PAS 1 – Presentation of Financial

Statements
By: Luvy Sale-Asis. CPA

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Learning Objectives
• Enumerate and describe the general features of financial statement
presentation.
• Enumerate and describe the components of a complete set of
financial statements.
• State the acceptable methods of presenting comprehensive income in
the financial statements.
• Differentiate between the statement of profit or loss and other
comprehensive income and the statement of changes in equity.
• State the relationship of the notes to the financial statements with
the other components of a complete set of financial statements.
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Objective of PAS 1

PAS 1 prescribes the basis for presentation of general purpose financial

statements to improve comparability both with the entity's financial
statements of previous periods and with the financial statements of other
entities.

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• General purpose financial statements are those
intended to serve users who do not have the authority
to demand financial reports tailored for their own
needs. General purpose financial statements are those
statements that cater to most of the common needs of
a wide range of external users. General purpose
financial statements are the subject matter of the
Conceptual Framework and the PFRSs.
• Types of comparability
1. Intra-comparability (horizontal or inter-period)
2. Inter-comparability (dimensional)

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Complete set of financial statements
1. Statement of financial position
2. Statement of profit or loss and other comprehensive
income
3. Statement of changes in equity
4. Statement of cash flows
5. Notes
(5a) comparative information in respect of the
preceding period

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General features

1. Fair Presentation and Compliance with PFRSs - The

application of PFRSs, with additional disclosure when
necessary, is presumed to result in financial statements that
achieve a fair presentation.

2. Going concern - An entity is not a going concern if, as of

financial reporting date or prior to the date of authorization
of financial statements for issue, management either
a. Intends to liquidate the entity or to cease trading, or
b. Has no realistic alternative but to do so.
• The assessment of going concern is at least 12 months.

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General features (Continuation)
3. Accrual Basis of Accounting - An entity shall prepare its financial
statements, except for cash flow information, using the accrual
basis of accounting.

4. Materiality & Aggregation - Each material class of similar items

must be presented separately in the financial statements.

5. Offsetting - Assets and liabilities, and income and expenses,

shall not be offset unless required or permitted by a PFRS.
• Measuring assets net of valuation allowances, for example,
obsolescence allowances on inventories, allowances for
doubtful accounts on receivables, and accumulated
depreciation on property, plant, and equipment are not
offsetting.
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General features (Continuation)

6. Frequency of reporting – An entity shall present a

complete set of financial statements (including
comparative information) at least annually.
• When an entity changes the end of its reporting
period and presents financial statements for a period
longer or shorter than one year, an entity shall disclose
the following,
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.

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General features (Continuation)

7. 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,
unless other standards permit or require otherwise.

8. Consistency of presentation - An entity shall retain the

presentation and classification of items in the financial
statements from one period to the next unless:
a. it is apparent that another presentation or classification would be
more appropriate following a significant change in the nature of
the entity’s operations or a review of its financial statements; or
b. a PFRS requires a change in presentation.

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Additional Statement of financial position

• A statement of financial position as at the beginning of

the preceding period shall be presented when an entity
1. Applies an accounting policy retrospectively or
2. Makes a retrospective restatement of items in its financial
statements, or
3. When it reclassifies items in its financial statements.

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Statement of financial position

• A statement of financial position may be presented as

either
1.Classified (current/non-current distinction) – showing current
and noncurrent assets and liabilities, or
2.Unclassified (based on liquidity) – showing no distinction between current
and noncurrent items

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Current Assets

• An entity shall classify an asset as current when:

1. it expects to realize the asset or intends to sell or consume it, in its
normal operating cycle;
2. it holds the asset primarily for the purpose of trading;
3. it expects to realize the asset within twelve months after the
reporting period; or
4. the asset is cash or a cash equivalent unless the asset is restricted
from being exchanged or used to settle a liability for at least twelve
months after the reporting period.

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Current Liabilities

• An entity shall classify a liability as current when:

1.it expects to settle the liability in its normal operating cycle;
2.it holds the liability primarily for the purpose of trading;
3.the liability is due to be settled within twelve months after
the reporting period; or
4.the entity does not have an unconditional right to defer
settlement of the liability for at least twelve months after
the reporting period.
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Currently maturing long-term liabilities
• General rule: Currently maturing long term liabilities
are presented as current liabilities.

