Week 17: IAS 1 Flashcards
What is the purpose of IAS 1?
To establish guidelines for presenting financial statements consistently and transparently
What type of financial statements does IAS 1 apply to?
General-purpose financial statements prepared under IFRS
Why is comparability important in financial statements?
It allows users to analyze trends over time and compare different entities
What are the key components of a complete set of financial statements under IAS 1?
Statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cash flows, and notes
What does the statement of financial position show?
A company’s assets, liabilities, and equity at a specific point in time
What are the general features of financial statements under IAS 1?
Fair presentation, going concern, accrual basis, materiality, consistency, and comparability
What is the accrual basis of accounting?
Transactions are recorded when they occur, not when cash is received or paid
What does the going concern assumption mean?
The business is expected to continue operating in the foreseeable future
What is the importance of materiality in IAS 1?
Only relevant information that affects decision-making should be included
What is meant by the term “offsetting” in financial statements?
Assets and liabilities, or income and expenses, should not be combined unless required by IFRS
What is included in the statement of profit or loss and other comprehensive income?
Revenue, expenses, and other income that may or may not be reclassified to profit or loss
How can the statement of profit or loss be presented?
As a single statement or two separate statements (profit or loss + other comprehensive income)
What does the statement of changes in equity show?
Changes in equity, including transactions with owners, dividends, and retained earnings
What is the purpose of the statement of cash flows?
To show cash inflows and outflows from operating, investing, and financing activities
What kind of information is included in the notes to financial statements?
Accounting policies, assumptions, and explanations of financial data
Why must financial statements be prepared at least annually?
To ensure timely and relevant financial reporting
What must entities disclose if their reporting period changes?
The reason for the change and the lack of comparability with previous periods
What is required for comparative information in financial statements?
The previous period’s figures must be included for all amounts presented
Why should financial statements be presented consistently?
To allow meaningful comparison across periods unless a change is justified
What are some limitations of IAS 1?
It does not dictate specific measurement rules and relies on management judgment for materiality
