Understanding the financial statements required by IAS 1
Understanding the financial statements required by IAS 1 A 86045 Accounting and Financial Reporting 1 Objective of financial statements According to IAS1, the objective of general purpose financial statements is "to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions". This is similar to the equivalent definition given in the IASB Conceptual Framework. A 86045 Accounting and Financial Reporting 2 General Requirements for Financial statements IAS 1 Fair presentation and compliance with IFRSs Going concern basis Accrual basis of accounting Materiality and aggregation Offsetting Frequency of reporting Comparative information Consistency of presentation A 86045 Accounting and Financial Reporting 3
Fair presentation and compliance with international standards Financial statements must present fairly the financial position, financial performance and cash flows of the entity to which they relate. It is assumed that the application of international standards will result in a fair presentation. An entity which complies with international standards must make an explicit and unreserved statement to that effect in the notes. A 86045 Accounting and Financial Reporting 4 Going concern and accruals basis Financial statements are generally prepared on the going concern basis unless the entity intends to cease trading or has no realistic alternative but to do so. Financial statements other than the statement of cash flows should be prepared on the accruals basis. A 86045 Accounting and Financial Reporting 5 Materiality and aggregation Items are "material" if they could influence the economic decisions made by users on the basis of the financial statements. If an item is not individually material it may be aggregated with other items. Each material class of similar items should be presented separately in the financial statements.
The requirements of international standards need not be applied to items that are immaterial. A 86045 Accounting and Financial Reporting 6 Offsetting In general, assets and liabilities should be reported separately in the statement of financial position and should not be offset against one another. Similarly, income and expenses should be reported separately in the statement of comprehensive income. However, this rule does not apply if offsetting is permitted or required by an international standard. A 86045 Accounting and Financial Reporting 7 Frequency of reporting Financial statements should normally be presented at least annually. An entity which presents financial statements for a period which is longer or shorter than one year should disclose: (a) the reason for using a period that is longer or shorter than one year; (b) the fact that the comparative amounts given for the previous period are not directly comparable with those given for the current period. A 86045 Accounting and Financial Reporting 8 Comparative information and consistency of
presentation As a minimum, entities should present comparative information in respect of the previous period for all amounts reported in the financial statements. To maintain comparability, the way in which items are presented and classified should generally be consistent from one accounting period to the next. A 86045 Accounting and Financial Reporting 9 Identification of the financial statements Name of the reporting entity Whether a single entity or a group Date at the end of the reporting period or the period covered Presentation currency used Level of rounding (e.g. 000 or m) A 86045 Accounting and Financial Reporting 10 Understanding the Financial Statements Required by IAS 1 Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements A 86045 Accounting and Financial Reporting
11 Linkages among the Financial Statements Statement of Cash Flow Opening Balance Sheet Cash Other assets Total assets Less (Liabilities) Net assets Or Shareholders equity Change in cash from : +/- Operations +/- Investing +/- Financing Statement of Profit or Loss and Other Comprehensive Income Sales Less Expenses = Net income Statement of Changes in Shareholders equity Closing Balance Sheet
Cash Other assets Total assets Less (Liabilities) Net assets Or Shareholders equity Change in equity from : Operations +/-Capital increases/decrease - Dividends +/- OCI A 86045 Accounting and Financial Reporting 12 The Statement of Profit or Loss and Other Comprehensive Income Profit or loss + Other comprehensive income = Comprehensive income Companies can choose to present either a single statement or two separate statements A 86045 Accounting and Financial Reporting
13 The Profit and Loss Account Two alternative presentations By Destination By Nature A 86045 Accounting and Financial Reporting 14 Profit & Loss Account by Nature and by destination SM3 A 86045 Accounting and Financial Reporting 15 Other Comprehensive Income Items not included in profit and loss such as: Changes in revaluation surplus relating to property, plant and equipment and intangible assets Actuarial profits and losses on defined benefit plans Gains and losses arising from translating the financial statements of a foreign operation Gains and losses on re-measuring availablefor sale financial assets The effective portion of gains and losses on hedging instruments in a cash flow hedge Categorized according to whether they will
subsequently be reclassified to P&L A 86045 Accounting and Financial Reporting 16 Information to be presented in the statement of comprehensive income revenue Additional items of income or expense finance costs should be disclosed if material tax expense profit or loss from discontinued operations profit or loss for the period each class of other comprehensive income total comprehensive income for the period. The first five items on this list may be presented in a separate statement of profit or loss. A 86045 Accounting and Financial Reporting 17 The Statement of Financial Position
Generally, Current/Non-Current Distinction Exceptionally, in order of liquidity A 86045 Accounting and Financial Reporting 18 Statement of financial position formerly referred to in the standards as the "balance sheet" the current/non-current distinction information that must be presented in the statement of financial position information that may be presented in the statement of financial position or in the notes A 86045 Accounting and Financial Reporting 19 Currents Assets When an asset satisfies any of the following criteria: 1. It expects to realize the asset or intends to sell it or consume it in the entitys normal operating cycle 2. It holds the asset primarily for the purposes of trading 3. It expects to realize the asset within twelve months after the end of the reporting period 4. The asset is cash or a cash equivalent (unless it is restricted for at least 12 months after the reporting period) as defined by IAS7. All other assets are non-current assets.
