IAS 1 — Presentation of Financial Statements That information, along with other information in the notes,

assists users of financial statements in predicting the entity's

 sets out the overall requirements for financial future cash flows and, in particular, their timing and certainty.
statements, including how they should be structured,
the minimum requirements for their content and Components of financial statements
overriding concepts such as going concern, the
accrual basis of accounting and the current/non- A complete set of financial statements includes: [IAS 1.10]
current distinction  a statement of financial position (balance sheet) at the
 requires a complete set of financial statements to end of the period
comprise a statement of financial position, a  a statement of profit or loss and other comprehensive
statement of profit or loss and other comprehensive income for the period (presented as a single
income, a statement of changes in equity and a statement, or by presenting the profit or loss section
statement of cash flows. in a separate statement of profit or loss, immediately
followed by a statement presenting comprehensive
Objective of IAS 1 income beginning with profit or loss)
 a statement of changes in equity for the period
 to prescribe the basis for presentation of general  a statement of cash flows for the period
purpose financial statements  notes, comprising a summary of significant
accounting policies and other explanatory notes
 to ensure comparability both with the entity's financial
 comparative information prescribed by the standard.
statements of previous periods and with the financial
statements of other entities An entity may use titles for the statements other than those
 sets out the overall requirements for the presentation stated above.  All financial statements are required to be
of financial statements, guidelines for their structure presented with equal prominence. [IAS 1.10] 
and minimum requirements for their content.
When an entity applies an accounting policy retrospectively or
Scope makes a retrospective restatement of items in its financial
statements, or when it reclassifies items in its financial
 applies to all general purpose financial statements
statements, it must also present a statement of financial
that are prepared and presented in accordance with
position (balance sheet) as at the beginning of the earliest
International Financial Reporting Standards (IFRSs).
comparative period.
General purpose financial statements are those intended to
Reports that are presented outside of the financial statements
serve users who are not in a position to require financial
– including financial reviews by management, environmental
reports tailored to their particular information needs. [IAS 1.7]
reports, and value added statements – are outside the scope
Objective of financial statements of IFRSs. [IAS 1.14]

 to provide information about the financial position, Fair presentation and compliance with IFRSs
financial performance, and cash flows of an entity that
 The financial statements must "present fairly" the
is useful to a wide range of users in making economic
financial position, financial performance and cash
decisions.
flows of an entity.
 To meet that objective, financial statements provide
information about an entity's: [IAS 1.9]  Fair presentation requires the faithful representation
of the effects of transactions, other events, and
 assets conditions in accordance with the definitions and
 liabilities recognition criteria for assets, liabilities, income and
 equity expenses set out in the Framework.
 income and expenses, including gains and
 The application of IFRSs, with additional disclosure
losses
 contributions by and distributions to owners (in when necessary, is presumed to result in financial
their capacity as owners) statements that achieve a fair presentation. [IAS 1.15]
 cash flows.
IAS 1 requires an entity whose financial statements comply the basis of those financial statements, which provide financial
with IFRSs to make an explicit and unreserved statement of information about a specific reporting entity. [IAS 1.7]*
such compliance in the notes. Financial statements cannot be
described as complying with IFRSs unless they comply with all Each material class of similar items must be presented
the requirements of IFRSs (which includes IFRS, IAS, IFRIC separately in the financial statements. Dissimilar items may be
Interpretations and SIC Interpretations). [IAS 1.16] aggregated only if they are individually immaterial. [IAS 1.29]

Inappropriate accounting policies are not rectified either by However, information should not be obscured by aggregating
disclosure of the accounting policies used or by notes or or by providing immaterial information, materiality
explanatory material. [IAS 1.18] considerations apply to the all parts of the financial statements,
and even when a standard requires a specific disclosure,
IAS 1 acknowledges that, in extremely rare circumstances, materiality considerations do apply. [IAS 1.30A-31]
management may conclude that compliance with an IFRS
requirement would be so misleading that it would conflict with Offsetting
the objective of financial statements set out in the Framework. Assets and liabilities, and income and expenses, may not be
In such a case, the entity is required to depart from the IFRS offset unless required or permitted by an IFRS. [IAS 1.32]
requirement, with detailed disclosure of the nature, reasons,
and impact of the departure. [IAS 1.19-21] Comparative information

