Lexine Dara E.

Comia Accy1a

Unit II: PAS 1

I. Purpose of Financial Statements

A. Financial statements must be presented fairly.
1. It must faithfully represent the effects of the transactions in accordance with the
definition and recognition of the financial elements set forth in the Framework.
2. It is achieved fairly with the application of PFRSs because it helps in making a
precisely and clearly expressed statement in the notes.
B. Situations that the entity should be wary of in handling financial statements.
1. In extremely rare situations, complying with the PFRS can be misleading so a
financial statement is required to depart from PFRS because it would create
conflict with the objective it sets out in the Framework.
2. PAS 1 requires a series of disclosure if management decides that an entity is not
going concern.
3. In regards with the materiality and aggregation, dissimilar items may be
aggregated only if they are individually immaterial.
C. Considerations for Statement Presentation
1. PAS 1 requires an entity to prepare its financial statements, except for cash flow
information, using the accrual basis of accounting.
2. There is a presumption that financial statements should be prepared, at least,
annually.

II. Components of Financial Statements

A. Statement of financial position must be prepared at the end of the period.
1. An entity must normally present a classified statement of financial position,
separating current and noncurrent assets and liabilities. Although its distinction is
not required.
B. Statement of comprehensive income must be prepared at the end of the period.
1. It should disclose the profit or loss for the period attributable to, in which,
expenses are deducted by revenue.
2. It should disclose the total comprehensive income for the period attributable to
where the items of income and expenses including reclassification adjustments
(RA) that are not included in Profit and Loss are required by a standard for
interpretation.
3. Analysis of the entity’s expense should be presented based on either the nature
of expenses or their function within the entity.
4. It shall not present any items of either income and expense as extraordinary
items.
C. Statement of changes in equity must be prepared at the end of the period.
1. It should present the statement of changes in equity, the amount of dividends
recognized as distributions to owners during the period, and the related amount
per share.
 D. Statement of Cash Flows
1. It shows the ability of an entity to generate cash and cash equivalents.
2. It shows the needs of the entity to make use of its cash flows.
E. Notes to the Financial Statements
1. It should present information about the specific accounting policies used.
2. It should present additional information that is not shown on the other financial
statements.

F. Additional Statement of Financial Position.

1. It should present additional information that is not shown on the financial position
but is only required when certain instances occur.

Reference:
A PDF of the Presentation of Financial Statements (PAS 1)