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    Section 3

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    Ifrs

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    Section 3

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    Getacher
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    Ifrs

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    SECTION 3

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    3 views23 pages

    Section 3

    Uploaded by

    Getacher
    Ifrs

    Copyright:

    © All Rights Reserved
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    Download as pptx, pdf, or txt
    of 23

    Section 3

    Financial Statement Presentation


    OVERVIEW OF SECTION 3

    • Scope of this section


    • Fair presentation
    • Compliance with the IFRS for SMEs
    • Frequency of reporting
    • Consistency of presentation
    • Comparative information
    • Materiality and aggregation
    • Complete set of financial statements
    • Identification of the financial statements
    • Presentation of information not required by this
    IFRS
    • Compare and contrast presentation of Financial
    Statements of Full IFRS and IFRS for SME.
    SCOPE OF THIS SECTION

    This section explains fair presentation


    of financial statements, what
    compliance with the IFRS for SMEs
    requires, and what is a complete set of
    financial statements.
    FAIR PRESENTATION

    Financial statements shall present fairly the


    financial position, financial performance and
    cash flows of an entity. Fair presentation requires
    the faithful representation of the effects of
    transactions, other events and conditions in
    accordance with the definitions and recognition
    criteria for assets, liabilities, income and expenses
    set out in Section 2 Concepts and Pervasive
    Principles.
    FAIR PRESENTATION
    (a) The application of the IFRS for SMEs, with
    additional disclosure when necessary, is
    presumed to result in financial statements
    that achieve a fair presentation of the
    financial position, financial performance and
    cash flows of SMEs.
    (b) As explained in paragraph 1.5, the
    application of this IFRS by an entity with
    public accountability does not result in a fair
    presentation in accordance with this IFRS.
    Cont.…
    In some circumstances it is necessary to
    provide users of financial statements with
    more disclosures than those required by
    the IFRS for SMEs in order to achieve a fair
    presentation of an entity’s financial
    position, financial performance and cash
    flows.
    COMPLIANCE WITH THE IFRS FOR SMES

    An entity whose financial statements comply


    with the IFRS for SMEs shall make an explicit
    and unreserved statement of such
    compliance in the notes. Financial
    statements shall not be described as
    complying with the IFRS for SMEs unless they
    comply with all the requirements of this IFRS.
    FREQUENCY OF REPORTING

    An entity shall retain the presentation and classification of items


    in the financial statements from one period to the next unless:

    (a) It is apparent, following a significant change in the nature of


    the entity’s operations or a review of its financial statements,
    that another presentation or classification would be more
    appropriate having regard to the criteria for the selection and
    application of accounting policies in Section 10 Accounting
    Policies, Estimates and Errors, or

    (b) This IFRS requires a change in presentation.


    Cont….

    When the presentation or classification of items in the


    financial statements is changed, an entity shall reclassify
    comparative amounts unless the reclassification is
    impracticable. When comparative amounts are
    reclassified, an entity shall disclose the following:
    (a) the nature of the reclassification.
    (b) the amount of each item or class of items that is
    reclassified.
    (c) the reason for the reclassification.
    EXAMPLE

    In 20X8, following a comprehensive review of its financial


    statements, a clothing retailer changed the manner in which
    it classifies expenses in the statement of comprehensive
    income from presenting the analysis of expenses by nature
    to presenting the analysis of expenses by function.
     If it is impracticable to reclassify comparative amounts, an

    entity shall disclose why reclassification was not practicable.


    COMPARATIVE INFORMATION

    Except when this IFRS permits or requires otherwise,


    an entity shall disclose comparative information in
    respect of the previous comparable period for all
    amounts presented in the current period’s financial
    statements. An entity shall include comparative
    information for narrative and descriptive
    information when it is relevant to an understanding
    of the current period’s financial statements.
    Cont…

    Examples of when comparative amounts must be


    restated include:
     An amendment to the IFRS for SMEs that requires
    retrospective application.
     A voluntary change in an accounting policy.
     The correction of a prior period error.
    MATERIALITY AND AGGREGATION

    • An entity shall present separately each material class of similar items. An


    entity shall present separately items of a dissimilar nature or function
    unless they are immaterial.
    • Omissions or misstatements of items are material if they could,
    individually or collectively, influence the economic decisions of users
    made on the basis of the financial statements.
    • Materiality depends on the size and nature of the omission or
    misstatement judged in the surrounding circumstances. The size or
    nature of the item, or a combination of both, could be the determining
    factor.
    EXAMPLES

