IAS 1 Presentation of Financial Statements - v2

IAS 1 - Presentation
of Financial
Statements
©2022 Grant Thornton Bharat LLP. All rights reserved.

Agenda
01 02
Objective & Scope Structure of IASB
03 04
Components of Statement of Financial
Financial Statement Position
and Supplementary
statements 06
05 Statement of Changes
in Equity
Statement of Profit or
Loss and Other 08
Comprehensive Income
Notes to the Financial
07 Statements
General Features 09
Definition of Material
2 ©2022 Grant Thornton Bharat LLP. All rights reserved.

Objective & Scope
3
Objective
To prescribe the basis for presentation of general purpose

financial statements in order to ensure comparability with:
• the entity’s own financial statements of previous periods; and
• financial statements of other entities
To achieve this IAS 1 sets out:

• overall requirements for presentation of financial statements;
• guidelines for their structure (i.e. how they should be ordered); and
• minimum content requirements

Scope
Application of IAS 1
❑ To all financial statements of entities with a profit objective.
❑ To consolidated accounts of groups and individual entities.
❑ To all types of commercial, industrial and business reporting

entities, whether public or private including:
• banks and other financial institutions;
• insurance entities.
❑ To public sector business entities with a profit objective.

Structure of IASB
6
Structure of IASB
Monitoring Board
Approve and oversee Trustees
IFRS Foundation
22 trustees appoint, oversee, raise fund
Board 15-16 (maximum 2-3 part time)

Set technical agenda, Approve standards, exposure drafts and
interpretations
IFRS INTERNATIONAL FINANCIAL REPORTING

ADVISORY COUNCIL INTERPRETATIONS COMMITTEE 14
Approx. 40 members members
Appoints
Working groups Report to
For major Agenda Projects Advice

Components of
Financial Statement
and Supplementary
Statements
8
Components of Financial statements
a statement of financial position at the end of the period;
a statement of profit or loss and other comprehensive income (statement of comprehensive income) for
the period;
a statement of changes in equity for the period;

Financial statements
a statement of cash flows for the period;
notes, comprising a summary of significant accounting policies and their explanatory information;
differences in current period that will result in deductible amounts in future periods and therefore lead
to decrease in future taxable profit

Supplementary Statements
Entities may present additional information on a voluntary basis, for example
➢ environmental reports;
➢ value added statements; and
➢ a review by management (“management commentary”) including financial and other information

Statement of Financial
Position
11
Statement of Financial Position
➢ Present asset and liability in statement of financial position:
Current/Non-Current or In order of liquidity
➢ Whichever method of presentation is adopted, an entity shall disclose the amount expected to be recovered or settled after more than twelve months
for each asset and liability line.
➢ Deferred tax asset or liabilities are never classified as current.

Current VS. Non- Current - Assets
• Expected to be realized, or is intended for sale or consumption in the normal course

of the operating cycle
• Held for trading purposes
Current Assets
• Expected to be realized within 12 months after the reporting period
• Cash or a cash equivalent which is not restricted in use
• An entity shall classify all other assets as non-current

Non-Current Assets

Current VS. Non- Current - Liabilities
• Expected to be settled in the normal course of the operating cycle

• Held for trading purposes
• To be settled within 12 months
Current Liabilities
• No unconditional right to defer settlement for at least 12 months after the reporting
period
All other liabilities are classified as Non-Current

Non-Current Liabilities

Particulars Notes 31 Dec 2016 31 Dec 2015 1 Jan 2015
Assets
Non-current
Goodwill 9 5,041 3,537 1,234
Other intangible assets 10 17,424 13,841 10,664
Property, plant and equipment 11 22,199 20,397 20,746
Investments accounted for using the equity method 7 860 467 104
Investment property 13 12,662 12,277 12,102
Other long term financial assets 14.1 3,765 3,880 4,327
Deferred tax assets 15 - 901 852
Non-current assets 61,951 55,300 50,029
Current
Assets included in disposal group classified as held for
sale 19 103 3,908 -
Inventories 16 18,298 17,226 18,571
Trade and other receivables 17 33,629 25,406 20,719
Derivative financial instruments 14.5 582 212 490
Other short term financial assets 14.1 655 649 631
Current tax assets - 337 -
Cash and cash equivalents 18 34,729 11,197 9,987
Current assets 87,996 58,935 50,398
Total assets 149,947 114,235 100,427

