Università degli studi di Pavia
Facoltà di Economia
a.a. 2014-2015
Lesson 2-3
International Accounting
Lelio Bigogno, Stefano Santucci
1
Contents
Section 1: History of IAS 1
Section 2: Financial Statements
Section 3: Statement of Financial Position (Balance
Sheet)
Section 4: Statement of Comprehensive Income
Section 5: Statement of Changes in Equity
Section 6: Disclosures
2
Section 1: HISTORY OF IAS 1
3
History of IAS 1
•March 1974 Exposure Draft E1 Disclosure of Accounting Policies
•January 1975 IAS 1 Disclosure of Accounting Policies
•June 1975 E5 Information to Be Disclosed in Financial Statements
•October 1976 IAS 5 Information to Be Disclosed in Financial Statements
•July 1978 E14 Current Assets and Current Liabilities
•November 1979 IAS 13 Presentation of Current Assets and Current
Liabilities 1994 IAS 1, IAS 5, and IAS 13 were reformatted
•July 1996 E53 Presentation of Financial Statements
•August 1997 IAS 1 (1997) Presentation of Financial Statements
superseded IAS 1 (1975), IAS 5, and IAS 13 (1979)
•1 July 1998 Effective date of IAS 1 (1997)
4
History of IAS 1
•18 December 2003 Revised version of IAS 1 (2003) issued by the
IASB 1 January 2005 Effective date of IAS 1 (2003)
•18 August 2005 IAS 1 amended to add disclosures about capital
16 March 2006 Exposure Draft of Proposed Amendments to IAS 1
Presentation of Financial Statements–A Revised Presentation
•1 January 2007 Effective date of August 2005 amendments to IAS 1
•6 September 2007 Revised IAS 1 (2007) issued
•1 January 2009 IAS 1 (2007) is effective for annual periods beginning
on or after 1 January 2009
•22 June 2006 Exposure Draft of proposed amendments to IAS1 32
relating to Puttable Instruments and Obligations Arising on Liquidation
would add new disclosure requirements to IAS 1
•14 February 2008 IAS 1 amended to add New Disclosure
Requirements for puttable instruments and obligations arising on
liquidation
5
History of IAS 1
•1 January 2009 Effective date of February 2008 amendments for
puttable instruments and obligations arising on liquidation
•22 May 2008 IAS 1 amended for Annual Improvements to IFRSs 2007 in
regards to classification of derivatives as current or non-current
•1 January 2009 Effective date of May 2008 amendment to IAS 1
•16 April 2009 IAS 1 amended for Annual Improvements to IFRSs 2009
about classification of liabilities as current
•1 January 2010 Effective date of the April 2009 revisions to IAS 1
• 6 May 2010 IAS 1 amended for Annual Improvements to IFRSs 2010
•27 May 2010 Exposure Draft of proposed amendments to IAS 1
relating to Presenting Comprehensive Income
•1 January 2011 Effective date of May 2010 amendment to IAS 1
•16 June 2011 Amendments to IAS 1 issued.
•17 May 2012 Amended by Annual Improvements 2009-2011
Cycle (comparative information) - Effective for annual periods
beginning on or after 1 July 2013
6
History of IAS 1
RELATED INTERPRETATIONS
•IAS 1 (2003) supersedes SIC 18 Consistency - Alternative Methods
•IFRIC 17 Distributions of Non-cash Assets to Owners
•SIC 27 Evaluating the Substance of Transactions in the Legal Form of a
Lease
•SIC 29 Disclosure - Service Concession Arrangements
AMENDMENTS UNDER CONSIDERATION
IAS 1 — Disclosures about going concern
IAS 1 — Classification of liabilities
Disclosure initiative — IAS 1 amendments
Disclosure initiative — Principles of disclosure (research project)
Disclosure initiative — Materiality (research project)
7
Section 2: Financial Statements
8
Financial Statements
Objective of IAS I
The objective of IAS 1 (2007) is to prescribe
the basis for presentation of general purpose
financial statements, to ensure comparability
both with the entity's financial statements of
previous periods and with the financial
statements of other entities.
