IAS 1 Presentation of Financial Statements

*UK qualifying parents and subsidiaries can take advantage of FRS 101 Reduced Disclosure Framework. Find out more on which entities qualify and the criteria to be met.

Synopsis

A complete set of financial statements includes:

• A statement of financial position (balance sheet) at the end of the period
• A statement of profit or loss and other comprehensive income (income statement) for the period
• A statement of changes in equity for the period
• A statement of cash flows (cash flow statement) for the period
• Notes to the accounts

The names of the main statements are not mandatory.

IAS 1 Revised also requires a statement of financial position at the start of the earliest comparative period where there has been a retrospective adjustment to the accounts or reclassification of items.

The statement of profit or loss and other comprehensive income, as the name suggests, presents profit and loss for the period as well as other comprehensive income. Other comprehensive income includes income and expenses not recognised in profit or loss such as revaluation surpluses. The statement of profit or loss and other comprehensive income may be presented either as one statement or a separate statement of profit or loss and statement showing other comprehensive income.

The standard provides guidance on the form and content of the financial statements and the underlying accounting concepts. It also requires financial statements to present fairly the position, performance and cash flows of an entity. This is normally achieved by the application of IFRS.

• Read the unaccompanied version of IAS 1

Which version of the standard?

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Recent amendments

Full access to details of all the amendments is only available to Financial Reporting Faculty members. Find out how to join the faculty.

*Not EU endorsed as at 2 December 2019. Read more on EU endorsement.

The following interpretations relate to IAS 1

• IFRIC 17 Distribution of Non-cash Assets to Owners
  Addresses the accounting for dividends of non-cash assets, including those where there is a cash alternative.

• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
  Addresses the accounting by an entity which issues equity instruments in order to settle, in full or part, a financial liability.

• IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
  Addresses the accounting treatment of mine waste materials, which are the materials removed by mining entities in order to gain access to mineral ore deposits.

• IFRIC 21 Levies
  Provides guidance on when to recognise liability for a levy imposed by a government.

• IFRIC 23 Uncertainty over Income Tax Treatments
  Clarifies how to apply the recognition and measurement requirements of IAS 12 when there is uncertainty over income tax treatments.

• SIC 27 Evaluating the Substance of Transactions in the Legal Form of a Lease
  Addresses issues that may arise when an arrangement between an entity and investor involves the legal form of a lease.

• SIC 29 Disclosure – Service Concession Arrangements
  Prescribes disclosures required by a concession operator and concession provider joined by a service concession arrangement.

Current proposals

1. ED/2015/1 Classification of Liabilities was issued in February 2015. The proposed amendments to IAS 1 clarify that the classification of a liability as either current or non-current is based on the entity’s rights at the end of the reporting period. The proposed amendments also make clear the link between the settlement of the liability and the outflow of resources from the liability. An amendment to IAS 1 is expected in 2019.
   
   • Read ED/2015/1 Classification of Liabilities
2. A review is underway of general disclosure guidance in IAS 1 and IAS 8 with the objective of improving existing guidance. A discussion paper (Disclosure Initiative - Principles of Disclosure) was issued in March 2017 and feedback suggested that entities require guidance when determining which accounting policies to disclose. An exposure draft is expected in the second half of 2019 which will amend IAS 1 to require the disclosure of material rather than significant accounting policies.
   
   • Read DP/2017/1 Disclosure Initiative - Principles of Disclosure
3. The IASB is in the early stages of a research project on primary financial statements examining possible changes to the structure and content of the primary financial statements including the implications of digital reporting. The focus is on the statement of performance and an exposure draft or discussion paper is expected in 2019.

UK reduced disclosures

UK qualifying parents and subsidiaries can take advantage of FRS 101 Reduced Disclosure Framework. Find out more on which entities qualify and the criteria to be met.

Amendments to the standard

Where an entity applies FRS 101, it is preparing Companies Act accounts rather than IAS accounts. Therefore the following amendments must be made to IAS 1 in order to achieve compliance with the Companies Act and related Regulations:

• The statement of financial position must comply with the balance sheet format requirements of the Companies Act.
• The statement of profit or loss and other comprehensive income must comply with the profit and loss account format requirements of the Companies Act.
• Ordinary activities of an entity are defined and extraordinary items are described as highly abnormal material items arising from events falling outside an entity’s ordinary activities.
• It is clarified that items of income or expense are not recognised in profit or loss where such recognition is prohibited by the Companies Act.

From 1 January 2016 the following apply to companies that adopt FRS 101 and apply Schedule 1 of The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 (SI 2015/980):

• Qualifying entities that apply paragraph 1A of Schedule 1 must apply the IAS 1 presentation requirements to the statement of financial position and statement of profit or loss and other comprehensive income rather than Companies Act formats
• No item may be presented as an extraordinary item

Disclosure exemptions

FRS 101 paragraph 8(f) states that a qualifying entity is exempt from the IAS 1 requirement to present the following within a set of financial statements:

• A statement of cash flows for the period;
• A third statement of financial position when a retrospective adjustment or reclassification is made;
• A statement of compliance with IFRS;
• A reconciliation of property, plant and equipment, intangible assets, investment properties, biological assets and the number of shares outstanding at the beginning and end of the comparative period;
• Capital management disclosures (this exemption is not available to a financial institution);
• All remaining IAS 1 disclosures must be applied.

IAS 1 paragraphs for which exemption is available: 10(d), 10(f), 16, 38, 38A-D, 40A-D, 111, 134-6

Other resources

Factsheets:

• 2016 IFRS Accounts
  Provides more details on amendment 7.

Articles:

• Financial statement disclosures provides more information on the disclosure initiative

This page was last updated 25 March 2019