Particulars Notes 31 Dec 2016 31 Dec 2015 1 Jan 2015
Equity and liabilities
Equity
Equity attributable to owners of the parent:
Share capital 20 13,770 12,000 12,000
Share premium 20 19,645 3,050 3,050
Other components of equity 20 2,440 (657) 2,505
Retained earnings 51,674 39,024 25,428
Equity attributable to owners of the parent 87,529 53,417 42,983
Non-controlling interest 713 592 476
Total equity 88,242 54,009 43,459
Liabilities
Non-current
Pension and other employee obligations 21 10,386 13,642 8,932
Borrowings 14.6 21,000 21,265 21,405
Trade and other payables 23 4,060 4,459 4,765
Deferred tax liabilities 15 1,907 - -
Other liabilities 24 2,020 1,500 1,600
Non-current liabilities 39,373 40,866 36,702
Current
Liabilities included in disposal group classified as held for sale 19 - 449 -
Provisions 22 1,215 3,345 4,400
Pension and other employee obligations 21 1,467 1,496 1,336
Borrowings 14 4,815 3,379 3,818
Trade and other payables 23 9,009 7,056 7,672
Current tax liabilities 3,068 - 208
Derivative financial instruments 14.5 - 160 -
Other liabilities 24 2,758 3,475 2,832
Current liabilities 22,332 19,360 20,266
Total liabilities 61,705 60,226 56,968
Total equity and liabilities 149,947 114,235 100,427

Breach of Material Provision
(When assessing the impact of waivers on the related loan’s classification, it is important to consider both the timing of the waiver and how
it affects the rights of the parties at the reporting date.)
Waiver of breach
After the reporting date Before the reporting date
Classify the liability as Non-

Classify the liability as current current
As compared to IFRS, Ind AS classifies long term loan as current in case there is breach of a material provision except:
Where before the approval of the financial statements for issue, the lender had agreed not to demand payment as a consequence of the
breach.

Example
• An entity has a long-term loan with a bank. The terms of the loan require quarterly testing of certain covenant ratios. The bank requires the entity to
file covenant compliance certificates within 60 days of the measurement date of the covenants. The entity’s year end is 31 December 2016.
• The entity was within the acceptable parameters based on the calculation of the ratios for the third quarter – that is, at 30 September 2016 The
covenant testing date in the fourth quarter is 31 December 2016 The financial results were finalised in January 2017. Based on these, the entity was
in breach of its covenants at 31 December 2016.
• The entity is due to file the covenant compliance certificates on 2 March 2017, which will show the breach. The entity believes that the breach in
covenant does not occur until the filing date, as this is the date at which the bank would call the loan, in the absence of any remedy.
• How should the loan balance be classified at year end?

Solution
The entity was, in effect, in breach of its covenants at 31 December 2016 even though reporting of the breach was not required until after the end of the
reporting period. This is the case, even though the reported financial figures were not finalised until January. The entity did not have the unconditional
right to defer settlement of the loan for at least 12 months after the end of the reporting period; the loan should, therefore, be classified as current.

Current and Non-Current Classification
Example
An entity has an outstanding borrowing under a term loan facility with a bank. The loan is due to be repaid six months after the end of the reporting period.
Prior to the end of the reporting period, the entity and the lender agree a new facility that expires in three years, and into which the entity is able to roll the
existing loan.
The entity intends to roll over the existing loan into the new loan facility when the loan matures and to maintain the outstanding balance of the new facility
for the duration of the new facility.
(a) How should this loan be shown in the entity's balance sheet?
(b) Would the answer be different if the existing loan and new facility were with different banks?

Current and Non-Current Classification
Solution
a) The loan should be classified as non-current. The entity has the ability and intent to roll this obligation over into the new loan facility even though the
loan is due for repayment within six months after the end of the reporting period, The debt does not have to be settled until the new three-year
committed facility expires.
b) Yes. Refinancing of the loan in this situation would require its settlement (in substance and in fact) concurrently with a new borrowing. The new
borrowing could not be viewed as an extension of the existing loan. The loan should be classified as current in the entity's balance sheet but the
circumstances and availability of the new facility should be disclosed.

Statement of Profit or
Loss and Other
Comprehensive
Income
22
Statement of Profit or Loss and other
Comprehensive Income - Presentation
❑ IAS 1 requires an entity to present analysis of expenses based on either:
• There nature within the equity, or
• There function within the equity
❑ Ind AS 1 requires only nature-wise classification of expenses
❑ All items of income and expense recognised in a period must be presented either:
• in a single statement of profit and loss and other comprehensive income; or
• in two statements:
✓ a statement displaying line items of profit or loss ; and
✓ a second statement beginning with profit or loss and displaying items of other comprehensive income.
❑ Both profit or loss and total comprehensive income must be attributed, separately, to:
• non-controlling interests; and
• owners of the parent

Profit or Loss
The requirement for line items in the statement of profit or loss includes:
❑ Revenue;
❑ Finance costs;
❑ Share of profits and losses of associates and joint ventures;
❑ Tax expense
❑ A single amount for the total of discontinued operations (see IFRS 5)

.
❑ Profit or loss (i.e. total income less expenses, excluding the items of other comprehensive income)
Under IGAAP-Statement of profit and loss is the IGAAP equivalent of separate statement of profit or loss under IAS 1. Some items such as
revaluation surplus which are treated in OCI in IFRS are recognised directly in equity under IGAAP.

