Financial Accounting Standard for
General Presentation and Disclosure
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Financial Accounting Standard for
General presentation and Disclosure
Content
Topic
1. Scope of the standard
2. Objective of the standard
3. The standard text
4. Illustrative forms and general guidelines for the preparation of
financial statements.
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Page
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Financial Accounting Standard for
General Presentation and Disclosure
1.
Introduction:
This standard determines the requirements of general presentation and disclosure of the financial
statements of profit seeking enterprises, consolidated financial statements, and financial
statements of enterprises under formation. It also determines the treatment of accounting changes
and contingent gains and losses. Furthermore, it defines disclosure requirements regarding the
definition of an accounting entity, the nature of its activities, the nature of each of the financial
statements, accounting policies, commitments, and events subsequent to the preparation of the
financial statements.
(Para. 578)
This standard has been divided into four main parts: the first part is concerned with the standard
of general presentation; the second part is concerned with the standard of general disclosure; the
third part is concerned with the requirements of general presentation and disclosure of
consolidated financial statements; and the fourth part is concerned with the requirements of
general presentation and disclosure of financial statements of enterprises under formation.
(Para. 579)
This standard should be studied in light of the illustrative introduction, the proposed statement of
financial accounting objectives in the kingdom, and the proposed statement of financial
accounting concepts.
(Para. 580)
2.
Scope of the Standard:
This standard applies to financial statements of profit-seeking enterprises, regardless of their legal
form or the nature of their activities. Furthermore, this standard contains specific considerations
regarding the materiality that should be taken into account in deciding whether individual
accounts should be disclosed separately or can be combined with other accounts for financial
statement presentation purpose. These considerations are not applicable to the other subjects
addressed by the standard of general presentation and disclosure.
(Para. 581)
3.
Text of the Standard:
The following is the text of the standard of the general presentation and disclosure:
3.1 General Presentation:
The Standard of General Presentation defines the requirements of information
presentation in the financial statements as a whole and in each statement. The following
are the details of these requirements.
(Para.582)
3.1.1 General Requirements:
1. The complete set of financial statements
The complete set of financial statements consists of the following:
 Statement of Financial Position.
 Income Statement.
 Statement of Cash Flows.
 Statement of Changes in Owners’ Equity, or alternatively, a Statement of
Retained Earnings.
These statements and related disclosure represent the minimum requirement for
presenting the financial position, results of operations, and cash flows.
(Para. 583)
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2. Sequence of the Financial Statements Presentation
The financial statements should be presented in the following order:
 The Statement of Financial Position.
 The Income statement.
 The statement of Cash Flows.
 The Statement of Retained Earnings or the Statement of Changes in Owners’
equity.
 Notes to the Financial Statements.
(Para. 584)
3. Materiality Considerations
An individual account or group of accounts is considered to be material if its
omission, non-disclosure, or improper presentation causes deviation or distortion
to the information presented in the financial statements, or this information is
inadequate to evaluate the performance of the entity. In deciding whether an item
is material for presentation purposes, its type and relative amount should be taken
into consideration. Ordinarily, these two factors should be evaluated together. In
some circumstances, however, either one of them may be the decisive factor.
(Para. 585)
In studying the type of an account or group of accounts for financial statements
disclosure purposes, the following should be taken into consideration:
1. The nature of the account or group of accounts (e.g. cash,
merchandise inventory, accounts receivable, notes receivable,
investment by owners, distributed profits, sales, revenue from real
estate investments, revenue from investments in other companies,
gains from fixed assets sales, losses, salaries and wages, advertising
expenses, rentals, cost of goods sold, etc.)
2. The basis of accounting measurement or recognition of the account
or group of accounts (e.g. realizable value, historical cost after
depreciation, first-in-first-out (FIFO), moving average cost, date of
the exchange transaction which generated revenue, etc.)
3. The reliability of the accounting measurement (e.g. estimated
liabilities, actual liabilities, estimated revenues, actual revenues,
estimated expenses, actual expenses, etc.)
4. The ability of an enterprise’s management to determine the
magnitude of an account or group of accounts (e.g. variable
expenses, fixed expenses, semi-fixed expenses, expenses subject to
management’s judgment such as research and development and
advertising expenses, unexpected expenses, etc.)
5. The significance of an account or group of accounts to the users of
the financial statements.
(Para. 586)
A. When considering the relative value of an item, class or component, it should be compared
against an appropriate base value. The following base values should be used:
1. Each item, class or component of the Income Statement should be compared with
the net income for the current year or the average net income for the last five
years (including the current year), whichever is the more relevant measure of net
income, taking into consideration the business trend during that period.
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2. Each item, class or component of the Statement of Financial Position should be
compared against the lower of:
a. Total owners’ equity (net assets), or
b. The appropriate total of the class to which the item belongs, for example,
total current assets, total non-current assets, total current liabilities, or
total non-current liabilities.
Where an item is subject to comparison against the base values described in
(a) and (b) above, the more stringent test should prevail.
3. Each item of one of the Statement of Cash Flows sections should be compared
against the total of that section, such as net cash flows from (or used in) operating
activities, investing activities, or financing activities.
(Para. 7)
B. The following guidelines should be applied when considering the materiality of an item, class
or component:
1. An item, class or component is considered material if its value is greater than or
equal 10 percent of the appropriate base value, unless an evidence exists to the
contrary.
2. An item, class or component is considered immaterial if its value is less than or
equal 5 percent of the appropriate base value, unless an evidence exists to the
contrary.
3. When the value of an item, class or component is between 5 and 10 percent of
the base value, deciding its materiality will be subject to professional judgment,
depending on the circumstances.
Although the above guidelines are somehow arbitrary, their application helps reduce
the possibility of wide discrepancy in materiality judgments.
(Para 8)
General Bases for Financial Statements Presentation:
1. Financial statements should be prepared in such a form and use of terminology
and classification of items that significant information is readily understandable.
Items not significant in themselves should be grouped with such other items as
most closely approximate their nature. To eliminate unnecessary details, it is
preferable to express all of the amounts in the financial statements to the nearest
one thousand monetary units depending on the magnitude of the amounts
involved.
(Para. 9)
2. Financial statements are generally more useful when they are presented in
comparative form with those of the preceding accounting period (or periods).
When comparative statements are presented, the notes to the financial statements
should contain information for all the periods presented to the extent currently
relevant. If changes have occurred in the manner or the basis of presenting the
financial statements items from one period to another, such changes should be
disclosed and explained in accordance with the requirements of this standard.
(Para. 10)
3. Each financial statement must have a title that describes its content and presents
the name of the accounting entity and its legal form (corporation, limited liability
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company, partnership, etc.) and the accounting period (s) for which the financial
statement is presented.
(Para. 11)
4. Notes to the financial statements should be captioned in such a manner that each
caption should adequately describe the information contained. Notes should be
numbered and the financial statements should contain specific references thereto.
In addition, each financial statement should include a reference stating that the
accompanying notes are an integral part of the financial statements.
