IAS 1

International Accounting Standard 1

Presentation of Financial Statements
This version includes amendments resulting from IFRSs issued up to 31 December 2006
IAS 1 !resentation of Financial Statements was issued by the International Accounting Standards Committee in
September 1997. It replaced IAS 1 Disclosure of "ccounting !olicies originally appro!ed in 197"#$ IAS % Information to
be Disclosed in Financial Statements originally appro!ed in 1977# and IAS 1& !resentation of #urrent "ssets and
#urrent $iabilities originally appro!ed in 1979#.
In April '((1 the International Accounting Standards )oard IAS)# resol!ed that all Standards and Interpretations issued
under pre!ious Constitutions continued to be applicable unless and until they were amended or withdrawn.
In *ecember '((& the IAS) issued a re!ised IAS 1. Since '((&$ the IAS) has issued an Amendment to IAS 1+#apital
Disclosures issued August '((%#.
IAS 1 and its accompanying documents ha!e been amended by the following pronouncements,
- IF.S % %on&current "ssets 'eld for Sale and Discontinued (perations issued /arch '(("#
- Amendment to IAS 19+"ctuarial )ains and $osses* )roup !lans and Disclosures issued *ecember '(("#
- IF.S 7 Financial Instruments+ Disclosures issued August '((%#.
0he following Interpretations refer to IAS 1,
- SIC11% (perating $eases,Incentives issued *ecember 1992$ amended *ecember '((&#
- SIC1'9 Service #oncession "rrangements+ Disclosures issued *ecember '((1$ amended *ecember '((& and
3o!ember '((4#
- SIC1&' Intangible "ssets,-eb Site #osts issued /arch '(('$ amended in *ecember '((& and /arch '(("#
- IF.IC 1 #hanges in ./isting Decommissioning* Restoration and Similar $iabilities issued /ay '(("#.
5 IASCF 1
IAS 1
CONTENTS
paragraphs
INTRODUCTION IN1IN20
INTERNATIONAL ACCOUNTING STANDARD 1
PRESENTATION OF FINANCIAL STATEMENTS
OBECTI!E 1
SCO"E 2#
"UR"OSE O$ $INANCIAL STATE%ENTS &
CO%"ONENTS O$ $INANCIAL STATE%ENTS '10
DE$INITIONS 1112
O!ERALL CONSIDERATIONS 1()1
$air *re+entation and co,*liance -it. I$RS+ 1(22
Going concern 2(2)
Accrual /a+i+ o0 accounting 212#
Con+i+tenc2 o0 *re+entation 2&2'
%aterialit2 and aggregation 23(1
O00+etting (2(1
Co,*arati4e in0or,ation (#)1
STRUCTURE AND CONTENT )212#
Introduction )2)(
Identi0ication o0 t.e 0inancial +tate,ent+ )))'
Re*orting *eriod )310
Balance +.eet 11&&
Current/non-current distinction 5156
Current assets 5759
Current liabilities 6067
Information to be presented on the face of the balance sheet 6873
Information to be presented either on the face of the balance sheet or in the notes 777
Inco,e +tate,ent &'31
!rofit or loss for the period 7880
Information to be presented on the face of the income statement 8185
Information to be presented either on the face of the income statement or in the notes 8695
State,ent o0 c.ange+ in e5uit2 3#101
Ca+. 0lo- +tate,ent 102
Note+ 10(12#
"tructure 103107
#isclosure of accountin$ policies 108115
%e& sources of estimation uncertaint& 1161'
Capital 1'(1'C
)ther disclosures 1'51'6
E$$ECTI!E DATE 12&12&B
6IT7DRA6AL O$ IAS 1 8RE!ISED 133&9 12'
A**endi:
A,end,ent+ to ot.er *ronounce,ent+
A""RO!AL O$ IAS 1 B; T7E BOARD
A""RO!AL O$ A%END%ENTS TO IAS 1 B; T7E BOARD
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IAS 1
BASIS $OR CONCLUSIONS
DISSENTING O"INION
I%"LE%ENTATION GUIDANCE
5 IASCF &
IAS 1
International Accounting Standard 1 !resentation of Financial Statements IAS 1# is set out in paragraphs 161'2 and the
Appendi7. All the paragraphs ha!e e8ual authority but retain the IASC format of the Standard when it was adopted by the
IAS). IAS 1 should be read in the conte7t of its ob9ecti!e and the )asis for Conclusions$ the !reface to International
Financial Reporting Standards and the Frame0or1 for the !reparation and !resentation of Financial Statements. IAS 2
"ccounting !olicies* #hanges in "ccounting .stimates and .rrors pro!ides a basis for selecting and applying accounting
policies in the absence of e7plicit guidance.
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IAS 1
Introduction
I31 International Accounting Standard 1 !resentation of Financial Statements IAS 1# replaces IAS 1 !resentation
of Financial Statements re!ised in 1997#$ and should be applied for annual periods beginning on or after 1
:anuary '((%. ;arlier application is encouraged.
Rea+on+ 0or re4i+ing IAS 1
I3' 0he International Accounting Standards )oard de!eloped this re!ised IAS 1 as part of its pro9ect on
Impro!ements to International Accounting Standards. 0he pro9ect was underta<en in the light of 8ueries and
criticisms raised in relation to the Standards by securities regulators$ professional accountants and other
interested parties. 0he ob9ecti!es of the pro9ect were to reduce or eliminate alternati!es$ redundancies and
conflicts within the Standards$ to deal with some con!ergence issues and to ma<e other impro!ements.
I3& For IAS 1$ the )oard=s main ob9ecti!es were,
a# to pro!ide a framewor< within which an entity assesses how to present fairly the effects of transactions
and other e!ents$ and assesses whether the result of complying with a re8uirement in a Standard or an
Interpretation would be so misleading that it would not gi!e a fair presentation>
b# to base the criteria for classifying liabilities as current or non1current solely on the conditions e7isting
at the balance sheet date>
c# to prohibit the presentation of items of income and e7pense as ?e7traordinary items=>
d# to specify disclosures about the 9udgements management has made in the process of applying the
entity=s accounting policies$ apart from those in!ol!ing estimations$ that ha!e the most significant
effect on the amounts recognised in the financial statements> and
e# to specify disclosures about <ey sources of estimation uncertainty at the balance sheet date that ha!e a
significant ris< of causing a material ad9ustment to the carrying amounts of assets and liabilities within
the ne7t financial year.
I3" 0he )oard did not reconsider the fundamental approach to the presentation of financial statements contained in
IAS 1.
C.ange+ 0ro, *re4iou+ re5uire,ent+
I3% 0he main changes from the pre!ious !ersion of IAS 1 are described below.
$air *re+entation and de*arture+ 0ro, I$RS+
I34 0he Standard includes guidance on the meaning of ?present fairly= and emphasises that the application of
International Financial .eporting Standards IF.Ss# is presumed to result in financial statements that achie!e a
fair presentation.
I37 0he Standard re8uires an entity$ in the e7tremely rare circumstances in which management concludes that
compliance with a re8uirement in a Standard or an Interpretation would be so misleading that it would conflict
with the ob9ecti!e of financial statements set out in the Frame0or1 for the !reparation and !resentation of
Financial Statements$ to depart from the re8uirement unless departure is prohibited by the rele!ant regulatory
framewor<. In either case$ the entity is re8uired to ma<e specified disclosures.
Cla++i0ication o0 a++et+ and lia/ilitie+
I32 0he Standard re8uires an entity to present assets and liabilities in order of li8uidity only when a li8uidity
presentation pro!ides information that is reliable and is more rele!ant than a current@non1current presentation.
I39 0he Standard re8uires a liability held primarily for the purpose of being traded to be classified as current.
I31( 0he Standard re8uires a financial liability that is due within twel!e months after the balance sheet date$ or for
which the entity does not ha!e an unconditional right to defer its settlement for at least twel!e months after the
balance sheet date$ to be classified as a current liability. 0his classification is re8uired e!en if an agreement to
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IAS 1
refinance$ or to reschedule payments$ on a long1term basis is completed after the balance sheet date and before
the financial statements are authorised for issue. Such an agreement would 8ualify for disclosure as a
non1ad9usting e!ent after the balance sheet date in accordance with IAS 1( .vents after the 2alance Sheet Date.#
Aowe!er$ this re8uirement does not affect the classification of a liability as non1current when the entity has$
under the terms of an e7isting loan facility$ the discretion to refinance or roll o!er its obligations for at least
twel!e months after the balance sheet date.
I311 In some cases$ a long1term financial liability is payable on demand because the entity has breached a condition of
its loan agreement on or before the balance sheet date. 0he Standard re8uires the liability to be classified as
current at the balance sheet date e!en if$ after the balance sheet date$ and before the financial statements are
authorised for issue$ the lender has agreed not to demand payment as a conse8uence of the breach. Such an
agreement would 8ualify for disclosure as a non1ad9usting e!ent after the balance sheet date in accordance with
IAS 1(.# Aowe!er$ the liability is to be classified as non1current if the lender agreed by the balance sheet date to
pro!ide a period of grace ending at least twel!e months after the balance sheet date. In this conte7t$ a period of
grace is a period within which the entity can rectify the breach and during which the lender cannot demand
immediate repayment.
"re+entation and di+clo+ure
I31' 0he Standard re8uires the following disclosures,
a# the 9udgements$ apart from those in!ol!ing estimations see b# below#$ management has made in the
process of applying the entity=s accounting policies that ha!e the most significant effect on the amounts
recognised in the financial statements eg management=s 9udgement in determining whether financial
assets are held1to1maturity in!estments#> and
b# the <ey assumptions concerning the future$ and other <ey sources of estimation uncertainty at the
balance sheet date$ that ha!e a significant ris< of causing a material ad9ustment to the carrying amounts
of assets and liabilities within the ne7t financial year.
I31& 0he following disclosures re8uired by the pre!ious !ersion of the Standard ha!e been omitted,
a# the results of operating acti!ities$ and e7traordinary items$ as line items on the face of the income
statement. 0he re!ised Standard prohibits disclosure of ?e7traordinary items= in financial statements.
b# the number of an entity=s employees.
I31" 0he Standard includes all re8uirements pre!iously set out in other Standards for the presentation of particular
line items on the face of the balance sheet and income statement and ma<es the necessary conse8uential
amendments to those Standards#. 0he line items are,
a# biological assets>
b# liabilities and assets for current ta7$ deferred ta7 liabilities and deferred ta7 assets> and
c# a single amount comprising the total of i# the post1ta7 profit or loss of discontinued operations and ii#
the post1ta7 gain or loss recognised on the measurement to fair !alue less costs to sell or on the disposal
of the assets or disposal groups# constituting the discontinued operation.
Ot.er c.ange+
I31% 0he re8uirements for the selection and application of accounting policies ha!e been transferred to the re!ised
IAS 2 "ccounting !olicies* #hanges in "ccounting .stimates and .rrors.
I314 0he presentation re8uirements for profit or loss for the period$ formerly contained in IAS 2 %et !rofit or $oss for
the !eriod* Fundamental .rrors and #hanges in "ccounting !olicies$ ha!e been transferred to this Standard.
I317 A definition of ?material= has been added.
I312 0he Standard re8uires disclosure$ on the face of the income statement$ of the entity=s profit or loss for the period
and the allocation of that amount between ?profit or loss attributable to minority interest= and ?profit or loss
attributable to e8uity holders of the parent=. A similar re8uirement has been added for the statement of changes in
e8uity. 0he allocated amounts are not to be presented as items of income or e7pense.
I319 0he Standard also re8uires disclosure$ on the face of the statement of changes in e8uity$ of total income and
e7penses for the period including amounts recognised directly in e8uity#$ showing separately the amounts
attributable to e8uity holders of the parent and to minority interest.
I3'( In August '((%$ the )oard added re8uirements for disclosures of,
a# the entity=s ob9ecti!es$ policies and processes for managing capital>
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IAS 1
b# 8uantitati!e data about what the entity regards as capital>
c# whether the entity has complied with any capital re8uirements> and
d# if it has not complied$ the conse8uences of such non1compliance.
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IAS 1
International Accounting Standard 1
Presentation of Financial Statements
O/<ecti4e
1 0he ob9ecti!e of this Standard is to prescribe the basis for presentation of general purpose financial statements$ to
ensure comparability both with the entity=s financial statements of pre!ious periods and with the financial
statements of other entities. 0o achie!e this ob9ecti!e$ this Standard sets out o!erall re8uirements for the
presentation of financial statements$ guidelines for their structure and minimum re8uirements for their content.
0he recognition$ measurement and disclosure of specific transactions and other e!ents are dealt with in other
Standards and in Interpretations.
Sco*e
2 This Standard shall be applied to all general purpose financial statements prepared and presented in
accordance with International Financial Reporting Standards (IFRSs).
& Beneral purpose financial statements are those intended to meet the needs of users who are not in a position to
demand reports tailored to meet their particular information needs. Beneral purpose financial statements include
those that are presented separately or within another public document such as an annual report or a prospectus.
0his Standard does not apply to the structure and content of condensed interim financial statements prepared in
accordance with IAS &" Interim Financial Reporting. Aowe!er$ paragraphs 1&6"1 apply to such financial
statements. 0his Standard applies e8ually to all entities and whether or not they need to prepare consolidated
financial statements or separate financial statements$ as defined in IAS '7 #onsolidated and Separate Financial
Statements.
" C*eletedD
% 0his Standard uses terminology that is suitable for profit1oriented entities$ including public sector business
entities. ;ntities with not1for1profit acti!ities in the pri!ate sector$ public sector or go!ernment see<ing to apply
this Standard may need to amend the descriptions used for particular line items in the financial statements and for
the financial statements themsel!es.
4 Similarly$ entities that do not ha!e e8uity as defined in IAS &' Financial Instruments+ !resentation eg some
mutual funds# and entities whose share capital is not e8uity eg some co1operati!e entities# may need to adapt the
presentation in the financial statements of members= or unitholders= interests.
"ur*o+e o0 0inancial +tate,ent+
7 Financial statements are a structured representation of the financial position and financial performance of an
entity. 0he ob9ecti!e of general purpose financial statements is to pro!ide information about the financial
position$ financial performance and cash flows of an entity that is useful to a wide range of users in ma<ing
economic decisions. Financial statements also show the results of management=s stewardship of the resources
entrusted to it. 0o meet this ob9ecti!e$ financial statements pro!ide information about an entity=s,
a# assets>
b# liabilities>
c# e8uity>
d# income and e7penses$ including gains and losses>
e# other changes in e8uity> and
f# cash flows.
0his 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.
