Chapter 3

PRESENTATION OF FINANCIAL STATEMENTS (IAS-1)

OBJECTIVE
The objective of this Standard is to prescribe the basis for presentation of general-
purpose financial statements, to ensure comparability both with the entity’s financial
statement 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.
SCOPE
This Standard shall be applied to all general-purpose (individual and group) financial
statements prepared and presented in accordance with International Financial
Reporting Standards (IFRSs). This IFRS is not applicable to the structure and contents of
interim financial statements.
DEFINITIONS
General purpose financial statements (referred to as ‘financial statements’) are those
intended to meet the needs of users who are not in a position to require an entity to
prepare reports tailored to their particular information needs.
Impracticable Applying a requirement is impracticable when the entity cannot apply it
after making every reasonable effort to do so.
Notes contain information in addition to that presented in the statement of financial
position, statement of comprehensive income, statement of changes in equity and
statement of cash flows. Notes provide narrative descriptions or dis-aggregations of
items disclosed in those statement and information about items that do not qualify for
recognition in those statements.
Other comprehensive income comprises items of income and expense (including
reclassification adjustments) that are not recognized in profit or loss as required or
permitted by other IFRSs.
Owners are holders of instruments classified as equity.
Profit or loss is the total of income less expenses, excluding the components of other
comprehensive income.
Reclassification adjustments are amounts reclassified to profit or loss in the current
period that were recognized in other comprehensive income in the current or previous
periods.
Total comprehensive income is the change in equity during a period resulting from
transactions and other events, other than those changes resulting from transactions
with owners in their capacity as owners.
GENERAL FEATURES
Fair Presentation and Compliance with IFRSs
Financial statements shall present fairly the financial position, financial performance
and cash flows of an entity. Fair presentation requires the faithful representation of the
effects of transactions, other events and conditions in accordance with the definitions
and recognition criteria for assets, liabilities, income and expenses set out in the

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Framework. The application of IFRSs, with additional disclosure when necessary, is
presumed to result in financial statements that achieve a fair presentation.
A fair presentation also requires an entity: -
a) To select and apply accounting policies in accordance with IAS-8
b) To present information in a manner that provides reliable, relevant, comparable
and understandable information.
c) To provide additional disclosures when compliance with the IFRSs is insufficient to
enable users to understand the impact of particular transactions and events.
Un-reserved statement
An entity whose financial statements comply with IFRSs shall make an explicit and
unreserved statement of such compliance in the notes. Financial statements shall not
be described as complying with IFRSs unless they comply with all the requirements of
IFRSs.
In-appropriate Treatment
Inappropriate accounting policies are not rectified either by disclosure of the
accounting policies used or by notes or explanatory material.
Disagreement with IFRSs
In the extremely rare circumstances in which management concludes that compliance
with a requirement in a Standard or an Interpretation would be so misleading that it
would conflict with the objective of financial statements set out in the Framework, the
entity shall depart from that requirement in the manner set out under IAS-1.
Going Concern
When preparing financial statements, management shall make an assessment of an
entity’s ability to continue as a going concern. Financial statements shall be prepared
on a going concern basis unless management either intends to liquidate the entity or to
cease trading, or has no realistic alternative but to do so. When management is aware,
in making its assessment, of material uncertainties related to events or conditions that
may cost significant doubt upon the entity’s ability to continue as a going concern,
those uncertainties shall be disclosed. When financial statements are not prepared on a
going concern basis that fact shall be disclosed, together with the basis on which the
financial statements are prepared and the reason whey the entity is not regarded as a
going concern.
Accrual Basis of Accounting
An entity shall prepare its financial statements, except for cash flow information, using
the accrual basis of accounting.
Consistency of Presentation
The presentation and classification of items in the financial statements shall be retained
from one period to the next unless:
a) Under IAS 8, when a change in accounting policy applied or prior period error is
rectified retrospectively; or
b) a Standard or an Interpretation requires a change in presentation

