Introduction of Corporate Financial Reporting (CFR)

INTERNATIONAL ACCOUNTING STANDARDS

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 “An older set of standards stating how particular
types of transactions and other events should be
reflected in financial statements.”

• In the past,
• International Accounting Standards (IAS) were issued by the
Board of the International Accounting Standards Committee
(IASC).
• Since 2001:
• New set of standards has been known as the International
Financial Reporting Standards (IFRS) and has been issued by
the International Accounting Standards Board (IASB).

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Objectives of IAS 1:
1. To prescribe the basis for presentation of general
purpose financial statements.
2. To ensure comparability both with the entity's
financial statements of previous periods and with the
financial statements of other entities.

Scope:
Applies to all general purpose financial statements
based on International Financial Reporting Standards
(IFRS).

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 Objective of Financial Statements
• To provide information about the:
– Financial position
– Financial performance; and
– Cash flows of an entity
– Entity’s:
– Assets
– Liabilities
– Equity
– Income and expenses, including gains and losses
– Contributions by and distributions to owners
– Cash flows

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 IAS 1
IAS 1.10
A complete set of financial statements should
include:
• A statement of financial position (balance sheet) at the end of the period
• A statement of comprehensive income for the period (or an income statement
and a statement of comprehensive income)
• A statement of changes in equity for the period
• A statement of cash flows for the period
• notes, comprising a summary of accounting policies and other explanatory
notes

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 IAS 1
IAS 1.15
– Fair Presentation
• 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 1.16
1. An entity whose financial statements comply with IFRSs make an explicit and unreserved
statement of such compliance in the notes.
2. Inappropriate accounting policies are not rectified either by disclosure of the accounting
policies used or by notes or explanatory material.

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 IAS 1
IAS 1.19-20
– Compliance with an IFRS requirement would be so
misleading that it would conflict with the objective of
financial statements set out in the Framework.
IAS 1.25
Entity’s Ability 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.
IAS 1.27
– Accrual Basis of Accounting
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 IAS 1
IAS 1.45
• Consistency of Presentation

IAS 1.43
• Offsetting : Assets & Liabilities, Income &
Expenses

IAS 1.38
• Comparative Information

IAS 1.41
• Various disclosures are required for the changes/reclassification of
comparative amounts

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 IAS 1
IAS 1.50
• Structure and Content of Financial Statements in General
1. The financial statements
2. The reporting enterprise
3. Whether the statements are for the enterprise or for a group
4. The date or period covered
5. The presentation currency
6. The level of precision (thousands, millions, etc.)

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 IAS 1
IAS 1.36
• Reporting Period
– Changes in Annual Reporting Period
– Disclose the reason for the change
– Warning for the comparability

IAS 1.61
• Balance Sheet/Statement of Financial Position
– Separating current & noncurrent assets
– More reliable and relevant

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 IAS 1
IAS 1.61
• Separate Long and Short Term Amounts
– 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.

IAS 1.66
• Defines Current Assets & Noncurrent Assets
IAS 1.69
• Defines Current Liabilities & Noncurrent Liabilities

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 IAS 1
IAS 1.54: Minimum Items On The Face Of The
Statement Of Financial Position
• Property, plant and equipment • Trade and other payables
• Investment property • provisions
• Intangible assets • Financial liabilities (excluding
• Financial assets (excluding amounts shown under (k)
amounts shown under (e), (h), and (l))
and (i)) • Liabilities and assets for
• Investments accounted for using current tax, as defined in IAS
the equity method 12
• Biological assets • Deferred tax liabilities and
• Inventories deferred tax assets, as
defined in IAS 12
• Trade and other receivables • Liabilities included in
• cash and cash equivalents disposal groups
• assets held for sale • Non-controlling interests,
presented within equity and
• Issued capital and reserves
attributable to owners of the 14
parent
 IAS 1
IAS 1.79
• Issued Share Capital & Reserves:
1. Numbers of shares authorised, issued and fully paid, and issued but not fully paid

2. Par value

3. Reconciliation of shares outstanding at the beginning and the end of the period

4. Description of rights, preferences, and restrictions

5. Treasury shares, including shares held by subsidiaries and associates

6. Shares reserved for issuance under options and contracts

7. A description of the nature and purpose of each reserve within equity

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 IAS 1
IAS 1.88
• Statement of Comprehensive Income
– Include comprehensive Profit or Loss + Income
and Expenses within a specified period
– Use “Profit or loss” rather than “Net Profit or
Loss”

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 IAS 1
IAS 1.82
• Minimum Items in Statement of Comprehensive
Income
– Revenue
– Finance costs
– Share of the profit or loss of associates and joint ventures accounted for using the equity method
– Tax expense
– A single amount comprising the total of (i) the post-tax profit or loss of discontinued operations and (ii)
the post-tax gain or loss recognised on the disposal of the assets or disposal group(s) constituting the
discontinued operation
– Profit or loss
– Each component of other comprehensive income classified by nature
– Share of the other comprehensive income of associates and joint ventures accounted for using the
equity method
– Total comprehensive income
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 IAS 1
IAS 1.85
• Additional line items may be needed to fairly present the entity's
results of operations.

IAS 1.87
• No items may be presented in the statement of comprehensive
income (or in the income statement, if separately presented) or in
the notes as 'extraordinary items.

IAS 1.99
• Expenses recognised in profit or loss should be analysed either by
nature (raw materials, staffing costs, depreciation, etc.) or by
function (cost of sales, selling, administrative, etc).

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 IAS 1
IAS 1.104
• Functional category: additional information of
an expense must be disclosed.

IAS 1.111
• Statement of Cash Flows
– IAS 7: Statement of Cash Flows

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 IAS 1
IAS 1.106
• Statement of Changes in Equity
1. Total comprehensive income for the period
2. Reconciliations between the carrying amounts at the
beginning and the end of the period for each
component of equity, separately disclosing:
– Profit or loss
– Each item of other comprehensive income
– Transactions with owners

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 IAS 1
IAS 1.112
• Notes to the Financial Statements
1. Present information – specific policies
2. Disclose any information required by IFRS
3. Additional information

IAS 1.113
• Notes should be crossed referenced from the
face of the financial statements to the relevant
note.

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 IAS 1
IAS 1.137
• Disclosures about Dividends
– Besides in the statement of changes in equity, the
following must be disclosed in the notes:
1. The amount of dividends proposed or declared before the
financial statements were authorised for issue but not
recognised as a distribution to owners during the period.
2. The amount of any cumulative preference dividends not
recognised.

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 Terminologies
Term before 2007 revision of IAS 1 Term as amended by IAS 1 (2007)
balance sheet statement of financial position
cash flow statement statement of cash flows
statement of comprehensive income (income
income statement statement is retained in case of a two-
statement approach)
recognised in the income
recognised in profit or loss
statement
recognised [directly] in equity
recognised in other comprehensive income
(only for OCI components)
recognised [directly] in equity (for
recognised outside profit or loss (either in OCI
recognition both in OCI and
or equity)
equity)
removed from equity and
reclassified from equity to profit or loss as a
recognised in profit or loss
reclassification adjustment
('recycling')
Standard or/and Interpretation IFRS
on the face of in
owners (exception for 'ordinary equity
equity holders
holders')
balance sheet date end of the reporting period
reporting date end of the reporting period 23