(Para.12)
Presentation requirements in the Statement of Financial Position:
1. The Statement of Financial Position should include and properly describe all
assets, liabilities and elements of owners’ equity. Assets and liabilities should not
be offset unless a legal right of setoff exists.
(Para. 13)
2. Assets should be presented in the Statement of Financial Position in accordance
with the following order:
a. Current assets.
b. Investments and financial assets.
c. Fixed assets.
d. Intangible assets.
e. Other assets.
(Para. 14)
3. Liabilities should be presented in the Statement of Financial Position in the
following order:
a. Current liabilities.
b. Non-current liabilities.
(Para. 15)
4. Owners’ equity should be presented in the Statement of Financial Position in the
following order:
a. Paid-in capital.
b. Additional-paid-in capital, unless the corporate law requires such an item
be presented differently.
c. Donated capital.
d. Reserves (appropriated retained earnings).
e. Un-appropriated return earnings.
(Para. 16)
5. Assets and liabilities should be classified into current and non-current. Current
assets should include cash and those assets ordinarily realizable in cash or sold or
consumed within one year from the date of the Statement of Financial Position,
or during the course of operating cycle whichever is longer.
(Para. 17)
6. Current assets should be segregated between the main classes in the Statement of
Financial Position based on their nature, e.g., cash, temporary investments,
accounts and notes receivables, inventories and prepaid expenses. Material items
within each class should be segregated as between monetary and non-monetary
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on the face of the Statement of Financial Position or in the related notes. In
addition, material items within a class that are subject to different measurement
basis should be segregated.
(Para. 18)
7. The total of the current assets should be shown on the face of the Statement of
Financial Position.
(Para. 19)
8. Non-current assets should be displayed on the face of the Statement of Financial
Position based on their general nature under the following captions:
a. Investments and financial assets.
b. Fixed assets.
c. Intangible assets.
d. Other assets.
(Para. 20)
9. Non-current assets displayed under each caption should be segregated as between
the main classes based on their specific nature, e.g., land, building, office
furniture and equipment under the fixed assets caption. Within each class,
material monetary assets should be segregated from non-monetary assets and
assets subject to different measurement bases. Segregation between the items of
non-current assets displayed under each separate caption is made either on the
face of the Statement of Financial Position or in the related notes.
(Para. 21)
10. Asset valuation allowances (e.g., Accumulated depreciation and Allowance for
doubtful accounts) should be deducted from the assets to which they relate.
(Para. 22)
11. Current liabilities should include amounts payable within one year from the date
of the Statement of Financial Position or during the operating cycle, whichever is
longer.
(Para. 23)
12. Obligations, otherwise classified as current liabilities, should be excluded from
the current liabilities classification to the extent that contractual agreements have
been made for settlements from other than current assets before the issuance of
financial statements. Examples include:
a. A maturing short-term loan where contractual arrangements have been
made for long-term refinancing.
b. Trade accounts where contractual arrangements have been made for
settlement by the issue of shares of capital stock.
(Para. 24)
13. Current liabilities should be segregated as between the main classes, on the face
of the Statement of Financial Position under separate captions according to their
type, e.g., bank loans, suppliers and accrued expenses payable, loans payable,
dividends payable, deferred revenues, and current payment on long-term debt.
(Para 25)
14. The total of the current liabilities should be shown on the face of the Statement of
Financial Position.
(Para 26)
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15. Non-current liabilities should be segregated as between the main classes, e.g.,
long-term loans and other non-current liabilities.
(Para 27)
16. Each of the following liabilities should be shown separately on the face of the
Statement of Financial Position or in the related notes:
a. Amounts due to the members of the board of directors, top officers,
shareholders or owners of the firms.
b. Amounts due to non-consolidated subsidiaries, whether as a result of a
loan or otherwise.
c. Amounts due to parent and other affiliated companies, whether as a
result of a loan or otherwise.
(Para 28)
17. Liabilities that are secured by a mortgage should be stated separately on the face
of the Statement of Financial Position or in the related notes and the assets used
as a mortgage or security for these liabilities should be disclosed.
(Para 29)
18. Owners equity should be segregated as between the following main classes:
a. Paid-in capital; Paid-in capital includes investments by the owners for
which equity interests have been granted by the reporting entity and are
outstanding (shares in the case of corporations). Items included in this
class of owners’ equity should be displayed separately based on the
different rights associated with different equity interests.
b. Donated capital: Donated capital include capital contributions received
by the reporting entity from non-owners.
c. Reserves or appropriated retained earnings: Reserves or appropriated
retained earnings should include accumulated earnings of the reporting
entity that have been set a side because of the requirements of the
companies law or the company statute or otherwise. Items included in
this class of owners’ equity should be displayed separately based on the
reasons for which the appropriation of retained earnings was made.
d. Additional-paid-in capital, unless required by the companies law to be
presented otherwise.
e. Un-appropriated retained earnings: Un-appropriated retained earnings
should include accumulated retained earnings of the reporting entity that
are available without any restriction for distribution to its owners.
(Para 30)
Presentation requirements for Income Statement:
1. The results of operations of the reporting entity should be presented in the
Income Statement in a multiple-step format showing appropriate intermediate
components of net income. Specifically, the Income Statement should display the
following components of net income where applicable:
a. The results of continuing operations.
b. The results of discontinued operations including any related gains or
losses from the disposal of a segment of a business.
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c. Extraordinary items, that is, gains or losses resulting from casualties or
involuntary expiration of usage period of assets for reasons not related to
the operations of the accounting entity.
(Para 31)
2. The results of continuing operations should separately display the following:
a. The results of the ongoing major operations of the reporting entity for
which financial statements are prepared.
b. The results of the peripheral or incidental transactions of the entity with
other entities and other events and circumstances affecting it other than:
1. Results of discontinued operations.
2. Extraordinary gains and losses.
The ongoing major operations of the reporting entity refer to its main
line(s) of business that is (are) the major source(s) of its revenues as
opposed to its peripheral or incidental transactions with other entities and
other events and circumstances affecting it. Examples of the results of
peripheral transactions with other entities include:
1. Income from rental operations of a steel manufacturer.
2. Dividends received on shares owned by a dairy producer.
Examples of the results of incidental transactions with other entities
include:
1. Gains and losses on the sale of assets not held for sale in the normal
course of business,
2. Revenues from the sale of by-products, e.g., sale of animal feed by a
dairy producer and sale of scrap material by a construction company.
Examples of the results of other events and circumstances that affect the
accounting entity include:
1. Loss resulting from the impairment of value of inventories.
2. Fines imposed by the government as a result of delay in the
completion of a project.
3. Loss due to a judgment against the accounting entity because of
breach of an agreement with a customer or supplier.
4. A loss contingency resulting from an uninsured claim regarding
product liability.
