CHAPTER 2

PRESENTATION OF FINANCIAL STATEMENTS

IAS 1

VLU – 2022 GV: Phan Minh Nguyệt

 CONTENT

1. Purpose and components of financial statements

2. Principles of Financial Reporting

3. Structure and content

2
 Related Standards

 IFRS 5 Non-current Assets Held for Sale and Discontinued

Operations

 IFRS 7 Financial Instruments: Disclosures

 IAS 8 Accounting Policies, Changes in Accounting

Estimates and Errors

3
 2.1 INTRODUCTION

• Relate to legal and conceptual frameworks for financial reporting

• Principles of financial reporting (See Section 2.2)

• Structure and content of financial statements (IAS 1 Presentation of

Financial Statements) (See Section 2.3)
 2.2 PRINCIPLES OF FINANCIAL REPORTING

• The purpose of financial statements is to provide information about the

financial position, financial performance and cash flows of an entity
that is useful to a wide range of users in making economic decisions
• IAS 1 Presentation of Financial Statements
 Prescribes the basis for the presentation of general purpose financial
statements to ensure comparability between the enterprise’s own
financial statements of previous periods and with the financial
statements of other enterprises
 Applies to the presentation of all general purpose financial statements
prepared and presented in accordance with IASs/IFRSs
2.2 PRINCIPLES OF FINANCIAL REPORTING

• Fair presentation and compliance with IASs/IFRSs

• Going concern
• Accruals basis of accounting
• Consistency of presentation
• Materiality and aggregation
• Offsetting
• Comparative information
 2.2 PRINCIPLES OF FINANCIAL REPORTING

Fair presentation and compliance with IASs/IFRSs

• Financial statements are required to present fairly the financial position, financial
performance and cash flows of an enterprise

• Compliance with IASs/IFRSs will result in financial statements that achieve fair
presentation in virtually all circumstances

• If financial statements comply with IASs/IFRSs, they must state that fact

• Financial statements must not be described as complying with IASs/IFRSs unless

they comply with each applicable IAS/IFRS and each applicable SIC
Interpretation
 2.2 PRINCIPLES OF FINANCIAL REPORTING

Fair presentation and compliance with IASs/IFRSs

• Fair presentation override

Non-compliance with a requirement in a standard is permitted where, in
management’s opinion, compliance would be misleading and would not
give a fair presentation
This is expected to be extremely rare and would need to be accompanied
by detailed disclosures outlining the reason for, the nature of, and the
financial effect of the non-compliance
 2.2 PRINCIPLES OF FINANCIAL REPORTING

Going concern
• Going concern must be assessed at each reporting date and must be
prepared on that basis, unless management either intends to liquidate the
enterprise or to cease trading, or has no realistic alternative

• If going concern basis is not applied, must state that fact, explain why and
state the basis on which the financial statements have been prepared
 2.2 PRINCIPLES OF FINANCIAL REPORTING

Accruals basis of accounting

• The accrual basis should be applied in the preparation of financial

statements, except the statement of cash flows
 2.2 PRINCIPLES OF FINANCIAL REPORTING

Consistency of presentation

• The presentation and classification of items should be retained from one

period to the next unless:
 the enterprise significantly changes the nature of its operations or
identifies that a change will result in a more appropriate presentation
 a change is required by an IAS/IFRS or a SIC Interpretation
 2.2 PRINCIPLES OF FINANCIAL REPORTING

Materiality and aggregation

• IASs/IFRSs apply to only material items

• Material items should be presented separately

• Immaterial items are to be aggregated with amounts of a similar nature

and function
 2.2 PRINCIPLES OF FINANCIAL REPORTING

Offsetting

• Not permitted in respect of assets and liabilities unless specifically

required or permitted by another IAS/IFRS
• Income and expense items are to be offset only:
if an IAS/IFRS requires or permits; or
gains, losses and related expenses arising from the same or similar
transactions and events are not material
 2.2 PRINCIPLES OF FINANCIAL REPORTING

