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On 23 January 2020 the IASB published amendments to IAS on the classification of liabilities.
The objective of financial statements is to provide information that is useful in making economic decisions. IAS 1’s objective is to ensure comparability of presentation of that information with the entity's financial statements of previous periods and with the financial statements of other entities.
Financial statements are prepared on a going concern basis unless management intends either to liquidate the entity or to cease trading, or has no realistic alternative but to do so. Management prepares its financial statements, except for cash flow information, under the accrual basis of accounting.
There is no prescribed format for the financial statements but there are minimum presentation and disclosure requirements. The implementation guidance to IAS 1 contains illustrative examples of acceptable formats.
Financial statements disclose corresponding information for the preceding period (comparatives), unless a standard or interpretation permits or requires otherwise.
Statement of financial position (balance sheet)
The statement of financial position presents an entity's financial position at a specific point in time. Subject to meeting certain minimum presentation and disclosure requirements, management uses its judgement regarding the form of presentation, which sub-classifications to present and which information to disclose on the face of the statement or in the notes.
The following items, as a minimum, are presented on the face of the balance sheet:
- Assets – property, plant and equipment; investment property; intangible assets; financial assets; investments accounted for using the equity method; biological assets; deferred tax assets; current tax assets; inventories; trade and other receivables; and cash and cash equivalents.
- Equity – issued capital and reserves attributable to the parent’s owners; and non-controlling interest.
- Liabilities – deferred tax liabilities; current tax liabilities; financial liabilities; provisions; and trade and other payables.
- Assets and liabilities held for sale – the total of assets classified as held for sale and assets included in disposal groups classified as held for sale; and liabilities included in disposal groups classified as held for sale in accordance with IFRS 5.
Current and non-current assets and current and non-current liabilities are presented as separate classifications in the statement, unless presentation based on liquidity provides information that is reliable and more relevant.
Statement of comprehensive income
The statement of comprehensive income presents an entity's performance over a specific period. An entity presents profit or loss, total other comprehensive income and comprehensive income for the period. [IAS 1 para 81A].
Entities have a choice of presenting the statement of comprehensive income in a single statement or as two statements. The statement of comprehensive income under the single-statement approach includes all items of income and expense and includes each component of other comprehensive income classified by nature. Under the two statement approach, all components of profit or loss are presented in an income statement. The income statement is followed immediately by a statement of comprehensive income, which begins with the total profit or loss for the period and displays all components of other comprehensive income.
Items to be presented in statement of comprehensive income
The following items of profit or loss are, as a minimum, presented in the statement of comprehensive income:
- Revenue, presenting separately interest revenue calculated using the effective interest method.
- Gains and losses arising from the derecognition of financial assets measured at amortised cost.
- Finance costs.
Impairment losses (including reversals of impairment losses or impairment gains) determined in accordance with Section 5.5 of IFRS 9.
- Share of the profit and loss of associates and joint ventures accounted for using the equity method.
- If a financial asset is reclassified out of the amortised cost measurement category so that it is measured at fair value through profit or loss, any gain arising from a difference between the previous amortised cost of the financial asset and its fair value at the reclassification date (as defined in IFRS 9).
- If a financial asset is reclassified out of the fair value through other comprehensive income measurement category so that it is measured at fair value through profit or loss, any cumulative gain or loss previously recognised in other comprehensive income that is reclassified to profit or loss.
- Tax expense.
- A single amount for the total of discontinued operations. This comprises the total of:
- the post-tax profit or loss of discontinued operations; and
- the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation.
Additional line items or sub-headings are presented in this statement when such presentation is relevant to an understanding of the entity's financial performance.
The nature and amount of items of income and expense are disclosed separately where they are material. Disclosure may be in the statement or in the notes. Such income/expenses might include restructuring costs; write-downs of inventories or property, plant and equipment; litigation settlements; and gains or losses on disposals of non-current assets.
Other comprehensive income
An entity shall present items of other comprehensive income grouped into those that will be reclassified subsequently to profit or loss and those that will not be reclassified. An entity shall disclose reclassification adjustments relating to components of other comprehensive income. The IAS 1 amendments clarify that the entity’s share of items of comprehensive income of associates and joint ventures is presented separately, analysed into those items that will not be reclassified subsequently to profit or loss and those that will be so reclassified when specific conditions are met.
An entity presents each component of other comprehensive income in the statement either (i) net of its related tax effects, or (ii) before its related tax effects, with the aggregate tax effect of these components shown separately.
Statement of changes in equity
The following items are presented in the statement of changes in equity:
The amounts of dividends recognised as distributions to owners during the period, and the related amount of dividends per share, shall be disclosed.
Statement of cash flows
Cash flow statements are addressed in a separate summary dealing with the requirements of IAS 7.
Notes to the financial statements
The notes are an integral part of the financial statements. Notes provide information additional to the amounts disclosed in the 'primary' statements. They also include significant accounting policies, critical accounting estimates and judgements, disclosures on capital and puttable financial instruments classified as equity.