Other Comprehensive Income
The requirement for line items in the statement of other comprehensive income includes:
To be segregated between:
❑ Items that will not be reclassified to profit or loss:
• Changes in revaluation surplus
• Remeasurements of defined benefit pension plans
• Income tax relating to items that will not be reclassified
❑ Items that may be reclassified subsequently to profit or loss:

• Exchange differences on translating foreign operations
• Available-for-sale financial assets
• Cash flow hedge reserve
• Income tax relating to items that may be reclassified
Income taxes may be disclosed item by item as well
Under IGAAP-A statement of other comprehensive income is currently not required.

Reclassification Adjustments
• Amounts reclassification from other comprehensive income to profit or loss
• Disclose reclassification adjustments
• Provide users with information to assess the effect of such reclassifications on profit or loss
• Example:
• On disposal of a foreign operation
• Cash flow forecast hedge affect profit or loss
Under IGAAP-A disclosure is made in financial statements that comparative amounts have been reclassified to confirm to the presentation
in the current period.

Profit or Loss
Notes 2016 2015
Revenue 8 205,793 191,228
Other Income 427 641
Changes in Inventory (7,923) (5,623)
Costs of Material (42,434) (40,485)
Employee benefit expenses 21 (113,809) (109,515)
Change in fair value of investment property 13 310 175
Depreciation amortization and impairment of non-financial assets (7,932) (6,051)
Other Expenses (12,878 (11,276)

Operating Profit 21,554 19,094
Share of profit or loss on equity accounted investments 7 391 141
Finance costs 25 (1,490) (1,876)
Finance Income 25 994 793
Othert Finance item 26 943 1,182
Profit before tax 22,392 19,334
Tax expenses 27 (6,910) (5,763)
Profit for year frorn continuing operations 15,482 13,571
Loss for year frorn discontinuing operations 19 (9) (325)
Profit for year 15,473 13.246
Profit for year attributed to:

Non-controling interest 121 116
Owners of the parent 15,352 13,130
15,473 13,246

Profit or Loss
Notes 2016 2015
Earnings Share 28
Basic earnings (loss) per share
From continuing operations 1.22 1.14
From discontinuing operations (0.00) (0.03)
Total 1.22 1.11
Diluted earnings (loss) per share

From continuing operations 1.22 1.14
From discontinuing operations (0.00) (0.03)
Total 1.22 1.11

Other Comprehensive Income
Notes 2016 2015
Profit for the year 15,473 13,246
Other comprehensive income

Items that will not be reclassified subsequently to profit & loss
Revaluation of land 11 303 -
Remeasurement of net defined benefit liability 21 3,830 (3,541)
Income tax relating to items not reclasified 20.3 (1,240) 1,062
Items that will be reclassified subsequently to profit & loss
Cash flow hedging 14
current year gains (losses) 367 (47)
reclassification to profit and loss 260 (425)
Avaliable for sale financial assets 14
current year gains 113 35
reclassification to profit and loss (50) -
Exchange difference on translating foreign operations (664) (341)
Shares of other comprehensive income of equity accounted investments 5 -
reclassification to profit and loss 7 (3) -
income tax relating to items that will be reclassified 176 95
Other comprehensive income for the year, net of tax 20.3 3,097 (3,162)
Total comprehensive income for the year 18,570 10,084
Total comprehensive income for the year, attributed to:
Non-controling interest 121 116
Owners of the parent 18,449 9,968
18,570 10,084

Statement of Changes
in Equity
30
Statement of Changes in Equity
A Separate Statement
❑ The following should be presented as a separate component of the financial statements:
• total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-
controlling interests;
• for each component of equity, the effects of retrospective application or retrospective restatement (per IAS 8);
• the amounts of transactions with owners in their capacity as owners, showing separately contributions and distributions; and
• for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, disclosing
each change separately
❑ An entity should also present, either in this statement or in the notes, dividends recognised as distributions to owners during the period, and the
related amount per share
Under IGAAP-A statement of changes in equity is currently not presented