Going concern IAS 1 requires that comparative information to be disclosed in

respect of the previous period for all amounts reported in the
The Conceptual Framework notes that financial statements are financial statements, both on the face of the financial
normally prepared assuming the entity is a going concern and statements and in the notes, unless another Standard requires
will continue in operation for the foreseeable future. otherwise. Comparative information is provided for narrative
[Conceptual Framework, paragraph 4.1] and descriptive where it is relevant to understanding the
IAS 1 requires management to make an assessment of an financial statements of the current period. [IAS 1.38]
entity's ability to continue as a going concern.  If management An entity is required to present at least two of each of the
has significant concerns about the entity's ability to continue as following primary financial statements: [IAS 1.38A]
a going concern, the uncertainties must be disclosed. If
management concludes that the entity is not a going concern,  statement of financial position*
the financial statements should not be prepared on a going  statement of profit or loss and other comprehensive
concern basis, in which case IAS 1 requires a series of income
disclosures. [IAS 1.25]  separate statements of profit or loss (where
presented)
Accrual basis of accounting  statement of cash flows
 statement of changes in equity
IAS 1 requires that an entity prepare its financial statements,  related notes for each of the above items.
except for cash flow information, using the accrual basis of
accounting. [IAS 1.27] * A third statement of financial position is required to be
presented if the entity retrospectively applies an accounting
Consistency of presentation policy, restates items, or reclassifies items, and those
adjustments had a material effect on the information in the
The presentation and classification of items in the financial statement of financial position at the beginning of the
statements shall be retained from one period to the next unless comparative period. [IAS 1.40A]
a change is justified either by a change in circumstances or a
requirement of a new IFRS. [IAS 1.45] Where comparative amounts are changed or reclassified,
various disclosures are required. [IAS 1.41]
Materiality and aggregation

Information is material if omitting, misstating or obscuring it

could reasonably be expected to influence decisions that the
primary users of general purpose financial statements make on
Structure and content of financial statements in general All other assets are non-current. [IAS 1.66]

IAS 1 requires an entity to clearly identify: [IAS 1.49-51] Current liabilities are those: [IAS 1.69]

 the financial statements, which must be distinguished  expected to be settled within the entity's normal
from other information in a published document operating cycle
 each financial statement and the notes to the financial  held for purpose of trading
statements.  due to be settled within 12 months
 for which the entity does not have the right at the end
of the reporting period to defer settlement beyond 12
In addition, the following information must be displayed months.
prominently, and repeated as necessary: [IAS 1.51]
Other liabilities are non-current.
 the name of the reporting entity and any change in the
name o When a long-term debt is expected to be refinanced
 whether the financial statements are a group of under an existing loan facility, and the entity has the
entities or an individual entity discretion to do so, the debt is classified as non-
 information about the reporting period current, even if the liability would otherwise be due
 the presentation currency (as defined by IAS 21 The within 12 months. [IAS 1.73]
Effects of Changes in Foreign Exchange Rates)
 the level of rounding used (e.g. thousands, millions).
o If a liability has become payable on demand because
an entity has breached an undertaking under a long-
Reporting period term loan agreement on or before the reporting date,
the liability is current, even if the lender has agreed,
There is a presumption that financial statements will be after the reporting date and before the authorisation of
prepared at least annually. If the annual reporting period the financial statements for issue, not to demand
changes and financial statements are prepared for a different payment as a consequence of the breach. [IAS 1.74]
period, the entity must disclose the reason for the change and However, the liability is classified as non-current if the
state that amounts are not entirely comparable. [IAS 1.36] lender agreed by the reporting date to provide a
period of grace ending at least 12 months after the
STATEMENT OF FINANCIAL POSITION (BALANCE SHEET)
end of the reporting period, within which the entity can
Current and non-current classification rectify the breach and during which the lender cannot
demand immediate repayment. [IAS 1.75]
An entity must normally present a classified statement of
financial position, separating current and non-current assets Settlement by the issue of equity instruments does not impact
and liabilities, unless presentation based on liquidity provides classification. [IAS 1.76B]
information that is reliable. [IAS 1.60] In either case, if an asset
Line items
(liability) category combines amounts that will be received
(settled) after 12 months with assets (liabilities) that will be The line items to be included on the face of the statement of
received (settled) within 12 months, note disclosure is required financial position are: [IAS 1.54]
that separates the longer-term amounts from the 12-month
amounts. [IAS 1.61] (a) property, plant and equipment
(b) investment property
Current assets are assets that are: [IAS 1.66] (c) intangible assets
(d) financial assets (excluding amounts under (e), (h), and (i))
 expected to be realised in the entity's normal (e) investments accounted for using the equity method
operating cycle (f) biological assets
 held primarily for the purpose of trading (g) inventories
 expected to be realised within 12 months after the (h) trade and other receivables
reporting period (i) cash and cash equivalents
 cash and cash equivalents (unless restricted). (j) assets held for sale
(k) trade and other payables
(l) provisions  shares reserved for issuance under options and
(m)financial liabilities (excluding amounts under (k) and (l)) contracts
(n) current tax liabilities and current tax assets (IAS 12)  a description of the nature and purpose of each
(o) deferred tax liabilities and deferred tax assets (IAS 12) reserve within equity.
(p) liabilities included in disposal groups *Additional disclosures are required in respect of entities without
(q) non-controlling interests, presented within equity share capital and where an entity has reclassified puttable financial
(r) issued capital and reserves attributable to owners of the parent. instruments.  [IAS 1.80-80A]
*Additional line items, headings and subtotals may be needed to
fairly present the entity's financial position. [IAS 1.55]  STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
When an entity presents subtotals, those subtotals shall be
comprised of line items made up of amounts recognised and Concepts of profit or loss and comprehensive income
measured in accordance with IFRS; be presented and labelled
in a clear and understandable manner; be consistent from  Profit or loss - "the total of income less expenses,
period to period; and not be displayed with more prominence excluding the components of other comprehensive
than the required subtotals and totals. [IAS 1.55A]* income"
 Other comprehensive income - "items of income and
Further sub-classifications of line items presented are made in expense (including reclassification adjustments) that
the statement or in the notes, for example: [IAS 1.77-78]: are not recognised in profit or loss as required or
permitted by other IFRSs". 
 classes of property, plant and equipment  Total comprehensive income - "the change in equity
 disaggregation of receivables
 disaggregation of inventories in accordance during a period resulting from transactions and other
with IAS 2 Inventories events, other than those changes resulting from
 disaggregation of provisions into employee benefits transactions with owners in their capacity as owners".
and other items [IAS 1.7]
 classes of equity and reserves.
Comprehensive Income Profit or
= + OCI
for the period Loss
Format of statement