(Para 32)
3. The results of operations of a discontinued segment of a business should be
displayed separately on the face of the Income Statement and any recognizable
gain or loss from the disposal of a segment of a business should be reported in
conjunction with the related results of discontinued operations. For purpose of
applying this standard, a segment of a business is defined as a component of the
reporting entity whose activities represent a separate major line of business. A
segment may be in the form of a subsidiary, a division, or a department or in
some cases a joint venture or other no subsidy investee, provided that its assets,
results of operations, and activities can be clearly distinguishable, physically and
operationally and for financial reporting purposes, from the other assets, results
of operations, and activities of the entity. A segment of a business should be
considered discontinued, for purpose of presentation of the results of operations,
when it has been sold, abandoned, spun off, or otherwise disposed of, or when it
is still operating but is the subject of a formal plan to dispose of it.
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(Para. 33)
4. Extraordinary items refer to material gains or losses due to casualties and
involuntary expiration of assets that is not related to operations and do not
represent the disposal of a segment of a business. Extraordinary items should be
displayed as a separate component of net income on the face of the Income
Statement following the display of the results of continuing operations and,
where applicable, the results of discontinued operations.
Casualties refer to sudden, unanticipated expiration of the entity’s assets not
caused by the other entities. Examples are fires, floods, earthquakes and
other similar events usually termed acts of God.
An involuntary expiration of assets that is not related to operations is the
sudden, unanticipated damage, destruction or disappearance of assets caused
by other entities. Examples are theft and expropriation.
(Para. 34)
5.
Any governmental operating subsidy should be displayed separately on the face
of the Income Statement following the presentation of the results of operations
before the operating subsidy.
(Para. 35)
6. The following items, where applicable, should be presented separately in the
following order on the face of the Income Statement as part of the results of
continuing operations:
a. Net sales (or revenues) from major operations.
b. Cost of goods sold (or cost of revenues).
c. Gross income (i.e., the difference between net sales and the
cost of goods sold).
d. Operating expenses related to major operations including
selling, general and administrative expenses displayed
separately.
e. Income from major continuing operations (i.e., the
difference between gross income and operating expenses).
f. Individual material elements of other income or gains and
loses (or in the aggregate if individual elements are not
material) resulting from the peripheral or incidental
transactions of the entity and other events and circumstances
affecting it other than extraordinary items.
g. Income (loss) from continuing operations (i.e., the total of all
of the above items or components).
(Para. 36)
7. Income (loss) from continuing operations should be followed, where applicable,
by a presentation of discontinued operations.
(Para. 37)
8. Income before extraordinary items should be followed, where applicable, by
individually material elements of gains or losses from casualties and/or
involuntary expiration of assets.
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(Para. 38)
9. The last caption on the Income Statement should always be Net Income (Net
Loss).
(Para. 39)
10. Earnings per share should be presented on the face of the Income Statement
immediately after Net Income (Net Loss). The basis of its computation should be
disclosed in the related notes.
(Para. 40)
Presentation requirement for the Statement of Cash Flows:
1. A firm should prepare a Statement of Cash Flows for each accounting period for
which financial statements are prepared. That statement should provide
explanation of changes in cash and cash equivalents, and it should show all cash
flows from operating, investing and financing activities and their net effect on
cash and cash equivalents during the accounting period. The total of cash and
cash equivalents shown on the face of the Statement of Cash Flows at the
beginning and end of the period must be equal to the amounts shown under
similar description in the Statement of Financial Position prepared on the same
date. Cash equivalents refer to highly liquid short-term investments that readily
convertible to known amounts of cash, and so near their maturity that they
present insignificant risk of change in their return rates. Examples are
government bonds and commercial papers.
(Para. 41)
2. Although information types contained in this statement might be different from
an economic activity to another and from one accounting period to another
depending on the materiality of that information, curtain cash flows are
meaningful to the users of the financial statements. Hence, in all cases,
information related to these cash flows must be presented clearly in the Statement
of Cash Flows.
(Para. 42)
3. Cash flows related to the operating, investing, and financing activities should be
presented in the Statement of Cash Flows as follows:
(Para. 43)
First: Cash flows from operating activities:
3.1.5.3.1 Cash flows from operating activities should show cash received
from, and used in, operating activities, including cash received
from (or paid for) continuing and discontinued operations, and
extraordinary items that are otherwise be categorized as
investing or financing. Generally speaking, cash flows from
operating activities is the resultant of transactions and events
affecting income from operations.
(Para. 44)
3.1.5.3.2
A firm that uses the direct method (the preferred method) in
presenting cash flows from operating activities, should display,
among cash flows from operating activities, the main elements of
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total cash received and total cash paid and the amount of net cash
flows from operating activities. At minimum, The following
items of cash receipts and cash payments related to operating
activities should be separately presented
a. Cash collections from customers, including sales of goods
and services.
b. Received revenues and return on investments.
c. Cash collections from other operating activities.
d. Cash payments to suppliers of goods and services including
insurance and advertising companies and others.
e. Cash paid to employees.
f. Interest paid.
g. Income taxes and Zakat paid (charged to income).
(Para. 45)
3.1.5.3.3 It is preferred that a firm present more details about cash receipts
and payments from operating activities according to the most
relevant method.
(Para. 46)
3.1.5.3.4
3.1.5.3.5
When a Statement of Cash Flows is prepared using the direct
method, a reconciliation of net income to cash flows from
operating activities should be disclosed in the related notes.
(Para. 47)
Firms which elect not to use the direct method (the preferred
method) in presenting cash flows from operating activities,
should display indirectly the same amount of cash flows from
operating activities through a reconciliation between net income
(net loss) as presented in the Income Statement and net cash
flows from operating activities. Reconciliation would eliminate
the effect of the following items on net income (net loss):
a. Cash receipts and payments related to operating activities
that were deferred in previous periods. Examples are
changes in inventories and deferred revenue.
b. Cash receipts and payments resulting from operating
activities and due in future periods. Examples are changes in
the balances of accounts receivable and accounts payable.
c. Revenues, expenses, gains or losses related to cash flows
from investing and financing activities such as depreciation
of fixed assets, amortization of intangible assets, and gains
and losses on the sale of land, building and equipment.
(Para. 48)
Second: Cash flows from investing activities:
3.1.5.3.6
Cash flows from investing activities should be presented
separately in the Statement of Cash Flows showing the main
sources of cash received and main uses of cash paid. Cash flows
from investing activities include cash flows related to granting
and collecting loans to others, selling and purchase of fixed and
intangible assets, investments and other productive assets used in
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producing goods and services other than material considered as
part of inventory.
(Para. 49)
Third: Cash flows from financing activities:
3.1.5.3.7
3.1.5.3.8
3.1.5.3.9
Cash flows from financing activities should be presented
separately in the Statement of cash flows showing the main
sources of total cash received and main uses of cash paid. Cash
flows from financing activities include cash collected from the
owners of the firm, cash dividends, cash subsidies, and short and
long-term loans and cash used to repay these loans.
(Para. 50)
The effect of changes in the exchange rates of foreign currency
on cash should be presented separately in the Statement of Cash
Flows to reconcile the balances at the beginning and the end of
the period.
