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B ias 1
- 1. IAS 1 Presentation ofFinancial Statements:
- 2. Related Standards IFRS5 Non-current Assets Held for Sale and Discontinued Operations IFRS 7 Financial Instruments: Disclosures IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 2
- 3. Purpose and Componentsof Financial Statements Comparable statements more useful IAS 1 looks to enhance comparability Applies to general purpose financial statements Meets the needs of most users “Financial statements are a structured representation of the financial position and financial performance of the entity.” 3
- 4. Overview Statement offinancial position Statement of comprehensive income (this may be augmented by a separate income statement) Statement of changes in equity Statement of cash flows Notes including significant accounting policies and explanatory information Statement of financial position at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement 4
- 5. Fair Presentation and Compliancewith IFRSs Should present fairly - faithful representation Entity must: select and apply appropriate accounting policies keeping in mind the IAS 8 hierarchy, present the information such that it provides, relevant, comparable and understandable information, and provide additional disclosures where necessary. Note disclosures are not a substitute for proper accounting In an extremely rare situations we may depart from IFRS: Fair Presentation Override 5
- 6. Going Concern andAccrual Based Accounting Accrual basis Going concern assumed If not – new basis of accounting 6
- 7. Materiality Omissions ormisstatements of items are material if they could, individually or collectively, influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor. 7
- 8. Presentation Identify whatis included Must display the following 1. the name of the entity 2. whether the financial statements are consolidated or not 3. the date of the balance sheet or period covered 4. the reporting currency and 5. the level of rounding (e.g. ETB 000s) 8
- 9. Frequency of reporting, comparabilityand consistency At a minimum – annual statements Comparative required unless IFRS permits or requires otherwise At least two statements and a third if retrospective application or restatement Presentation and classification should generally stay the same 9
- 10. Statement of Financial Position Information to be Presented in the Statement of Financial Position Sufficiently different Based on size, function, nature and liquidity, nature, timing Different measurement bases Specific items to be presented separately May present relevant subcategories Details on share capital 10
- 11. Current Assets and Liabilities Segregate current versus non Order of liquidity Combined Amounts beyond 12 months 11
- 12. Current Assets Anentity classifies assets as current assets when: (a) it expects to realize the asset, or intends to sell or consume it, in its normal operating cycle; (b) it holds the asset primarily for the purpose of trading; (c) it expects to realize the asset within twelve months after the reporting period; or (d) the asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. 12
- 13. Current Liabilities An entityclassifies liabilities as current liabilities when: (a) it expects to settle the liability in its normal operating cycle; (b) it holds the liability primarily for the purpose of trading; (c) the liability is due to be settled within twelve months after the reporting period; or (d) it does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. 13
- 14. Statement of Profitor Loss and Other Comprehensive Income . 14 (a) revenue; (b) finance costs; (c) share of the profit or loss of associates and joint ventures accounted for using the equity method; (d) tax expense; (e) a single amount comprising the total of: (i) the post-tax profit or loss of discontinued operations and (ii) the post-tax gain or loss recognized 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; (f) profit or loss; (g) each component of other comprehensive income classified by nature (excluding amounts in (h)); (h) share of other comprehensive income of associates and joint ventures accounted for using the equity method; and (i) total comprehensive income.
- 15. Total comprehensive income …thechange in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners. includes all components of profit or loss and of other comprehensive income as noted above 15
- 16. Other Comprehensive Income 1. changesin the revaluation surplus for property, plant and equipment and intangible assets, 2. certain actuarial gains/losses on defined benefit plans, 3. gains/losses arising on translation of financial statements of foreign operations, 4. gains/losses arising from remeasuring available for sale securities and 5. gains/losses on cash flow hedges. 16
- 17. Presentation of Profitor Loss Nature of Expense presentation Revenue X Other income X Changes in inventories of finished goods and work in progress X Raw materials and consumables used X Employee benefits expense X Depreciation and amortization expense X Other expenses X Total expenses (X) Profit before tax X 17
- 18. Function ofExpense presentation: Revenue -- Cost of sales (--) Gross profit -- Other income -- Distribution cost (--) Administrative expenses (--) Other expenses (--) Profit before tax -- 18 Presentation of Profit or Loss
- 19. Statement of Changesin Equity This statement presents the following: 1. total comprehensive income 2. for each component of equity, the effects of retrospective application/restatement 3. reconciliation between the carrying amount of each component of equity at the beginning and end of the period. 19
- 20. Statement of Changesin Equity Notes: augment the basic statements include information about the way they have been prepared provide additional descriptive and supportive information should be cross-referenced accounting policies key sources of estimation uncertainty nature and structure of an entity’s capital and how it is managed 20
- 21. Samples of andExcerpts from Selected Statements 21
- 22. Samples of andExcerpts from Selected Statements 22
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- 24. Statement of Changesin Equity 24
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- 27. Case study 1 Facts ABUGIDA plc. is a customer of ethio telecom and is in the business of manufacturing of car batteries. The domestic market for car batteries is currently not doing well, and therefore many entities in this business are switching to exports. As per the audited financial statements for the year ended December 31, 2018, the entity had net losses of 2 million birr. At December 31, 2018, its current assets aggregate to 20 million birr and the current liabilities aggregate to 25 million birr. Due to expected favourable changes in the government policies for the manufacturing industry, the entity is projecting profits in the coming years. Furthermore, the owners of the entity have arranged alternative additional sources of finance for its expansion plans and to support its working needs in the next 12 months. Required Should ABUGIDA plc prepare its financial statements under the going concern assumption?