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CFAS NOTES SALISID

Chapter 03 : PRESENTATION OF FINANCIAL
STATEMENTS | PAS 1

OBJECTIVES
Prescribe the basis for presentation of general purpose financial
statements.

Ensure comparability both with the entity's financial Statements Of

previous periods and with the financial statements Of Other entities.

Set out overall requirements for the presentation Of financial

statements, guidelines for their structure and minimum requirements
for their content.

Does not apply to the structure and content of

condensed interim financial statements. However, there
are few provisions in PAS 1 that are applicable to such
financial statements.

(Periodic Financial Statements)

💡 Condensed Interim Financial Statements - period shorter than a

fiscal year.

Applies equally to all entities, including those that

present consolidated financial statements in accordance

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 with PFRS 10, "Consolidated Financial Statements", and
those that present separate financial statements in
accordance with PAS 27, "Separate Financial
Statements".

An entity shall apply this standard in preparing and presenting

General purpose financial statements in accordance with international
financial reporting standards.

It should be applied to anyone governed by PFRS.

💡 PAS 1 are suitable for profit-oriented entities, including

public sector business entities, PAS 1 may be applied by
entities with not-for-profit activities in the private sector or
the public sector

FINANCIAL STATEMENTS
Complete set of Financial statements is composed of:

Statement of financial position as at the end of the period;

Statement of profit or loss and other comprehensive income for the

period;

Statement of changes in equity for the period;

Statement of cash flows for the period;

Notes, comprising significant accounting policies and other

explanatory information; and

Comparative information in respect of the preceding period.

💡 The objective of 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.

💡 Financial statements shall present fairly the financial

position, financial performance and cash flows Of an entity.

The application of PFRSS, with additional disclosure when necessary, is

presumed to result in financial statements that achieve a fair
presentation.

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 💡 Fair Presentation - True, Correct, Complete | Completeness,
Neutrality, Free from Error

To meet that objective, financial statements provide

information about an entity's:

assets

cash flows

liabilities

contributions by and distributions

to owners

equity

income and expenses, including gains and losses

GENERAL FEATURES
Entities shall present with equal prominence all of the financial
statements in a complete set of financial statements.

💡 Structure and Content of Financial Statements in General clearly

identify The financial statements must be clearly identified and
distinguished from other information in the same published
document. and Each financial statement and the notes must be
clearly identified

In addition, the following must be displayed prominently:

Name of the reporting entity:

Whether the financial statements are of an individual entity or a

group;

Reporting date;

Presentation currency (as defined in PAS 21);

Level of rounding used (thousands, millions, etc.)

FAIR PRESENTATION AND COMPLIANCE WITH PFRS

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

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 definitions and recognition criteria for assets, liabilities, income
and expenses set out in the Framework.

PAS 1 requires that an entity whose financial statements comply with

PFRSs make an explicit and unreserved statement of such compliance in
the notes.

Departure from a requirement might be required (extremely rarely).

IN EXTREMELY RARE CASES COMPLIANCE WITH AN PFRS

REQUIREMENT WOULD BE SO MISLEADING AS TO CONFLICT WITH
THE OBJECTIVE OF FINANCIAL STATEMENTS SET OUT IN “THE
FRAMEWORK"

REBUTTABLE PRESUMPTION - THERE IS NO CONFLICT WHERE

OTHER ENTITIES IN SIMILAR CIRCUMSTANCES COMPLY WITH THE
REQUIREMENT

💡 In assessing whether conflict exists management must consider

Why the objective is not achieved in the particular
circumstances; and how the entity's circumstances differ from
those of other entities that comply with the requirement.

FAIR PRESENTATION AND COMPLIANCE WITH PFRS

Inappropriate accounting policies are NOT rectified either by

Disclosure of the accounting policies used or

By notes or explanatory material.

💡 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

GOING CONCERN

Financial statements shall be prepared on a going concern basis and

using the accrual basis of accounting. Except the statement of cash
flows which is to be prepared under cash basis of accounting and not the
accrual basis of accounting

An entity shall not prepare financial statements On a

going concern basis when management either intends to

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 liquidate the entity or to cease trading, or has no
realistic alternative but to do so.

MATERIALITY AND AGGREGATION

The final stage in the process of aggregation and classification is the

presentation of condensed and classified data, which form line items in
the financial statements. An entity shall present separately each
material class Of similar items.

An entity shall not reduce the understandability of its

financial statements by obscuring material information
with immaterial information or by aggregating material
items that have different natures or functions.

OFFSETTING

Generally, an entity shall not offset assets and liabilities or income

and expenses, subject to some exceptions.

FREQUENCY OF REPORTING

An entity shall present a complete set Of financial statements

(including comparative information) at least annually.

💡 Normally, an entity consistently prepares financial Statements

for a one-year period. However, for practical reasons, some
entities prefer to report, for example, for a 52-week period.

