3.8 Statement of financial position (balance sheet)

Question 1

Why is the statement of profit or loss and other comprehensive income useful?

Answer 1

It provides a significant indicator of the performance of the entity during the accounting period.

Question 2

What is the most common measure of performance?

Answer 2

Profit

Question 3

How is total comprehensive income defined?

Answer 3

The change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in the capacity as owners.

Question 4

What two options does an entity have in presenting its statement of profit and loss under IAS1?

Answer 4

1 A single statement of comprehensive income with two sections covering: 1) statement of profit and loss and 2) other comprehensive income or
2 Separate statement of profit or loss followed by a statement of other comprehensive income

Question 5

According to IAS1, what minimum items must be presented in the profit or loss section:

Answer 5

1 revenue
2 finance costs
3 share of profit and losses of associates and joint ventures accounted for using the equity method
4 a single amount for total discontinued operations
5 tax expense
6 a total for profit and loss
7 gains and losses from the de-recognition of financial assets measured at amortized cost

Question 6

How are items in the “other comprehensive income” section classified?

Answer 6

By their nature and according to whether they will be transferred to the profit or loss section in subsequent periods.

Question 7

What types of items are included in the “other comprehensive income” section?

Answer 7

1 changes in revaluation on long term assets
2 gains and losses on remeasurement of defined benefit plans
3 exchange differences from foreign operations
4 gains and losses on financial instruments
5 correction of prior period errors.

Question 8

What two criteria must a discontinued operation meet under IFRS rules?

Answer 8

1 The asset or component must be disposed of or reported as being held for sale
2 The component must be a separate area of the business being removed or sold.

Question 9

What is the difference between “profit or loss” and “Other comprehensive income”?

Answer 9

Profit or loss is the excess of income receivable over expense incurred. Other comprehensive income is all income not recognised in profit or loss.