Statement of Changes in Equity
Total
Other Non-
Share Share Retained attributable
Particulars Notes Components controlling Total Equity
Capital premium Earnings to owners of
of equity interest
parent
Balance at 1 January 2016 12,000 3,050 (657) 39,024 53,417 592 54,009
Dividends 28 - - - (3,000) (3,000) - (3,000)
Issue of share capital on exercise of employee share option 21.2 270 1,415 - - 1,685 - 1,685
Employee Share based compensation 21.2 - - - 298 298 - 298
Issue of share capital on private placement 20 1,500 15,180 - - 16,680 - 16,680
Transactions with owners 1,770 16,595 - (2,702) 15,663 - 15,663
Profit for the year - - - 15,352 15,352 121 15,473
Other comprehensive Income 20.3 - - 3,097 - 3,097 - 3,097
Total comprehensive Income for the year - - 3,097 15,352 18,449 121 18,570
Balance at 31 December 2016 13,770 19,645 2,440 51,674 87,592 713 88,242
Balance at 1 January 2015 12,000 3,050 2,505 25,428 42,983 476 43,459
Employee Share based compensation 21.2 - - - 466 466 - 466
Transactions with owners - - - 466 466 - 466
Profit for the year - - - 1,3130 1,3130 116 13,246
Other comprehensive Income 20.3 - - (3,162) - (3,162) - (3,162)
Total comprehensive Income for the year - - (3,162) 1,3130 9,968 116 10,084
Balance at 31 December 2015 12,000 3,050 (657) 39,024 53,417 592 54,009

Notes to the Financial
Statements
33
Notes to the financial statements
❑ To present information about:
❑ the basis of preparation of the financial statements;
❑ specific accounting policies selected and applied for significant transactions and events
❑ Matters to be disclosed in respect of significant accounting policies:

❑ Measurement basis (or bases) used;
❑ Each specific accounting policy that is significant to a fair presentation.
❑ Disclosure is also required of those judgements management has made in the process of applying accounting policies.
❑ Further disclosure must be made about assumptions concerning the future, and other major sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial
year.
❑ Disclosure includes information about the nature of assets and liabilities and their carrying amounts at the end of the reporting period

General Features
35
General Features
1 2 3 4
Accrual Basis of Frequency of Consistency of

Fair Presentation
Accounting Reporting Presentation
5 6 7 8
Materiality and Comparative

Going Concern Offsetting
Aggregation Information

General Features
Fair presentation and compliance with IFRS
❑ Financial statements should “present fairly” the entity’s financial position, financial performance and cash flows
❑ This is achieved by appropriate application of IFRSs, with additional disclosure, where necessary
Going concern
It is management’s responsibility to:
❑ assess the entity’s ability to continue as a going concern (considering all information available for the foreseeable future);
❑ prepare financial statements on a going concern basis (unless it is probable that the entity will be liquidated/ cease trading);
❑ disclose material uncertainties which may affect the going concern concept
Accrual basis
❑ This means that assets, liabilities, equity, income and expenses are:
• recognised when they occur (not as cash or its equivalent is received or paid); and
• recorded in the accounting records and reported in the financial statements of the periods to which they relate

General Features
Materiality and aggregation
❑ Materiality provides that the specific disclosure requirements of IFRS need not be met if a transaction is not material.
Offsetting
❑ Assets and liabilities, also income and expenses, cannot be offset except when required or permitted by an IFRS.
❑ Offsetting, except when it reflects the substance of the transaction or event, impairs understanding of the transactions undertaken and hinders
assessment of future cash flows.
❑ Some netting off of income with related expenses arising on the same transaction is permitted. For example:
gains/losses on the disposal of non-current assets are reported after deducting the carrying amount and selling expenses from the
proceeds;
expenditure related to a recognised provision that is reimbursed under a contractual arrangement with a third party may be netted against
the reimbursement;
gain/losses relating to a group of similar transactions are reported on a net basis.

