International Accounting Standard 1: Presentation of Financial Statements or IAS 1

is an international financial reporting standard adopted by the International

Accounting Standards Board (IASB).

IAS 1 Presentation of Financial

Statements
Overview
IAS 1 Presentation of Financial Statements sets out the overall requirements for financial statements, including how they should be structured, the minimum requirements for their content and
overriding concepts such as going concern, the accrual basis of accounting and the current/noncurrent distinction. The standard requires a complete set of financial statements to comprise a
statement of financial position, a statement of profit or loss and other comprehensive income, a
statement of changes in equity and a statement of cash flows.
IAS 1 was reissued in September 2007 and applies to annual periods beginning on or after 1
January 2009.

History of IAS 1
Date
March 1974
January 1975
June 1975
October 1976
July 1978
November 1979
1994
July 1996
August 1997

Development
Comments
Exposure Draft E1 Disclosure of
Accounting Policies
IAS 1 Disclosure of Accounting Policies
Operative for periods beginning
issued
on or after 1 January 1975
Exposure Draft E5 Information to Be
Disclosed in Financial Statements published
IAS 5 Information to Be Disclosed in
Operative for periods beginning
Financial Statements issued
on or after 1 January 1975
Exposure Draft E14 Current Assets and
Current Liabilities published
IAS 13 Presentation of Current Assets and Operative for periods beginning
Current Liabilities issued
on or after 1 January 1981
IAS 1, IAS 5, and IAS 13 reformatted
Exposure Draft E53 Presentation of
Financial Statements published
IAS 1 Presentation of Financial Statements Operative for periods beginning
(1997) issued
on or after 1 July 1998
(Supersedes IAS 1 (1975), IAS 5, and IAS

13 (1979))
Effective for annual periods
IAS 1 Presentation of Financial Statements
18 December 2003
beginning on or after 1 January
(2003) issued
2005
Effective for annual periods
Amended by Amendment to IAS 1
18 August 2005
beginning on or after 1 January
Capital Disclosures
2007
Exposure Draft Proposed Amendments to
16 March 2006
Comment deadline 17 July 2006
IAS 1 A Revised Presentation published
Exposure Draft Financial Instruments
Comment deadline 23 October
22 June 2006
Puttable at Fair Value and Obligations
2006
Arising on Liquidation published
Effective for annual periods
IAS 1 Presentation of Financial Statements
6 September 2007
beginning on or after 1 January
(2007) issued
2009
Amended by Puttable Financial InstruEffective for annual reporting
14 February 2008 ments and Obligations Arising on Liquida- periods beginning on or after 1
tion
January 2009
Amended by Annual Improvements to
Effective for annual reporting
22 May 2008
IFRSs 2007 (classification of derivatives as periods beginning on or after 1
current or non-current)
January 2009
Effective for annual periods
Amended by Improvements to IFRSs 2009
16 April 2009
beginning on or after 1 January
(classification of liabilities as current)
2010
Amended by Improvements to IFRSs 2010 Effective for annual periods
6 May 2010
(clarification of statement of changes in
beginning on or after 1 January
equity)
2011
Exposure Draft ED/2010/5 Presentation of
Comment deadline 30
27 May 2010
Items of Other Comprehensive Income
September 2010
published
Effective for annual periods
Amended by Presentation of Items of Other
16 June 2011
beginning on or after 1 July
Comprehensive Income
2012
Effective for annual periods
Amended by Annual Improvements 200917 May 2012
beginning on or after 1 January
2011 Cycle (comparative information)
2013
Effective for annual periods
Amended by Disclosure Initiative (Amend18 December 2014
beginning on or after 1 January
ments to IAS 1) (project history)
2016

Related Interpretations

IAS 1 (2003) superseded 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 Principles of disclosure (research project)

Disclosure initiative Materiality (research project)

Summary of IAS 1
Objective of IAS 1
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. IAS 1 sets out the overall requirements for the presentation of financial statements, guidelines for their structure and
minimum requirements for their content. [IAS 1.1] Standards for recognising, measuring, and
disclosing specific transactions are addressed in other Standards and Interpretations. [IAS 1.3]

Scope
IAS 1 applies to all general purpose financial statements that are prepared and presented in accordance with International Financial Reporting Standards (IFRSs). [IAS 1.2]
General purpose financial statements are those intended to serve users who are not in a position
to require financial reports tailored to their particular information needs. [IAS 1.7]

Objective of financial statements

The objective of general purpose 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. To meet that objective, financial statements
provide information about an entity's: [IAS 1.9]

assets

liabilities

equity

income and expenses, including gains and losses

contributions by and distributions to owners (in their capacity as owners)

cash flows.

That 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.

Components of financial statements

A complete set of financial statements includes: [IAS 1.10]

a statement of financial position (balance sheet) at the end of the period

a statement of profit or loss and other comprehensive income for the period (presented as
a single statement, or by presenting the profit or loss section in a separate statement of
profit or loss, immediately followed by a statement presenting comprehensive income
beginning with profit or loss)

a statement of changes in equity for the period

a statement of cash flows for the period

notes, comprising a summary of significant accounting policies and other explanatory

notes

comparative information prescribed by the standard.

An entity may use titles for the statements other than those stated above. All financial statements
are required to be presented with equal prominence. [IAS 1.10]
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.
Reports that are presented outside of the financial statements including financial reviews by
management, environmental reports, and value added statements are outside the scope of
IFRSs. [IAS 1.14]

Fair presentation and compliance with IFRSs

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. [IAS 1.15]
IAS 1 requires an entity whose financial statements comply with IFRSs to make an explicit and
unreserved statement of such compliance in the notes. Financial statements cannot be described
as complying with IFRSs unless they comply with all the requirements of IFRSs (which includes
International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations). [IAS 1.16]
Inappropriate accounting policies are not rectified either by disclosure of the accounting policies
used or by notes or explanatory material. [IAS 1.18]
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. [IAS 1.19-21]

Going concern
The Conceptual Framework notes that financial statements are normally prepared assuming the
entity is a going concern and will continue in operation for the foreseeable future. [Conceptual
Framework, paragraph 4.1]
IAS 1 requires management to make an assessment of an entity's ability to continue as 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. [IAS 1.25]

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. [IAS 1.27]

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. [IAS 1.45]

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. [IAS 1.29]
However, information should not be obscured by aggregating or by providing immaterial information, materiality considerations apply to the all parts of the financial statements, and even
when a standard requires a specific disclosure, materiality considerations do apply. [IAS 1.30A31]*
* Added by Disclosure Initiative (Amendments to IAS 1), effective 1 January 2016.

