Presentationof Financial Statements PAS 1 PDF

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PRESENTATION of FINANCIAL STATEMENTS PAS 1

SCOPE  The Standard shall be applied to all general purpose financial statements prepared and presented in accordance with International Financial Reporting Standards (IFRSs).

MODULE OBJECTIVES  Update the participants on the basis ofthe presentation of the financial statements  Acquaint participants with the proper balance sheet presentation, using the current and non-current classification of assets and liabilities  Acquaint participants with the formats of presenting expenses on the income statement.  Present an illustrative format for presentation of the statement changes in equity.

the of

 Enumerate information that are required to be presented in the notes to the financial statements.

International Financial Reporting Standards (IFRSs) are Standards and Interpretations issued by the International Accounting Standards Board (IASB). They comprise: (a) International Financial Reporting Standards; (b) International Accounting Standards; (c) IFRIC Interpretations; and (d) SIC Interpretations. IFRS Defined

Objective 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. It sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. OBJECTIVE of

IFRS Components

PAS 1

 To prescribe the basis for presentation of general purpose financial statements, to ensure comparability both with financial statements of previous periods and with the financial statements of other entities.  The Standard sets out the following:  overall requirements for the presentation of financial statements;  guidelines for their structure; and Minimum requirements for their content

International Financial Reporting Standards -are Standards and Interpretations adopted by the International Accounting Standards Board composed of: *IFRSs *IASs *Interpretations originated by IFRIC or SIC Materiality Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make 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. OTHER COMPREHENSIVE INCOME Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other IFRSs.

The components of other comprehensive income include: (a) changes in revaluation surplus (see IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets); (b) remeasurements of plans (see IAS Benefits);

defined 19Employee

(d) gains

and losses from investments in equity instruments measured at fair value through other comprehensive income in with

paragraph

PURPOSE OF FINANCIAL STATEMENTS  To provide information about the -

benefit

(c) gains and losses arising from translating the financial Statements of a foreign operation;

accordance of IFRS

Total comprehensive income comprises all components of ‘profit or loss’ and of ‘other comprehensive income’.

-

financial position,

-

financial performance, and

-

cash flows

of an entity that is useful to a wide range of users in making economic decisions. COMPONENTS STATEMENTS

OF

FINANCIAL

5.7.5

A complete set of comprises:

financial

statements

(e) Instruments; (a) a balance sheet; (f) The components of other comprehensive income include:

(b) an income statement;

(g) the effective portion of gains and losses on hedging instruments in a cash flow hedge (see IAS 39 Financial Instruments: Recognition and Measurement);

(c )

(h) for particular liabilities designated as at fair value through profit or loss, the amount of the change in fair value that is attributable to changes in the liability’s credit risk (see paragraph 5.7.7 of IFRS 9).

(f) a statement of financial position as at the beginning of the earliest comparative period when an entity 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.

Other Definitions Owners

are

Profit or loss incomeless

holders equity. is the total of expenses excluding the

components of other comprehensive income.

Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods. Total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners.

a statement of changes in equity;

(d) cash flow statement; notes to the financial statements;

An entity may use titles for the statements other than those used in this Standard. For example, an entity may use the title ‘statement of comprehensive income’ instead of ‘statement of profit or loss and other comprehensive income’. An entity may present a single statement of profit or loss and other comprehensive income, with profit or loss and other comprehensive income presented in two sections. The sections shall be presented together, with the section presented first followed directly by the other comprehensive income section. An entity may present the profit or loss section in a separate statement of profit or loss. If

so, the separate statement of profit or loss shall immediately precede the statement presenting comprehensive income, which shall begin with profit or loss. 11 An entity shall present with equal prominence all of the financial statements in a complete set of financial statements. Management’s Responsibility The financial statements are basically the responsibility of the company’s management

(b) management judgment/ decision that results to relevant and reliable information, considering (1) requirements and guidance of accounting standards interpretations; and

similar and

(2) the definitions, recognition criteria and measurement bases in the Framework. OVERALL CONSIDERATIONS

GENERAL FEATURES

 Fair Presentation and Compliance with IFRSs

Fair presentation and compliance with IFRSs

 Going Concern

Financial statements shall present fairly the financial position, financial

 Accrual Basis of

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 An entity whose financial statements comply with IFRSs shall make an explicit and unreserved statement of such compliance in the notes. An entity shall not describe financial statements as complying with IFRSs unless they comply with all the requirements of IFRSs. An entity cannot rectify inappropriate accounting policies either by disclosure of the accounting policies used or by notes or explanatory material. Accounting Policies

Accounting

 Consistency ofPresentation  Materiality and Aggregation  Offsetting  Comparative Information FAIR PRESENTATION AND COMPLIANCE WITH IFRS Achieved by:  Complying with requirements of

all the PFRS;

applicable

 Presenting information that meets qualitative characteristics  Providing necessary

additional

disclosures,

the when

An entity whose financial statements comply with IFRS shall make an explicit and unreserved statement of such compliance in the notes.

Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.

Financial statements shall not be described as complying with IFRS unless they comply with ALL the requirements of IFRSs.

Hierarchy of Accounting Policies

An entity preparing IFRS financial statements are presumed to be a going concern.

In descending order: (a) requirements of an applicable standard or an interpretation;

accounting

GOING CONCERN

If management has significant concerns about the entity’s ability to continue as a going concern, the uncertainties must be disclosed. If management concludes that the entity is not 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 OF ACCOUNTING An entity should prepare its financial statements, except for cash flow information, using the accrual basis of accounting. CONSISTENCY OF PRESENTATION The presentation and classification ofitems 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 IFRS. MATERIALITY AND AGGREGATION Each material class of similar items must be presented separately in the financial statements. Dissimilar items may be aggregated only if these are individually immaterial. OFFSETTING Assets and liabilities, and income and expenses, may not be offset unless required or permitted by a Standard or an Interpretation. COMPARATIVE INFORMATION The Standard requires that comparative information shall be disclosed in respect of the previous period for all amounts reported in the financial statements, both on the face of financial statements and notes, unless another Standard requires otherwise. If comparative amounts are changed or reclassified, generally restatement and various disclosures are required. STRUCTURE AND CONTENT FINANCIAL STATEMENTS

OF

 Identification of the Financial Statements The financial statements shall be identified clearly

and distinguished from other information in the same published document.  Reporting Period Financial statements shall be presented at least annually. PRESENTATION OF ASSETS LIABILITIES ON THE BS

AND

 An entity shall present current and noncurrent classification of assets and liabilities, except when a presentation based on liquidity provides information that is reliable and is more relevant.  When exception applies, all assets and liabilities shall be presented broadly in the order of liquidity. NORMAL OPERATING CYCLE When an entity’s normal operating cycle is not clearly identifiable, its duration is assumed to be twelve months. Current Assets Defined Assets falling under any of

the following:

 Expected to be realized in, or for sale or consumption in, the entity’s normal operating cycle;  Held primarily for the purpose of traded;

being

 Expected to be realized within twelve months of the balance sheet date;  Cash or cash equivalent, unless restricted from being used or exchanged to settle a liability for at least twelve months after the balance sheet date. Current Liabilities An obligation meeting any of the following criteria:  It is expected to be settled in the entity’s normal operating cycle  It is held primarily for the purpose ofbeing traded

 It is due to be settled within twelve months after the balance sheet date  The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date Current and Non-current Liabilities An entity classifies its financial liabilities as current when they are due to be settled within twelve months after the balance sheet date, even if: (a) the original term was for a period of more than twelve months; and (b) an agreement to refinance or to reschedule payments, on a long-term basis is completed after the balance sheet date and before the issuance of the financial statements However, when refinancing or rolling over the obligation is not at the discretion of the entity, the potential to refinance is not considered and the obligation is classified as current. When an entity breaches an undertaking under a long-term agreement on or before the balance sheet date with the effect that the liability becomes payable on demand, the liability is classified as current, even if the lender has agreed, after the balance sheet date and before the authorization of the financial statements for issue not to demand payment as a consequence of the breach. The liability is classified as non-current if the lender agreed by the balance sheet date to provide a period of grace ending at least 12 months after the balance sheet date, within which the entity can rectify the breach and during which the lender cannot demand immediate payment. For each of the following cases, determine how much will be reported as current liabilities and noncurrent liabilities on December 31, 2007 balance sheet. Case 1. Ravena, Inc. has P2M of notes payable due June 15, 2008. At December 31, 2007, Ravena signed an agreement to borrow up to P2M to refinance the notes payable on a longterm basis. The financing agreement called for borrowings not to exceed 80% of the value of the