(Para. 51)
Cash flows from operating, investing and financing activities
should be presented in a manner that is most appropriate to the
nature of the firm’s activity, taking into consideration that it
should allow the users of financial statements the opportunity to
evaluate the effect of these activities on the financial position of
the firm, the results of its operations, changes in owners’ equity,
and the amounts of cash and cash equivalents, and to use this
information for evaluating the relations among these activities.
(Para. 52)
3.1.5.3.10 Complex transactions (related to more than one activity) should
be analyzed to show cash flows from each activity separately. In
case of inability to segregate the activities related to these
transactions, separate disclosure to that extent should be added
for each item.
(Para. 53)
3.1.5.3.11 Cash flows resulting from extraordinary items should be
presented according to the nature of the related activity. They
should be classified separately in order to appropriately disclose
their effects.
(Para. 54)
3.1.5.3.12 Net cash flows resulting from acquisition and sale of subsidiaries
or other firms should be presented separately, and for each type
of investment, in the investing activity section
(Para. 55)
4. The reconciliation between net income and net cash flows from operating
activities should display all main items subject to reconciliation independently
regardless of whether the direct or the indirect method is used. Examples of items
that should be displayed separately are the main cash receipts and payments
resulting from operating activities and were deferred in previous period, and cash
receipts and payments related to operating activities and due in future periods.
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When appropriate, it is preferred that each firm provides more detailed
information.
(Para. 56)
5. The financial statements should disclose the following:
a. The components of cash on hand and at the banks and cash equivalents,
and the amount and nature of cash that is not currently available for use.
b. Accounting policy used by the firm for cash equivalents.
c. Investing and financing transactions that do not involve collection or
payments of cash during the accounting period.
d. The following information should be disclosed for each individual
investment when a subsidiary or other firms are acquired or sold:
1. Total purchase or sale value.
2. Cash paid (received) as part of the total purchase (sale)
value.
3. Cash and cash equivalent balance at the acquired (or
disposed of) firm.
4. Total non-monetary assets and liabilities and non cash
equivalents classified into their main components.
(Para. 57)
6. When accounting for investment in an affiliated or a subsidiary company is based
on the equity method or the cost method, only cash flows between the investor
and investee should be presented in the investor’s Statement of cash Flows.
Examples are cash dividends and loans.
(Para. 58)
7. A firm that displays its interest in a partially owned firm should present in its
consolidated Statement of Cash Flows only its share in cash flows of the investee
company. When a firm accounts for such investment using the equity method, it
should present in its Statement of Cash Flows only its share of the investee
company’s cash flows and dividends, and other payments and receipts between
the firm and the investee company.
(Para. 59)
8. Total cash flows resulting from the purchase or sale of subsidiaries and other
business firms should be presented separately and classified as investment
activities.
(Para. 60)
9. A firm should disclose the following for each purchase or sale transaction of a
subsidiary or other business firms during the period:
a. Total purchase or sale value.
b. Cash or cash equivalent paid (received) as part of the purchase (sale)
value.
c. The amount of cash or cash equivalent in the subsidiary or other investee
firms purchased or sold.
d. The amount of non-monetary assets and liabilities in the subsidiary or
other business firms purchased or sold summarized in main classes.
(Para.61)
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10. Separate presentation of the effects of cash flows resulting from the purchase or
sale of subsidiaries or other business firms, and the separate disclosure of the
amount of assets and liabilities purchased or sold, helps in segregating these cash
flows from those resulting from other operating, investing and financing
activities. The effects of cash flows resulting from selling subsidiaries and other
firms should not offset against those resulting from purchase of subsidiaries and
other firms.
(Para. 62)
11. Investing and financing transactions that do not require the use of cash or cash
equivalents should be excluded from the Statement of Cash Flows. Such
transactions should be disclosed in another part of the financial statements such
that all information related to these activities is provided.
(Para. 63)
12. A firm should disclose the components of cash and cash equivalent and it should
present reconciliation between the amounts in the Statement of Cash Flows and
those related items in the Statement of Financial Position.
(Para.64)
Presentation requirements for the Statement of Retained Earnings:
1. The Statement of retained Earnings should separately report the changes in
appropriated (reserves) and un-appropriated retained earnings during the period.
(Para. 65)
2. The Statement of Retained Earnings should separately display the beginning
balances of appropriated (i.e., the balances of legal, general and other reserves)
and un-appropriated retained earnings before and after any prior period
adjustments.
(Para. 66)
3. Additions to and deductions from the beginning balances of appropriated and unappropriated retained earnings during the period should be separately displayed
on the face of the Statement of Retained Earnings.
(Para. 67)
Presentation requirements for the Statement of Change in Owners’ Equity:
1. The Statement of Changes in Owners’ Equity should report separately the
changes in paid-in capital; where applicable, donated capital; reserves and/or
appropriated retained earnings; and un-appropriated retained earnings.
(Para. 68)
2. The Statement of Changes in Owners’ Equity should separately display the
beginning balances of paid-in capital; where applicable, donated capital; reserves
and/or appropriated retained earnings; and un-appropriated retained earnings
before and after any prior period adjustments.
(Para. 69)
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3. Additions to and deduction from the beginning balances of paid-in capital; where
applicable, donated capital; reserves and/or appropriated retained earnings; and
un-appropriated retained earnings should be separately displayed on the face of
the Statement of Changes in Owners’ Equity with a description of the nature of
each addition or deduction.
(Para. 70)
3.2 GENERAL DISCLOSURE:
3.2.1 The standard of general disclosure defines disclosure requirements in the financial
statements with respect to the following:
a. Nature of business.
b. Significant accounting policies.
c. Accounting changes including:
1. Changes in accounting policies.
2. Changes in accounting estimates.
d. Corrections of errors in financial statements.
e. Contingencies and their treatments.
f. Commitments.
g. Subsequent events.
(Para. 71)
3.2.2 Notes to the financial statements should include a brief description of the nature of an
entity business.
(Para. 72)
3.2.3. Disclosure of significant accounting policies:
3.2.3.1 A clear and concise description of the significant accounting policies of an
enterprise should be included as an integral part of the financial statements.
As a minimum, disclosure of information on accounting policies should be
provided in the following situations:
a. When a selection has been made from alternative acceptable accounting
standards and methods.
b. When there are accounting standards and methods used which are
peculiar to an industry in which an enterprise operates, even if such
accounting standards and methods are predominantly followed in the
industry.
c. When the financial statements are prepared on a basis not in conformity
with one or more of the fundamental concepts described in the
Conceptual Framework of Financial Accounting.
(Para. 73)
3.2.3.2 In order to provide an overview of the accounting policies of an entity
these policies must be disclosed together in the form of a summary rather
than in individual notes to the financial statements. Therefore, it is
preferable for the disclosure of accounting policies to be provided as either:
a. The first note to the financial statements; or
b. A separate summary, to which the financial statements are crossreferenced.
16
Suitable titles would be “Summary of Significant Accounting Policies” or
“Significant Accounting Policies.”