IAS 1 does not prescribe the format of the statement of All items of income and expense recognised in a period must
financial position. Assets can be presented current then non- be included in profit or loss unless a Standard or an
current, or vice versa, and liabilities and equity can be Interpretation requires otherwise. [IAS 1.88] Some IFRSs
presented current then non-current then equity, or vice versa. require or permit that some components to be excluded from
A net asset presentation (assets minus liabilities) is allowed . profit or loss and instead to be included in other
The long-term financing approach used in UK and elsewhere – comprehensive income.
fixed assets + current assets - short term payables = long-term
debt plus equity – is also acceptable. Examples of items recognised outside of profit or loss

Share capital and reserves

 Changes in revaluation surplus where the revaluation
Regarding issued share capital and reserves, the following method is used under IAS 16 Property, Plant and
disclosures are required: [IAS 1.79] Equipment and IAS 38 Intangible Assets
 Remeasurements of a net defined benefit liability or asset
 numbers of shares authorised, issued and fully paid, recognised in accordance with IAS 19 Employee
and issued but not fully paid Benefits (2011)
 par value (or that shares do not have a par value)  Exchange differences from translating functional currencies
 a reconciliation of the number of shares outstanding into presentation currency in accordance with IAS 21 The
at the beginning and the end of the period Effects of Changes in Foreign Exchange Rates
 description of rights, preferences, and restrictions  Gains and losses on remeasuring available-for-sale
financial assets in accordance with IAS 39 Financial
 treasury shares, including shares held by subsidiaries Instruments: Recognition and Measurement
and associates  The effective portion of gains and losses on hedging
 [IAS 1.99] If an entity categorises by function, then additional
instruments in a cash flow hedge under IAS 39
or IFRS 9 Financial Instruments information on the nature of expenses – at a minimum
 Gains and losses on remeasuring an investment in equity depreciation, amortisation and employee benefits expense –
instruments where the entity has elected to present them in must be disclosed. [IAS 1.104]
other comprehensive income in accordance with IFRS 9
 The effects of changes in the credit risk of a financial Other comprehensive income section
liability designated as at fair value through profit and loss
under IFRS 9. The other comprehensive income section is required to present
line items which are classified by their nature, and grouped
In addition, IAS 8 Accounting Policies, Changes in Accounting
between those items that will or will not be reclassified to profit
Estimates and Errors requires the correction of errors and the
and loss in subsequent periods. [IAS 1.82A]
effect of changes in accounting policies to be recognised
outside profit or loss for the current period. [IAS 1.89] An entity's share of OCI of equity-accounted associates and
joint ventures is presented in aggregate as single line items
Choice in presentation and basic requirements
based on whether or not it will subsequently be reclassified to
An entity has a choice of presenting: profit or loss. [IAS 1.82A]*

 a single statement of profit or loss and other When an entity presents subtotals, those subtotals shall be
comprehensive income, with profit or loss and other comprised of line items made up of amounts recognised and
comprehensive income presented in two sections, or measured in accordance with IFRS; be presented and labelled
 two statements: in a clear and understandable manner; be consistent from
 a separate statement of profit or loss period to period; not be displayed with more prominence than
 a statement of comprehensive the required subtotals and totals; and reconciled with the
income, immediately following the statement
subtotals or totals required in IFRS. [IAS 1.85A-85B]*
of profit or loss and beginning with profit or
loss [IAS 1.10A]
Other requirements
The statement(s) must present: [IAS 1.81A] Additional line items may be needed to fairly present the
entity's results of operations. [IAS 1.85]
 profit or loss
 total other comprehensive income Items cannot be presented as 'extraordinary items' in the
 comprehensive income for the period
financial statements or in the notes. [IAS 1.87]
 an allocation of profit or loss and comprehensive
income for the period between non-controlling Certain items must be disclosed separately either in the
interests and owners of the parent.
statement of comprehensive income or in the notes, if material,
including: [IAS 1.98]
Profit or loss section or statement

