IAS 1 - PREPARATION OF FINANCIAL STATEMENTS Flashcards
One of the objectives of IAS 1 is:
To prescribe the basis for presentation of specific purpose financial statements
True or False?
FALSE
It should be to prescribe the basis for presentation of general purpose financial statements
One of the objectives of IAS 1 is:
To ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities.
True or False?
True
One of the objectives of IAS 1 is:
To set out the overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content.
True or False?
True
One of the objectives of IAS 1 is:
Standards for recognizing, measuring, and adapting specific transactions are addressed in other standards and interpretations.
True or False?
FALSE, Standards for recognizing, measuring, and disclosing specific transactions are addressed in other standards and interpretations.
Where does IAS 1 apply?
all general purpose financial statements
Are those intended to serve users who are not in a position to require financial reports tailored to their particular information needs.
General Purpose Financial Statements
What is the objective of GPFS?
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.
To meet objectives, financial statements provide information about an entity’s?
Assets
Liabilities
Equity
Income and expenses, including gains and losses contributions by and distributions to owners (in their capacity as owners)
Cash flows
This 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.
A complete set of financial statements includes?
- statement of financial position
- statement of profit or loss and other comprehensive income for the period
- statement of changes in equity
- statement of cash flows
- notes to financial statements
- comparative information
An entity may use titles for the statements other than those stated above. All financial statements are required to be presented with equal prominence.
True or False?
True
When an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements, it must not present a statement of financial position (balance sheet) as at the beginning of the earliest comparative period.
True or False?
FALSE, it must also present a statement of financial position
Financial reviews by management, environmental reports and value added statements are reports presented outside of the financial statements but are inside the scope of IFRSs
True or False?
FALSE, it should be outside the scope of IFRSs
The financial statements must “present fairly” the financial position, financial performance and cash flows of an entity.
True or False?
True, regards with “Fair Presentation and Compliance with IFRS”
Fair presentation requires?
the faithful representation of the effects of transactions, other events, and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework.
IAS 1 requires an entity whose financial statements comply with IFRSs to make an explicit and unreserved statement of such compliance in the notes.
True or False?
True
Financial statements cannot be described as complying with IFRSs unless they comply with all the requirements of IFRSs (which includes International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations).
True or False?
True
The application of IFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation.
True or False?
True
Inappropriate accounting policies are not rectified either by disclosure of the accounting policies used or by notes or explanatory material.
True or False?
True
Financial statements are normally prepared assuming the entity is a going concern and will continue in operation for the foreseeable future.
True or False?
True, base on going concern principle
IAS 1 requires management to make an assessment of an entity’s ability to continue as a going concern. If management has significant concerns about the entity’s ability to continue as a going concern, the uncertainties must be disclosed. If management concludes that the entity is not a going concern, the financial statements should not be prepared on a going concern basis, in which case IAS 1 requires a series of disclosures
True or False?
True
IAS 1 requires that
an entity prepares its financial statements, except for cash flow information, using the accrual basis of accounting.
True or False?
True, base on principle of accrual basis
The presentation and classification of items in the financial statements
shall be retained from one period to the next unless a change is justified either by a change in circumstances or a requirement of a new IFRS
True or False?
True, base on Consistency of Presentation
When information is omitted, misstated or obscured and reasonably expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. Therfore, the information is?
Material
Each material class of similar items must be presented separately in the financial statements. Dissimilar items may be aggregated only if they are individually immaterial.
True or False?
True
Information should not be obscured by aggregating or by providing immaterial information, materiality considerations apply to the all parts of the financial statements, and even when a standard requires a specific disclosure, materiality considerations do apply.
True or False?
True
Assets and liabilities, and income and expenses, may be offset unless not required or permitted by an IFRS
True or False?
FALSE, assets and liabilities, and income and expenses, may not be offset unless required or permitted by an IFRS
IAS 1 requires that comparative information be disclosed in respect of the previous period for all amounts reported in the financial statements, both on the face of the financial statements and in the notes, unless another Standard requires otherwise.
True or False?
True
Comparative Information is provided for “narrative and descriptive’ where it is relevant to understanding the financial statements of the current period
True or False?
True
A third statement of financial position is required to be presented if the entity retrospectively applies an accounting policy restates items, or reclassifies items, and those adjustments had a material effect on the information in the statement of financial position at the beginning of the comparative period.
True or False?
True
Where comparative amounts are changed or reclassified, various disclosures are required.
True or False?
True
Opening statement is only required if impact is material
True or False?
