Chapter 1 – Introduction to Published Accounts

Financial Reporting (FR/F7)

Chapter Synopsis
IAS 1 Presentation of Financial Statements
IAS 1 Presentation of Financial Statements states that a complete set
of financial statements comprises:
• a statement of financial position
• either
– a statement of profit or loss and other comprehensive income, or
– a statement of profit or loss plus a statement showing other
comprehensive income.
• a statement of changes in equity
• a statement of cash flows
• accounting policies and explanatory notes.
Exceptional items
Exceptional items is the name often given to material items of income and
expense of such size, nature or incidence that disclosure is necessary in order
to explain the performance of the entity.
The accounting treatment is to:
• include the item in the standard statement of profit or loss line
• disclose the nature and amount in the notes. In some cases it may be more
appropriate to show the item separately on the face of the statement of profit or
loss.
Examples include:
• write down of inventories to net realisable value (NRV)
• impairment of property, plant and equipment
• restructuring costs
• gains/losses on disposal of non-current assets
• discontinued operations
• litigation settlements
• reversals of provisions
Statement of profit or loss and other comprehensive income

• Total comprehensive income is the realised profit or loss for the

period, plus other comprehensive income.

• Other comprehensive income (OCI) is income and expenses that are

not recognised in profit or loss (i.e. they are recorded in reserves
rather than as an element of the realised profit for the period). For the
purposes of FR, other comprehensive income includes any change in
the revaluation of non-current assets (IAS 16, covered in Chapter 2)
and fair value through other comprehensive income financial assets
(IFRS 9, covered in Chapter 10)