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Topics: Balance sheet, Generally Accepted Accounting Principles, Asset Pages: 24 (3611 words) Published: March 26, 2013
Ethel Durrant
AAT Student

Financial statements factsheet
International Accounting Standards
The purpose of this document is to provide useful guidance to aid students in their understanding of the content of those accounting standards assessable in the Financial Statements module.
IAS 1: Presentation of Financial Statements

This standard prescribes the basis for the presentation of general purpose financial statements, to ensure comparability both with the entity’s financial statements of previous periods and with 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.

Objective of financial statements
The objective of general purpose 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. To meet that objective, financial statements provide information about an entity's:




income and expenses, including gains and losses

contributions by and distributions to owners

• cash flows.
That 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. A complete set of financial statements for a limited company consists of: •

a statement of comprehensive income for the period

a statement of financial position as at the end of the period

a statement of changes in equity for the period

a statement of cash flows for the period

notes, comprising a summary of significant accounting policies and other explanatory information.

In addition, financial statements must clearly identify:

the reporting enterprise

whether the statements are for the enterprise or for a group

the date or period covered

the presentation currency

the level of precision (thousands, millions, and so on).

Other assessable requirements of IAS 1 include the following. •

Financial statements must present fairly the financial position, financial performance and cash flows of an entity. Compliance with IFRSs is presumed to result in fair presentation. Companies must state that their financial statements comply with IFRS.

Directors must assess whether or not it is applicable for the company to prepare financial statements on the going concern basis.

Companies must use the accruals basis in preparing their financial statements.

Each material class of similar items must be presented separately.

Related assets and liabilities must not be offset.

Comparative information must be presented.

Financial statements must be presented annually.

Presentation and classification must be consistent.

The Statement of Financial Position must show separately current and non-current assets and liabilities.
Current assets are:


cash equivalent

assets held for collection, sale, or consumption within the entity's normal operating cycle; or

assets held for trading within the next 12 months. All other assets are noncurrent.

Current liabilities are:

those to be settled within the entity's normal operating cycle or due within 12 months; or

those held for trading; or

those for which the entity does not have an unconditional right to defer payment beyond 12 months. All other liabilities are noncurrent.

Income and expenses must be disclosed either on:

a single statement of comprehensive income; or

two separate statements, being one income statement and one statement of comprehensive income (note that the two statement approach is not examinable here).

A statement of comprehensive income brings...
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