IAS 1
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Statement of financial position
Statement of profit or loss & other
comprehensive income
Statement of changes in equity
Statement of cash flows
Notes, comprising a summary of significant
accounting policies & other explanatory
information
Comparative information iro of preceding period
New accounting policy applied retrospectively or
restatement – 3rd statement of financial position
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Statement of financial position:
• Assets (non-current & current)
• Liabilities (non-current & current)
• Equity
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Statement of profit or loss & other
comprehensive income:
• Profit or loss for the year FIRST (par. 82)
• Other comprehensive income or loss LAST (par.
82A)
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Statement of changes in equity
• Share capital
• Accumulated profit of loss
• Reserves
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Statement of cash flows
• Cash flows from operating activities
• Cash flows from investing activities
• Cash flows from financing activities
ASSETS:
Property, plant & equipment
 Investment property
 Intangible assets
 Financial assets
 Investments
 Biological assets
 Trade and other receivables
 Cash and cash equivalents
 Total assets classified as held for sale
 Assets for current tax
 Deferred tax assets
NB – consider liquidity, nature and function
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CURRENT ASSETS:
• Expect to realise, sell or consume asset within 12
months after reporting date;
• Held mainly for purpose of being traded;
• Expected to be sold, used or realised (converted
into cash) as part of the normal operating cycle; or
• Asset is cash or cash equivalents, unless restricted
to from being exchanged or used to settle a liability
for at least 12 months after reporting date.
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NON-CURRENT ASSETS:
• Any assets that are not current assets
Example:
Era Limited has the following 2 assets at its
financial year ended 31 December 2014.
1. Inventory – this is slow-moving inventory
and is expected to be sold during 2016
2. Fixed deposit – this matures on 30 June
2016
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LIABILITIES:
Trade and other payables
 Provisions
 Financial liabilities
 Liabilities for current tax
 Deferred tax liabilities
 Total liabilities classified as held for sale
NB – consider amount, timing & nature
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CURRENT LIABILITIES:
• Expect to be settled/paid within 12 months after
reporting date;
• Held mainly for purpose of being traded;
• Expected to be settled/paid within the normal
operating cycle; or
• If the entity does not have an unconditional right to
delay settlement beyond the 12-month period
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NON-CURRENT LIABILITIES:
• Any assets that are not current assets
Example:
Pixi Limited has a bank loan of N$500 000 at
31 December 2013, payable in 2 instalments of
N$250 000 each. The first instalment is
payable on 31 December 2014.
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Example:
The accountant of Logi Limited has presented you with the
following list of items:
 Cash in the bank and a 15-month fixed deposit
 Property, plant & equipment and intangible assets
 Inventory and intangible assets
 A long-term loan, 20% of which is repayable within 12
months of reporting date
 Provisions and tax payable
For each of the items listed above, indicate whether they need
to be presented as separate line items or together. Explain your
answer
EQUITY:
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Issued share capital and share premium
Accumulated profit or loss
Reserves
Non-controlling interests
For each class of share capital, the following should be disclosed:
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Number of shares authorised
Number of shares issued and fully paid for
Number of shares issued but not yet fully paid for
Par value per share or that they may not have a par value
Reconciliation of the number of outstanding shares at the beginning and end
of the year
Rights, preferences and restrictions attaching to that class
Shares in the entity held by the entity itself, or its subsidiaries or associates
Shares reserved for issue under options and sales contracts, including terms
and amount
PROFIT OR LOSS:
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Revenue
Gains and losses arising from the derecognition of financial
assets
Finance costs and interest income
Share of profit or loss of associates and joint ventures
Gains and losses arising from fair value adjustments of
financial assets/liabilities
Tax expense
Profit or loss from discontinued operations
Profit or loss for the period attributable to owners of the
parent and non-controlling interests
OTHER COMPREHENSIVE INCOME:
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IAS 16 – changes in revaluation surplus
IAS 19 – remeasurements of defined benefit plans
IAS 21 – gains & losses arising from translating a foreign
operation’s financial statements
IAS 9 – gains and losses from various financial instrument
transactions
Above items grouped as under the sub-headings items may
never be reclassified to p&l or items that may be reclassified to
p&l
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Items can be presented before or after tax
Tax effect of each item should be presented on the face or in the
notes
OTHER COSIDERATIONS:
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Single statement or two statement layout
ANALYSIS OF EXPENSES:
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Nature method – expenses presented based on their nature
and not allocated to the different functions within the entity
Function method – expenses classified into the different
functions of the business
Generally 4 main functions – sales, distribution,
administration & other operations
Material expenses (nature and amount) to be disclosed
separately – either on the face on in the notes
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IAS 1, paragraph 15:
Financial statements shall present fairly the
financial position, financial performance and
cash flows of an entity.
