ifrs 1 presentation of financial statements

International Accounting Standard 1  Presentation of Financial Statements  (IAS 1) is set out in  paragraphs 1⁠–⁠140  and the  Appendix . All the paragraphs have equal authority. IAS 1 should be read in the context of its  objective  and the  Basis for Conclusions , the  Preface to IFRS Standards  and the  Conceptual Framework for Financial Reporting .  IAS 8  Accounting Policies, Changes in Accounting Estimates and Errors  provides a basis for selecting and applying accounting policies in the absence of explicit guidance. [ Refer: IAS 8 paragraphs 10⁠–⁠12 ]

International Accounting Standard 1 Presentation of Financial Statements

Definitions.

General purpose financial statements (referred to as ‘financial statements’) are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs.

Basis for Conclusions paragraphs BC11⁠–⁠BC13

paragraphs 10⁠–⁠11 for a complete set of financial statements]

Impracticable Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.

International Financial Reporting Standards (IFRSs) are Standards and Interpretations issued by the International Accounting Standards Board (IASB). They comprise:

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.

paragraphs 29, 30  and  139T

Basis for Conclusions paragraphs BC13A⁠–⁠BC13S

Conceptual Framework  paragraph 2.11 ]

Materiality depends on the nature or magnitude of information, or both. An entity assesses whether information, either individually or in combination with other information, is material in the context of its financial statements taken as a whole.

Information is obscured if it is communicated in a way that would have a similar effect for primary users of financial statements to omitting or misstating that information. The following are examples of circumstances that may result in material information being obscured:

Assessing whether information could reasonably be expected to influence decisions made by the primary users of a specific reporting entity’s general purpose financial statements requires an entity to consider the characteristics of those users while also considering the entity’s own circumstances.

Many existing and potential investors, lenders and other creditors cannot require reporting entities to provide information directly to them and must rely on general purpose financial statements for much of the financial information they need. Consequently, they are the primary users to whom general purpose financial statements are directed. Financial statements are prepared for users who have a reasonable knowledge of business and economic activities and who review and analyse the information diligently. At times, even well-informed and diligent users may need to seek the aid of an adviser to understand information about complex economic phenomena.

Notes [ Refer: paragraphs 112⁠–⁠138 ] contain information in addition to that presented in the statement of financial position [ Refer: paragraphs 54⁠–⁠80A ] , statement(s) of profit or loss and other comprehensive income [ Refer: paragraphs 81⁠–⁠105 ] , statement of changes in equity [ Refer: paragraphs 106⁠–⁠110 ] and statement of cash flows [ Refer: paragraph 111 ] . Notes provide narrative descriptions or disaggregations of items presented in those statements and information about items that do not qualify for recognition in those statements.

Other comprehensive income  comprises items of income and expense (including  reclassification adjustments ) that are not recognised in  profit or loss  as required or permitted by other  IFRSs . [ Refer: paragraphs 90⁠–⁠96 ]

The components of other comprehensive income include:

Owners are holders of instruments classified as equity.

Profit or loss  is the total of income less expenses, excluding the components of  other comprehensive income .

Reclassification adjustments  are amounts reclassified to  profit or loss  in the current period that were recognised in  other comprehensive income  in the current or previous periods.

Total comprehensive income  is the change 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 .

Total comprehensive income comprises all components of ‘ profit or loss ’ and of ‘ other comprehensive income ’.

Financial statements

Purpose of financial statements.

This information, along with other information in the  notes , assists users of financial statements in predicting the entity’s future cash flows and, in particular, their timing and certainty.

Complete set of financial statements E1

The Interpretations Committee observed that a complete set of financial statements is comprised of items recognised and measured in accordance with IFRS.

The Interpretations Committee noted that IAS 1 addresses the overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. It also noted that while IAS 1 does permit flexibility in presentation, it also includes various principles for the presentation and content of financial statements as well as more detailed requirements. These principles and more detailed requirements are intended to limit the flexibility such that financial statements present information that is relevant, reliable, comparable and understandable.

The Interpretations Committee observed that securities regulators, as well as some members of the Interpretations Committee, were concerned about the presentation of information in the financial statements that is not determined in accordance with IFRS. They were particularly concerned when such information is presented on the face of the primary statements. The Interpretations Committee noted that it would be beneficial if the IASB’s Disclosure Initiative considered what guidance should be given for the presentation of information beyond what is required in accordance with IFRS.

Consequently, the Interpretations Committee determined that it should not propose an Interpretation nor an amendment to a Standard and consequently decided not to add this issue to its agenda.]

comparative information in respect of the preceding period as specified in  paragraphs 38   and 38A ; and

a statement of financial position [ Refer: paragraphs 54⁠–⁠80A ] as at the beginning of the preceding period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements in accordance with  paragraphs 40A⁠–⁠40D .

An entity may use titles for the statements other than those used in this Standard. For example, an entity may use the title ‘statement of comprehensive income’ instead of ‘statement of profit or loss and other comprehensive income’.

General features

Fair presentation and compliance with ifrss.

that it has complied with applicable IFRSs, except that it has departed from a particular requirement to achieve a fair presentation;

the title of the IFRS from which the entity has departed, the nature of the departure, including the treatment that the IFRS would require, the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in the  Conceptual Framework , [ Refer: paragraph 139S , Basis for Conclusions paragraph BC105H(b) and Conceptual Framework paragraph 3.2 ] and the treatment adopted; and

for each period presented, the financial effect of the departure on each item in the financial statements that would have been reported in complying with the requirement.

for each period presented, the adjustments to each item in the  financial statements  that management has concluded would be necessary to achieve a fair presentation.

Going concern

Accrual basis of accounting, materiality and aggregation, frequency of reporting.

the fact that amounts presented in the financial statements are not entirely comparable.

Comparative information

Minimum comparative information, additional comparative information, change in accounting policy, retrospective restatement or reclassification.

the amount of each item or class of items that is reclassified; and

the reason for the reclassification.

the nature of the adjustments that would have been made if the amounts had been reclassified.

Consistency of presentation

Structure and content e7.

Consequently, the Interpretations Committee determined that it should not propose an Interpretation nor an amendment to a Standard and consequently decided not to add this issue to its agenda. [In December 2014 the Board issued ‘ Disclosure Initiative —Amendments to IAS 1’ which made a number of changes to IAS 1, including adding paragraphs 30A, 55A, 85A and 85B to IAS 1]]

Introduction

Identification of the financial statements.

whether the financial statements are of an individual entity or a group of entities;

the date of the end of the reporting period or the period covered by the set of financial statements or notes;

the presentation currency, as defined in  IAS 21 ; and

the level of rounding [ Refer: paragraph 53 ] used in presenting amounts in the financial statements.

Statement of financial position

Information to be presented in the statement of financial position.

investment property;

intangible assets;

financial assets (excluding amounts shown under (e), (h) and (i));

portfolios of contracts within the scope of IFRS 17 that are assets, disaggregated as required by paragraph 78 of IFRS 17;

investments accounted for using the equity method;

biological assets within the scope of  IAS 41  Agriculture ;

inventories;

trade and other receivables;

cash and cash equivalents;

the total of assets classified as held for sale [ Refer: IFRS 5 paragraphs 6⁠–⁠14 ] and assets included in disposal groups classified as held for sale in accordance with  IFRS 5  Non‑current Assets Held for Sale and Discontinued Operations ;

trade and other payables;

provisions;

financial liabilities (excluding amounts shown under (k) and (l));

portfolios of contracts within the scope of IFRS 17 that are liabilities, disaggregated as required by paragraph 78 of IFRS 17;

liabilities and assets for current tax, as defined in  IAS 12  Income Taxes ; E8

deferred tax liabilities and deferred tax assets, as defined in  IAS 12 ; [ Refer: footnote to paragraph 54(n)]

liabilities included in disposal groups classified as held for sale in accordance with  IFRS 5 ;

non‑controlling interests, presented within equity; and

issued capital and reserves attributable to  owners  of the parent.