The following are to be disclosed:

1. the period covered by the financial Statements;

2. the reason for using a longer Or shorter period; and

3. the fact that amounts presented in the financial statements are not
entirely comparable

COMPARATIVE INFORMATION
An entity shall present comparative information in respect of the
preceding period for all amounts reported in the current period's
financial statements, except when PFRSs permit or require otherwise.

💡 An entity shall include comparative information for narrative

and descriptive information if it is relevant to understanding
the current period's financial statements.

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 An entity shall present a third statement Of financial
position as at the beginning Of the preceding period in
addition to the minimum comparative financial
statements if it applies an accounting policy
retrospectively

In such circumstances, an entity shall present three statements of

financial position as at:

1. the end of the current period;

2. the end of the preceding period; and

3. the beginning of the preceding period.

If an entity changes the presentation or classification of items in its

financial statements, it shall reclassify comparative amounts unless
reclassification is impracticable. Including as at the beginning of the
preceding period, when an entity reclassifies comparative amounts, it
shall disclose:

1. the nature of the reclassification;

2. the amount of each item or class Of items that is reclassified

3. the reason for the reclassification.

When it is impracticable to reclassify comparative amounts, an entity

shall disclose:

1. the reason for not reclassifying the amounts, and

2. the nature of the adjustments that would have been made if the
amounts had been reclassified.

CONSISTENCY OF PRESENTATION
An entity may not retain the presentation and classification of items
in the financial statements from one period to the next when:

It is apparent, following a significant change in the nature of

the entity's operations or a review of its financial statements,
that another presentation or classification would be more
appropriate having regard to the criteria for the selection and
application Of accounting policies in PAS 8.

A PFRS requires a change in presentation.

STATEMENT OF FINANCIAL POSITION

IDENTIFICATION OF THE FINANCIAL STATEMENTS

The name of the reporting entity or the means of identification

Whether the FS are of an individual entity or a group of entities

The date of the reporting period

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 The presentation currency

The level of rounding off used in presenting the amounts

💡 An entity must normally present a classified statement of

financial position, separating current and noncurrent assets
and liabilities.

💡 Only if a presentation based on liquidity provides information

that is reliable and more relevant may the current/noncurrent
split be omitted.

CURRENT ASSETS

Cash; cash equivalent; assets held for collection,

sale, or consumption within the entity's normal
operating cycle; or assets held for trading within
the next 12 months. All other assets are noncurrent.

CURRENT LIABILITIES

Those to be settled within the entity's normal

operating cycle or due within 12 months, or those
held for trading, or those for which the entity does
NOT have an unconditional right to defer payment
beyond 12 months. Other liabilities are noncurrent.

💡 When a long-term debt is expected to be refinanced under an

Existing loan DEBTS facility and the entity has the
discretion, the debt is classified as Noncurrent, even if due
within 12 months.

💡 IF A LIABILITY HAS BECOME PAYABLE ON DEMAND BECAUSEAN ENTITY

HAS BREACHED AN UNDERTAKING UNDER A LONGTERM LOAN AGREEMENT ON
OR BEFORE THE REPORTING DATE, THE LIABILITY IS CURRENT, EVEN
IF THE LENDER HAS AGREED, AFTER THE REPORTING DATE AND BEFORE
THE AUTHORIZATION OF THE FINANCIAL STATEMENTS FOR ISSUE NOT TO
DEMAND PAYMENT AS A CONSEQUENCE OF THE BREACH.

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 💡 HOWEVER, THE LIABILITY IS CLASSIFIED AS NON-CURRENT IF THE
LENDER AGREED BY THE REPORTING DATE TO PROVIDE A PERIOD OF
GRACE ENDING AT LEAST 12 MONTHS AFTER THE END OF THE REPORTING
PERIOD, WITHIN WHICH THE ENTITY CAN RECTIFY THE BREACH AND
DURING WHICH THE LENDER CANNOT DEMAND IMMEDIATE REPAYMENT.

💡 PAS 1 DOES NOT PRESCRIBE THE FORMAT OF THE STATEMENT OF

FINANCIAL POSITION. ASSETS CAN BE PRESENTED CURRENT THEN
NONCURRENT, OR VICE VERSA, AND LIABILITIES AND EQUITY CAN BE
PRESENTED CURRENT THEN NONCURRENT THEN EQUITY, OR VICE VERSA.
A NET ASSET PRESENTATION CASSETS MINUS LIABILITIES) IS
ALLOWED.