True
Opening statement is presented as at the beginning of the immediately preceding comparative period required by IAS 1
(e.g. if an entity has a reporting date of 31 December X2 statement of financial position, this will be as at 1 January X1)
True or False?
True
Only include notes for the third period relating to the change
True or False?
True
IAS 1 requires an entity to clearly identify:
- The financial statements, which must be distinguished from other information in a published document
- Each financial statement and the notes to the financial statements.
True or False?
True
The following information must be displayed prominently, and repeated as necessary.
- Name of the reporting entity and any change in the name
- Whether the financial statements are a group of entities or an individual entity
- Information about the reporting period
- The presentation currency
- The level of rounding used (e.g. thousands, millions).
True or False?
True
There is a presumption that;
- Financial statements will be prepared at least annually
- If the annual reporting period changes and financial statements are prepared for a different period, the entity must disclose the reason for the change and state that amounts are not entirely comparable.
True or False?
True
An entity must normally present a classified statement of financial position separating current and noncurrent assets and liabilities, unless presentation based on liquidity provides information that is reliable.
True or False?
True
In either case, if an asset (liability) category combines amounts that will be received (settled) after 12 months with assets (liabilities) that will be received (settled) within 12 months, note disclosure is required that separates the longer- term amounts from the 12-month amounts.
True or False?
True
Current assets are assets that are?
- expected to be realized in the entity’s normal operating cycle
- held primarily for the purpose of trading
- expected to be realized within 12 months after the reporting period
- cash and cash equivalents (unless restricted).
All other assets are non-current
Current liabilities are those?
- expected to be settled within the entity’s normal operating cycle
- held for purpose of trading
- due to be settled within 12 months
- for which the entity does not have the right at the end of the reporting period to defer settlement beyond 12 months.
Other liabilities are non-current.
When a long-term debt is expected to be refinanced under an existing loan facility, and the entity has the discretion to do so, the debt is classified as current, even if the liability would otherwise be due within 12 months.
True or False?
FALSE, it should be non-current
The line items to be included on the face of the statement of financial position are?
(a) property, plant and equipment
(b) investment property
(c) Intangible assets
(d) financial assets (excluding amounts shown under (e). (h), and (i)
(e) investments accounted for using the equity method
(i) biological assets
(g) Inventories
(h) trade and other receivables
(i ) cash and cash equivalents
(j ) assets held for sale
(k) trade and other payables
(l ) provisions
(m)financial liabilities (excluding amounts shown under (k) and (l )
(n)current tax liabilities and current tax assets, as defined in IAS 12
(o) deferred tax Babilises and deferred tax assets, as defined in IAS 12
(p) liabilities included in disposal groups
(q) non-controlling Interests, presented within equity
(r ) issued capital and reserves attributable to owners of the parent.
IAS 1 does not prescribe the format of the statement of financial position. Assets can be presented current then noncurrent, or vice versa, and liabilities and equity can be presented current then non-current then equity, or vice versa.
True or False?
True
A net asset presentation (assets minus liabilities) is allowed.
True or False?
True
The long-term financing approach used in UK and elsewhere fixed assets current assets - short term payables = long-term debt plus equity - is also acceptable.
True or False?
True
Regarding issued share capital and reserves, what are the following disclosures required?
- numbers of shares authorized, issued and fully paid, and issued but not fully paid
- par value (or that shares do not have a par value)
- a reconciliation of the number of shares outstanding at the beginning and the end of the period
- description of rights,preferences, and restrictions
- treasury shares, including shares held by subsidiaries and associates
- shares reserved for issuance under options and contracts a description of the nature and purpose of each reserve within equity.
Additional disclosures are required in respect of entities without share capital and where an entity has reclassified puttable financial instruments.
True or False?
True
The total of income less expenses, excluding the components of other comprehensive income
Profit or loss
Items of income and expense (including reclassification adjustments) that are not recognized in profit or loss as required or permitted by other IFRSs
Other comprehensive income
The change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners
Total comprehensive income
All items of income and expense recognized in a period must be included in profit or loss unless a Standard or an Interpretation requires otherwise. Some IFRSs require or permit that some components to be excluded from profit or loss and instead to be included in other comprehensive income
True or False?
True
What are the examples of items recognised outside of profit or loss?
