IAS 1

Presentation of Financial Statements

1Objective and scope

IAS 1 sets out the overall requirements for general purpose financial statements: their structure, minimum content, and overriding principles such as fair presentation, going concern, the accrual basis, and consistency. It applies to every general purpose financial statement prepared under IFRS, though it does not prescribe the format of condensed interim statements (IAS 34 covers those separately).

• A complete set of financial statements comprises: a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity, a statement of cash flows, notes (accounting policies and explanatory information), and comparative information for the preceding period.
• An entity presents a third statement of financial position (at the start of the earliest comparative period) only when it applies an accounting policy retrospectively, restates items retrospectively, or reclassifies items, and the effect is material.

2Key definitions

3Structure and classification

Current vs non-current

An asset is classified as current if the entity expects to realise it, or intends to sell or consume it, in its normal operating cycle; holds it primarily for trading; expects to realise it within twelve months after the reporting period; or it is cash or a cash equivalent (unless restricted from being exchanged or used to settle a liability for at least twelve months). Everything else is non-current. A liability follows the mirror-image test: current if the entity expects to settle it in its normal operating cycle, holds it primarily for trading, expects to settle it within twelve months, or has no unconditional right to defer settlement for at least twelve months.

Statement of profit or loss and OCI

Expenses may be presented by nature (raw materials, staff costs, depreciation) or by function (cost of sales, distribution, administration); an entity presenting by function must disclose additional information on the nature of expenses, including depreciation, amortisation and staff costs. Other comprehensive income is split into items that will never be reclassified to profit or loss (e.g. revaluation surplus on PPE under IAS 16, remeasurements of a net defined benefit liability under IAS 19, fair value gains on equity investments designated at FVOCI under IFRS 9) and items that may subsequently be reclassified when specified conditions are met (e.g. exchange differences on translating foreign operations under IAS 21, the effective portion of cash flow hedge gains/losses under IFRS 9).

4Presentation and disclosure

• Financial statements must be presented at least annually, with comparative information for the preceding period for all amounts reported, including narrative and descriptive information where relevant to understanding the current period.
• Notes must be presented systematically: a statement of compliance with IFRS, a summary of significant accounting policies, supporting information for line items on the face of the primary statements, and other disclosures (contingent liabilities, non-financial disclosures).
• Disclosure of judgements management has made in applying accounting policies that have the most significant effect on the amounts recognised, and of key sources of estimation uncertainty that carry a significant risk of a material adjustment within the next financial year.
• Offsetting of assets and liabilities, or income and expenses, is prohibited unless another IFRS specifically requires or permits it.

5Examinable focus