A 86045 Accounting and Financial Reporting 20 Current Liabilities When a liability satisfies any of the following criteria: 1. It is expected to be settled in the entitys normal operating cycle 2. It is held primarily for the purposes of trading 3. It is due to be settled within twelve months after the end of the reporting period 4. The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period All other liabilities are non-current liabilities. A 86045 Accounting and Financial Reporting 21 Information to be presented in the statement of financial position property, plant and equipment investment property
intangible assets financial assets inventories trade receivables cash and cash equivalents trade payables provisions financial liabilities tax assets and liabilities equity capital and reserves A 86045 Accounting and Financial Reporting 22 To be presented in the statement of financial position or in the notes Sub-classification of line items as appropriate to the entity's operations and/or as required by other international standards. (e.g. analysis of property, plant and equipment as required by IAS16) Analysis of share capital and reserves. A 86045 Accounting and Financial Reporting 23 Statement of Changes in Equity Shows the changes in net assets between two balance sheet dates and reconciles each component. Profit or loss Other comprehensive income Transactions with owners (equity contributions, dividends, purchase of own
shares) A 86045 Accounting and Financial Reporting 24 Statement of changes in equity shows how each component of equity has changed during an accounting period items presented include: total comprehensive income for the period; effects of any changes in accounting policies; share issues; and dividends paid. provides a reconciliation of the opening and closing balance on each component of equity A 86045 Accounting and Financial Reporting 25 Statement of Cash Flows Direct Method Indirect Method A 86045 Accounting and Financial Reporting 26 The Linkages among the 4 Financial Statements Consolidated statement of profit or loss Continuing
Operations Revenues Cost of sales Gross profit 180.462 (136.448) 44.014 Other operating income Selling and distribution expenses Administrative expenses Other operating expenses Operating profit 1.585 (14.001) (18.428) (1.153) 12.017 Finance costs Finance income Share of profit of associates and JVs Profit before tax continuing operations income tax expense Profit from continuing
operations Consolidated statement of other comprehensive income Profit for the year Other comprehensive income (Net of tax) To be reclassified to profit or loss in subsequent periods Net gain on hedge of a net investment Exchange difference on translation of foreign operations Net movement on cash flow hedges Net loss on available for sale financial assets Not to be reclassified to profit or loss in subsequent periods Re-measurement gains on defined benefit plans Revaluation of land & buildings 8.230 195 Other comprehensive income for the year (net of tax) Total Comprehensive income for the year (net of tax) Assets classified as held for distribution
(512) (40) (603) 257 592 849 246 8.476 (3.098) 8.010 Discontinued operations Profit after tax from discontinued operations Profit for the year Current Assets Inventories Trade and other receivables Prepayments Other current financial assets Cash and short-term deposits (246) (2.766) 1.186 671 11.108
Consolidated statement of financial position Assets Non-current assets Property, plant & equipment Investment properties Intangible assets Investment in an associate and a joint venture Non-current financial assets Deferred tax assets Total assets Equity and liabilities Equity Issued capital Share premium Treasury shares Other capital reserves Retained earnings Other componenets of equity Non-cash distribution liability Reserves of a disposal group classified as held for distribution Equity attributable to equity holders of the parent 21.888 4.780 (508) 1.171 35.052 (649) (410) 8.230 8.188 288 8.476
63.780 Liabilities associated with the asets classified as held for distribution Total liabilities 7.942 SM4 3.907 325 (190) 412 306 (532) 358 (1.186) 2.766 (671) (732) (9.265) 4.192 4.095 15.106 336 (484) (3.131) 11.827 46 61.370 Total equity