(Para. 74)
3.2.3.3 Wrong or inappropriate treatment of items in the financial statements is not
rectified either by disclosure of accounting policies or by notes or
explanatory material.
(Para. 75)
3.2.4 Change in an accounting policy:
3.2.4.1 A change in an accounting policy should only be made if required by a law
or regulation or an accounting standard, or if the change in an accounting
policy provides better information in the entity’s financial statements.
(Para. 76)
3.2.4.2 When there is a change in an accounting policy of the reporting entity the
new accounting policy should be applied retroactively by restating the
financial statements of all prior periods presented, except in those
circumstances when the necessary financial data is not reasonably
determinable.
(Para. 77)
3.2.4.3 When a change in an accounting policy is applied retroactively, the
financial statements of all prior periods presented for comparative purposes
should be restated to give effect to the new accounting policy, except in
those circumstances when the effect of the new accounting policy is not
reasonably determinable for individual prior periods. In such
circumstances, an adjustment should be made to the opening balance of
retained earnings of the current period, or such earlier period as is
appropriate, to reflect the cumulative effect of the change on prior periods.
(Para. 78)
3.2.4.4 For each change in an accounting policy in the current period, the following
information should be disclosed:
a. A description of the change;
b. Justification of the change; and
c. The effect of the change on the financial statements of the current
period.
(Para. 79)
3.2.4.5 When a change in an accounting policy has been applied retroactively and
prior periods have been restated, the fact that the financial statements of
prior periods that are presented have been restated and the effect of the
change on those prior periods should be disclosed.
(Para. 80)
3.2.4.6 When a change in an accounting policy has been applied retroactively but
prior periods have not been restated, the fact that the financial statements
of prior periods that are presented have not been restated should be
disclosed. The cumulative adjustment to the opening balance of the
retained earnings of the current period should also be disclosed.
17
(Para. 81)
3.2.4.7 The disclosure of particulars, including monetary amounts applies to each
change in an accounting policy; it is not appropriate to net items when
considering materiality of the effect of changes in accounting policies for
disclosure purposes.
(Para. 82)
3.2.4.8 A change in an accounting policy that does not have a material effect in the
current period but is likely to have a material effect in future periods
should be disclosed.
(Para. 83)
3.2.5 Change in accounting estimates:
3.2.5.1 A change in accounting estimate refers to any change the entity makes on
estimates used in the past as a basis for measurement as a result of new
information that did not exist at the date of original estimate. The effect of
a change in an accounting estimate should be accounted for in:
a. The period of change, if the change affects the financial results of that
period only; or
b. The period of change and applicable future periods, if the change affects
the financial results of both current and future periods.
(Para. 84)
3.2.5.2 Disclosure of the nature and effect on net income before extraordinary
items and net income of the current period for a change in an accounting
estimate that is rare or unusual or that may affect the results of both current
and future periods, such as a change in the estimated useful life of a fixed
asset, should be made in the Notes to the Financial Statements.
(Para. 85)
3.2.5.3 Disclosure is not necessary for a change in an estimate each period in the
course of accounting for normal business activities, such as allowances for
uncollectible accounts.
(Para. 86)
3.2.6 Corrections of errors in prior period financial statement:
3.2.6.1 Errors in prior period financial statements might result from arithmetical
mistakes, errors in applying accounting standards or methods, oversight, or
misuse of available information and data and affect accounting estimates in
the financial statements. All financial statements for the period(s) affected
by the error should be restated.
(Para. 87)
3.2.6.2 When there has been a correction in the current period of an error in prior
period financial statements, the following information should be disclosed:
a. A description of the error;
b. The effect of the correction of the error on the financial statements of the
current and prior periods; and
18
c. The fact that the financial statements of prior periods that are presented
have been restated.
(Para. 88)
3.2.7 Contingencies:
3.2.7.1 The amount of contingent loss should be accrued in the financial statements
by a charge to income when both the following conditions are met:
a. It is likely that a future event will confirm that an asset had been
impaired or a liability incurred at the date of the financial
statements; and
b. The amount of the loss can be reasonably estimated.
(Para. 89)
3.2.7.2 Disclosure of the nature of an accrual and the amount accrued is preferable.
(Para 90)
3.2.7.3 The existence of a contingent loss at the date of the financial statements
should be disclosed in Notes to the Financial Statements when:
a. The occurrence of the confirming future event is likely but the
amount of the loss cannot be reasonably estimated; or
b. The occurrence of the confirming future event is likely and an
accrual has been made but there exists an exposure to loss in
excess of the amount accrued; or
c. The occurrence of the confirming future event is not determinable.
(Para. 91)
3.2.7.4 Contingent gains should not be accrued in financial statements.
(Para. 92)
3.2.7.5 When it is likely that a future event will confirm that an asset had been
acquired or a liability reduced at the date of the financial statements, the
existence of a contingent gain should be disclosed in Notes to the Financial
Statements.
(Para. 93)
3.2.7.6 When the existence of a contingent gain, or a contingent loss which has not
been accrued, is disclosed in a note to the financial statements, the
information should include:
a. The nature of the contingency; and
b. An estimate of the amount of the contingent gain or loss or a
statement that such an estimate cannot be made.
(Para. 94)
3.2.7.7 When the existence of a contingent gain or loss is disclosed in a note to the
financial statements, it is preferable to include a reference to contingencies
on the Statement of Financial Position.
(Para. 95)
3.2.7.8 Even though the possibility of loss may be remote, certain loss
contingencies should be disclosed nonetheless. The common characteristics
of these contingencies “guarantee.” This includes:
a. Guarantees (both direct and indirect) or indebtedness of others;
b. Guarantees of lease payments of others; and
19
c. Guarantees to repurchase receivables or the related property.
(Para. 96)
3.2.7.9 Disclosure of the above and other guarantees should include:
a. The nature of the guarantee;
b. The amount of the guarantee;
c. The value of any recovery that can be expected to result (as in the
case of the entity’s right to proceed against an outside party).
(Para. 97)
3.2.8 Commitments:
3.2.8.1 Unusual or large commitments of the reporting entity should me disclosed
in Notes to the Financial Statements.
(Para. 98)
3.2.8.2 The following information about unusual or large commitments should be
disclosed:
a. A description of the commitment;
b. The terms of the commitments; and
c. The amount of the commitment.
(Para. 99)
3.2.8.3 When a commitment is disclosed in a note to the financial statement, it is
desirable to include a reference to commitment on the Statement of
Financial Position.
(Para. 100)
3.2.9 Subsequent events:
3.2.9.1 Financial statements should not be adjusted for, but disclosure should be
made of those events occurring between the date of the financial statements
and the date of their issuance that do not relate to conditions that existed at
the date of the financial statements but:
a. Cause significant changes to assets or liabilities in the subsequent
period; or
b. Will or may, have a significant effect on the future operations of
the entity.
(Para. 101)
3.2.9.2 Disclosure of a subsequent event that does not require adjustment of the
financial statements would be made by way of a note to the financial
statements.
