Updated PAS-1-PRESENTATION-OF-FINANCIAL-STATEMENTS.pptx

PAS 1 Presentation of Financial Statement

1. Conceptual Framework & Accounting Standards PAS 1 Presentation of Financial Statements Conceptual Framework & Accounting Standards 1

2. PAS 1 Presentation of Financial Statements Learning Objectives Enumerate and describe the general features of financial statement presentation. Enumerate and describe the components of a complete set of financial statements. State the acceptable methods of presenting items of income and expenses. Differentiate between the statement of profit or loss and other comprehensive income and the statement of changes in equity. State the relationship of the notes with the other components of a complete set of financial statements. Conceptual Framework & Accounting Standards 2

3. Objective of PAS 1 PAS 1 prescribes the basis for presentation of general purpose financial statements to improve comparability both with the entity's financial statements of previous periods (intra-comparability) and with the financial statements of other entities (inter-comparability) . Conceptual Framework & Accounting Standards 3

4. General Purpose Financial Statements General purpose financial statements are those intended to serve users who do not have the authority to demand financial reports tailored for their own needs. General purpose financial statements cater to most of the common needs of a wide range of external users . General purpose financial statements are the subject matter of the Conceptual Framework and the PFRSs . Conceptual Framework & Accounting Standards 4

5. Complete Set of Financial Statements Statement of financial position Statement of profit or loss and other comprehensive income Statement of changes in equity Statement of cash flows Notes (5a) comparative information with respect to the preceding period, and Additional statement of financial position (required only when certain instances occur) Conceptual Framework & Accounting Standards 5

6. General Features 1. Fair Presentation and Compliance with PFRSs - The application of PFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. 2. Going concern - An entity is not a going concern if, as of the financial reporting date or prior to the date of authorization of the financial statements for issue, management either: a. Intends to liquidate the entity or to cease trading or b. Has no realistic alternative but to do so. The assessment of going concern is at least 12 months . Conceptual Framework & Accounting Standards 6

7. General Features (Continuation) 3. Accrual Basis of Accounting - An entity shall prepare its financial statements, except for cash flow information, using the accrual basis of accounting . 4. Materiality & Aggregation - Each material class of similar items must be presented separately in the financial statements. 5. Offsetting - Assets and liabilities and income and expenses shall not be offset unless required or permitted by a PFRS. Measuring assets net of valuation allowances, for example, obsolescence allowances on inventories, allowances for doubtful accounts on receivables, and accumulated depreciation on property, plant, and equipment are not offsetting. Conceptual Framework & Accounting Standards 7

8. General Features (Continuation) 6. Frequency of reporting – An entity shall present a complete set of financial statements (including comparative information) at least annually . When an entity changes the end of its reporting period and presents financial statements for a period longer or shorter than one year, an entity shall disclose the following: The period covered by the financial statements, The reason for using a longer or shorter period, and The fact that amounts presented in the financial statements are not entirely comparable. Conceptual Framework & Accounting Standards 8

9. General Features (Continuation) 7. Comparative Information An entity shall present comparative information regarding the preceding period for all amounts reported in the current period’s financial statements unless other standards permit or require otherwise. 8. Consistency of presentation - An entity shall retain the presentation and classification of items in the financial statements from one period to the next unless: it is apparent that another presentation or classification would be more appropriate following a significant change in the nature of the entity’s operations or a review of its financial statements; or a PFRS requires a change in presentation. Conceptual Framework & Accounting Standards 9

10. Additional Statement of Financial Position An additional statement of financial position is presented at the beginning of the preceding period when an entity: Applies an accounting policy r etrospectively , or Makes a r etrospective restatement of items in its financial statements or r eclassifies items in its financial statements. …..and the effect of the event on the statement of financial position as at the beginning of the preceding period is material . Conceptual Framework & Accounting Standards 10

11. Statement of Financial Position A statement of financial position may be presented as either Classified – showing distinctions between current and noncurrent assets and liabilities, or Unclassified (based on liquidity) – showing no distinction between current and noncurrent items Conceptual Framework & Accounting Standards 11

12. Current Assets An entity shall classify an asset as current when: it expects to realize the asset or intends to sell or consume it, in its normal operating cycle; it holds the asset primarily for the purpose of trading; it expects to realize the asset within twelve months after the reporting period; or the asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. Conceptual Framework & Accounting Standards 12

