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NAS 1-Part 2

This document outlines the key requirements for structuring and presenting financial statements according to relevant accounting standards. It discusses requirements for identifying financial statements, presenting the statement of financial position with current/non-current classifications, presenting the statement of profit or loss and other comprehensive income with line items for revenue, expenses, taxes, and comprehensive income, and presenting the statement of changes in equity with information on changes in components of equity.

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92 views9 pages

NAS 1-Part 2

This document outlines the key requirements for structuring and presenting financial statements according to relevant accounting standards. It discusses requirements for identifying financial statements, presenting the statement of financial position with current/non-current classifications, presenting the statement of profit or loss and other comprehensive income with line items for revenue, expenses, taxes, and comprehensive income, and presenting the statement of changes in equity with information on changes in components of equity.

Uploaded by

binu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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STRUCTURE AND CONTENT

Identification of the financial statements


An entity shall clearly identify the financial statements and distinguish them from other information in
the same published document.
An entity shall clearly identify each financial statement and the notes. In addition, an entity shall display
the following information:
a) the name of the reporting entity or other means of identification, and any change in that information
from the end of the preceding reporting period;
b) whether the financial statements are of an individual entity or a group of entities;
c) the date of the end of the reporting period or the period covered by the set of financial statements or
notes;
d) the presentation currency, as defined in NAS 21; 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 in its statement of financial position except when a presentation based on liquidity provides
information that is reliable and more relevant. When that exception applies, an
entity shall present all assets and liabilities in order of liquidity.
Whichever method of presentation is adopted, an entity shall disclose the amount expected to be
recovered or settled after more than twelve months for each asset and liability line item that
combines amounts expected to be recovered or settled:
(a) no more than twelve months after the reporting period, and
(b) more than twelve months after the reporting period.

Current assets
An entity shall classify an asset as current when:
a) it expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
b) it holds the asset primarily for the purpose of trading;
c) it expects to realize the asset within twelve months after the reporting period; or
d) the asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to
settle a liability for at least twelve months after the reporting period.

An entity shall classify all other assets as non-current.


S.N Cases Remarks
1 Radha Ltd. Purchased certain items of
inventory and held for consumption for a
period more then 12months.Operating cycle of
the entity is 15 Months. Should these items
should be treated as current assets ?
2 An entity has placed certain deposits with
various parties. How the following deposits
should be classified, i.e., current or non
current ?
a) Electricity Deposit
b) Tender Deposit/Earnest Money
Deposit [EMD]
c) VAR Deposit paid under dispute or
VAT payment under dispute

3 Udaan Avition Ltd. Produces aircrafts. The


length of time between first purchasing raw
materials to make the aircrafts and the date
the company completes the production and
delivery is 9 months. The company receives for
the aircrafts 7 months after the delivery.
a) What is the length of operating cycle ?
b) How should it treat its inventory and
debtors ?

Current liabilities
An entity shall classify a liability as current when:
a) it expects to settle the liability in its normal operating cycle;
b) it holds the liability primarily for the purpose of trading;
c) the liability is due to be settled within twelve months after the reporting period; or
d) it does not have an unconditional right to defer settlement of the liability for at least twelve months
after the reporting period.
e) Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of
equity instruments do not affect its classification.

An entity shall classify all other liabilities as non-current.


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
The statement of profit or loss and other comprehensive income (statement of comprehensive income)
shall present, in addition to the profit or loss and other comprehensive income sections:
(a) profit or loss;
(b) total other comprehensive income;
(c) comprehensive income for the period, being the total of profit or loss and other comprehensive
income.

An entity shall present the following items, in addition to the profit or loss and other comprehensive
income sections, as allocation of profit or loss and other comprehensive income for the period:
(a) profit or loss for the period attributable to:
(i) non-controlling interests, and
(ii) owners of the parent.

(b) comprehensive income for the period attributable to:


(i) non-controlling interests, and
(ii) owners of the parent.

In addition to items required by other NFRSs, the profit or loss section or the statement of profit or loss
shall include line items that present the following amounts for the period:
a) revenue;
b) gains and losses arising from the derecognition of financial assets measured at amortized cost;
c) finance costs;
d) share of the profit or loss of associates and joint ventures accounted for using the equity method;
e) if a financial asset is reclassified so that it is measured at fair value, any gain or loss arising from a
difference between the previous carrying amount and its fair value at the reclassification date (as
defined in NFRS 9);
f) tax expense;
g) a single amount for the total of discontinued operations (see NFRS 5).

Information to be presented in the other comprehensive income section


The other comprehensive income section shall present line items for amounts of other comprehensive
income in the period, classified by nature (including share of the other comprehensive income of
associates and joint ventures accounted for using the equity method) and grouped into those that, in
accordance with other NFRSs:
(a) will not be reclassified subsequently to profit or loss; and
(b) will be reclassified subsequently to profit or loss when specific conditions are met.

An entity shall not present any items of income or expense as extraordinary items, in the statement(s)
presenting profit or loss and other comprehensive income or in the notes.

Profit or loss for the period


An entity shall recognize all items of income and expense in a period in profit or loss.

Other comprehensive income for the period


An entity may present items 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 items.
If an entity elects alternative (b), it shall allocate the tax between the items that might be reclassified
subsequently to the profit or loss section and those that will not be reclassified subsequently to the
profit or loss section.

An entity shall present an analysis of expenses recognized in profit or loss using a classification based on
either their nature or their function within the entity, whichever provides information that is reliable and
more relevant.
An example of a classification using the nature of expense method is as follows:
Revenue X
Other income X
Changes in inventories of finished goods and work in progress X
Raw materials and consumables used X
Employee benefits expense X
Depreciation and amortization expense X
Other expenses X
Total expenses (X)
Profit before tax X

An example of a classification using the function of expense method is as follows:


Revenue X
Cost of sales (X)
Gross profit X
Other income X
Distribution costs (X)
Administrative expenses (X)
Other expenses (X)
Profit before tax X
An entity classifying expenses by function shall disclose additional information on the nature of expenses,
including depreciation and amortization expense and employee benefits expense. The choice between
the function of expense method and the nature of expense method depends on historical and industry
factors and the nature of the entity.

STATEMENT OF CHANGES IN EQUITY


The statement of changes in equity includes the following information:
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 NAS 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) other comprehensive income; and
(iii) 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.
Information to be presented in the statement of changes in equity or in the notes
For each component of equity an entity shall present, either in the statement of changes in equity or in
the notes, an analysis of other comprehensive income by item. 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 of dividends 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. NAS 7 sets
out requirements for the presentation and disclosure of cash flow information.

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 NFRSs 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
An entity shall disclose information that enables users of its financial statements to evaluate the entity’s
objectives, policies and processes for managing capital.
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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