9
Financial Statements
IAS 1 sets out the overall requirements for the
presentation of financial statements, guidelines
for their structure and minimum requirements
for their content.
Standards for recognising, measuring, and
disclosing specific transactions are addressed
in other Standards and Interpretations.
10
Financial Statements
The objective of financial statements
The objective of 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.
11
Financial Statements
To meet that objective, financial statements
provide information about an entity's:
• Assets
• Liabilities
• Equity
• Income and expenses, including gains and losses
• Contributions by and distributions to owners
• Cash flows
12
Financial Statements
Those 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.
13
Financial Statements –
Components of FS
A complete set of financial statements should include:
Statement of financial position (balance sheet) period end;
Statement of profit and loss and other comprehensive income
(presented ad a single statement , or by presenting the profit or
loss section in a separate statement of profit and loss
immediately followed by a statement of comprehensive income
beginnig with profit or loss).
Statement of changes in equity for the period;
Statement of cash flows for the period (regulated by IAS 7);
• Notes, including summary of accounting policies and other
explanatory notes
• Comparative information
14
Financial Statements –
Components of FS
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, it must also
present a statement of financial position (balance
sheet) as at the beginning of the earliest comparative
period.
FIRST BIG DIFFERENCE WITH ITAGAAP!
15
Financial Statements -Fair Presentation
and Compliance with IFRs
 The financial statements must "present fairly" the
financial position, financial performance and cash flows of
an entity;
Fair presentation requires the faithful representation
of the effects of transactions, other events, and
conditions in accordance with the definitions and
recognition criteria for assets, liabilities, income and
expenses set out in the Framework;
The application of IFRSs, with additional disclosure
when necessary, is presumed to result in financial
statements that achieve a fair presentation.
16
Financial Statements -Fair Presentation
and Compliance with IFRs
IAS 1 requires that an entity whose financial
statements comply with IFRSs make an explicit and
unreserved statement of such compliance in the
notes. Financial statements shall not be described
as complying with IFRSs unless they comply with
all the requirements of IFRSs (including
Interpretations);
Inappropriate accounting policies are not
rectified either by disclosure of the accounting
policies used or by notes or explanatory
material.
17
Financial Statements -Fair Presentation
and Compliance with IFRs
IAS 1 acknowledges that, in extremely rare
circumstances, management may conclude that
compliance with an IFRS requirement would be so
misleading that it would conflict with the objective
of financial statements set out in the Framework. In
such a case, the entity is required to depart from
the IFRS requirement, with detailed disclosure of
the nature, reasons, and impact of the departure.
18
Financial Statements -Going
Concern
An entity preparing IFRS financial statements is
presumed to be a going concern. If management
has significant concerns about the entity's ability to
continue as a going concern, the uncertainties must
be disclosed. If management concludes that the
entity is not a going concern, the financial
statements should not be prepared on a going
concern basis, in which case IAS 1 requires a series
of disclosures.
19
Financial Statements -Accrual basis
of Accounting
IAS 1 requires that an entity prepare its
financial statements, except for cash flow
information, using the accrual basis of
accounting.
20
Financial Statements -Accrual basis
of Accounting
Definition
ABA (Accrual Basis of Accounting) is a system of
accounting that matches revenues and expenses,
respectively, to the period they were earned and
incurred. Under accrual basis accounting, revenue is
recorded when product is shipped or services provided.
Similarly, accrual basis accounting requires expenses be
recorded in the period in which the related revenues
were recognized. Accrual basis accounting differs from
cash basis accounting, where revenue and expense are
recorded when cash is received or paid.
[SAME UNDER ITALIAN GAAP]
21
Fianancial Statements Consistency of Presentation
The presentation and classification of items in the
financial statements shall be retained from one period
to the next unless a change is justified either by a
change in circumstances or a requirement of a new
IFRS.