The following minimum line items must be presented in the  write-downs of inventories to net realisable value or of
property, plant and equipment to recoverable amount,
profit or loss section (or separate statement of profit or loss, if
as well as reversals of such write-downs
presented): [IAS 1.82-82A]  restructurings of the activities of an entity and
 revenue reversals of any provisions for the costs of
 gains and losses from the derecognition of financial restructuring
assets measured at amortised cost  disposals of items of property, plant and equipment
 finance costs  disposals of investments
 share of the profit or loss of associates and joint  discontinuing operations
ventures accounted for using the equity method  litigation settlements
 certain gains or losses associated with the  other reversals of provisions
reclassification of financial assets
 tax expense
 a single amount for the total of discontinued items STATEMENT OF CASH FLOWS
Expenses recognised in profit or loss should be analysed
either by nature (raw materials, staffing costs, depreciation,
etc.) or by function (cost of sales, selling, administrative, etc).
Rather than setting out separate requirements for presentation Notes are presented in a systematic manner and cross-
of the statement of cash flows, IAS 1.111 refers referenced from the face of the financial statements to the
to IAS 7 Statement of Cash Flows. relevant note. [IAS 1.113]

STATEMENT OF CHANGES IN EQUITY IAS 1.114 suggests that the notes should normally be
presented in the following order:*
IAS 1 requires an entity to present a separate statement of
changes in equity. The statement must show: [IAS 1.106]  a statement of compliance with IFRSs

 total comprehensive income for the period, showing  a summary of significant accounting policies applied,
separately amounts attributable to owners of the including: [IAS 1.117]
parent and to non-controlling interests  the measurement basis (or bases) used in
preparing the financial statements
 the effects of any retrospective application of
accounting policies or restatements made in  the other accounting policies used that are
accordance with IAS 8, separately for each relevant to an understanding of the financial
component of other comprehensive income statements

 reconciliations between the carrying amounts at the  supporting information for items presented on the face
beginning and the end of the period for each of the statement of financial position (balance sheet),
component of equity, separately disclosing: statement(s) of profit or loss and other comprehensive
 profit or loss income, statement of changes in equity and statement
 other comprehensive income* of cash flows, in the order in which each statement
 transactions with owners, showing separately and each line item is presented
contributions by and distributions to owners
and changes in ownership interests in  other disclosures, including:
subsidiaries that do not result in a loss of  contingent liabilities (see IAS 37) and
control unrecognised contractual commitments

* An analysis of other comprehensive income by item is  non-financial disclosures, such as the entity's
required to be presented either in the statement or in the notes. financial risk management objectives and
[IAS 1.106A] policies (see IFRS 7 Financial Instruments:
Disclosures)
The following amounts may also be presented on the face of
the statement of changes in equity, or they may be presented * Disclosure Initiative (Amendments to IAS 1), effective 1
in the notes: [IAS 1.107] January 2016, clarifies this order just to be an example of how
notes can be ordered and adds additional examples of
 amount of dividends recognised as distributions possible ways of ordering the notes to clarify that
 the related amount per share. understandability and comparability should be considered
when determining the order of the notes.
NOTES TO THE FINANCIAL STATEMENTS
The notes must: [IAS 1.112]

 present information about the basis of preparation of OTHER DISCLOSURES

the financial statements and the specific accounting
policies used Judgements and key assumptions

 disclose any information required by IFRSs that is not An entity must disclose, in the summary of significant
presented elsewhere in the financial statements and accounting policies or other notes, the judgements, apart from
those involving estimations, that management has made in the
 provide additional information that is not presented process of applying the entity's accounting policies that have
elsewhere in the financial statements but is relevant
the most significant effect on the amounts recognised in the
to an understanding of any of them
financial statements. [IAS 1.122]
Examples cited in IAS 1.123 include management's Puttable financial instruments
judgements in determining:
IAS 1.136A requires the following additional disclosures if an
 when substantially all the significant risks and rewards entity has a puttable instrument that is classified as an equity
of ownership of financial assets and lease assets are instrument:
transferred to other entities
 summary quantitative data about the amount
 whether, in substance, particular sales of goods are classified as equity
financing arrangements and therefore do not give rise  the entity's objectives, policies and processes for
to revenue. managing its obligation to repurchase or redeem the
instruments when required to do so by the instrument
An entity must also disclose, in the notes, information about holders, including any changes from the previous
the key assumptions concerning the future, and other key period
sources of estimation uncertainty at the end of the reporting  the expected cash outflow on redemption or
period, that have a significant risk of causing a material repurchase of that class of financial instruments and
 information about how the expected cash outflow on
adjustment to the carrying amounts of assets and liabilities
redemption or repurchase was determined.
within the next financial year. [IAS 1.125] These disclosures do
not involve disclosing budgets or forecasts. [IAS 1.130]
Other information
Dividends
The following other note disclosures are required by IAS 1 if
In addition to the distributions information in the statement of not disclosed elsewhere in information published with the
changes in equity (see above), the following must be disclosed financial statements: [IAS 1.138]
in the notes: [IAS 1.137]
 domicile and legal form of the entity
 the amount of dividends proposed or declared before  country of incorporation
the financial statements were authorised for issue but  address of registered office or principal place of
which were not recognised as a distribution to owners business
during the period, and the related amount per share  description of the entity's operations and principal
activities
 the amount of any cumulative preference dividends  if it is part of a group, the name of its parent and the
not recognised. ultimate parent of the group
 if it is a limited life entity, information regarding the
Capital disclosures
length of the life
An entity discloses information about its objectives, policies
and processes for managing capital. [IAS 1.134] To comply
with this, the disclosures include: [IAS 1.135] Terminology