Offsetting
Assets and liabilities, and income and expenses, may not be offset unless required or permitted
by an IFRS. [IAS 1.32]

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]
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.

* 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]

Where comparative amounts are changed or reclassified, various disclosures are required. [IAS
1.41]

Structure and content of financial statements in general

IAS 1 requires an entity to clearly identify: [IAS 1.49-51]

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:
[IAS 1.51]

the name of the reporting entity and any change in the name

whether the financial statements are a group of entities or an individual entity

information about the reporting period

the presentation currency (as defined by IAS 21 The Effects of Changes in Foreign
Exchange Rates)

the level of rounding used (e.g. thousands, millions).

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 state that amounts are not entirely comparable. [IAS
1.36]

Statement of financial position (balance sheet)

Current and non-current classification
An entity must normally present a classified statement of financial position, separating current
and non-current assets and liabilities, unless presentation based on liquidity provides information
that is reliable. [IAS 1.60] 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 longer-term amounts from the 12month amounts. [IAS 1.61]
Current assetsare assets that are: [IAS 1.66]

expected to be realised in the entity's normal operating cycle

held primarily for the purpose of trading

expected to be realised within 12 months after the reporting period

cash and cash equivalents (unless restricted).

All other assets are non-current. [IAS 1.66]

Current liabilitiesare those: [IAS 1.69]

expected to be settled within the entity's normal operating cycle

held for purpose of trading

due to be settled within 12 months

for which the entity does not have an unconditional right to defer settlement beyond 12
months (settlement by the issue of equity instruments does not impact classification).

Other liabilities are non-current.

When a long-term debt is expected to be refinanced under an existing loan facility, and the entity
has the discretion to do so, the debt is classified as non-current, even if the liability would
otherwise be due within 12 months. [IAS 1.73]
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 authorisation of the financial statements for issue, not to demand payment as a consequence of the breach. [IAS 1.74] 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. [IAS
1.75]
Line items
The line items to be included on the face of the statement of financial position are: [IAS 1.54]
(a)
(b)
(c)
(d)
(e)

property, plant and equipment

investment property
intangible assets
financial assets (excluding amounts shown under (e), (h), and (i))
investments accounted for using the equity method

(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)

biological assets
inventories
trade and other receivables
cash and cash equivalents
assets held for sale
trade and other payables
provisions
financial liabilities (excluding amounts shown under (k) and (l))
current tax liabilities and current tax assets, as defined in IAS 12
deferred tax liabilities and deferred tax assets, as defined in IAS 12
liabilities included in disposal groups
non-controlling interests, presented within equity
issued capital and reserves attributable to owners of the parent.

Additional line items, headings and subtotals may be needed to fairly present the entity's
financial position. [IAS 1.55]
When an entity presents subtotals, those subtotals shall be comprised of line items made up of
amounts recognised and measured in accordance with IFRS; be presented and labelled in a clear
and understandable manner; be consistent from period to period; and not be displayed with more
prominence than the required subtotals and totals. [IAS 1.55A]*
* Added by Disclosure Initiative (Amendments to IAS 1), effective 1 January 2016.
Further sub-classifications of line items presented are made in the statement or in the notes, for
example: [IAS 1.77-78]:

classes of property, plant and equipment

disaggregation of receivables

disaggregation of inventories in accordance with IAS 2 Inventories

disaggregation of provisions into employee benefits and other items

classes of equity and reserves.

Format of statement
IAS 1 does not prescribe the format of the statement of financial position. 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.

Share capital and reserves

Regarding issued share capital and reserves, the following disclosures are required: [IAS 1.79]

numbers of shares authorised, issued and fully paid, and issued but not fully paid

par value (or that shares do not have a par value)

a reconciliation of the number 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.

Additional disclosures are required in respect of entities without share capital and where an
entity has reclassified puttable financial instruments. [IAS 1.80-80A]

Statement of profit or loss and other comprehensive income

Concepts of profit or loss and 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". [IAS 1.7]
Comprehensive income
for the period

Profit
or loss

Other
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. [IAS 1.88] Some IFRSs require or permit that
some components to be excluded from profit or loss and instead to be included in other comprehensive income.
Examples of items recognised outside of profit or loss

Changes in revaluation surplus where the revaluation method is used under IAS 16
Property, Plant and Equipment and IAS 38 Intangible Assets

Remeasurements of a net defined benefit liability or asset recognised in accordance with

IAS 19 Employee Benefits (2011)

Exchange differences from translating functional currencies into presentation currency in

accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates

Gains and losses on remeasuring available-for-sale financial assets in accordance with

IAS 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.

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. [IAS 1.89]
Choice in presentation and basic requirements
An entity has a choice of presenting:

a single statement of profit or loss and other comprehensive income, with profit or loss
and other comprehensive income presented in two sections, or

two statements:
o a separate statement of profit or loss
o a statement of comprehensive income, immediately following the statement of
profit or loss and beginning with profit or loss [IAS 1.10A]

The statement(s) must present: [IAS 1.81A]

profit or loss

total other comprehensive income

comprehensive income for the period

an allocation of profit or loss and comprehensive income for the period between non-controlling interests and owners of the parent.

Profit or loss section or statement

The following minimum line items must be presented in the profit or loss section (or separate
statement of profit or loss, if presented): [IAS 1.82-82A]

revenue

gains and losses from the derecognition of financial assets measured at amortised cost

finance costs

share of the profit or loss of associates and joint ventures accounted for using the equity
method

certain gains or losses associated with the reclassification of financial assets

tax expense

a single amount for the total of discontinued items

Expenses recognised in profit or loss should be analysed either by nature (raw materials, staffing
costs, depreciation, etc.) or by function (cost of sales, selling, administrative, etc). [IAS 1.99] If
an entity categorises by function, then additional information on the nature of expenses at a
minimum depreciation, amortisation and employee benefits expense must be disclosed. [IAS
1.104]
Other comprehensive income section
The other comprehensive income section is required to present line items which are classified by
their nature, and grouped between those items that will or will not be reclassified to profit and
loss in subsequent periods. [IAS 1.82A]
An entity's share of OCI of equity-accounted associates and joint ventures is presented in
aggregate as single line items based on whether or not it will subsequently be reclassified to
profit or loss. [IAS 1.82A]*
* Clarified by Disclosure Initiative (Amendments to IAS 1), effective 1 January 2016.