Comparative information

• Comparatives are required for the previous period unless specifically

exempted in another IAS/IFRS
• Comparatives must be reclassified if the presentation and
classification in the financial statements is amended, unless it is
impracticable to do so
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

• The annual report and financial statements consist of:

 The financial statements
o Statement of financial position
o Statement of profit or loss and other comprehensive income
o Statement of changes in equity
o Statement of cash flows.
 Notes to the financial statements, including accounting policies
 Other narrative information (e.g. directors’ report)
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

• The financial statements must be clearly identified and distinguished from

other information in the financial report
• Each component of the financial statements must be clearly identified and the
following disclosed:
 Name of the enterprise
 Whether individual or consolidated statements
 Reporting date or period covered by the statement
 Reporting currency
 The level of precision in the presentation of figures
• Where, in exceptional circumstances, an enterprise is required to, or decides
to, change its reporting date, it is required to state why the change occurred
and the fact that the comparative amounts are not comparable
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of financial position

• IAS 1 specifies the asset, liability and equity line items that must, as a
minimum, be presented on the face of the SFP
• Additional line items, headings and sub-totals are to be presented on the
face of the SFP if required by another IAS or if considered necessary to
present fairly the enterprise’s financial position
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of financial position

• Further sub-classifications of the line items presented on the face of the
SFP can be given, with amounts payable to and receivable from related
parties being disclosed separately
• Assets and liabilities can be presented either on a current/non-current
basis or in order of their liquidity
• Must disclose the amounts of assets and liabilities expected to be
recovered or settled after more than twelve months from end of
reporting period
• Detailed disclosures relating to equity line items are required
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of financial position

• Current assets are assets that are:

 expected to be realised, consumed or disposed of in the normal
course of the enterprise’s operating cycle; or
 held primarily for trading purposes or the short-term and expected
to be realised within 12 months of end of reporting period; or
 a cash or cash equivalent asset not restricted in its use
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of financial position

• Current liabilities are liabilities that are:

 expected to be settled in the normal course of the enterprise’s
operating cycle; or
 due to be settled within 12 months of end of reporting period

• Long-term borrowings continue to be classified as long-term even if due

for settlement within 12 months provided that the enterprise has the
intention and ability to ‘roll over’ the obligation
2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS
Example: Statement of Financial Position
XYZ Group – Statement of Financial Position as at 31st December 2014
(excluding comparatives)

2014 2014
€’000 €’000
ASSETS
Non-current Assets
Property, plant and equipment X
Goodwill X
Other intangible assets X
Investments in associates X
Biological assets X
X
Current Assets
Inventories X
Trade and other receivables X
Prepayments X
Cash and cash equivalents X
X
Total Assets X
2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS
Example: Statement of Financial Position
XYZ Group – Statement of Financial Position as at 31st December 2014
(excluding comparatives) 2014 2014
€’000 €’000
EQUITY AND LIABILITIES
Equity Attributable to Owners of the Parent
Issued share capital X
Retained earnings X
Other components of equity X
X
Non-controlling interests X
Non Current Liabilities
Long-term borrowings X
Deferred tax X
Provisions X
X
Current Liabilities
Bank overdraft X
Trade and other payables X
Current portion of long-term borrowings X
Tax payable X
X
Total Equity and Liabilities X
2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of profit or loss and other comprehensive income

• IAS 1 specifies the line items that, as a minimum, should be

presented on the face of the SPLOCI
• Additional line items, headings and sub-totals are to be presented on
the face of the SPLOCI if required by another IAS/IFRS or if
considered necessary to present fairly the enterprise’s financial
performance
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of profit or loss and other comprehensive income