(Para.102)
3.2.9.3 Disclosure of a subsequent event that does not require adjustment of the
financial statements should include:
a. A description of the nature of the event; and
b. An estimate of the financial effect, when practicable, or a
statement that such an estimate cannot be made.
(Para. 103)
3.2.10 Change in the reporting entity:
3.2.10.1 Accounting changes that result in financial statements that are in effect the
statements of a different reporting entity should be reported by restating the
financial statements of all prior periods presented in order to show
financial information for the new reporting entity for all periods.
(Para. 104)
20
3.3
3.3.1
3.3.2
3.3.3
3.3.4
3.2.10.2 The financial statements of the period of a change in the reporting entity
should describe the nature of the change and the reason for it.
(Para. 105)
3.2.10.3 The effect of the change on income before extraordinary items and on net
income should be described for all periods presented. Financial statements
of subsequent periods need not repeat the disclosure.
(Para. 106)
PRESENTATION AND DISCLOSURE REQUIREMENTS FOR FIRMS IN
THE DEVELOPMENT STAGE:
Firms in the development stage should adhere to the general disclosure and presentation
requirements for all financial statements. There are also certain general disclosure and
presentation requirements which are peculiar to the financial statements of firms in the
development stage.
(Para. 107)
The financial statements of the firms in the development stage should disclose the
following:
a. Identification of the financial statements as those of a firm in the
development stage.
b. A description of the development stage activities in which the firm is
engaged.
(Para. 108)
In issuing the same basic financial statements as an established operating firm, a firm in
the development stage should present therein certain additional information. The basic
financial statements to be presented and the additional information should include the
following:
a. A Statement of Financial Position, including any cumulative net losses reported
with a descriptive caption, such as “deficit accumulated during the development
stage”, in the owners’ equity section.
b. An Income Statement, showing amounts of revenues, expenses, gains and losses
for each period covered by the Income Statement and, in addition, cumulative
amounts since the inception of the firm.
c. A Statement of Cash Flows, showing cash flows during each accounting period
for which an Income Statement is prepared and, in addition, cumulative amounts
since the inception of the firm.
d. A Statement of Change in Owners’ Equity, showing from the firm’s inception:
1.
For each issuance, the date and number of shares of stock, or
equity interests issued for cash and for other consideration.
2.
For each issuance, the amounts (per share or other equity unit
and in total) assigned to the consideration received for shares of stock or
equity interests. An amount is assigned also to any non-cash
consideration received.
3.
For each issuance involving no-cash consideration, the nature
of the non-cash consideration and the basis for assigning amounts.
(Para. 109)
In the first year in which the firm is considered an operating firm. Notes to the Financial
Statements should disclose that in prior years the firm had been in the development stage.
If comparative statements include periods in which the firm was first in the development
stage and later an operating firm, the cumulative mounts and other development stage
disclosures are not required for the periods in which the firm was in the development
stage.
(Para. 110)
21
4. ILLUSTRATIVE FINANCIAL STATEMENTS AND GENERAL GUIDELINES FOR
THEIR PREPARATION:
This section contains illustrative financial statements. The following should be noted:
1) The methods of presentation used are illustrative only and in no way mandatory. Other
methods of presentation may equally with the General Presentation and Disclosure
Standard.
2) The material contained in this section is organized as follows:
First: Illustrative statements of financial position:
a. Vertical classified comparative statement.
b. Horizontal classified comparative statement.
c. Horizontal unclassified comparative statement.
Second: Illustrative income statements.
Third: Illustrative statement of retained earnings.
Fourth: Illustrative statement of change in owners’ equity.
Fifth: Illustrative statement of cash flows.
ILLUSTRATIVE STATEMENTS OF FINANCIAL POSITION
The following pages contain three illustrative forms of the statement of financial position for a
corporation. These forms are:
a. Form (A) represents a vertical classified comparative statement of financial position.
b. Form (B) represents a horizontal classified comparative statement of financial position.
c. Form (C) represents a horizontal unclassified comparative statement of financial position.
Reference to notes to financial statements is not intended to illustrate minimum number of note
references on a Statement of Financial Position. Rather, they are intended to illustrate format. It
should be emphasized that whichever form is used, the classification, grouping and description of
items must be carefully considered. The samples provided on the following pages are intended to
illustrate general situations. The format used by a reporting entity should be selected with a view
of presenting clearly the nature and amount of the entity’s assets, liabilities and owners’ equity.
22
SAMPLE (A): STATEMENT OF FINANCIAL POSITION (COMPARATIVE AND
CLASSIFIED)
GULF CORPORATION
STATEMENT OF FINANCIAL POSITION
AS AT / / 20X3
20X2
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
(xx)
xx
xx
xx
xx
xx
(xx)
xx
xx
xx
Notes
CURRENT ASSETS
Cash
Accounts receivable
Inventories
Prepaid expenses
--------------------------------------Total Current Assets
(
(
(
(
(
(
)
)
)
)
)
)
20X3
xx
xx
xx
xx
xx
xx
xx
CURRENT LIABILITIES
Notes payable
Accounts payable
Accrued expenses
Dividends payable
Current maturities of long-term debt
Tax payable
--------------------------------------------Total Current Liabilities
Working Capital
FIXED ASSETS, at cost (Note)
Land
Building
Machinery and equipment
Office furniture and equipment
Less: Accumulated depreciation
--------------------------------------------Total Fixed Assets
23
(
(
(
(
(
(
(
(
)
)
)
)
)
)
)
)
xx
xx
xx
xx
xx
xx
xx
xx
(xx)
(
(
(
(
(
(
(
)
)
)
)
)
)
)
xx
xx
xx
xx
(xx)
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
(xx)
xx
xx
(xx)
xx
xx
xx
xx
xx
xx
xx
INTANGIBLE ASSETS
Patent
Goodwill
------------------------------------------------Total Intangible Assets
(
(
(
(
)
)
)
)
xx
xx
xx
xx
xx
NON-CURRENT LIABILITIES
Long-term loans
End-of-service indemnity
----------------------Total Non-current Liabilities
Net Assets
SHAREHOLDERS EQUITY
Authorized share capital ------shares, par value---per
share
Less: Un-issued share capital ------shares
Paid-up share capital
Donated capital
Reserves or appropriated retained earnings
Retained earnings
Total Shareholders’ Equity
Contingent Liabilities
Notes numbers ( ) to ( ) are an integral part of the financial statements.