Consequently, the Committee observed that uncertain tax liabilities or assets recognised applying IFRIC 23 are liabilities (or assets) for current tax as defined in IAS 12, or deferred tax liabilities or assets as defined in IAS 12.

Presentation of uncertain tax liabilities (or assets)

Neither IAS 12 nor IFRIC 23 contain requirements on the presentation of uncertain tax liabilities or assets. Therefore, the presentation requirements in IAS 1 apply. Paragraph 54 of IAS 1 states that ‘the statement of financial position shall include line items that present: …(n) liabilities and assets for current tax, as defined in IAS 12; (o) deferred tax liabilities and deferred tax assets, as defined in IAS 12…’.

Paragraph 57 of IAS 1 states that paragraph 54 ‘lists items that are sufficiently different in nature or function to warrant separate presentation in the statement of financial position’. Paragraph 29 requires an entity to ‘present separately items of a dissimilar nature or function unless they are immaterial’.

Accordingly, the Committee concluded that, applying IAS 1, an entity is required to present uncertain tax liabilities as current tax liabilities (paragraph 54(n)) or deferred tax liabilities (paragraph 54(o)); and uncertain tax assets as current tax assets (paragraph 54(n)) or deferred tax assets (paragraph 54(o)).

The Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis for an entity to determine the presentation of uncertain tax liabilities and assets. Consequently, the Committee decided not to add the matter to its standard-setting agenda.]

In a reverse factoring arrangement, a financial institution agrees to pay amounts an entity owes to the entity’s suppliers and the entity agrees to pay the financial institution at the same date as, or a date later than, suppliers are paid.

Presentation in the statement of financial position

IAS 1   Presentation of Financial Statements specifies how an entity is required to present its liabilities in the statement of financial position.

Paragraph 54 of IAS 1 requires an entity to present ‘trade and other payables’ separately from other financial liabilities. ‘Trade and other payables’ are sufficiently different in nature or function from other financial liabilities to warrant separate presentation ( paragraph 57 of IAS 1 ). Paragraph 55 of IAS 1 requires an entity to present additional line items (including by disaggregating the line items listed in paragraph 54 ) when such presentation is relevant to an understanding of the entity’s financial position. Consequently, an entity is required to determine whether to present liabilities that are part of a reverse factoring arrangement:

Paragraph 11(a) of IAS 37   Provisions, Contingent Liabilities and Contingent Assets states that ‘trade payables are liabilities to pay for goods or services that have been received or supplied and have been invoiced or formally agreed with the supplier’. Paragraph 70 of IAS 1 explains that ‘some current liabilities, such as trade payables… are part of the working capital used in the entity’s normal operating cycle’. The Committee therefore concluded that an entity presents a financial liability as a trade payable only when it:

Paragraph 29 of IAS 1 requires an entity to ‘present separately items of a dissimilar nature or function unless they are immaterial’. Paragraph 57 specifies that line items are included in the statement of financial position when the size, nature or function of an item (or aggregation of similar items) is such that separate presentation is relevant to an understanding of the entity’s financial position. Accordingly, the Committee concluded that, applying IAS 1, an entity presents liabilities that are part of a reverse factoring arrangement:

The Committee observed that an entity assessing whether to present liabilities that are part of a reverse factoring arrangement separately might consider factors including, for example:

Derecognition of a financial liability

An entity assesses whether and when to derecognise a liability that is (or becomes) part of a reverse factoring arrangement applying the derecognition requirements in IFRS 9 Financial Instruments .

An entity that derecognises a trade payable to a supplier and recognises a new financial liability to a financial institution applies IAS 1 in determining how to present that new liability in its statement of financial position (see ‘Presentation in the statement of financial position’).

Notes to the financial statements

An entity applies judgement in determining whether to provide additional disclosures in the notes about the effect of reverse factoring arrangements on its financial position, financial performance and cash flows. The Committee observed that:

The Committee noted that making materiality judgements involves both quantitative and qualitative considerations.

The Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis for an entity to determine the presentation of liabilities that are part of reverse factoring arrangements, the presentation of the related cash flows, and the information to disclose in the notes about, for example, liquidity risks that arise in such arrangements. Consequently, the Committee decided not to add a standard-setting project on these matters to the work plan.] 

Current/non‑current distinction

more than twelve months after the reporting period.

Current assets

An entity shall classify all other assets as non‑current.

Current liabilities

An entity shall classify all other liabilities as non‑current.

Normal operating cycle (paragraph 69(a))

Held primarily for the purpose of trading (paragraph 69(b)) or due to be settled within twelve months (paragraph 69(c)), right to defer settlement for at least twelve months (paragraph 69(d)), settlement (paragraphs 69(a), 69(c) and 69(d)), information to be presented either in the statement of financial position or in the notes.

inventories are disaggregated, in accordance with IAS 2 Inventories , into classifications such as merchandise, production supplies, materials, work in progress and finished goods; [ Refer: IAS 2 paragraph 37 ]

provisions are disaggregated into provisions for employee benefits and other items; and

equity capital and reserves are disaggregated into various classes, such as paid‑in capital, share premium and reserves.

the number of shares issued and fully paid, and issued but not fully paid;

par value per share, or that the shares have no par value;

a reconciliation of the number of shares outstanding at the beginning and at the end of the period;

the rights, preferences and restrictions attaching to that class including restrictions on the distribution of dividends and the repayment of capital;

shares in the entity held by the entity or by its subsidiaries or associates; and

shares reserved for issue under options and contracts for the sale of shares, including terms and amounts; and

a description of the nature and purpose of each reserve within equity.

between financial liabilities and equity, it shall disclose the amount reclassified into and out of each category (financial liabilities or equity), and the timing and reason for that reclassification.

IAS 32 paragraphs 16E and 16F

Basis for Conclusions paragraphs BC6A  and  BC100A ]

Statement of profit or loss and other comprehensive income

total other comprehensive income;

comprehensive income for the period, being the total of profit or loss and other comprehensive income.

If an entity presents a separate statement of profit or loss it does not present the profit or loss section in the statement presenting comprehensive income.

owners of the parent.

comprehensive income for the period attributable to:

If an entity presents profit or loss in a separate statement it shall present (a) in that statement.

Information to be presented in the profit or loss section or the statement of profit or loss

insurance revenue (see IFRS 17);

gains and losses arising from the derecognition of financial assets measured at amortised cost;

insurance service expenses from contracts issued within the scope of IFRS 17 (see IFRS 17);

income or expenses from reinsurance contracts held (see IFRS 17);

finance costs;

impairment losses (including reversals of impairment losses or impairment gains) determined in accordance with  Section 5.5 of IFRS 9 ;

insurance finance income or expenses from contracts issued within the scope of IFRS 17 (see IFRS 17);

finance income or expenses from reinsurance contracts held (see IFRS 17);

share of the  profit or 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 or loss 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; E15

a single amount for the total of discontinued operations (see  IFRS 5 ). [ Refer: IFRS 5 paragraph 33 ]

Information to be presented in the other comprehensive income section

the share of the other comprehensive income of associates and joint ventures accounted for using the equity method, separated into the share of items that, in accordance with other IFRSs:

Profit or loss for the period

Other comprehensive income for the period.

before related tax effects with one amount shown for the aggregate amount of income tax relating to those items.

If an entity elects alternative (b), it shall allocate the tax between the items that might be reclassified subsequently to the profit or loss section and those that will not be reclassified subsequently to the profit or loss section.

