Presentation of Financial

Statement

BKAR 1013
CHAPTER 3
Learning Outcomes

On completion of this subject, the student should be able

to:
• Understand the presentation of financial statement
according to MFRS 101.
• Carry out basic financial statement analysis
• Interpret the financial ratios
Outline
• Introduction
• Financial statements
• Statement of financial position
• Statement of profit or loss and other comprehensive income
Introduction
• MFRS 101 Presentation of Financial Statements prescribes the basis
for presentation of financial statements. Specifically, it sets out:
• Overall requirements for the presentation of financial statements;
• Guidelines for the structure of the financial statements; and
• the minimum requirements for the content of the financial
statements.

• MFRS 101 is applicable to all general-purpose financial statements

prepared and presented in accordance with Financial Reporting
Standards (para 2).

• MFRS 101 is applicable to the financial statements of all business

entities (either individual or group) presented in annual reports and
other public documents such as prospectus, but not to condensed
interim financial information.
Financial Statements
• Financial statements are prepared in order 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.
• Purpose: The objective of financial statement is to provide
information about the financial position, performance and cash flow
of an entity that is useful to a wide range of users in making
economic decisions (para 9).
• Complete set of financial statements consist of:
a) A statement of financial position (balance sheet)
b) A statement of profit or loss and other comprehensive income;
c) A statement of changes in equity;
d) A statement of cash flow; and
e) Notes comprising a summary of significant accounting policies
and explanatory notes
Financial Statements
• MFRS 101 sets out the general features for the presentation of
financial statements. Specifically, MFRS 101 deals with the
following:
(a) Fair presentation and compliance with FRS
(b) Going concern
(c) Accrual basis of accounting
(d) Materiality, aggregation and offsetting;
(e) Consistency of presentation;
(f) Comparative information; and
(g) Frequency of reporting
Financial Statements
Identification of financial statements:
• Clearly identified and distinguished from other information in
the same documents (para 49).
• Each component of the financial statements should be clearly
identified (para 51). The information to be displayed;
a) The name of the entity
b) Whether the financial statements cover the individual
entity or a group of entities
c) the date of the end of the reporting period or the period
covered by the set of financial statements or notes;
d) The presentation currency, and
e) The level of rounding used in the presentation of figures
in the financial statements. (Ex: RM’000).
Statement of Financial Position
• Statement of financial position, also referred to as the balance
sheet:
• Reports assets, liabilities, and equity at a specific date.
• Provides information about resources, obligations to creditors,
and equity in net resources.
• Helps in predicting amounts, timing, and uncertainty of future
cash flows.
Statement of Financial Position
Usefulness
 Computing rates of return.

 Evaluating the capital structure.

 Assess risk and future cash flows.

 Assess the company’s:

► Liquidity,

► Solvency, and

► Financial flexibility.
Statement of Financial Position
• MFRS 101 contains provisions in relation to:
(a) Information to be presented on the face of statement
(para 54-59);
(b) current/ non current distinction (para 60-76);
(c) Information to be presented either on the face of the
statement or in the notes (para 77-80A); and
(d) A statement as at the beginning of the earliest
comparative period.
 Statement of financial position
Information to be presented on the face of the statement
- As a minimum, the face of the statement of financial position should
include line items which present the following amounts (para 54):
(a) property, plant and equipment;
(b) investment property;
(c) intangible assets;
(d) financial assets (excluding amounts shown under (e), (h) and (i));
(e) investments accounted for using the equity method;
(f) biological assets;
(g) inventories;
(h) trade and other receivables;
(i) cash and cash equivalents;
(j) the total of assets classified as held for sale and assets included
indisposal groups classified as held for sale in accordance with
MFRS 5 Non-current Assets Held for Sale and Discontinued
Operations;
Statement of financial position
• Information to be presented on the face of the statement
(cont…)
(k) trade and other payables;
(l) provisions;
(m) financial liabilities (excluding amounts shown under (k)
and (l));
(n) liabilities and assets for current tax, as defined in MFRS
112 Income Taxes;
(o) deferred tax liabilities and deferred tax assets, as defined
in MFRS 112;
(p) liabilities included in disposal groups classified as held for
sale in accordance with MFRS 5;
(q) non-controlling interests, presented within equity; and
(r) issued capital and reserves attributable to owners of the
parent.
 Statement of financial position
Current/ Non-current distinction
• Para 60 - requires an entity to present current and non-current assets,
and current and non-current liabilities, as separate classifications on the
face of its balance sheet, except when a presentation based on a
liquidity provides information that is more reliable and is more relevant.

