IAS 1 Presentation of Financial Statements COMPLETE SET...

IAS 1 Summary Notes

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IAS 1 Presentation of Financial Statements

COMPLETE SET OF FINANCIAL STATEMENTS

A complete set of financial statements comprises:

1. a statement of financial position

2. a statement of profit or loss and other comprehensive income

3. a statement of changes in equity

4. a statement of cash flows (covered separately under IAS 7)

5. Notes to financial statements including accounting policies (not examined)

IAS 1 does not make it mandatory to use the above titles. It is likely in practice that many companies will continue to use the previous terms of balance sheet etc.

COMPREHENSIVE FORMAT – BASIC LEVEL UNCONSOLIDATED

ABC PLC

Statement of profit or loss and other comprehensive income For the year ended 31 December ______

$ Revenue IFRS 15 XXX Cost of sales (XXX)

Gross profit XX Administrative expenses (XX) Distribution expenses (XX) Exceptional items IAS 1 (XX)

Operating profit XX Finance cost (XX) Other income X

Profit before tax XXX Taxation IAS 12 (X)

Profit after tax XXX Profit (loss) on discontinued operations IFRS 5 XX

Profit for the period XX Other comprehensive income

Gain (loss) on revaluation IAS 16/38

XX

Gain (loss) on investments (FVTOCI) IFRS 9 XX

Other comprehensive income XX

Total comprehensive income XXX

IAS 1 Summary Notes


ABC PLC Statement of Changes in equity

For the year ended 31 December ______

Share Capital

Share premium

Revaluation surplus

Other reserves

Retained earnings

Total

$ $ $ $ $ $

Balance as at 1 January XX XX XX XX XX XXX

Correction of prior period error (IAS 8) (X)

Change in accounting policy (IAS 8) X

XX XX XX XX XX XXX

Issue of shares XX XX XX

Total comprehensive income XX XX XX XX

Incremental depreciation (IAS 16/38) (XX) XX

Dividends (XX) (XX)

Balance as at 31 December XXX XXX XX XX XX XXX

IAS 1 Summary Notes


ABC PLC Statement of Financial Position

As at 31 December ______ Non-current assets $

Property, plant and equipment IAS 16 XX Investment property IAS 40 XX Investments (esp. FVTOCI) IFRS 9 XX Intangible assets IAS 38 XX Deferred tax asset IAS 12 XX

XXX Current assets

Non-current assets held for sale IFRS 5 XX Inventories IAS 2 XX Due from customers under construction contract IAS 11 XX Trade receivables XX Cash and bank balances XX

XXX

Total assets XXX

Equity

Share capital XX Share premium XX Revaluation Surplus IAS

16/38 XX

Other reserves IFRS 9 XX Retained earnings XX

XXX Non-current liabilities

Loan notes, redeemable preference shares & long term loans IFRS 9 XX Deferred government grant IAS 20 XX Finance lease obligation IAS 17 XX Long term provisions IAS 37 XX Deferred tax liability IAS 12 XX

XXX Current liabilities

Trade and other payables XX Deferred government grant IAS 20 XX Finance lease obligation IAS 17 XX Due to customers under construction contract IAS 11 XX Current tax payable IAS 12 XX Short term provisions IAS 37 XX Short term borrowings / Bank overdraft XX

XXX

Total equity and liabilities XXX

IAS 1 Summary Notes


IMPORTANT POINTS

Current vs. non-current

An asset or liability is classified as current if: It will be settled within 12 months of the reporting date It is part of the entity’s normal operating cycle.

Statement of changes in equity

This provides a summary of all changes in equity arising from transactions with owners in their capacity as owners.

EXCEPTIONAL ITEMS

Definition These are material items of income and expense of such size or nature that disclosure is necessary to understand entity’s financial performance.

Accounting treatment

Generally, these items are included in standard income statement line and their nature and amount is disclosed in notes.

However, in some cases, it may be more appropriate to show the item separately on the face of income statement.

Examples Write down to NRV Impairment loss

Restructuring Gain / loss on

disposal

Litigation settlement Reversal of provisions

HOW TO SOLVE EXAM QUESTION

Step 1 Prepare the format

Step 2 Post the trial balance figures (as per TB sequence) in the formats

Step 3 Pass and post the journal entries for adjustments in the format

Step 4 Calculate sub totals and totals.