    1. In 20X9, before the entity’s 20X8 financial statements were


    approved for issue, the entity discovered an error in the
    calculation of depreciation expense for the year ended 31
    December 20X8. Management ignored the error (i.e. the
    entity’s reported profit before tax for the year ended 31
    December 20X8 of Br 600,000 was understated by Br150).
    2. The facts are the same as in example 1. However, in this
    example, the error was discovered in 20X9, after the
    entity’s 20X8 financial statements were approved for issue.
    COMPLETE SET OF FINANCIAL
    STATEMENTS
    A complete set of financial statements of an entity shall include all of the following:

    1. A statement of financial position as at the reporting date. [Refer: Section 4]

    2. Either: [Refer: Section 5]

    (i) a single statement of comprehensive income for the reporting period displaying all

    items of income and expense recognized during the period including those items recognized

    in determining profit or loss (which is a subtotal in the statement of comprehensive income)

    and items of other comprehensive income, or

    (ii) a separate income statement and a separate statement of comprehensive income. If an

    entity chooses to present both an income statement and a statement of comprehensive

    income, the statement of comprehensive income begins with profit or loss and then displays

    the items of other comprehensive income.

    3. A statement of changes in equity for the reporting period. [Refer: Section 6]

    4. A statement of cash flows for the reporting period. [Refer: Section 7]

    5. Notes, comprising a summary of significant accounting policies and other explanatory

    information. [Refer: Section 8]


    Cont…
    • If the only changes to equity during the periods for which financial
    statements are presented arise from profit or loss, payment of
    dividends, corrections of prior period errors, and changes in accounting
    policy, the entity may present a single statement of income and
    retained earnings in place of the statement of comprehensive income
    and statement of changes in equity (see paragraph 6.4).
    • If an entity has no items of other comprehensive income in any of the
    periods for which financial statements are presented, it may present
    only an income statement, or it may present a statement of
    comprehensive income in which the ‘bottom line’ is labeled ‘profit or
    loss’.
    • In a complete set of financial statements, an entity shall present each
    financial statement with equal prominence.
    IDENTIFICATION OF THE FINANCIAL
    STATEMENTS
    An entity shall clearly identify each of the financial statements and the
    notes and
    distinguish them from other information in the same document. In
    addition, an entity shall display the following information prominently,
    and repeat it when necessary for an
    understanding of the information presented:
    A. The name of the reporting entity and any change in its name since
    the end of the
    preceding reporting period.
    B. Whether the financial statements cover the individual entity or a
    group of entities.
    C. The date of the end of the reporting period and the period covered
    by the financial
    statements.
    D. The presentation currency, as defined in Section 30 Foreign
    Currency Translation.
    E. The level of rounding, if any, used in presenting amounts in the
    financial statements.
    F. An entity shall also disclose the following in the notes:
    Cont…
    PRESENTATION OF INFORMATION NOT
    REQUIRED BY THIS IFRS

    An entity that prepares its financial statements in


    compliance with the IFRS for SMEs is not required to
    present segment information and is not required to
    present earnings per share. However, an entity that
    chooses to present segment information or earnings
    per share, or both, is required to disclose that fact
    and must describe the basis for preparing and
    presenting that information.
    COMPARE AND CONTRAST PRESENTATION
    OF FINANCIAL STATEMENTS OF FULL IFRS
    AND IFRS FOR SME.
    1. IAS 1 and Section 3 of the IFRS for SMEs are based on the same principles for the presentation of
    financial statements. However, since the IFRS for SMEs is drafted in simple language and includes
    much less guidance on how to apply the principles, differences between IAS 1 and Section 3 may arise
    in practice.

    2. In accordance with the IFRS for SMEs, an entity that has changes to equity during the periods for which
    financial statements are presented that arise only from profit or loss, payment of dividends, corrections
    of prior period errors, and changes in accounting policy may present a single statement of income and
    retained earnings in place of the statement of comprehensive income and statement of changes in
    equity. That presentation simplification is not available to entities that report in accordance with full
    IFRSs.
    Cont…
    3. In accordance with full IFRSs, management includes a

    statement of financial position as at the beginning of the

    earliest comparative period when an entity applies an

    accounting policy retrospectively or makes a retrospective

    restatement of items in its financial statements, or when it

    reclassifies items in its financial statements (see IAS 1

    paragraph 10(f)). The IFRS for SMEs does not have an

    equivalent requirement (i.e. in those circumstances an entity

    need not present a statement of financial position as at the

    beginning of the earliest comparative period).


    Cont…
    4. An entity that prepares its financial statements
    in compliance with full IFRS must prepare
    segment information in accordance with IFRS 8
    Operating Segments. The IFRS for SMEs does not
    require segment information to be presented in
    financial statements. Similarly, some entities that
    prepare their financial statements in compliance
    with full IFRS present earnings per share in
    accordance with IAS 33 Earnings per Share. The
    IFRS for SMEs does not require earnings per share
    to be presented in financial statements.

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