 qualitative information about the entity's objectives, The 2007 comprehensive revision to IAS 1 introduced some
policies and processes for managing capital, new terminology. Consequential amendments were made at
including: that time to all of the other existing IFRSs, and the new
terminology has been used in subsequent IFRSs including
 description of capital it manages amendments.
 nature of external capital requirements, if any
 how it is meeting its objectives IAS 1.8 states: "Although this Standard uses the terms 'other
comprehensive income', 'profit or loss' and 'total
 quantitative data about what the entity regards as comprehensive income', an entity may use other terms to
capital describe the totals as long as the meaning is clear.
 changes from one period to another
 whether the entity has complied with any external For example, an entity may use the term 'net income' to
capital requirements and describe profit or loss." Also, IAS 1.57(b) states: "The
 if it has not complied, the consequences of such non- descriptions used and the ordering of items or aggregation of
similar items may be amended according to the nature of the
compliance.
entity and its transactions, to provide information that is
relevant to an understanding of the entity's financial position."
 IAS 7 — Statement of Cash Flow
 requires an entity to present a statement of cash flows
Term before 2007 Term as amended by IAS 1
as an integral part of its primary financial statements.
revision of IAS 1 (2007)
 Cash flows are classified and presented into
operating activities (either using the 'direct' or 'indirect'
balance sheet statement of financial position
method), investing activities or financing activities,
with the latter two categories generally presented on a
cash flow statement statement of cash flows
gross basis.
income statement statement of comprehensive
Objective of IAS 7
income (income statement is
 require the presentation of information about the
retained in case of a two-
historical changes in cash and cash equivalents of an
statement approach)
entity by means of a statement of cash flows, which
classifies cash flows during the period according to
recognised in the recognised in profit or loss operating, investing, and financing activities.
income statement
Fundamental principle in IAS 7
recognised [directly] in recognised in other  All entities that prepare financial statements in
equity (only for OCI comprehensive income conformity with IFRSs are required to present a
components) statement of cash flows. [IAS 7.1]
recognised [directly] in recognised outside profit or loss
 The statement of cash flows analyses changes in
equity (for recognition (either in OCI or equity)
cash and cash equivalents during a period.
both in OCI and equity)
 Cash and cash equivalents comprise cash on hand
and demand deposits, together with short-term, highly
removed from equity reclassified from equity to profit
liquid investments that are readily convertible to a
and recognised in profit or loss as a reclassification
known amount of cash, and that are subject to an
or loss ('recycling') adjustment
insignificant risk of changes in value.
Standard or/and IFRSs  Guidance notes indicate that an investment normally
Interpretation meets the definition of a cash equivalent when it has
a maturity of three months or less from the date of
on the face of in acquisition.
 Equity investments are normally excluded, unless
equity holders owners (exception for 'ordinary they are in substance a cash equivalent (e.g.
equity holders') preferred shares acquired within three months of their
specified redemption date).
balance sheet date end of the reporting period  Bank overdrafts which are repayable on demand and
which form an integral part of an entity's cash
reporting date end of the reporting period management are also included as a component of
cash and cash equivalents. [IAS 7.7-8]
after the balance sheet after the reporting period
date Presentation of the Statement of Cash Flows
 Cash flows must be analysed between operating,
investing and financing activities. [IAS 7.10]

Key principles specified by IAS 7 for the preparation of a

statement of cash flows are as follows:

 operating activities - are the main revenue-producing

activities of the entity that are not investing or
financing activities
- operating cash flows include cash received
from customers and cash paid to suppliers
and employees [IAS 7.14]
  investing activities - are the acquisition and disposal
Less Interest accrued but not yet paid xx,xxx
of long-term assets and other investments that are not
considered to be cash equivalents [IAS 7.6]
Interest paid xx,xxx
 financing activities - activities that alter the equity
capital and borrowing structure of the entity [IAS 7.6]
Income taxes paid xx,xxx
 Interest and dividends received and paid may be classified
Net cash from operating activities xx,xxx
as operating, investing, or financing cash flows, provided
that they are classified consistently from period to period  The exchange rate used for translation of transactions
[IAS 7.31] denominated in a foreign currency should be the rate in
 Cash flows arising from taxes on income are normally effect at the date of the cash flows [IAS 7.25] 
classified as operating, unless they can be specifically  Cash flows of foreign subsidiaries should be translated at
identified with financing or investing activities [IAS 7.35] the exchange rates prevailing when the cash flows took
 For operating cash flows, the direct method of presentation place [IAS 7.26] 
is encouraged, but the indirect method is acceptable [IAS  As regards the cash flows of associates, joint ventures,
7.18] and subsidiaries, where the equity or cost method is
used, the statement of cash flows should report only cash
The direct method shows each major class of gross cash flows between the investor and the investee; where
receipts and gross cash payments. The operating cash flows proportionate consolidation is used, the cash flow
section of the statement of cash flows under the direct method statement should include the venturer's share of the cash
would appear something like this: flows of the investee [IAS 7.37] 
Cash receipts from customers xx,xxx  Aggregate cash flows relating to acquisitions and
disposals of subsidiaries and other business units should
Cash paid to suppliers xx,xxx be presented separately and classified as investing
activities, with specified additional disclosures. [IAS 7.39]
Cash paid to employees xx,xxx The aggregate cash paid or received as consideration
should be reported net of cash and cash equivalents
Cash paid for other operating expenses xx,xxx acquired or disposed of [IAS 7.42] 
 Cash flows from investing and financing activities should
Interest paid xx,xxx be reported gross by major class of cash receipts and
major class of cash payments except for the following
Income taxes paid xx,xxx cases, which may be reported on a net basis: [IAS 7.22-
24]
Net cash from operating activities xx,xxx  cash receipts and payments on behalf of
customers (for example, receipt and repayment of
demand deposits by banks, and receipts collected
The indirect method adjusts accrual basis net profit or loss for on behalf of and paid over to the owner of a
the effects of non-cash transactions. The operating cash flows property)
section of the statement of cash flows under the indirect  cash receipts and payments for items in which the
method would appear something like this: turnover is quick, the amounts are large, and the
Profit before interest and income xx,xxx maturities are short, generally less than three
taxes months (for example, charges and collections from
credit card customers, and purchase and sale of
Add back depreciation xx,xxx investments)
 cash receipts and payments relating to deposits by
Add back impairment of assets xx,xxx financial institutions
 cash advances and loans made to customers and
Increase in receivables xx,xxx repayments thereof

Decrease in inventories xx,xxx  Investing and financing transactions which do not