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Materiality and Aggregation
Each material class of similar items shall be presented separately in the financial
statements. Items of a dissimilar nature of function shall be presented separately unless
they are immaterial.
Offsetting
Assets and liabilities, and income and expenses, shall not be offset unless required or
permitted by a Standard or an Interpretation.
Frequency of reporting
An entity shall present a complete set of financial statements (including comparative
information) at least annually. When an entity changes the end of its reporting period
and presents financial statements for a period longer or shorter than one year, an entity
shall disclose, in addition to the period covered by the financial statements:
(a) the reason for using a longer or shorter period, and
(b) the fact that amounts presented in the financial statements are not entirely
comparable.
Comparative Information
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.
Changed in accounting policy, retrospective restatement or reclassification
An entity shall present a third statement of financial position as at the beginning
of the preceding period in addition to the minimum comparative financial
statements required in paragraph 38A if:
(a) it applies an accounting policy retrospectively, makes a retrospective
restatement of items in its financial statements or reclassifies items in its
financial statements; and
(b) the retrospective application, retrospective restatement or the
reclassification has a material effect on the information in the statement of
financial position at the beginning of the preceding period.
STRUCTURE AND CONTENT
Identification of the Financial Statements
The financial statements shall be identified clearly and distinguished from other
information in the same published document.
Each component of the financial statements shall be identified clearly. In addition, the
following information shall be displayed prominently, and repeated when it is necessary
for a proper understanding of the information presented:
(a) the name of the reporting entity or other means of identification, and any
change in that information from the preceding statement of financial position
date;
(b) whether the financial statements cover the individual entity or a group of entities;

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(c) the statement of financial position date or the period covered by the financial
statements, whichever is appropriate to that component of the financial
statements;
(d) the presentation currency, as defined in IAS 21 The Effects of Changes in Foreign
Exchange Rates; and
(e) the level of rounding used in presenting amounts in the financial statements.
STATEMENT OF FINANCIAL POSITION
Current/Non-current Distinction
An entity shall present current and non-current assets, and current and non-current
liabilities, as separate classifications on the face of its statement of financial position in
accordance except when a presentation based on liquidity provides information that is
reliable and is more relevant. When that exception applies, all assets and liabilities shall
be presented broadly in order of liquidity.
Whichever method of presentation is adopted, for each asset and liability line item that
combines amounts expected to be recovered or settled (a) no more than twelve
months after the statement of financial position date and (b) more than twelve months
after the statement of financial position date, an entity shall disclose the amount
expected to be recovered or settled after more than twelve months.
Current assets
An asset shall be classified as current when it satisfies any of the following criteria:
(a) it is expected to be realized in, or is intended for sale or consumption in, the
entity’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is expected to be realized within twelve months after the statement of financial
position date; or
(d) it is cash or a cash equivalent (as defined in IAS 7 Statement of Cash Flow) unless
it is restricted from being exchanged or used to settle a liability for at least twelve
months after the statement of financial positions date
All other assets shall be classified as non-current.
Current liabilities
A liability shall be classified as current when it satisfies any of the following criteria:
(a) it is expected to be settled in the entity’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is due to be settled within twelve months after the statement of financial
position date; or
(d) the entity does not have an unconditional right to defer settlement of the liability
for at least twelve months after the statement of financial position date.
All other liabilities shall be classified as non-current.
STATEMENT OF COMPREHENSIVE INCOME
An entity shall present all items of income and expense recognized in a period in a
single statement of comprehensive income.
Information to be presented in the statement of comprehensive income

