This blog is written by Mr. Anwar A. Gondal, Assistant Manager Internal Audit Services. Please read this academic blog and provide your valued comments.
IAS 1 PRESENTATION OF FINANCIAL STATEMENTS
It sets out the overall requirements for financial statements, including how they should be structured, the minimum requirements for their content and overriding concepts such as going concern, the accrual basis of accounting and the current/non-current distinction.
The objective of IAS 1 (2007) is to prescribe the basis for presentation of general purpose financial statements, to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities. IAS 1 sets out the overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. Standards for recognizing, measuring, and disclosing specific transactions are addressed in other Standards and Interpretations
It applies to all general purpose financial statements that are prepared and presented in accordance with International Financial Reporting Standards (IFRSs). General purpose financial statements are those intended to serve users who are not in a position to require financial reports tailored to their particular information needs.
Objective of general purpose 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. To meet that objective, financial statements provide information about entities.
- income and expenses, including gains and losses
- contributions by and distributions to owners (in their capacity as owners)
- Cash flows.
Fair presentation and compliance with IFRS
The financial statements must “present fairly” the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events, and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework. The application of IFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. IAS 1 requires an entity whose financial statements comply with IFRSs to make an explicit and unreserved statement of such compliance in the notes. Financial statements cannot be described as complying with IFRSs unless they comply with all the requirements of IFRSs (which includes International Financial Reporting Standards, International Accounting Standards, and IFRIC Interpretations and SIC Interpretations).
There is a presumption that financial statements will be prepared at least annually. If the annual reporting period changes and financial statements are prepared for a different period, the entity must disclose the reason for the change and state that amounts are not entirely comparable
An entity must disclose, in the summary of significant accounting policies or other notes, the judgments, apart from those involving estimations, that management has made in the process of applying the entity’s accounting policies that have the most significant effect on the amounts recognized in the financial statements.
Examples cited in IAS 1 include management’s judgments in determining:
- when substantially all the significant risks and rewards of ownership of financial assets and lease assets are transferred to other entities
- Whether, in substance, particular sales of goods are financing arrangements and therefore do not give rise to revenue.
- An entity must also disclose, in the notes, information about the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. These disclosures do not involve disclosing budgets or forecasts.
Anwar Ahmed Gondal