Information to be presented in the statement(s) of profit or loss and other comprehensive income or in the notes

restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring;

disposals of items of property, plant and equipment;

disposals of investments;

discontinued operations;

litigation settlements; and

other reversals of provisions.

Statement of changes in equity

Information to be presented in the statement of changes in equity.

for each component of equity, the effects of retrospective application [ Refer: IAS 8 paragraphs 14⁠–⁠27   and 50⁠–⁠53 ] or retrospective restatement [ Refer: IAS 8 paragraphs 41⁠–⁠48   and 50⁠–⁠53 ] recognised in accordance with  IAS 8 ; [ Refer: Basis for Conclusions paragraph BC74 ] and

for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately (as a minimum) disclosing changes resulting from:

other comprehensive income; and

transactions with  owners  in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control.

Information to be presented in the statement of changes in equity or in the notes

Statement of cash flows, disclosure of accounting policies.

the other accounting policies used that are relevant to an understanding of the financial statements .

In the light of the points above, the submitter asked the Interpretations Committee whether corporate bonds with a rating lower than ‘AA’ can be considered to be HQCB.

The Interpretations Committee observed that IAS 19 does not specify how to determine the market yields on HQCB, and in particular what grade of bonds should be designated as high quality. The Interpretations Committee considers that an entity should take into account the guidance in paragraphs 84 and 85 of IAS 19 (2011) in determining what corporate bonds can be considered to be HQCB. Paragraphs 84 and 85 of IAS 19 (2011) state that the discount rate:

The Interpretations Committee further noted that ‘high quality’ as used in paragraph 83 of IAS 19 reflects an absolute concept of credit quality and not a concept of credit quality that is relative to a given population of corporate bonds, which would be the case, for example, if the paragraph used the term ‘the highest quality’. Consequently, the Interpretations Committee observed that the concept of high quality should not change over time. Accordingly, a reduction in the number of HQCB should not result in a change to the concept of high quality. The Interpretations Committee does not expect that an entity’s methods and techniques used for determining the discount rate so as to reflect the yields on HQCB will change significantly from period to period. Paragraphs 83 and 86 of IAS 19, respectively, contain requirements if the market in HQCB is no longer deep or if the market remains deep overall, but there is an insufficient number of HQCB beyond a certain maturity.

The Interpretations Committee also noted that:

The Interpretations Committee discussed this issue in several meetings and noted that issuing additional guidance on, or changing the requirements for, the determination of the discount rate would be too broad for it to address in an efficient manner. The Interpretations Committee therefore recommends that this issue should be addressed in the IASB’s research project on discount rates. Consequently, the Interpretations Committee decided not to add this issue to its agenda.]

Sources of estimation uncertainty

their carrying amount as at the end of the reporting period.

summary quantitative data about what it manages as capital. Some entities regard some financial liabilities [ Refer: IAS 32 paragraph 11 (definition of a financial liability) ] (eg some forms of subordinated debt) as part of capital. Other entities regard capital as excluding some components of equity [ Refer: Conceptual Framework paragraph 4.63 and IAS 32 paragraph 11 (definition of an equity instrument) ] (eg components arising from cash flow hedges).

any changes in (a) and (b) from the previous period.

whether during the period it complied with any externally imposed capital requirements to which it is subject.

when the entity has not complied with such externally imposed capital requirements, the consequences of such non‑compliance.

Basis for Conclusions paragraph BC96

Implementation Guidance paragraph IG11 ]

The entity bases these disclosures on the information provided internally to key management personnel.

Puttable financial instruments classified as equity

its objectives, policies and processes for managing its obligation to repurchase or redeem the instruments when required to do so by the instrument holders, including any changes from the previous period;

the expected cash outflow on redemption or repurchase of that class of financial instruments; and

information about how the expected cash outflow on redemption or repurchase was determined.

Other disclosures

the amount of any cumulative preference dividends not recognised.

a description of the nature of the entity’s operations and its principal activities;

the name of the parent and the ultimate parent of the group; and

if it is a limited life entity, information regarding the length of its life.

Transition and effective date

Withdrawal of ias 1 (revised 2003), appendix amendments to other pronouncements.

The amendments in this appendix shall be applied for annual periods beginning on or after 1 January 2009. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period. In the amended paragraphs, new text is underlined and deleted text is struck through.

The amendments contained in this appendix when this Standard was revised in 2007 have been incorporated into the relevant pronouncements published in this volume.

Board Approvals

Approval by the board of ias 1 issued in september 2007.

International Accounting Standard 1 Presentation of Financial Statements (as revised in 2007) was approved for issue by ten of the fourteen members of the International Accounting Standards Board. Professor Barth and Messrs Cope, Garnett and Leisenring dissented. Their dissenting opinions are set out after the Basis for Conclusions.

Approval by the Board of Puttable Financial Instruments and Obligations Arising on Liquidation  (Amendments to IAS 32 and IAS 1) issued in February 2008

Puttable Financial Instruments and Obligations Arising on Liquidation  (Amendments to IAS 32  Financial Instruments: Presentation  and IAS 1  Presentation of Financial Statements ) was approved for issue by eleven of the thirteen members of the International Accounting Standards Board. Professor Barth and Mr Garnett dissented. Their dissenting opinions are set out after the Basis for Conclusions on IAS 32.

Approval by the Board of Presentation of Items of Other Comprehensive Income issued in June 2011

Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) was approved for issue by fourteen of the fifteen members of the International Accounting Standards Board. Mr Pacter dissented from the issue of the amendments. His dissenting opinion is set out after the Basis for Conclusions.

Approval by the Board of the Disclosure Initiative (Amendments to IAS 1) issued in December 2014

Disclosure Initiative (Amendments to IAS 1) was approved for publication by fourteen members of the International Accounting Standards Board.

Approval by the Board of Definition of Material (Amendments to IAS 1 and IAS 8) issued in October 2018

Definition of Material (Amendments to IAS 1 and IAS 8) was approved for issue by the fourteen members of the International Accounting Standards Board.

Approval by the Board of Classification of Liabilities as Current or Non-current  issued in January 2020

Classification of Liabilities as Current or Non-current , which amended IAS 1, was approved for issue by all 14 members of the International Accounting Standards Board.

Approval by the Board of Classification of Liabilities as Current or Non-current—Deferral of Effective Date  issued in July 2020

Classification of Liabilities as Current or Non-current—Deferral of Effective Date , which amended IAS 1, was approved for issue by all 14 members of the International Accounting Standards Board.

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Presentation of Financial Statements (IAS 1)

Last updated: 18 November 2024

IAS 1 serves as the main standard that outlines the general requirements for presenting financial statements. It is applicable to ‘general purpose financial statements’, which are designed to meet the informational needs of users who cannot demand customised reports from an entity. Documents like management commentary or sustainability reports, which are often included in annual reports, fall outside the scope of IFRS, as indicated in IAS 1.13-14. Similarly, financial statements submitted to a court registry are not considered general purpose financial statements (see IAS 1.BC11-13).

The standard primarily focuses on annual financial statements, but its guidelines in IAS 1.15-35 also extend to interim financial reports (IAS 1.4). These guidelines address key elements such as fair presentation, compliance with IFRS, the going concern principle, the accrual basis of accounting, offsetting, materiality, and aggregation. For comprehensive guidance on interim reporting, please refer to IAS 34 .

Note that IAS 1 will be superseded by the upcoming IFRS 18 Presentation and Disclosure in Financial Statements .

Now, let’s explore the general requirements for presenting financial statements in greater detail.

Financial statements

Components of a complete set of financial statements.

Paragraph IAS 1.10 outlines the elements that make up a complete set of financial statements. Companies have the flexibility to use different titles for these documents, but each statement must be presented with equal prominence (IAS 1.11). The terminology used in IAS 1 is tailored for profit-oriented entities. However, not-for-profit organisations or entities without equity (as defined in IAS 32), may use alternative terminology for specific items in their financial statements (IAS 1.5-6).

