Going Concern
IAS 1 requires an entity to prepare account of financial statements on a going concern basis. This means that management shall prepare accounts with the assumption that the business would continue in perpetuity unless management either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so.
Accrual Basis of Accounting
An entity shall prepare its financial statements except for cash flow information using the accrual basis of accounting
Materiality and Aggregation
An entity shall present separately each material class of similar items. An entity shall present separately items of a dissimilar nature or function unless they are immaterial. Items might not be material individually, but aggregated into classes according to their nature or function, may become material.
An entity presents on a net basis gains and losses arising from a group of similar transactions, but if material enough individually, they would be presented separately.
Frequency of reporting
An entity shall present a complete set of financial statements at least annually. On the event of a change in accounting date by a company, an entity shall disclose:
a) The reason for using a longer or shorter period
b) The fact that amounts presented in the financial statements are not entirely comparable.
Except when IFRSs permit or require otherwise, an entity shall disclose comparatively information in respect othe previous period for all amounts reported in the current period’s financial statements.
When the entity changes the presentation or Classification of items in its financial statements, the entity amounts reclassify comparative amounts, the entity shall disclose:
a) The nature of reclassification
b) The amount of each item that is reclassified and
c) The reason for reclassification.
When it is impracticable to reclassify comparative amounts, an entity shall disclose:
a) The reason for not reclassifying the amounts, and
b) The nature of the adjustments that would have been made if the amounts had been reclassified.
Ifrs requires financial statement information to be easily identified by users of the information and it should have the appropriate headings and details. When an entity presents current and non current assets, and current and non – current liabilities as separate classifications in its statement of financial position, it shall not classify deferred tax assets (liabilities) as current assets .
IAS 1 states that an entity shall present current and non-current assets, and current and non current liabilities as separate classifications in its statement of financial position .
An entity shall disclose the following either in the statement of financial position or the statement of changes in equity or also in the notes.
a) For each class of share capital:
- The number of shares authorized
- The number of shares issued and fully paid and issued and not fully paid.
- Par value per share or that the shares have no par value.
- A reconciliation of the number of shares outstanding at the beginning and at the end of the period.
- The rights preferences, and restrictions attaching to that class including restrictions on the distribution of dividends and the payment of capital.
- Shares in the entity held by the subsidiaries or associates.
- Shares reserved for issue under options and contracts for the sale of share including terms and amounts.
b) A description of the nature and purpose of each reserve within equity.
Information to be prepared in the statement of comprehensive income include:
- Revenue
- Finance costs
- Gains and losses arising from derecognition of financial assets measured at amortized cost;
- Share of profit or loss of associates and joint ventures accounted for using the equity method
- Gains or losses from reclassification of assets
- Tax expense
- Each component of other comprehensive income classified by nature.
- Share of the comprehensive income of associates accounted for using equity method.
Total Comprehensive Income
It should be noted that the entity shall disclose the following items in the statement of comprehensive income as allocations for the period. An entity shall disclose the amount of income tax relating to each component of other comprehensive income, including reclassification adjustments either in the statement of comprehensive income or in the notes.
The entity shall disclose in the summary of significant accounting policies,
a) The measurement basis used in preparing the financial statements and
b) The other accounting policies used that are relevant to an understanding of the financial statements
Source of Estimation Uncertainty
An entity shall disclose information about the assumption it makes about the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Capital
An entity shall disclose information that enables users of its financial statements to evaluate the entity’s objectives, policies and processes for managing capital.
Recommended Readings
Abbas A Mirza., Graham Holt., Liesel Knorr., Wiley IFRS: Practical Implementation Guide and Workbook
Dieter Christian., Nobert Ludenbach., IFRS Essentials
