CHAPTER 9 – PAS 1

PRESENTATION OF FINANCIAL
STATEMENTS
Statement of Comprehensive Income
INCOME STATEMENT
Income Statement is a formal statement
showing the financial performance of an entity
for a given period of time.
The financial performance of an entity is
primarily measured in terms of the level of
income earned by the entity through the
effective and efficient utilization of its resources.
COMPREHENSIVE INCOME
The change in equity during a period
resulting from transactions and other events,
other than changes resulting from transactions
with owners in their capacity as owners.
Comprehensive income includes:
A. Components of profit or loss
Profit or loss is the total income less expenses,
excluding the
components of other comprehensive income.

B. Components of other comprehensive income

Other comprehensive income comprises items of
income and expenses including reclassification
adjustments that are not recognized in profit
Components of other comprehensive income include the
following:
1. Unrealized gain or loss on equity investment measured at
fair value through other comprehensive income.
2. Unrealized gain or loss on debt investment measured at fair
value through other comprehensive income.
3. Gain or loss from translation of the financial statements of a
foreign operation.
4. Revaluation surplus during the year.
5. Unrealized gain or loss from derivative contracts designated
as cash flow hedge.
6. “Remeasurements” of defined benefit plan, including
Presentation of other comprehensive income
PAS 1 paragraph 82A, provides that the statement of
comprehensive income shall present line items for
amounts of other comprehensive income during the
period classified by nature.
The line items for amounts of OCI shall be grouped
as follows:
a. OCI that will be reclassified subsequently to profit
or loss when specific conditions are met.
PRESENTATION OF COMPREHENSIVE INCOME
1. TWO STATEMENTS
a. An income statement showing the components of
profit or loss.
b. A statement of comprehensive income
beginning with profit or loss as shown in the income
statement plus or minus the components of other
comprehensive income
This is the combined statement showing the
2.components of profit
SINGLE STATEMENT OFor loss and components
COMPREHENSIVE INCOMEof
other comprehensive income in a single
SOURCES OF INCOME
a. Sales of merchandise to customers
The income from sales shall include all sales to customers during
the period.
Sales returns, allowances and discounts shall be deducted from
gross sales to arrive at net sales.
b. Rendering of services
Income from rendering of services, among others, includes
professional fees, media advertising commissions, insurance
agency commissions, admission fees for artistic performance and
tuition fees.
c. Use of entity resources
This includes interest, rent, royalty and dividend income.
COMPONENTS OF EXPENSE
a. COGS or COS Beginning Inventory
500,000
Net Purchases
2,000,000
Goods available for sale
2,500,000
Ending inventory
(300,000)
Cost of goods sold
2,200,000

Gross Purchases
COMPONENTS OF EXPENSE
a. COGS or COS
b. Distribution costs or selling expenses
c. Administrative expenses
d. Other expenses
e. Income tax expense
CLASSIFICATION OF EXPENSES
DISTRIBUTION COSTSconstitute costs which are
directly related to selling, advertising and delivery of
goods to customers.
ADMINISTRATIVE EXPENSES
constitute cost of
administering the business. These ordinarily include
all operating expenses not related to selling and cost
OTHER EXPENSES
of goods sold.
are those expenses which are not
Line items
PAS 1 paragraph 82, the income statement and statement of
comprehensive income shall include the following line items:
a.Revenue e.Gain or loss on the
b.Gain and loss from reclassification of h.A single amount
the derecognition of financial asset from comprising
financial asset amortized cost to fair discontinued
measured at value profit or loss operations
amortized cost as f. Gain or loss on the i. Profit or loss for the
required by PFRS 9 reclassification of period
c. Finance Cost financial asset from j. Total other
d.Share in income or fair value other comprehensive
loss of associate and comprehensive income
joint venture income to fair value k.Comprehensive
FORMS OF INCOME STATEMENT
PAS 1 paragraph 99. An entity shall present an
analysis of expenses recognized in profit or loss
using a classification based on either the function
of expenses or their nature within the entity,
whichever provides information that is more
reliable and more relevant.
TWO WAYS TO PRESENT AN INCOME STATEMENT

1. FUNCTIONAL PRESENTATION (COST OF GOODS SOLD METHOD)

This form classifies expenses according to their
function as part of cost of sales , distribution costs,
administrative activities and other activities.
2. NATURAL PRESENTATION
(NATURE OF EXPENSE METHOD)
Expenses are aggregated according to their nature
and not allocated among the various functions
within the entity.
Which form of income
statement?
PAS 1 paragraph 105, does not prescribe any
format because each presentation has merit
for different types of entities, management is
required to select the presentation that is
reliable and more relevant.
Statement of Comprehensive
Income
The statement of comprehensive income starts
with the profit or loss as shown in the income
statement plus or minus the components of other
comprehensive.
The purpose of this statement is to provide a
more comprehensive information on the financial
 EXAMPLAR COMPANY
Statement of Comprehensive Income
Year Ended December 31, 2019

Net Income 1,550,000

Other comprehensive income to be reclassified to profit or loss:
Foreign currency translation gain 150,000
Unrealized loss on derivative contract
designated as cash flow hedge (100,000)
50,000
Comprehensive income
1,600,000
STATEMENT OF RETAINED EARNINGS
The statement of retained earnings shows the
changes affecting directly the retained earnings of an
entity and relates the income
statement to the statement of financial position.
Should be clearly disclosed in the statement of
retained earnings:
A. profit or loss for the period
B. prior period errors
C. dividends declared and paid to shareholders
STATEMENT OF CHANGES IN EQUITY
The statement of changes in equity is a basic statement that
shows the movements in the elements or components of the
shareholders’ equity.
Statements of changes in equity should show:
1. Comprehensive income for the period
2. Effects of changes in accounting policies and corrections
of errors
3. Reconciliation between the carrying amount at the
beginning and end of the period, separately disclosing
changes from:
a. Profit or loss
STATEMENT OF CASH FLOWS
The statement of cash flows is a basic
component of the financial statements which
summarizes the operating, investing and
financing activities of an entity.

In simple language, it provides information

about the cash receipts and cash payments of
an entity during a period.
end