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Compliance with IFRS

Financial statements must include an explicit and unreserved statement of compliance with IFRS in the accompanying notes. This statement is only valid if the entity adheres to all the requirements of every IFRS standard (IAS 1.16). In many jurisdictions, such as the European Union, laws mandate compliance with a locally adopted version of IFRS.

IAS 1 does consider extremely rare situations where an entity might diverge from a specific IFRS requirement. Such a departure is permissible only if it prevents the presentation of misleading information that would conflict with the objectives of general-purpose financial reporting (IAS 1.20-22). Alternatively, entities can disclose the impact of such a departure in the notes, explaining how the statements would appear if the exception were made (IAS 1.23).

Identification of financial statements

The guidelines for identifying financial statements outlined in IAS 1.49-53 are straightforward and rarely cause issues in practice.

Going concern

The ‘going concern’ principle is a cornerstone of IFRS and other major GAAP. It assumes that an entity will continue to operate for the foreseeable future (at least 12 months). IAS 1 mandates management to assess whether the entity is a ‘going concern’. Should there be any material uncertainties regarding the entity’s future, these must be disclosed (IAS 1.25-26). IFRSs do not provide specific accounting principles for entities that are not going concerns, other than requiring disclosure of the accounting policies used. One of the possible approaches is to measure all assets and liabilities using their liquidation value.

See also this educational material at IFRS.org.

Materiality and aggregation

IAS 1.29-31 emphasise the importance of materiality in preparing user-friendly financial statements. While IFRS mandates numerous disclosures, entities should only include information that is material. This concept should be at the forefront when preparing financial statements, as reminders about materiality are seldom provided in other IFRS standards or publications.

Generally, entities should not offset assets against liabilities or income against expenses unless a specific IFRS standard allows or requires it. IAS 1.32-35 offer guidance on what can and cannot be offset. Offsetting of financial instruments is discussed further in IAS 32 .

Frequency of reporting

Entities are required to present a complete set of financial statements at least annually (IAS 1.36). However, some Public Interest Entities (PIEs) may be obliged to release financial statements more frequently, depending on local regulations. However, these are typically interim financial statements compiled under IAS 34 .

IAS 1 also allows for a 52-week reporting period instead of a calendar year (IAS 1.37). This excerpt from Tesco’s annual report serves to demonstrate this point, showing that the group uses 52-week periods for their financial year, even when some subsidiaries operate on a calendar-year basis:

If an entity changes its reporting period, it must clearly disclose this modification and provide the rationale for the change (IAS 1.36). It is advisable to include an explanatory note with comparative data that aligns with the new reporting period for clarity.

Comparative information

As a general guideline, entities should present comparative data for the prior period alongside all amounts reported for the current period, even when specific requirements in a given IFRS do not require it. However, there’s no obligation to include narrative or descriptive information about the preceding period if it isn’t necessary for understanding the current period (IAS 1.38).

If an entity opts to provide comparative data for more than the immediately preceding period, this additional information can be included in selected primary financial statements only. However, these additional comparative periods should also be detailed in the relevant accompanying notes (IAS 1.38C-38D).

IAS 1.40A-46 outlines how to present the statement of financial position when there are changes in accounting policies, retrospective restatements, or reclassifications. This entails producing a ‘third balance sheet’ at the start of the preceding period (which may differ from the earliest comparative period, if more than one is presented). Key points to note are:

• The third balance sheet is required only if there’s a material impact on the opening balance of the preceding period (IAS 1.40A(b)).
• If a third balance sheet is presented, there’s no requirement to add a corresponding third column in the notes, although this could be useful where numbers have been altered by the change (IAS 1.40C).
• Interim financial statements do not require a third balance sheet (IAS 1.BC33).

IAS 8 also requires comprehensive disclosures concerning changes in accounting policies and corrections of errors .

Statement of financial position

IAS 1.54 enumerates the line items that must, at a minimum, appear in the statement of financial position. Entities should note that separate lines are not required for immaterial items (IAS 1.31). Additional line items can be added for entity-specific or industry-specific matters. IAS 1 permits the inclusion of subtotals, provided the criteria set out in IAS 1.55A are met.

Additional disclosure requirements are set out in IAS 1.77-80A. Of particular interest are the requirements pertaining to equity (IAS 1.79), which begin with the number of shares and extend to include details such as ‘rights, preferences, and restrictions relating to share capital, including restrictions on the distribution of dividends and the repayment of capital.’ While these kinds of limitations are common across various legal jurisdictions (for example, not all retained earnings can be distributed as dividends), many companies neglect to disclose such limitations in their financial statements.

For guidance on classifying assets and liabilities as either current or non-current, please refer to the separate page dedicated to this topic.

Statement of profit or loss and other comprehensive income

IAS 1 provides two methods for presenting profit or loss (P/L) and other comprehensive income (OCI). Entities can either combine both P/L and OCI into a single statement or present them in separate statements (IAS 1.81A-B). Additionally, the P/L and total comprehensive income for a given period should be allocated between the owners of the parent company and non-controlling interests (IAS 1.81B).

Minimum contents in P/L and OCI

IAS 1.82-82A specifies the minimum items that must appear in the P/L and OCI statements. These items are required only if they materially impact the financial statements (IAS 1.31).

Entities are permitted to add subtotals to the P/L statement if they meet the criteria specified in IAS 1.85A. Operating income is often the most commonly used subtotal in P/L. This practice may be attributed to the 1997 version of IAS 1, which mandated the inclusion of this subtotal—although this is no longer the case. IAS 1.BC56 clarifies that an operating profit subtotal should not exclude items commonly considered operational, such as inventory write-downs, restructuring costs, or depreciation/amortisation expenses.

Profit or loss (P/L)

All items of income and expense must be recognised in P/L (or OCI). This means that no income or expenses should be recognised directly in the statement of changes in equity, unless another IFRS specifically mandates it (IAS 1.88). Direct recognition in equity may also result from intra-group transactions . IAS 1.97-98 require separate disclosure of material items of income and expense, either directly in the income statement or in the notes.

Expenses in P/L can be presented in one of two ways (IAS 1.99-105):

• By their nature (e.g., depreciation, employee benefits); or
• By their function within the entity (e.g., cost of sales, distribution costs, administrative expenses).

When opting for the latter, entities must provide additional details on the nature of the expenses in the accompanying notes (IAS 1.104).

Other comprehensive income (OCI)

OCI encompasses income and expenses that other IFRS specifically exclude from P/L. There is no conceptual basis for deciding which items should appear in OCI rather than in P/L. Most companies present P/L and OCI as separate statements, partly because OCI is generally overlooked by investors and those outside of accounting and financial reporting circles. The concern is that combining the two could reduce net profit to merely a subtotal within total comprehensive income.

All elements that constitute OCI are specifically outlined in IAS 1.7, as part of its definitions.

Reclassification adjustments

A reclassification adjustment refers to the amount reclassified to P/L in the current period that was recognised in OCI in the current or previous periods (IAS 1.7). All items in OCI must be grouped into one of two categories: those that will or will not be subsequently reclassified to P/L (IAS 1.82A). Reclassification adjustments must be disclosed either within the OCI statement or in the accompanying notes (IAS 1.92-96).

To illustrate, foreign exchange differences arising on translation of foreign operations and gains or losses from certain cash flow hedges are examples of items that will be reclassified to P/L. In contrast, remeasurement gains and losses on defined benefit employee plans or revaluation gains on properties will not be reclassified to P/L.

The practice of transferring items from OCI to P/L, commonly known as ‘recycling’, lacks a concrete conceptual basis and the criteria for allowing such transfers in IFRS are often considered arbitrary.

