standards permit or require otherwise.
8. Consistency of presentation - An entity shall retain the presentation and classification of items in the
financial statements from one period to the next unless:
a. it is apparent that another presentation or classification would be more appropriate
following a significant change in the nature of the entity’s operations or a review of its
financial statements; or
b. a PFRS requires a change in presentation.

STATEMENT OF FINANCIAL POSITION

• A statement of financial position may be presented as either
1. Classified – showing distinctions between current and noncurrent assets and liabilities, or
2. Unclassified (based on liquidity) – showing no distinction between current and
noncurrent items

Current Assets
• An entity shall classify an asset as current when:
1. it expects to realize the asset or intends to sell or consume it, in its normal operating
cycle;
2. it holds the asset primarily for the purpose of trading;
3. it expects to realize the asset within twelve months after the reporting period; or
 4. the asset is cash or a cash equivalent unless the asset is restricted from being exchanged
or used to settle a liability for at least twelve months after the reporting period.

Current Liabilities
• An entity shall classify a liability as current when:
1. it expects to settle the liability in its normal operating cycle;
2. it holds the liability primarily for the purpose of trading;
3. the liability is due to be settled within twelve months after the reporting period; or
4. the entity does not have an unconditional right to defer settlement of the liability for at
least twelve months after the reporting period.

Currently maturing long-term liabilities

General rule: Currently maturing long term liabilities are presented as current liabilities.
• Exceptions:
1. Refinancing agreement is fully completed on or before the balance sheet date – non-
current liability
2. Refinancing agreement after the balance sheet date but before the financial statements are
authorized for issue – noncurrent liability if the entity expects, and has the discretion, to
refinance it on a long-term basis under an existing loan facility.
Breach of Loan Agreement
• General rule: A liability that is payable on demand is a current liability.
• Exception: It is presented as non-current liability if the lender provides the entity, on or before
the balance sheet date, a grace period ending at least 12 months after the balance sheet date to
rectify a breach of loan covenant.

Presentation of Deferred taxes

• Deferred tax liabilities (assets) are presented as noncurrent items in a classified statement of
financial position, irrespective of their expected dates of reversal.

Minimum line items in the statement of financial position

a. Property, plant and equipment;
b. Investment property;
c. Intangible assets;
 d. Financial assets (excluding amounts shown under (e), (h) and (i));
e. Investments accounted for using the equity method;
f. Biological assets;
g. Inventories;
h. Trade and other receivables;
i. Cash and cash equivalents;
j. Assets (or disposal groups) classified as held for sale in accordance with PFRS 5;
k. Trade and other payables;
l. Provisions;
m. Financial liabilities (excluding amounts shown under (k) and (l));
n. Liabilities and assets for current tax, as defined in PAS 12 Income Taxes;
o. Deferred tax liabilities and deferred tax assets, as defined in PAS 12;
p. Liabilities included in disposal groups classified as held for sale in accordance with PFRS 5;
q. Non-controlling interests, presented within equity; and
r. Issued capital and reserves attributable to owners of the parent

Order/ Format of Presentation

• PAS 1 does not prescribe the order or format in which an entity presents items.

Statement of profit or loss and other comprehensive income

• An entity shall present all items of income and expense recognized in a period:
1. in a single statement of profit or loss and other comprehensive income; or
2. in two statements: (1) a statement displaying the profit or loss section only (separate
‘statement of profit or loss’ or ‘income statement’) and (2) a second statement beginning
with profit or loss and displaying components of other comprehensive income.
Extraordinary Items
• PAS 1 prohibits the presentation of any items of income or expense as extraordinary items in the
statement(s) presenting profit or loss and other comprehensive income or in the notes.
PAS 1 requires an entity to present information on the following
a) Profit or loss
b) Other comprehensive income
c) Comprehensive income

Other comprehensive income for the period

a. Changes in revaluation surplus
b. Unrealized gains and losses on investments in FVOCI securities
c. Remeasurements of the net defined benefit liability (asset)
d. Gains and losses arising from translating the financial statements of a foreign operation
e. Effective portion of gains and losses on hedging instruments in a cash flow hedge
• OCI may be presented either (a) net of tax or (b) gross of tax.

Reclassification adjustments

• Reclassification adjustments are amounts reclassified to profit or loss in the current period that
were recognized in other comprehensive income in the current or previous periods.

Total comprehensive income

• Total comprehensive income comprises all components of
1. Profit or loss; and
2. Other comprehensive income.
Presentation of Expenses
1. Nature of expense method
2. Function of expense method
• If an entity classifies expenses by function, it shall disclose additional information on the nature
of expenses
Disclosure of dividends
• Dividends declared by an entity are disclosed either in the (a) notes or (b) statement of changes in
equity.

Order of presentation of disclosures in the Notes

1. Statement of compliance with PFRSs;
2. Summary of significant accounting policies applied;
3. Supporting information for items presented in the other financial statements; and
4. Other disclosures.

Amendments to PAS 1, Classification of Liabilities as Current or Non-current

Date Adopted by FRSC February 12, 2020 / August 19, 2020
Effective for annual periods beginning on or after January 1, 2023

The amendments in Classification of Liabilities as Current or Noncurrent (Amendments to IAS 1) affect

only the presentation of liabilities in the statement of financial position not the amount or timing of
recognition of any asset, liability income or expenses, or the information that entities disclose about those
items. They:

 clarify that the classification of liabilities as current or non-current should be based on rights that
are in existence at the end of the reporting period and align the wording in all affected paragraphs
to refer to the "right" to defer settlement by at least twelve months and make explicit that only
rights in place "at the end of the reporting period" should affect the classification of a liability;

 clarify that classification is unaffected by expectations about whether an entity will exercise its
right to defer settlement of a liability; and

 make clear that settlement refers to the transfer to the counter party of cash, equity instruments,
other assets or services.