22
Fianancial Statements -Materiality
and Aggregation
Each material class of similar items must be
presented separately in the financial statements.
Dissimilar items may be aggregated only if the are
individually immaterial.
23
Financial Statements - Offsetting
Assets and liabilities, and income and expenses, may
not be offset unless required or permitted by an
IFRS.
24
Financial Statements - Comparative
Information
IAS 1 requires that comparative information
to be disclosed in respect of the previous
period for all amounts reported in the
financial statements, both on the face of the
financial statements and in the notes, unless
another Standard requires otherwise.
Comparative information is provided for
narrative and descriptive where it is relevant
to understanding the financial statements of
the current period. [IAS 1.38]
25
Financial Statements -Comparative
information
An entity is required to present at least two of each of
the following primary financial statements: [IAS 1.38A]
statement of financial position*
statement of profit or loss and other comprehensive
income
separate statements of profit or loss (where presented)
statement of cash flows
statement of changes in equity
related notes for each of the above items.
26
Financial Statements -Comparative
information
* A third statement of financial position is required to be
presented if the entity retrospectively applies an
accounting policy, restates items, or reclassifies items,
and those adjustments had a material effect on the
information in the statement of financial position at the
beginning of the comparative period. [IAS 1.40A]
27
Financial Statements -Structure
and Content
IAS 1 requires an entity to clearly identify:
 the financial statements, which must be distinguished
from other information in a published document
each financial statement and the notes to the financial
statements.
In addition, the following information must be
displayed prominently, and repeated as
necessary…………
28
Financial Statements -Structure
and Content
(a) the name of the reporting entity or other means of
identification, and any change in that information from
the end of the preceding reporting period;
(b) whether the financial statements are of an individual
entity or a group of entities;
(c) Information about the reporting period
(d) the presentation currency, as defined in IAS 21; and
(e) the level of rounding used in presenting amounts in
the financial statementS.
29
Financial Statements - Reporting
Period
There is a presumption that financial statements
will be prepared at least annually. If the annual
reporting period changes and financial statements
are prepared for a different period, the entity must
disclose the reason for the change and a warning
about problems of comparability
30
Section 3: Statement of Financial
Position (Balance Sheet)
31
Statement of Financial Position
(Balance Sheet)
An entity must normally present a classified
statement of financial position, separating current
and non current assets and liabilities. Only if a
presentation based on liquidity provides
information that is reliable and more relevant may
the current/noncurrent split be omitted.
32
Statement of Financial Position
(Balance Sheet)
In either case, if an asset (liability) category
combines amounts that will be received (settled)
after 12 months with assets (liabilities) that will be
received (settled) within 12 months, note
disclosure is required that separates the longerterm amounts from the 12-month amounts.
Under ITAGAAP this information is required for
figures.
33
Statement of Financial Position
(Balance Sheet)
Some definitions:
Current assets are cash, cash equivalent, assets held for
collection, sale, or consumption within the entity's
normal operating cycle, or assets held for trading
within the next 12 months. All other assets are noncurrent.
Current liabilities are those expected to be settled
within the entity's normal operating cycle or due within
12 months, or those held for trading, or those for
which the entity does not have an unconditional right
to defer payment beyond 12 months. Other liabilities
are non-current.
34
Statement of Financial Position
(Balance Sheet) - Current vs. Noncurrent
Current asset:
• Expected to be realised, sold or
consumed within entity’s normal
operating cycle
• Held primarily for trading purposes
• Expected to be realised within 12
months after balance sheet date
• Unrestricted cash or cash
equivalent
• Now some examples
Current liability:
• Expected to be settled within
entity’s normal operating cycle
• Held primarily for trading
purposes
• Expected to be settled within 12
months after balance sheet date
• No unconditional right to defer
settlement for at least 12 months
after balance sheet date
• Now some examples
35
Statement of Financial Position
(Balance Sheet)
When a long-term debt is expected to be
refinanced under an existing loan facility and the
entity has the discretion the debt is classified as
non-current, even if due within 12 months.
