CONCEPTUAL FRAMEWORK
and
AC 1101
Tuesday, Thursday
ACCOUNTING STANDARDS 10:30-12:00
Lesson: Chapter 3- PAS 1 PRESENTATION OF FINANCIAL STATEMENTS
OBJECTIVE OF PAS 1 BALANCE SHEET, shows what a company owns and owes
- prescribes the basis for presentation of general purpose financial and how much shareholders have invested.
statements to improve comparability both with the entity’s financial formula: ASSETS = LIABILITIES + EQUITY
statements of previous periods and with the financial statements of 2 types: Account form and Vertical Form
other entities.
- set out overall requirements for the presentations of financial
statements, guidelines for their structure and minimum requirements OPERATING CYCLE, time between acquisition of assets for
for their content. processing and their realization in cash or cash equivalents,
which is normally assumed to be 12 months.
FINANCIAL STATEMENTS AND NOTES
IFRS requires that a complete set of financial statements to be
presented annually. Comprised of the following:
1. Statement of Financial Position
2. Statement of Comprehensive income
3. Statement of changes in equity
4. Statement of Cash flows
5. Notes, comprising a summary of significant accounting
policies and other explanatory information
GOING CONCERN
- assumes a business will continue to trade for the foreseeable
future CURRENT AND NON-CURRENT
- allows costs and revenues to be allocated to future accounting
periods
- provides a more realistic value of business assets
- allows fixed assets to be written off proportionally over their
useful life
MATERILITY AND AGGREGATION, each material class of similar items
should be separately presented. Immaterial items can be aggregated
and presented according to either their nature or function.
OFFSETTING, assets & liabilities and income expenses are not to be
offset, unless required or permitted by another accounting standard.
Offsetting detracts from the ability from the ability of the users to
understand the entity’s transactions. It is appropriate when netting any INCOME STATEMENTS
income with related expenses arising from the same transactions. Comprehensive Income
One Statement
COMPARATIVE INFORMATION Approach, does not
Present require creation of a
when an entity: new financial
- applies an accounting policies retrospectively statement but net
- makes a retrospective restatement of items in its income is buried as a
financial statements subtotal on the
- reclassifies items in its financial statements
statement.
disclosing comparative information as a minimum:
- three statement of financial position Two Statement
- two of each of the statements Approach
- related notes
CONSISTENCY OF PRESENTATION
an entity shall retain the presentation and classification of items in
financial statements from on period to the next unless:
- it is apparent, following a significant change in the
nature of the entity’s operations or a review of its financial statements
that another presentation or classification would be more appropriate
having regard to the criteria for the selection and appropriation of
accounting policies in IAS 8 or an IFRS requires a change in NATURE AND FORM OF INCOME STATEMENT
presentation
Natural Form, one where expenses are classified
STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS according to nature of expense
- financial statements Functional Form, one where expenses are classified
- the reporting enterprise according to function of expense
- whether the statements are for the enterprise or for a group
- reporting period
- presentation currency
- level of precision (thousands, millions, etc.)