24
( )
( )
( )
xx
xx
xx
(xx)
xx
( )
(
(
(
(
(
)
)
)
)
)
( )
xx
(xx)
xx
xx
xx
xx
xx
xx
xx
SAMPLE (B): STATEMENT OF FINANCIAL POSITION (COMPARATIVE AND
HORIZONTAL)
GULF CORPORATION
STATEMENT OF FINANCIAL POSITION
AS AT / / 20X3
Not
e
CURRENT
ASSETS
Cash
Account
receivable
Inventories
Prepaid
expenses
--------------------------------------Total Current
Assets
FIXED
ASSETS, at cost
(Note )
Land
Building
Machinery
&equipment
Office furniture
&equipment
Less:
Accumulated
depreciation
-----------------------------------------
Total Fixed
Assets
20X3
20X2
Note
s
20X3
20X2
( )
( )
xx
xx
xx
xx
CURRENT
LIABILITIES
Notes payable
Accounts Payable
( )
( )
xx
xx
xx
xx
Accrued expenses
Dividends payable
( )
( )
xx
xx
xx
xx
( )
xx
xx
( )
xx
xx
( )
xx
xx
Current maturities
of long-term debt
Tax payable
( )
xx
xx
---------------------Total Current
Liabilities
( )
xx
xx
x
x
x
x
( )
xx
xx
( )
( )
xx
xx
xx
xx
( )
xx
xx
( )
(xx
)
(xx
0
xx
xx
xx
xx
x
x
NON-CURRENT
LIABILITIES
Long-term loans
End-of-service
indemnity
Total Non-current
liabilities
x
x
SHAREHOLDER
S’ EQUITY
Authorized share
capital ---shares,
par value --- per
share
Less: Un-issued
share capital--shares
Paid-up share
capital
25
( )
( )
xx
xx
xx
xx
x
x
( )
( )
xx
xx
x
x
xx
xx
x
x
x
x
( )
xx
xx
( )
(xx
)
(xx
)
( )
xx
xx
INTANGIBLE
ASSETS
Patent
( )
xx
xx
Goodwill
( )
xx
xx
---------------------
( )
xx
xx
Total Intangible
Assets
x
x
Total Assets
Donated capital
( )
xx
xx
Reserves or
appropriated
retained earnings
Un-appropriated
retained earnings
Total
Shareholders’
Equity
( )
xx
xx
Contingent
Liabilities
Total Liabilities
and Shareholders’
Equity
( )
( )
xx
xx
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
The attached Notes No. ( ) to No. ( ) form an integral part of these financial statements.
SAMPLE (C): STATEMENT OF FINANCIAL POSITION (UNCLASSIFIED AND
HORIZONTAL)
GULF CORPORATION
STATEMENT OF FINANCIAL POSITION
AS AT / / 20X3
Not
e
Cash
Account
receivable
Inventories
Prepaid
expenses
20X3
20X2
Note
s
( )
( )
xx
xx
CURRENT
LIABILITIES
xx Notes payable
xx Accounts Payable
( )
( )
xx
xx
xx Accrued expenses
xx
Land
( )
xx
xx
Building
( )
xx
xx
SHAREHOLDERS
’ EQUITY
Authorized share
capital ---shares, par
value --- per share
Less: Un-issued
26
20X3
( )
( )
xx
xx
( )
xx
20X2
xx
xx
xx
xx
xx
( )
xx
xx
( )
(xx)
(xx)
Office
furniture
Less:
Accumulate
d
depreciation
( )
xx
xx
( )
(xx
)
(xx)
xx
Goodwill
( )
xx
Patent
( )
xx
xx
( )
xx
xx
( )
xx
xx
xx Reserves or
appropriated
retained earnings
Un-appropriated
retained earnings
( )
xx
xx
( )
xx
xx
xx Contingent
Liabilities
xx Total Liabilities and
Shareholders’
Equity
( )
xx
xx
Total Assets
share capital--shares
Paid-up share
capital
Donated capital
xx
xx
xx
xx
xx
xx
xx
The attached Notes No. ( ) to No. ( ) form an integral part of these financial statements.
DISPLAYING MINORITY INTEREST IN THE CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
If there is any minority interest in any of the consolidated subsidiaries, the consolidated statement
of financial position should have a main caption between “Long-term Debt” and “Shareholders
Equity” showing the amount of the minority interest as of the date of each statement of financial
position (whether classified or not classified) presented as follows in case of the classified vertical
statement of financial position of a corporation:
27
20X2
xx
xx
xx
xx
xx
Long-term loans
Provision for terminal benefits
Notes
( )
( )
Minority interest in subsidiaries
( )
SHAREHOLDERS’ EQUITY
Authorized share capital ---shares, par value --per share.
Less: Un-issued share capital ---shares
Paid-up capital
Donated capital
Reserves or appropriated retained earnings
Un-appropriated retained earnings
xx
xx
xx
xx
xx
xx
xx
Contingent Liabilities
20X3
xx
xx
xx
xx
xx
( )
xx
( )
(xx)
xx
xx
xx
xx
( )
( )
( )
( )
xx
xx
xx
ILLUSTRATIVE INCOME STATEMENT
Three illustrative Income Statements are presented on the following pages as follows:
1.
2.
3.
Income statement showing income from continuing operations and extraordinary
items (Sample A).
Income statement showing income from continuing operations,
discontinued operations and extraordinary items (Sample B).
Income statement for a company that receives a subsidy from the
government equal to its net losses plus 15% of paid-in capital as secured profit for
shareholders (Sample C).
Reference to Notes to Financial Statements is not intended to illustrate minimum number of notes
references on an Income Statement. Rather, they are intended to illustrate format.
28
The format used by the reporting entity should be selected with vies of presenting clearly the
components of net income.
SAMPLE (A): INCOME STATEMENT (INCOME FROM CONTINUING OPERATIONS
AND EXTRAORDINARY ITEMS)
GULF CORPORATION
INCOME STATEMENT
FOR THE YEAR ENDED / / 20X3
20X2
Notes
xx
(xx)
xxx
xx
xx
xxx
xxx
Net sales
Cost of goods sold
Gross Income
( )
( )
20X3
xx
(xx)
xxx
Operating Expenses:
Selling Expenses
General and administrative expenses
Income from major operations
29
( )
( )
xx
xx
xxx
xxx
xx
xx
(xx)
Other Operating Income:
Rental income, net
Investment income
Loss on sale of fixed assets
( )
( )
( )
xx
xx
(xx)
xxx
xxx
Income before extraordinary items
xxx
xxx
xxx
xxx
Extraordinary gains (losses)
Net Income
xxx
xxx
The attached Notes No. (
) to No. ( ) are an integral part of the financial statements.
SAMPLE (B): INCOME STATEMENT (INCOME FROM CONTINUING OPERATIONS,
DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEMS)
GULF CORPORATION
INCOME STATEMENT
FOR THE YEAR ENDED / / 20X3
20X2
Notes
xx
(xx)
xxx
xx
xx
Net sales
Cost of goods sold
Gross Income
( )
( )
xx
(xx)
xxx
Operating Expenses:
Selling Expenses
General and administrative expenses
xxx
xxx
Income from major operations
xxx
Other Operating Income:
Rental income, net
Investment income
Loss on sale of fixed assets
Income from continuing operations
xx
xx
(xx)
20X3
30
( )
( )
xx
xx
xxx
xxx
( )
( )
( )
xx
xx
(xx)
xxx
xx
xx
xxx
xxx
xxx
xxx
Discontinued Operations:
Income (loss) from discontinued
operations of Division X
Gain (loss) on sale of discontinued
operations assets
( )
xx
( )
xx
xxx
xxx
xxx
xxx
Income before extraordinary items
Extraordinary gains (losses)
Net Income
The attached Notes No. ( ) to No. ( ) are an integral part of the financial statements.
