Preparation and Presentation of financial statements of IAS 1

Objective
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.
Scope
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.
Definition
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
Notes
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 Statement
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.
  Disagreement with IFRSs
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 title of the standard from which departure is taken, the details of departure and
related reason for the departure
 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.
Offsetting
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

Assets
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
 Income tax
 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:
 Owners of the group
 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
Notes
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

AB Ltd
Statement of financial position
As on …
ASSETS $ $
Non-current assets
Plant and Machinery x
Other Intangible assets x
Investments x x
Current assets
Closing Stock x
Receivables x
Cash x x
Total assets xx
EQUITY AND LIABILITIES
Equity
Issued Share capital x
Other reserves x
Accumulated earnings x x
Non-current liabilities
Long term Loans x
Long term provision x x
Current liabilities
Trade Creditors
Bank Overdraft x
Tax payable x x
Total equity and liabilities xx

Format of Statement of profit or loss and other comprehensive income

AB Ltd
Statement of Profit or Loss
For the year ended…
Statement of profit or loss $ $
Sales Revenue x
Cost of sales (x)
Gross profit x
Administration Costs (x)
Selling expenses (x)
Operating profits x
Interest costs (x)
Profits before tax x
Income tax (x)
Profit/(loss) after tax (A) x/(x)
OTHER COMPREHENSIVE INCOME
Items that are not reclassify to profit or loss
Revaluation Surplus/(Loss) x/(x)
Fair Value gain/(loss) financial asset x/(x)
Income tax relating to other comprehensive income (x) x/(x)
Items that may be reclassify to profit or loss
Fair value gain/(loss) on cash flow hedge x/(x)
Exchange gain/(loss) on foreign operation x/(x)
Reclassification adjustment (x)
Income tax relating to other comprehensive income (x)
Total of other comprehensive income (B) x/(x)
Total comprehensive Income for the year (A+B) x/(x)