CHAPTER 12

COMPANY FINANCIAL STATEMENTS UNDER IFRS

1
 LEARNING OBJECTIVES

Prepare and present a statement of financial position,

statement of profit or loss, statement of changes in
equity and statement of cash flows (or extracts) from
the accounting records and trial balance in a formant
which satisfies the information requirements of the
entity.

2
TOPIC LIST
12.1. The statement of profit or loss (IAS 1)
12.2. The statement of financial position (IAS 1)
12.3. Statement of changes in equity (IAS 01)
12.4. Applying the IAS 1 formats

3
12.1. THE SPL (IAS 1)
 The statement of profit or loss must show balances as
set out in the IAS 1 format, including gross profit, profit
before tax and (post-tax) profit for the reporting period
 Functional format
 Main requirement: all items of income and expense
recognised in a period shall be included in profit or
loss
 Note: SCI – beyond scope of Accounting

4
 12.1. THE SPL (IAS 1)
Worked example: Statement of profit or loss

Ducat plc
Statement of profit or loss for the year ended 31/12/20X3
£
Revenue 623,000
Cost of sales (414,000)
Gross profit 209,000
Other income 26,000
Distribution costs (73,000)
Administrative expenses (32,000)
Finance costs (15,000)
Profit before tax 115,000
Income tax (35,000)
Profit for the period 80,000
Note: income tax – term used in IAS 1 – refer to tax on an entity’s
profits (not to be confused with income tax (PAYE) on an
employee’s salary) 5
12.1. THE SPL (IAS 1)
12.1.1. Cost of sales, distributions costs and
administration expenses
 Functional one: COS, dist costs, admin expenses

6
 12.1. THE SPL (IAS 1)
12.1.1. Cost of sales, distributions costs and administration
expenses
Cost of sales Distribution costs Admin expenses
- Purchases, delivery - Marketing, dist staff - Admin staff
inwards, adjusted - Sales comm. - Non-production,
for OI, CI, - Costs relating to non-dist operations
substantial loss of delivery vehicles, - Amortisation of
inventory other NCA used by intangibles
- Manufacturing dist operations - Expenses of
company: - Advertising, selling subtantial loss of
production staff, activities inventory
expenses relating to - Irrcoverable debts
production NCA expense

7
12.1. THE SPL (IAS 1)
12.1.2. Other income
 Dividends received on investments
 Interest received on savings
 Rent received from property
 Discounts received from suppliers???
 Insurance claim proceeds
 Profits on disposal of non-current assets

8
12.1. THE SPL (IAS 1)
12.1.3. Finance costs
 Interest payable on bank loans and overdrafts
 Interest on debt securities

9
12.2. THE SFP (IAS 1)
Ducat plc - SFP as at …
ASSETS
Non-current assets
Current assets
Total assets
EQUITY AND LIABILITIES
Equity
Total equity
Non-current liabilities
Current liabilities
Total equity and liabilities
10
12.2. THE SFP (IAS 1)
 Points to note (extremely important!)
 All tangible assets (including land and buildings) are
combined under the heading 'property, plant and
equipment’
 Trade receivables and any other receivables (including VAT
due) are combined as 'trade and other receivables';
prepayments are included in the heading 'other current
assets'. The allowance for receivables is set off here.
 Cash in hand and at bank are combined as 'cash and cash
equivalents'.
11
12.2. THE SFP (IAS 1)
 Any long-term liabilities such as bank loans or debt
securities that are not repayable within 12 months are
combined as 'long-term borrowings' under 'non-current
liabilities'. Redeemable preference shares would be
included here.
 There are detailed disclosure requirements for share capital
in IAS 1, in particular of the issued, fully paid and partly paid
share capital, and of the par value. The figure included in
the statement of financial position is the called-up share
capital, both paid and unpaid.
12
12.2. THE SFP (IAS 1)
 Bank overdrafts, which are technically repayable on
demand, are called 'short-term borrowings'. They are not
offset against any cash and cash equivalent asset
balances, unless a right of set-off exists.
 Trade payables and other payables (including VAT,
PAYE/NIC and sales commission owed, interest payable
and accruals) are combined as 'trade and other payables’.
 Current amounts of tax payable are each shown as a
separate item under current liabilities.

13
12.3. THE STATEMENT OF CHANGES IN EQUITY (IAS 1)

The following should be shown in the statement of changes in

equity:
(a) Total comprehensive income for the period. For the
purposes of Accounting, this is profit or loss for the
period.
(b) The amounts of transactions with owners, showing
separately contributions by owners (eg issues of share
capital and any related premium) and distributions to
owners (in the form of dividends)
(c) For each component of equity, a reconciliation between the
carrying amount at the beginning and end of the period,
showing separately each change. For the purposes of
Accounting, share capital, share premium, retained
earnings and other reserves are the key components of
equity that should be included in the statement of changes
in equity. 14
12.3. THE STATEMENT OF CHANGES IN EQUITY (IAS 1)

Worked example: Statement of changes in equity

The following has been extracted from the equity section of the statements of
financial position of Monty Ltd as at 30 April 20X8 and 20X9:

Equity 20X9 20X8

£ £
Share capital: £1 equity shares 120,000 100,000
Share premium 70,000 60,000
Retained earnings 122,400 86,700
Other reserves 12,000 12,000

Notes: Monty Ltd paid a dividend of 20p per share to all registered shareholders on
31 December 20X8 and issued 20,000 £1 equity shares at £1.50 on 1 February
20X9. The only other movement in equity in the year was in respect of profit for
the period of £55,700.
Requirement:
Prepare Monty Ltd's statement of changes in equity for the year ended 30 April
20X9.

15
12.4. APPLYING THE IAS 1 FORMATS

 extract a trial balance

 draw up adjustment journals
 Process adjustments and calculate closing TB
 gather the ledger accounts together appropriately
regarding the statement of profit or loss cost of sales,
administrative expenses and distribution cost headings
 complete the formats for statement of profit or loss and
statement of financial position

16
End of Chapter 12
Thank you!

17