KINGS CROWN BUSINESS SCHOOL

ICAN PROFESSIONAL E -LEARNING CLASS (IFRS SESSION)

CLASS SESSION 1: IAS 1 PRESENTATION OF FINANCIAL STATEMENTS The following financial summaries are required by IAS 1 1. Statement of Financial Position formerly referred to as Balance Sheet 2. Income Statement / Statement of Comprehensive Income (where a revaluation of Non-current Asset or Foreign Exchange Gains/Losses has occurred). This Statement was previously referred to as Profit and Loss Account 3. Statement of Changes in Equity. This was newly introduced 4. Notes, comprising of summary of accounting policies and other explanatory notes 5. Statement of Cashflow for the period With the above, you will discover that the following Statements are no longer required by the Standard Value Added Statement Five Years Financial Summary STATEMENT OF FINANCIAL POSITION IAS 1 requires that both Assets and Liabilities should be classified as Current and Non-Current. Assets should be classified as CURRENT ASSET : if 1. It will be realized within 12 months of Reporting Date i.e. Financial Year end 2. It is part of the enterprises normal operating cycle i.e. classified as working capital item 3. It is held primarily for trading purpose 4. It is Cash or cash equivalents All other Assets should be classified as Non-Current. NOTE: The above definition allows Inventory and Receivables to be classified as Current Asset under point 2 even if they may not be realised into cash within 12 months. CURRENT LIABILITY : A liability should be classified as Current Liability if : 1. it is expected to be settled in the normal course of the enterprises operating cycle 2. it is held primarily for the purpose of being traded 3. it is due to be settled within 12 months of the Reporting date All other liabilities should be classified as non-current liabilities. 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.
IFRS FACULTY: DEJI AWOBOTU 08181292443, 08035487820. kingscrownbs@aol.com Page 1

KINGS CROWN BUSINESS SCHOOL

ICAN PROFESSIONAL E -LEARNING CLASS (IFRS SESSION)

The structure of the SOFP is such that the Assets (both current and Non-current) are classified together while Equity (i.e. Share capital and Reserves) and Liabilities (both Current and Non-Current) are also classified together. Statement of financial position for XYZ at 31 December XXXX Nm Nm Non-current assets Property, plant and equipment Investments X Intangibles X X Current assets Inventories X Trade and other receivables X Prepayments X Cash X X Total assets X Equity Ordinary share capital X Irredeemable preference share capital X Share premium X 2Retained profits X X Non-current liabilities Loan notes X Current liabilities Trade and other payables X Overdrafts X Tax payable X X X Total equity and liabilities
IFRS FACULTY: DEJI AWOBOTU 08181292443, 08035487820. kingscrownbs@aol.com Page 2

KINGS CROWN BUSINESS SCHOOL

ICAN PROFESSIONAL E -LEARNING CLASS (IFRS SESSION)

The above structure has changed our usual format of Fixed Assets + (Current Assets Current Liabilities) Long Term Loan = Net Assets. Financed By: Share Capital and Reserves INCOME STATEMENT A recommended format for the Income statement is as follows: XYZ Group Income statement for the year ended 31 December 20X2 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Investment Gains / (Losses) Profit from operations Finance costs Profit before tax tax expense Net profit for the period Note that all expenses are classified under one of three headings: Cost of sales This is calculated as follows Opening Inventory + Purchases Closing Inventory. However the calculation should be shown in a note to the accounts rather than on the face of the income statement. Also note that Inventory is same as what we refer to as Stocks. This was not used as it is subject to dual interpretation, Stocks as Investment and also as Inventory. Distribution costs These are all expenses relating to selling or delivering products or services. Administrative expenses This includes all expenses not classified within cost of sales or distribution costs.
IFRS FACULTY: DEJI AWOBOTU 08181292443, 08035487820. kingscrownbs@aol.com Page 3

N X (X) X (X) (X) X X (X) X (X) X

KINGS CROWN BUSINESS SCHOOL

ICAN PROFESSIONAL E -LEARNING CLASS (IFRS SESSION)