When an entity presents subtotals, those subtotals shall be comprised of line items made up of
amounts recognised and measured in accordance with IFRS; be presented and labelled in a clear
and understandable manner; be consistent from period to period; not be displayed with more
prominence than the required subtotals and totals; and reconciled with the subtotals or totals
required in IFRS. [IAS 1.85A-85B]*
* Added by Disclosure Initiative (Amendments to IAS 1), effective 1 January 2016.
Other requirements
Additional line items may be needed to fairly present the entity's results of operations. [IAS 1.85]
Items cannot be presented as 'extraordinary items' in the financial statements or in the notes.
[IAS 1.87]
Certain items must be disclosed separately either in the statement of comprehensive income or in
the notes, if material, including: [IAS 1.98]

write-downs of inventories to net realisable value or of property, plant and equipment to

recoverable amount, as well as reversals of such write-downs

restructurings of the activities of an entity and reversals of any provisions for the costs of
restructuring

disposals of items of property, plant and equipment

disposals of investments

discontinuing operations

litigation settlements

other reversals of provisions

Statement of cash flows

Rather than setting out separate requirements for presentation of the statement of cash flows, IAS
1.111 refers to IAS 7 Statement of Cash Flows.

Statement of changes in equity

IAS 1 requires an entity to present a separate statement of changes in equity. The statement must
show: [IAS 1.106]

total comprehensive income for the period, showing separately amounts attributable to
owners of the parent and to non-controlling interests

the effects of any retrospective application of accounting policies or restatements made in

accordance with IAS 8, separately for each component of other comprehensive income

reconciliations between the carrying amounts at the beginning and the end of the period
for each component of equity, separately disclosing:
o profit or loss
o other comprehensive income*
o transactions 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

* An analysis of other comprehensive income by item is required to be presented either in the

statement or in the notes. [IAS 1.106A]
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: [IAS 1.107]

amount of dividends recognised as distributions

the related amount per share.

Notes to the financial statements

The notes must: [IAS 1.112]

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 are presented in a systematic manner and cross-referenced from the face of the financial
statements to the relevant note. [IAS 1.113]
IAS 1.114 suggests that the notes should normally be presented in the following order:*

a statement of compliance with IFRSs

a summary of significant accounting policies applied, including: [IAS 1.117]

o the measurement basis (or bases) used in preparing the financial statements
o the other accounting policies used that are relevant to an understanding of the
financial statements

supporting information for items presented on the face of the statement of financial
position (balance sheet), statement(s) of profit or loss and other comprehensive income,
statement of changes in equity and statement of cash flows, in the order in which each
statement and each line item is presented

other disclosures, including:

o contingent liabilities (see IAS 37) and unrecognised contractual commitments
o non-financial disclosures, such as the entity's financial risk management objectives and policies (see IFRS 7 Financial Instruments: Disclosures)

* Disclosure Initiative (Amendments to IAS 1), effective 1 January 2016, clarifies this order just
to be an example of how notes can be ordered and adds additional examples of possible ways of
ordering the notes to clarify that understandability and comparability should be considered when
determining the order of the notes.

Other disclosures
Judgements and key assumptions
An entity must disclose, in the summary of significant accounting policies or other notes, the
judgements, apart from those involving estimations, that management has made in the process of
applying the entity's accounting policies that have the most significant effect on the amounts
recognised in the financial statements. [IAS 1.122]
Examples cited in IAS 1.123 include management's judgements in determining:

when substantially all the significant risks and rewards of ownership of financial assets
and lease assets are transferred to other entities

whether, in substance, particular sales of goods are financing arrangements and therefore
do not give rise to revenue.

An entity must also disclose, in the notes, information about the key assumptions concerning the
future, and other key sources of estimation uncertainty at the end of the reporting period, that

have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. [IAS 1.125] These disclosures do not involve disclosing
budgets or forecasts. [IAS 1.130]
Dividends
In addition to the distributions information in the statement of changes in equity (see above), the
following must be disclosed in the notes: [IAS 1.137]

the amount of dividends proposed or declared before the financial statements were authorised for issue but which were not recognised as a distribution to owners during the
period, and the related amount per share

the amount of any cumulative preference dividends not recognised.

Capital disclosures
An entity discloses information about its objectives, policies and processes for managing capital.
[IAS 1.134] To comply with this, the disclosures include: [IAS 1.135]

qualitative information about the entity's objectives, policies and processes for managing
capital, including>
o description of capital it manages
o nature of external capital requirements, if any
o how it is meeting its objectives

quantitative data about what the entity regards as capital

changes from one period to another

whether the entity has complied with any external capital requirements and

if it has not complied, the consequences of such non-compliance.

Puttable financial instruments

IAS 1.136A requires the following additional disclosures if an entity has a puttable instrument
that is classified as an equity instrument:

summary quantitative data about the amount classified as equity

the entity's objectives, policies and processes for managing its obligation to repurchase or
redeem the instruments when required to do so by the instrument holders, including any
changes from the previous period

the expected cash outflow on redemption or repurchase of that class of financial instruments and

information about how the expected cash outflow on redemption or repurchase was determined.

Other information
The following other note disclosures are required by IAS 1 if not disclosed elsewhere in information published with the financial statements: [IAS 1.138]

domicile and legal form of the entity

country of incorporation

address of registered office or principal place of business

description of the entity's operations and principal activities

if it is part of a group, the name of its parent and the ultimate parent of the group

if it is a limited life entity, information regarding the length of the life

Terminology
The 2007 comprehensive revision to IAS 1 introduced some new terminology. Consequential
amendments were made at that time to all of the other existing IFRSs, and the new terminology
has been used in subsequent IFRSs including amendments. IAS 1.8 states: "Although this
Standard uses the terms 'other comprehensive income', 'profit or loss' and 'total comprehensive
income', an entity may use other terms to describe the totals as long as the meaning is clear. For
example, an entity may use the term 'net income' to describe profit or loss." Also, IAS 1.57(b)
states: "The descriptions used and the ordering of items or aggregation of similar items may be
amended according to the nature of the entity and its transactions, to provide information that is
relevant to an understanding of the entity's financial position."
Term before 2007 revision of IAS 1
balance sheet
cash flow statement
income statement

