CertIFR ACCA - IFRS

Module 1: Revenue, Representation And Changes

In Accounting Policies, Estimates & Errors

LECTURER: NGUYỄN THỊ THỦY, FCCA

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 IAS 1
PRESENTATION OF FINANCIAL STATEMENTS

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IAS 1
IAS 1 contains several aspects that reflect the Conceptual Framework, including
the purpose of financial statements. The Standard identifies the objective and
content of a set of financial statements and then primarily deals with:

❖ General features of financial statements

❖ Structure and content 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.

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IAS 1
“To meet that objective, financial statements provide information about an
entity’s:
a. Assets
b. Liabilities
c. Equity
d, Income and expenses, including gains and losses
e. Contributions by and distributions to owners, in their capacity as owners.
f. Cash flows.”
(IAS 1, paragraph 9)

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IAS 1
That information, along with other information in the notes, assists users of financial statements in
predicting the entity's future cash flows end, in particular, their timing and certainty.
a. A statement of financial position at the end of the period.
b. A statement of profit or loss end other comprehensive income (see below) for the period
c. A statement of changes on equity for the period,
d. A statement of cash flows for the period,
e. Notes, comprising a summary of accounting policies and other explanatory information.
f. Comparative information in respect of the preceding period, and
g. A statement of financial position at the beginning of the preceding period where
retrospective adjustment is made in accordance with IAS 8”
(IAS 1, paragraph 10)
Entities ere not required to use the titles listed above in their financial statements (for example,
they may instead use ‘old’ titles such es balance sheet end income statement), but all existing
Standards and Interpretations reflect the terminology referred to above.

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General features of financial statements (IAS 1)
General features of financial statements:
▪ Fair presentation
▪ Going concern
▪ Accrual basis
▪ Materiality and aggregation
▪ Offsetting
▪ Frequency of reporting
▪ Comparative information
▪ Consistency of presentation

IAS 1 requires that financial statements show a fair presentation of the financial
position, performance, and cash flows of an entity. This will nearly always be
achieved by compliance with the requirements of IFRS Standards. In extremely rare
circumstances, it may be necessary to depart from an IFRS Standard.
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 Extensive disclosures
Rarely allowed in
Departure from IFRS required including
order to achieve Fair
Standards the financial impact
Presentation
of the departure

Financial statements should be prepared on a going concern basis unless

management intends to liquidate an entity or cease trading or has no realistic
alternative but to do so. Disclosure is required where financial statements are not
prepared on the going concern basis.

Financial statements, other then cash flow information, should be prepared on

the accrual basis.

Each material class of similar items should be presented separately. Line items
that are not material individually should be aggregated with other line items. This
aids understandability.
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Financial statements should be prepared on a going concern basis unless management
intends to liquidate an entity or cease trading or has no realistic alternative but to do
so. Disclosure is required where financial statements are not prepared on the going
concern basis.

Financial statements, other than cash flow information, should be prepared on the
accrual basis.

Each material class of similar items should be presented separately. Line items that are
not material individually should be aggregated with other line items. This aids
understandability.

“Information is material if omitting, misstating or obscuring it could reasonably be

expected to influence decisions that the primary users of general purpose financial
statements make on the basic of those financial statements which provide financial
information about a specific reporting entity
Materiality depends on the nature or magnitude of information, or both.”

(IAS 1, paragraph 7 (amended October 2018))

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Assets and liabilities and income and expenses should not be offset unless this
is required or permitted by another IFRS Standard.

A complete set of financial statements should be prepared at least annually.

Reasons for a reporting period of more or less than a year should be disclosed.

Comparative information should be presented for the preceding period for all
amounts reported in the current year financial statements. Additional
comparative information may be presented provided that it is prepared in
accordance with IFRS Standards. If the presentation or classification of items is
changed, comparative information should be reclassified on the same basis.

Consistent presentation and classification should be retained unless a change

is required by an IFRS Standard or another presentation and classification
would be more appropriate.

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Exercise - IAS 1 Question 1

Select the correct word/phrase from the drop down choices to populate the
relevant fill in the blank spaces and complete the following sentences.