Current/ Non-current Assets

• Para 66 provides that an asset should be classified as a current asset when it is:
(a) Expected to be realised in, or is intended for sale or consumption in, the
entity’s normal operating cycle;
(b) Held primarily for the purpose of being traded;
(c) expected to be realised within 12 months of the balance sheet date; OR
(d) Cash or cash equivalent asset that is not restricted in its use.
• All other assets should be classified as non-current assets.
• Generally, current assets are recognised when they are expected to be realised
within one year or within one operating cycle of the entity, whichever is the
longer.
Statement of financial position
Current/ Non-current Liabilities
• MFRS 101 Para 69 provides that a liability asset should be
classified as a current liability when:
(a) It is expected to be settled in the entity’s normal operating
cycle;
(b) Held primarily for the purpose of being traded;
(c) It is due to be settled within 12 months of the balance sheet
date; or
(d) the entity does not have an unconditional right to defer the
settlement fro at least 12 months after the balance sheet date.
• All other liabilities should be classified as non-current assets.
• If a part of long term liability is due to be settled within 12 months
of the balance sheet date, that part should be classified as current
liability.
• Deferred tax assets and liabilities should not be classified as
current assets and liabilities (para 56).
 Statement of financial position
Information to be presented either on the face of the statement or in the
notes
• An entity should disclose, either on the face of the statement of financial
position or in the notes, further sub-classifications of the line items
presented, classified in a manner appropriate to the entity’s operation
(para 77). For example (para 78):
(a) items of property, plant and equipment are disaggregated into
classes in accordance with MFRS 116;
(b) receivables are disaggregated into amounts receivable from trade
customers, receivables from related parties, prepayments and other
amounts;
(c) inventories are disaggregated, in accordance with MFRS 102
Inventories, into classifications such as merchandise, production
supplies, materials, work in progress and finished goods;
(d) provisions are disaggregated into provisions for employee benefits
and other items; and
(e) equity capital and reserves are disaggregated into various classes,
such as paid-in capital, share premium and reserves.
 Statement of financial position
Information to be presented either on the face of the statement or in the
notes (cont…)
• The disclosure of the following for each class of share capital, either in the
statement of financial position or the statement of changes in equity, or in
the notes: (para 79):
(a) The number of shares authorised;
(b) The number of shares issued and fully paid, and issued but not fully
paid;
(c) Par value per share, or that shares have no par value;
(d) A reconciliation of the number of shares outstanding at the beginning
and at the end of the year;
(e) The rights, preferences and restrictions attaching to the class including
restrictions on the distribution of dividends and repayment of capital;
(f) Shares in the entity held by the entity itself or by subsidiaries or by
associates of the entity; and
(g) Shares reserved for issuance under options and sales contracts,
including the terms and amounts.
Statement of Profit or Loss and Other
Comprehensive Income
• An entity may use titles for the statements other than those
used in this Standard. For example, ‘statement of
comprehensive income’.
• It may be presented using one-statement format or the two
statement format.
(a) One-statement format – all items of income and expense
recognised in a period are presented in one single
statement.
(b) Two-statement format – the statement of comprehensive
income is presented in two separate statements.
(example – refer to TM annual report)
One-statement
format
 Statement of Statement of Profit or
Loss and Other Comprehensive Income
• Para 81A - The statement of profit or loss and other
comprehensive income shall present, in addition to the profit or
loss and other comprehensive income sections:
(a) profit or loss;
(b) total other comprehensive income;
(c) comprehensive income for the period, being the total of profit
or loss and other comprehensive income.

• Para 81B - in addition to the profit or loss and other

comprehensive income sections, as allocation of profit or loss and
other comprehensive income for the period:
(a) profit or loss for the period attributable to:
(i) non-controlling interests, and
(ii) owners of the parent.
(b) comprehensive income for the period attributable to:
(i) non-controlling interests, and
(ii) owners of the parent.
 Statement of Statement of Profit or
Loss and Other Comprehensive Income
• Para 82 - the profit or loss section or the statement of profit or loss
shall include line items
(a) revenue;
(b) finance costs;
(c) share of the profit or loss of associates and joint ventures
accounted for using the equity method;
(d) tax expense;
(e) a single amount for the total of discontinued operations (see
MFRS 5).

• Para 82A - The other comprehensive income section shall present line
items for amounts of other comprehensive income in the period,
classified by nature and grouped into those that, in accordance with
other MFRSs:
(a) will not be reclassified subsequently to profit or loss; and
(b) will be reclassified subsequently to profit or loss when specific
conditions are met.
 Statement of Statement of Profit or
Loss and Other Comprehensive Income
• Para 97 - When items of income or expense are material, an
entity shall disclose their nature and amount separately.
• Para 99 - An entity shall present an analysis of expenses
recognised in profit or loss using a classification based on
either their nature or their function within the entity,
whichever provides information that is reliable and more
relevant.
RM'000 RM'000
Revenue 390,000 Sales 390,000
Other income 20,667 Cost of sales 245,000
Purchases 80,000 Gross profit 145,000
Changes in inventories 115,000 Other income 20,667
Employees benefit costs 45,000 Distribution expenses 9,000
Depreciation and amortisation expense 19,000
Administrative expenses 20,000
Impairment loss 4,000
Finance costs 8,000
Finance costs 15,000
Other expenses 6,000 Other expenses 2,100
Share of profit of associates 35,100 Share of profit of associates 35,100
Profit before tax 161,667 Profit before tax 161,667

nature function
 Statement of Statement of Profit or
Loss and Other Comprehensive Income
• Para 87- An entity shall not present any items of income or
expense as extraordinary items, in the statement(s) presenting
profit or loss and other comprehensive income or in the notes.
• Para 90 - An entity shall disclose the amount of income tax
relating to each item of other comprehensive income,
including reclassification adjustments, either in the statement
of profit or loss and other comprehensive income or in the
notes.
• Para 92 - An entity shall disclose reclassification adjustments
relating to components of other comprehensive income.