36
Statement of Financial Position
(Balance Sheet)
If a liability has become payable on demand because an
entity has breached an undertaking under a long-term
loan agreement on or before the reporting date, the
liability is current, even if the lender has agreed, after
the reporting date and before the approval of the
financial statements, not to demand payment as a
consequence of the breach.
VERY IMPORTANT FOR COVENANTS
37
Statement of Financial Position
(Balance Sheet)
However, the liability is classified as non-current if the
lender agreed by the reporting date to provide a
period of grace ending at least 12 months after the
end of the reporting period, within which the entity
can rectify the breach and during which the lender
cannot demand immediate repayment.
38
Statement of financial position
Minimum line items
•
•
•
•
•
•
•
•
•
Property, plant and equipment
•
Investment property
•
Intangible assets
Financial assets (other than those shown•
on other line items)
•
Investments accounted for using the
equity method
•
Biological assets
•
Inventories
•
Trade and other receivables
•
Cash and cash equivalents
•
Held for sale assets and assets included
in disposal groups
Trade and other payables
Provisions
Financial liabilities (other than those
shown on other line items)
Current tax assets and liabilities
Deferred tax assets and liabilities
Liabilities included in disposal groups
Non controlling interest
Issued capital and reserves attributable
to owners of the parent
39
Statement of Financial Position
(Balance Sheet)
Additional line items may be needed to fairly
present the entity's financial position
40
Statement of Financial Position
(Balance Sheet)- format
IAS 1 does not prescribe the format of the balance
sheet. Assets can be presented current then non current,
or vice versa, and liabilities and equity can be presented
current then non current then equity, or vice versa;
A net asset presentation (assets minus liabilities) is
allowed;
The long-term financing approach used in UK and
elsewhere – fixed assets + current assets - short term
payables = long-term debt plus equity – is also
acceptable.
41
Statement of Financial Position
(Balance Sheet)- Equity
Regarding issued share capital and reserves, the following
disclosures are required:
numbers of shares authorised, issued and fully paid, and issued
but not fully paid and related value;
 reconciliation of shares outstanding at the beginning and the
end of the period;
description of rights, preferences, and restrictions
treasury shares, including shares held by subsidiaries and
associates;
shares reserved for issuance under options and contracts
a description of the nature and purpose of each reserve within
equity
42
Statement of Financial Position (Balance
Sheet) – Summary of key issues
• Minimum line items prescribed
• Order not prescribed
• May amend descriptions according to the nature of the
entity
• May include additional line items where relevant
• Current/non-current classification or liquidity basis
• Classes of assets/liabilities with different measurement
bases, would generally require presentation as separate line
items
43
Statement of Financial Position (Balance
Sheet) – Summary of key issues
• Liquidity basis if more relevant
• Choice driven by type of business
• Manufacturers and retailers → current/non-current basis
• Financial institutions → liquidity basis
• Disclose assets and liabilities to be recovered or settled
• With 12 months of balance sheet date
• More than 12 months from balance sheet date
44
Statement of Financial Position
(Balance Sheet) – Summary of key
learning points
• Current/non-current status based on condition at balance
sheet date
• Post year end covenant breaches:
- Classification not affected
• Pre-year end covenant breaches on long term loans:
- Current classification generally required, unless
• lender agrees to period of grace
• agreement occurs before balance sheet date
• agreement postpones required repayment until at
least 12 months from balance sheet date
45
Section 4: Statement of
Comprehensive Income
•
46
Statement of comprehensive
income
• Single statement or two statement approach
o If a single statement: a statemement of profit or loss and other
comprehensive income, with profit or loss and other comprehensive
income presented in two sections, - Items of profit or loss (income
statement)
o If two statements:
-a separate statement of profit or loss
-a statement of comprehensive income, immediately following the
statement of profit or loss and beginning with profit or loss
• Minimum line items
• Presentation of items as “extraordinary” is
prohibited
47
Statement of comprehensive
income
• Profit or loss is defined as "the total of income less
expenses, excluding the components of other comprehensive
income”
• Other comprehensive income is defined as comprising
"items of income and expense (including reclassification
adjustments) that are not recognised in profit or loss as
required or permitted by other IFRSs
• Total comprehensive income is defined as "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"
48
Statement of comprehensive
income
Comprehensive income
for the period
= Profit or loss + Other Comprehensive income
49
Statement of comprehensive
income
 All
items of income and expense recognised in a
period must be included in profit or loss unless a
Standard or an Interpretation requires otherwise;
Some IFRSs require or permit that some components
to be excluded from profit or loss and instead to be
included in other comprehensive income.