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As a minimum, the statement of comprehensive income shall include line items that
present the following amounts for the period:
(a) revenue;
(b) finance costs;
(c) share of the profit or loss of associates and joint ventures accounted for using
the equity method;
(d) tax expense;
(e) profit or loss;
(f) each component of other comprehensive income classified by nature;
(h) share of the other comprehensive income of associates and joint ventures
accounted for using the equity method; and
(i) total comprehensive income.
An entity shall disclose the following items in the statement of comprehensive income
as allocations of profit or loss for the period:
(a) profit or loss for the period attributable to:
(i) non-controlling interests, and
(ii) owners of the parent.
(b) total comprehensive income for the period attributable to:
(i) non-controlling interests, and
(ii) owners of the parent.
An entity shall present additional line items, headings and subtotals in the statement of
comprehensive income and the separate income statement (if presented), when such
presentation is relevant to an understanding of the entity’s financial performance.
Other comprehensive income 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.
An entity may present components of other comprehensive income either:
(a) net of related tax effects, or
(b) before related tax effects with one amount shown for the aggregate amount of
income tax relating to those components.
An entity shall disclose reclassification adjustments relating to components of other
comprehensive income.
STATEMENT OF CHANGES IN EQUITY
An entity shall present a statement of changes in equity showing in the statement:
(a) total comprehensive income for the period, showing separately the total
amounts attributable to owners of the parent and to non-controlling interests;
(b) for each component of equity, the effects of retrospective application or
retrospective restatement recognized in accordance with IAS 8; and
(c) for each component of equity, a reconciliation between the carrying amount at
the beginning and the end of the period, separately disclosing changes resulting
from:
(i) profit or loss;
(ii) each item of other comprehensive income: and
(i) transactions with owners in their capacity as owners, showing separately
contributions by and distributions to owners and changes in ownership
interests in subsidiaries that do not result in a loss of control.

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 An entity shall present, either in the statement of changes in equity or in the notes, the
amount of dividends recognized as distributions to owners during the period, and the
related amount per share.
Statement of Cash Flows
Cash flow information provides users of financial statements with a basis to assess the
ability of the entity to generate cash and cash equivalents and the needs of the entity
to utilize those cash flows. IAS -7 sets out requirements for the presentation of statement
of cash flows and related disclosures.
NOTES
Structure
The notes shall:
(a) present information about the basis of preparation of the financial statements
and the specific accounting policies used;
(b) disclose the information required by IFRSs that is not presented on the face of the
statement of financial position, statement of comprehensive income, statement
of changes in equity or cash flow statement; and
(c) provide additional information that is not presented on the face of the statement
of financial position, statement of comprehensive income, statement of changes
in equity or cash flow statement, but is relevant to an understanding of any of
them.
Notes shall, as far as practicable, be presented in a systematic manner. Each item on
the face of the statement of financial position, statement of comprehensive income,
statement of changes in equity and cash flow statement shall be cross-referenced to
any related information in the notes.
Disclosure of Accounting Policies
An entity shall disclose in the summary of significant accounting policies:
(a) the measurement basis (or bases) used in preparing the financial statements;
and
(b) the other accounting policies used that are relevant to an understanding of the
financial statements.
An entity shall disclose, in the summary of significant accounting policies or other notes,
the judgments, apart from those involving estimations, management has made in the
process of applying the entity’s accounting policies that have the most significant
effect on the amounts recognized in the financial statements.
Key Sources of Estimation Uncertainty
An entity shall disclose in the notes information about the key assumptions concerning
the future, and other key sources of estimation uncertainty at the statement of financial
position date, that have an significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year. In respect of
those assets and liabilities, the notes shall include details of:
(a) their nature; and
(b) their carrying amount as at the statement of financial position date.
Capital