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IAS 1
Co,*onent+ o0 0inancial +tate,ent+
8 A complete set of financial statements comprises
(a) a balance sheet!
(b) an income statement!
(c) a statement of changes in e"uit# showing either
(i) all changes in e"uit#$ or
(ii) changes in e"uit# other than those arising from transactions with e"uit# holders acting
in their capacit# as e"uit# holders!
(d) a cash flow statement! and
(e) notes$ comprising a summar# of significant accounting policies and other e%planator# notes.
9 /any entities present$ outside the financial statements$ a financial re!iew by management that describes and
e7plains the main features of the entity=s financial performance and financial position and the principal
uncertainties it faces. Such a report may include a re!iew of,
a# the main factors and influences determining financial performance$ including changes in the
en!ironment in which the entity operates$ the entity=s response to those changes and their effect$ and the
entity=s policy for in!estment to maintain and enhance financial performance$ including its di!idend
policy>
b# the entity=s sources of funding and its targeted ratio of liabilities to e8uity> and
c# the entity=s resources not recognised in the balance sheet in accordance with IF.Ss.
1( /any entities also present$ outside the financial statements$ reports and statements such as en!ironmental reports
and !alue added statements$ particularly in industries in which en!ironmental factors are significant and when
employees are regarded as an important user group. .eports and statements presented outside financial
statements are outside the scope of IF.Ss.
De0inition+
&& The following terms are used in this Standard with the meanings specified
Impracticable Appl#ing a re"uirement is impracticable when the entit# cannot appl# it after ma'ing e(er#
reasonable effort to do so.
International Financial Reporting Standards (IFRSs) are Standards and Interpretations adopted b# the
International Accounting Standards )oard (IAS)). The# comprise
(a) International Financial Reporting Standards!
(b) International Accounting Standards! and
(c) Interpretations originated b# the International Financial Reporting Interpretations *ommittee
(IFRI*) or the former Standing Interpretations *ommittee (SI*).
Material +missions or misstatements of items are material if the# could$ indi(iduall# or collecti(el#$
influence the economic decisions of users ta'en on the basis of the financial statements. ,aterialit#
depends on the si-e and nature of the omission or misstatement .udged in the surrounding circumstances.
The si-e or nature of the item$ or a combination of both$ could be the determining factor.
Notes contain information in addition to that presented in the balance sheet$ income statement$ statement
of changes in e"uit# and cash flow statement. /otes pro(ide narrati(e descriptions or disaggregations of
items disclosed in those statements and information about items that do not "ualif# for recognition in
those statements.
1' Assessing whether an omission or misstatement could influence economic decisions of users$ and so be material$
re8uires consideration of the characteristics of those users. 0he Frame0or1 for the !reparation and !resentation
of Financial Statements states in paragraph '% that ?users are assumed to ha!e a reasonable <nowledge of
business and economic acti!ities and accounting and a willingness to study the information with reasonable
diligence.= 0herefore$ the assessment needs to ta<e into account how users with such attributes could reasonably
be e7pected to be influenced in ma<ing economic decisions.
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IAS 1
O4erall con+ideration+
$air *re+entation and co,*liance -it. I$RS+
&0 Financial statements shall present fairl# the financial position$ financial performance and cash flows of an
entit#. Fair presentation re"uires the faithful representation of the effects of transactions$ other e(ents and
conditions in accordance with the definitions and recognition criteria for assets$ liabilities$ income and
e%penses set out in the Framework. The application of IFRSs$ with additional disclosure when necessar#$ is
presumed to result in financial statements that achie(e a fair presentation.
&1 An entit# whose financial statements compl# with IFRSs shall ma'e an e%plicit and unreser(ed statement
of such compliance in the notes. Financial statements shall not be described as compl#ing with IFRSs
unless the# compl# with all the re"uirements of IFRSs.
1% In !irtually all circumstances$ a fair presentation is achie!ed by compliance with applicable IF.Ss. A fair
presentation also re8uires an entity,
a# to select and apply accounting policies in accordance with IAS 2 "ccounting !olicies* #hanges in
"ccounting .stimates and .rrors. IAS 2 sets out a hierarchy of authoritati!e guidance that management
considers in the absence of a Standard or an Interpretation that specifically applies to an item.
b# to present information$ including accounting policies$ in a manner that pro!ides rele!ant$ reliable$
comparable and understandable information.
c# to pro!ide additional disclosures when compliance with the specific re8uirements in IF.Ss is
insufficient to enable users to understand the impact of particular transactions$ other e!ents and
conditions on the entity=s financial position and financial performance.
&2 Inappropriate accounting policies are not rectified either b# disclosure of the accounting policies used or
b# notes or e%planator# material.
&3 In the e%tremel# rare circumstances in which management concludes that compliance with a re"uirement
in a Standard or an Interpretation would be so misleading that it would conflict with the ob.ecti(e of
financial statements set out in the Framework$ the entit# shall depart from that re"uirement in the manner
set out in paragraph &8 if the rele(ant regulator# framewor' re"uires$ or otherwise does not prohibit$ such
a departure.
&8 4hen an entit# departs from a re"uirement of a Standard or an Interpretation in accordance with
paragraph &3$ it shall disclose
(a) that management has concluded that the financial statements present fairl# the entit#5s financial
position$ financial performance and cash flows!
(b) that it has complied with applicable Standards and Interpretations$ e%cept that it has departed
from a particular re"uirement to achie(e a fair presentation!
(c) the title of the Standard or Interpretation from which the entit# has departed$ the nature of the
departure$ including the treatment that the Standard or Interpretation would re"uire$ the reason
wh# that treatment would be so misleading in the circumstances that it would conflict with the
ob.ecti(e of financial statements set out in the Framework$ and the treatment adopted! and
(d) for each period presented$ the financial impact of the departure on each item in the financial
statements that would ha(e been reported in compl#ing with the re"uirement.
&6 4hen an entit# has departed from a re"uirement of a Standard or an Interpretation in a prior period$ and
that departure affects the amounts recognised in the financial statements for the current period$ it shall
ma'e the disclosures set out in paragraph &8(c) and (d).
'( Paragraph 19 applies$ for e7ample$ when an entity departed in a prior period from a re8uirement in a Standard or
an Interpretation for the measurement of assets or liabilities and that departure affects the measurement of
changes in assets and liabilities recognised in the current period=s financial statements.
2& In the e%tremel# rare circumstances in which management concludes that compliance with a re"uirement
in a Standard or an Interpretation would be so misleading that it would conflict with the ob.ecti(e of
financial statements set out in the Framework$ but the rele(ant regulator# framewor' prohibits departure
from the re"uirement$ the entit# shall$ to the ma%imum e%tent possible$ reduce the percei(ed misleading
aspects of compliance b# disclosing
(a) the title of the Standard or Interpretation in "uestion$ the nature of the re"uirement$ and the
reason wh# management has concluded that compl#ing with that re"uirement is so misleading in
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IAS 1
the circumstances that it conflicts with the ob.ecti(e of financial statements set out in the
Framework! and
(b) for each period presented$ the ad.ustments to each item in the financial statements that
management has concluded would be necessar# to achie(e a fair presentation.
'' For the purpose of paragraphs 176'1$ an item of information would conflict with the ob9ecti!e of financial
statements when it does not represent faithfully the transactions$ other e!ents and conditions that it either
purports to represent or could reasonably be e7pected to represent and$ conse8uently$ it would be li<ely to
influence economic decisions made by users of financial statements. Ehen assessing whether complying with a
specific re8uirement in a Standard or an Interpretation would be so misleading that it would conflict with the
ob9ecti!e of financial statements set out in the Frame0or1$ management considers,
a# why the ob9ecti!e of financial statements is not achie!ed in the particular circumstances> and
b# how the entity=s circumstances differ from those of other entities that comply with the re8uirement. If
other entities in similar circumstances comply with the re8uirement$ there is a rebuttable presumption
that the entity=s compliance with the re8uirement would not be so misleading that it would conflict with
the ob9ecti!e of financial statements set out in the Frame0or1.
Going concern
20 4hen preparing financial statements$ management shall ma'e an assessment of an entit#5s abilit# to
continue as a going concern. Financial statements shall be prepared on a going concern basis unless
management either intends to li"uidate the entit# or to cease trading$ or has no realistic alternati(e but to
do so. 4hen management is aware$ in ma'ing its assessment$ of material uncertainties related to e(ents or
conditions that ma# cast significant doubt upon the entit#5s abilit# to continue as a going concern$ those
uncertainties shall be disclosed. 4hen financial statements are not prepared on a going concern basis$ that
fact shall be disclosed$ together with the basis on which the financial statements are prepared and the
reason wh# the entit# is not regarded as a going concern.
'" In assessing whether the going concern assumption is appropriate$ management ta<es into account all a!ailable
information about the future$ which is at least$ but is not limited to$ twel!e months from the balance sheet date.
0he degree of consideration depends on the facts in each case. Ehen an entity has a history of profitable
operations and ready access to financial resources$ a conclusion that the going concern basis of accounting is
appropriate may be reached without detailed analysis. In other cases$ management may need to consider a wide
range of factors relating to current and e7pected profitability$ debt repayment schedules and potential sources of
replacement financing before it can satisfy itself that the going concern basis is appropriate.
Accrual /a+i+ o0 accounting
27 An entit# shall prepare its financial statements$ e%cept for cash flow information$ using the accrual basis of
accounting.
'4 Ehen the accrual basis of accounting is used$ items are recognised as assets$ liabilities$ e8uity$ income and
e7penses the elements of financial statements# when they satisfy the definitions and recognition criteria for
those elements in the Frame0or1.
Con+i+tenc2 o0 *re+entation
23 The presentation and classification of items in the financial statements shall be retained from one period to
the ne%t unless
(a) it is apparent$ following a significant change in the nature of the entit#5s operations or a re(iew of
its financial statements$ that another presentation or classification would be more appropriate
ha(ing regard to the criteria for the selection and application of accounting policies in IAS 8! or
(b) a Standard or an Interpretation re"uires a change in presentation.
'2 A significant ac8uisition or disposal$ or a re!iew of the presentation of the financial statements$ might suggest
that the financial statements need to be presented differently. An entity changes the presentation of its financial
statements only if the changed presentation pro!ides information that is reliable and is more rele!ant to users of
the financial statements and the re!ised structure is li<ely to continue$ so that comparability is not impaired.
Ehen ma<ing such changes in presentation$ an entity reclassifies its comparati!e information in accordance with
paragraphs &2 and &9.
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IAS 1
%aterialit2 and aggregation
26 8ach material class of similar items shall be presented separatel# in the financial statements. Items of a
dissimilar nature or function shall be presented separatel# unless the# are immaterial.
&( Financial statements result from processing large numbers of transactions or other e!ents that are aggregated into
classes according to their nature or function. 0he final stage in the process of aggregation and classification is the
presentation of condensed and classified data$ which form line items on the face of the balance sheet$ income
statement$ statement of changes in e8uity and cash flow statement$ or in the notes. If a line item is not
indi!idually material$ it is aggregated with other items either on the face of those statements or in the notes.
An item that is not sufficiently material to warrant separate presentation on the face of those statements may
ne!ertheless be sufficiently material for it to be presented separately in the notes.
&1 Applying the concept of materiality means that a specific disclosure re8uirement in a Standard or an
Interpretation need not be satisfied if the information is not material.
O00+etting
02 Assets and liabilities$ and income and e%penses$ shall not be offset unless re"uired or permitted b# a
Standard or an Interpretation.
&& It is important that assets and liabilities$ and income and e7penses$ are reported separately. Fffsetting in the
income statement or the balance sheet$ e7cept when offsetting reflects the substance of the transaction or other
e!ent$ detracts from the ability of users both to understand the transactions$ other e!ents and conditions that ha!e
occurred and to assess the entity=s future cash flows. /easuring assets net of !aluation allowances+for e7ample$
obsolescence allowances on in!entories and doubtful debts allowances on recei!ables+is not offsetting.
&" IAS 12 Revenue defines re!enue and re8uires it to be measured at the fair !alue of the consideration recei!ed or
recei!able$ ta<ing into account the amount of any trade discounts and !olume rebates allowed by the entity. An
entity underta<es$ in the course of its ordinary acti!ities$ other transactions that do not generate re!enue but are
incidental to the main re!enue1generating acti!ities. 0he results of such transactions are presented$ when this
presentation reflects the substance of the transaction or other e!ent$ by netting any income with related e7penses
arising on the same transaction. For e7ample,
a# gains and losses on the disposal of non1current assets$ including in!estments and operating assets$ are
reported by deducting from the proceeds on disposal the carrying amount of the asset and related
selling e7penses> and
b# e7penditure related to a pro!ision that is recognised in accordance with IAS &7 !rovisions* #ontingent
$iabilities and #ontingent "ssets and reimbursed under a contractual arrangement with a third party
for e7ample$ a supplier=s warranty agreement# may be netted against the related reimbursement.
&% In addition$ gains and losses arising from a group of similar transactions are reported on a net basis$ for e7ample$
foreign e7change gains and losses or gains and losses arising on financial instruments held for trading. Such
gains and losses are$ howe!er$ reported separately if they are material.
Co,*arati4e in0or,ation
02 8%cept when a Standard or an Interpretation permits or re"uires otherwise$ comparati(e information
shall be disclosed in respect of the pre(ious period for all amounts reported in the financial statements.
*omparati(e information shall be included for narrati(e and descripti(e information when it is rele(ant to
an understanding of the current period5s financial statements.
&7 In some cases$ narrati!e information pro!ided in the financial statements for the pre!ious periods# continues to
be rele!ant in the current period. For e7ample$ details of a legal dispute$ the outcome of which was uncertain at
the last balance sheet date and is yet to be resol!ed$ are disclosed in the current period. Gsers benefit from
information that the uncertainty e7isted at the last balance sheet date$ and about the steps that ha!e been ta<en
during the period to resol!e the uncertainty.
08 4hen the presentation or classification of items in the financial statements is amended$ comparati(e
amounts shall be reclassified unless the reclassification is impracticable. 4hen comparati(e amounts are
reclassified$ an entit# shall disclose
(a) the nature of the reclassification!
(b) the amount of each item or class of items that is reclassified! and
(c) the reason for the reclassification.
1' 5 IASCF
IAS 1
06 4hen it is impracticable to reclassif# comparati(e amounts$ an entit# shall disclose
(a) the reason for not reclassif#ing the amounts! and
(b) the nature of the ad.ustments that would ha(e been made if the amounts had been reclassified.