SAMPLE (c): INCOME STATEMENT (INCOME FROM CONTINUING OPERATIONS
AND OPERATING SUBSIDY)
GULF CORPORATION
INCOME STATEMENT
FOR THE YEAR ENDED / / 20X3
20X2
Notes
xx
(xx)
xxx
xx
xx
xxx
xxx
( )
( )
xx
(xx)
xxx
Operating Expenses:
Selling Expenses
General and administrative expenses
( )
( )
xx
xx
xxx
xxx
Income from major operations
xx
xx
(xx)
(xxx)
(xxx)
xxx
xxx
Net sales
Cost of goods sold
Gross Income
20X3
Other Operating Income:
Rental income, net
Investment income
Loss on sale of fixed assets
( )
( )
( )
xx
xx
(xx)
Loss before operating subsidy
Operating subsidy
Net Income
The attached Notes No. ( ) to No. ( ) are an integral part of the financial statements.
31
(xxx)
(xxx)
xxx
xxx
MINORITY INTEREST IN THE CONSOLIDATED INCOME STATEMENT
If there is any minority interest in any of the consolidated subsidiaries, the consolidated income
statements should have a main caption between “Income (loss) before minority interest in net
income of consolidated subsidiaries” and “Net Income” as follows:
20X2
xx
Income before extraordinary items
Notes
(xx)
xx
(xx)
xx
Extraordinary Loss:
Disaster loss
Income before minority interest
Minority interest in subsidiaries
Net Income
xx
( )
( )
32
20X3
(xx)
xx
(xx)
xx
ILLUSTRATIVE STATEMENT OF RETAINED EARNINGS
One illustrative Statement of Retained Earnings is presented below. The format used by the
reporting entity should be selected with a view of presenting clearly the changes in appropriated
and un-appropriated retained earnings during the periods of presentation.
SAMPLE STATEMENT OF RETAINED EARNINGS
GULF CORPORATION
STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED / / 20X3
Notes
Balance, 1/1/20X3 (unadjusted)
Adjustments applicable to the year
ended 31/12/20X2
Balance 31/12/20X3 as restated
Net Income for the year ended
31/12/20X3
( )
Transfer to reserves
Dividends
Balance, 31/12/20X3
Statutory
Reserve
General
Reserve
Unappropriated
Retained
Earnings
xx
xx
xx
xx
xx
xx
xx
--
xx
--
xx
xx
xx
xx
-xx
xx
xx
-xx
xx
(xx)
(xx)
xx
The attached Notes No. ( ) to No. ( ) are an integral part of the financial statements.
33
ILLUSTRATIVE STATEMENT OF CHANGES IN OWNERS’EQUITY
One illustrative Statement of Changes in Owners’ Equity is presented below. The format used by
the reporting entity should be selected with a vies of presenting clearly the changes in all owners’
equity accounts during the period(s) of presentation.
SAMPLE STATEMENT OF CHANGES IN OWNERS’ EQUITY
GULF CORPORATION
STATEMENT OF CHANGES IN OWNERS’ EQUITY
YEARS ENDED 31/12/ 20x2 & 20x3
Notes
Balance, 1/1/20X2
(unadjusted)
Adjustments applicable to
year 20X1
Balance, 1/1/20X2 as restated
Sale of 1000 shares of capital
Net income, 20X2
Transfer to reserves
Donation of land for plant
facilities
Dividends
Balance, 31/12/20X2
Net Income, year 20X3
Transfer to reserves
Dividends
Balance, 31/12/20X3
( )
( )
( )
( )
( )
( )
( )
Paid-in
Capital
Donated
Capital
Statutory
Reserve
General
Reserve
xx
xx
xx
xx
Unappropriated
Retained
Earnings
xx
--
--
(xx)
(xx)
(xx)
xx
xx
----
xx
---xx
xx
--xx
--
xx
--xx
--
xx
-xx
(xx)
--
-xx
---xx
-xx
---xx
-xx
-xx
-xx
-xx
-xx
-xx
(xx)
xx
xx
(xx)
(xx)
xx
The attached notes No. ( ) to ( ) form an integral part of these financial statements.
34
ILLUSTRATIVE STATEMENT OF CASH FLOWS
(SAMPLE A)
GULF CORPORATION
STATEMENT OF CASH FLOWS (DIRECT METHOD)
FOR THE YEAR ENDAD 31/12/20X3
20X2
xx
xx
(xx)
(xx)
xx
(xx)
(xx)
xx
xx
xx
xx
(xx)
xx
xx
xx
xx
Notes
CASH FLOWS FROM OPERATING ACTIVITIES:
Collections from customers
Dividends received on investment in stock
Payments to suppliers and employees
Interest paid
Cash Flows from Operating Activities
(
(
(
(
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of a subsidiary (after deducting cash)
Acquisition of plant assets
Proceeds from sale of plant assets
Net Cash Used for Investing activities
( )
( )
( )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock
Proceeds from issuance of long-term debt
Cash dividends paid
Net Cash Flows from Financing Activities
Net Increase (decrease) in Cash
Cash Balance, 31/12/20X2
Cash Balance, 31/12/20X3
)
)
)
)
xx
xx
(xx)
(xx)
xx
(xx)
(xx)
xx
xx
( )
( )
( )
The attached Notes No. ( ) to ( ) form an integral part of the financial statements.
35
20X3
xx
xx
(xx)
xx
xx
xx
xx
ILLUSTRATIVE STATEMENT OF CASH FLOWS
(SAMPLE B)
GULF CORPORATION
STATEMENT OF CASH FLOWS (INDIRECT METHOD)
FOR THE YEAR ENDAD 31/12/20X3
20X2
xx
xx
(xx)
xx
xx
xx
(xx)
(xx)
xx
xx
xx
xx
(xx)
xx
xx
xx
xx
Notes
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income
Adjustments for non-cash items:
Depreciation
Gain on sale of plant assets
Decrease (increase) in inventory
Increase (decrease) in accounts payable
Cash Flows from Operating Activities
( )
( )
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of a subsidiary (after deducting cash)
Acquisition of plant assets
Proceeds from sale of plant assets
Net Cash Used for Investing activities
( )
( )
( )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock
Proceeds from issuance of long-term debt
Cash dividends paid
Net Cash Flows from Financing Activities
Net Increase (decrease) in Cash
Cash Balance, 31/12/20X2
Cash Balance, 31/12/20X3
xx
xx
(xx)
xx
xx
xx
(xx)
(xx)
xx
xx
( )
( )
( )
The attached Notes No. ( ) to ( ) form an integral part of the financial statements.
36
20X3
xx
xx
(xx)
xx
xx
xx
xx