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HOW?
• Application of the standards (IAS & IFRS)
• Additional disclosures
• Faithful presentation of the effects of transactions
(free from error)
• Conceptual framework definitions & recognition
criteria (relevant, comparable, understandable)
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Compliance with IAS/IFRS misleading – the
following disclosures required:
• Management’s conclusion that the financial statements
fairly present the entity’s financial position, financial
performance & cash flows
• Declaration that entity has complied with IFRS except
that it has departed from a particular requirement in
order to achieve fair presentation
• Name of the standard from which there has been
departure
• Nature of departure, including treatment that was
required by the standard
• Reason why treatment was considered to be misleading
• Alternative treatment adopted & financial impact of
departure
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Conceptual framework par 4.1
The financial statements are normally prepared on the
assumption that an entity is a going concern and will continue
in operation for the foreseeable future.
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IAS 1 par.25
When preparing financial statements, management shall make
an assessment of an entity’s ability to continue as a going
concern. An entity shall prepare financial statements on a going
concern basis unless management either intends to liquidate
the entity or to cease trading, or has no realistic alternative but
to do so.
Management must assess whether the entity is
a going concern. They may conclude that:
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The entity is a going concern
The entity is not a going concern
There is significant doubt as to whether the entity will be able
to continue as a going concern or not.
This assessment:
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Is made when preparing the financial statements
Is based on all available information regarding the future
(budgets, debt repayment schedules etc.)
Includes a review of the available information relating to at
least 1 year from the end of the reporting date.
Entity is a going
concern
Entity is not a
going concern
Significant doubt
on going concern
AFS prepared on GC
basis
AFS not prepared
on GC basis; must
disclose the fact
that they are not
GC, reason why
entity is not GC and
basis used to
prepare the AFS
(used liquidation
values)
Entity is a going
concern, but
significant doubt;
disclose the
material
uncertainties
causing the doubt
Indicators that there is a going concern issue:
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Entity is making a loss on the Statement of profit or
loss and other comprehensive income;
Losses are made consistently over a number of
years;
Liabilities exceed the assets;
Management does not have plans in place to turn
the situation around;
Budgets indicate losses will be made in future
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Recognising elements (assets, liabilities,
income, expenses & equity) when the
definitions and recognition criteria are met.
Refer to conceptual framework
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Transactions and events are recorded in the
period in which they occur rather than when
the cash is received or paid.
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When is an item material?
• Will the users of the financial statements be
influenced if the item is misstated or omitted?
• Materiality depends on the size & nature of the item
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Accountancy involves a process of logical
summarisation
• To summarise is to combine (aggregate) items that
we believe are not material enough to be shown
separately
• Transactions or events are aggregated into classes
according to their nature or function
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Materiality is applied to classes of items and
items are analysed based on their nature or
function
• Each class of similar items that is material should
be separately disclosed
• Each dissimilar item that is material should be
segregated and separately disclosed
• Each dissimilar item that is immaterial may be
aggregated/grouped with another class of items
Examples:
The carrying amount of furniture is N$100 000 and the carrying
amount of plant is N$50 000. The company’s materiality limit is
N$300 000 for items of property, plant and equipment. Explain
whether or not the furniture and plant should be disclosed
separately.
A company’s materiality limit is N$300 000 and the total
carrying amount of its:
 Factory plant is N$500 000, including machine A, with a
carrying amount of N$450 000;
 Office furniture is N$300 000;
 Office equipment is N$310 000
Explain whether or not:
 Machine A should be disclosed separately from the other
machinery based on size
 Office furniture should be separately disclosed from office
equipment based on the carrying amount of each relative to
the materiality limit
 These assets should be aggregated on the face of the
statement of financial position or in the notes
Notes to the annual financial statements:
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Basis of preparation of financial statements
Information relevant to understanding the financial
statements
Statement of compliance with IFRS
Summary of significant accounting policies
Sources of measurement uncertainty
Supporting information and sub-classifications for items
presented in the SOFP, SOPL, SOCE & SOCF
Contingent liabilities and unrecognised contractual
commitments
Non-financial disclosures
OTHER DISCLOSURES:
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Country of incorporation
Address of registered office
Description of the nature of the entity’s operations and
principle activities
Name of parent and ultimate parent company