Some expenses such as depreciation of tangible assets will be split across all three expense categories depending on the asset depreciated. COMMENT Where there are Other Comprehensive Income items such as Revaluation Surplus/Deficit, a Statement of Comprehensive Income will be preferred to reflect such item. Please note that the Income statement ends at Profit for the year. It does not include Dividend deductions as this will be treated in Statement of Changes in Equity. Prior to now, we have the Appropriation of profit which no longer exist in the revised standard but rather such items as contained in the Appropriation will now reflect in the Statement of Changes in Equity e.g. transfer to general reserves , dividend etc. STATEMENT OF COMPREHENSIVE INCOME XYZ Group Income statement for the year ended 31 December 20X2 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Investment Gains / (Losses) Profit from operations Finance costs Profit before tax tax expense Net profit for the period Other comprehensive Income: Gain/Loss on Property Revaluation Exchange Gain /Loss on translation Total Comprehensive Income for the year
IFRS FACULTY: DEJI AWOBOTU 08181292443, 08035487820. kingscrownbs@aol.com

N X (X) X (X) (X) X X (X) X (X) X

X X X
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KINGS CROWN BUSINESS SCHOOL

ICAN PROFESSIONAL E -LEARNING CLASS (IFRS SESSION)

Extra ordinary and Exceptional Items: In as much as extraordinary items need not be separately disclosed on the income statement, exceptional items are certain circumstances where large one-off items require separate disclosure on the face of the income statement and as such should be separately disclosed. These circumstances include: restructuring or the reorganisation cost of the entity disposal of items of property, plant and equipment disposal of investment write downs of inventory or property, plant and equipment Also note that the Standard still permit the Income statement to be presented in either of 2 ways: 1. By function of expenditure or cost of sales: This method shows expenses classified under the headings: cost of sales, distribution costs and administrative expenditure. 2. By nature of expenditure: This method analyses expenses according to their nature. This method is suitable for a manufacturing outfit. Nm Nm Sales revenue X Other operating income X Changes in inventories of finished goods and work in progress (X) Raw materials and consumables used (X) Staff costs (X) Depreciation and amortisation expense (X) Other operating expenses (X) (X) Profit from operations X Net interest cost (interest paid less interest received) (X) Profit before tax X Tax expense (X) Net profit for the period X Changes in inventories of finished goods and work in progress : This is simply the difference between the opening and closing inventory amounts of Finished Goods & Work in progress and could thus be a debit or a credit in the statement if inventories have risen it will be a credit and if they have fallen a debit. Raw materials and consumables used This is purchases of raw materials adjusted for opening and closing inventories
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IFRS FACULTY: DEJI AWOBOTU 08181292443, 08035487820. kingscrownbs@aol.com

KINGS CROWN BUSINESS SCHOOL

ICAN PROFESSIONAL E -LEARNING CLASS (IFRS SESSION)

STATEMENT OF CHANGES IN EQUITY This statement is included within the accounts to provide further information on certain statement of financial position accounts, namely share capital and reserves. Statement of changes in equity for XYZ Ltd Share Share Revaluation capital premium reserve Nm Nm Nm Balance at 1 January X X X Equity shares issued X X Revaluation surplus X Reclassification/Transfers (X) Profit for the Year Dividends X X X

Retained profits Nm X

Total Nm X X X X (X) X

X X (X) X

TREATMENT OF PREFERENCE SHARES Details of this we shall consider when treating Financial Instruments. In the interim you should know that where the Preference shares is Redeemable Preference Shares : it should be treated as Debt (Non-Current Liability) and the Preference Dividend treated as Finance Charge Irredeemable Preference Shares: It should be treated as Equity and the Preference Dividend treated as a deduction from Profit for the year, the same treatment applied to ordinary share dividend. STATEMENT OF CASHFLOW IAS 7 WILL BE TREATED AT A LATER DATE. STAY CONNECTED.

IFRS FACULTY: DEJI AWOBOTU 08181292443, 08035487820. kingscrownbs@aol.com

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