INTERMEDIATE ACCOUNTING 3
Statement of Financial Position
Objective of PAS 1 - PAS 1 permits departure from a PFRS requirement.
And when an entity departs from that requirement it
- PAS 1 prescribes the basis for presentation of general-
shall disclose the following;
purpose financial statements to improve comparability
both with the entity's financial statements of previous i. that all other PFRSs are complied with.
periods and with the financial statements of other ii. the title of the PFRS which the entity has
entities. departed.
iii. the financial effect of the departure.
Financial Statements
2. Going Concern
- the structured representation of an entity’s financial
position and result of its operation. - financial statements are normally prepared in a going
concern basis unless;
- it is the end product of the financial reporting process.
the entity has an intention to liquidate
Primary Objective: provide info’s about the financial
the entity has no other alternative but to do so
position, financial performance, and cash flows of an
entity that is helpful for decision making. - the assessment of going concern is at least 12 months
from the reporting date.
Secondary Objective: to show results of management’s
stewardships over the entity’s resources. - if entity has history of profitable operations and ready
access to financial resources, the entity then is a going
concern without detailed analysis.
General Purpose Financial Statements
- if entity has material uncertainties to continue as a
- caters to the common needs of wide range of external going concern, those uncertainties shall be disclosed.
users.
- if entity is not going concern, its FS shall be prepared
- intends to meet the needs of users who are not in a using another basis.
position to require an entity to prepare reports.
- subject matter of Conceptual Framework and PFRSs.
3. Accrual Basis of Accounting
- an entity shall prepare its financial statements, except
Complete set of Financial Statements for cash flow information, using the accrual basis of
accounting.
1. Statement of financial position (aka balance sheet)
2. Statement of profit or loss and other comprehensive
income (aka statement of comprehensive income)
4. Materiality & Aggregation
3. Statement of changes in equity
4. Statement of cash flows - Each material class of similar items must be presented
5. Notes separately in the financial statements.
(5a) comparative information in respect of the
preceding period; and
6. A statement of financial position as at the beginning 5. Offsetting
of the preceding period when an entity applies an
accounting policy retrospectively or makes a - Assets and liabilities, and income and expenses, shall
retrospective restatement of items in its financial not be offset unless required or permitted by a PFRS.
statements, or when it reclassifies items in its
- Measuring assets net of valuation allowances are not
financial statements.
offsetting.
*income statement is different from statement of profit
or loss and other income as well as statement of
comprehensive income 6. Frequency of reporting
- An entity shall present a complete set of financial
statements (including comparative information) at least
General Features of Financial Statement
annually.
1. Fair Presentation and Compliance with PFRSs
When an entity changes the end of its reporting period
- compliance with the PFRSs is presumed to result in and presents financial statements for a period longer or
fairly presented financial statement. shorter than one year, an entity shall disclose the
following;
- entity shall not make statements unless it complies with
all the requirements of PFRS. i. The period covered by the financial statements:
INTERMEDIATE ACCOUNTING 3
Statement of Financial Position
ii. The reason for using a longer or shorter period,
and
Current Assets
iii. The fact that amounts presented in the financial
statements are not entirely comparable. An entity shall classify an asset as current when:
1. it expects to realize the asset or intends to sell or
consume it, in its normal operating cycle;
7. Comparative Information
2. it holds the asset primarily for the purpose of trading;
- An entity shall present comparative information in
respect of the preceding period for all amounts reported 3. it expects to realize the asset within twelve months
in the current period’s financial statements, unless other after the reporting period; or
standards permit or require otherwise.
4. the asset is cash or a cash equivalent unless the asset is
Intracomparability – comparing FS from another restricted from being exchanged or used to settle a
period liability for at least twelve months after the reporting
period.
Intercomparability – comparing FS to other entity
8. Consistency of presentation
Current Liabilities
- An entity shall retain the presentation and classification
of items in the financial statements from one period to An entity shall classify a liability as current when:
the next unless:
1. it expects to settle the liability in its normal operating
a. it is apparent that another presentation or cycle;
classification would be more appropriate
following a significant change in the nature of 2. it holds the liability primarily for the purpose of
the entity’s operations or a review of its financial trading;
statements; or 3. the liability is due to be settled within twelve months
b. a PFRS requires a change in presentation. after the reporting period; or
4. the entity does not have an unconditional right to defer
Additional Statement of Financial Position settlement of the liability for at least twelve months after
the reporting period.
A statement of financial position as at the beginning of
the preceding period shall be presented when an entity;
1. Applies an accounting policy retrospectively or Currently Maturing Long-Term Liabilities
2. Makes a retrospective restatement of items in its General rule: Currently maturing long term liabilities
financial statements, or are presented as current liabilities.
3. When it reclassifies items in its financial
statements Exceptions:
….and the effect of the event to the statement of 1. Refinancing agreement fully completed on or
financial position as at the beginning of the preceding before the balance sheet date – noncurrent liability
period is material. 2. Refinancing agreement after the balance sheet date
but before the financial statements are authorized
for issue – non-current liability if the refinancing is
Statement of Financial Position at the discretion of the entity.
A statement of financial position may be presented as
either
1. Classified (current/non-current distinction) –
showing current and noncurrent assets and
liabilities, or Breach Of Loan Agreement
2. Unclassified (based on liquidity) – showing no
General rule: A liability that is payable on demand is a
distinction between current and noncurrent items
current liability.
*unclassified presentation is used when it provides
Exception: It is presented as non-current liability if the
information that is reliable and more relevant.
lender provides the entity, on or before the balance
sheet date, a grace period ending at least 12 months
after the balance sheet date to rectify a breach of loan
covenant.
INTERMEDIATE ACCOUNTING 3
Statement of Financial Position
Presentation Of Deferred Taxes
Deferred tax liabilities (assets) shall be presented as
noncurrent items in a classified statement of financial
position, irrespective of their expected dates of
reversal.
Minimum Line Items in The Statement of Financial
Position
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;
f. Biological assets;
g. Inventories;
h. Trade and other receivables;
i. Cash and cash equivalents;
j. Assets classified as held for sale (Groups classified
as held for sale) in accordance with PFRS 5;
k. Trade and other payables;
l. Provisions;
m. Financial liabilities (excluding amounts shown
under (k) and (l));
n. Liabilities and assets for current tax, as defined in
PAS 12 Income Taxes;
o. Deferred tax liabilities and deferred tax assets, as
defined in PAS 12;
p. Liabilities included in disposal groups classified as
held for sale in accordance with PFRS 5;
q. Non-controlling interests, presented within equity;
and
r. Issued capital and reserves attributable to owners
of the parent
Order/ Format of Presentation
PAS 1 does not prescribe the order or format in which
an entity presents items.
