Chapter 3 (presentation of financial statements)

Question 1

The objective for the financial statements from IAS1

Answer 1

Kortfattat: “To provide information that is useful to a wide range of users in making economic decisions”

The objective of the financial statements is “to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions”

Provide information about:

1. Financial position
2. Financial performance
3. Cash flows

Question 2

What does a complete set of financial statements comprise of?

Answer 2

OFCN (Of course not!)

Kortfattat:

1. Financial position
2. Other comprehensive income
3. Changes in equity
4. Notes

Långfattat:

1. A statement of financial position as at the end of the accounting period
2. A statement of profit or loss and other comprehensive income for the period
3. A statement of changes in equity for the period
4. A statement of cash flows for the period
5. A set of notes, providing information on the entity’s significant accounting policies together with other explanatory information
6. Comparative information in respect of the previous period
7. A statement of financial position as at the beginning of the previous period, in the case that the entity has applied an accounting policy retrospectively or has made a retrospective restatement of items in its financial statements

Question 3

What is ”material information”?

Answer 3

OMO

1. Omitting
2. Mis-stating
3. Obscuring

IAS1 states that information is material if “omitting, mis-stating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements”

Question 4

What criteria satisfies the classification of ”current assets”?

Answer 4

An asset is classified as a current asset if it satisfies any of the following criteria:

1. It is expected to be realised, or is intended for sale or consumption, within the entity’s normal operating cycle
2. It is held primarily for the purpose of being traded
3. It is expected to be realised within twelve months after the reporting period
4. It is cash or a cash equivalent as defined by standard IAS7 unless it is restricted from being exchanged or from being used to settle a liability for at least twelve months after the reporting period

Question 5

Non-current asset

Answer 5

An asset that DOESN’T satisfy any of the criteria for a current asset is a non-current asset

Question 6

What is the difference between the ”profit and loss statement” and ”other comprehensive income”?

Answer 6

Certain standards require the company to present items in Other Comprehensive Income and not in the Profit and Loss

Most types of income and expenses are taken into account when calculating an entity’s profit or loss for a reporting period. However, international standards require that certain classes of income or expense should be disregarded when calculating profit or loss and should instead be presented in the statement of comprehensive income under the heading “other comprehensive income”. The Profit and Loss statement should present the actual main core of the business what it sells, and other comprehensive income can be “Gains on property revaluation”

Question 7

What MAIN items is presented in the statement of comprehensive income?

Answer 7

1. Revenue
2. Finance costs
3. Profits or losses accounted for by the equity method
4. Tax expense
5. A single amount for the total of discontinued operations
6. Each class of other comprehensive income

Question 8

What accounting standard includes a management commentary?

Answer 8

IFRS Practice Statement 1

Question 9

Describe the format for the balance sheet that IAS 1 prescribes

Answer 9

IAS1 does not specify any particular format for the statement of financial position. Nor does it prescribe the order in which items should be shown.

Question 10

If an interim report only presents the statements of comprehensive income and earnings per share it does not comply with IAS 34. What is missing?

Answer 10

An interim financial report may consist of a complete set of financial statements as defined in IAS1. Alternatively, an entity may provide a “condensed” set of financial statements consisting of a condensed version of each of the four primary statements together with selected explanatory notes.