Tax effects

OCI items can be presented either net of tax effects or before tax, with the overall tax impact disclosed separately. In either case, entities must specify the tax amount related to each item in OCI, including any reclassification adjustments (IAS 1.90-91). Interestingly, there is no such requirement to disclose tax effects for individual items in the income statement.

Statement of changes in equity

IAS 1.106 outlines the minimum line items that must be included in the statement of changes in equity. Subsequent paragraphs specify the disclosure requirements, which can be addressed either within the statement itself or in the accompanying notes. It’s crucial to note that changes in equity during a reporting period can arise either from income and expense items or from transactions involving owners acting in their capacity as owners (IAS 1.109). This means that entities cannot adjust equity directly based on changes in assets or liabilities unless these adjustments result from transactions with owners, such as capital contributions or dividend payments, or are otherwise mandated by other IFRSs.

Statement of cash flows

The statement of cash flows is governed by IAS 7 .

• Explanatory notes

Structure of explanatory notes

The structure for explanatory notes is detailed in IAS 1.112-116. In practice, there are several commonly adopted approaches to organising these notes:

Approach #1:

• Primary financial statements (P/L, OCI, etc.)
• Statement of compliance and basis of preparation
• Accounting policies

Approach #1 is logically coherent, as understanding accounting policies is crucial before delving into the financial data. However, in reality, few people read the accounting policies in their entirety. Consequently, users often have to navigate past several pages of accounting policies to reach the explanatory notes.

Approach #2:

• Primary financial statements (P/L, OCI, etc)

In Approach #2, accounting policies are treated as an appendix and positioned at the end of the financial statements. The advantage here is that all numerical data is clustered together, uninterrupted by extensive descriptions of accounting policies.

Approach #3:

• Explanatory notes integrated with relevant accounting policies

Approach #3 pairs accounting policies directly with the associated explanatory notes. For example, accounting policies relating to inventory would appear alongside the explanatory note that breaks down inventory components.

Management of capital

IAS 1.134-136 outline the disclosures related to capital management. These provisions apply to all entities, whether or not they are subject to external capital requirements. An important note here is that entities are not obligated to disclose specific values or ratios concerning capital objectives or requirements.

IAS 1.137 mandates disclosure of dividends proposed or declared before the financial statements were authorised for issue but not recognised as a distribution to owners during the period. Furthermore, entities are required to disclose the amount of any cumulative preference dividends not recognised.

Disclosure of accounting policies

IAS 1 specifies the requirements for disclosing accounting policy information which are discussed here .

Disclosing judgements and sources of estimation uncertainty

IAS 1 mandates disclosing judgements and sources of estimation uncertainty .

Other disclosures

Additional miscellaneous disclosure requirements are detailed in paragraphs IAS 1.138.

IFRS 18 Presentation and Disclosure in Financial Statements

On 9 April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements , which replaces IAS 1 and amends IAS 7. This new standard will be effective from 2027 with early application permitted.

Here are the key changes under IFRS 18:

• Two new subtotals have been added to the income statement: ‘Operating Profit’ and ‘Profit Before Financing and Income Taxes’. This change requires companies to categorise income and expenses into operating, investing, and financing activities.
• A new requirement mandates the reconciliation of non-GAAP measures with IFRS-specified subtotals, but this only applies to P/L measures such as adjusted profit. Other metrics like free/organic cash flow or net debt are not included.
• The statement of cash flows will start with operating profit for the indirect method, and the classification of cash flows related to interest and dividends has been standardised. Typically, dividends and interest paid will fall under financing activities, while those received will be recorded under investing activities.

While many IAS 1 provisions remain under IFRS 18, others, including the basis of financial statement preparation and disclosure of accounting policies, have moved to IAS 8, which will be retitled Basis of Preparation of Financial Statements . For further insights, see the IASB Project Summary .

© 2018-2024 Marek Muc

The information provided on this website is for general information and educational purposes only and should not be used as a substitute for professional advice. Use at your own risk. Excerpts from IFRS Standards come from the Official Journal of the European Union (© European Union, https://eur-lex.europa.eu). You can access full versions of IFRS Standards at shop.ifrs.org. IFRScommunity.com is an independent website and it is not affiliated with, endorsed by, or in any other way associated with the IFRS Foundation. For official information concerning IFRS Standards, visit IFRS.org.

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IAS 1 Presentation of Financial Statements: Summary

IAS 1 Presentation of Financial Statements represents a basis of the whole IFRS reporting, as it sets overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content.

Financial Statements

Purpose of the 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.

The complete set of financial statements compliant with IFRS comprises 5 elements:

• a statement of financial position as at the end of the period
• a statement of comprehensive income for the period
• a statement of changes in equity for the period
• a statement of cash flows for the period
• notes containing a summary of significant accounting policies and other explanatory information.

If some accounting policy is applied retrospectively, or some retrospective restatements or reclassifications were made, then also a statement of financial position as at the beginning of the earliest comparative period shall be presented.

IAS 1 explains the general features of financial statements, such as fair presentation and compliance with IFRS , going concern, accrual basis of accounting, materiality and aggregation, offsetting, frequency of reporting, comparative information and consistency of presentation.

Structure and Content

IAS 1 requires identification of the financial statements and distinguishing them from other information in the same published document.

Every element of the financial statements shall contain the name of the reporting entity, the information whether the financial statements are of an individual or of a group, the date of the reporting entity and period covered, the presentation currency and the level of rounding (thousands, millions…).

IAS 1 lists the minimum content to be presented in the financial statements, except for the statement of cash flows (subject to IAS 7). So let’s look at it in a detail.

Statement of Financial Position

Before significant amendments of IAS 1, this statement was simply called “balance sheet”, however, it was renamed.

IAS 1 requires presentation of classified statement of financial position where current assets or liabilities are separated from non-current assets or liabilities. Basically, the asset or liability is current when it is expected to be recovered or settled within 12 months after the reporting period.

With regard to a minimum content, the following line items shall be presented:

Further subclassifications of the line items shall be disclosed either directly in the statement of financial position or in the notes, such as disaggregation of property, plant and equipment into classes, and similar. Also, certain information related to the share capital, reserves and a few others shall be included in the statement of financial position, the statement of changes in equity or in the notes.

IAS 1 does NOT prescribe the precise format of the statement of financial position. Instead, several formats are acceptable if they fulfill all requirements outlined above.

Statement of Comprehensive Income

The statement of comprehensive income has 2 basic elements:

• Profit or loss for the period : here, all items of income and expenses must be recognized.
• Other comprehensive income : items recognized directly to equity or reserves, such as changes in revaluation surplus, gains or losses from subsequent measurement of available-for-sale financial assets, etc.

As a minimum , the statement of comprehensive income must contain the following items:

As opposed to US GAAP , IAS 1 prohibits to report any transaction or item as extraordinary items.

Profit or loss for the period, as well as total comprehensive income shall be both presented in allocation:

• attributable to non-controlling interests and
• attributable to owners of the parent.

The entity might choose to classify expenses recognized in profit or loss for the period by their nature or by their function.

IAS 1 requires disclosure of certain items separately , either in the statement of comprehensive income, or in the notes. These items are as follows: write-downs of inventories and property, plant and equipment, their reversals, restructuring of activities and reversals of related provisions, disposals of property, plant and equipment, disposals of investments, discontinuing operations, litigation settlements and other reversals of provisions.

Statement of Changes in Equity

As a minimum , the statement of changes in equity must contain the following items:

• total comprehensive income for the period, showing separately amounts attributable to owners of the parent and to non-controlling interests
• the effect of retrospective application or restatement for each component of equity (if applicable)
• those resulting from profit or loss
• resulting from other comprehensive income
• resulting from transactions with owners (contributions, distributions and changes in ownership)

Also, IAS 1 prescribes to present amount of dividends recognized as distributions and the related amount per share on the face of the statement of changes in equity or in the notes.