"( ;nhancing the inter1period comparability of information assists users in ma<ing economic decisions$ especially
by allowing the assessment of trends in financial information for predicti!e purposes. In some circumstances$ it
is impracticable to reclassify comparati!e information for a particular prior period to achie!e comparability with
the current period. For e7ample$ data may not ha!e been collected in the prior periods# in a way that allows
reclassification$ and it may not be practicable to recreate the information.
"1 IAS 2 deals with the ad9ustments to comparati!e information re8uired when an entity changes an accounting
policy or corrects an error.
Structure and content
Introduction
"' 0his Standard re8uires particular disclosures on the face of the balance sheet$ income statement and statement of
changes in e8uity and re8uires disclosure of other line items either on the face of those statements or in the notes.
IAS 7 #ash Flo0 Statements sets out re8uirements for the presentation of a cash flow statement.
"& 0his Standard sometimes uses the term ?disclosure= in a broad sense$ encompassing items presented on the face
of the balance sheet$ income statement$ statement of changes in e8uity and cash flow statement$ as well as in the
notes. *isclosures are also re8uired by other Standards and Interpretations. Gnless specified to the contrary
elsewhere in this Standard$ or in another Standard or Interpretation$ such disclosures are made either on the face
of the balance sheet$ income statement$ statement of changes in e8uity or cash flow statement whiche!er is
rele!ant#$ or in the notes.
Identi0ication o0 t.e 0inancial +tate,ent+
11 The financial statements shall be identified clearl# and distinguished from other information in the same
published document.
"% IF.Ss apply only to financial statements$ and not to other information presented in an annual report or other
document. 0herefore$ it is important that users can distinguish information that is prepared using IF.Ss from
other information that may be useful to users but is not the sub9ect of those re8uirements.
12 8ach component of the financial statements shall be identified clearl#. In addition$ the following
information shall be displa#ed prominentl#$ and repeated when it is necessar# for a proper understanding
of the information presented
(a) the name of the reporting entit# or other means of identification$ and an# change in that
information from the preceding balance sheet date!
(b) whether the financial statements co(er the indi(idual entit# or a group of entities!
(c) the balance sheet date or the period co(ered b# the financial statements$ whiche(er is appropriate
to that component of the financial statements!
(d) the presentation currenc#$ as defined in IAS 2& The Effects of Changes in Foreign Echange
Rates! and
(e) the le(el of rounding used in presenting amounts in the financial statements.
"7 0he re8uirements in paragraph "4 are normally met by presenting page headings and abbre!iated column
headings on each page of the financial statements. :udgement is re8uired in determining the best way of
presenting such information. For e7ample$ when the financial statements are presented electronically$ separate
pages are not always used> the abo!e items are then presented fre8uently enough to ensure a proper
understanding of the information included in the financial statements.
"2 Financial statements are often made more understandable by presenting information in thousands or millions of
units of the presentation currency. 0his is acceptable as long as the le!el of rounding in presentation is disclosed
and material information is not omitted.
5 IASCF 1&
IAS 1
Re*orting *eriod
16 Financial statements shall be presented at least annuall#. 4hen an entit#5s balance sheet date changes and
the annual financial statements are presented for a period longer or shorter than one #ear$ an entit# shall
disclose$ in addition to the period co(ered b# the financial statements
(a) the reason for using a longer or shorter period! and
(b) the fact that comparati(e amounts for the income statement$ statement of changes in e"uit#$ cash
flow statement and related notes are not entirel# comparable.
%( 3ormally$ financial statements are consistently prepared co!ering a one1year period. Aowe!er$ for practical
reasons$ some entities prefer to report$ for e7ample$ for a %'1wee< period. 0his Standard does not preclude this
practice$ because the resulting financial statements are unli<ely to be materially different from those that would
be presented for one year.
Balance +.eet
Current=non>current di+tinction
7& An entit# shall present current and non9current assets$ and current and non9current liabilities$ as separate
classifications on the face of its balance sheet in accordance with paragraphs 73:23 e%cept when a
presentation based on li"uidit# pro(ides information that is reliable and is more rele(ant. 4hen that
e%ception applies$ all assets and liabilities shall be presented broadl# in order of li"uidit#.
72 4hiche(er method of presentation is adopted$ for each asset and liabilit# line item that combines amounts
e%pected to be reco(ered or settled (a) no more than twel(e months after the balance sheet date and (b)
more than twel(e months after the balance sheet date$ an entit# shall disclose the amount e%pected to be
reco(ered or settled after more than twel(e months.
%& Ehen an entity supplies goods or ser!ices within a clearly identifiable operating cycle$ separate classification of
current and non1current assets and liabilities on the face of the balance sheet pro!ides useful information by
distinguishing the net assets that are continuously circulating as wor<ing capital from those used in the entity=s
long1term operations. It also highlights assets that are e7pected to be realised within the current operating cycle$
and liabilities that are due for settlement within the same period.
%" For some entities$ such as financial institutions$ a presentation of assets and liabilities in increasing or decreasing
order of li8uidity pro!ides information that is reliable and is more rele!ant than a current@non1current
presentation because the entity does not supply goods or ser!ices within a clearly identifiable operating cycle.
%% In applying paragraph %1$ an entity is permitted to present some of its assets and liabilities using a
current@non1current classification and others in order of li8uidity when this pro!ides information that is reliable
and is more rele!ant. 0he need for a mi7ed basis of presentation might arise when an entity has di!erse
operations.
%4 Information about e7pected dates of realisation of assets and liabilities is useful in assessing the li8uidity and
sol!ency of an entity. IF.S 7 Financial Instruments+ Disclosures re8uires disclosure of the maturity dates of
financial assets and financial liabilities. Financial assets include trade and other recei!ables$ and financial
liabilities include trade and other payables. Information on the e7pected date of reco!ery and settlement of
non1monetary assets and liabilities such as in!entories and pro!isions is also useful$ whether or not assets and
liabilities are classified as current or non1current. For e7ample$ an entity discloses the amount of in!entories that
are e7pected to be reco!ered more than twel!e months after the balance sheet date.
Current a++et+
73 An asset shall be classified as current when it satisfies an# of the following criteria
(a) it is e%pected to be realised in$ or is intended for sale or consumption in$ the entit#5s normal
operating c#cle!
(b) it is held primaril# for the purpose of being traded!
(c) it is e%pected to be realised within twel(e months after the balance sheet date! or
(d) it is cash or a cash e"ui(alent (as defined in IAS 3) unless it is restricted from being e%changed or
used to settle a liabilit# for at least twel(e months after the balance sheet date.
All other assets shall be classified as non9current.
1" 5 IASCF
IAS 1
%2 0his Standard uses the term ?non1current= to include tangible$ intangible and financial assets of a long1term
nature. It does not prohibit the use of alternati!e descriptions as long as the meaning is clear.
%9 0he operating cycle of an entity is the time between the ac8uisition of assets for processing and their realisation
in cash or cash e8ui!alents. Ehen the entity=s normal operating cycle is not clearly identifiable$ its duration is
assumed to be twel!e months. Current assets include assets such as in!entories and trade recei!ables# that are
sold$ consumed or realised as part of the normal operating cycle e!en when they are not e7pected to be realised
within twel!e months after the balance sheet date. Current assets also include assets held primarily for the
purpose of being traded financial assets within this category are classified as held for trading in accordance with
IAS &9 Financial Instruments+ Recognition and 3easurement# and the current portion of non1current financial
assets.
Current lia/ilitie+
2; A liabilit# shall be classified as current when it satisfies an# of the following criteria
(a) it is e%pected to be settled in the entit#5s normal operating c#cle!
(b) it is held primaril# for the purpose of being traded!
(c) it is due to be settled within twel(e months after the balance sheet date! or
(d) the entit# does not ha(e an unconditional right to defer settlement of the liabilit# for at least
twel(e months after the balance sheet date.
All other liabilities shall be classified as non9current.
41 Some current liabilities$ such as trade payables and some accruals for employee and other operating costs$ are
part of the wor<ing capital used in the entity=s normal operating cycle. Such operating items are classified as
current liabilities e!en if they are due to be settled more than twel!e months after the balance sheet date. 0he
same normal operating cycle applies to the classification of an entity=s assets and liabilities. Ehen the entity=s
normal operating cycle is not clearly identifiable$ its duration is assumed to be twel!e months.
4' Fther current liabilities are not settled as part of the normal operating cycle$ but are due for settlement within
twel!e months after the balance sheet date or held primarily for the purpose of being traded. ;7amples are
financial liabilities classified as held for trading in accordance with IAS &9$ ban< o!erdrafts$ and the current
portion of non1current financial liabilities$ di!idends payable$ income ta7es and other non1trade payables.
Financial liabilities that pro!ide financing on a long1term basis ie are not part of the wor<ing capital used in the
entity=s normal operating cycle# and are not due for settlement within twel!e months after the balance sheet date
are non1current liabilities$ sub9ect to paragraphs 4% and 44.
4& An entity classifies its financial liabilities as current when they are due to be settled within twel!e months after
the balance sheet date$ e!en if,
a# the original term was for a period longer than twel!e months> and
b# an agreement to refinance$ or to reschedule payments$ on a long1term basis is completed after the
balance sheet date and before the financial statements are authorised for issue.
4" If an entity e7pects$ and has the discretion$ to refinance or roll o!er an obligation for at least twel!e months after
the balance sheet date under an e7isting loan facility$ it classifies the obligation as non1current$ e!en if it would
otherwise be due within a shorter period. Aowe!er$ when refinancing or rolling o!er the obligation is not at the
discretion of the entity for e7ample$ there is no agreement to refinance#$ the potential to refinance is not
considered and the obligation is classified as current.
4% Ehen an entity breaches an underta<ing under a long1term loan agreement on or before the balance sheet date
with the effect that the liability becomes payable on demand$ the liability is classified as current$ e!en if the
lender has agreed$ after the balance sheet date and before the authorisation of the financial statements for issue$
not to demand payment as a conse8uence of the breach. 0he liability is classified as current because$ at the
balance sheet date$ the entity does not ha!e an unconditional right to defer its settlement for at least twel!e
months after that date.
44 Aowe!er$ the liability is classified as non1current if the lender agreed by the balance sheet date to pro!ide a
period of grace ending at least twel!e months after the balance sheet date$ within which the entity can rectify the
breach and during which the lender cannot demand immediate repayment.
47 In respect of loans classified as current liabilities$ if the following e!ents occur between the balance sheet date
and the date the financial statements are authorised for issue$ those e!ents 8ualify for disclosure as non1ad9usting
e!ents in accordance with IAS 1( .vents after the 2alance Sheet Date,
a# refinancing on a long1term basis>
5 IASCF 1%
IAS 1
b# rectification of a breach of a long1term loan agreement> and
c# the receipt from the lender of a period of grace to rectify a breach of a long1term loan agreement ending
at least twel!e months after the balance sheet date.
In0or,ation to /e *re+ented on t.e 0ace o0 t.e /alance +.eet
28 As a minimum$ the face of the balance sheet shall include line items that present the following amounts to
the e%tent that the# are not presented in accordance with paragraph 28A
(a) propert#$ plant and e"uipment!
(b) in(estment propert#!
(c) intangible assets!
(d) financial assets (e%cluding amounts shown under (e)$ (h) and (i))!
(e) in(estments accounted for using the e"uit# method!
(f) biological assets!
(g) in(entories!
(h) trade and other recei(ables!
(i) cash and cash e"ui(alents!
(.) trade and other pa#ables!
(') pro(isions!
(l) financial liabilities (e%cluding amounts shown under (.) and ('))!
(m) liabilities and assets for current ta%$ as defined in IAS &2 Income Taes!
(n) deferred ta% liabilities and deferred ta% assets$ as defined in IAS &2!
(o) minorit# interest$ presented within e"uit#! and
(p) issued capital and reser(es attributable to e"uit# holders of the parent.
28A The face of the balance sheet shall also include line items that present the following amounts
(a) the total of assets classified as held for sale and assets included in disposal groups classified as
held for sale in accordance with IFRS 7 Non!c"rrent #ssets $eld for Sale and %iscontin"ed
&perations! and
(b) liabilities included in disposal groups classified as held for sale in accordance with IFRS 7.
26 Additional line items$ headings and subtotals shall be presented on the face of the balance sheet when such
presentation is rele(ant to an understanding of the entit#5s financial position.
3; 4hen an entit# presents current and non9current assets$ and current and non9current liabilities$ as
separate classifications on the face of its balance sheet$ it shall not classif# deferred ta% assets (liabilities) as
current assets (liabilities).
71 0his Standard does not prescribe the order or format in which items are to be presented. Paragraph 42 simply
pro!ides a list of items that are sufficiently different in nature or function to warrant separate presentation on the
face of the balance sheet. In addition,
a# line items are included when the siHe$ nature or function of an item or aggregation of similar items is
such that separate presentation is rele!ant to an understanding of the entity=s financial position> and
b# the descriptions used and the ordering of items or aggregation of similar items may be amended
according to the nature of the entity and its transactions$ to pro!ide information that is rele!ant to an
understanding of the entity=s financial position. For e7ample$ a financial institution may amend the
abo!e descriptions to pro!ide information that is rele!ant to the operations of a financial institution.
7' 0he 9udgement on whether additional items are presented separately is based on an assessment of,
a# the nature and li8uidity of assets>
b# the function of assets within the entity> and
c# the amounts$ nature and timing of liabilities.
7& 0he use of different measurement bases for different classes of assets suggests that their nature or function differs
and$ therefore$ that they should be presented as separate line items. For e7ample$ different classes of property$
14 5 IASCF
IAS 1
plant and e8uipment can be carried at cost or re!alued amounts in accordance with IAS 14 !ropert4* !lant and
.5uipment.
In0or,ation to /e *re+ented eit.er on t.e 0ace o0 t.e /alance +.eet or in t.e note+
31 An entit# shall disclose$ either on the face of the balance sheet or in the notes$ further subclassifications of
the line items presented$ classified in a manner appropriate to the entit#5s operations.
7% 0he detail pro!ided in subclassifications depends on the re8uirements of IF.Ss and on the siHe$ nature and
function of the amounts in!ol!ed. 0he factors set out in paragraph 7' also are used to decide the basis of
subclassification. 0he disclosures !ary for each item$ for e7ample,
a# items of property$ plant and e8uipment are disaggregated into classes in accordance with IAS 14>
b# recei!ables are disaggregated into amounts recei!able from trade customers$ recei!ables from related
parties$ prepayments and other amounts>
c# in!entories are subclassified$ in accordance with IAS ' Inventories$ into classifications such as
merchandise$ production supplies$ materials$ wor< in progress and finished goods>
d# pro!isions are disaggregated into pro!isions for employee benefits and other items> and
e# contributed e8uity and reser!es are disaggregated into !arious classes$ such as paid1in capital$ share
premium and reser!es.