require the use of cash should be excluded from the
Increase in trade payables xx,xxx statement of cash flows, but they should be
separately disclosed elsewhere in the financial
Interest expense xx,xxx statements [IAS 7.43] 
  Entities shall provide disclosures that enable users of mathematical mistakes, mistakes in applying accounting
financial statements to evaluate changes in liabilities policies, oversights or misinterpretations of facts, and fraud.
arising from financing activities [IAS 7.44A-44E]
 The components of cash and cash equivalents should Selection and application of accounting policies
be disclosed, and a reconciliation presented to
amounts reported in the statement of financial When a Standard or an Interpretation specifically applies to a
position [IAS 7.45]  transaction, other event or condition, the accounting policy or
 The amount of cash and cash equivalents held by the policies applied to that item must be determined by applying
entity that is not available for use by the group should the Standard or Interpretation and considering any relevant
be disclosed, together with a commentary by Implementation Guidance issued by the IASB for the Standard
management [IAS 7.48] or Interpretation. [IAS 8.7]
In the absence of a Standard or an Interpretation that
IAS 8 — Accounting Policies, Changes in specifically applies to a transaction, other event or condition,
Accounting Estimates and Errors management must use its judgement in developing and
 applied in selecting and applying accounting policies, applying an accounting policy that results in information that is
accounting for changes in estimates and reflecting relevant and reliable. [IAS 8.10].
corrections of prior period errors. In making that judgement, management must refer to, and
 requires compliance with any specific IFRS applying consider the applicability of, the following sources in
to a transaction, event or condition, and provides descending order:
guidance on developing accounting policies for other  the requirements and guidance in IASB standards
items that result in relevant and reliable information. and interpretations dealing with similar and related
Changes in accounting policies and corrections of issues; and
errors are generally retrospectively accounted for,  the definitions, recognition criteria and measurement
whereas changes in accounting estimates are concepts for assets, liabilities, income and expenses
generally accounted for on a prospective basis. in the Framework. [IAS 8.11]
Management may also consider the most recent
 Accounting policies are the specific principles, bases, pronouncements of other standard-setting bodies that use a
conventions, rules and practices applied by an entity in similar conceptual framework to develop accounting standards,
preparing and presenting financial statements. other accounting literature and accepted industry practices, to
 A change in accounting estimate is an adjustment of the the extent that these do not conflict with the sources in
carrying amount of an asset or liability, or related expense, paragraph 11. [IAS 8.12]
resulting from reassessing the expected future benefits and
obligations associated with that asset or liability. Consistency of accounting policies
 International Financial Reporting Standards are standards An entity shall select and apply its accounting policies
and interpretations adopted by the International Accounting consistently for similar transactions, other events and
Standards Board (IASB). They comprise: conditions, unless a Standard or an Interpretation specifically
 International Financial Reporting Standards requires or permits categorisation of items for which different
(IFRSs) policies may be appropriate. If a Standard or an Interpretation
 International Accounting Standards (IASs) requires or permits such categorisation, an appropriate
 Interpretations developed by the International accounting policy shall be selected and applied consistently to
Financial Reporting Interpretations Committee each category. [IAS 8.13]
(IFRIC) or the former Standing Interpretations
Committee (SIC) and approved by the IASB. CHANGES IN ACCOUNTING POLICIES
An entity is permitted to change an accounting policy only if the
 Materiality. Information is material if omitting, misstating or change:
obscuring it could reasonably be expected to influence  is required by a standard or interpretation; or
decisions that the primary users of general purpose  results in the financial statements providing reliable
financial statements make on the basis of those financial and more relevant information about the effects of
statements, which provide financial information about a transactions, other events or conditions on the entity's
specific reporting entity. financial position, financial performance, or cash
 Prior period errors are omissions from, and misstatements flows. [IAS 8.14]
in, an entity's financial statements for one or more prior
periods arising from a failure to use, or misuse of, reliable Note that changes in accounting policies do not include
information that was available and could reasonably be applying an accounting policy to a kind of transaction or event
expected to have been obtained and taken into account in that did not occur previously or were immaterial. [IAS 8.16]
preparing those statements. Such errors result from
If a change in accounting policy is required by a new IASB  the reasons why applying the new accounting policy
standard or interpretation, the change is accounted for as provides reliable and more relevant information
required by that new pronouncement or, if the new  for the current period and each prior period
pronouncement does not include specific transition provisions, presented, to the extent practicable, the amount of the
then the change in accounting policy is applied retrospectively. adjustment:
[IAS 8.19] o for each financial statement line item
affected, and
 Retrospective application means adjusting the opening o for basic and diluted earnings per share
balance of each affected component of equity for the (only if the entity is applying IAS 33)
earliest prior period presented and the other comparative  the amount of the adjustment relating to periods
amounts disclosed for each prior period presented as if the before those presented, to the extent practicable
new accounting policy had always been applied. [IAS 8.22]  if retrospective application is impracticable, an
 However, if it is impracticable to determine either the explanation and description of how the change in
period-specific effects or the cumulative effect of the accounting policy was applied.
change for one or more prior periods presented, the
entity shall apply the new accounting policy to the Financial statements of subsequent periods need not repeat
carrying amounts of assets and liabilities as at the these disclosures.
beginning of the earliest period for which retrospective
application is practicable, which may be the current If an entity has not applied a new standard or interpretation
period, and shall make a corresponding adjustment to that has been issued but is not yet effective, the entity must
the opening balance of each affected component of disclose that fact and any and known or reasonably estimable
equity for that period. [IAS 8.24] information relevant to assessing the possible impact that the
 Also, if it is impracticable to determine the cumulative new pronouncement will have in the year it is applied. [IAS
effect, at the beginning of the current period, of 8.30]
applying a new accounting policy to all prior periods,
the entity shall adjust the comparative information to CHANGES IN ACCOUNTING ESTIMATES
apply the new accounting policy prospectively from The effect of a change in an accounting estimate shall be
the earliest date practicable. [IAS 8.25] recognised prospectively by including it in profit or loss in : [IAS
8.36]
Disclosures relating to changes in accounting policies  the period of the change, if the change affects that
a) Disclosures relating to changes in accounting policy period only, or
caused by a new standard or interpretation include: [IAS  the period of the change and future periods, if the
8.28] change affects both.
 the title of the standard or interpretation causing the
change However, to the extent that a change in an accounting estimate
 the nature of the change in accounting policy gives rise to changes in assets and liabilities, or relates to an
 a description of the transitional provisions, including item of equity, it is recognised by adjusting the carrying amount
those that might have an effect on future periods of the related asset, liability, or equity item in the period of the
 for the current period and each prior period change. [IAS 8.37]
presented, to the extent practicable, the amount of the
adjustment: Disclosures relating to changes in accounting estimates
o for each financial statement line item Disclose:
affected, and  the nature and amount of a change in an accounting
o for basic and diluted earnings per share estimate that has an effect in the current period or is
(only if the entity is applying IAS 33) expected to have an effect in future periods
 the amount of the adjustment relating to periods  if the amount of the effect in future periods is not
before those presented, to the extent practicable disclosed because estimating it is impracticable, an
 if retrospective application is impracticable, an entity shall disclose that fact. [IAS 8.39-40]
explanation and description of how the change in
accounting policy was applied. PRIOR PERIOD ERRORS
The general principle in IAS 8 is that an entity must correct all
Financial statements of subsequent periods need not repeat material prior period errors retrospectively in the first set of
these disclosures. financial statements authorised for issue after their discovery
b) Disclosures relating to voluntary changes in accounting by: [IAS 8.42]
policy include: [IAS 8.29]  restating the comparative amounts for the prior
 the nature of the change in accounting policy period(s) presented in which the error occurred; or
 