collateral Ravena was providing. At the date of issue of the December 31, 2007 financial statements, the value of the collateral was P2.4M and was not expected to fall below this amount. Case 2. Ravena, Inc. has P2M of notes payable due June 15, 2008. At February 15, 2008, Ravena signed an agreement to borrow up to P2M to refinance the notes payable on a long-term basis. The financing agreement called for borrowings not to exceed 80% of the value of the collateral Ravena was providing. The value of the collateral was P2.4M and was not expected to fall below this amount. The financial statements are authorized for issuance on March 5, 2008. Case 3. In October 2005, Vivian Corp. acquired land from Carlo, Inc. by paying P750,000 down and signing a note with a maturity value of P5M due October 2007. Situation A. Under the terms of the financing agreement, Vivian has the discretion to roll over the obligation for at least twelve months. In October 2007, management decides to exercise its discretion to roll over the liability up to October 31, 2009. Case 3. In October 2005, Vivian Corp. acquired land from Carlo, Inc. by paying P750,000 down and signing a note with a maturity value of P5M due October 2007. Situation B. The existing loan agreement does not carry a provision to refinance. In October 2007, Vivian was experiencing financial difficulty and was unable to pay the maturing obligation. On February 1, 2008, Carlo has agreed not to demand payment for at least 12 months as a consequence of the breach of payment on the principal of the loan. The financial statements were authorized for issue on March 31, 2008. Situation C. The existing loan agreement does not carry a provision to refinance. In October 2007, Vivian was experiencing financial difficulty and was unable to pay the maturing obligation. On December 31, 2007, Carlo signed an agreement to provide Vivian a grace period of 15 months from that date, during which period, Carlo will not demand immediate payment in order to give Vivian the chance to rectify the breach. The

financial statements were authorized for issue on March 31, 2008. INFORMATION ON THE FACE BALANCE SHEET

(for consolidated FS) 

Profit or loss attributable to minority interest; and



Profit or loss attributable to equity holders of the parent

OF THE

•

Property, Plant and Equiipment

•

Investment property

•

Intangible assets

•

Financial assets, excluding cash, receivables and investment under equity method

•

Investments accounted for using the equity method

•

Biological assets

•

Inventories

•

Trade and other receivables

• • • •

Cash and cash equivalents Trade and other payables Provisions Financial liabilities, excluding trade and other payables and provisions Liabilities and assets for current tax Deferred tax liabilities and assets Minority interest, which is presented within equity (for consolidated balance sheet) and Issued capital and reserves attributable to equity holders of the parent.

Expenses should be analyzed and presented either by nature (raw materials, staffing costs, depreciation, etc.) or by function (cost of sales, selling, administrative, etc.). If an enterprise categorizes by function, additional information on the nature of expenses, at a minimum - depreciation, amortization, and staff costs, must be disclosed. An entity shall not present any items of income and expense as extraordinary items, either on the face of the income statement or in the notes. Discontinued Operations

• • • •

INCOME STATEMENT INFORMATION TO BE PRESENTED ON THE FACE OF THE INCOME STATEMENT  Revenue  Finance Costs  Share of the profit or loss accounted for using the equity method  Discontinued Operations  Tax Expense  Profit or loss The following items shall be disclosed on the face of the income statement as allocations of profit or loss for the period:

 A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale, and –  represents a separate major line of business or geographical area of operations, that is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or  is a subsidiary acquired exclusively with a view to resale.  In presenting discontinued operations, an entity shall disclose a single amount comprising the total of  The post-tax profit or loss from operations of the discontinued operations and  The post tax gain or loss on disposal of the assets of the discontinued operations or the post-tax gain or loss on the measurement to realizable value of the assets or disposal groups constituting the discontinued operations. STATEMENT OF CHANGES IN EQUITY The statement must show:

* profit or loss for the period; * each item of income and expense for the period that is recognized directly in equity, and total of those items; * total income and expense for the period (calculated as the sum of the first two items), showing separately the total amounts attributable to equity holders of the parent and to minority interest; and * for each component of equity, the effects of changes in accounting policies and corrections of errors recognized in accordance with IAS 8.

(2) a summary of significant accounting policies applied, including (a) the measurement basis bases used in preparing the financial statements; and (b)

the other accounting policies used that are relevant to an understanding of the financial statements.

(3) supporting information for items presented on the face of the BS, IS, SCE and CFS, in the order in which each statement and each line item is presented; and (4) other disclosures, including -

ALTERNATIVE ...