Notes to the Financial Statements

The notes are meant to be the document accompanying numerical financial statements listed above. They should provide additional information not contained in the numbers, the basis of preparation of the financial statements and some additional information that might be relevant.

IAS 1 sets that the notes shall contain a statement of compliance with IFRS , summary of significant accounting policies applied, supporting information for the numbers presented in the financial statements and other disclosures.

You can read more about the notes and how to write them in this article .

IAS 1 is shortly summarized in the following video:

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43 Comments

Thank you for simplifying this standard . It is very helpful in my study and revision . looking forward to the other standards

A speed point machine, is it an asset that needs to be recorded in a business if they are using it?

Dear Silvia, Are prudence and conservatism concepts still applicable now under the new Conceptual Framework?

Hi I want to know can we prepare multiyear financials (i.e. 2 years to show I comparatives) as per the international auditing standards

SILIVAIA I really apprentice the presentation please can i have the ppt.?

Hi Asmera, no sorry, we only provide pdf to our subscribed students of the IFRS Kit.

Hi i have case that we debit the account Other comprehensive income (Re-measurement losses / Gain on defined benefit liability) by amount 12 Million and credit two account one of them is end of service expenses ( P&L item) by 7 Million and other account is provision of end of service by 6 Million Dr/ Other comprehensive income 12 Million Cr/ End of service expense ( P&L Item). Cr/ Provision of end of service ( Balance sheet item). my question :- 1- Other comprehensive account will be appear in balance sheet and income statement 2- and if it must appear in income statement shall we put total balance of this account 12 Million or just put 6 Million which is came from PL and ignore the 7 Million which came from provision of end of service as it is balance sheet item

This video has made my understanding of IAS 1 more clearly and understandable.I can confidently say I`am ready for the test.

I didn’t see any explanatiins for Cash Flow statement. This is also an element of Financial Statement as whole. Or would that mean it is no longer considered as part the whole reported Financial Statement?

You did not see it because it is not covered by IAS 1 (and, you are reading the article about IAS 1). You should check out IAS 7 .

Hello Silvia, Can you please help me to know as to what is the objective of creating Other Comprehensive Income and how to decide what all items should go to Other comprehensive income and Profit or loss account ?

Hi Diksha, I think this article can give you the answer . S.

hello siliva, help me with tax expense computation when u have provision, some balance due

In my opinion the documents that you share through social media is more attractive and brief to understand. I would like to follow you! Please, would you like to share brief notes and explanation on IFRS 9. By focusing MFI in detail!

Til now, I don’t understand what is the main consideration, if any, the IASB classifies a transaction as profit or loss while another as other comprehensive income. Is there any theoretical foundation or something behind the existence of other comprehensive income items?

Dear Siklus, I think this article might help . S.

Dear Sylvia, if a Company made a decision to decrease share capital (due to accumulated loss that existed on December 31, 2016) on January 17, should this be treated as an adjusting event?

Thank you very much for your help!

It depends on when the decision was made. If after 31 Dec 2016, then no, it’s non-adjusting event. S.

amazing presentation of statement of financial position but other comprehensive income should elaborate clearly. Over all presentation was very good . I also learn from that.thank you very much

Very lucid explanations. Thanks

The presentation is very knowledgeable. Is it possible for you to mail me the ppt. It would be of great help.

Hi Silvia, is it required by the standard to present the subscribed share capital with the outstanding balance of subscription receivables or a presentation of share capital would be fine?

comprehensive and material indeed

helped me tounderstand the IFRS

dear waseem…we record purchase cost as 110000.coz we did not avail the discout optiom given by the seller.

I have doubt in IAS 2. Lets say for a example, a manufacturer purchased raw material by giving 4 months pd cheque for 110,000. If they had paid by cash, price would be 100,000. What is treatment for this difference? Can we record this difference of 10,000 as finance charges?

Hey Silvia, I was about to subscribe. But I found that the name of my country (Bangladesh) is not in the list. Please let me know.

thank you for help

wow, made my studies simpler and to make sense…a superb summary indeed.

clearly and comprehensive IAS1 elaborated

Great site and well summarized IASs

very well summarized and it is very good for accounting students. thank you.

Verry good!IAS 1 !

very good indeed.impressed for days

great work………..

Great Vedio…

IT IS WELL ARRANGED OF STATEMENT.

Excellent summarized information of IAS-1

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IAS 1 Presentation of Financial Statements

Presentation of financial statements sets out the overall requirements for the presentation of financial statements, guidelines for their structure, and minimum requirements for their content., access the standard, current proposals, recent amendments, related ifric interpretations, uk reduced disclosures – frs 101, icaew factsheets and guides, icaew articles, other resources.

• 2023 Issued Standard – IAS 1 The 2023 Issued Standards include all amendments issued up to and including 1 January 2023.

Registration is required to access the free version of the Issued Standards, which do not include additional documents that accompany the full standard (such as illustrative examples, implementation guidance and basis for conclusions).

A complete set of financial statements includes:

• A statement of financial position (balance sheet) at the end of the period
• A statement of profit or loss and other comprehensive income (income statement) for the period
• A statement of changes in equity for the period
• A statement of cash flows (cash flow statement) for the period
• Notes to the accounts.

The names of the main statements are not mandatory.

IAS 1 Revised also requires a statement of financial position at the start of the earliest comparative period where there has been a retrospective adjustment to the accounts or reclassification of items.

The statement of profit or loss and other comprehensive income, as the name suggests, presents profit and loss for the period as well as other comprehensive income. Other comprehensive income includes income and expenses not recognised in profit or loss such as revaluation surpluses. The statement of profit or loss and other comprehensive income may be presented either as one statement or a separate statement of profit or loss and statement showing other comprehensive income.

The standard provides guidance on the form and content of the financial statements and the underlying accounting concepts. It also requires financial statements to present fairly the position, performance and cash flows of an entity. This is normally achieved by the application of IFRS.

ED/2019/7 General Presentation and Disclosures was issued in December 2019. This is the exposure draft of a proposed new standard that would replace IAS 1. The standard would carry forward most of the current requirements of IAS 1 and add supplementary requirements, including:

• Categorising items in profit or loss as operating, investing or financing
• Requiring additional profit subtotals
• Distinguishing between integral and non-integral associates and joint ventures
• Removing the choice of how to present cash flows from dividends and interest
• Requiring additional disclosure about unusual items
• Providing disclosure of management performance measures.

All amendments issued up to and including the publication date of 1 January 2022 are included within the IFRS Foundation’s latest version of the issued standard: 2022 Issued Standard – IAS 1 . Issued amendments may, therefore, have a mandatory effective date that is later than 1 January 2022 – see below for details.

Any amendments issued after 1 January 2022 will not be included in the IFRS Foundation’s 2022 Issued Standards but will be listed below and identified as such.

See the Corporate Reporting Faculty’s annual IFRS factsheets  for a more detailed discussion of recent IFRS amendments.

Mandatory date: Annual periods beginning on or after 1 January 2024. Earlier application is permitted.

Issue date: October 2022 (not included within the IFRS Foundation’s 2022 Issued Standards).

The amendments specify that the classification of a liability as current or non-current is only affected by covenants that an entity must comply with on or before the end of the reporting period. They also require disclosure of information that allows users of financial statements to understand the risk that non-current liabilities with covenants could become repayable within 12 months.

This amendment has been endorsed for use in the UK. It is not yet endorsed for use in the EU as at 25 July 2023. Read more on UK endorsement  and EU endorsement  of IFRS standards.