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 An entity shall disclose information that enables users of its financial statements to
evaluate the entity’s objectives, policies and processes for managing capital.
Puttable financial instruments classified as equity
For puttable financial instruments classified as equity instruments, an entity shall disclose
(to the extent not disclosed elsewhere):
(a) summary quantitative data about the amount classified as equity;
(b) its objectives, policies and processes for managing its obligation to repurchase or
redeem the instruments when required to do so by the instrument holders,
including any changes from the previous period;
(c) the expected cash outflow on redemption or repurchase of that class of
financial instruments; and
(d) information about how the expected cash outflow on redemption or repurchase
was determined.
Other Disclosures
An entity shall disclose in the notes:
(a) the amount of dividends proposed or declared before the financial statements
were authorized for issue but not recognized as a distribution to equity holders
during the period, and the related amount per share; and
(b) the amount of any cumulative preference dividends not recognized.
An entity shall disclose the following, if not disclosed elsewhere in information published
with the financial statements:
(a) the domicile and legal form of the entity, its country of incorporation and the
address of its registered office (or principal place of business, if different from the
registered office);
(b) a description of the nature of the entity’s operations and its principal activities;
and
(c) the name of the parent and the ultimate parent of the group.

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FORMAT OF STATEMENT OF FINANCIAL STATEMENTS
ABC GROUP
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 20X9

Rs. Rs.
ASSETS
Non-curent assets
Property, plant and equipment x
Goodwill x
Other intangible assets x
Investments in associates x
Investments in equity instruments x xx

Current assets
Inventories x
Trade receivables x
Other current assets x
Cash and cash equivalents x
x XX
Total assets XXX

EQUITY AND LIABILITIES

Capital and reserves
Share capital x
Retained earnings x
Other components of equity x x
Non-controlling interest x

Total equity XX
Non-current liabilities
Long-term borrowings x
Deferred tax x
Long-term provision x XX

Current liabilities x
Trade and other payables x
Short-term borrowings x
Current portion of long term borrowings x
Current tax payable x XX
Short-term provisions

Total equity and liabilities XXX

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FORMAT OF STATEMENT OF COMPREHENSIVE INCOME
Two formats of income statement are provided, one using the classification of expenses
by function and the other using classification by nature.
Classification of expenses by function
ABC Group
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 20X9
INCOME STATEMENT Rs. Rs.
Revenue X
Cost of sales (x)
Gross profit X
Distribution cost X
Administrative expenses X (xx)
Profit from operations X
Finance cost (x)
Profit before tax X
Tax expense (x)
Profit for the year from continuing operations X
Profit after tax from discontinued operations X
Profit for the year (A) XX
OTHER COMPREHENSIVE INCOME
Items that will be not be re-classified to profit or loss account
Gain of property revaluation X
Gain/(Loss) at fair value through OCI Investments (equity instruments) X
Re-measurement of defined benefit pension plans X
Share of other comprehensive income from associate X
Income tax relating to items that will not be reclassified (x) X
Items that will be re-classified to profit or loss account
Exchange difference on translation of foreign operation X
Cash flow hedges X
Gain/(Loss) at fair value through OCI Investments (Debt instruments) X
Reclassification adjustment (X)
Income tax relating to components of other comprehensive income (X) X
Other comprehensive income (B) XX
TOTAL COMPREHENSIVE INCOME FOR THE YEAR (A+B) XXX
Profit attributable to: -
Owners of the parent X
Non-controlling interest X XX
Total comprehensive income attributable to: -
Owners of the parent X
Non-controlling interest X XX
Earnings per share

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 Basic X
Dilutive X

FORMAT OF STATEMENT OF CHANGES IN EQUITY

The statement of changes in equity provides a comprehensive summary of all
movements in the share capital and reserves during the year.
ABC Group
Statement of changes in equity
For the year ended 31 December 20X9
Share Share Revaluation Retained Total
capita premium reserve earnings
Rs. Rs. Rs. Rs. Rs.
Balance at 31 December 20X1 X X X X XX
Changes in accounting policy (x) (XX)
Restated balance XX XX XX XX XX
Total Comprehensive income X X XX
Dividends (X) (XX)
Issue of share capital X XX
Bonus issue X (X) --
Transfer to retained earnings (X) X --
Balance at 31 December 20X2 XXX XXX XXX XXX XXX

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