PRESENTATION OF

FINANCIAL STATEMENTS
 2.1 INTRODUCTION

• Relate to legal and conceptual frameworks for financial reporting

• Principles of financial reporting

• Structure and content of financial statements (IAS 1 Presentation

of Financial Statements)
 2.2 PRINCIPLES OF FINANCIAL REPORTING
• The purpose 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
• IAS 1 Presentation of Financial Statements
 Prescribes the basis for the presentation of general purpose
financial statements to ensure comparability between the
enterprise’s own financial statements of previous periods and with
the financial statements of other enterprises
 Applies to the presentation of all general purpose financial
statements prepared and presented in accordance with IASs/IFRSs
 2.2 PRINCIPLES OF FINANCIAL REPORTING

• Fair presentation and compliance with IASs/IFRSs (See next)

• Going concern (See later)
• Accruals basis of accounting (See later)
• Consistency of presentation (See later)
• Materiality and aggregation (See later)
• Offsetting (See later)
• Comparative information (See later)
 FAIR PRESENTATION AND COMPLIANCE WITH
IASS/IFRSS
• Financial statements are required to present fairly the financial
position, financial performance and cash flows of an enterprise
• Compliance with IASs/IFRSs will result in financial statements
that achieve fair presentation in virtually all circumstances
• If financial statements comply with IASs/IFRSs, they must state
that fact
• Financial statements must not be described as complying with
IASs/IFRSs unless they comply with each applicable IAS/IFRS
and each applicable SIC Interpretation
 FAIR PRESENTATION AND COMPLIANCE WITH
IASS/IFRSS
• Fair presentation override
 Non-compliance with a requirement in a standard is permitted
where, in management’s opinion, compliance would be
misleading and would not give a fair presentation
 This is expected to be extremely rare and would need to be
accompanied by detailed disclosures outlining the reason for,
the nature of, and the financial effect of the non-compliance
 GOING CONCERN

• Going concern must be assessed at each reporting date and must

be prepared on that basis, unless management either intends to
liquidate the enterprise or to cease trading, or has no realistic
alternative
• If going concern basis is not applied, must state that fact, explain
why and state the basis on which the financial statements have
been prepared
 ACCRUALS BASIS OF ACCOUNTING

• The accrual basis should be applied in the preparation of financial

statements, except the statement of cash flows
 CONSISTENCY OF PRESENTATION

• The presentation and classification of items should be retained

from one period to the next unless:
 the enterprise significantly changes the nature of its operations or identifies that a
change will result in a more appropriate presentation
 a change is required by an IAS/IFRS or a SIC Interpretation
 MATERIALITY AND AGGREGATION

• IASs/IFRSs apply to only material items

• Material items should be presented separately
• Immaterial items are to be aggregated with amounts of a similar
nature and function
 OFFSETTING

• Not permitted in respect of assets and liabilities unless specifically

required or permitted by another IAS/IFRS
• Income and expense items are to be offset only:
 if an IAS/IFRS requires or permits; or
 gains, losses and related expenses arising from the same or similar transactions and
events are not material
 COMPARATIVE INFORMATION

• Comparatives are required for the previous period unless

specifically exempted in another IAS/IFRS
• Comparatives must be reclassified if the presentation and
classification in the financial statements is amended, unless it is
impracticable to do so
2.3 STRUCTURE AND CONTENT OF FINANCIAL
STATEMENTS

• The annual report and financial statements consist of:

 The financial statements
o Statement of financial position (See later)
o Statement of profit or loss and other comprehensive income (See later)
o Statement of changes in equity (See later)
o Statement of cash flows
 Notes to the financial statements, including accounting policies (See later)
 Other narrative information (e.g. directors’ report)
2.3 STRUCTURE AND CONTENT OF FINANCIAL
STATEMENTS

• The financial statements must be clearly identified and distinguished

from other information in the financial report
• Each component of the financial statements must be clearly identified
and the following disclosed:
 Name of the enterprise
 Whether individual or consolidated statements
 Reporting date or period covered by the statement
 Reporting currency
 The level of precision in the presentation of figures

• Where, in exceptional circumstances, an enterprise is required to, or

decides to, change its reporting date, it is required to state why the
change occurred and the fact that the comparative amounts are not
comparable
STATEMENT OF FINANCIAL POSITION

• IAS 1 specifies the asset, liability and equity line items that must,
as a minimum, be presented on the face of the SFP

• Additional line items, headings and sub-totals are to be presented

on the face of the SFP if required by another IAS or if considered
necessary to present fairly the enterprise’s financial position
 EXAMPLE: STATEMENT OF FINANCIAL POSITION
XYZ GROUP – STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER 2014
(EXCLUDING COMPARATIVES)