32 An entit# shall disclose the following$ either on the face of the balance sheet or in the notes
(a) for each class of share capital
(i) the number of shares authorised!
(ii) the number of shares issued and full# paid$ and issued but not full# paid!
(iii) par (alue per share$ or that the shares ha(e no par (alue!
(i() a reconciliation of the number of shares outstanding at the beginning and at the end of
the period!
(() the rights$ preferences and restrictions attaching to that class including restrictions on
the distribution of di(idends and the repa#ment of capital!
('i) shares in the entit# held b# the entit# or b# its subsidiaries or associates! and
((ii) shares reser(ed for issue under options and contracts for the sale of shares$ including the
terms and amounts! and
(b) a description of the nature and purpose of each reser(e within e"uit#.
33 An entit# without share capital$ such as a partnership or trust$ shall disclose information e"ui(alent to
that re"uired b# paragraph 32(a)$ showing changes during the period in each categor# of e"uit# interest$
and the rights$ preferences and restrictions attaching to each categor# of e"uit# interest.
Inco,e +tate,ent
"ro0it or lo++ 0or t.e *eriod
38 All items of income and e%pense recognised in a period shall be included in profit or loss unless a Standard
or an Interpretation re"uires otherwise.
79 3ormally$ all items of income and e7pense recognised in a period are included in profit or loss. 0his includes the
effects of changes in accounting estimates. Aowe!er$ circumstances may e7ist when particular items may be
e7cluded from profit or loss for the current period. IAS 2 deals with two such circumstances, the correction of
errors and the effect of changes in accounting policies.
2( Fther Standards deal with items that may meet the Frame0or1 definitions of income or e7pense but are usually
e7cluded from profit or loss. ;7amples include re!aluation surpluses see IAS 14#$ particular gains and losses
arising on translating the financial statements of a foreign operation see IAS '1# and gains or losses on
remeasuring a!ailable1for1sale financial assets see IAS &9#.
5 IASCF 17
IAS 1
In0or,ation to /e *re+ented on t.e 0ace o0 t.e inco,e +tate,ent
8& As a minimum$ the face of the income statement shall include line items that present the following
amounts for the period
(a) re(enue!
(b) finance costs!
(c) share of the profit or loss of associates and .oint (entures accounted for using the e"uit# method!
(d) ta% e%pense!
(e) a single amount comprising the total of (i) the post9ta% profit or loss of discontinued operations
and (ii) the post9ta% gain or loss recognised on the measurement to fair (alue less costs to sell or
on the disposal of the assets or disposal group(s) constituting the discontinued operation! and
(f) profit or loss.
82 The following items shall be disclosed on the face of the income statement as allocations of profit or loss for
the period
(a) profit or loss attributable to minorit# interest! and
(b) profit or loss attributable to e"uit# holders of the parent.
80 Additional line items$ headings and subtotals shall be presented on the face of the income statement when
such presentation is rele(ant to an understanding of the entit#5s financial performance.
2" )ecause the effects of an entity=s !arious acti!ities$ transactions and other e!ents differ in fre8uency$ potential for
gain or loss and predictability$ disclosing the components of financial performance assists in an understanding of
the financial performance achie!ed and in ma<ing pro9ections of future results. Additional line items are included
on the face of the income statement$ and the descriptions used and the ordering of items are amended when this
is necessary to e7plain the elements of financial performance. Factors to be considered include materiality and
the nature and function of the components of income and e7penses. For e7ample$ a financial institution may
amend the descriptions to pro!ide information that is rele!ant to the operations of a financial institution. Income
and e7pense items are not offset unless the criteria in paragraph &' are met.
87 An entit# shall not present an# items of income and e%pense as e%traordinar# items$ either on the face of
the income statement or in the notes.
In0or,ation to /e *re+ented eit.er on t.e 0ace o0 t.e inco,e +tate,ent or in t.e
note+
82 4hen items of income and e%pense are material$ their nature and amount shall be disclosed separatel#.
27 Circumstances that would gi!e rise to the separate disclosure of items of income and e7pense include,
a# write1downs of in!entories to net realisable !alue or of property$ plant and e8uipment to reco!erable
amount$ as well as re!ersals of such write1downs>
b# restructurings of the acti!ities of an entity and re!ersals of any pro!isions for the costs of restructuring>
c# disposals of items of property$ plant and e8uipment>
d# disposals of in!estments>
e# discontinued operations>
f# litigation settlements> and
g# other re!ersals of pro!isions.
88 An entit# shall present an anal#sis of e%penses using a classification based on either the nature of e%penses
or their function within the entit#$ whiche(er pro(ides information that is reliable and more rele(ant.
29 ;ntities are encouraged to present the analysis in paragraph 22 on the face of the income statement.
9( ;7penses are subclassified to highlight components of financial performance that may differ in terms of
fre8uency$ potential for gain or loss and predictability. 0his analysis is pro!ided in one of two forms.
91 0he first form of analysis is the nature of e7pense method. ;7penses are aggregated in the income statement
according to their nature for e7ample$ depreciation$ purchases of materials$ transport costs$ employee benefits
and ad!ertising costs#$ and are not reallocated among !arious functions within the entity. 0his method may be
simple to apply because no allocations of e7penses to functional classifications are necessary. An e7ample of a
classification using the nature of e7pense method is as follows,
12 5 IASCF
IAS 1
*e+enue ,
)ther income ,
Chan$es in in+entories of finished $oods and -or. in pro$ress ,
*a- materials and consumables used ,
/mplo&ee benefits e0pense ,
#epreciation and amortisation e0pense ,
)ther e0penses ,
1otal e0penses 2,3
!rofit ,
9' 0he second form of analysis is the function of e7pense or ?cost of sales= method and classifies e7penses
according to their function as part of cost of sales or$ for e7ample$ the costs of distribution or administrati!e
acti!ities. At a minimum$ an entity discloses its cost of sales under this method separately from other e7penses.
0his method can pro!ide more rele!ant information to users than the classification of e7penses by nature$ but
allocating costs to functions may re8uire arbitrary allocations and in!ol!e considerable 9udgement. An e7ample
of a classification using the function of e7pense method is as follows,
*e+enue ,
Cost of sales 2,3
4ross profit ,
)ther income ,
#istribution costs 2,3
(dministrati+e e0penses 2,3
)ther e0penses 2,3
!rofit ,
60 8ntities classif#ing e%penses b# function shall disclose additional information on the nature of e%penses$
including depreciation and amortisation e%pense and emplo#ee benefits e%pense.
9" 0he choice between the function of e7pense method and the nature of e7pense method depends on historical and
industry factors and the nature of the entity. )oth methods pro!ide an indication of those costs that might !ary$
directly or indirectly$ with the le!el of sales or production of the entity. )ecause each method of presentation has
merit for different types of entities$ this Standard re8uires management to select the most rele!ant and reliable
presentation. Aowe!er$ because information on the nature of e7penses is useful in predicting future cash flows$
additional disclosure is re8uired when the function of e7pense classification is used. In paragraph 9&$ ?employee
benefits= has the same meaning as in IAS 19 .mplo4ee 2enefits.
5 IASCF 19
IAS 1
67 An entit# shall disclose$ either on the face of the income statement or the statement of changes in e"uit#$ or
in the notes$ the amount of di(idends recognised as distributions to e"uit# holders during the period$ and
the related amount per share.
State,ent o0 c.ange+ in e5uit2
62 An entit# shall present a statement of changes in e"uit# showing on the face of the statement
(a) profit or loss for the period!
(b) each item of income and e%pense for the period that$ as re"uired b# other Standards or b#
Interpretations$ is recognised directl# in e"uit#$ and the total of these items!
(c) total income and e%pense for the period (calculated as the sum of (a) and (b))$ showing separatel#
the total amounts attributable to e"uit# holders of the parent and to minorit# interest! and
(d) for each component of e"uit#$ the effects of changes in accounting policies and corrections of
errors recognised in accordance with IAS 8.
A statement of changes in e"uit# that comprises onl# these items shall be titled a statement of recognised
income and e%pense.
63 An entit# shall also present$ either on the face of the statement of changes in e"uit# or in the notes
(a) the amounts of transactions with e"uit# holders acting in their capacit# as e"uit# holders$
showing separatel# distributions to e"uit# holders!
(b) the balance of retained earnings (ie accumulated profit or loss) at the beginning of the period and
at the balance sheet date$ and the changes during the period! and
(c) a reconciliation between the carr#ing amount of each class of contributed e"uit# and each reser(e
at the beginning and the end of the period$ separatel# disclosing each change.
92 Changes in an entity=s e8uity between two balance sheet dates reflect the increase or decrease in its net assets
during the period. ;7cept for changes resulting from transactions with e8uity holders acting in their capacity as
e8uity holders such as e8uity contributions$ reac8uisitions of the entity=s own e8uity instruments and di!idends#
and transaction costs directly related to such transactions$ the o!erall change in e8uity during a period represents
the total amount of income and e7penses$ including gains and losses$ generated by the entity=s acti!ities during
that period whether those items of income and e7penses are recognised in profit or loss or directly as changes in
e8uity#.
99 0his Standard re8uires all items of income and e7pense recognised in a period to be included in profit or loss
unless another Standard or an Interpretation re8uires otherwise. Fther Standards re8uire some gains and losses
such as re!aluation increases and decreases$ particular foreign e7change differences$ gains or losses on
remeasuring a!ailable1for1sale financial assets$ and related amounts of current ta7 and deferred ta7# to be
recognised directly as changes in e8uity. )ecause it is important to consider all items of income and e7pense in
assessing changes in an entity=s financial position between two balance sheet dates$ this Standard re8uires the
presentation of a statement of changes in e8uity that highlights an entity=s total income and e7penses$ including
those that are recognised directly in e8uity.
1(( IAS 2 re8uires retrospecti!e ad9ustments to effect changes in accounting policies$ to the e7tent practicable$
e7cept when the transitional pro!isions in another Standard or an Interpretation re8uire otherwise. IAS 2 also
re8uires that restatements to correct errors are made retrospecti!ely$ to the e7tent practicable. .etrospecti!e
ad9ustments and retrospecti!e restatements are made to the balance of retained earnings$ e7cept when a Standard
or an Interpretation re8uires retrospecti!e ad9ustment of another component of e8uity. Paragraph 94d# re8uires
disclosure in the statement of changes in e8uity of the total ad9ustment to each component of e8uity resulting$
separately$ from changes in accounting policies and from corrections of errors. 0hese ad9ustments are disclosed
for each prior period and the beginning of the period.
1(1 0he re8uirements in paragraphs 94 and 97 may be met in !arious ways. Fne e7ample is a columnar format that
reconciles the opening and closing balances of each element within e8uity. An alternati!e is to present only the
items set out in paragraph 94 in the statement of changes in e8uity. Gnder this approach$ the items described in
paragraph 97 are shown in the notes.
Ca+. 0lo- +tate,ent
1(' Cash flow information pro!ides users of financial statements with a basis to assess the ability of the entity to
generate cash and cash e8ui!alents and the needs of the entity to utilise those cash flows. IAS 7 sets out
re8uirements for the presentation of the cash flow statement and related disclosures.
'( 5 IASCF
IAS 1
Note+
Structure
&;0 The notes shall
(a) present information about the basis of preparation of the financial statements and the specific
accounting policies used in accordance with paragraphs &;8:&&7!
(b) disclose the information re"uired b# IFRSs that is not presented on the face of the balance sheet$
income statement$ statement of changes in e"uit# or cash flow statement! and
(c) pro(ide additional information that is not presented on the face of the balance sheet$ income
statement$ statement of changes in e"uit# or cash flow statement$ but is rele(ant to an
understanding of an# of them.
&;1 /otes shall$ as far as practicable$ be presented in a s#stematic manner. 8ach item on the face of the
balance sheet$ income statement$ statement of changes in e"uit# and cash flow statement shall be
cross9referenced to an# related information in the notes.
1(% 3otes are normally presented in the following order$ which assists users in understanding the financial statements
and comparing them with financial statements of other entities,
a# a statement of compliance with IF.Ss see paragraph 1"#>
b# a summary of significant accounting policies applied see paragraph 1(2#>
c# supporting information for items presented on the face of the balance sheet$ income statement$
statement of changes in e8uity and cash flow statement$ in the order in which each statement and each
line item is presented> and
d# other disclosures$ including,
i# contingent liabilities see IAS &7# and unrecognised contractual commitments> and
ii# non1financial disclosures$ eg the entity=s financial ris< management ob9ecti!es and policies
see IF.S 7#.
1(4 In some circumstances$ it may be necessary or desirable to !ary the ordering of specific items within the notes.
For e7ample$ information on changes in fair !alue recognised in profit or loss may be combined with information
on maturities of financial instruments$ although the former disclosures relate to the income statement and the
latter relate to the balance sheet. 3e!ertheless$ a systematic structure for the notes is retained as far as
practicable.
1(7 3otes pro!iding information about the basis of preparation of the financial statements and specific accounting
policies may be presented as a separate component of the financial statements.
Di+clo+ure o0 accounting *olicie+
&;8 An entit# shall disclose in the summar# 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 rele(ant to an understanding of the financial
statements.
1(9 It is important for users to be informed of the measurement basis or bases used in the financial statements for
e7ample$ historical cost$ current cost$ net realisable !alue$ fair !alue or reco!erable amount# because the basis on
which the financial statements are prepared significantly affects their analysis. Ehen more than one
measurement basis is used in the financial statements$ for e7ample when particular classes of assets are re!alued$
it is sufficient to pro!ide an indication of the categories of assets and liabilities to which each measurement basis
is applied.
11( In deciding whether a particular accounting policy should be disclosed$ management considers whether
disclosure would assist users in understanding how transactions$ other e!ents and conditions are reflected in the
reported financial performance and financial position. *isclosure of particular accounting policies is especially
useful to users when those policies are selected from alternati!es allowed in Standards and Interpretations. An
e7ample is disclosure of whether a !enturer recognises its interest in a 9ointly controlled entity using
proportionate consolidation or the e8uity method see IAS &1 Interests in 6oint 7entures#. Some Standards
specifically re8uire disclosure of particular accounting policies$ including choices made by management between
different policies they allow. For e7ample$ IAS 14 re8uires disclosure of the measurement bases used for classes
5 IASCF '1
IAS 1
of property$ plant and e8uipment. IAS '& 2orro0ing #osts re8uires disclosure of whether borrowing costs are
recognised immediately as an e7pense or capitalised as part of the cost of 8ualifying assets.