IAS 1 Summary Notes


EXAMPLE 1A

The following trial balance relates to Moon plc, a publicly listed company, at 30 September 2010: $ $ Revenue (net) 280,000 Inventories at 01 October 2009 54,000 Purchases (net) 175,000 Dividends paid 20,000 Administrative expenses 40,000 Interest paid 5,000 Bank Charges 1,000 Distribution costs 7,000 Other income 2,000 Land 100,000 Building – cost 70,000 Plant and equipment – cost 50,000 Accumulated depreciation – building 47,000 Accumulated depreciation – plant and equipment 20,000 Ordinary share capital of $1 each 150,000 Share premium 15,000 Retained earnings 01 October 2009 17,000 Revaluation Surplus 01 October 2009 5,000 Loan notes (Redemption date October 2015) 50,000 Deferred tax liability 12,000 Trade receivables 53,000 Bank 35,000 Trade payables 12,000

610,000 610,000

The following have not yet been recorded: (a) The inventory at 30 September 2010 is $ 49,000. (b) Land has been revalued on 30 September 2010 at $120,000 (c) The building is to be depreciated at 10% of cost using straight line basis. Plant and

equipment are to be depreciated 20% reducing balance method. The 60% depreciation relates to production and remaining relates to administrative expenses.

(d) The company issued 1 for 3 right shares at end of the year at $1.5 per share but no entry has been passed.

(e) The current income tax for the year is $18,000. The deferred tax liability need not be adjusted.

Required: Prepare the draft statement of profit or loss and other comprehensive income, statement of changes in equity and statement of financial position along with relevant workings.

IAS 1 Summary Notes


EXAMPLE 1B

The following trial balance relates to Jupiter Limited at 31 March 2009: $000 $000 Administrative expenses 170 Interest paid 5 Share capital of $1 each 200 Dividend 6 Cash at bank and in hand 9 Income tax (remaining balance from previous year) 10 Distribution costs 193 Revaluation surplus (1 April 2008) 40 Land and building (Land $110; Building $100) 210 Accumulated depreciation – Land and building 48 Plant and machinery 125 Accumulated depreciation 75 Retained earnings (1 April 2008) 270 Loan 80 Purchases 470 Sales 1,300 Inventory (1 April 2008) 150 Trade payables 60 Trade receivables 725

2,073 2,073

Additional information: (a) Inventory at 31 March 2009 was valued at $250,000 (b) Buildings and plant and machinery are depreciated on a straight line basis (assuming no

residual value) at the following rates (on cost): Buildings 5% Plant and machinery 20%

The depreciation charge is to be apportioned as follows:

Cost of sales 60% Distribution expenses 20% Administrative expenses 20%

(c) There were no purchases or sales of property, plant and equipment during the year. (d) Income taxes for the year to 31 March 2009 are estimated to be $135,000 (e) The previous revalued amount of land was $110,000. However, due to recent slump in

property market the revalued amount at the year-end has been estimated at $95,000 only. (f) The loan is repayable in five years. Required: Prepare the draft statement of profit or loss and other comprehensive income, statement of changes in equity and statement of financial position along with relevant workings.

IAS 1 Summary Notes


ANSWER 1A

Moon PLC Statement of profit or loss and other comprehensive income

For the year ended 30 September 2010 $ Revenue 280,000 Cost of sales $(54,000+175,000 – 49,000 J1 + 7,800 J3) (187,800)

Gross profit 92,200 Administrative expenses $(40,000+5,200 J3) (45,200) Distribution expenses (7,000) Finance cost $(5,000 + 1,000) (6,000) Other income 2,000

Profit before tax 36,000 Taxation J5 (18,000)

Profit after tax 18,000 Other comprehensive income

Gain (loss) on revaluation J2 20,000

Other comprehensive income 20,000

Total comprehensive income 38,000

MOON PLC

Statement of Changes in equity For the year ended 30 September 2010

Share Capital

Share premium

Revaluation surplus

Retained earnings

Total

$ $ $ $ $

Balance as at 1 October 2009 150,000 15,000 5,000 17,000 187,000 Issue of shares J4 50,000 25,000 75,000 Total comprehensive income 20,000 18,000 38,000 Dividends (20,000) (20,000)

