BM 3340– Financial Reporting

Topic 02: LKAS 01-Presentation of

Financial Statements
Ms. Thisali Liyanage Year: 3 – Semester: I
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Financial Reporting
BM3340

Thisali Liyanage
MBA (Colombo), BBA Accounting Sp. First Class (Colombo), CIMA (Passed Finalist)
Lecturer, SLIIT Business School
thisali.l@sliit.lk
Learning Outcomes: 3
At the end of the module students
should be able to:
LO1: Explain conceptual and regulatory framework for financial reporting.
LO2: Solve accounting transactions in accordance with Sri Lanka
Accounting Standards.
LO3: Prepare and present financial statements for individual entities in accordance
with Sri Lanka Accounting Standards
LO4: Prepare and present financial statements for group entities in accordance
with Sri Lanka Accounting Standards.
LO5: Analyze corporate governance disclosures of an entity
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Course Outline

Conceptual Framework for Financial Reporting LKAS

01-Presentation of Financial Statements

LKAS 02-Inventories
LKAS 07-Statement of Cashflow
LKAS 12-Income Taxes
LKAS 16-Property Plant and Equipment
SLFRS 17-Leases
LKAS 18-Revenue
SLFRS 10-Consolidated Financial Statements
Corporate Governance
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Session Outline

Objective
Scope
Purpose of Financial Statements
Components of Financial Statements
General Features
Structure and Content
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Objective of LKAS 01- Presentation of
Financial Statements

The standard prescribes the basis for the presentation of general-purpose

financial statements to ensure comparability both with
the entity’s financial statements of previous years and the financial statements
of other entities.

It sets out overall requirements for the presentation of financial statements,

guidelines for their structure and minimum requirements of its content.
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Scope

An entity shall apply this standard in preparing and presenting general purpose
financial statements in accordance with Sri Lanka Accounting Standards.
Other SLFRSs set out the recognition, measurement and disclosure
requirements for specific transactions and other events.
This Standard does not apply to the structure and content of interim financial statements
prepared in accordance with LKAS 34 Interim Financial Reporting.
This Standard applies equally to all entities, including those that present consolidated
financial statements in accordance with SLFRS 10 Consolidated Financial Statements and
those that present separate financial statements in accordance with LKAS 27 Separate
Financial Statements.
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Recap (Session 1)

The fundamental qualitative characteristics of useful financial

information are:
a.Relevance and faithful representation
b.Relevance and reliability
c. Comparability and relevance
d.Relevance, reliability and comparability
e.Comparability, relevance and faithful representation
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Definition- General purpose financial
statements

General purpose financial statements (referred to as ‘financial statements’) are

those intended to meet the needs of users who are not in a position to require
an entity to prepare reports tailored to their particular information needs.
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Purpose of Financial Statements

The objective 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.

Financial statements also show the results of the

management’s stewardship of the resources entrusted to it.
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Purpose of Financial Statements

To meet this objective, financial statements provide

information about an entity’s
Assets
Liabilities
Equity
Income and expenses including gains andlosses
contributions by and distributions to owners in theircapacity as owners
(Changes in equity)
Cashflows
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Components of Financial Statements

(a) a statement of financial position as at the end of the period;

(a) a statement of profit or loss and other comprehensive income for
the period;
(c) a statement of changes in equity for the period
(d) a statement of cash flows for the period-(LKAS 07);
(e)notes, comprising significant accounting policies and other
explanatory information;
(f)comparative information in respect of the preceding period as
specified in paragraphs 38 and 38A; and
 Recap (Session 2)

Which of the following is not included in a complete set of financial statements according
to IAS 1 Presentation of Financial Statements?

A Profit or loss statement.

B Balance sheet statement.
C Details of accounting policies adopted.
D Directors report.
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General Features

Present fairly
Fair presentation requires the faithful representation of the effects of transactions, other
events and conditions in accordance with the definitions and recognition criteria for
assets, liabilities, income and expenses set out in the Conceptual Framework for Financial
Reporting
State compliance with SLFRs explicitly
An entity whose financial statements comply with SLFRSs shall make an explicit and
unreserved statement of such compliance in the notes. An entity shall not describe financial
statements as complying with SLFRSs unless they comply with all the requirements of SLFRSs.
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General Features