111 ;ach entity considers the nature of its operations and the policies that the users of its financial statements would
e7pect to be disclosed for that type of entity. For e7ample$ an entity sub9ect to income ta7es would be e7pected to
disclose its accounting policies for income ta7es$ including those applicable to deferred ta7 liabilities and assets.
Ehen an entity has significant foreign operations or transactions in foreign currencies$ disclosure of accounting
policies for the recognition of foreign e7change gains and losses would be e7pected. Ehen business
combinations ha!e occurred$ the policies used for measuring goodwill and minority interest are disclosed.
11' An accounting policy may be significant because of the nature of the entity=s operations e!en if amounts for
current and prior periods are not material. It is also appropriate to disclose each significant accounting policy that
is not specifically re8uired by IF.Ss$ but is selected and applied in accordance with IAS 2.
&&0 An entit# shall disclose$ in the summar# of significant accounting policies or other notes$ the .udgements$
apart from those in(ol(ing estimations (see paragraph &&2)$ that management has made in the process of
appl#ing the entit#5s accounting policies and that ha(e the most significant effect on the amounts
recognised in the financial statements.
11" In the process of applying the entity=s accounting policies$ management ma<es !arious 9udgements$ apart from
those in!ol!ing estimations$ that can significantly affect the amounts recognised in the financial statements. For
e7ample$ management ma<es 9udgements in determining,
a# whether financial assets are held1to1maturity in!estments>
b# when substantially all the significant ris<s and rewards of ownership of financial assets and lease assets
are transferred to other entities>
c# whether$ in substance$ particular sales of goods are financing arrangements and therefore do not gi!e
rise to re!enue> and
d# whether the substance of the relationship between the entity and a special purpose entity indicates that
the special purpose entity is controlled by the entity.
11% Some of the disclosures made in accordance with paragraph 11& are re8uired by other Standards. For e7ample$
IAS '7 re8uires an entity to disclose the reasons why the entity=s ownership interest does not constitute control$
in respect of an in!estee that is not a subsidiary e!en though more than half of its !oting or potential !oting
power is owned directly or indirectly through subsidiaries. IAS "( re8uires disclosure of the criteria de!eloped
by the entity to distinguish in!estment property from owner1occupied property and from property held for sale in
the ordinary course of business$ when classification of the property is difficult.
?e2 +ource+ o0 e+ti,ation uncertaint2
&&2 An entit# shall disclose in the notes information about the 'e# assumptions concerning the future$ and
other 'e# sources of estimation uncertaint# at the balance sheet date$ that ha(e a significant ris' of
causing a material ad.ustment to the carr#ing amounts of assets and liabilities within the ne%t financial
#ear. In respect of those assets and liabilities$ the notes shall include details of
(a) their nature! and
(b) their carr#ing amount as at the balance sheet date.
117 *etermining the carrying amounts of some assets and liabilities re8uires estimation of the effects of uncertain
future e!ents on those assets and liabilities at the balance sheet date. For e7ample$ in the absence of recently
obser!ed mar<et prices used to measure the following assets and liabilities$ future1oriented estimates are
necessary to measure the reco!erable amount of classes of property$ plant and e8uipment$ the effect of
technological obsolescence on in!entories$ pro!isions sub9ect to the future outcome of litigation in progress$ and
long1term employee benefit liabilities such as pension obligations. 0hese estimates in!ol!e assumptions about
such items as the ris< ad9ustment to cash flows or discount rates used$ future changes in salaries and future
changes in prices affecting other costs.
112 0he <ey assumptions and other <ey sources of estimation uncertainty disclosed in accordance with paragraph 114
relate to the estimates that re8uire management=s most difficult$ sub9ecti!e or comple7 9udgements. As the
number of !ariables and assumptions affecting the possible future resolution of the uncertainties increases$ those
9udgements become more sub9ecti!e and comple7$ and the potential for a conse8uential material ad9ustment to
the carrying amounts of assets and liabilities normally increases accordingly.
119 0he disclosures in paragraph 114 are not re8uired for assets and liabilities with a significant ris< that their
carrying amounts might change materially within the ne7t financial year if$ at the balance sheet date$ they are
measured at fair !alue based on recently obser!ed mar<et prices their fair !alues might change materially within
'' 5 IASCF
IAS 1
the ne7t financial year but these changes would not arise from assumptions or other sources of estimation
uncertainty at the balance sheet date#.
1'( 0he disclosures in paragraph 114 are presented in a manner that helps users of financial statements to understand
the 9udgements management ma<es about the future and about other <ey sources of estimation uncertainty. 0he
nature and e7tent of the information pro!ided !ary according to the nature of the assumption and other
circumstances. ;7amples of the types of disclosures made are,
a# the nature of the assumption or other estimation uncertainty>
b# the sensiti!ity of carrying amounts to the methods$ assumptions and estimates underlying their
calculation$ including the reasons for the sensiti!ity>
c# the e7pected resolution of an uncertainty and the range of reasonably possible outcomes within the ne7t
financial year in respect of the carrying amounts of the assets and liabilities affected> and
d# an e7planation of changes made to past assumptions concerning those assets and liabilities$ if the
uncertainty remains unresol!ed.
1'1 It is not necessary to disclose budget information or forecasts in ma<ing the disclosures in paragraph 114.
1'' Ehen it is impracticable to disclose the e7tent of the possible effects of a <ey assumption or another <ey source
of estimation uncertainty at the balance sheet date$ the entity discloses that it is reasonably possible$ based on
e7isting <nowledge$ that outcomes within the ne7t financial year that are different from assumptions could
re8uire a material ad9ustment to the carrying amount of the asset or liability affected. In all cases$ the entity
discloses the nature and carrying amount of the specific asset or liability or class of assets or liabilities# affected
by the assumption.
1'& 0he disclosures in paragraph 11& of particular 9udgements management made in the process of applying the
entity=s accounting policies do not relate to the disclosures of <ey sources of estimation uncertainty in paragraph
114.
1'" 0he disclosure of some of the <ey assumptions that would otherwise be re8uired in accordance with paragraph
114 is re8uired by other Standards. For e7ample$ IAS &7 re8uires disclosure$ in specified circumstances$ of ma9or
assumptions concerning future e!ents affecting classes of pro!isions. IF.S 7 re8uires disclosure of significant
assumptions applied in estimating fair !alues of financial assets and financial liabilities that are carried at fair
!alue. IAS 14 re8uires disclosure of significant assumptions applied in estimating fair !alues of re!alued items of
property$ plant and e8uipment.
Ca*ital
&21A An entit# shall disclose information that enables users of its financial statements to e(aluate the entit#5s
ob.ecti(es$ policies and processes for managing capital.
1'") 0o comply with paragraph 1'"A$ the entity discloses the following,
a# 8ualitati!e information about its ob9ecti!es$ policies and processes for managing capital$ including but
not limited to#,
i# a description of what it manages as capital>
ii# when an entity is sub9ect to e7ternally imposed capital re8uirements$ the nature of those
re8uirements and how those re8uirements are incorporated into the management of capital>
and
iii# how it is meeting its ob9ecti!es for managing capital.
b# summary 8uantitati!e data about what it manages as capital. Some entities regard some financial
liabilities eg some forms of subordinated debt# as part of capital. Fther entities regard capital as
e7cluding some components of e8uity eg components arising from cash flow hedges#.
c# any changes in a# and b# from the pre!ious period.
d# whether during the period it complied with any e7ternally imposed capital re8uirements to which it is
sub9ect.
e# when the entity has not complied with such e7ternally imposed capital re8uirements$ the conse8uences
of such non1compliance.
0hese disclosures shall be based on the information pro!ided internally to the entity=s <ey management
personnel.
1'"C An entity may manage capital in a number of ways and be sub9ect to a number of different capital re8uirements.
For e7ample$ a conglomerate may include entities that underta<e insurance acti!ities and ban<ing acti!ities$ and
5 IASCF '&
IAS 1
those entities may also operate in se!eral 9urisdictions. Ehen an aggregate disclosure of capital re8uirements and
how capital is managed would not pro!ide useful information or distorts a financial statement user=s
understanding of an entity=s capital resources$ the entity shall disclose separate information for each capital
re8uirement to which the entity is sub9ect.
Ot.er di+clo+ure+
&27 An entit# shall disclose in the notes
(a) the amount of di(idends proposed or declared before the financial statements were authorised for
issue but not recognised as a distribution to e"uit# holders during the period$ and the related
amount per share! and
(b) the amount of an# cumulati(e preference di(idends not recognised.
&22 An entit# shall disclose the following$ if not disclosed elsewhere in information published with the financial
statements
(a) the domicile and legal form of the entit#$ its countr# 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 entit#5s operations and its principal acti(ities! and
(c) the name of the parent and the ultimate parent of the group.
E00ecti4e date
&23 An entit# shall appl# this Standard for annual periods beginning on or after & <anuar# 2;;7. 8arlier
application is encouraged. If an entit# applies this Standard for a period beginning before & <anuar# 2;;7$
it shall disclose that fact.
&23A An entit# shall appl# the amendment in paragraph 62 for annual periods beginning on or after & <anuar#
2;;2. If an entit# applies the amendments to IAS &6 8mplo#ee )enefits(#ct"arial )ains and *osses+
)ro"p ,lans and %isclos"res for an earlier period$ that amendment shall be applied for that earlier period.
&23) An entit# shall appl# the re"uirements of paragraphs &21A:&21* for annual periods beginning on or after
& <anuar# 2;;3. 8arlier application is encouraged.
6it.dra-al o0 IAS 1 8re4i+ed 133&9
1'2 0his Standard supersedes IAS 1 !resentation of Financial Statements re!ised in 1997.
'" 5 IASCF
IAS 1
A**endi:
A,end,ent+ to ot.er *ronounce,ent+
The amendments in this appendi/ shall be applied for annual periods beginning on or after 1 6anuar4 2008 If an entit4
applies this Standard for an earlier period* these amendments shall be applied for that earlier period
I I I I I
The amendments contained in this appendi/ 0hen this Standard 0as revised in 2003 have been incorporated into the
relevant pronouncements published in this volume
5 IASCF '%
IAS 1
A**ro4al o0 IAS 1 /2 t.e Board
International Accounting Standard 1 !resentation of Financial Statements was appro!ed for issue by the fourteen
members of the International Accounting Standards )oard.
Sir *a!id 0weedie Chairman
0homas ; :ones Jice1Chairman
/ary ; )arth
Aans1Beorg )runs
Anthony 0 Cope
.obert P Barnett
Bilbert BKlard
:ames : Leisenring
Earren : /cBregor
Patricia L F=/alley
Aarry M Schmid
:ohn 0 Smith
Beoffrey Ehittington
0atsumi Namada
'4 5 IASCF
IAS 1
A**ro4al o0 A,end,ent+ to IAS 1 /2 t.e Board
0hese Amendments to International Accounting Standard 1 Presentation of Financial Statements+#apital Disclosures
were appro!ed for issue by thirteen of the fourteen members of the International Accounting Standards )oard. /r
Leisenring dissented. Ais dissenting opinion is set out after the )asis for Conclusions.
Sir *a!id 0weedie Chairman
0homas ; :ones Jice1Chairman
/ary ; )arth
Aans1Beorg )runs
Anthony 0 Cope
:an ;ngstrOm
.obert P Barnett
Bilbert BKlard
:ames : Leisenring
Earren : /cBregor
Patricia L F=/alley
:ohn 0 Smith
Beoffrey Ehittington
0atsumi Namada
5 IASCF '7
IAS 1 )C
Ba+i+ 0or Conclu+ion+ on
IAS 1 Presentation of Financial Statements
This 2asis for #onclusions accompanies* but is not part of* I"S 1
Introduction
)C1 0his )asis for Conclusions summarises the International Accounting Standards )oard=s considerations in
reaching its conclusions on re!ising IAS 1 !resentation of Financial Statements in '((&. Indi!idual )oard
members ga!e greater weight to some factors than to others.
)C' In :uly '((1 the )oard announced that$ as part of its initial agenda of technical pro9ects$ it would underta<e a
pro9ect to impro!e a number of Standards$ including IAS 1. 0he pro9ect was underta<en in the light of 8ueries
and criticisms raised in relation to the Standards by securities regulators$ professional accountants and other
interested parties. 0he ob9ecti!es of the Impro!ements pro9ect were to reduce or eliminate alternati!es$
redundancies and conflicts within Standards$ to deal with some con!ergence issues and to ma<e other
impro!ements. In /ay '((' the )oard published its proposals in an ;7posure *raft of Improvements to
International "ccounting Standards$ with a comment deadline of 14 September '(('. 0he )oard recei!ed o!er
14( comment letters on the ;7posure *raft.
)C& )ecause the )oard=s intention was not to reconsider the fundamental approach to the presentation of financial
statements established by IAS 1$ this )asis for Conclusions does not discuss re8uirements in IAS 1 that the
)oard has not reconsidered. Jarious issues concerning the presentation of the income statement were not
addressed in the Standard and Implementation Buidance because of the )oard=s pro9ect on reporting
comprehensi!e income.
De*arture+ 0ro, +tandard+ and inter*retation+
)C" Paragraph 1& of the pre!ious !ersion of IAS 1 permitted an entity to depart from a re8uirement in a Standard ?in
the e7tremely rare circumstances when management concludes that compliance with a re8uirement in a Standard
would be misleading$ and therefore that departure from a re8uirement is necessary to achie!e a fair presentation=.
Ehen such a departure occurred$ paragraph 1& re8uired e7tensi!e disclosure of the facts and circumstances
surrounding the departure and the treatment adopted.
)C% 0he )oard decided to clarify in paragraph 1& of the Standard that for financial statements to present fairly the
financial position$ financial performance and cash flows of an entity$ they must represent faithfully the effects of
transactions and other e!ents in accordance with the definitions and recognition criteria for assets$ liabilities$
income and e7penses set out in the Frame0or1 for the !reparation and !resentation of Financial Statements
)C4 0he )oard decided to limit the occasions on which an entity should depart from a re8uirement in a Standard or
an Interpretation to the e7tremely rare circumstances in which management concludes that compliance with the
re8uirement would be so misleading that it would conflict with the ob9ecti!e of financial statements set out in the
Frame0or1. Buidance on this criterion states that an item of information would conflict with the ob9ecti!e of
financial statements when it does not represent faithfully the transactions$ other e!ents or conditions that it either
purports to represent or could reasonably be e7pected to represent and$ conse8uently$ it would be li<ely to
influence economic decisions made by users of financial statements.
