IAS 1 – Presentation of Financial Statements

IAS 1 – Presentation of Financial Statements

IAS 1 Presentation of Financial Statements forms the foundation of the entire IFRS framework. It establishes the basis for how financial statements are presented, guiding entities on structure, form, and minimum disclosure requirements. However, IAS 1 does not address recognition or measurement — those are covered by other IFRSs such as IAS 2 Inventories or IAS 16 Property, Plant and Equipment.

IAS 1 Presentation of Financial Statements under IFRS
IAS 1 sets the foundation for financial statement presentation under IFRS.

Overview of IAS 1

IAS 1 provides a consistent framework for presenting financial information, enhancing comparability across entities and reporting periods. It ensures that users of financial statements — including investors, creditors, and regulators — receive transparent and reliable information.

Overall Considerations under IAS 1

  • Comparative Information: Entities must present at least one year of comparative information, unless impracticable.
  • Offsetting: Assets, liabilities, income, and expenses should not be offset unless required or permitted by another IFRS.
  • Materiality and Aggregation: Material items are presented separately; immaterial items may be aggregated.
  • Consistency of Presentation: The same presentation and classification must be retained from period to period.
  • Accrual Basis: Except for cash flow information, financial statements must be prepared on an accrual basis.
  • Going Concern: Entities must assess whether they are a going concern; if not, the financial statements should disclose this fact.
  • Fair Presentation and Compliance: Financial statements must present a true and fair view and comply fully with IFRSs.

Components of Financial Statements

A complete set of financial statements under IAS 1 includes the following:

  • Statement of Financial Position
  • Statement of Comprehensive Income (single statement or separate income and OCI statements)
  • Statement of Changes in Equity
  • Statement of Cash Flows (as per IAS 7)
  • Notes to the Financial Statements

Each component must be given equal prominence in presentation.

Identification of Financial Statements

Financial statements must be clearly identified and include:

  • Name of the reporting entity
  • Whether the report covers the individual entity or group
  • Reporting date or period covered
  • Presentation currency
  • Level of rounding used

Notes to the Financial Statements

IAS 1 requires entities to disclose:

  • Compliance with IFRSs
  • Significant accounting policies, estimates, assumptions, and judgements
  • Additional information useful to users’ understanding and decision making
  • Capital management policies, objectives, and processes

Statement of Financial Position

Entities may present assets and liabilities by current/non-current classification or in order of liquidity.

Current Assets

  • Expected to be realized in the entity’s normal operating cycle
  • Held primarily for trading
  • Expected to be realized within 12 months
  • Cash or cash equivalents

Current Liabilities

  • Expected to be settled in the normal operating cycle
  • Held primarily for trading
  • Due within 12 months
  • No unconditional right to defer settlement for at least 12 months

All other assets and liabilities are classified as non-current.

Statement of Comprehensive Income

Entities can present income and expenses using either:

  • A single Statement of Comprehensive Income, or
  • A separate Income Statement and a second statement for Other Comprehensive Income (OCI).

Expenses may be presented by function (e.g., cost of sales, admin, selling) or by nature (e.g., depreciation, salaries, rent). OCI must show items that can or cannot be reclassified to profit or loss.

Statement of Changes in Equity

This statement presents changes in equity over the reporting period, including:

  • Total comprehensive income, showing amounts attributable to owners and non-controlling interests
  • Effects of retrospective restatements and policy changes under IAS 8
  • Transactions with owners (e.g., dividends, share issues)
  • Reconciliations for each equity component between the beginning and end of the period

Statement of Cash Flows

IAS 1 refers to IAS 7 Statement of Cash Flows for requirements on presenting cash inflows and outflows from operating, investing, and financing activities.

Third Statement of Financial Position

When an entity changes accounting policies or makes retrospective restatements, IAS 1 requires an additional (third) statement of financial position at the beginning of the comparative period — but only if the change has a material impact.

Conclusion

IAS 1 underpins the structure of all IFRS-based financial statements. It ensures consistency, transparency, and comparability in reporting — essential for global users of financial information. For more IFRS topics, see our related posts on IAS 7 and Interpretation of Tax Treaties.

Focus keyphrase: IAS 1 Presentation of Financial Statements

Excerpt: IAS 1 defines how financial statements are structured and presented under IFRS, ensuring fair presentation, consistency, and comparability across reporting entities.

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