Trade and othe payables interest bearing loans and borrowings Other current financial liabilities Government grants Deferred revenue Income tax payable Provisions Non-cash distribution liability 11.108 213 11.321 Interest received Interest paid Income tax paid Net cash flows from operating activities 20.346 806 1.950 3.300 196 3.050 263 2.931 32.842 Current liabilities Attributable to: Equity holders of the parent Noncontrolling interests
220 288 8.230 140.281 2.410 Non-current liabilities Interest-bearing loans and borrowings Other non-current financial liabilities Provisions Government grants Deferred revenue Net employee defined benefit liabilities Other liabilities Deferred tax liabilities Operating activities Profit before tax from continuing operations Profit/(loss) before tax from discontinued operations Profit before tax Adjustments to reconcile profit before tax to net cash flows: Depreciation and impairment of property, plant & equipment Amortization and impairment of intangible assets Contribution of prpoerty, plant & equipment by customers Share-based payment expense Decrease in investment properties Gain on disposal of property, plant & equipment Fair value adjustment of a contingent consideration
Finance income Finance costs Share of profit of an associate and a joint venture Movements in provisions , pensions and government grants Working capital adjustments: Increase in trade and other receivables Decrease in inventories Increase in trade and other payables 23.262 27.672 244 551 17.112 68.841 13.554 82.395 Non-controlling interest Total equity and liabilities Attributable to: Equity holders of the parent Noncontrolling interests Consolidated statement of cash flows 32.979 8.893 6.019 3.187 6.425 383
57.886 19.444 2.460 3.040 149 220 3.961 850 410 30.534 13.125 43.659 76.501 140.281 Consolidated statement of changes in equity Investing activities Proceeds from sale of property, plant & equipment Purchase of property, plant & equipment Purchase of investment properties Purchase of financial instruments Proceeds from sale of financial instruments Development expenditures Acquisition of a subsidiary, net cash acquired Receipt of government grants Net cash flows used in investing activities 1.990 (10.162) (1.216) (3.054) 0 (587)
230 2.951 (9.848) Financing activities Proceeds from exercise of share options Acquisition of non-controlling interests Transaction costs on issue of shares Payment of finance lease liabilities Proceeds from borrowings Repayment of borrowings Dividends paid to equity holders of the parent Dividends paid to non-controlling interests Net cash flows from/(used in) financing activities 175 (325) (32) (51) 5.577 (122) (1.972) (30) 3.220 Note 23 Reconciliation Cash 11,316 ST Deposits 5,796 17,112 Disposal group 1,294 18,406 Overdrafts (966)
17,440 Attributable to the equity holders of the parent Foreign Cash Flow Available Currency Asset Translatio Revaluati Issued Share Treasury Capital Retained Hedge for sale n on Discontinued Net increase in cash and cash equivalents 5.199 Operation foreign exchange differencesReserves Earnings Reserve Reserve Reserve (25) Capital Net Premium Shares Reserve s Total Other Cash and cash equivalents aa beginning of year Cash and cash equivalents at end of year As at beginning of the year 19.388 Profit for the period Other comprehensive income Total comprehensive income 0 Depreciation transfer for land and buildings Discontinued
operations Issue of share capital 2.500 Exercise of options Share based payments Transaction costs Cash dividends Non-cash distributions to owners Acxquisition of a subsidiary Acquisition of non-controlling interests At end of the year 21.888 A 86045 Accounting and Financial Reporting 80 0 (654) 0 864 0 28.935 7.942 257 8.199 (70) 2
(84) (495) 512 46 27 Notes to the Financial Statements Accounting policies Sources of estimation uncertainty nature and carrying amount Capital objectives, policies and processes Risk management Other disclosures required by IFRSs Other information relevant to understanding the financial statements A 86045 Accounting and Financial Reporting 28
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