Prepare financial statements in going concern basis unless the management liquidate or
cease the business
When management is aware, in making its assessment, of material uncertainties related
to events or conditions that may cast significant doubt
upon the entity’s ability to continue as a going concern, the entity shall disclose
those uncertainties.
Financial statements other than the statement of cash flows are prepared on the accrual basis
Present separately each material class of similar items
An entity shall not offset assets and liabilities or income and expenses, unless
required or permitted by a SLFRS (intercompany offsets are permitted by the standard itself)
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General Features

❑ Present a complete set of financial statements (including comparative information) at least

annually

❑ Presentation and classification of items should be consistent from one period to another
Cross Check with the Annual Report

Hayley Annual Report 2021/22

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Structure and Content

Identification of financial statements

An entity shall clearly identify the financial statements and distinguish
them from other information in the same published document.
Required Information
Name of the reporting entity
Whether the financial statements are of an individual entity or a group of
entities;
The date of the end of the reporting period or the period covered by the set of
financial statements or notes;
The presentation currency, as defined in LKAS 21; and
The level of rounding used in presenting amounts in the financial
statements.
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Structure and Content

Reporting Period
At least annually
Where reporting period is adjusted ,note reason and lack of
comparability
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Statement of Financial Position

Known as balance sheet

Statement of financial position is preferred, but, still can use the term
‘balance sheet’
An entity shall present current and non-current assets, and current and non-current
liabilities, as separate classifications in its statement of financial position entity. The
entity shall present all assets and liabilities in order of liquidity
Current assets and current liabilities are defined, but non-current which is in the
default category
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Current Assets

Classified as current assets if any one of the following criteria is met

Expected to be realized or intended to sale or consumption in the
normal operating cycle
Held primarily for trading purpose
Expected be realized within with in 12 months after the reporting period
Cash and cash equivalents unless restricted in it use for at least 12
months after the reporting period
All other assets are classified as non current assets or liability
Deferred tax assets/liability must be classified as non-current assts or liability
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Current Liabilities

Classified as current liabilities if any one of the following criteria is met:

Expected to be settled in the normal operating cycle
Due to be settled within 12 months after the reporting period
Does not have a right at the reporting date to defer settlement of the liability by
the transfer of cash or other assets for at least twelve
months after the reporting period”(Amendment to LKAS 1 in 2015)
All other liabilities are classified as non-current liabilities
Deferred tax liabilities must be classified as non-current
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Statement of Financial Position-
Minimum Line items

Property, plant & equipment Investment property Intangible assets

Financial assets Investments (equity method) Biological assets Inventories
Trade and other receivables Cash and equivalents
Trade and other payables Provisions
Financial liabilities
Current tax liabilities/assets Deferred tax liabilities/assets
Non-controlling interests (within equity)
Non-controlling interests (Within Equity)

For example, if the organization owns 70% of the subsidiary and a minority partner

owns 30% and subsidiaries book value is $8M. The non-controlling interest would

be:
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Statement of Comprehensive Income

Must present all non-owner changes in equity (“comprehensive income”)

either:
In single statement of profit and loss and other comprehensive
income,or
In two statements (profit and loss statement andseparate
statement of comprehensive income)
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Statement of Comprehensive Income
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Statement of Comprehensive Income

Minimum line items on face of SCI

Revenue
Gains and losses from derecognition of financial assets measured at amortized
cost (per SLFRS 9)
Finance costs
Share of associates & joint ventures (equity method)
Gains and losses from reclassifying financial assets to fair value (per SLFRS 9)
Tax expense
Single amount comprising discontinued operations
Profit or loss – allocated to non-controlling interests and owners of parent
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Statement of Comprehensive Income

Includes:
Profit or loss for the period, plus
Other comprehensive income recognized in that period
Profit or loss for the period
All items of income and expense in a period must be recognized in profit or loss unless an
SLFRS requires of permits
Presentation of income or expenses as extraordinary items is not allowed
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Statement of Comprehensive Income

Other Comprehensive Income

Comprises items of income and expense, including reclassification adjustments, that are
not required or permitted to be recognized in profit or loss
Components of other comprehensive income include:
Changes in revaluation surpluses (LKAS 16)
Remeasurements (including actuarial gains and losses) on defined benefit plans (LKAS 19)
Gains and losses from translating financial statements of a foreign operation (LKAS 21)
Gains and losses on re-measuring available-for-sale financial assets (LKAS 39)
Effective portion of gains/ losses on hedging instruments in a cash flow hedge (LKAS 39)
Actuarial gains and loss
Hedging
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Thank You !!
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