)C7 0hese amendments pro!ide a framewor< within which an entity assesses how to present fairly the effects of
transactions$ other e!ents and conditions$ and whether the result of complying with a re8uirement in a Standard
or an Interpretation would be so misleading that it would not gi!e a fair presentation.
)C2 0he )oard considered whether the Standard should be silent regarding departures from IF.Ss. 0he )oard
decided against that change$ noting that such a change would remo!e its capability to specify the criteria under
which departures from IF.Ss should occur.
)C9 *eparting from a re8uirement in a Standard or an Interpretation when considered necessary to achie!e a fair
presentation would conflict with the regulatory framewor< in some 9urisdictions. 0he re!ised Standard ta<es into
account the different regulatory framewor<s concerning departures from accounting standards in the !arious
9urisdictions in which entities prepare financial statements. It re8uires that when an entity=s circumstances satisfy
the criterion described in paragraph )C4 for departure from a re8uirement in a Standard or an Interpretation$ the
entity should proceed as follows,
'2 5 IASCF
IAS 1 )C
a# when the rele!ant regulatory framewor< re8uires+or otherwise does not prohibit+a departure from
the re8uirement$ the entity is re8uired to ma<e that departure and the disclosures set out in paragraph 12
of the Standard> and
b# when the rele!ant regulatory framewor< prohibits departure from the re8uirement$ the entity is
re8uired$ to the ma7imum e7tent possible$ to reduce the percei!ed misleading aspects of compliance by
ma<ing the disclosures set out in paragraph '1 of the Standard.
0his amendment enables entities to comply with the re8uirements of the Standard when the rele!ant regulatory
framewor< prohibits departures from accounting standards$ while retaining the principle that entities should$ to
the ma7imum e7tent possible$ ensure that financial statements pro!ide a fair presentation.
)C1( After considering the comments recei!ed on the ;7posure *raft$ the )oard added to the Standard a re8uirement
in paragraph 19 to disclose the effect of a departure from a re8uirement of a Standard or an Interpretation in a
prior period on the current period=s financial statements. Eithout this disclosure$ users of the entity=s financial
statements could be unaware of the continuing effects of prior period departures.
)C11 In !iew of the strict criteria for departure from a re8uirement in a Standard or an Interpretation$ the Standard
includes a rebuttable presumption that if other entities in similar circumstances comply with the re8uirement$ the
entity=s compliance with the re8uirement would not be so misleading that it would conflict with the ob9ecti!e of
financial statements set out in the Frame0or1.
Re+ult+ o0 o*erating acti4itie+
)C1' 0he Standard omits the re8uirement in the pre!ious !ersion to disclose the results of operating acti!ities as a line
item on the face of the income statement. ?Fperating acti!ities= are not defined in the Standard$ and the )oard
decided not to re8uire disclosure of an undefined item.
)C1& 0he )oard recognises that an entity may elect to disclose the results of operating acti!ities$ or a similar line item$
e!en though this term is not defined. In such cases$ the )oard notes that the entity should ensure the amount
disclosed is representati!e of acti!ities that would normally be considered to be ?operating=. In the )oard=s !iew$
it would be misleading and would impair the comparability of financial statements if items of an operating nature
were e7cluded from the results of operating acti!ities$ e!en if that had been industry practice. For e7ample$ it
would be inappropriate to e7clude items clearly related to operations such as in!entory write1downs and
restructuring and relocation e7penses# because they occur irregularly or infre8uently or are unusual in amount.
Similarly$ it would be inappropriate to e7clude items on the grounds that they do not in!ol!e cash flows$ such as
depreciation and amortisation e7penses.
E:traordinar2 ite,+
)C1" IAS 2 %et !rofit or $oss for the !eriod* Fundamental .rrors and #hanges in "ccounting !olicies re8uired
e7traordinary items to be disclosed on the face of the income statement separately from the profit or loss from
ordinary acti!ities paragraph 1(#. Paragraph 4 of that Standard defined ?e7traordinary items= as ?income or
e7penses that arise from e!ents or transactions that are clearly distinct from the ordinary acti!ities of the
enterprise and therefore are not e7pected to recur fre8uently or regularly=.
)C1% 0he )oard decided to eliminate the concept of e7traordinary items from IAS 2 and to prohibit the presentation of
items of income and e7pense as ?e7traordinary items= in the income statement and the notes. 0herefore$ in
accordance with the re!ised Standard$ no items of income and e7pense are to be presented as arising from
outside the entity=s ordinary acti!ities.
)C14 Some respondents to the ;7posure *raft argued that e7traordinary items should be presented in a separate
component of the income statement because they are clearly distinct from all of the other items of income and
e7pense$ and because such presentation highlights to users of financial statements the items of income and
e7pense to which the least attention should be gi!en when predicting an entity=s future performance.
)C17 0he )oard decided that items treated as e7traordinary result from the normal business ris<s faced by an entity
and do not warrant presentation in a separate component of the income statement. 0he nature or function of a
transaction or other e!ent$ rather than its fre8uency$ should determine its presentation within the income
statement. Items currently classified as ?e7traordinary= are only a subset of the items of income and e7pense that
may warrant disclosure to assist users in predicting an entity=s future performance.
)C12 ;liminating the category of e7traordinary items eliminates the need for arbitrary segregation of the effects of
related e7ternal e!ents+some recurring and others not+on the profit or loss of an entity for a period. For
e7ample$ arbitrary allocations would ha!e been necessary to estimate the financial effect of an earth8ua<e on an
5 IASCF '9
IAS 1 )C
entity=s profit or loss if it occurs during a ma9or cyclical downturn in economic acti!ity. In addition$ paragraph 24
of the Standard re8uires disclosure of the nature and amount of material items of income and e7pense.
%inorit2 intere+t
)C19 0he Standard re8uires the ?profit or loss attributable to minority interest= and ?profit or loss attributable to e8uity
holders of the parent= each to be presented on the face of the income statement in accordance with paragraph 2'.
0hese amounts are to be presented as allocations of profit or loss$ not as items of income or e7pense. A similar
re8uirement has been added for the statement of changes in e8uity$ in paragraph 94c# of the Standard. 0hese
changes are consistent with the re!ised IAS '7 #onsolidated and Separate Financial Statements$ which re8uires
that in consolidated balance sheets$ minority interest is presented within e8uity because it does not meet the
definition of a liability in the Frame0or1.
E00ect o0 e4ent+ a0ter t.e /alance +.eet date on t.e cla++i0ication o0
lia/ilitie+
)C'( Paragraph 4& of the pre!ious !ersion of IAS 1 included the following,
An enterprise should continue to classify its long1term interest1bearing liabilities as non1current$ e!en when they are due to
be settled within twel!e months of the balance sheet date if,
a# the original term was for a period of more than twel!e months>
b# the enterprise intends to refinance the obligation on a long1term basis> and
c# that intention is supported by an agreement to refinance$ or to reschedule payments$ which is completed before
the financial statements are authorised for issue.
)C'1 Paragraph 4% of the pre!ious !ersion of IAS 1 stated,
Some borrowing agreements incorporate underta<ings by the borrower co!enants# which ha!e the effect that the liability
becomes payable on demand if certain conditions related to the borrower=s financial position are breached. In these
circumstances$ the liability is classified as non1current only when,
a# the lender has agreed$ prior to the authorisation of the financial statements for issue$ not to demand payment as
a conse8uence of the breach> and
b# it is not probable that further breaches will occur within twel!e months of the balance sheet date.
)C'' 0he )oard considered the re8uirements in paragraphs 4& and 4% and concluded that refinancing$ or the receipt of
a wai!er of the lender=s right to demand payment$ that occurs after the balance sheet date should not be ta<en
into account in the classification of a liability.
)C'& 0he ;7posure *raft proposed the following amendments,
a# to amend paragraph 4& to specify that a long1term financial liability due to be settled within twel!e
months of the balance sheet date should not be classified as a non1current liability because an
agreement to refinance$ or to reschedule payments$ on a long1term basis is completed after the balance
sheet date and before the financial statements are authorised for issue. 0his amendment does not affect
the classification of a liability as non1current when the entity has$ under the terms of an e7isting loan
facility$ the discretion to refinance or roll o!er its obligations for at least twel!e months after the
balance sheet date.
b# to amend paragraph 4% to specify that a long1term financial liability that is payable on demand because
the entity breached a condition of its loan agreement should be classified as current at the balance sheet
date e!en if the lender has agreed after the balance sheet date$ and before the financial statements are
authorised for issue$ not to demand payment as a conse8uence of the breach. Aowe!er$ if the lender has
agreed by the balance sheet date to pro!ide a period of grace within which the entity can rectify the
breach and during which the lender cannot demand immediate repayment$ the liability is classified as
non1current if it is due for settlement$ without that breach of the loan agreement$ at least twel!e months
after the balance sheet date and,
i# the entity rectifies the breach within the period of grace> or
ii# when the financial statements are authorised for issue$ the period of grace is incomplete and it
is probable that the breach will be rectified.
)C'" Some respondents disagreed with these proposals. 0hey ad!ocated classifying a liability as current or
non1current according to whether it is e7pected to use current assets of the entity$ rather than strictly on the basis
of its date of maturity and whether it is callable at the balance sheet date. In their !iew$ this would pro!ide more
rele!ant information about the liability=s future effect on the timing of the entity=s resource flows.
&( 5 IASCF
IAS 1 )C
)C'% Aowe!er$ the )oard decided that the following arguments for changing paragraphs 4& and 4% of the pre!ious
!ersion of the Standard were more persuasi!e,
a# refinancing a liability after the balance sheet date does not affect the entity=s li8uidity and sol!ency at
the balance sheet date$ the reporting of which should reflect contractual arrangements in force on that
date. 0herefore$ it is a non1ad9usting e!ent in accordance with IAS 1( .vents after the 2alance Sheet
Date and should not affect the presentation of the entity=s balance sheet.
b# it is illogical to adopt a criterion that ?non1current= classification of short1term obligations e7pected to
be rolled o!er for at least twel!e months after the balance sheet date depends on whether the roll 1o!er is
at the discretion of the entity$ and then to pro!ide an e7ception based on refinancing occurring after the
balance sheet date.
c# in the circumstances set out in paragraph 4%$ unless the lender has wai!ed its right to demand
immediate repayment or granted a period of grace within which the entity may rectify the breach of the
loan agreement$ the financial condition of the entity at the balance sheet date was that the entity did not
hold an absolute right to defer repayment$ based on the terms of the loan agreement. 0he granting of a
wai!er or a period of grace changes the terms of the loan agreement. 0herefore$ an entity=s receipt from
the lender$ after the balance sheet date$ of a wai!er or a period of grace of at least twel!e months does
not change the nature of the liability to non1current until it occurs.
)C'4 0he re!ised Standard includes the amendments proposed in the ;7posure *raft$ with one change. 0he change
relates to the classification of a long1term loan when$ at the balance sheet date$ the lender has pro!ided a period
of grace within which a breach of the loan agreement can be rectified$ and during which period the lender cannot
demand immediate repayment of the loan.
)C'7 0he ;7posure *raft proposed that such a loan should be classified as non1current if it is due for settlement$
without the breach$ at least twel!e months after the balance sheet date and,
a# the entity rectifies the breach within the period of grace> or
b# when the financial statements are authorised for issue$ the period of grace is incomplete and it is
probable that the breach will be rectified.
)C'2 After considering the comments recei!ed on the ;7posure *raft$ the )oard decided that the occurrence or
probability of a rectification of a breach after the balance sheet date is irrele!ant to the conditions e7isting at the
balance sheet date. 0he re!ised Standard re8uires that$ for the loan to be classified as non1current$ the period of
grace must end at least twel!e months after the balance sheet date see paragraph 44#. 0herefore$ conditions a#
and b# in paragraph )C'7 are redundant.
)C'9 0he )oard considered arguments that if a period of grace to remedy a breach of a long1term loan agreement is
pro!ided before the balance sheet date$ the loan should be classified as non1current regardless of the length of the
period of grace. 0hese arguments are based on the !iew that$ at the balance sheet date$ the lender does not ha!e
an unconditional legal right to demand repayment before the original maturity date ie if the entity remedies the
breach during the period of grace$ it is entitled to repay the loan on the original maturity date#. Aowe!er$ the
)oard concluded that an entity should classify a loan as non1current only if it has an unconditional right to defer
settlement of the loan for at least twel!e months after the balance sheet date. 0his criterion focuses on the legal
rights of the entity$ rather than those of the lender.
Di+clo+ure o0 t.e <udge,ent+ ,anage,ent .a+ ,ade in t.e *roce++ o0
a**l2ing t.e entit2@+ accounting *olicie+
)C&( 0he re!ised Standard re8uires disclosure of the 9udgements$ apart from those in!ol!ing estimations$ management
has made in the process of applying the entity=s accounting policies that ha!e the most significant effect on the
amounts recognised in the financial statements see paragraph 11&#. An e7ample of these 9udgements is how
management determines whether financial assets are held1to1maturity in!estments. 0he )oard decided that
disclosure of the most important of these 9udgements would enable users of financial statements to understand
better how the accounting policies are applied and to ma<e comparisons between entities regarding the basis on
which managements ma<e these 9udgements.
)C&1 Comments recei!ed on the ;7posure *raft indicated that the purpose of the proposed disclosure was unclear.
Accordingly$ the )oard amended the disclosure e7plicitly to e7clude 9udgements in!ol!ing estimations which
are the sub9ect of the disclosure in paragraph 114 of the re!ised Standard# and added another four e7amples of
the types of 9udgements disclosed see paragraphs 11" and 11%#.
5 IASCF &1
IAS 1 )C
Di+clo+ure o0 Ae2 +ource+ o0 e+ti,ation uncertaint2
)C&' 0he re!ised Standard re8uires disclosure of the <ey assumptions concerning the future$ and other <ey sources of
estimation uncertainty at the balance sheet date$ that ha!e a significant ris< of causing a material ad9ustment to
the carrying amounts of assets and liabilities within the ne7t financial year. For those assets and liabilities$ the
proposed disclosures include details of,
a# their nature> and
b# their carrying amount as at the balance sheet date see paragraph 114#.