50
Statement of comprehensive
income
Examples of items recognised outside of profit or loss
Changes in revaluation surplus where the revaluation method
is used under IAS 16Property, Plant and
Equipment and IAS 38 Intangible Assets;
Remeasurements of a net defined benefit liability or asset
recognised in accordance withIAS 19 Employee Benefits
Exchange differences from translating functional currencies
into presentation currency in accordance with IAS 21 The Effects
of Changes in Foreign Exchange Rates
51
Statement of comprehensive
income
 Gains and losses on remeasuring available-for-sale financial
assets in accordance withIAS 39 Financial Instruments: Recognition
and Measurement
The effective portion of gains and losses on hedging
instruments in a cash flow hedge under IAS 39 or IFRS 9 Financial
Instruments
Gains and losses on remeasuring an investment in equity
instruments where the entity has elected to present them in
other comprehensive income in accordance with IFRS 9
The effects of changes in the credit risk of a financial liability
designated as at fair value through profit and loss under IFRS 9.
52
Statement of comprehensive
income
 Gains and losses on remeasuring available-for-sale financial
assets in accordance withIAS 39 Financial Instruments: Recognition
and Measurement
The effective portion of gains and losses on hedging
instruments in a cash flow hedge under IAS 39 or IFRS 9 Financial
Instruments
Gains and losses on remeasuring an investment in equity
instruments where the entity has elected to present them in
other comprehensive income in accordance with IFRS 9
The effects of changes in the credit risk of a financial liability
designated as at fair value through profit and loss under IFRS 9.
53
Statement of comprehensive
income
 In addition, IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors requires the correction of errors and the
effect of changes in accounting policies to be recognised outside
profit or loss for the current period
54
Statement of comprehensive
income -Presentation of minority
interest
The following items must also be disclosed in the
statement of comprehensive income as allocations
for the period:
•profit or loss for the period attributable to noncontrolling interests and owners of the parent;
•total comprehensive income attributable to noncontrolling interests and owners of the parent
55
Statement of comprehensive
income -Presentation of minority
interest
Minority interest should NOT be presented as if it is an
expense
INCORRECT presentation
CORRECT presentation
Profit for the year
Attributable to:
Owners of the parent
Minority interest
100
90
10
100
Profit before minority interests
100
Less: Minority interest
(10)
Net Profit
90
56
Statement of comprehensive income
- Minimum line items
•
Revenue
•
Finance costs
Share of profit or loss of associates
and joint ventures
•
• Tax
•
Each component of other
comprehensive income by nature
•
Share of other comprehensive
income of associates and joint
ventures
•
Total comprehensive income
attributable to:
 Minority interest
 Owners of the parent
expense
•
Discontinued operations
•
Profit or loss
•
Profit or loss attributable to:
•
Minority interest
•
Owners of the parent
57
Statement of comprehensive incomeAdditional line items, headings and
sub-totals
• Required when relevant to an understanding of performance
• Description and order of line items amended where necessary to explain
elements of performance
• Framework qualitative characteristics of financial statements
- Understandability
- Relevance
- Reliability
- Comparability
