Sunday, February 15, 2009

Comparative Information of financial statements based on IAS 1

Except when IFRSs permit or require otherwise, an entity shall disclose comparative information in respect of the previous period for all amounts reported in the current period's financial statements. An entity shall include comparative information for narrative and descriptive information when it is relevant to an understanding of the current period's financial statements (IAS 1 par. 38).

Par. 39 stated that an entity disclosing comparative information shall present, as a minimum, two statements of financial position, two of each of the other statements, and related notes. 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 shall present, as a minimum, three statements of financial position, two of each of the other statements, and related notes. An entity presents statements of financial position as at :

  1. the end of the current period,
  2. the end of the previous period (which is the same as the beginning of the current period), and
  3. the beginning of the earliest comparative period

In some cases, narrative information provided in the financial statements for the previous period(s) continues to be relevant in the current period. For example, an entity discloses in the current period details of a legal dispute whose outcome was uncertain at the end of the immediately preceding reporting period and that is yet to be resolved. Users benefit from information that the uncertainty existed at the end of the immediately preceding reporting period, and about the steps that have been taken during the period to resolve the uncertainty (IAS 1 par. 40).

Further, par. 41 stated that when the entity changes the presentation or classification of items in its financial statements, the entity shall reclassify comparative amounts unless reclassification is impracticable. When the entity reclassifies comparative amounts, the entity shall disclose :

  1. the nature of the reclassification;
  2. the amount of each item or class of items that is reclassified; and
  3. the reason for the reclassification.

When it is impracticable to reclassify comparative amounts, an entity shall disclose :

  1. the reason for not reclassifying the amounts, and
  2. the nature of the adjustments that would have been made if the amounts had been reclassified.

Enhancing the inter-period comparability of information assists users in making economic decisions, especially by allowing the assessment of trends in financial information for predictive purposes. In some circumstances, it is impracticable to reclassify comparative information for a particular prior period to achieve comparability with the current period. For example, an entity may not have collected data in the prior period(s) in a way that allows reclassification, and it may be impracticable to recreate the information (par. 43).

Later, par. 44 stated that IAS 8 sets out the adjustments to comparative information required when an entity changes an accounting policy or corrects an error (Hrd) ***

(Source : IAS 1 - Presentation of Financial Statements)

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