)C&& *etermining the carrying amounts of some assets and liabilities re8uires estimation of the effects of uncertain
future e!ents on those assets and liabilities at the balance sheet date. For e7ample$ in the absence of recently
obser!ed mar<et prices used to measure the following assets and liabilities$ future1oriented estimates are
necessary to measure the reco!erable amount of classes of property$ plant and e8uipment$ the effect of
technological obsolescence of in!entories$ pro!isions sub9ect to the future outcome of litigation in progress$ and
long1term employee benefit liabilities such as pension obligations. 0hese estimates in!ol!e assumptions about
such items as the ris< ad9ustment to cash flows or discount rates used$ future changes in salaries and future
changes in prices affecting other costs. 3o matter how diligently an entity estimates the carrying amounts of
assets and liabilities sub9ect to significant estimation uncertainty at the balance sheet date$ the reporting of point
estimates in the balance sheet cannot pro!ide information about the estimation uncertainties in!ol!ed in
measuring those assets and liabilities and the implications of those uncertainties for the period=s profit or loss.
)C&" 0he Frame0or1 states that ?0he economic decisions that are ta<en by users of financial statements re8uire an
e!aluation of the ability of an enterprise to generate cash and cash e8ui!alents and of the timing and certainty of
their generation.= 0he )oard decided that disclosure of information about <ey assumptions and other <ey sources
of estimation uncertainty at the balance sheet date enhances the rele!ance$ reliability and understandability of the
information reported in financial statements. 0hese <ey assumptions and other <ey sources of estimation
uncertainty relate to estimates that re8uire management=s most difficult$ sub9ecti!e or comple7 9udgements.
0herefore$ disclosure in accordance with paragraph 114 of the re!ised Standard would be made in respect of
relati!ely few assets or liabilities or classes of them#.
)C&% 0he ;7posure *raft proposed the disclosure of some ?sources of measurement uncertainty=. In the light of
comments recei!ed that the purpose of this disclosure was unclear$ the )oard decided,
a# to amend the sub9ect of that disclosure to ?sources of estimation uncertainty at the balance sheet date=>
and
b# to clarify in the re!ised Standard that the disclosure does not apply to assets and liabilities measured at
fair !alue based on recently obser!ed mar<et prices see paragraph 119 of the Standard#.
)C&4 Ehen assets and liabilities are measured at fair !alue on the basis of recently obser!ed mar<et prices$ future
changes in carrying amounts would not result from using estimates to measure the assets and liabilities at the
balance sheet date. Gsing obser!ed mar<et prices to measure assets or liabilities ob!iates the need for estimates
at the balance sheet date. 0he mar<et prices properly reflect the fair !alues at the balance sheet date$ e!en though
future mar<et prices could be different. 0he ob9ecti!e of fair !alue measurement is to reflect fair !alue at the
measurement date$ not to predict a future !alue.
)C&7 0he re!ised Standard does not prescribe the particular form or detail of the disclosures. Circumstances differ
from entity to entity$ and the nature of estimation uncertainty at the balance sheet date has many facets. 0he
re!ised Standard limits the scope of the disclosures to items that ha!e a significant ris< of causing a material
ad9ustment to the carrying amounts of assets and liabilities 0ithin the ne/t financial 4ear. 0he longer the future
period to which the disclosures relate$ the greater the range of items that would 8ualify for disclosure$ and the
less specific the disclosures that could be made about particular assets or liabilities. A period longer than the ne7t
financial year might obscure the most rele!ant information with other disclosures.
Criterion 0or e:e,*tion 0ro, re5uire,ent+
)C&2 0he pre!ious !ersion of IAS 1 specified that when the presentation or classification of items in the financial
statements is amended$ comparati!e amounts should be reclassified unless it is impracticable to do so
paragraph "(#. Applying a re8uirement is impracticable when the entity cannot apply it after ma<ing e!ery
reasonable effort to do so.
)C&9 0he ;7posure *raft proposed a different criterion for e7emption from particular re8uirements. For the
reclassification of comparati!e amounts$ and its proposed new re8uirement to disclose <ey assumptions and other
sources of estimation uncertainty at the balance sheet date discussed in paragraphs )C&'6)C&7#$ the ;7posure
&' 5 IASCF
IAS 1 )C
*raft proposed that the criterion for e7emption should be that applying the re8uirements would gi!e rise to
undue cost or effort.
)C"( In the light of comments recei!ed on the ;7posure *raft$ the )oard decided that an e7emption based on
management=s assessment of undue cost or effort is too sub9ecti!e to be applied consistently by different entities.
/oreo!er$ the )oard decided that balancing costs and benefits is a tas< for the )oard when it sets accounting
re8uirements rather than for entities when they apply those re8uirements. 0herefore$ the )oard decided to retain
the ?impracticability= criterion for e7emption set out in the pre!ious !ersion of IAS 1. 0his affects the e7emptions
set out in paragraphs &26"( and 1'' of the re!ised Standard. Impracticability is the only basis on which specific
e7emptions are pro!ided in Standards and Interpretations from applying particular re8uirements when the effect
of applying them is material.
Di+clo+ure+ a/out ca*ital
)C"1 In :uly '(("$ the )oard published an ;7posure *raft+;* 7 Financial Instruments+ Disclosures. As part of that
pro9ect$ the )oard considered whether it should re8uire disclosures about capital.
)C"' 0he le!el of an entity=s capital and how it manages capital are important factors for users to consider in assessing
the ris< profile of an entity and its ability to withstand une7pected ad!erse e!ents. 0he le!el of capital might also
affect the entity=s ability to pay di!idends. Conse8uently$ ;* 7 proposed disclosures about capital.
)C"& In ;* 7$ the )oard decided that it should not limit its re8uirements for disclosures about capital to entities that
are sub9ect to e7ternal capital re8uirements eg regulatory capital re8uirements established by legislation or other
regulation#. 0he )oard belie!es that information about capital is useful for all entities$ as is e!idenced by the fact
that some entities set internal capital re8uirements and norms ha!e been established for some industries. 0he
)oard noted that the capital disclosures are not intended to replace disclosures re8uired by regulators. 0he )oard
also noted that the financial statements should not be regarded as a substitute for disclosures to regulators which
may not be a!ailable to all users# because the function of disclosures made to regulators may differ from those to
other users. 0herefore$ the )oard decided that information about capital should be re8uired of all entities because
it is useful to users of general purpose financial statements. Accordingly$ the )oard did not distinguish between
the re8uirements for regulated and non1regulated entities.
)C"" Some respondents to ;* 7 8uestioned the rele!ance of the capital disclosures in a Standard dealing with
disclosures relating to financial instruments. 0he )oard noted that an entity=s capital does not relate solely to
financial instruments and$ thus$ capital disclosures ha!e more general rele!ance. Accordingly$ the )oard included
these disclosures in IAS 1$ rather than IF.S 7 Financial Instruments+ Disclosures$ the Standard resulting from
;* 7.
)C"% 0he )oard also decided that an entity=s decision to adopt the amendments to IAS 1 should be independent of the
entity=s decision to adopt IF.S 7. 0he )oard noted that issuing a separate amendment facilitates separate
adoption decisions.
O/<ecti4e+B *olicie+ and *roce++e+ 0or ,anaging ca*ital
)C"4 0he )oard decided that disclosure about capital should be placed in the conte7t of a discussion of the entity=s
ob9ecti!es$ policies and processes for managing capital. 0his is because the )oard belie!es that such a discussion
both communicates important information about the entity=s capital strategy and pro!ides the conte7t for other
disclosures.
)C"7 0he )oard considered whether an entity can ha!e a !iew of capital that differs from what IF.Ss define as e8uity.
0he )oard noted that$ although for the purposes of this disclosure capital would often e8uate with e8uity as
defined in IF.Ss$ it might also include or e7clude some components. 0he )oard also noted that this disclosure is
intended to gi!e entities the opportunity to describe how they !iew the components of capital they manage$ if this
is different from what IF.Ss define as e8uity.
E:ternall2 i,*o+ed ca*ital re5uire,ent+
)C"2 0he )oard considered whether it should re8uire disclosure of any e7ternally imposed capital re8uirements. Such
a capital re8uirement could be,
a# an industry1wide re8uirement with which all entities in the industry must comply> or
b# an entity1specific re8uirement imposed on a particular entity by its prudential super!isor or other
regulator.
5 IASCF &&
IAS 1 )C
)C"9 0he )oard noted that some industries and countries ha!e industry1wide capital re8uirements$ and others do not.
0hus$ the )oard concluded that it should not re8uire disclosure of industry1wide re8uirements$ or compliance
with such re8uirements$ because such disclosure would not lead to comparability between different entities or
between similar entities in different countries.
)C%( 0he )oard concluded that disclosure of the e7istence and le!el of entity1specific capital re8uirements is
important information for users$ because it informs them about the ris< assessment of the regulator. Such
disclosure impro!es transparency and mar<et discipline.
)C%1 Aowe!er$ the )oard noted the following arguments against re8uiring disclosure of e7ternally imposed
entity1specific capital re8uirements.
a# Gsers of financial statements might rely primarily on the regulator=s assessment of sol!ency ris<
without ma<ing their own ris< assessment.
b# 0he focus of a regulator=s ris< assessment is for those whose interests the regulations are intended to
protect eg depositors or policyholders#. 0his emphasis is different from that of a shareholder. 0hus$ it
could be misleading to suggest that the regulator=s ris< assessment could$ or should$ be a substitute for
independent analysis by in!estors.
c# 0he disclosure of entity1specific capital re8uirements imposed by a regulator might undermine that
regulator=s ability to impose such re8uirements. For e7ample$ the information could cause depositors to
withdraw funds$ a prospect that might discourage regulators from imposing re8uirements. Furthermore$
an entity=s regulatory dialogue would become public$ which might not be appropriate in all
circumstances.
d# )ecause different regulators ha!e different tools a!ailable$ for e7ample formal re8uirements and moral
suasion$ a re8uirement to disclose entity1specific capital re8uirements could not be framed in a way that
would lead to the pro!ision of information that is comparable across entities.
e# *isclosure of capital re8uirements and hence$ regulatory 9udgements# could hamper clear
communication to the entity of the regulator=s assessment by creating incenti!es to use moral suasion
and other informal mechanisms.
f# *isclosure re8uirements should not focus on entity1specific capital re8uirements in isolation$ but should
focus on how entity1specific capital re8uirements affect how an entity manages and determines the
ade8uacy of its capital resources.
g# A re8uirement to disclose entity1specific capital re8uirements imposed by a regulator is not part of
Pillar & of the )asel II Framewor< de!eloped by the )asel Committee on )an<ing Super!ision.
)C%' 0a<ing into account all of the abo!e arguments$ the )oard decided not to re8uire 8uantitati!e disclosure of
e7ternally imposed capital re8uirements. .ather$ it decided to re8uire disclosures about whether the entity
complied with any e7ternally imposed capital re8uirements during the period and$ if not$ the conse8uences of
non1compliance. 0his retains confidentiality between regulators and the entity$ but alerts users to breaches of
capital re8uirements and their conse8uences.
)C%& Some respondents to ;* 7 did not agree that breaches of e7ternally imposed capital re8uirements should be
disclosed. 0hey argued that disclosure about breaches of e7ternally imposed capital re8uirements and the
associated regulatory measures subse8uently imposed could be disproportionately damaging to entities. 0he
)oard was not persuaded by these arguments because it belie!es that such concerns indicate that information
about breaches of e7ternally imposed capital re8uirements may often be material by its nature. 0he Frame0or1
states that ?Information is material if its omission or misstatement could influence the economic decisions of
users ta<en on the basis of the financial statements.= Similarly$ the )oard decided not to pro!ide an e7emption for
temporary non1compliance with regulatory re8uirements during the year. Information that an entity is sufficiently
close to its limits to breach them$ e!en on a temporary basis$ is useful for users.
Internal ca*ital target+
)C%" 0he )oard proposed in ;* 7 that the re8uirement to disclose information about breaches of capital re8uirements
should apply e8ually to breaches of internally imposed re8uirements$ because it belie!ed the information is also
useful to a user of the financial statements.
)C%% Aowe!er$ this proposal was criticised by respondents to ;* 7 for the following reasons,
a# 0he information is sub9ecti!e and$ thus$ not comparable between entities. In particular$ different entities
will set internal targets for different reasons$ so a breach of a re8uirement might signify different things
for different entities. In contrast$ a breach of an e7ternal re8uirement has similar implications for all
entities re8uired to comply with similar re8uirements.
&" 5 IASCF
IAS 1 )C
b# Capital targets are not more important than other internally set financial targets$ and to re8uire
disclosure only of capital targets would pro!ide users with incomplete$ and perhaps misleading$
information.
c# Internal targets are estimates that are sub9ect to change by the entity. It is not appropriate to re8uire the
entity=s performance against this benchmar< to be disclosed.
d# An internally set capital target can be manipulated by management. 0he disclosure re8uirement could
cause management to set the target so that it would always be achie!ed$ pro!iding little useful
information to users and potentially reducing the effecti!eness of the entity=s capital management.
)C%4 As a result$ the )oard decided not to re8uire disclosure of the capital targets set by management$ whether the
entity has complied with those targets$ or the conse8uences of any non1compliance. Aowe!er$ the )oard
confirmed its !iew that when an entity has policies and processes for managing capital$ 8ualitati!e disclosures
about these policies and processes are useful. 0he )oard also concluded that these disclosures$ together with
disclosure of the components of e8uity and their changes during the year re8uired by paragraphs 9461(1#$
would gi!e sufficient information about entities that are not regulated or sub9ect to e7ternally imposed capital
re8uirements.
5 IASCF &%
IAS 1 )C
Di++enting O*inion
Di++ent o0 a,e+ Lei+enring
*F1 /r Leisenring dissents from the amendments to IAS 1 Presentation of Financial Statements+#apital
Disclosures. Ae disagrees with the assertion in paragraph )C"& that the information re8uired by this amendment
is useful for all entities. Ae notes that nothing would prohibit an entity ma<ing these disclosures if specific
circumstances suggested the disclosures were particularly useful. 0herefore he would not impose the disclosure
re8uirements of paragraphs 1'"A61'"C on entities that are not sub9ect to e7ternal capital re8uirements.
&4 5 IASCF
IAS 1 IB
Guidance on i,*le,enting
IAS 1 Presentation of Financial Statements
This guidance accompanies* but is not part of* I"S 1
Illu+trati4e 0inancial +tate,ent +tructure
IB1 0he Standard sets out the components of financial statements and minimum re8uirements for disclosure on the
face of the balance sheet and the income statement as well as for the presentation of changes in e8uity. It also
describes further items that may be presented either on the face of the rele!ant financial statement or in the notes.
0his guidance pro!ides simple e7amples of ways in which the re8uirements of the Standard for the presentation
of the balance sheet$ income statement and changes in e8uity might be met. 0he order of presentation and the
descriptions used for line items should be changed when necessary in order to achie!e a fair presentation in each
entity=s particular circumstances.