2014 2014
$’000 $’000
ASSETS
Non-current Assets
Property, plant and equipment X
Goodwill X
Other intangible assets X
Investments in associates X
Biological assets X
X
Current Assets
Inventories X
Trade and other receivables X
Prepayments X
Cash and cash equivalents X
X
Total Assets X
 EXAMPLE: STATEMENT OF FINANCIAL POSITION
XYZ GROUP – STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER 2014
(EXCLUDING COMPARATIVES)

2014 2014
$’000 $’000
EQUITY AND LIABILITIES
Equity Attributable to Owners of the Parent
Issued share capital X
Retained earnings X
Other components of equity X
X
Non-controlling interests X
Non Current Liabilities
Long-term borrowings X
Deferred tax X
Provisions X
X
Current Liabilities
Bank overdraft X
Trade and other payables X
Current portion of long-term borrowings X
Tax payable X
X
Total Equity and Liabilities X
STATEMENT OF FINANCIAL POSITION

• Further sub-classifications of the line items presented on the face

of the SFP can be given, with amounts payable to and receivable
from related parties being disclosed separately
• Assets and liabilities can be presented either on a current/non-
current basis or in order of their liquidity
• Must disclose the amounts of assets and liabilities expected to be
recovered or settled after more than twelve months from end of
reporting period
• Detailed disclosures relating to equity line items are required
STATEMENT OF FINANCIAL POSITION

• Current assets are assets that are:

 expected to be realised, consumed or disposed of in the normal course of the
enterprise’s operating cycle; or
 held primarily for trading purposes or the short-term and expected to be realised
within 12 months of end of reporting period; or
 a cash or cash equivalent asset not restricted in its use
STATEMENT OF FINANCIAL POSITION

• Current liabilities are liabilities that are:

 expected to be settled in the normal course of the enterprise’s
operating cycle; or
 due to be settled within 12 months of end of reporting period

• Long-term borrowings continue to be classified as long-

term even if due for settlement within 12 months
provided that the enterprise has the intention and ability
to ‘roll over’ the obligation
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME

• IAS 1 specifies the line items that, as a minimum,

should be presented on the face of the SPLOCI
• Additional line items, headings and sub-totals are to
be presented on the face of the SPLOCI if required
by another IAS/IFRS or if considered necessary to
present fairly the enterprise’s financial performance
 EXAMPLE: STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
XYZ GROUP – STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE
YEAR ENDED 31ST DECEMBER 2014 (EXCLUDING COMPARATIVES) (CLASSIFICATION OF EXPENSES BY
FUNCTION)
2014
$’000
Revenue X
Cost of sales (X)
Gross profit X
Other operating income X
Distribution costs (X)
Administrative expenses (X)
Profit from operations X
Finance costs (X)
Share of profit/(loss) of associates X
Profit before tax X
Income tax expense (X)
Profit for the year X
Other Comprehensive Income:

Continued ....
 EXAMPLE: STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
XYZ GROUP – STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE
YEAR ENDED 31ST DECEMBER 2014 (EXCLUDING COMPARATIVES) (CLASSIFICATION OF EXPENSES BY
FUNCTION) 2014
$’000
Other comprehensive income:
Items that may be reclassified into profit or loss:
Foreign exchange gains arising from the translation of foreign operations X
Items that will not be reclassified into profit or loss
Gain/(loss) on property revaluation X
Other comprehensive income for year X
Total comprehensive income for year X

Profit/(loss) attributable to:

Owners of the parent X
Non-controlling interests X
X

Total comprehensive income/(loss) attributable to:

Owners of the parent X
Non-controlling interests X
X
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME

• Additional information disclosed on face of the SPLOCI or in the

notes
 An analysis of expenses using a classification based on either
the nature of expenses or their function within the enterprise
 If functional classification adopted, must also disclose
information on the nature of expenses, including depreciation
and staff costs
 Dividends per share (declared or proposed)
STATEMENT OF CHANGES IN EQUITY

• Third component of a set of financial statements

• Components that make up comprehensive income must not be
shown in the statement of changes in equity (only totals shown)
• Main purpose is to show the amounts of transactions with owners
(e.g. shares and dividends) and to reconcile opening and closing
balance of each equity and reserve

See Chapter 2, Figure 2.7

STATEMENT OF CHANGES IN EQUITY
Share Other Retained
Capital Reserves Earnings Total
$’000 $’000 $’000 $’000
Opening balance x x x x
Changes in accounting policy - - x x
Restated balance x x x x

Changes in equity for year

Dividends (x) (x)
Total comprehensive income x x x
Issue of share capital x - - x
Total changes in equity x x x x

Closing balance x x x x
NOTES TO THE FINANCIAL STATEMENTS

• Must include accounting policies, identifying the

measurement basis used in preparing the financial
statements and the significant accounting policies adopted
• Must include other information required by IASs/IFRSs or
necessary for a fair presentation
• Other disclosures include information about the enterprise if
not disclosed elsewhere in information published with the
financial statements (e.g. the domicile and legal form of the
enterprise, principal activities, number of employees)