- Changes in revaluation surplus where the revaluation method is used under IAS 16
- Property, Plant and Equipment and IAS 38 Intangible Assets
- Remeasurements of a net defined benefit liability or asset recognised in accordance with IAS 19 Employee Benefits (2011)
- Exchange differences from translating functional currencies into presentation currency in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates
- Gains and losses on remeasuring available-for-sale financial assets in accordance with IAS 39 Financial Instruments: Recognition and Measurement
- The effective portion of gains and losses on hedging instruments in a cash flow hedge under IAS 39 or IFRS 9 Financial Instruments
- Gains and losses on remeasuring an investment in equity instruments where the entity has elected to present them in other comprehensive income in accordance with IFRS 9
- The effects of changes in the credit risk of a financial liability designated as at fair value through profit and loss under IFRS 9.
What are the choices in presentation of Statement of profit or loss and other comprehensive income?
An entity has a choice of presenting:
1. Single statement of profit or loss and other comprehensive income, with profit or loss and other comprehensive income presented in two sections, or
- Two statements:
a separate statement of profit or loss
a statement of comprehensive income, immediately following the statement of profit or loss and beginning with profit or loss.
The statment of profit or loss and other comprehensive income must present the following?
- profit or loss
- total other comprehensive income
comprehensive income for the period - an allocation of profit or loss and comprehensive income for the period between non-controlling interests and owners of the parent.
What are the following minimum line items that must be presented in the profit or loss section?
- revenue
- gains and losses from the derecognition of financial assets measured at amortized cost
- finance costs
- share of the profit or loss of associates and joint ventures accounted for using the equity method
- certain gains or losses associated with the reclassification of financial assets
- tax expense
- a single amount for the total of discontinued items
Expenses recognized in profit or loss should be analyzed either by nature (raw materials, staffing costs, depreciation, etc. or by function (cost of sales, selling, administrative, etc).
True or False?
True
If an entity categorizes by function, then additional information on the nature of expenses at a minimum depreciation, amortization and employee benefits expense - must be disclosed
True or False?
True
The other comprehensive income section is required to present line items which are classified by their nature, and grouped between those items that will or will not be reclassified to profit and loss in subsequent periods.
True or False?
True
An entity’s share of OCI of equity-accounted associates and joint ventures is presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.
True or False?
True
When an entity presents subtotals, those subtotals shall be comprised of what following?
- line items made up of amounts recognized and measured in accordance with IFRS;
- be presented and labelled in a clear and understandable manner;
- be consistent from period to period;
- not be displayed with more prominence than the required subtotals and totals;
- reconciled with the subtotals or totals required in IFRS.
- Additional line items may be needed to fairly present the entity’s results of operations.
- Items cannot be presented as ‘extraordinary items’ in the financial statements or in the notes.
- Certain items must be disclosed separately either in the statement of comprehensive income or in the notes, if material, including:
- write-downs of inventories to net realizable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs
- restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring
- disposals of items of property, plant and equipment
- disposals of investments
- discontinuing operations
- litigation settlements
- other reversals of provisions
IAS 1 requires an entity to present a separate statement of changes in equity. The statement must show the following?
- total comprehensive income for the period, showing separately amounts attributable to owners of the parent and to non-controlling interests
- the effects of any retrospective application of accounting policies or restatements made in accordance with IAS 8, separately for each component of other comprehensive income
- reconciliations between the carrying amounts at the beginning and the end of the period for each component of equity, separately disclosing:
- profit or loss
- other comprehensive income
- transactions with owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control
What are the following amounts that may also be presented on the face of the statement of changes in equity, or they may be presented in the notes?
- amount of dividends recognized as distributions
- the related amount per share
The notes to financial statements must present information about the basis of preparation of the financial statements and the specific accounting policies used.
True or False?
True
The notes to financial statements must disclose any information required by IFRSs that is not presented elsewhere in the financial statements and provide additional information that is not presented elsewhere in the financial statements but is relevant to an understanding of any of them
True or False?
True
Notes are presented this way from the face of the financial statements to the relevant note.
systematic manner and cross-referenced
The notes should normally be presented in what following order?
- a statement of compliance with IFRS’s
- a summary of significant accounting policies applied
- supporting information for items presented on the face of the statement of financial position (balance sheet), statement(s) of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows, in the order in which each statement and each line item is presented
- other disclosures, including contingent liabilities, unrecognized contractual commitments, and non-financial disclosures, such as the entity’s financial risk management objectives and policies
This is a statement of compliance with IFRS’s and has a material accounting policy information, estimates, assumptions,and judgements must be disclosed.
Notes to financial statements
This statement has a additional information useful to users understanding/decision making to be presented. Information that enables users to evaluate the entity’s objectives, policies and processes for managing capital.
Notes to financial statements