IB' 0he illustrati!e balance sheet shows one way in which a balance sheet distinguishing between current and non1
current items may be presented. Fther formats may be e8ually appropriate$ pro!ided the distinction is clear.
IB& 0wo income statements are pro!ided$ to illustrate the alternati!e classifications of income and e7penses$ by
nature and by function. 0wo possible approaches to presenting changes in e8uity are also illustrated.
IB" 0he e7amples are not intended to illustrate all aspects of IF.Ss. 3or do they comprise a complete set of financial
statements$ which would also include a cash flow statement$ a summary of significant accounting policies and
other e7planatory notes.
C;D Grou* Balance +.eet a+ at (1 Dece,/er 20C2
2in thousands of currenc& units3
20C2 20C1
ASSETS
Non>current a++et+
!ropert&5 plant and e6uipment , ,
4ood-ill , ,
)ther intan$ible assets , ,
In+estments in associates , ,
(+ailable-for-sale in+estments , ,
, ,
Current a++et+
In+entories , ,
1rade recei+ables , ,
5 IASCF &7
IAS 1 IB
C;D Grou* Balance +.eet a+ at (1 Dece,/er 20C2
)ther current assets , ,
Cash and cash e6ui+alents , ,
, ,
Total a++et+ , ,
C;D Grou* Balance +.eet a+ at (1 Dece,/er 20C2
2in thousands of currenc& units3
20C2 20C1
EEUIT; AND LIABILITIES
E5uit2 attri/uta/le to e5uit2 .older+ o0 t.e *arent
"hare capital , ,
)ther reser+es , ,
*etained earnin$s , ,
, ,
%inorit2 intere+t , ,
Total e5uit2 , ,
Non>current lia/ilitie+
7on$-term borro-in$s , ,
#eferred ta0 , ,
7on$-term pro+isions , ,
Total non>current lia/ilitie+ , ,
Current lia/ilitie+
&2 5 IASCF
IAS 1 IB
C;D Grou* Balance +.eet a+ at (1 Dece,/er 20C2
1rade and other pa&ables , ,
"hort-term borro-in$s , ,
Current portion of lon$-term borro-in$s , ,
Current ta0 pa&able , ,
"hort-term pro+isions , ,
Total current lia/ilitie+ , ,
Total lia/ilitie+ , ,
Total e5uit2 and lia/ilitie+ , ,
C;D Grou* Inco,e +tate,ent 0or t.e 2ear ended (1 Dece,/er 20C2
8illu+trating t.e cla++i0ication o0 e:*en+e+ /2 0unction9
2in thousands of currenc& units3
20C2 20C1
Re4enue , ,
Cost of sales 2,3 2,3
4ross profit , ,
)ther income , ,
#istribution costs 2,3 2,3
(dministrati+e e0penses 2,3 2,3
)ther e0penses 2,3 2,3
8inance costs 2,3 2,3
"hare of profit of associates
2a3
, ,
"ro0it /e0ore ta: , ,
5 IASCF &9
IAS 1 IB
C;D Grou* Inco,e +tate,ent 0or t.e 2ear ended (1 Dece,/er 20C2
Income ta0 e0pense 2,3 2,3
"ro0it 0or t.e *eriod , ,
(ttributable to9
/6uit& holders of the parent , ,
:inorit& interest , ,
, ,
a# 0his means the share of associates= profit attributable to e8uity holders of the associates$ ie it is after ta7 and minority interests
in the associates.
C;D Grou* inco,e +tate,ent 0or t.e 2ear ended (1 Dece,/er 20C2
8illu+trating t.e cla++i0ication o0 e:*en+e+ /2 nature9
2in thousands of currenc& units3
20C2 20C1
Re4enue , ,
)ther income , ,
Chan$es in in+entories of finished $oods and -or. in pro$ress 2,3 ,
;or. performed b& the entit& and capitalised , ,
*a- material and consumables used 2,3 2,3
/mplo&ee benefits e0pense 2,3 2,3
#epreciation and amortisation e0pense 2,3 2,3
Impairment of propert&5 plant and e6uipment
2a3
2,3 2,3
)ther e0penses 2,3 2,3
8inance costs 2,3 2,3
"hare of profit of associates , ,
"( 5 IASCF
IAS 1 IB
C;D Grou* inco,e +tate,ent 0or t.e 2ear ended (1 Dece,/er 20C2
"ro0it /e0ore ta: , ,
Income ta0 e0pense 2,3 2,3
"ro0it 0or t.e *eriod , ,
(ttributable to9
/6uit& holders of the parent , ,
:inorit& interest , ,
, ,
a# In an income statement in which e7penses are classified by nature$ an impairment of property$ plant and e8uipment is shown as
a separate line item. )y contrast$ if e7penses are classified by function$ the impairment is included in the functions# to which it
relates.
C;D Grou* State,ent o0 c.ange+ in e5uit2 0or t.e 2ear ended (1 Dece,/er 20C2
2in thousands of currenc& units3
(ttributable to e6uit& holders of the parent :inorit&
interest
1otal
e6uit&
"hare
capital
)ther
reser+es
2a3
1ranslation
reser+e
*etained
earnin$s
1otal
Balance at
(1 Dece,/er 20C0 , , 2,3 , , , ,
Chan$es in accountin$ polic& 2,3 2,3 2,3 2,3
*estated balance , , 2,3 , , , ,
C.ange+ in e5uit2 0or 20C1
4ain on propert& re+aluation , , , ,
(+ailable-for-sale in+estments9
<aluation $ains/2losses3
ta.en to e6uit& 2,3 2,3 2,3
5 IASCF "1
IAS 1 IB
C;D Grou* State,ent o0 c.ange+ in e5uit2 0or t.e 2ear ended (1 Dece,/er 20C2
1ransferred to profit or
loss on sale 2,3 2,3 2,3
Cash flo- hed$es9
4ains/2losses3 ta.en to
e6uit& , , , ,
1ransferred to profit or
loss for the period , , , ,
1ransferred to initial
carr&in$ amount of
hed$ed items 2,3 2,3 2,3
/0chan$e differences on
translatin$ forei$n operations 2,3 2,3 2,3 2,3
1a0 on items ta.en directl& to or
transferred from e6uit& 2,3 , 2,3 2,3 2,3
=et income reco$nised directl& in
e6uit& , 2,3 , , ,
!rofit for the period , , , ,
Total recogni+ed inco,e and
e:*en+e 0or t.e *eriod , 2,3 , , , ,
#i+idends 2,3 2,3 2,3 2,3
Issue of share capital , , ,
/6uit& share options issued , , ,
Balance at
(1 Dece,/er 20C1
carried 0or-ard , , 2,3 , , , ,
Balance at
(1 Dece,/er 20C1
/roug.t 0or-ard , , 2,3 , , , ,
C.ange+ in e5uit2 0or 20C2
7oss on propert& re+aluation 2,3 2,3 2,3 2,3
"' 5 IASCF
IAS 1 IB
C;D Grou* State,ent o0 c.ange+ in e5uit2 0or t.e 2ear ended (1 Dece,/er 20C2
(+ailable-for-sale in+estments9
<aluation $ains/2losses3
ta.en to e6uit& 2,3 2,3 2,3
1ransferred to profit or
loss on sale , , ,
Cash flo- hed$es9
4ains/2losses3 ta.en to
e6uit& , , , ,
1ransferred to profit or
loss for the period 2,3 2,3 2,3 2,3
1ransferred to initial
carr&in$ amount of
hed$ed items 2,3 2,3 2,3
/0chan$e differences on
translatin$ forei$n operations 2,3 2,3 2,3 2,3
1a0 on items ta.en directl& to or
transferred from e6uit& , , , , ,
=et income reco$nised directl& in
e6uit& 2,3 2,3 2,3 2,3 2,3
!rofit for the period , , , ,
Total recogni+ed inco,e and
e:*en+e 0or t.e *eriod 2,3 2,3 , , , ,
#i+idends 2,3 2,3 2,3 2,3
Issue of share capital , , ,
Balance at
(1 Dece,/er 20C2 , , 2,3 , , , ,
a# Fther reser!es are analysed into their components$ if material
5 IASCF "&
IAS 1 IB
"n alternative method of presenting changes in e5uit4 is illustrated on the follo0ing page
C;D Grou* State,ent o0 recogni+ed inco,e and e:*en+e 0or t.e 2ear ended (1 Dece,/er
20C2
2in thousands of currenc& units3
20C2 20C1
4ain/2loss3 on re+aluation of properties 2,3 ,
(+ailable-for-sale in+estments9
<aluation $ains/2losses3 ta.en to e6uit& 2,3 2,3
1ransferred to profit or loss on sale , 2,3
Cash flo- hed$es9
4ains/2losses3 ta.en to e6uit& , ,
1ransferred to profit or loss for the period 2,3 ,
1ransferred to the initial carr&in$ amount of hed$ed items 2,3 2,3
/0chan$e differences on translation of forei$n operations 2,3 2,3
(ctuarial $ains 2losses3 on defined benefit plans , 2,3
1a0 on items ta.en directl& to or transferred from e6uit& , 2,3
Net inco,e recogni+ed directl2 in e5uit2 2,3 ,
"ro0it 0or t.e *eriod , ,
Total recogni+ed inco,e and e:*en+e 0or t.e *eriod , ,
(ttributable to9
/6uit& holders of the parent , ,
:inorit& interest , ,
, ,
/ffect of chan$es in accountin$ polic&9
/6uit& holders of the parent 2,3
:inorit& interest 2,3
2,3
The above e/ample illustrates an approach that presents changes in e5uit4 representing income and e/pense in a
separate component of the financial statements 9nder this approach* a reconciliation of opening and closing
balances of share capital* reserves and accumulated profit* as illustrated on the previous page* is given in the
notes
"" 5 IASCF
IAS 1 IB
Illu+trati4e e:a,*le+ o0 ca*ital di+clo+ure+ 8*aragra*.+ 12)A12)C9
An entit2 t.at i+ not a regulated 0inancial in+titution
IB% 0he following e7ample illustrates the application of paragraphs 1'"A and 1'") for an entity that is not a
financial institution and is not sub9ect to an e7ternally imposed capital re8uirement. In this e7ample$ the entity
monitors capital using a debt1to1ad9usted capital ratio. Fther entities may use different methods to monitor
capital. 0he e7ample is also relati!ely simple. An entity decides$ in the light of its circumstances$ how much
detail it pro!ides to satisfy the re8uirements of paragraphs 1'"A and 1'").
$act+
Broup A manufactures and sells cars. Broup A includes a finance subsidiary that pro!ides finance to customers$
primarily in the form of leases. Broup A is not sub9ect to any e7ternally imposed capital re8uirements.
E:a,*le di+clo+ure
0he Broup=s ob9ecti!es when managing capital are,
- to safeguard the entity=s ability to continue as a going concern$ so that it can continue to pro!ide
returns for shareholders and benefits for other sta<eholders$ and
- to pro!ide an ade8uate return to shareholders by pricing products and ser!ices commensurately with
the le!el of ris<.
0he Broup sets the amount of capital in proportion to ris<. 0he Broup manages the capital structure and ma<es
ad9ustments to it in the light of changes in economic conditions and the ris< characteristics of the underlying
assets. In order to maintain or ad9ust the capital structure$ the Broup may ad9ust the amount of di!idends paid to
shareholders$ return capital to shareholders$ issue new shares$ or sell assets to reduce debt.
Consistently with others in the industry$ the Broup monitors capital on the basis of the debt1to1ad9usted capital
ratio. 0his ratio is calculated as net debt P ad9usted capital. 3et debt is calculated as total debt as shown in the
balance sheet# less cash and cash e8ui!alents. Ad9usted capital comprises all components of e8uity ie share
capital$ share premium$ minority interest$ retained earnings$ and re!aluation surplus# other than amounts
recognised in e8uity relating to cash flow hedges$ and includes some forms of subordinated debt.
*uring '(Q"$ the Broup=s strategy$ which was unchanged from '(Q&$ was to maintain the debt1to1ad9usted
capital ratio at the lower end of the range 4,1 to 7,1$ in order to secure access to finance at a reasonable cost by
maintaining a )) credit rating. 0he debt1to1ad9usted capital ratios at &1 *ecember '(Q" and at &1 *ecember
'(Q& were as follows,
(1 Dec C) (1 Dec C(
CU ,illion CU ,illion
1otal debt 15000 15100
7ess9 cash and cash e6ui+alents 2903 21503
=et debt 910 950
1otal e6uit& 110 105
(dd9 subordinated debt instruments 38 38
7ess9 amounts reco$nised in e6uit& relatin$ to cash flo- hed$es 2103 253
(d>usted capital 138 138
5 IASCF "%
IAS 1 IB
#ebt-to-ad>usted capital ratio 6?6 6?9
0he decrease in the debt1to1ad9usted capital ratio during '(Q" resulted primarily from the reduction in net debt
that occurred on the sale of subsidiary R. As a result of this reduction in net debt$ impro!ed profitability and
lower le!els of managed recei!ables$ the di!idend payment was increased to CG'.2 million for '(Q" from
CG'.% million for '(Q&#.
An entit2 t.at .a+ not co,*lied -it. e:ternall2 i,*o+ed ca*ital
re5uire,ent+
IB4 0he following e7ample illustrates the application of paragraph 1'")e# when an entity has not complied with
e7ternally imposed capital re8uirements during the period. Fther disclosures would be pro!ided to comply with
the other re8uirements of paragraphs 1'"A and 1'").
$act+
;ntity A pro!ides financial ser!ices to its customers and is sub9ect to capital re8uirements imposed by .egulator
). *uring the year ended &1 *ecember '(Q7$ ;ntity A did not comply with the capital re8uirements imposed
by .egulator ). In its financial statements for the year ended &1 *ecember '(Q7$ ;ntity A pro!ides the
following disclosure relating to its non1compliance.
E:a,*le di+clo+ure
;ntity A filed its 8uarterly regulatory capital return for &( September '(Q7 on '( Fctober '(Q7. At that date$
;ntity A=s regulatory capital was below the capital re8uirement imposed by .egulator ) by CG1 million. As a
result$ ;ntity A was re8uired to submit a plan to the regulator indicating how it would increase its regulatory
capital to the amount re8uired. ;ntity A submitted a plan that entailed selling part of its un8uoted e8uities
portfolio with a carrying amount of CG11.% million in the fourth 8uarter of '(Q7. In the fourth 8uarter of '(Q7$
;ntity A sold its fi7ed interest in!estment portfolio for CG1'.4 million and met its regulatory capital
re8uirement.
"4 5 IASCF
5 IASCF "7