• Exceptions:
1. Refinancing agreement fully completed on or before the
balance sheet date – non-current liability
2. Refinancing agreement after the balance sheet date but
before the financial statements are authorized for issue –
non-current liability if the refinancing is at the discretion of
the entity.

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Breach of loan agreement

• General rule: A liability that is payable on demand is a current liability.

• Exception: It is presented as non-current liability if the lender provides

the entity, on or before the balance sheet date, a grace period ending at
least 12 months after the balance sheet date to rectify a breach of loan
covenant.

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Presentation of Deferred taxes

• Deferred tax liabilities (assets) shall be presented as noncurrent

items in a classified statement of financial position, irrespective
of their expected dates of reversal.

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Minimum line items in the statement of financial position

a. Property, plant and equipment;

b. Investment property;
c. Intangible assets;
d. Financial assets (excluding amounts shown under (e),
(h) and (i));
e. Investments accounted for using the equity method;
f. Biological assets;
g. Inventories;
h. Trade and other receivables;
i. Cash and cash equivalents;
j. Assets classified as held for sale (Groups classified as
held for sale) in accordance with PFRS 5;
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Minimum line items (Continuation)
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 PAS 12
Income Taxes;
o. Deferred tax liabilities and deferred tax assets, as defined
in PAS 12;
p. Liabilities included in disposal groups classified as held
for sale in accordance with PFRS 5;
q. Non-controlling interests, presented within equity; and
r. Issued capital and reserves attributable to owners of the
parent
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Order/ Format of Presentation

• PAS 1 does not prescribe the order or format in which an

entity presents items.
• In practice:
• Report form
• Account form

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Statement of profit or loss and other comprehensive income

• An entity shall present all items of income and expense

recognized in a period:
1. in a single statement of profit or loss and other comprehensive
income; or
2. in two statements: (1) a statement displaying the profit or loss section
only (separate ‘statement of profit or loss’ or ‘income statement’)
and (2) a second statement beginning with profit or loss and
displaying components of other comprehensive income.

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Extraordinary items

• PAS 1 prohibits the presentation of any items of income or

expense as extraordinary items in the in the statement(s)
presenting profit or loss and other comprehensive income or in
the notes.

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Other comprehensive income
a. Unrealized gains and losses on equity investments measured at fair value
through OCI
b. Unrealized gains and losses on debt investments measured at fair value
through OCI
c. Gains and losses arising from translating the financial statements of a foreign
operation
d. Revaluation surplus during the year
e. Unrealized gains and losses from derivative contracts designated as cash as
cash flow hedge
f. Remeasurements of the defined benefit plan, including actuarial gains or
losses
g. Change in fair value attributable to credit risk of a financial liability
designated at fair value through profit or loss
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Reclassification adjustments

• Reclassification adjustments are amounts reclassified

to profit or loss in the current period that were
recognized in other comprehensive income in the
current or previous periods.

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Total comprehensive income

• Total comprehensive income comprises all components

of
1. Profit or loss; and
2. Other comprehensive income.

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Presentation of Expenses

1. Nature of expense method

2. Function of expense method

• If an entity classifies expenses by function, it shall disclose additional

information on the nature of expenses

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Minimum line items in the statement of income

• revenue
• gains and losses from the derecognition of financial assets measured at
amortised cost
• finance costs
• share of the profit or loss of associates and joint 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
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Statement of changes in equity

• The statement must show:

• total comprehensive income for the period, showing separately amounts
attributable to owners of the parent and to non-controlling interests
• the effects of any retrospective application of accounting policies or
restatements made in accordance with IAS 8, separately for each
component of other comprehensive income
• reconciliations between the carrying amounts at the beginning and the
end of the period for each component of equity, separately disclosing:
• profit or loss
• other comprehensive income
• transactions with owners, showing separately contributions by and distributions
to owners and changes in ownership interests in subsidiaries that do not result in
a loss of control
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Disclosure of dividends

• The following amounts may also be presented on the face of

the statement of changes in equity, or they may be presented
in the notes:
• amount of dividends recognised as distributions
• the related amount per share.

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Order of presentation of disclosures in the Notes

1. Statement of compliance with PFRSs;

2. Summary of significant accounting policies applied;
3. Supporting information for items presented in the other financial
statements; and
4. Other disclosures.

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 QUESTIONS????
 REACTIONS!!!!!

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