Term as amended by IAS 1 (2007)

statement of financial position
statement of cash flows
statement of comprehensive income (income statement
is retained in case of a two-statement approach)

recognised in the income statement

recognised [directly] in equity (only for
OCI components)
recognised [directly] in equity (for
recognition both in OCI and equity)
removed from equity and recognised in
profit or loss ('recycling')
Standard or/and Interpretation
on the face of
equity holders
balance sheet date
reporting date
after the balance sheet date

recognised in profit or loss

recognised in other comprehensive income
recognised outside profit or loss (either in OCI or
equity)
reclassified from equity to profit or loss as a reclassification adjustment
IFRSs
in
owners (exception for 'ordinary equity holders')
end of the reporting period
end of the reporting period
after the reporting period

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IAS 1
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International Accounting Standard 1: Presentation of Financial Statements or IAS 1 is an

international financial reporting standard adopted by the International Accounting Standards
Board (IASB).[1] It lays out the guidelines for the presentation of financial statements[2] and sets
out minimum requirements of their content; it is applicable to all general purpose financial
statements that are based on International Financial Reporting Standards (IFRS).[1]
IAS 1 was originally issued by the International Accounting Standards Committee in 1997,
superseding three standards on disclosure and presentation requirements,[1] and was the first
comprehensive accounting standard to deal with the presentation of financial standards.[3] It was
adopted by the IASB in 2001,[1] and as of 2012 the standard was last amended in June 2011;
these amendments will be effective from July 1, 2012.[4]

Contents

1 Overview
o 1.1 Purpose and Features
o 1.2 Structure and Content

2 Recent amendments

3 References

Overview
Purpose and Features
IAS 1 sets out the purpose of financial statements as the provision of useful information on the
financial position, financial performance and cash flows of an entity, and categorizes the

information provided into assets, liabilities, income and expenses, contributions by and
distribution to owners, and cash flows. It lists the set of statements, for example the statement of
financial position and statement of profit and loss, that together comprise the financial
statements.[1]
IAS 1 also elaborates on the following features of the financial statements:

fairly presented and compliant with IFRSs;

prepared on a going concern basis;

prepared using the accrual basis of accounting;

has material classes presented separately;

does not offset assets and liabilities;

prepared at least annually;

includes comparison with previous periods; and

presented consistently across periods.[1]

Structure and Content

IAS 1 lists the line items that, as a minimum, are to be included The statements lists requirements
regarding the classification of information, such as requiring that current liabilities be listed
separately, and details on when to classify as liability as current as opposed to non-current. It also
sets out requirements regarding the notes to the financial statements, including disclosures on
accounting policy and information on assumptions used.[1]

Recent amendments
IAS 1 was amended in 2007 to reflect a change in terminology that also affected other
accounting standards. The changes include the following.[4]
Term before amendment
Balance sheet
Cash flow statement
Income statement

Term after amendment

Statement of financial position
Statement of cash flows
Statement of comprehensive income

The IASB amended the statement again in 2011, adding the requirement that items in other
comprehensive income be grouped based on their potential reclassifiability to profit and loss,
among several other changes.[4] These amendments, when previously proposed, led to the

Institute of Chartered Accountants in England and Wales advising that the approach of making
"small changes to one standard" can have negative effects.[5]

References
1.
IFRS Foundation, 2012. International Accounting Standard 1: Presentation of Financial
Statements. Retrieved on April 20, 2012.
ICAEW, 2012. IAS 1: Presentation of financial statements. Retrieved on April 20, 2012.
Kirk, R.J. The Key Issues in IAS1. Retrieved on April 20, 2012.
Deloitte Global Services Limited, 2012. IAS 1 Presentation of Financial Statements.
Retrieved on April 20, 2012.
Reed K, 2010. IASB must hold off tweaking existing standards, says ICAEW. Retrieved on
April 22, 2012.
https://en.wikipedia.org/wiki/IAS_1

IAS 1: Presentation of financial statements

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Press release issued by the IASB on 16 June 2011.
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Bulletin from Ernst & Young, published in June 2011, highlighting the impact of amendments
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PwC briefing published in June 2011 examining changes to the standard.
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PwC briefing published May 2010 looking at the implications of proposed amendments to IAS 1.

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http://www.icaew.com/en/library/subject-gateways/accounting-standards/ifrs/ias-01
Answer added by: Tanveer Qureshi Recovery Manager 1 year ago

Components of Financial Statement are:

1. Income Statement
2. Balance Sheet

3. Cash flow Statement

4. Statement of Change Equity
5. Notes
0 Comments
5

Request Deletion

Answer added by: Hussain Altaf Bhoon Chief Accountant 1 year ago

1. Balance Sheet
2. Profit loss account
3. Statement changes in equity
4. Cash flow
5. Notes to the account
0 Comments
5

Request Deletion

Answer added by: Sara 1 year ago

Thanks Sir for the invitation and agree with all answers.
0 Comments

Request Deletion

Answer added by: VENKITARAMAN KRISHNA MOORTHY VRINDAVAN Project Execution

Manager & Accounts Manager 1 year ago

A complete set of financial statements includes: [IAS1.10]

a statement of financial position (balance sheet) at the end of the period a statement of profit or
loss and other comprehensive income for the period (presented as a single statement, or by
presenting the profit or loss section in a separate statement of profit or loss, immediately
followed by a statement presenting comprehensive income beginning with profit or loss) a
statement of changes in equity for the period a statement of cash flows for the period notes,
comprising a summary of significant accounting policies and other explanatory notes
comparative information prescribed by the standard.
An entity may use titles for the statements other than those stated above. All financial statements
are required to be presented with equal prominence. [IAS1.10]
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.
Reports that are presented outside of the financial statements including financial reviews by
management, environmental reports, and value added statements are outside the scope of
IFRSs.
0 Comments
3

Request Deletion

Answer added by: Ednalyn 1 year ago

A complete set of financial statements includes: (IAS1.10)1. A statement of financial
position at the end of the period2. A statement of profit or loss and other
comprehensive income for the period (presented as a single statement, or by
presenting the profit or loss section in a separate statement of profit or loss,
immediately folowed by a statement presenting comprehensive income beginning
with profit or loss)3. A statement of changes in equity for the period4. A statement
of cash flows for the period5. Notes, comprising a summary of significant
accounting policies and other explanatory notes6. Comparative information
prescribed by the standard
0 Comments
3

Request Deletion

Answer added by: Khaled Mohy Eldin Abbas Mahmoud Chartered Accountant #
10465 1 year ago