13. Current Liabilities An entity shall classify a liability as current when: it expects to settle the liability in its normal operating cycle; it holds the liability primarily for the purpose of trading; the liability is due to be settled within twelve months after the reporting period; or the entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Conceptual Framework & Accounting Standards 13

14. Currently maturing Long-term Liabilities General rule: Currently maturing long-term liabilities are presented as current liabilities. Exceptions: Refinancing agreement is fully completed on or before the balance sheet date – non-current liability Refinancing agreement after the balance sheet date but before the financial statements are authorized for issue – noncurrent liability if the entity expects, and has the discretion , to refinance it on a long-term basis under an existing loan facility . Conceptual Framework & Accounting Standards 14

15. Breach of Loan Agreement General rule: A liability that is payable on demand is a current liability. Exception: It is presented as a non-current liability if the lender provides the entity, on or before the balance sheet date , a grace period ending at least 12 months after the balance sheet date to rectify a breach of a loan covenant. Conceptual Framework & Accounting Standards 15

16. Presentation of Deferred taxes Deferred tax liabilities (assets) are presented as noncurrent items in a classified statement of financial position, irrespective of their expected dates of reversal. Conceptual Framework & Accounting Standards 16

17. Minimum line items in the Statement Of Financial Position 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; Biological assets; Inventories; Trade and other receivables; Cash and cash equivalents; Assets (or disposal groups) classified as held for sale in accordance with PFRS 5; Conceptual Framework & Accounting Standards 17

18. Minimum line items (Continuation) Trade and other payables; Provisions; Financial liabilities (excluding amounts shown under (k) and (l)); Liabilities and assets for current tax, as defined in PAS 12 Income Taxes ; Deferred tax liabilities and deferred tax assets, as defined in PAS 12; Liabilities included in disposal groups classified as held for sale in accordance with PFRS 5; Non-controlling interests, presented within equity; and Issued capital and reserves attributable to owners of the parent Conceptual Framework & Accounting Standards 18

19. Order/ Format of Presentation PAS 1 does not prescribe the order or format in which an entity presents items. Conceptual Framework & Accounting Standards 19

20. Statement of Profit or Loss and Other Comprehensive Income An entity shall present all items of income and expense recognized in a period: in a single statement of profit or loss and other comprehensive income; or in two statements: (1) a statement displaying the profit or loss section only (separate ‘statement of profit or loss’ or ‘income statement’) and (2) a second statement beginning with profit or loss and displaying components of other comprehensive income. Conceptual Framework & Accounting Standards 20

21. Extraordinary items PAS 1 prohibits the presentation of any items of income or expense as extraordinary items in the statement(s) presenting profit or loss and other comprehensive income or in the notes. Conceptual Framework & Accounting Standards 21

22. Other Comprehensive Income for the Period Changes in revaluation surplus Unrealized gains and losses on investments in FVOCI securities Remeasurements of the net defined benefit liability (asset) Gains and losses arising from translating the financial statements of a foreign operation Effective portion of gains and losses on hedging instruments in a cash flow hedge OCI may be presented either (a) net of tax or (b) gross of tax. Conceptual Framework & Accounting Standards 22

23. Reclassification adjustments Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognized in other comprehensive income in the current or previous periods. Conceptual Framework & Accounting Standards 23

24. Total Comprehensive Income Total comprehensive income comprises all components of Profit or loss; and Other comprehensive income. Conceptual Framework & Accounting Standards 24

25. Presentation of Expenses Nature of expense method Function of expense method If an entity classifies expenses by function , it shall disclose additional information on the nature of expenses Conceptual Framework & Accounting Standards 25

26. Disclosure of dividends Dividends declared by an entity are disclosed either in the (a) notes or (b) statement of changes in equity. Conceptual Framework & Accounting Standards 26

27. Order of presentation of disclosures in the Notes Statement of compliance with PFRSs; Summary of significant accounting policies applied; Supporting information for items presented in the other financial statements; and Other disclosures. Conceptual Framework & Accounting Standards 27

28. APPLICATION OF CONCEPTS   Conceptual Framework & Accounting Standards 28

29. End of Presentation Conceptual Framework & Accounting Standards 29 Thank you