International Accounting Standard 1

PAS 1: Presentation of Financial Statements

Objective
• Sets out overall requirements for the presentation of Financial Statements
• Guidelines for Structure
• Minimum Requirements for their Content

Scope
• Applied to preparation of Financial Statements in accordance with the PFRS (Philippine
Financial Reporting Standards)
• (Specifically, the part of “Provisions and Requirements for the structure and its content”)
Does not apply to the structure and content of Condensed Interim Financial Statements
(reporting period shorter than the reporting year).
• Apply to Interim Financial Statements. (Parag. 15-35, General Feature of Financial
Statements)
• Applies equally to all entities including those that;
- present Consolidated Financial Statements, PFRS 10
(Combined FS of Parent and Subsidiary by a 3rd reporting
entity)
- present Separate Financial Statements IAS 27 ( Diff. FS of
Parent and Subsidiary)
• Applied to FS preparation of Non-Profit Organizations/Entities.

Definition of Terms (Terms used in the Standard w/ meanings)

➢ General Purpose Financial Statements (Financial Statements) - those intended to meet

the needs of USERS WHO ARE NOT IN THE POSITION to require an entity to prepare
reports tailord to their particular information needs.
➢ Impracticable – a requirement that cannot be applied even when the entity made every
reasonable effort to do so.
➢ International Financial Reporting Standard (IFRS) – Standards and Interpretations
issued by the International Accounting Standards Board (IASB).
- Comprises;
• International Financial Reporting Standards (or PFRS)
• International Accounting Standards (PAS)
• IFRIC Interpretations
• SIC interpretations (PIC)
➢ Materiality – an items is material if its Omission or Misstatement could individually or
collectively influence the economic decisions that users make on the basis of FS.
- Materiality as to Size
- Materiality as to Nature
 - An item may be immaterial for large entities but material to small entities OR
material regardless of the size of the entity.

➢ Notes to Financial Statements – equal component of a complete set of a complete set

of FS.
- Provide narrative descriptions / disaggregation of items presented in the; (1)
Statement of Financial Position, (2) Statement of Profit or Loss, (3) Statement of
Changes in Equity, (4) Statement of Cash Flows.
- Provide information about items that do not qualify for recognition in the FS
(stated above).
- Where OTHER IMPORTANT INFORMATION is disclosed when cannot be
presented in the FS.
➢ Balance Sheet – assets, liabilities, and equity
➢ Income Statement – income & expenses, revenues & gains, expenses from operations &
losses
➢ Statement of Cash Flows – the movement of Cash in the entity (e.i. if they arise from
operating activities OR financing/investing activities)
➢ Statement of Changes in Equity – presents the Change in Equity
➢ Other Comprehensive Income – other items from income and expense that are not
recognized in profit or loss as required/permitted by other IFRS.
➢ Total Comprehensive Income – change in equity during a period resulting from
transactions and events OTHER THAN those resulting from with owners and their
capacity as owners. Includes everything that affects the equity EXCEPT changes brought
about by investments/withdrawals by the owners of the company.
- Statement of Comprehensive Income – is the FS. Gives a
comprehensive view of the performance of the entity.
- Comprises;
• of Profit or Loss ( items that arises from the operations from the
activities/transaction of the entity in pursuit of its business
purpose)
• of Other Comprehensive Income (not related to the business
operations of the entity / not classified by the Standards as part of
Comprehensive Income), comprises;
- CHANGE IN REVALUATION OF SURPLUS (change of value
long term assets’ carrying amount to match the fair value)
- REMEASSUREMENTS OF DEFINED BENEFIT PLANS
(employee benefits/pensions)
- GAINS AND LOSSES ARRISING FROM TRANSLATING FS OF
A FOREIGN OPERATION (due to the use of diff. exchange
rates)
o The amount considered part is NOT the Cumulative
Translation Adjustment, but ONLY THE CURRENT
CHANGE IN THE TRANSLATION ADJUSTMENT
 - GAINS AND LOSSES FROM INVESTMENTS IN EQUITY
INSTRUMENTS/ FINANCIAL ASSETS DESIGNATED AT FAIR
VALUE THROUGH OTHER COMPREHENSIVE INCOME.
o Every gain or loss arising from CHANGE IN THE FAIR
VALUE, the gain or loss will be reported in the
OTHER COMPREHENSIVE INCOME.
o Financial assets at fair value through OCI (Reported
in OCI)
o Financial assets at fair value through Profit or Loss
(Reported in the FS/SCI)
- CHANGES IN FAIR VALUE DUE TO THE LIABILITY’S CREDIT
RISK (for particular liabilities designated at a fair value
through profit or loss)
- EFFECTIVE PORTION OF A THE GAINS AND LOSSES IN A
CASH FLOW HEDGE
- CHANGES IN THE VALUE OF TIME VALUE OF OPTION
- FORWARD CONTRACTS (WHEN IT INVOLVES SEPARATION
OF A FORWARD ELEMENT AND A SPOT ELEMENT OF THE
FORWARD CONTRACT)
- INSURANCE FINANCE INCOME AND EXPENSES EXCLUDED
FROM PROFIT OR LOSS
- DISAGGREGATION OF THE FINANCE INCOME AND
EXPENSE FROM REINSURRANCE CONTRACTS (when your
insurance company seeks another insurance company for
insurance of risk)
➢ Reclassification Adjustments – amounts reclassified as profit or loss in the current
period that was classified as OCI in the previous period.
- Only items of OCI can undergo Reclassification Adjustment
(but not all)
- Items removed from OCI and do not undergo
Reclassification Adjustments are transferred directly to
Retained Earnings.
- Profit or Loss are closed to Retained Earnings
- Items undergone Reclassification Adjustments are part of
Operating Income BUT items transferred to Retained
Earnings are NOT part of Operating Income.