Balance as at 30 September 2010 200,000 40,000 25,000 15,000 280,000

IAS 1 Summary Notes


MOON PLC Statement of Financial Position

As at 30 September 2010 Non-current assets $ Property, plant and equipment $100,000+70,000+50,000 – 47,000 – 20,000 + 20,000 J2 – 13,000 J3

160,000

Current assets

Inventories J1 49,000 Trade receivables 53,000 Cash and bank balances $35,000 + 75,000 J4 110,000

212,000

Total assets 372,000

Equity

Share capital 200,000 Share premium 40,000 Revaluation Surplus 25,000 Retained earnings 15,000

280,000 Non-current liabilities

Loan notes 50,000 Deferred tax liability 12,000

62,000 Current liabilities

Trade and other payables 12,000 Current tax payable J5 18,000

30,000

Total equity and liabilities 372,000

IAS 1 Summary Notes


JOURNAL ENTRIES & WORKINGS $

Dr. Cr.

(a) 1 Inventories 49,000

COS 49,000

Closing inventory recorded

(b) 2 PPE (Land) 20,000

Gain or revaluation 20,000

Gain on revaluation recognised.

(c) 3

COS (60%) 7,800

Administrative expenses (40%) 5,200

PPE (Accumulated depreciation) 13,000

$ Depreciation on Building $70,000 x 10% 7,000 Depreciation on Plant $50,000 – 20,000 = $30,000 x 20%

6,000

13,000

(d) 4

Bank 75,000

Share capital 50,000

Share premium 25,000

150,000 shares x 1/3 = 50,000 shares 50,000 shares x $1 = $50,000 share capital 50,000 shares x $0.5 = $25,000 share premium 50,000 shares x $1.5 = $75,000 cash received

(e) 5 Income tax expense 18,000

Current tax payable 18,000

The provision for current income tax.

IAS 1 Summary Notes


ANSWER 1B

Jupiter Limited Statement of profit or loss and other comprehensive income

For the year ended 31 March 2009 $000 Revenue 1,300 Cost of sales $(470 + 150 – 250 J1 + 18 J2) (388)

Gross profit 912 Administrative expenses $(170 + 6 J2) (176) Distribution expenses $(193 + 6 J2) (199) Finance cost (5)

Profit before tax 532 Taxation $(10 + 135 J3) (145)

Profit after tax 387 Other comprehensive income Loss on revaluation J4 (15)

Total comprehensive income 372

Jupiter Limited

Statement of Changes in equity For the year ended 31 March 2009

Share Capital

Revaluation surplus

Retained earnings

Total

$000 $000 $000 $000

Balance as at 1 April 2008 200 40 270 510 Total comprehensive income (15) 387 372 Dividends (6) (6)

Balance as at 31 March 2009 200 25 651 876

IAS 1 Summary Notes


Jupiter Limited Statement of Financial Position

As at 31 March 2009 Non-current assets $000 Property, plant and equipment $210 – 48 + 125 – 75 – 30 J2 – 15 J4 167 Current assets

Inventories J1 250 Trade receivables 725 Cash and bank balances 9

984

Total assets 1,151

Equity

Share capital 200 Revaluation Surplus 25 Retained earnings 651

876 Non-current liabilities Loan 80 Current liabilities

Trade and other payables 60 Current tax payable J3 135

195

Total equity and liabilities 1,151

IAS 1 Summary Notes


JOURNAL ENTRIES & WORKINGS $000

Dr. Cr.

(a) 1 Inventories 250

COS 250

Closing inventory recorded

(b) 2

COS (60%) 18

Distribution costs (20%) 6

Administrative expenses (20%) 6

PPE (Accumulated depreciation) 30

$ Depreciation on Building $100 x 5% 5 Depreciation on Plant $125 x 20% 25

30

(d) 3 Income tax expense 135

Current tax payable 135

The provision for current income tax.

(e) 4 Loss on revaluation 15

PPE (Land) 15

Loss on revaluation recognised $110 – 95 = $15

Dated: 11 August 2016

IAS 1 Presentation of Financial Statements COMPLETE SET...

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