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Content of financial statements (Statement of financial position (Assets,…
Content of financial statements
An entity should identify the financial statements to distinguish them from other information published with them
Entities should also include the following information in a prominent manner
The name of the reporting entity
Whether the statements are for the entity or for the group
The period end date or period covered
The presentation currency
The level of rounding used in presenting amounts
Statement of financial position
Information is intended to provide suers with an understanding of its financial position as at a specific point in time
Sets out the assets and liabilities of the reporting entity
Assets
PPE
Investment property
Intangible assets
Financial assets
Investments accounted for using the equity method
Biological assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Liabilities
Provisions
Financial liabilities
Liabilities and assets for current tax
Deferred tax liabilities and assets
Liabilities included in disposal groups
Equity
Non controlled interest, presented within equity
Issued capital and reserves attributable to owners of the parents
An entity must classify an asset as a current asset when
It expects to realise the asset or intends to sell or consume it in its normal operating cycle
It holds the asset primarily for the purpose of trading
It expects to realise the asset within 12 months after the reporting period
The asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period
An entity must classify a liability as a current liability when
It expects to settle the liability in its normal operating cycle
It holds the liability primarily for the purpose of trading
The liability is due to be settled within 12 months after the reporting period
It does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period
Long-term debt under an existing loan facility which is due to expire within 12 months of the year end is treated as current unless an agreement to refinance for a longer period was made before the balance sheet date. However, if the entity breaches a loan covenant, resulting in the loan becoming repayable on demand on or prior to the balance sheet date, the liability is treated as a current liability.
Certain information should be presented in either the statement of financial position, the statement of changes in equity or in the notes, for each class of share capital the following information should be provided
Number of shares authorised for issued, issued and fully paid, and issued but not fully paid
Par value per share or that the shares have no par value
Reconciliation of the number of shares outstanding at the start and end of the period
Description of any rights, preferences or restrictions attached to the share class
Details of treasury shares held by an entity and its subsidiaries and associates
Shares held for issue under options and other contracts
The liability is only classified as non-current if the lender agreed, on or before the balance sheet date, to provide a period of grace lasting 12 months or more from the end of the reporting period, during which the entity may remedy the breach and within which the lender is unable to enforce repayment of the loan.
Statement of comprehensive income
IAS 1 allows an entity to present either
A single statement of comprehensive income
Two statements
A statement of profit or loss
A statement comprehensive income that has the profit or loss figure from the bottom line of the income statement as the first line item and shows components of other comprehensive income underneath
The reason for this choice is that accounting standards give rise to certain profits and losses that are generally viewed as not suitable to be reported within the main profit or loss figure for period, they can large and volatile and outside management control or relate to items that will ultimately mature in a future period so these are split into OCI which can be added to profit and loss or shown as a separate statement
The profit or loss section of statement of profit or loss will show
Revenue
Finance costs
Share of the results of associated and joint ventures accounted for under the equity method
Taxation expense
A single amount for the total of discounted operations
In the OCI section or statement of OCI, items must be classified according to whether or not they will in subsequent periods be transferred to profit or loss or not. Items included in OCI include
Changes in the revaluation surplus on long term assets
Actuarial gains and losses on defined benefit plans
Gains and losses arising from the translation of the financial statements of a foreign operation
Certain gains and losses relating to financial instruments, including on certain instruments used for hedging
In order to give a fair presentation of results, entities may present additional items in the statements provided these separate items are shown within the category to which they relate. This is because the classification of extraordinary items, i.e. shown net of tax after the profit after tax line, is not permitted under IFRS Standards. With regard to such material items, these should be separately disclosed, for example material amounts arising as a result of
Write downs on inventories to NRV or of PPE to recoverable amounts as well as reversals of such write downs
Restructuring of the activities of an entity and reversals of any provisions for the costs of restructuring
Disposals of items of PPE
Disposals of investments
Discounted operations
Litigation settlements
Other reversals of provisions
The standard requires entities to provide an analysis of expenses recognised in profit and loss using a classification based on either their nature or their function within the entity, which provides information that is reliable and more relevant
Nature of expense method: Expenses are analysed according to their nature i.e depreciation, purchase of materials, transport costs, employee benefits etc. They are not allocated to their function
Function of expense method: Expenses are allocated to their function at a minimum to cost of sales and other functions ie distribution and administration expenses
Statement of changes in equity
Provides an analysis of the composition of equity at the beginning and end of the reporting period and how this has changed during the period
Typical components include minimum share capital, share premium and retained earnings (accumulated income and expenses of the entity that have been distributed to owners)
Notes to the financial statements
The disclosure notes provide more detailed information in respect of items presented in the financial statements such as a break down of figures and supportive narrative
Also provide information on items that are not present on the face of the main statements
It is not possible to understand the main statements without the further detail given in the supporting notes
IAS 1 requires the notes to be properly structured in a systematic matter to make them understandable and easy to follow
Includes
Confirmation of the basis of preparation of the financial statements
Compliance with accounting standards stating the standards applied
Accounting policies adopted, significant judgements made and measurement basis applied and sources of estimation uncertainty
Information required by other standards that is not present on the face of the main statements
Information that is not presented elsewhere in the financial statements but is relevant and helps users understand them
Disclosures in connection with contingent liabilities and contractual commitments not yet required to be shown in the financial statements
Disclosures in respect of dividends, including proposed dividends or declared before the financial statements were authorised for issue but not recognised as a distribution to shareholders during the period and related amount per share, and the amount of any cumulative preference dividends not recognised
Information that enables users of financial statements to evaluate the entity's objectives, policies and processes for managing capital and risk, including confirmation of whether capital requirements are met
The domicile and legal form of the business
Country of incorporation
Registered office address, and if different, principal place of business
Description of the nature of the entity's operations and principal activities
If part of a group, the name of its parent and ultimate parent
If it is a limited life entity, information regarding the length of its life
Discontinued operations
Businesses often sell major assets or sell or close down areas of business activity but this can take time and at the end of a reporting period the process of sale or closure may still be in progress
If the process is complete, there may be significant gains or losses to report on the transaction. When this happens, accounting standards require the discounted operations to be disclosed separately and in a specific way so that users of accounts can see which parts of the business will not be part of the future of the remaining business
IFRS 5 requires entities to measure a non current asset or disposal group classified as he'd for sale at the lower of its carrying amount and fair value less costs to sell
Information must be given that enables users of the financial statements to evaluate the financial effects of discontinued operations and disposals of non current assets or disposal groups
The presentation of the profits and losses arising from disposal groups and discontinued operations are particularly important because users of the accounts need a clear picture of what components of the years performance will not be repeated as the relevant assets or parts of the business are being sold
An entity must therefore disclose a single amount in statement of comprehensive income comprising the total of
The post tax profit or loss of discontinued operations and
The post tax gain or loss recognised on the measure to fair value less costs to sell or on the disposal of the assets or disposal groups constituting the discounted operation
A breakdown of amounts must be disclosed as well as net cash flows attributable to the operating, investing and financing activities of discounted operations
The entity must also present a non current asset classified as held for sale or a disposal group held for sale separately from other assets in the SOFP. The liabilities of the disposal group classified as held for sale must also be presented separately