A complete set of financial statements includes the following components:

a) Balance sheet
b) Income statement
c) A statement showing either:
i) All changes in equity, or
ii) Changes in equity other than those arising from capital transactions with owners and
distributions to owners
d) Cash flow statement
e) Accounting policies and explanatory notes (IASI .8)
0 Comments

Request Deletion

Answer added by: georgei assi 1 year ago

I agree with Mr. Altaf Hussain answer

0 Comments
3

Request Deletion

Answer added by: Valentin 1 year ago

P&L, B/S, CF, Statement of change equity and notes

0 Comments
2

Request Deletion

Answer added by: Mohammad Shamim Ahmad Accounts Manager 1 year ago

Components of Financial Statements

A complete set of financial statements should include: [IAS1.8]
a balance sheet,
income statement,

a statement of changes in equity showing either:

all changes in equity, or
changes in equity other than those arising from transactions with equity holders
acting in their capacity as equity holders;
cash flow statement, and
notes, comprising a summary of accounting policies and other explanatory notes.

Reports that are presented outside of the financial statements -- including financial reviews by
management, environmental reports, and value added statements -- are outside the scope of
IFRSs. [IAS1.9-10]
0 Comments
2

Request Deletion

Answer added by: Muhammad Qasim Shaikh Senior Auditor 1 year ago

According to IAS1 Para10. A complete set of financial statement includes:

1) Statement of financial position (Balance Sheet);
2) Statement of comprehensive income (Profit and Loss account);
3) Statement of changes in equity;
4) Statement of cash flow; and
5) Notes to the financial statement.

http://www.bayt.com/en/specialties/q/137831/what-are-the-components-of-financialstatements-as-per-ias-1/

Accruals Concept
Financial statements are prepared under the Accruals Concept of accounting which requires that
income and expense must be recognized in the accounting periods to which they relate rather
than on cash basis. An exception to this general rule is the cash flow statement whose main
purpose is to present the cash flow effects of transaction during an accounting period.

Under Accruals basis of accounting, income must be recorded in the accounting period in which
it is earned. Therefore, accrued income must be recognized in the accounting period in which it
arises rather than in the subsequent period in which it will be received. Conversely, prepaid
income must be not be shown as income in the accounting period in which it is received but
instead it must be presented as such in the subsequent accounting periods in which the services
or obligations in respect of the prepaid income have been performed.

Expenses, on the other hand, must be recorded in the accounting period in which they are
incurred. Therefore, accrued expense must be recognized in the accounting period in which it
occurs rather than in the following period in which it will be paid. Conversely, prepaid expense
must be not be shown as expense in the accounting period in which it is paid but instead it must
be presented as such in the subsequent accounting periods in which the services in respect of the
prepaid expense have been performed.

Accruals basis of accounting ensures that expenses are "matched" with the revenue earned in an
accounting period. Accruals concept is therefore very similar to the matching principle.
- See more at: http://accounting-simplified.com/financial-accounting/accounting-concepts-andprinciples/accrual-concept.html#sthash.9oaJKBLp.dpuf
http://accounting-simplified.com/financial-accounting/accounting-concepts-andprinciples/accrual-concept.html
Income Statement | Profit & Loss Account
Definition

Income Statement, also known as Profit & Loss Account, is a report of income, expenses and the
resulting profit or loss earned during an accounting period.

Topic contents:
1. Definition
2. Example
3. Basis of preparation
4. Components
5. Purpose & Use
6. Template

Example

Following is an illustrative example of an Income Statement prepared in accordance with the

format prescribed by IAS 1 Presentation of Financial Statements.

Income Statement for the Year Ended 31st December 2013

Notes

2013

2012

USD

USD

Revenue

16

120,000

100,000

Cost of Sales

17

(65,000)

(55,000)

Gross Profit

Other Income

18

55,000

45,000

17,000

12,000

Distribution Cost

19

(10,000)

(8,000)

Administrative Expenses

20

(18,000)

(16,000)

Other Expenses

21

(3,000)

(2,000)

Finance Charges

22

(1,000)

(1,000)

(15,000)
Profit before tax

Income tax

Net Profit

23

(15,000)

40,000

30,000

(12,000)

(9,000)

28,000

21,000

Basis of preparation

Income statement is prepared on the accruals basis of accounting.

This means that income (including revenue) is recognized when it is earned rather than when
receipts are realized (although in many instances income may be earned and received in the
same accounting period).
Conversely, expenses are recognized in the income statement when they are incurred even if
they are paid for in the previous or subsequent accounting periods.

Income statement does not report transactions with the owners of an entity.
Hence, dividends paid to ordinary shareholders are not presented as an expense in the income
statement and proceeds from the issuance of shares is not recognized as an income. Transactions
between the entity and its owners are accounted for separately in the statement of changes in
equity.

Components

Income statement comprises of the following main elements:

Revenue

Revenue includes income earned from the principal activities of an entity. So for example, in
case of a manufacturer of electronic appliances, revenue will comprise of the sales from
electronic appliance business. Conversely, if the same manufacturer earns interest on its bank
account, it shall not be classified as revenue but as other income.

Cost of Sales

Cost of sales represents the cost of goods sold or services rendered during an accounting period.
Hence, for a retailer, cost of sales will be the sum of inventory at the start of the period and
purchases during the period minus any closing inventory.
In case of a manufacturer however, cost of sales will also include production costs incurred in the
manufacture of goods during a period such as the cost of direct labor, direct material
consumption, depreciation of plant and machinery and factory overheads, etc.
You may refer to the article on cost of sales for an explanation of its calculation.

Other Income

Other income consists of income earned from activities that are not related to the entity's main
business. For example, other income of an entity that manufactures electronic appliances may
include:

Gain on disposal of fixed assets

Interest income on bank deposits

Exchange gain on translation of a foreign currency bank account

Distribution Cost

Distribution cost includes expenses incurred in delivering goods from the business premises to
customers.

Administrative Expenses

Administrative expenses generally comprise of costs relating to the management and support
functions within an organization that are not directly involved in the production and supply of
goods and services offered by the entity.
Examples of administrative expenses include:

Salary cost of executive management

Legal and professional charges

Depreciation of head office building

Rent expense of offices used for administration and management purposes

Cost of functions / departments not directly involved in production such as

finance department, HR department and administration department

Other Expenses

This is essentially a residual category in which any expenses that are not suitably classifiable
elsewhere are included.

