Prepared By – – Rajat DuaRajat Dua

Objectives

Basis of presentation of Financial Statements

Comparability

To setout the framework for preparation of financial statements

True & fair information

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Scope

Applies to all general purpose financial statements based on International Financial Reporting Standards.

[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.]

Financial statements should include:

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Balance Sheet (Statement of financial Position)

Income Statement (Statement of comprehensive income)

Cash flow Statement (Statement of Cash flows)

Notes, comprising a summary of accounting policies and other explanatory notes

Statement on changes in equity

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Requirements

Going Concern

Accrual basis of accounting

Consistency

Reporting period

An entity preparing IFRS financial statements is presumed to be a going concern. If not, the uncertainties must be disclosed.

If the annual reporting period changes and financial statements are prepared for a different period, the enterprise must disclose the reason for the change and a warning about problems of comparability.

IAS 1 requires that an entity prepare its financial statements, except for cash flow information, using the accrual basis of accounting.

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Requirements

Statement of changes in Equity

Comparative Information

Materiality and aggregation

Offsetting

Each material class of similar items must be presented separately in the financial statements. Dissimilar items may be aggregated only if the are individually immaterial.

Assets and liabilities, and income and expenses, may not be offset unless required or permitted by a Standard or an Interpretation.

With entity's financial statements of previous periods and with the financial statements of other entities

All owner changes in equity to be reflected in “Statement of changes in Equity”

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Structure and contents of financial statements in general

Clearly identify:

1.The financial statements 2.The reporting enterprise3.Whether the statements are for the enterprise or for a group 4.The date or period covered 5.The presentation currency 6.The level of precision (thousands, millions, etc.)

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Balance Sheet

IAS 1 does not prescribe the format of the balance sheet.

Assets can be presented current then noncurrent, or vice versa.

Liabilities and equity can be presented current then noncurrent then equity, or vice versa.

A net asset presentation (assets minus liabilities) is allowed

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Balance Sheet

Classifying current and non-current assets and liabilities.

Disclosure is required that separates the longer-term amounts from the 12-month amounts.

[Long-term debt expected to be refinanced under an existing loan facility is noncurrent, even if due within 12 months.]

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Income Statement

All items of income and expense recognized in a period must be included in profit or loss unless a Standard or an Interpretation requires otherwise.

On the face of the income statement, following items must be disclosed:

Profit or loss attributable to minority interest.

Profit or loss attributable to equity holders of the parent.

Additional line items that may be needed to fairly present the enterprise's results of operations [like: finance cost, tax expense etc].

No items may be presented on the face of the income statement or in the notes as "extraordinary items”

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Statement of Comprehensive Income

On 6 September 2007, the IASB issued a revised IAS 1; that require an entity must:

Present all non-owner changes in equity either in one statement of comprehensive income or, in two statements (a separate income statement and a statement of comprehensive income can be prepared for income and expenses).

Components of “Comprehensive income” are NOT permitted to be presented in the “Statement of changes in equity”.

Other Comprehensive Income [like: reclassification adjustments, changes in revaluation surplus etc.]

Income tax relating to each component of other comprehensive income to be disclosed.

Reclassification adjustments relating to components of other comprehensive income also to be disclosed.

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Cash Flow Statement

Rather than setting out separate standards for presenting the cash flow statement, IAS 1 refers to IAS 7, Cash Flow Statements

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Notes to the Financial Statements

Notes must disclose/present:

Basis of preparation of the financial statements and the specific accounting policies used.

Any information required by IFRSs that is not presented on the face of financials.

Should be cross-referenced from the face of the financial statements

Information about the key assumptions concerning the future.

Information about other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities.

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Notes to the Financial Statements

Notes must be presented in the following order:

A statement of compliance with IFRSs.

A summary of significant accounting policies or other notes, judgments applied, including:

Contingent liabilities and un-recognized contractual commitments.

Non-financial disclosures, such as the entity's financial risk management objectives and policies.

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Notes to the Financial Statements

Dividend Disclosures Capital Disclosures

Amount recognized for distribution to equity holders

Amount per share

Amount of proposed dividends

Any cumulative preference dividends not recognized

Objectives, policies and processes for managing capital

Quantitative data

Capital requirement; if any & whether complied

If not complied, consequences of such non-compliance

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Notes to the Financial Statements

The following other note disclosures are required:

Domicile of the enterprise

Country of incorporation

Address of registered office or principal place of business.

Description of operations and principal activities

Name of its parent and the ultimate parent.

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Questions??

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