For a more detailed discussion of the amendment, read the faculty’s factsheet:

• 2022 IFRS Accounts

Mandatory date: Annual periods beginning on or after 1 January 2024 (deferred from 2023). Earlier application is permitted.

IAS 1 is amended to clarify that the classification of liabilities as current or non-current should be based on rights that exist at the end of the reporting period. Expectations about whether an entity will exercise a right to defer settlement of a liability do not affect its classification. The amendments also clarify that settlement is the transfer of cash, equity instruments, other assets or services.

The deferral of the effective date to 2024 is included in the Non-current Liabilities with Covenants amendment to IAS 1.

Mandatory date: Annual periods beginning on or after 1 January 2023. Earlier application is permitted.

The amendments to IAS 1:

• Require an entity to disclose material accounting policy information rather than significant accounting policies.
• Explain that accounting policy information is material if, together with other information in the financial statements, it can reasonably be expected to influence decisions that primary users make.
• Provide examples of material accounting policies.
• Clarify that accounting policy information relating to immaterial transactions need not be disclosed.

IAS 1 is amended to:

• Add finance income and expenses to the list of components of other comprehensive income;
• Require line items to be presented in the statement of financial position in respect of contracts that are within the scope of IFRS 17;
• Require line items to be presented in the statement of profit or loss in respect of amounts related to contracts within the scope of IFRS 17.

IAS 1 is amended to refer to portfolios of contracts rather than groups of contracts within the scope of IFRS 17.

Mandatory date: Annual periods beginning on or after 1 January 2020. Earlier application is permitted.

The definition of material is amended to be as follows:

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.

Examples of circumstances that may result in material information being obscured are added to the standard as a result of the amendment, as is guidance on users of financial statements.

• 2020 IFRS Accounts

Mandatory date: Annual periods beginning on or after 1 January 2020. Earlier application is permitted if an entity also applies the amendments to other IFRS Accounting Standards at the same time.

IAS 1 is updated to refer to the 2018 Conceptual Framework rather than the Framework for the Preparation and Presentation of Financial Statements when referring to materiality, definitions of elements and their recognition criteria and the objective of financial statements.

• IFRIC 1 Existing Decommissioning, Restoration and Similar Liabilities Addresses accounting for a change in a provision that is included in the carrying amount of an item of PPE.
• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction Provides general guidance on how to assess the limit in IAS 19 on the amount of the surplus that can be recognised as an asset. Explains how the pensions asset or liability may be affected when there is a statutory or contractual minimum funding requirement.
• IFRIC 17 Distribution of Non-cash Assets to Owners Addresses the accounting for dividends of non-cash assets, including those where there is a cash alternative.
• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments Addresses the accounting by an entity which issues equity instruments in order to settle, in full or part, a financial liability.
• IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine Addresses the accounting treatment of mine waste materials, which are the materials removed by mining entities in order to gain access to mineral ore deposits.
• IFRIC 21 Levies Provides guidance on when to recognise liability for a levy imposed by a government.
• IFRIC 23 Uncertainty over Income Tax Treatments Clarifies how to apply the recognition and measurement requirements of IAS 12 when there is uncertainty over income tax treatments.
• SIC 7 Introduction of the Euro The effective start of the EMU after the reporting date does not alter the requirements of IAS 21 at the reporting date.
• SIC 25 Income Taxes – Changes in the Tax Status of an Enterprise or its Shareholders Addresses the deferred tax consequences of changes in tax status of an enterprise or its shareholders.
• SIC 29 Disclosure – Service Concession Arrangements Prescribes disclosures required by a concession operator and concession provider joined by a service concession arrangement.
• SIC 32 Intangible Assets – Website Costs Addresses accounting for costs associated with the development of a website.

UK qualifying parents and subsidiaries can take advantage of FRS 101 Reduced Disclosure Framework. Our FRS 101 page  gives more information on which entities qualify and the criteria to be met.

The following amendments must be made to IAS 1 in order to achieve compliance with the Companies Act and related Regulations:

• The statement of financial position must comply with the balance sheet format requirements of the Companies Act.
• The statement of profit or loss and other comprehensive income must comply with the profit and loss account format requirements of the Companies Act.
• Ordinary activities of an entity are defined and extraordinary items are described as highly abnormal material items arising from events falling outside an entity’s ordinary activities.
• It is clarified that items of income or expense are not recognised in profit or loss where such recognition is prohibited by the Companies Act.

FRS 101 paragraph 8(f) states that a qualifying entity is exempt from the IAS 1 requirement to present the following within a set of financial statements:

• A statement of cash flows for the period;
• A third statement of financial position when a retrospective adjustment or reclassification is made;
• A statement of compliance with IFRS;
• A reconciliation of property, plant and equipment, intangible assets, investment properties, biological assets and the number of shares outstanding at the beginning and end of the comparative period;
• Capital management disclosures (this exemption is not available to a financial institution);
• All remaining IAS 1 disclosures must be applied.

IAS 1 paragraphs for which exemption is available: 10(d), 10(f), 16, 38A-D, 40A-D, 111, 134-6.

The Corporate Reporting Faculty's annual IFRS factsheets  provide a more detailed discussion of recent IFRS amendments.

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IAS 1 - Presentation of Financial Statements (detailed review)

This standard prescribes the guide lines to be used by the entity, in the presentation of general purpose financial statements, to make sure that financial statement of the entity are comparable both with its previous periods financial statement and with the financial statements of the other entity. For this purpose, it provides overall requirements for the structure and contents of financial statements along with some general features.

The requirements of this standard are applicable to all the general purpose financial statements (individual and consolidated both) which are prepared and presented in accordance' with 'International Financial .Reporting Standards (IFRSs).

However, this standard is not applicable to the structure and contents of statement of cash flows and interim financial statements.

General Purpose Financial Statements

These are financial statements which are prepared and presented to satisfy the information needs of the general users, who are not able to require the reporting entity to prepare accounting reports according to their particular information needs.

Complete Set of Financial Statements

The complete set of financial statements entails the following:

• Statement of profit or loss and other comprehensive income
• Statement of financial position
• Statement of changes in equity
• Statement of cash flows
• Notes to accounts
• Comparative year information
• Opening Statement of financial position in respect of retrospective application or restatement of a change in accounting policy or error, or when entity first adopts the IFRSs 

International Financial Reporting Standards (IFRSs)

These are accounting standards and related Interpretations, which are issued and regulated by the International Accounting Standards Board (IASB) and these encompasses:

• International Financial Reporting Standards (IFRS)
• International Accounting Standards (IAS)
• Interpretations issued by IFRIC and
• Interpretations issued by SIC

Impracticable

It is when the entity is not able to apply the requirement of a particular standard, after any reasonable effort to do so.

These are one of the essential component of financial statements and include the information (financial and non-financial) in addition to the information which is  presented in the other components of financial statements such as statement of profit or loss and other comprehensive income, statement of changes in equity, statement of financial' position and statement of cash flows. These are in the form of narrative descriptions

Other comprehensive income

It entails the incomes and expenses which are not permitted to be recognized in profit or loss as per the requirements of the other standards. It also includes the reclassification, adjustments

Reclassification Adjustments

It is the reclassification of certain amounts to profit or loss during the current accounting period, which were previously recognized in statement of other comprehensive income

Total comprehensive income

It is the increase or decrease in the equity in the current accounting period resulting due to the events and transactions, which are other than the transactions with shareholders in their capacity as owners.

General Features

Fair Presentation

This standard requires that the financial. Performance, financial position and cash flows of an entity should be fairly presented. Fair presentation of financial statements, the events and transactions should be reported to financial statements in accordance with the recognition and measurement principle for the elements of financial statements, given in the IASB’s framework, and financial statements should be prepared in accordance with IFRS with related disclosure requirements.