Finance Charges

Finance charges usually comprise of interest expense on loans and debentures.

The effect of present value adjustments of discounted provisions are also included in finance
charges (e.g. unwinding of discount on provision for decommissioning cost).

Income tax

Income tax expense recognized during a period is generally comprised of the following three
elements:

Current period's estimated tax charge

Prior period tax adjustments

Deferred tax expense

Prior Period Comparatives

Prior period financial information is presented along side current period's financial results to
facilitate comparison of performance over a period.
It is therefore important that prior period comparative figures presented in the income statement
relate to a similar period.
For example, if an organization is preparing income statement for the six months ending 31
December 2013, comparative figures of prior period should relate to the six months ending 31
December 2012.

Purpose & Use

Income Statement provides the basis for measuring performance of an entity over the course of
an accounting period.
Performance can be assessed from the income statement in terms of the following:

Change in sales revenue over the period and in comparison to industry

growth

Change in gross profit margin, operating profit margin and net profit margin
over the period

Increase or decrease in net profit, operating profit and gross profit over the
period

Comparison of the entity's profitability with other organizations operating in

similar industries or sectors

Income statement also forms the basis of important financial evaluation of an entity when it is
analyzed in conjunction with information contained in other financial statements such as:

Change in earnings per share over the period

Analysis of working capital in comparison to similar income statement

elements (e.g. the ratio of receivables reported in the balance sheet to the
credit sales reported in the income statement, i.e. debtor turnover ratio)

Analysis of interest cover and dividend cover ratios

Template

Download a free blank excel template of income statement.

- See more at: http://accounting-simplified.com/financial/statements/incomestatement-profit-and-loss.html#sthash.71IgiwWD.dpuf

21,200

903,700

782,900

Non-controlling interests

70,050

48,600

Total equity

973,750

831,500

Non-current liabilities

Long-term borrowings

120,000

160,000

Deferred tax

28,800

26,040

Long-term provisions

28,850

52,240

Total non-current liabilities

177,650

238,280

Current liabilities

Trade and other payables

115,100

187,620

Short-term borrowings

150,000

200,000

Current portion of long-term borrowings

10,000

20,000

Current tax payable

35,000

42,000

Short-term provisions

5,000

4,800

Total current liabilities

315,100

454,420

Total liabilities

492,750

692,700

Total equity and liabilities

1,466,500

1,524,200

Examples of statement of profit or loss and other comprehensive income when IFRS
9 Financial Instruments is applied

XYZ Group Statement of comprehensive income for the year ended

31 December 20X7

(illustrating the presentation of profit or loss and other comprehensive income in

one statement and the classification of expenses within profit or loss by function)

(in thousands of currency units)

20X7

20X6

Revenue

390,000

355,000

Cost of sales

( 238,000)

( 219,500)

Gross profit

152,000

135,500

Other income

20,667

11,300

Distribution costs

( 9,000)

( 8,700)

Administrative expenses

( 20,000)

( 21,000)

Other expenses

( 2,100)

( 1,200)

Finance costs

( 15,000)

( 18,000)

Share of profit of associates(a)

35,100

30,100

Profit before tax

161,667

128,000

Income tax expense

( 40,417)

( 32,000)

Profit for the year from continuing operations

121,250

96,000

Loss for the year from discontinued operations

( 30,500)

PROFIT FOR THE YEAR

121,250

65,500

Other comprehensive income:

Items that will not be reclassified to profit or loss:

Gains on property revaluation

933

3,367

Investments in equity instruments

( 24,000)

26,667

Remeasurements of defined benefit pension plans

( 667)

1,333

Share of gain (loss) on property revaluation of associates(c)

400

( 700)

Income tax relating to items that will not be reclassified(d)

5,834

(7,667)

(17,500)

23,000

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translating foreign operations(b)

5,334

10,667

Cash flow hedges(b)

( 667)

( 4,000)

Income tax relating to items that may be reclassified(d)

( 1,167)

( 1,667)

3,500

5,000

Other comprehensive income for the year, net of tax

( 14,000)

28,000

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

107,250

93,500

XYZ Group Statement of comprehensive income for the year ended

31 December 20X7

(illustrating the presentation of comprehensive income in one

statement and the classification of expenses within profit by function)

(in thousands of currency units)

20X7

20X6

Profit attributable to:

Owners of the parent

97,000

52,400

Non-controlling interests

24,250

13,100

121,250

65,500

Total comprehensive income attributable to:

Owners of the parent

85,800

74,800

Non-controlling interests

21,450

18,700

107,250

93,500

Earnings per share (in currency units):

Basic and diluted

0.46

0.30

Alternatively, components of other comprehensive income could be presented in

the statement of comprehensive income net of tax:

Other comprehensive income for the year, after tax:

20X7

20X6

Items that will not be reclassified to profit or loss:

Gains on property revaluation

600

2,700

Investments in equity instruments

( 18,000)

20,000

Remeasurements of defined benefit pension plans

( 500)

1,000

Share of gain (loss) on property revaluation of associates

400

( 700)

( 17,500)

23,000

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translating foreign operations

4,000

8,000

Cash flow hedges

( 500)

( 3,000)

3,500

5,000

Other comprehensive income for the year, net of tax (d)

( 14,000)

28,000

(a) This means the share of associates profit attributable to owners of the
associates, ie it is after tax and non-controlling interests in the associates.

(b) This illustrates the aggregated presentation, with disclosure of the current year
gain or loss and reclassification adjustment presented in the notes. Alternatively, a
gross presentation can be used.

(c) This means the share of associates other comprehensive income attributable
to owners of the associates, ie it is after tax and non-controlling interests in the
associates.

(d) The income tax relating to each component of other comprehensive income is
disclosed in the notes.

XYZ Group Income statement for the year ended 31 December 20X7

(illustrating the presentation of comprehensive income in two statements and

classification of expenses within profit by nature)

(in thousands of currency units)

20X7

20X6

Revenue

390,000

355,000

Other income

20,667

11,300

Changes in inventories of finished goods and work in progress

( 115,100)

( 107,900)

Work performed by the entity and capitalised

16,000

15,000

Raw material and consumables used

( 96,000)

( 92,000)

Employee benefits expense

( 45,000)

( 43,000)

Depreciation and amortisation expense

( 19,000)

( 17,000)

Impairment of property, plant and equipment

( 4,000)

Other expenses

( 6,000)

( 5,500)

Finance costs

( 15,000)

( 18,000)

Share of profit of associates(e)

35,100

30,100

Profit before tax

161,667

128,000

Income tax expense

( 40,417)

( 32,000)

Profit for the year from continuing operations

121,250

96,000

Loss for the year from discontinued operations

( 30,500)

PROFIT FOR THE YEAR

121,250

65,500

Profit attributable to:

Owners of the parent

97,000

52,400

Non-controlling interests

24,250

13,100

121,250

65,500

Earnings per share (in currency units):

Basic and diluted

0.46

0.30

(e) This means the share of associates profit attributable to owners of the
associates, ie it is after tax and non-controlling interests in the associates.