• Undefined terms may be used where relevant to an understanding (subject to
meeting qualitative characteristics)
58
Statement of comprehensive
income- Additional line items,
headings and sub-totals
• Operating profit is not a required sub-total, although
often presented
• If operating profit is presented
- must include all operating items
- whether or not they occur frequently
- whether or not they involve cash flows
• Other sub-totals and line items – follow common
understanding of terms used
59
Statement of comprehensive income Application of the requirement to
analyse expenses
• IAS1
encourages analysis from the perspective of the
income statement
• Expenses should be analysed by:
- Nature, or
- Function
• Choose most relevant presentation method, do not
mix
60
Statement of comprehensive income Analysis of expenses – types of
expense
By FUNCTION:
By NATURE:
• Cost of sales
• Raw materials and consumables
• Distribution costs
• Employee benefit costs
• Administrative expenses
• Depreciation
• Research and development
• Amortisation
•
Rent and utility costs
61
Statement of comprehensive
income -Application of the
requirement to analyse expenses
• Choose most relevant presentation analysis method; by:
• Function - usually used by manufacturers, retailers
• Nature - usually used by financial institutions
• If analysis by function is provided, additional note disclosures
analysing the nature of expenses is required
62
Statement of comprehensive income Capitalised expenses – operating items
Example: The entity capitalises $15 of its raw materials and employee benefit
expense, all of which relate to the ‘cost of sales’ function.
Functional analysis
Natural analysis
Sales
Cost of sales:
Raw materials
Employee benefits
Less: capitalised costs
Operating profit
Finance costs
Profit for the year
400
(100)
(50)
15
(135)
265
(25)
Sales
400
Raw materials used
Employee benefits
Work performed by the entity
and capitalised
Operating profit
(100)
(50)
Finance costs
240
Profit for the year
15
265
(25)
240
63
Statement of comprehensive income -
Capitalised expenses – finance
costs
Example: In addition, the entity capitalises $10 of its finance costs.
Natural analysis
Functional analysis
Sales
Cost of sales
Raw materials
Employee benefits
Less: capitalised costs
Operating profit
Finance costs
Interest and other charges
Less : capitalised interest
Profit for the year
Sales
400
(100)
(50)
(135)
265
Raw materials used
Employee benefits
Work performed by the entity
and capitalised
Operating profit
(15)
Finance costs
250
Profit for the year
400
(100)
(50)
15
(25)
10
?
?
?
250
64
Statement of comprehensive income -
Capitalised expenses – finance
costs
Example: In addition, the entity capitalises $10 of its finance costs.
Functional analysis
Natural analysis
Sales
Cost of sales
Raw materials
Employee benefits
Less: capitalised costs
Operating profit
400
(100)
(50)
15
(135)
265
Sales
400
Raw materials used
Employee benefits
Work performed by the entity
and capitalised
Operating profit
(100)
(50)
Finance costs
Interest and other charges (25)
Less : capitalised interest
10
(15)
Finance costs
Profit for the year
250
Profit for the year
15
265
(15)
250
65
Statement of comprehensive income -
Material items of income and
expense
• Must be separately disclosed
• Examples in IAS 1:
• Inventory write downs
• Restructuring costs
• Profits/losses on disposal of PPE/investments
• Litigation settlements
• Reversals of provisions
• Disclosure to the statement can be problematic in functional analysis
(ie where the item also impacts other functional categories).