• Additional information disclosed on face of the SPLOCI or in the notes

An analysis of expenses using a classification based on either the nature
of expenses or their function within the enterprise
If functional classification adopted, must also disclose information on
the nature of expenses, including depreciation and staff costs
Dividends per share (declared or proposed)
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of profit or loss and other comprehensive income

(a) revenue;
(b) finance costs;
(c) shareof the profit or loss of associates and joint ventures
accounted for using the equity method;
(d) tax expense;
(e) a single amount comprising the total of:
(i) the post-tax profit or loss of discontinued operations and
(ii) the post-tax gain or loss recognized on the measurement to fair value less costs to sell or on the disposal of
the assets or disposal group(s) constituting the discontinued operation;
(f) profit or loss;
(g) each component of other comprehensive income classified by nature (excluding amounts in (h));
(h) share of other comprehensive income of associates and joint ventures accounted for using the equity method;
and
(i) total comprehensive income.
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of profit or loss and other comprehensive income

Total comprehensive income:
…the change in equity during a period resulting from transactions and other
events, other than those changes resulting from transactions with owners in their
capacity as owners.

includes all components of profit or loss and of other comprehensive income as

noted above
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of profit or loss and other comprehensive income

Other Comprehensive Income:
1.changes in the revaluation surplus for property, plant
and equipment and intangible assets,
2.certain actuarial gains/losses on defined benefit plans,
3.gains/losses arising on translation of financial
statements of foreign operations,
4.gains/losses arising from remeasuring available for sale securities and
5.gains/losses on cash flow hedges.
(IASCF, IAS 1.7)
2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of profit or loss and other comprehensive income

• Example: Statement of Profit or Loss and Other Comprehensive Income
XYZ Group – Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 31st December 2014 (excluding comparatives)
(classification of expenses by function)
2014
€’000
Revenue X
Cost of sales (X)
Gross profit X
Other operating income X
Distribution costs (X)
Administrative expenses (X)
Profit from operations X
Finance costs (X)
Share of profit/(loss) of associates X
Profit before tax X
Income tax expense (X)
Profit for the year X
Other Comprehensive Income:

Continued ....
2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS
Statement of profit or loss and other comprehensive income
• Example: Statement of Profit or Loss and Other Comprehensive Income
XYZ Group – Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 31st December 2014 (excluding comparatives)
(classification of expenses by function) 2014
€’000
Other comprehensive income:
Items that may be reclassified into profit or loss:
Foreign exchange gains arising from the translation of foreign operations X
Items that will not be reclassified into profit or loss
Gain/(loss) on property revaluation X
Other comprehensive income for year X
Total comprehensive income for year X

Profit/(loss) attributable to:

Owners of the parent X
Non-controlling interests X
X

Total comprehensive income/(loss) attributable to:

Owners of the parent X
Non-controlling interests X
X
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of changes in equity

• Third component of a set of financial statements

• Components that make up comprehensive income must not be shown in

the statement of changes in equity (only totals shown)

• Main purpose is to show the amounts of transactions with owners (e.g.

shares and dividends) and to reconcile opening and closing balance of
each equity and reserve
2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Statement of changes in equity

Share Other Retained
Capital Reserves Earnings Total
€’000 €’000 €’000 €’000
Opening balance x x x x
Changes in accounting policy - - x x
Restated balance x x x x

Changes in equity for year

Dividends (x) (x)
Total comprehensive income x x x
Issue of share capital x - - x
Total changes in equity x x x x

Closing balance x x x x
 2.2 STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Notes to the financial statements

• Must include accounting policies, identifying the measurement basis
used in preparing the financial statements and the significant accounting
policies adopted
• Must include other information required by IASs/IFRSs or necessary for
a fair presentation
• Other disclosures include information about the enterprise if not
disclosed elsewhere in information published with the financial
statements (e.g. the domicile and legal form of the enterprise, principal
activities, number of employees)
 SELF STUDY

• Review all the knowledge in this chapter.

• Do all the related exercises in e-learning system
• Continue to learn next chapter

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