General Features
Frequency of reporting
❑ A complete set of financial statements (including comparative information) should be presented at least annually
❑ In exceptional circumstances where there is a change in the end of the reporting period disclose:
• the reason for the use of a period other than one year;
• the fact that comparative amounts presented are not entirely comparable
Comparative information
❑ Numerical information in previous period should be disclosed unless an IFRS permits/requires otherwise
❑ Where there is a restatement of prior period information a statement of financial position is also required for the beginning of the earliest
comparative period
❑ Additional disclosure is not required for periods before the minimum comparative requirements of IAS 1
❑ If a retrospective change in accounting policy has a material effect on the statement of financial position at the beginning of the preceding period
then that statement should also be presented
Consistency
❑ Presentation and classification of items in financial statements should be retained from one period to the next. A change is only allowed if it:
• will result in a more appropriate presentation
• is required by an IFRS

Measurement Bases
Bases for measurement of these elements
Historical cost Fair value / Net realisable Present value

Current cost (settlement) value
Actual amount on Fair value is the price that Estimated selling price
money or money’s /settlement value in the Nominal amount of
would be received to sell an
worth, received or ordinary course of money which will
asset or paid to transfer a
paid to complete business (less the change hands at some
liability in an orderly
transaction estimated costs of future date, discounted
transaction between market
completion and sale for to account for the time
participants at the
assets) value of money
measurement date

(Amendment to IAS 1)
41
(Amendments to IAS 1)
➢ In October 2018, the IASB issued ‘Definition of Material’ making amendments to IAS 1 ‘Presentation of Financial Statements’ and IAS 8 ‘Accounting
Policies, Changes in Accounting Estimates and Errors’.
➢ The amendments are a response to findings that some companies experienced difficulties using the previous definition when judging whether
information was material for inclusion in the financial statements. In fact, up to now, the wording of the definition of material in the Conceptual
Framework for Financial Reporting differed from the wording used in IAS 1 and IAS 8. The existence of more than one definition of material was
potentially confusing, leading to questions over whether the definitions had different meanings or should be applied differently.

The old definition
➢ Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on
the basis of the financial statements.
The new definition
➢ Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of
general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific
reporting entity.
Grant Thornton International Ltd insight – ‘obscuring’
➢ Including ‘obscuring’ in the definition of material addresses concerns that the former definition could be perceived by stakeholders as focusing only
on information that cannot be omitted (material information) and not also on why it may be unhelpful to include immaterial information. However,
this does not mean that entities are prohibited from disclosing immaterial information.
➢ The amendments give a number of examples of circumstances that may result in material information being obscured.

Definition of material
Grant Thornton International Ltd insight – ‘reasonably be’
➢ This wording reflects wording broadly previously used in IAS 1 and helps to address concerns raised by some parties that the threshold ‘could
influence’ in the existing definition of material is too low and might be applied too broadly.
Grant Thornton International Ltd insight – ‘primary users’
➢ The amendments note that many existing and potential investors, lenders and other creditors cannot require reporting entities to provide information
directly to them and must rely on general purpose financial statements for much of the financial information they need. Consequently, they are the
primary users to whom general purpose financial statements are directed.
Transition
➢ The changes are effective from 1 January 2020, but companies can decide to apply them earlier.

Thank you for your attention
Any questions?

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IAS 1 - Presentation

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To prescribe the basis for presentation of general purpose

• the entity’s own financial statements of previous periods; and

• financial statements of other entities

To achieve this IAS 1 sets out:

4 ©2022 Grant Thornton Bharat LLP. All rights reserved.

❑ To all financial statements of entities with a profit objective.

❑ To consolidated accounts of groups and individual entities.

❑ To all types of commercial, industrial and business reporting

❑ To public sector business entities with a profit objective.

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Board 15-16 (maximum 2-3 part time)

IFRS INTERNATIONAL FINANCIAL REPORTING

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a statement of changes in equity for the period;

a statement of cash flows for the period;

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➢ value added statements; and

➢ a review by management (“management commentary”) including financial and other information

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Current/Non-Current or In order of liquidity

➢ Deferred tax asset or liabilities are never classified as current.

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• Expected to be realized, or is intended for sale or consumption in the normal course

• An entity shall classify all other assets as non-current

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• Expected to be settled in the normal course of the operating cycle

All other liabilities are classified as Non-Current

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Total assets 149,947 114,235 100,427

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Total liabilities 61,705 60,226 56,968

Total equity and liabilities 149,947 114,235 100,427

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After the reporting date Before the reporting date

Classify the liability as Non-

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• How should the loan balance be classified at year end?

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❑ Share of profits and losses of associates and joint ventures;

❑ A single amount for the total of discontinued operations (see IFRS 5)

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❑ Items that may be reclassified subsequently to profit or loss:

Income taxes may be disclosed item by item as well

Under IGAAP-A statement of other comprehensive income is currently not required.

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• Amounts reclassification from other comprehensive income to profit or loss

• Disclose reclassification adjustments

• On disposal of a foreign operation

• Cash flow forecast hedge affect profit or loss

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Depreciation amortization and impairment of non-financial assets (7,932) (6,051)

Other Expenses (12,878 (11,276)

Profit for year attributed to:

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Diluted earnings (loss) per share

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