XYZ Group Statement of comprehensive income for the year ended

31 December 20X7

(illustrating the presentation of comprehensive income in two statements)

(in thousands of currency units)

20X7

20X6

Profit for the year

121,250

65,500

Other comprehensive income:

Items that will not be reclassified to profit or loss:

Gains on property revaluation

933

3,367

Investments in equity instruments

( 24,000)

26,667

Remeasurements of defined benefit pension plans

( 667)

1,333

Share of gain (loss) on property revaluation of associates(f)

400

( 700)

Income tax relating to items that will not be reclassified(g)

5,834

(7,667)

(17,500)

23,000

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translating foreign operations

5,334

10,667

Cash flow hedges

( 667)

( 4,000)

Income tax relating to items that may be reclassified(g)

(1,167)

(1,667)

3,500

5,000

Other comprehensive income for the year, net of tax

( 14,000)

28,000

TOTAL COMPREHENSIVE INCOME FOR

THE YEAR

107,250

93,500

Total comprehensive income attributable to:

Owners of the parent

85,800

74,800

Non-controlling interests

21,450

18,700

107,250

93,500

Alternatively, components of other comprehensive income could be presented, net

of tax. Refer to the statement of comprehensive income illustrating the
presentation of income and expenses in one statement.

(f)

This means the share of associates other comprehensive income attributable to

owners of the associates, ie it is after tax and non-controlling interests in the
associates.

(g)

The income tax relating to each component of other comprehensive income is

disclosed in the notes.

XYZ Group - Disclosure of components of other comprehensive income

Notes

Year ended 31 December 20X7

(in thousands of currency units)

20X7

20X6

Other comprehensive income:

Exchange differences on translating foreign operations(i)

5,334

10,667

Investments in equity instruments

( 24,000)

26,667

Cash flow hedges:

Gains (losses) arising during the year

( 4,667)

( 4,000)

Less: Reclassification adjustments for gains (losses) included in profit or loss

3,333

Less: Adjustments for amounts transferred to initial carrying amount of hedged

items

667

( 667)

( 4,000)

Gains on property revaluation

933

3,367

Remeasurements of defined benefit pension plans

( 667)

1,333

Share of other comprehensive income of associates

400

( 700)

Other comprehensive income

( 18,667)

37,334

Income tax relating to components of other comprehensive income(j)

4,667

( 9,334)

Other comprehensive income for the year (h)

( 14,000)

28,000

(h)

When an entity chooses an aggregated presentation in the statement of

comprehensive income, the amounts for reclassification adjustments and current
year gain or loss are presented in the notes.

(i)

There was no disposal of a foreign operation. Therefore, there is no reclassification

adjustment for the years presented.

(j)

The income tax relating to each component of other comprehensive income is

disclosed in the notes.

XYZ Group - Disclosure of tax effects relating to each component of other

comprehensive income

Notes

Year ended 31 December 20X7

(in thousands of currency units)

20X7

20X6

Before-tax amount

Tax (expense) benefit

Net-of-tax amount

Before-tax amount

Tax (expense)benefit

Net-of-tax amount

Exchange
differences on translating
foreign
operations

5,334

( 1,334)

4,000

10,667

( 2,667)

8,000

Investments in equity instruments

( 24,000)

6,000

( 18,000)

26,667

( 6,667)

20,000

Cash flow hedges

( 667)

167

( 500)

( 4,000)

1,000

( 3,000)

Gains on
property
revaluation

933

( 333)

600

3,367

( 667)

2,700

Remeasurements of defined benefit pension plans

( 667)

167

( 500)

1,333

( 333)

1,000

Share of other comprehensive

income of
associates

400

400

( 700)

( 700)

Other
comprehensive
income

( 18,667)

4,667

( 14,000)

37,334

( 9,334)

28,000

XYZ Group Statement of changes in equity for the year ended

31 December 20X7

(in thousands of currency units)

Share capital

Retained earnings

Translation of foreign operations

Investments in equity instruments

Cash flow hedges

Revaluation surplus

Total

Non-controlling interests

Total equity

Balance at
1 January 20X6

600,000

118,100

( 4,000)

1,600

2,000

717,700

29,800

747,500

Changes in accounting policy

400

400

100

500

Restated balance

600,000

118,500

( 4,000)

1,600

2,000

718,100

29,900

748,000

Changes in equity for 20X6

Dividends

( 10,000)

( 10,000)

( 10,000)

Total comprehensive income for the year(k)

53,200

6,400

16,000

( 2,400)

1,600

74,800

18,700

93,500

Balance at
31 December 20X6

600,000

161,700

2,400

17,600

( 400)

1,600

782,900

48,600

831,500

Changes in equity for 20X7

Issue of share capital

50,000

50,000

50,000

Dividends

( 15,000)

( 15,000)

( 15,000)

Total comprehensive income for the year(l)

96,600

3,200

( 14,400)

( 400)

800

85,800

21,450

107,250

Transfer to retained earnings

200

( 200)

Balance at
31 December 20X7

650,000

243,500

5,600

3,200

( 800)

2,200

903,700

70,050

973,750

(k)

The amount included in retained earnings for 20X6 of 53,200 represents profit
attributable to owners of the parent of 52,400 plus actuarial gains on defined
benefit pension plans of 800 ( 1,333, less tax 333, less non-controlling interests
200). The amount included in the translation, investments in equity instruments and
cash flow hedge reserves represent other comprehensive income for each
component, net of tax and non-controlling interests, eg other comprehensive
income related to investments in equity instruments for 20X6 of 16,000 is 26,667,
less tax 6,667, less non-controlling interests 4,000. The amount included in the
revaluation surplus of 1,600 represents the share of other comprehensive income of
associates of ( 700) plus gains on property revaluation of 2,300 ( 3,367, less tax
667, less non-controlling interests 400). Other comprehensive income of associates
relates solely to gains or losses on property revaluation.

