Financial Statements IAS 1

2 Related Standards Canadian GAAP Reference – HB 1400 General Standards of Financial Statement Presentation – HB 1505 Disclosure of Accounting Policies – HB 1510 Current Assets and Current Liabilities – HB 1520 Income Statement – HB 1530 Comprehensive Income – HB 1535 Capital Disclosures – HB 3480 Extraordinary Items

3 Related Standards FAS 130 Reporting Comprehensive Income FAS 130 Reporting Comprehensive Income

4 Related Standards IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IFRS 7 Financial Instruments: Disclosures IFRS 7 Financial Instruments: Disclosures IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

5 Purpose and Components of Financial Statements Comparable statements more useful Comparable statements more useful IAS 1 looks to enhance comparability IAS 1 looks to enhance comparability Applies to general purpose financial statements Applies to general purpose financial statements Meets the needs of most users Meets the needs of most users “Financial statements are a structured representation of the financial position and financial performance of the entity.” “Financial statements are a structured representation of the financial position and financial performance of the entity.”

6 IAS 1 - Overview Statement of financial position Statement of financial position Statement of comprehensive income (this may be augmented by a separate income statement) Statement of comprehensive income (this may be augmented by a separate income statement) Statement of changes in equity Statement of changes in equity Statement of cash flows Statement of cash flows Notes including significant accounting policies and explanatory information Notes including significant accounting policies and explanatory information Statement of financial position at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement Statement of financial position at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement

7 Fair Presentation and Compliance with IFRSs Fair Presentation and Compliance with IFRSs Should present fairly - faithful representation Should present fairly - faithful representation Entity must: Entity must: select and apply appropriate accounting policies keeping in mind the GAAP hierarchy, select and apply appropriate accounting policies keeping in mind the GAAP hierarchy, present the information such that it provides, relevant, comparable and understandable information, and present the information such that it provides, relevant, comparable and understandable information, and provide additional disclosures where necessary. provide additional disclosures where necessary. Note disclosures are not a substitute for proper accounting Note disclosures are not a substitute for proper accounting May depart from GAAP May depart from GAAP

Going Concern and Accrual Based Accounting Accrual basis Accrual basis Going concern assumed Going concern assumed If not – new basis of accounting If not – new basis of accounting 8

9 Materiality Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor.” Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor.”

Presentation Identify what is included Identify what is included Must display the following Must display the following 1. the name of the entity 2. whether the financial statements are consolidated or not 3. the date of the balance sheet or period covered 4. the reporting currency and 5. the level of rounding (e.g. $000s) 10

Frequency of reporting, comparability and consistency At a minimum – annual statements At a minimum – annual statements Comparative required unless IFRS permits or requires otherwise Comparative required unless IFRS permits or requires otherwise At least two statements and a third if retrospective application or restatement At least two statements and a third if retrospective application or restatement Presentation and classification should generally stay the same Presentation and classification should generally stay the same 11

Statement of Financial Position Information to be Presented in the Statement of Financial Position Information to be Presented in the Statement of Financial Position Sufficiently different Sufficiently different Based on size, function, nature and liquidity, nature, timing Based on size, function, nature and liquidity, nature, timing Different measurement bases Different measurement bases Specific items to be presented separately Specific items to be presented separately May present relevant subcategories May present relevant subcategories Details re share capital Details re share capital 12

Current assets and liabilities Segregate current versus non Segregate current versus non Order of liquidity Order of liquidity Combined Combined Amounts beyond 12 months Amounts beyond 12 months 13

Current Assets An entity classifies assets as current assets when: An entity classifies assets as current assets when: 14

Current Liabilities An entity classifies liabilities as current liabilities when: An entity classifies liabilities as current liabilities when: 15

Statement of Comprehensive Income 16

17 Total comprehensive income …the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners. …the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners. includes all components of profit or loss and of other comprehensive income as noted above includes all components of profit or loss and of other comprehensive income as noted above

18 Other Comprehensive Income 1. changes in the revaluation surplus for property, plant and equipment and intangible assets, 2. certain actuarial gains/losses on defined benefit plans, 3. gains/losses arising on translation of financial statements of foreign operations, 4. gains/losses arising from remeasuring available for sale securities and 5. gains/losses on cash flow hedges. (IASCF, IAS 1.7)

19 Presentation of Income Statements Nature of Expense presentation Nature of Expense presentation

20 Function of Expense presentation: Function of Expense presentation: Presentation of Income Statements

21. Which one? Which one? Either may be iused Either may be iused Survey - 55% presented the statement by function of expense and 45% by nature of expense Survey - 55% presented the statement by function of expense and 45% by nature of expense Presentation of Income Statements

Statement of Changes in Equity This statement presents the following: This statement presents the following: 1. total comprehensive income 2. for each component of equity, the effects of retrospective application/restatement 3. reconciliation between the carrying amount of each component of equity at the beginning and end of the period. 22

Statement of Changes in Equity Notes: Notes: augment the basic statements augment the basic statements include information about the way they have been prepared include information about the way they have been prepared provide additional descriptive and supportive information provide additional descriptive and supportive information should be cross referenced should be cross referenced accounting policies accounting policies key sources of estimation uncertainty key sources of estimation uncertainty nature and structure of an entity’s capital and how it is managed nature and structure of an entity’s capital and how it is managed 23

Samples of and Excerpts from Selected Statements 24

Samples of and Excerpts from Selected Statements 25

26 Statement of Comprehensive Income

Statement of Changes in Equity 27

Looking Ahead Part of MoU Part of MoU Phase A complete Phase A complete Phase B – in progress Phase B – in progress Discussion paper planned 2008 Discussion paper planned

Phase B consistent principles for aggregating information in each financial statement consistent principles for aggregating information in each financial statement the totals and subtotals that should be reported in each financial statement the totals and subtotals that should be reported in each financial statement whether the direct or the indirect method of presenting operating cash flows provides more useful information whether the direct or the indirect method of presenting operating cash flows provides more useful information whether components of other comprehensive income should be reclassified to profit or loss and, if so, the characteristics of the transactions and events that should be reclassified and when reclassification should be made whether components of other comprehensive income should be reclassified to profit or loss and, if so, the characteristics of the transactions and events that should be reclassified and when reclassification should be made 29

Phase B (taken from Summary of tentative preliminary views (IASB and FASB)) 30

ICMAP STAGE 1,2,3,4 FUNDAMENTALS OF FINANCIAL ACCOUNTING ECONOMICS FUNDAMENTALS OF COST ACCOUNTING FINANCIAL ACCOUNTING COST ACCOUNTING PERFORMANCE APPRAISAL ADVANCED FINANCIAL ACCOUNTING

PIPFA FOUNDATION,INTERMEDIATE,FINAL BASIC ACCOUNTING BASIC ACCOUNTING BASIC COST ACCOUNTING BASIC COST ACCOUNTING FINANCIAL ACCOUNTING FINANCIAL ACCOUNTING PERFORMANCE MEASUREMENT PERFORMANCE MEASUREMENT FINANCIAL REPORTING FINANCIAL REPORTING MANAGEMENT ACCOUNTING MANAGEMENT ACCOUNTING

COACHING CLASSES MA-ECONOMICS MA-ECONOMICS B.COM B.COM BBA & MBA BBA & MBA O/A LEVEL (ACCOUNTING) O/A LEVEL (ACCOUNTING)

KHALID AZIZ R-1173,ALNOOR SOCIETY, BLOCK 19, F.B.AREA, KARACHI, PAKISTAN