Ias 1 Presentation of Financial Statements - Copy

7/30/2019 Ias 1 Presentation of Financial Statements - Copy

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KINGS CROWN BUSINESS SCHOOLICAN PROFESSIONAL E -LEARNING CLASS (IFRS SESSION)

IFRS FACULTY: DEJI AWOBOTU 08181292443, 08035487820. [email protected] Page 1

CLASS SESSION 1: IAS 1 PRESENTATION OF FINANCIAL STATEMENTS

The following financial summaries are required by IAS 1

1. Statement of Financial Position formerly referred to as Balance Sheet2. Income Statement / Statement of Comprehensive Income (where a

revaluation of Non-current Asset or Foreign Exchange Gains/Losses has

occurred). This Statement was previously referred to as Profit and Loss

Account

3. Statement of Changes in Equity. This was newly introduced4. Notes, comprising of summary of accounting policies and other explanatory

notes

5. Statement of Cashflow for the periodWith the above, you will discover that the following Statements are no longerrequired by the Standard

Value Added Statement Five Years Financial SummarySTATEMENT OF FINANCIAL POSITION

IAS 1 requires that both Assets and Liabilities should be classified as Current and

Non-Current.

Assets should be classified as

CURRENT ASSET : if1. It will be realized within 12 months of Reporting Date i.e. Financial Year

end

2. It is part of the enterprises normal operating cycle i.e. classified asworking capital item

3. It is held primarily for trading purpose4. It is Cash or cash equivalents

All other Assets should be classified as Non-Current.

NOTE: The above definition allows Inventory and Receivables to be classified as

Current Asset under point 2 even if they may not be realised into cash within 12

months.

CURRENT LIABILITY : A liability should be classified as Current Liability if :1. it is expected to be settled in the normal course of the enterprises

operating cycle

2. it is held primarily for the purpose of being traded3. it is due to be settled within 12 months of the Reporting date

All other liabilities should be classified as non-current liabilities. When a long-term

debt is expected to be refinanced under an existing loan facility and the entity

has the discretion, the debt is classified as non-current, even if due within 12

months.


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The structure of the SOFP is such that the Assets (both current and Non-current)

are classified together while Equity (i.e. Share capital and Reserves) and

Liabilities (both Current and Non-Current) are also classified together.

Statement of financial position for XYZ at 31 December XXXX

Nm NmNon-current assets

Property, plant and equipment

Investments X

Intangibles X

X

Current assets

Inventories X

Trade and other receivables XPrepayments X

Cash X

X

Total assets X

Equity

Ordinary share capital X

Irredeemable preference share capital X

Share premium X

2Retained profits X

X

Non-current liabilities

Loan notes X

Current liabilities

Trade and other payables X

Overdrafts XTax payable X

X

Total equity and liabilitiesX


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The above structure has changed our usual format of Fixed Assets + (Current

AssetsCurrent Liabilities)Long Term Loan = Net Assets.

Financed By: Share Capital and Reserves

INCOME STATEMENT

A recommended format for the Income statement is as follows:

XYZ Group

Income statement for the year ended 31 December 20X2

N

Revenue X

Cost of sales (X)

Gross profit X

Distribution costs (X)

Administrative expenses (X)

Investment Gains / (Losses) X

Profit from operations X

Finance costs (X)

Profit before tax X

tax expense (X)

Net profit for the period X

Note that all expenses are classified under one of three headings:

Cost of salesThis is calculated as follows Opening Inventory + PurchasesClosing Inventory.

However the calculation should be shown in a note to the accounts rather than

on the face of the income statement. Also note that Inventory is same as what

we refer to as Stocks. This was not used as it is subject to dual interpretation,Stocks as Investment and also as Inventory.

Distribution costsThese are all expenses relating to selling or delivering products or services.

Administrative expensesThis includes all expenses not classified within cost of sales or distribution costs.


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Some expenses such as depreciation of tangible assets will be split across all

three expense categories depending on the asset depreciated.

COMMENT

Where there are Other Comprehensive Income items such as Revaluation

Surplus/Deficit, a Statement of Comprehensive Income will be preferred to

reflect such item. Please note that the Income statement ends at Profit for

the year. It does not include Dividend deductions as this will be treated in

Statement of Changes in Equity. Prior to now, we have the Appropriation of

profit which no longer exist in the revised standard but rather such items as

contained in the Appropriation will now reflect in the Statement of Changes

in Equity e.g. transfer to general reserves , dividend etc.

STATEMENT OF COMPREHENSIVE INCOME

XYZ Group

Income statement for the year ended 31 December 20X2

N

Revenue X

Cost of sales (X)

Gross profit X

Distribution costs (X)

Administrative expenses (X)Investment Gains / (Losses) X


Finance costs (X)

Profit before tax X

tax expense (X)


Other comprehensive Income:

Gain/Loss on Property Revaluation X

Exchange Gain /Loss on translation X

Total Comprehensive Income for the year X


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Extra ordinary and Exceptional Items: In as much as extraordinary items need

not be separately disclosed on the income statement, exceptional items are

certain circumstances where large one-off items require separate disclosure on

the face of the income statement and as such should be separately disclosed.

These circumstances include: restructuring or the reorganisation cost of the entity disposal of items of property, plant and equipment disposal of investment write downs of inventory or property, plant and equipmentAlso note that the Standard still permit the Income statement to be presented in

either of 2 ways:

1. By function of expenditure or cost of sales: This method shows expensesclassified under the headings: cost of sales, distribution costs andadministrative expenditure.

2. By nature of expenditure: This method analyses expenses according to theirnature. This method is suitable for a manufacturing outfit.

Nm Nm

Sales revenue X

Other operating income X

Changes in inventories of finished goods and work in progress (X)

Raw materials and consumables used (X)

Staff costs (X)

Depreciation and amortisation expense (X)

Other operating expenses (X)

(X)


Net interest cost (interest paid less interest received) (X)

Profit before tax X

Tax expense (X)


Changes in inventories of finished goods and work in progress : This is simplythe difference between the opening and closing inventory amounts of

Finished Goods & Work in progress and could thus be a debit or a credit in

the statementif inventories have risen it will be a credit and if they have

fallen a debit.

Raw materials and consumables usedThis is purchases of raw materials adjusted for opening and closing inventories


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STATEMENT OF CHANGES IN EQUITY

This statement is included within the accounts to provide further information on

certain statement of financial position accounts, namely share capital andreserves.

Statement of changes in equity for XYZ Ltd

Share Share Revaluation Retained Total

capital premium reserve profits

Nm Nm Nm Nm Nm

Balance at 1 January X X X X X

Equity shares issued X X X

Revaluation surplus X X

Reclassification/Transfers (X) X

Profit for the Year X X

Dividends (X) (X)

X X X X X

TREATMENT OF PREFERENCE SHARES

Details of this we shall consider when treating Financial Instruments. In the interim

you should know that where the Preference shares is Redeemable Preference Shares : it should be treated as Debt (Non-Current

Liability) and the Preference Dividend treated as Finance Charge

Irredeemable Preference Shares: It should be treated as Equity and thePreference Dividend treated as a deduction from Profit for the year, the

same treatment applied to ordinary share dividend.

STATEMENT OF CASHFLOW IAS 7 WILL BE TREATED AT A LATER DATE. STAY

CONNECTED.

Ias 1 Presentation of Financial Statements - Copy

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