💡 CERTAIN ITEMS ("LINE ITEMS") MUST BE SHOWN ON THE FACE OF THE

STATEMENT OF FINANCIAL POSITION AS A MINIMUM:ADDITIONAL LINE
ITEMS, HEADINGS AND SUBTOTALS ARE PRESENTED WHEN RELEVANT TO
AN UNDERSTANDING OF FINANCIAL POSITION

STATEMENT OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME
Profit or loss for that period + other Comprehensive
Income recognized in that period = Total
Comprehensive income for a period

💡 ALL ITEMS OF INCOME AND EXPENSE RECOGNIZED IN A PERIOD MUST BE

INCLUDED IN PROFIT OR LOSS UNLESS A STANDARD OR AN
INTERPRETATION REQUIRES OTHERWISE.

💡 SOME PFRSS REQUIRE OR PERMIT THAT SOME COMPONENTS TO BE

EXCLUDED FROM PROFIT OR LOSS AND INSTEAD TO BE INCLUDED IN

The components of other comprehensive income include:

Changes in revaluation surplus (PAS 16 and PAS 38)

Actuarial gains and losses on defined benefit plans recognized in

accordance with PAS 19

Gains and losses arising from translating the financial statements

of a foreign operation (PAS 211 • Gains and losses on remeasuring
available-forsale financial assets (PAS 39)

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 The effective portion of gains and losses on hedging instruments
in a cash flow hedge (PAS 39).

An entity has a choice of presenting:

A single statement of profit or loss and other comprehensive income

or two statements:

A statement of profit or loss displaying components of profit or

loss and

A statement of other comprehensive income that begins with profit

or loss and displays components of other comprehensive income

💡 NO ITEMS MAY BE PRESENTED IN THE STATEMENT OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME (OR IN THE STATEMENT OF PROFIT
OR LOSS, IF SEPARATELY PRESENTED) OR IN THE NOTES AS
'EXTRAORDINARY ITEMS'.

💡 EXPENSES RECOGNIZED IN PROFIT OR LOSS SHOULD BE ANALYZED

EITHER BY NATURE CRAW MATERIALS, STAFFING COSTS. DEPRECIATION.
ETC.) OR BY FUNCTION (COST OF SALES. SELLING, ADMINISTRATIVE,
ETC).

💡 IF AN ENTITY CATEGORIZES BY FUNCTION, THEN ADDITIONAL

INFORMATION ON THE NATURE OF EXPENSES-AT A MINIMUM
DEPRECIATION, AMORTIZATION AND EMPLOYEE BENEFITS EXPENSE -
MUST BE DISCLOSED.

STATEMENT OF CHANGES IN EQUITY

💡 THE AMOUNT OF DIVIDENDS RECOGNISED AS DISTRIBUTIONS TO

OWNERS DURING THE PERIOD, AND THE RELATED AMOUNT PER SHARE
MUST BE DISCLOSED EITHER IN THE STATEMENT OF CHANGES IN
EQUITY OR IN THE NOTES

NOTES TO THE FINANCIAL STATEMENTS

PAS 1 suggests that the notes should normally be presented in the
following order:

A statement of compliance with PFRSS

A summary of significant accounting policies applied, including:

The measurement basis used in preparing the financial statements

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 The other accounting policies used

supporting information for items presented on the face of the

statement of financial position, statement of profit or loss and
other comprehensive income, statement of changes in equity and
statement of cash flows, in the order in which each statement and
each line item is presented • other disclosures, including:

Contingent liabilities (see PAS 37 and unrecognized contractual

commitments

Non-financial disclosures, such as the entity's financial risk

management objectives and policies (see PERS]

Disclosure of key sources of estimation uncertainty.

An entity must disclose, in the notes, information about the key

assumptions concerning the future, and other key sources of
estimation uncertainty at the end of the reporting period, that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year.

These disclosures do not involve disclosing budgets or forecasts

DISCLOSURES ABOUT DIVIDENDS

The amount of dividends proposed or declared before the financial

statements were authorized for issue but not recognized as a
distribution to owners during the period, and the related amount per
share and the amount of any cumulative preference dividends not
recognized.

💡 CAPITAL DISCLOSURES: AN ENTITY SHOULD DISCLOSE INFORMATION

ABOUT ITS OBJECTIVES, POLICIES AND PROCESSES FOR MANAGING
CAPITAL

PFRS FOR SMEs

The requirements provided by the full version Of PAS
1 are the same as the requirements Of PAS 1 for SMEs
in the following aspects

1. General features in the preparation of financial statements;

2. Components of financial statements; and

3. Presentation of the statement of comprehensive income, statement

of changes in equity, statement Of cash flows, and notes to
financial statements.

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 The two are different in the following regard:

1. A single statement of income and retained earnings is allowed for

SMES;

2. Line items for the total of assets classified as held for sale and
the total of liabilities included in disposal group classified as
held for sale are not required for SMEs;

3. PFRS for SMEs requires presentation of both investments in

associates and investment in joint ventures while full PFRS
require presentation Of investments in associates only.

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