A Complete set of Financial Statements (as agree with IAS 1)

This Standard (IAS 1 Presentation of Financial Statements) prescribes the basis for presentation of general purpose financial statements to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities. It sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content (IAS 1 Presentation of Financial Statements par.1)

An entity shall apply this Standard in preparing and presenting general purpose financial statements in accordance with International Financial Reporting Standards (IFRSs) (IAS 1 Presentation of Financial Statements par. 2)

IAS 1 applies to all entities, including profit-oriented and not-for-profit entities. Not-for-profit entities in both the private and public sectors can apply this standard, however they may need to change the descriptions used for particular line items within their financial statements and for the financial statements themselves.

Financial statements are a structured representation of the financial position and financial performance of an entity.

The objective of 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. Financial statements also show the results of the management’s stewardship of the resources entrusted to it.

To meet this 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, and (f) cash flows.

This information along with other information in the notes, assists users of financial statements in predicting the entity’s future cash flows and, in particular, their timing and certainty.

Par. 10 of IAS 1 rules that a complete set of financial statements must comprises the following :

1. A statement of financial position as at the end of the period. The previous version of IAS 1 used the title “balance sheet”. The revised standard uses the title “statement of financial position.”

2. A statement of comprehensive income for the period

3. A statement of changes in equity for the period

4. A statement of cash flows for the period. The previous version of IAS 1 used the title “cash flow statement.”

5. Notes, comprising a summary of significant accounting policies and other explanatory information; and

6. A statement of financial position as at the beginning of the earliest comparative period 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.

An entity shall present with equal prominence all of the financial statements in a complete set of financial statements.

The financial statements, except for cash flow information, are to be prepared using accrual basis of accounting.

As permitted by paragraph 81 of IAS 1, an entity may present the components of profit or loss either as part of a single statement of comprehensive income or in a separate income statement.

When an income statement is presented it is part of a complete set of financial statements and shall be displayed immediately before the statement of comprehensive income.

Many entities present, outside the financial statements, a financial review by management that describes and explains the main features of the entity’s financial performance and financial position, and the principal uncertainties it faces.

Such a report may include a review of : (a) the main factors and influences determining financial performance, including changes in the environment in which the entity operates, the entity’s response to those changes and their effect, and the entity’s policy for investment to maintain and enhance financial performance, including its dividend policy; (b) the entity’s sources of funding and its targeted ratio of liabilities to equity; and (c) the entity’s resources not recognized in the statement of financial position in accordance with IFRSs.

Many entities also present, outside the financial statements, reports and statements such as environmental reports and value added statements, particularly in industries in which environment factors are significant and when employees are regarded as an important user group.

Reports and statements presented outside financial statements are outside the scope of IFRSs.

Source of this article : IAS 1 Presentation of Financial Statements (amendments resulting from IFRS issued up to 17 January 2008)