Click on the ‘Check Answer’ button to see if you are correct.

(1) General purpose financial statements are prepared to provide useful information to a wide
range of users about the financial position, financial performance and fill in the blank of an entity.

(2) Comparative information should be presented for the preceding period for all amounts reported
in the current year. A third statement of fill in the blank is required where retrospective adjustment
is made.

(3) Entities fill in the blank use the titles of financial statements referred to in IAS 1 e.g. statement
of financial position and statement of profit or loss.

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Content of financial statements (IAS 1)

Structure and content of financial statements

▪ Statement of financial position
▪ Statement of profit or loss and other comprehensive income
▪ Statement of changes in equity
▪ Note

IAS 1 does not lay down particular formats for financial statements but
does have minimum requirements for the presentation of items on the
face of the financial statements.

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Statement of financial position (SOFP)

Certain line items MUST be presented in the statement of financial position.

They are:
a. “property, plant and equipment j. Assets held for sale.
b. Investment property k. Trade and other payables
c. Intangible assets l. Provisions
d. Financial assets m. Financial liabilities
e. Equity accounted investments n. Current tax amounts
f. Biological assets o. Deferred tax amounts
g. Inventories p. Liabilities held for sale
h. Trade and other receivables q. non-controlling interests
i. Cash and cash equivalents r. Issued capital and reserves.”

It is necessary to present assets and liabilities on the basis of the distinction between
current items and non-current items except where a presentation based on liquidity is
reliable and more relevant.

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Current items are those which meet at least one of the following criteria:

In the case of a
Expected to be Expected to be In the case of liability has no
Held primarily
realized/ realised /due an asset is unconditional
for the
settled in an to be settled unrestricted right to defer
purpose of
entity’s normal within 12 cash or cash settlement for
trading
operating cycle months equivalent at least 12
months

(IAS 1, paragraph 66)

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A liability may need to be split for presentation purposes into a current and non-
current element, for example:

Current liability is
$500 x 12months = $6,000
$20,000 loan repayable at
Total liability is $18,500 at
$500 per month starting on
31 December 20X8
October 20X8
Non-current liability is
$12,500

Additional information should be disclosed either in the statement of financial position

or in the notes, for example:

▪ Classes of property, plant and equipment

▪ Classifications of inventory
▪ Types of provision
▪ Details of classes of share capital
▪ A description of reserves within equity.

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Content of financial statements (IAS 1)

Statement of profit or loss and other comprehensive income (SPLOCI)

• Profit or loss includes most items of income and expenses
• Other comprehensive income (OCI) is items of income and expense that are not recognised in profit or loss,
as stipulated by other IFRS Standards. It includes:

Revaluation surplus arising on PPE Remeasurements of defined

(Module 4) pension schemes (Module 7)

May not be reclassified to profit or loss at a later date

Changes in fair value of Exchange differences arising

Cash flow hedges financial instruments on translation of foreign
(Module 7) (Module 7) subsidiary (Module 9)

In accordance with other IFRS Standards these may be reclassified to profit or loss at a later date

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• The statement of profit or loss and other comprehensive income may be presented as one single
statement or two separate statements (a statement of profit or loss and a statement disclosing
OCI and total comprehensive income).

Profit or loss and total comprehensive income must be allocated between amounts attributable to:
• The non-controlling interest, and
• Owners of the parent (see Module 9).

Minimum disclosure requirements in the statement of profit or loss are as

• Revenue
• Gains/losses on derecognition of financial assets measured at amortised cost
• Finance costs
• Impairment losses (and reversals)
• Share of profit or loss of associates/joint ventures
• Gains/losses on reclassification of financial assets
• Tax expense
• Single amount for discontinued operations.

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Items in OCI are split between those that can be reclassified to profit or loss and
those that cannot be reclassified.

Sometimes, items of OCI that are not currently recognised in profit or loss may be recognised
there at a later date. They should be analysed as follows:

• OCI that will not be reclassified subsequently to profit or loss

• OCI that may be reclassified to profit or loss
• Share of OCI of associate/JV that will not be reclassified to profit or loss
• Share of OCI of associate/JV that may be reclassified to profit or loss.

