IAS 1-PRESENTATION OF

FINANCIAL STATEMENTS
OBJECTIVE OF GENERAL PURPOSE FINANCIAL STATEMENTS
• To provide info about the fin. Position, performance and cash flows of an entity
• That is useful to a wide range of users in making economic decisions.

COMPLETE SET OF FINANCIAL STATEMENTS

-5 main statements in a complete set of fin. Statements:
• Statement of Comprehensive Income (SOCI)
• Statement of Financial Position (SOFP)/Balance Sheet
• Statement of Changes in Equity (SOCIE)
• Notes to the financial statements

FAIR PRESENTATION & COMPLIANCE WITH IFRSs

 Fin. Statements must fairly present the fin. Position, performance & cash flows of an entity.
 Fair presentation is generally achieved by application of the IFRSs & additional disclosure when necessary.
 Disclosure regarding compliance with IFRSs must be made in the fin. Statements if absolutely all standards and interpretations
have been complied with in full.
STATEMENT OF FINANCIAL POSITION (SOFP):STRUCTURE & CONTENT
Sample presentation: Statement of Financial Position
Statement of Financial Position as at 31 December 2021
R R
ASSETS
NON-CURRENT ASSETS XXX
Property, Plant and Equipment X
Goodwill X
Other Intangible Assets X
Investment Properties X
Available-for-sale investments (Investments at Cost) X

CURRENT ASSETS
Inventories X
Trade Receivables X
Other Receivables (Prepaid Expenses + Accrued Income etc) X
Non-Current Assets held for disposal (Disposal groups) X
Cash and cash equivalents X
XXX
SOFP
EQUITY AND LIABILITIES
ISSUED SHARE CAPITAL AND RESERVES XX
NON-CURRENT LIABILITIES
Long-term loans/borrowings X
Deferred tax X
Provisions X
XX

CURRENT LIABILITIES
Trade Payables (Accounts Payables) X XX
Other Payables (Accrued expenses + Income received in advance, etc) X
Current portion of long-term loans X
Short-term loans/borrowings X
Current tax payable X
Current provisions X
Liabilities of a disposal group held for sale X
TOTAL LIABILITIES XXX
TOTAL EQUITY AND LIABILITIES XXXX
STATEMENT OF COMPREHENSIVE INCOME: STRUCTURE AND CONTENT
Sample presentation :Statement of Comprehensive Income
Statement of Comprehensive Income for the year ended 31 December 2021
R
Revenue XXX
Less: Cost of Sales (XX)
Gross profit XX
Add: Other Income (Rent Income, Interest Income, Discounts received etc) XX
Total Income XXX

Distribution costs (XX)

Administration costs (XX)
Other costs (XX)
(XXX)
Profit before interest and tax XXX
Less: Finance costs (Interest expense) (XX)
Profit before tax XXX
Less: Taxation (XX)
Net Profit (or loss) for the year XXX
Statement of Comprehensive Income
Revaluation Surplus XX
Gain on cash flow hedge XX
XXX
Total Comprehensive Income for the year XXX

ANALYSIS OF EXPENSES
Expenses used in calculating profit or loss must be analyzed based on either the:
• Function of the expenses (function method); or
• Nature of the expenses (Nature method)

Preferably use the function method, unless told otherwise.

Present the analysis separately in the notes (workings)

FUNCTION METHOD
 Generally, expenses are classified/categorized according to the 4 main functions/tasks of a business as follows:
• Sales (Cost of Sales)
• Distribution
• Administration
• Other operations (Other costs)
 Using the function method requires allocation of all expenses to the 4 different functions. Function method-normally
more relevant.
STATEMENT OF CHANGES IN EQUITY: STRUCTURE AND CONTENT
Statement of Changes in Equity for the year ended 31 Dec 2021
Ordinary Preference Retained Other Total
Share Share Earnings Compr. Equity
Capital Capital Income
R R R R
Opening Balance XX XX XX XX XXX
Total Comprehensive Income (from SOCI) XX XX XX
Less Dividend declared (XX) (XX)
Add Issue of shares XX XX
Revaluation surplus ------- -------- ------- XX XX
Closing balance XXX XXX XXX XXX XXXX
NOTES TO THE FINANCIAL STATEMENTS
 Notes
• Contain info in addition to that presented in the SOCI, SOFP, SOCIE, & SOCF.
• Are narrative descriptions or disaggregations of:
 Items recognized in the fin. Statements (ie supporting info); & about
 Items not recognized in the fin. Statements.

 Notes give info about the following:

• The basis of preparation
• The significant accounting policies, including:
- The measurement basis or bases
- Other relevant accounting policies
• Supporting info regarding items in the FSs which:
- Is required by the IFRSs
- Is required becoz it is relevant
• Extra info regarding items not recognized in the FSs which:
- Is required by the IFRSs
- Is required becoz it is relevant
 QUESTION 3.6 (GAAP GRADED QUESTIONS)
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