(l)

The amount included in retained earnings for 20X7 of 96,600 represents profit
attributable to owners of the parent of 97,000 plus actuarial losses on defined
benefit pension plans of 400 ( 667, less tax 167, less non-controlling interests 100).
The amount included in the translation, investments in equity instruments and cash
flow hedge reserves represents other comprehensive income for each component,
net of tax and non-controlling interests, eg other comprehensive income related to
the translation of foreign operations for 20X7 of 3,200 is 5,334, less tax 1,334, less

non-controlling interests 800. The amount included in the revaluation surplus of 800
represents the share of other comprehensive income of associates of 400 plus gains
on property revaluation of 400 ( 933, less tax 333, less non-controlling interests
200). Other comprehensive income of associates relates solely to gains or losses on
property revaluation.
http://www.ifrs.org/XBRL/Resources/Documents/Illustrative%20Examples
%202013/ixbrl_example2_2013-03-28.xhtml
Statement of Financial Position [Balance Sheet]
Definition

Statement of Financial Position, also known as the Balance Sheet, presents the financial position
of an entity at a given date. It is comprised of three main components: Assets, liabilities and
equity.
Statement of Financial Position helps users of financial statements to assess the financial
soundness of an entity in terms of liquidity risk, financial risk, credit risk and business risk.
Example

Following is an illustrative example of a Statement of Financial Position prepared under the

format prescribed by IAS 1 Presentation of Financial Statements.

Statement of Financial Position as at 31st December 2013

Notes

2013

2012

USD

USD

ASSETS

Non-current assets
Property, plant & equipment

130,000

Goodwill

10

30,000

30,000

Intangible assets

11

60,000

50,000

220,000

120,000

200,000

Current assets
Inventories

12

12,000

10,000

Trade receivables

13

25,000

30,000

Cash and cash equivalents

14

8,000

10,000

TOTAL ASSETS

45,000

50,000

265,000

250,000

EQUITY AND LIABILITIES

Equity
Share capital

Retained earnings
Revaluation reserve

Total equity

100,000

100,000

50,000

40,000

15,000

10,000

165,000

150,000

Non-current liabilities
Long term borrowings

35,000

50,000

Trade and other payables

35,000

25,000

Short-term borrowings

10,000

8,000

Current portion of long-term borrowings

15,000

15,000

Current tax payable

5,000

Current liabilities

2,000

Total current liabilities

65,000

50,000

Total liabilities

100,000

100,000

TATAL EQUITY AND LIABILITIES

265,000

250,000

You may download a free blank excel template of the statement of financial position. The
template is pre-linked with the cash flow statement and statement of changes in equity.

Classification of Components

Statement of financial position consists of the following key elements:

Assets
An asset is something that an entity owns or controls in order to derive economic benefits from
its use. Assets must be classified in the balance sheet as current or non-current depending on the
duration over which the reporting entity expects to derive economic benefit from its use. An asset
which will deliver economic benefits to the entity over the long term is classified as non-current
whereas those assets that are expected to be realized within one year from the reporting date are
classified as current assets.
Assets are also classified in the statement of financial position on the basis of their nature:

Tangible & intangible: Non-current assets with physical substance are

classified as property, plant and equipment whereas assets without any
physical substance are classified as intangible assets. Goodwill is a type of an
intangible asset.

Inventories balance includes goods that are held for sale in the ordinary
course of the business. Inventories may include raw materials, finished goods
and works in progress.

Trade receivables include the amounts that are recoverable from customers
upon credit sales. Trade receivables are presented in the statement of
financial position after the deduction of allowance for bad debts.

Cash and cash equivalents include cash in hand along with any short term
investments that are readily convertible into known amounts of cash.

Liabilities

A liability is an obligation that a business owes to someone and its settlement involves the
transfer of cash or other resources. Liabilities must be classified in the statement of financial
position as current or non-current depending on the duration over which the entity intends to
settle the liability. A liability which will be settled over the long term is classified as non-current
whereas those liabilities that are expected to be settled within one year from the reporting date
are classified as current liabilities.
Liabilities are also classified in the statement of financial position on the basis of their nature:

Trade and other payables primarily include liabilities due to suppliers and
contractors for credit purchases. Sundry payables which are too insignificant
to be presented separately on the face of the balance sheet are also
classified in this category.

Short term borrowings typically include bank overdrafts and short term bank
loans with a repayment schedule of less than 12 months.

Long-term borrowings comprise of loans which are to be repaid over a period

that exceeds one year. Current portion of long-term borrowings include the
installments of long term borrowings that are due within one year of the
reporting date.

Current Tax Payable is usually presented as a separate line item in the

statement of financial position due to the materiality of the amount.

Equity
Equity is what the business owes to its owners. Equity is derived by deducting total liabilities
from the total assets. It therefore represents the residual interest in the business that belongs to
the owners.
Equity is usually presented in the statement of financial position under the following categories:

Share capital represents the amount invested by the owners in the entity

Retained Earnings comprises the total net profit or loss retained in the
business after distribution to the owners in the form of dividends.

Revaluation Reserve contains the net surplus of any upward revaluation of

property, plant and equipment recognized directly in equity.

Rationale - Why the balance sheet always balances?

The balance sheet is structured in a manner that the total assets of an entity equal to the sum of
liabilities and equity. This may lead you to wonder as to why the balance sheet must always be in
equilibrium.
Assets of an entity may be financed from internal sources (i.e. share capital and profits) or from
external credit (e.g. bank loan, trade creditors, etc.). Since the total assets of a business must be
equal to the amount of capital invested by the owners (i.e. in the form of share capital and profits
not withdrawn) and any borrowings, the total assets of a business must equal to the sum of equity
and liabilities.
This leads us to the Accounting Equation: Assets = Liabilities + Equity

Purpose & Importance

Statement of financial position helps users of financial statements to assess the financial health of
an entity. When analyzed over several accounting periods, balance sheets may assist in
identifying underlying trends in the financial position of the entity. It is particularly helpful in
determining the state of the entity's liquidity risk, financial risk, credit risk and business risk.
When used in conjunction with other financial statements of the entity and the financial
statements of its competitors, balance sheet may help to identify relationships and trends which
are indicative of potential problems or areas for further improvement. Analysis of the statement
of financial position could therefore assist the users of financial statements to predict the amount,
timing and volatility of entity's future earnings.
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