Professional Documents
Culture Documents
Presentation of Financial Statements: Objective of Financial Reporting Objective of Financial Reporting
Presentation of Financial Statements: Objective of Financial Reporting Objective of Financial Reporting
LEARNING OBJECTIVES 2
International Financial Reporting Standards
1 2
• Provide financial information about the reporting entity that To meet that objective, financial statements provide
is useful to existing and potential investors, lenders and information about an entity's:
other creditors in making decisions about providing ▪ assets
resources to the entity. ▪ liabilities
– The information provided about financial performance ▪ equity
▪ income and expenses, including gains and losses
helps existing and potential investors, lenders and
▪ contributions by and distributions to owners (in their
other creditors to understand the return the entity has capacity as owners)
produced on its economic resources. ▪ cash flows.
That information, along with other information in the notes,
assists users of financial statements in predicting the
entity's future cash flows and, in particular, their timing and
certainty.
3 4
• Fair presentation
A complete set of financial statements includes: – achieved through application of IFRS
– a statement of financial position (balance sheet) at the end – disclose compliance with IFRS
of the period – full compliance with IFRS required
– a statement of comprehensive income (profit or loss and – application before effective date
other comprehensive income) for the period – disclose that fact
– true and fair override
– a statement of changes in equity for the period
– only in extremely rare circumstances
– a statement of cash flows for the period – In extremely rare circumstances, where compliance with
– notes, comprising a summary of significant accounting a Standard would be misleading so it would conflict with
policies and other explanatory notes objective set out in the framework
– comparative information prescribed by the standard. – departure is permissible, if regulatory framework requires
or does not prohibit
– Specified disclosure required
5 6
7 8
► Financial flexibility.
LO 1
9 10
Elements of the Statement of Financial Position Elements of the Statement of Financial Position
11 12
13 14
15 16
• Current vs. Non-Current Liabilities As a minimum, the statement of financial position shall
include line items that present the following amounts:
– Settled in the normal course of operating
• (a) property, plant and equipment;
cycle or due to be settled within 12 month of
• (b) investment property;
the balance sheet date
• (c) intangible assets;
– Held primarily for the purpose of being traded
• (d) financial assets (excluding amounts shown under (e), (h) and (i));
– No unconditional right to defer settlement for • (e) investments accounted for using the equity method;
at least 12 months
• (f) biological assets;
– Post-balance sheet events (refinancing, • (g) inventories;
correction of defaults) do not affect current vs. • (h) trade and other receivables;
non-current classification • (i) cash and cash equivalents;
– All other Liabilities are non-Current
17 18
• (j) the total of assets classified as held for sale and assets included
in disposal groups classified as held for sale in accordance with
IFRS 5
• (k) trade and other payables;
• (l) provisions;
• (m) financial liabilities (excluding amounts shown under (k) and (l));
• (n) liabilities and assets for current tax, as defined in IAS 12
• (o) deferred tax liabilities, deferred tax assets, as defined in IAS 12
• (p) liabilities included in disposal groups classified as held for sale in
accordance with IFRS 5
• (q) non-controlling interests, presented within equity; and
• (r) issued capital and reserves attributable to owners of the parent.
19 20
21 22
• Usefulness
• Concepts
• Choice in presentation and basic requirements
• Profit or loss
• Other comprehensive income
• Other requirements
23 24
Comprehensive Other
Profit
income = + comprehensive
or loss
for the period income
Evaluate past performance.
25 26
27 28
One Two
Statement Statement
Approach Approach
29 30
• The statement(s) must present: • The following minimum line items must be presented:
– profit or loss – revenue
– other comprehensive income – gains and losses from the derecognition of financial
– total comprehensive income for the period assets measured at amortised cost
– an allocation of profit or loss and comprehensive – finance costs
income for the period between non-controlling – share of the profit or loss of associates and joint
interests and owners of the parent. ventures accounted for using the equity method
– certain gains or losses associated with the
reclassification of financial assets
– tax expense
– a single amount for the total of discontinued items
31 32
33 34
• The other comprehensive income section is • Additional line items may be needed to fairly
required to present line items which are classified present the entity's results of operations
by their nature, and grouped between those items • Items cannot be presented as 'extraordinary items'
that will or will not be reclassified to profit and loss in the financial statements or in the notes
in subsequent periods.
• Certain items must be disclosed separately either in
the statement of comprehensive income or in the
notes, if material
35 36
37 38
• Comply with IAS 7 (will be covered in the next topic). • Basis of preparation of financial statements
• Accounting policies selected
• Additional disclosure to present fairly
• Other sundry disclosures
– e.g. domicile, legal form, country of incorporation
39 40
ILLUSTRATION
Accounting Policies—
Inventory
Additional Notes to the Financial Statements
IFRS requires specific disclosures. Examples include:
1. Items of property, plant, and equipment are disaggregated
into classes such as
◆ land,
◆ buildings, etc.,
41 42
ILLUSTRATION
Reconciliation Schedule for
Property, Plant, and Equipment
Thank you!
43 44