66
Statement of comprehensive income -
Finance costs and Derivative gains /
losses
• Finance costs
• Examples:
• Interest payable
• Unwinding of discounts on financial liabilities
• Finance charges on finance leases
• Finance income
• Examples
• Interest income on cash and cash equivalents
• Unwinding of discounts on financial assets
• Finance income should not be netted against finance costs
• Derivative gains and losses
67
Statement of comprehensive income -
Material items of income and
expense
• Usually presented after finance costs
• Net of tax and minority interests
• Major part of business – some flexibility in order
of presentation
• Share of associate/joint venture revenue ≠ part
of ‘Revenue’
International Accounting – Lesson 3
68
Statement of Comprehensive
Income – Summary of key learning
points
• Single or two statement approach
• Minimum line items prescribed
• Additional line items, sub-totals and headings
• Flexibility not to be abused
• Regulatory requirements
69
Section Four – Statement of Changes in Equity
Statement of Changes in Equity
IAS 1 requires an entity to present a statement of
changes in equity as a separate component of the
financial statements.
70
Section 5: Statement of Changes
in Equity
71
Section Four – Statement of Changes in Equity
Statement of Changes in Equity
The statement must show:
total comprehensive income for the period,
showing separately amounts attributable to
owners of the parent and to non-controlling
interests;
the effects of retrospective application, when
applicable, for each component ;
72
Section Four – Statement of Changes in Equity
Statement of Changes in Equity
reconciliations between the carrying amounts at the
beginning and the end of the period for each
component of equity, separately disclosing:
oprofit or loss
oeach item of other comprehensive income
otransactions with 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
73
Section Four – Statement of Changes in Equity
Statement of Changes in Equity
The following amounts may also be presented on
the face of the statement of changes in equity, or
they may be presented in the notes:
amount of dividends recognised as distributable,
and;
the related amount per share.
74
Section 6: Disclosures
•
75
Disclosures
Notes to the Financial Statements must:
present information about the basis of preparation of the
financial statements and the specific accounting policies
used;
disclose any information required by IFRSs that is not
presented elsewhere in the financial statements and
provide additional information that is not presented
elsewhere in the financial statements but is relevant to an
understanding of any of them
Notes should be cross-referenced from the financial
statements to the relevant note
76
Disclosures - presentation
The notes should normally be presented in the
following order:
1. a statement of compliance with IFRSs;
2. a summary of significant accounting policies
applied, including:
•the measurement basis (or bases) used in
preparing the financial statements;
•the other accounting policies used that are
relevant to an understanding of the financial
statements.
77
Disclosures - presentation
3. supporting information for items presented in the
statement of financial position (balance sheet),
statement of comprehensive income (and income
statement, if presented), statement of changes in
equity and statement of cash flows, with the same
order that each statement and each line item is
presented in the FS
78
Disclosures - presentation
4. other disclosures, including:
•contingent liabilities (see IAS 37) and
unrecognised contractual commitments;
•non-financial disclosures, such as the entity's
financial risk management objectives and policies
(see IFRS 7)
79
Disclosures - Key judgements
“ An
entity shall disclose, in the summary of significant
accounting policies or other notes, the
judgements…that management has made in the
process of applying the entity’s accounting policies and
that have the most significant effect on the amounts
recognised in the financial statements.”
80
Disclosures -Estimation
uncertainty
“An entity shall disclose information about the
assumptions it makes about the future, and other
sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of resulting
in a material adjustment to the carrying amounts of
assets and liabilities within the next financial year. In
respect of those assets and liabilities, the notes shall
include details of:
(a) their nature, and
(b) their carrying amounts as at the end of the
reporting period. ”
81
Disclosures - Capital
• Information
that enables users to evaluate the entity’s
objectives, policies and processes for managing capital
• Qualitative information regarding objectives, policies,
and processes for managing capital (what it manages as
capital, externally imposed requirements, and how it
meets its objectives)
• Quantitative data and other related disclosures;
• Changes from one period to another
82
Disclosures - Dividends
In addition to the distributions information in
the statement of changes in equity, the
following must be disclosed in the notes:
"the amount of dividends proposed or
declared before the financial statements were
authorised for issue but not recognised as a
distribution to owners during the period, and
the related amount per share and" the amount
of any cumulative preference dividends not
recognised.
83