Items of OCI can be shown net of tax or gross, with a tax amount relating to OCI presented in
aggregate.

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Expenses in profit or loss may be analysed using either the “nature of expense”
or the “function of expense” method.

Examples of each are as follows:

Nature of expense Function of expense

Revenue X Revenue X
Other income X Cost of sales (X)
Change in inventories (X) Gross profit X
Raw materials used (X) Other income X
Employee benefit expense (X) Distribution costs (X)
Depreciation expenses (X) Administrative expenses (X)
Other expense (X) Other expenses (X)
Profit before tax X Profit before tax X

When an item of income or expense is material, its nature and amount should be disclosed
separately in the statement of profit or loss or in the notes to the accounts. No item may be
presented as extraordinary.
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Content of financial statements (IAS 1)

Statement of changes in equity (SOCIE)

The statement of changes in equity must include:

• “Total comprehensive income for the period

• For each component of equity, the effects of changes in accounting policies
and corrections of errors recognised in accordance with IAS 8
• For each component of equity, a reconciliation between the carrying
amount at the beginning and end of the period resulting from:
• Profit or loss
• Other comprehensive income
• Transactions with owners in their capacity as owners” (e.g. share issues
and dividends paid).
(IAS 1, paragraph 106)

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A typical SOCIE for the current and comparative accounting periods is presented as follows:

Share Share Retained Revaluation Total $

capitals $ premium $ earnings $ surplus $
Balance at 1 January 20X8 100,000 250,000 567,000 210,000 1,127,000
Retrospective restatement* - - (19,600) - (19,600)
Restated balance at 1
100,000 250,000 547,400 210,000 1,107,400
January 20X8
Dividends - - (40,000) - (40,000)
Total comprehensive income - - 76,500 42,000 118,500
Balance 31 December 20X8 100,000 250,000 583,900 252,000 1,185,900
Issue of shares 20,000 60,000 - - 80,000
Dividends - (45,000) - (45,000)
Total comprehensive income - 82,300 (26,000) 56,300
Balance 31 December 20X9 120,000 310,000 621,200 226,000 1,277,200

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Retrospective restatement may arise due to:
• A change in accounting policy; or
• The correction of a prior period error.

Notes to the financial statements

These should:
▪ Present information about the basis of preparation and accounting policies

▪ Disclose information required by IFRS Standards that is not disclosed elsewhere

▪ Provide other relevant information not presented elsewhere.

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Exercise – IAS 1 Question 2
Should the going concern assumption be dropped when part of a reporting entity is suffering
financial difficulty?
You should refer to the text of the Standard when answering all exercises.

Assess your response

Before you read our model answer, think about your own answer and consider
whether you have included the following points. Select the points you included
and see how you did.

❑ Did you identify that going concern relates to the whole entity? (1 point)
❑ Did you identify that financial difficulty will not necessarily result in an entity
ceasing to trade or being liquidated? (1 point)
❑ Did you consider that assets may need to be reviewed for impairment? (1
point)
❑ Did you consider that provisions may need to be recognised? (1 point)

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Exercise – IAS 1 Question 3
Does IAS 1 require the consistent use of accounting policies from year to year?
You should refer to the text of the Standard when answering all exercises.

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Exercise – IAS 1 Question 4
Can a bank loan with a maturity date in four months’ time be a non-current liability?
You should refer to the text of the Standard when answering all exercises.

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 Nghe bài giảng thật kỹ, mindmap các vấn đề quan
trọng, hoàn thành từng bài tập thực hành trên lớp.
Cuối cùng: hoàn thành Quiz của mỗi module

PRACTICE, PRACTICE AND PRACTICE

CHÚC CÁC BẠN HẠNH PHÚC
& THÀNH CÔNG!

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Ending

Resources Reference:
BPP Text Book and Revision Kit; IFRS sources; ACCA website
Email: thuyn.fcca@gmail.com
Zalo Mrs Thuy Nguyen ACCA: 098 359 8586
Fanpage Thuy Nguyen: https://www.facebook.com/nguyenthuy.fcca/
Youtube Thuy Nguyen ACCA: https://www.youtube.com/c/ThuyNguyenACCA

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