Presentation of Financial Statement (PAS 1)

Presentation of Financial
Statement (PAS 1)
Overall consideration for financial statement: Fair presentation, accounting policies,
going concern accrual basis of accounting, consistency of presentation, materiality, and
aggregation, offsetting and comparative information.
Four basic financial statements:
1. Balance Sheet (the current/noncurrent distinction is NOT required)

2. Income Statement (operating/non-operating separation is required)
3. Cash Flow Statement
4. Statement showing changes in equity. Various formats are allowed:
 The statements show:
(a) Each item of income and expense, gain or loss, which is recognized
directly in equity, and the total of these items, certain foreign currency
translation gains and losses, and changes in fair values of financial
instruments; and
(b) Net profit or loss for the period, but NO total of (a) and (b). Owners’
investment and withdrawals of capital and other movements in retained
earnings and equity capital are shown in the notes
Cash Flow Statement
(PAS 7)
The cash flow statement is a required important financial statement, and it explains
changes in cash and cash equivalents during a period.
Cash equivalents are short-term, highly liquid investments subject to insignificant risk of
changes in value.
Cash flow statements should classify changes in cash and cash equivalents into
operating, investing, and financial activities.
Operating Activities
- May be presented using either direct or indirect methods,. Direct Method shows
receipts from customers and payments to suppliers, employees, government
(taxes), etc. The indirect method begins with accrual basis net profit or loss and
adjusts major non-cash items.
Investing Activities
- Disclose separately cash receipts and payments arising from acquisition or sale of
property, plant, and equipment; acquisition or sale of equity or debt instruments of
other enterprise (including acquisition or sale of subsidiaries); and advances and
loans made to, or repayments from, third parties.
Financing Activities
- Disclose separately cash receipts and payments arising from an issue of a share or
other equity securities; payments made to redeem such securities; proceeds arising
from issuing debentures, loans, notes; and repayments of such securities.
Cash flows from taxes should be disclosed SEPARATELY within operating

activities, unless they can be correctly identifies with one of the other two headings.
Investing and financing activities that do NOT give rise to cash flows (a nonmonetary
transaction such as an acquisition of property by issuing debt) should be EXCLUDED
from the cash flow statement but disclosed SEPARATELY.
Net Profit or Loss for the Period,
Fundamental Errors and Changes in
Accounting Policies
(PAS 8)
Separate disclosure of extraordinary items1 of profit or loss is required on the face of the
income statement, after the total profit or loss from ordinary activities. Such
extraordinary items are:
 Items of income or expense arising from ordinary activities that are abnormal
because of their size, nature, or incidence are separately disclosed, usually in the
notes.
 A change in accounting estimate should be reflected prospectively. The nature
and effect of the change should be disclosed, even if the effect will only be
significant in a future period. If the effect cannot be quantified, that fact should be
disclosed.
 A change in accounting policy should be treated retrospectively by restating all
prior periods presented and adjusting opening retained earnings (benchmark). If the
adjustments relating to prior periods CANNOT be reasonably determined, the
change may be accounted for prospectively. An allowed alternative for the
adjustments arising from a retrospective change in accounting policy is to
INCLUDE it in the determination of net profit or loss for the current period.
Disclosure is required of the reasons for and effect and accounting treatment of
change.
o A change in accounting policy should be made ONLY if required by statute
or by an accounting standard-setting body, or if the change results in a more
appropriate presentation of financial statements
1
Extraordinary items are rarer and beyond management control. Examples are expropriation of assets and effects of natural
disasters
Events After the Balance
Sheet Date (PAS 10)
An enterprise should adjust its financial statements for events after the balance sheet date
that provide further evidence of conditions that EXISTED at the balance sheet date;
An enterprise should NOT adjust its financial statements for events AFTER the balance
sheet date that are indicative of conditions that arose after the balance sheet date;
If dividends to holders of equity instruments are proposed or declared AFTER the

balance sheet date, and enterprise should NOT recognize those dividends as a liability;
An enterprise may give the disclosure of proposed dividends either on the face of the
balance sheet as an appropriation within equity or in the notes to the financial statements;
An enterprise should NOT prepare its financial statements on going concern basis if
management determines after the balance sheet date either that it intends to liquidate the
enterprise or to cease trading, or that it has no realistic alternative but to do so;
There should NO longer be a requirement to adjust the financial statements where an

event after the balance sheet date indicates that the going concern assumption is NOT
appropriate part of an enterprise;
An enterprise should disclose the date when the financial statements were authorized
for issue and who gave that authorization. If the enterprise’s owners or others have the
power to amend the financial statements AFTER issuance, the enterprise should disclose
that fact; and
An enterprise should update disclosure that relate to conditions that existed at the balance
sheet date in the light of any new information that it receives AFTER the balance sheet
date about those conditions.

Presentation of Financial Statement (PAS 1)

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Presentation of Financial

Four basic financial statements:

1. Balance Sheet (the current/noncurrent distinction is NOT required)

Cash flows from taxes should be disclosed SEPARATELY within operating

If dividends to holders of equity instruments are proposed or declared AFTER the

There should NO longer be a requirement to adjust the financial statements where an

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