 if the error occurred before the earliest prior period
presented, restating the opening balances of assets, IAS 10 — Events After the Reporting Period
liabilities and equity for the earliest prior period  contains requirements for when events after the end
presented. of the reporting period should be adjusted in the
financial statements.
However, if it is impracticable to determine the period-specific
effects of an error on comparative information for one or more  Event after the reporting period: An event, which could be
prior periods presented, the entity must restate the opening favourable or unfavourable, that occurs between the end of
balances of assets, liabilities, and equity for the earliest period the reporting period and the date that the financial
for which retrospective restatement is practicable (which may statements are authorised for issue. [IAS 10.3]
be the current period). [IAS 8.44]  Adjusting event: An event after the reporting period that
provides further evidence of conditions that existed at the
Further, if it is impracticable to determine the cumulative effect, end of the reporting period, including an event that
at the beginning of the current period, of an error on all prior indicates that the going concern assumption in relation to
periods, the entity must restate the comparative information to the whole or part of the enterprise is not appropriate. [IAS
correct the error prospectively from the earliest date 10.3]
practicable. [IAS 8.45]  Non-adjusting event: An event after the reporting period
that is indicative of a condition that arose after the end of
Disclosures relating to prior period errors the reporting period. [IAS 10.3]
Disclosures relating to prior period errors include: [IAS 8.49]
 the nature of the prior period error Accounting
 for each prior period presented, to the extent  Adjust financial statements for adjusting events -
practicable, the amount of the correction: events after the balance sheet date that provide
o for each financial statement line item further evidence of conditions that existed at the end
affected, and of the reporting period, including events that indicate
o for basic and diluted earnings per share that the going concern assumption in relation to the
(only if the entity is applying IAS 33) whole or part of the enterprise is not appropriate. [IAS
 the amount of the correction at the beginning of the 10.8]
earliest prior period presented  Do not adjust for non-adjusting events - events or
 if retrospective restatement is impracticable, an conditions that arose after the end of the reporting
explanation and description of how the error has been period. [IAS 10.10]
corrected.  If an entity declares dividends after the reporting
period, the entity shall not recognise those dividends
as a liability at the end of the reporting period. That is
a non-adjusting event. [IAS 10.12]

Going concern issues arising after end of the reporting period

An entity shall not prepare its financial statements on a going
concern basis if management determines after the end of the
reporting period either that it intends to liquidate the entity or to
cease trading, or that it has no realistic alternative but to do so.
[IAS 10.14]

Disclosure
Non-adjusting events should be disclosed if they are of such
importance that non-disclosure would affect the ability of users
to make proper evaluations and decisions. The required
disclosure is (a) the nature of the event and (b) an estimate of
its financial effect or a statement that a reasonable estimate of
the effect cannot be made. [IAS 10.21]

A company should update disclosures that relate to conditions

that existed at the end of the reporting period to reflect any
new information that it receives after the reporting period about
those conditions. [IAS 10.19]
  Initiation of a major litigation against the company
Companies must disclose the date when the financial arising out of events that occurred after the reporting
statements were authorised for issue and who gave that period.
authorisation. If the enterprise's owners or others have the  Major losses suffered as a result of a natural disaster
power to amend the financial statements after issuance, the occurring after the end of reporting period.
enterprise must disclose that fact. [IAS 10.17]

Examples of Adjusting Events include:

 Settlement of litigation against the entity after the reporting
date, in respect of events that occurred before the end of
reporting period, may provide evidence of the existence
and amount of liability at the reporting date. A liability in
respect of the litigation may be recorded in the financial
statements if not recognized initially or the amount of
liability may be adjusted in accordance with IAS 37
Provisions, Contingent Liabilities and Contingent Assets.

 Declaration of bankruptcy by a long outstanding receivable

after the reporting date may provide evidence that the
receivable was impaired at the reporting date. Impairment
may be recognized in the financial statements by reducing
the amount of receivable to its recoverable amount, if any.

 Detection of fraud or errors after the reporting period may

indicate that the financial statements are misstated.
Financial statements may be adjusted to reflect accounting
for those errors or frauds that relate to the present or prior
reporting periods in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors.

Examples of Non-Adjusting Events include:

 Declaration of dividends after the reporting date does
not indicate existence of liability to pay dividends at the
reporting date and shall not therefore trigger the
recognition of liability in financial statements in
accordance with IAS 37 Provisions, Contingent Liabilities
and Contingent Assets.
 Destruction of assets of the entity by floods occurring
after the reporting period does not indicate that the assets
of the entity were impaired at the end of reporting period.
Hence, the financial statements should not be adjusted to
account for the impairment loss that arose after the end
of reporting period.
 Initiation of litigation against the company arising out
of events that occurred after the reporting period does not
indicate the existence of liability at the reporting date and
shall not therefore trigger the recognition of liability in the
financial statements in accordance with IAS
37 Provisions, Contingent Liabilities and Contingent
Assets.

Examples of material non-adjusting events include:

 Management’s plan to discontinue or significantly
curtail its activities in major geographic segments.