IFRS Essentials

Dieter Christian, Norbert Lüdenbach

• Publisher: Wiley
• Year: 2013
• ISBN:
  9781118501344
• Edition: 1
• Topic: Business
• Subtopic: Accounting Standards
• Index: Business

Gain a deeper understanding of financial reporting under IFRS through clear explanations and extensive practical examples. IFRS can be a complex topic, and books on the subject often tackle its intricacies through dense explanation across thousands of pages. Others seek to provide an overview of IFRS and these, while useful for the general reader, lack the depth required by practitioners and students. IFRS Essentials strikes a balance between the two extremes, offering concise interpretation of the crucial facts supported by a wealth of examples. Problems and their solutions are demonstrated in a manner which is short, straightforward and simple to understand, avoiding complex language; jargon and redundant detail. This book is suitable for students and lecturers at universities and other educational institutions, auditing and accounting trainees, and employees in the area of accounting and auditing who seek to develop their practical skills and deepen their knowledge of IFRS.

IAS 1 PRESENTATION OF FINANCIAL STATEMENTS

1 INTRODUCTION AND SCOPE

IAS 1 primarily addresses the presentation of financial statements and can be divided into three large areas:

• General guidelines going beyond presentation issues (e.g. going concern).
• General principles relating to presentation (e.g. offsetting, consistency of presentation, and comparative information).
• Structure and content of the financial statements and most of its components (statement of financial position, statement of comprehensive income, separate income statement, statement of changes in equity, and notes).

With regard to recognition and measurement, IAS 1 refers to other IFRSs (IAS 1.3).

2 GOING CONCERN

When preparing financial statements, management has to make an assessment of the entity's ability to continue as a going concern. Financial statements are prepared on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern, those uncertainties have to be disclosed. When financial statements are not prepared on a going concern basis, that fact has to be disclosed, together with the basis on which the financial statements were prepared and the reason why the entity is not regarded as a going concern. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, 12 months from the end of the reporting period (IAS 1.25–1.26).

3 FAIR PRESENTATION OF THE FINANCIAL STATEMENTS AND COMPLIANCE WITH IFRSS

Financial statements have to present fairly the financial position, financial performance, and cash flows of an entity. It is generally presumed that the application of IFRSs, with additional disclosure when necessary, results in financial statements that achieve such fair presentation (IAS 1.15).

In extremely rare circumstances, compliance with a requirement in an IFRS may conflict with the principle of fair presentation. In such a case, it is generally necessary to depart from that requirement (overriding principle) (IAS 1.19). In the case of such a departure, it is necessary to disclose, among others, how the assets, profit or loss, etc. would have been reported in complying with the requirement (IAS 1.20d). In practice, the overriding principle is hardly ever applied.

An entity whose financial statements comply with IFRSs has to disclose an explicit and unreserved statement of such compliance in the notes (statement of compliance). Disclosing such a statement requires that the entity has complied with all the requirements of IFRSs (IAS 1.16).

4 GENERAL PRINCIPLES RELATING TO PRESENTATION

4.1 Materiality and Aggregation

Items of a dissimilar nature or function have to be presented separately, unless they are immaterial. The materiality threshold that applies to the notes is generally lower than the threshold that applies to the other components of the financial statements. This means, for example, that items which are not itemized in the statement of financial position because they are immaterial in that statement may have to be shown in the notes (IAS 1.29–1.31).

4.2 Offsetting

Offsetting is generally prohibited (IAS 1.32). This means that in general an entity cannot offset assets and liabilities, or income and expenses. However, in certain situations, offsetting may be required or permitted by an IFRS. Regarding the separate income statement or the single statement of comprehensive income, the scope of the prohibition to offset is not straightforward.

4.3 Frequency of Reporting

The financial statements (including com...