International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS): IAS 1

Background

This standard prescribes the basis for presentation of general purpose financial statements, to ensure comparability both with the entity's financial statements of previous periods and with the financial statements of other entities. To achieve this objective, this standard sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content.

IAS 1 sets out the overall framework and responsibilities for the presentation of financial statements, guidelines for their structure and minimum requirements for the content of the financial statements. Please note that standards for recognizing, measuring and disclosing specific transactions are addressed in other standards and interpretations.

Scope

IAS 1 applies to all general-purpose financial statements based on International Financial Reporting Standards. General purpose financial statements are those intended to serve users who do not have the authority to demand financial reports tailored for their own needs.

Objective of Financial Statements

The objective of general-purpose 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. To meet that objective, financial statements provide information about an entity's:

Assets
Liabilities
Equity
Income and expenses, including gains and losses
Other changes in equity
Cash Flows

Components of Financial Statements

A complete set of financial statements should include:

A statement of financial position at the end of the period
A statement of comprehensive income for the period
A statement of changes in equity for the period
Statement of cash flows for the period
Notes, comprising a summary of accounting policies and other explanatory notes

When an entry applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements, it must also present a statement of financial position as at the beginning of the comparative period.

Retrospective application means adjusting the opening balance of each affected component of equity for the earliest prior period presented and the other comparative amounts disclosed for each prior period presented as if the new accounting policy had always been applied.

An entity may use titles for the statements other than those stated above.

Reports that are presented out side of the financial statements including financial reviews by management, environmental reports, and value-added statements are outside the scope of IFRSs.

Fair presentation and compliance with IFRSs

The financial statements must "present fairly" the financial position, financial performance and cash flows of an entity. 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 framework. The application of IFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation.

IAS 1 requires that an entity whose financial statements comply with IFRSs make an explicit and unreserved statement of such compliance in the notes. Financial statements shall not be described as complying with IFRSs unless they comply with all the requirements of IFRSs (including interpretations)

Inappropriate accounting policies are not rectified either by disclosure of the accounting policies used or by notes or explanatory material.

IAS 1 acknowledges that, in extremely rare circumstances, management may conclude that compliance with an IFRSs requirement would be so misleading that it would conflict with the objective of financial statements set out in the framework. In such a case, the entity is required to depart from the standard requirement, with detailed disclosure of the nature, reasons and impact of the departure.

Going concern

When preparing financial statements, management shall make an assessment of an entity's ability to continue as a going concern. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. 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 financial statements should not be prepared on a going concern basis, in which case IAS 1 requires a series of disclosures.

Accrual Basis

IAS 1 requires that an entity prepare its financial statements, except for cash flow information, using the accrual basis of accounting.

Consistency of presentation

The presentation and classification of items in the financial statements shall be retained from one period to the next unless a change is justified either by a change in circumstances or a requirement of a new standard.

Materiality and aggregation

Each material class of similar items shall be presented separately in the financial statements. Items of a dissimilar nature or function shall be presented separately unless they are immaterial.

Omissions or misstatements of items are material if they could, individually or collectively; influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor. If a line item is not individually material, it is aggregated with other items either on the face of those statements or in the notes. An item that is not sufficiently material to warrant separate presentation on the face of those statements may nevertheless be sufficiently material for it to be presented separately in the notes.

Offsetting

Assets and liabilities, and income and expenses, may not be offset unless required or permitted by a standard or an interpretation.

Comparative information

IAS 1 requires that comparative information shall be disclosed in respect of the previous period for all amounts reported in the financial statements, both face of financial statements and notes, unless another standard requires otherwise. If comparative amounts are changed or reclassified, various disclosures are required.

Structure and content of financial statements in general

Clearly identify:

The financial statements
The reporting enterprise
Whether the statements are for the enterprise or for a group
The date or period covered
The presentation currency
The level of precision (thousands, millions, etc.)

Reporting period

There is a presumption that financial statements will be prepared at least annually. If the annual reporting period changes and financial statements are prepared for a different period, the enterprise must disclose the reason for the change and a warning about problems of comparability.

International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS)

Pages

Tuesday, November 13, 2012

IAS 1 - Presentation of Financial Statements