International Financial Reporting Standards_guide.pdf

Chapter 3 Presentation of Financial Statements (IAS 1) 33
3.8 IMPLEMENTATION DECISIONS
The following table sets out some of the strategic and tactical decisions that should be considered
when applying IAS 1.
Strategic decisions Tactical decisions Problems to overcome
Determining what information will be
presented on the face of the statement
of financial position, income statement,
and statement of changes in equity,
and what information will be presented
in the notes to the annual financial
statements.
IAS 1 permits presentation on the
statement of financial position based on
either a current and noncurrent split or
on a liquidity basis.
What information will be presented as
forming part of the financial statements
and what supplementary information
required by certain users will also be
presented in the annual report.
IAS 1 also provides a choice to
present either a single statement
of comprehensive income or two
statements (an income statement and
separate statement of comprehensive
income). This decision is primarily
dependent on industry practice
although entity specific issues may also
be relevant
What accounting policies are considered
to be significant. Based on this analysis
determine which accounting policies
will be disclosed in the annual financial
statements.
When determining what information
will be presented on the face of the
various statements and in the notes to
the financial statements, management
needs to ensure that their presentation
is in line with the presentation of other
entities within the same industry.
Management should determine what
information to present on the face of
the statement of financial position,
income statement, statement of
changes in equity and what information
to present in the notes to the annual
financial statements. Industry practice
and user requirements are useful
guidelines.
Where the current/noncurrent basis of
presentation is selected, management
needs to define what is regarded as
current and noncurrent based on the
entity’s normal operating cycle and the
guidance provided in IAS 1.
Management, in conjunction with the
external auditors, should decide what
level of assurance will be applied to
additional information presented in the
annual report.
Whether the components of other
comprehensive income will be
presented net of the related tax effects
or gross of the related tax effects, with a
single line presented for the tax effects,
on the face of the statement of other
comprehensive income.
When considering whether a specific
accounting policy should be presented,
consider whether it would assist users
in understanding how transactions,
other events, and conditions are
reflected in the financial statements.
Consideration should also be given
to whether the disclosure of certain
accounting policies is required by a
specific standard.
Ensuring that the financial reporting and
management reporting systems are
adequate to obtain all the information
that is required to be presented in
terms of IAS 1.
Ensuring that the financial reporting
system is adequate to obtain the
information required regarding the
amounts expected to be recovered
or settled within 12 months after the
reporting period and more than 12
months after the reporting period.
The annual report should clearly
distinguish between information that
forms part of the annual financial
statements and is subject to sign-off
by the auditors. This may necessarily
interfere with the flow of commentary.
Management reporting systems should
be able to provide the following
information for each component of
comprehensive income:
• gains or losses arising in the current
year;
• reclassification adjustments
recognized in profit or loss for the
period; and
• related income tax effect.