To achieve the fair presentation the entity should make sure the following:

• The selection and application of accounting policies as per IAS8
• The information contained in financial statements should have all the qualitative characteristics of financial statements 
• Complete disclosure should be given as per the IFRS

Un-reserved Stat e ment

The entity which prepares financial statements in compliance with all the lFRSs, should place an un-reserved statement in the notes to accounts, in respect of such compliance with IFRSs. This is termed as un-reserved statement. However, the entity cannot make such a statement unless the financial statements are in compliance with all the requirements of IFRSs.

D i sagreement with IFRS s

If in very rare situations, the management identifies that compliance with a particular requirement of a specific standard or Interpretation will result in the information, which is in conflict with the objectives of financial statements as laid down in the Framework, the entity will account for such situation as follows:

a) If the regulatory frame work permits departure from such requirement, the entity will take departure from that requirement and will disclose the following:

• The financial statements fairly present the financial performance, financial position and cash flows of the entity, as per the judgment of management
• The financial statements of the entity are in compliance with all the relevant IFRS’s other than the departure from the particular requirement
• The title of the standard from which departure is taken, the details of departure and related reason for the departure
• The financial effect on financial statements due to such departure

b) If the regulatory frame work does not permit departure from such requirement, the entity will reduce the related impact of such compliance by giving following disclosures:

• The adjustment which is required as per the judgment of the management to achieve fair presentation

Going Concern

At the end of each reporting period, when entity will prepare its financial statements, the management is required to assess of whether the entity has ability to continue its business as a going concern. If management identifies that it has ability to continue its business as a going concern then its financial statement will be prepared on a going concern basis.

The entity will be treated as going concern, if it can continue its operations for the foreseeable future such that neither the management has intention nor the circumstances are there that the entity will have to curtail its business activities

Accrual Basis of Accounting

The entity is required to report all the events and transactions in the financial statements in the period to which these relate except for the cash flows

Consistency of Presentation

The entity should use the same accounting policies in the preparation and presentation of financial statements for the similar events and transactions, from one period to the next in order to ensure the comparability of financial statements unless the change is required by the circumstance laid down in IAS 8

Materiality and Aggregation

The entity is required to present each material class of items separately in the financial statements, unless these are immaterial.

The entity should not offset any assets and liabilities or any income and expense, except it is required by a IFRS

Frequency of Reporting

An entity shall present a complete set of financial statements (including comparative information) at least annually. When an entity changes the end of its reporting period and presents financial statements for a period longer or shorter than one year an entity shall disclose, in addition to the period covered by the financial statements (a) The reason for using a longer or shorter period, and (b) The fact that amounts presented in the financial statements are not entirely comparable.  

Comparative Information

This standard requires an entity to disclose the comparative information in respect of the previous accounting period similar to those amounts which are presented in the financial statements of the current accounting period

Identification of Financial Statements

The financial statements of the entity should be identified and distinguished from the other information using the following:

• The title of the entity presenting financial statements
• Whether these are the financial statements of an individual entity or consolidated financial statements for the group of entities:
• The reporting date for which financial statements are presented
• The presentation currency for the amounts reported in financial statements
• The level of rounding up for the amounts reported in financial statements

Contents of Financial Statements

Statement of Financial Position

The assets of the entity will be presented into current and non-current assets as per the definition on the face of statement of financial position, unless the presentation on the basis of liquidity is more appropriate

Current assets

The entity will present an asset as current asset, if it meets any of the following criteria:

• It is held for trading in the normal course of business
• It will be realized within a period of 12 months from the reporting date
• It is expected to be sold or consumed in the normal course of business
• It is cash or cash equivalent as defined in IAS 7

The entity will present all other assets as non-current assets.

Liabilities

The liabilities of the entity will be presented into current and non-current liabilities as per the definition on the face of statement of financial position as follows:

Current Liabilities

The entity will present a liability as current liability, if It relates to the normal course of the business and will be paid within 12 months from the reporting date

The entity will present all other liabilities as non-current liabilities

Statement of Profit or Loss and other comprehensive income

The entity the all items of incomes and expenses relating to the current accounting period in the form of either:

• A single statement of profit or loss and other comprehensive income or
• Two separate statements, one is the statement of profit or loss and another statement of other comprehensive income

Statement of profit or loss

The entity will present the following Information in the statement of profit or loss at minimum:

• Entity’s Revenue for the current accounting period
• Interest costs
• Entity’s share of the profit or loss from associates or joint ventures
• Any reclassification adjustment recognized during the current accounting period
• Net profit or loss for the current accounting period

Other comprehensive Income

The entity will present the line items of statement of comprehensive income into two sections as follows:

a) Items that are not reclassify to profit or loss

b) Items that may be reclassify to profit or loss, when certain conditions will meet

The line items of statement of comprehensive income may be presented either

• Net of tax or
• Before tax with the tax effect being presented as a separate line item under the respective section

The entity is required to disclose the allocation of profit or loss and comprehensive Income as follows in addition to the statement of profit or loss and other comprehensive income:

a) Profit or loss for the current accounting period attributable to:

• Owners of the group
• Non-controlling interests in the entity

b) Total comprehensive income for the current accounting period attributable to:

• Non-controlling interests, and

Statement of Changes in Equity

The entity is required to present the following in respect of each component of entity, in the statement of changes in equity:

• Changes in the elements of equity due to transaction with owners in the current accounting period
• Changes in the elements of equity due to the total comprehensive income for the year
• Changes in the components of equity due to the change in accounting policy
• Changes in the components of the equity due to the requirement of a standard

These contain the information (financial and non-financial) in addition to the information which is  presented in the other components of financial statements such as statement of profit or loss and other comprehensive income, statement of changes in equity, statement of financial' position and statement of cash flows. These are in the form of narrative descriptions and include the following:

• Basis used by the entity for the preparation of the financial statements
• Accounting policies of the entity
• Disclosures required by the standards

Format of Statement of financial position

Format of Statement of profit or loss and other comprehensive income

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Introduction to IFRS – IAS 1 Presentation of Financial Statements

If you would like to dive into the world of international financial reporting standards (IFRS), you have to be aware of what IFRS and IAS means, what the difference between the standards and the conceptual framework is, what the fundamental definition of assets and liabilities is, etc. This course provides answers to these questions using practical examples.

The course consists of two parts. First part, after the introduction to the IFRS, explains the most important concepts of the Conceptual Framework. In the second part IAS 1 Presentation of financial statements standard’s requirements are presented including practical examples and interim tests to enhance understanding. 

This course will enable you to:

understand the concept of international financial reporting standards

identify main features of the Conceptual Framework

understand the qualitative characteristics of useful financial information (fundamental and enhancing)

decide whether the standard or the conceptual framework prevail in case they are in conflict with each other

understand the definition of control

distinguish main accounting considerations and define which are applicable to the primary statements (statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and notes)

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Further information:

Training hours: 50 minutes

Language: English

• Topics: IFRS, Reporting
• Sector: Corporates

Training method: E-learning

Type: Single course

Geographic relevance: Global

This e-learning course is part of an e-learning series designed by PwC Academy Hungary which aims to provide a comprehensive overview of the application of IFRS (IAS) standards to finance and accounting experts who are already familiar with fundamental (local) accounting and reporting processes.

This e-learning course takes approximately 50 minutes to complete, and as such, it can provide 1 learning hour – 1 CPD point based on a 50-minute hour. Upon completion of this course, you can print the certificate of completion as an evidence that you undertook the course.

In case you need CPA CPE credit points, please contact us for the certificates.

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© 2023 - 2024 PwC. All rights reserved. “PwC” refers to PricewaterhouseCoopers Auditing Ltd. and PricewaterhouseCoopers Hungary Ltd. which are member of the PwC network. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

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