Presentation of Financial

Statements and
Accounting Policies

REVDEVT - TOA

F.H.Villamin

Main standard dealing with the overall

requirements for the presentation of financial
statements, including their form, content and
structure.

REVDEVT - TOA

F.H.Villamin

Deals with the requirements for the selection

and application of accounting policies. It also
deals with the requirements as to when
changes to accounting policies should be
made, and how such changes should be
accounted and disclosed.

REVDEVT - TOA

F.H.Villamin

Aug. 1997 IASC issued IAS 1 (revised)

Presentation of Financial Statements which
consolidated and replaced IAS 1 Disclosure
of Accounting Polices (originally published in
1974), IAS 5 Information to Be Disclosed in
Financial Statements, IAS 13 Presentation of
Current Assets and Current Liabilities
(originally published in 1979).
Dec. 2003 Updated as part of IASBs
improvements project.

REVDEVT - TOA

F.H.Villamin

Mar. 2004 Further revisions were made by

IFRS 5.
IAS 1 was further amended in
Feb. 2008 as a consequence of the revision of
IAS 32 Financial Instruments Presentation
allowing a special balance sheet presentation
for puttable financial instruments.
May 2008, when a revised version of IAS 27
Consolidated
and
Separate
Financial
Statements was published.

REVDEVT - TOA

F.H.Villamin

May 2008 published the IASBs annual

improvement project which contained some
minor updates to IAS 1.
Apr
2009 IASBs annual improvement
project clarifying the distinction between
current and non current liabilities when the
liabilities may be settled in equity.
Nov 2009 reflected changed requirements
for certain financial instruments introduced
by IFRS 9 Financial Instruments.

REVDEVT - TOA

F.H.Villamin

Jun 2011 required the statement of other

comprehensive
income
to
distinguish
between items that will subsequently be
reclassified to profit and loss from those that
will not.

REVDEVT - TOA

F.H.Villamin

Applies to general purpose financial

statements, that is those intended to meet
the needs of users who are not in a position
to require an entity to prepare reports
tailored to meet their particular information
needs, and it should be applied to all such
financial statements prepared in accordance
with IFRS.

REVDEVT - TOA

F.H.Villamin

Standards and interpretations issued by the

IASB composed of:
1) International Financial Reporting Standards
2) International Accounting Standards
3) IFRIC interpretations Committee
4) SIC interpretations

REVDEVT - TOA

F.H.Villamin

1)

2)

Applies equally to all entities including

those that present consolidated financial
statements and those that present separate
financial statements .
IAS1 does not apply to the structure and
content of condensed interim financial
statements prepared in accordance with IAS
34 Interim Financial Reporting, although
their provisions relating to fair presentation,
compliance with IFRS and fundamental
accounting policies do apply to interims.

REVDEVT - TOA

F.H.Villamin

10

The objective of the standard is to prescribe

the basis for presentation of general-purpose
financial
statements,
and
to
ensure
comparability both with the entitys financial
statements of previous periods and with
financial statements of other entities.
It sets out overall requirements for the
presentation
of
financial
statements,
guidelines for their structure and minimum
requirements for their content.

REVDEVT - TOA

F.H.Villamin

11

It sets out also the recognition, measurement

and disclosure of specific transactions and
other events.
It is primarily directed at profit oriented
entities (including public sector business
entities).

REVDEVT - TOA

F.H.Villamin

12

It has a long history, dating back to 1976.

This standard in its current form with its
current title was published in December 2003
as part of the IASBs improvement project.

REVDEVT - TOA

F.H.Villamin

13

It applies to selecting and applying

accounting policies and accounting changes
in accounting policies, changes in accounting
estimates and corrections of prior period
errors.
Its objective is to prescribe the criteria for
selecting and changing accounting policies,
together with the accounting treatment and
disclosure of changes in accounting policies,
changes in accounting estimates and
correction of errors.

REVDEVT - TOA

F.H.Villamin

14

1.

2.

Disclosure requirements for accounting

policies, except those for changes in
accounting policies.
Accounting and disclosure requirements
regarding the tax effects of corrections of
prior period errors and of retrospective
adjustments made to apply changes in
accounting policies.

REVDEVT - TOA

F.H.Villamin

15

Financial
Statements
are
structured
representations of the financial position and
financial performance of an entity.
o The objective of f/s 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.

REVDEVT - TOA

F.H.Villamin

16

IAS 1 also acknowledges a second important

role of financial statements . That is they also
show the results of managements stewardship
of the resources entrusted to it. To meet this
objective, IAS 1 requires that the financial
statements provide information about an
entitys
A. Assets
B. Liabilities
C. Equity
REVDEVT - TOA

F.H.Villamin

17

D. Income and Expenses , including gains

and losses
E. Contributions
by
owners
and
distributions to owners in their capacity
as owners (owners being defined as
holders of instruments classified as
equity)
F. Cash Flows

REVDEVT - TOA

F.H.Villamin

18

IAS 1 requires that a complete set of financial

statements be presented at least annually.
Disclosure shall be required if there was a period
change, for a period longer or shorter than one
year:
a) The reason for using a longer or shorter period.
b) The fact that amounts presented in the financial
statements are not entirely compatible.

REVDEVT - TOA

F.H.Villamin

19

a) A balance sheet as at the end of the period (IAS1

uses the phrase statement of financial position ,
but indicates that the other titles may be used.)
b) A statement of profit and loss and other
comprehensive income for the period to be
presented either as
1) One single statement of comprehensive income with a
section for profit and loss followed immediately by a
section for other comprehensive income.
2) A separate income statement and statement of
comprehensive income.

REVDEVT - TOA

F.H.Villamin

20

c) A statement of changes in equity for the period.

d) A statement of cash flows for the period.
e) Notes, comprising a summary of significant
accounting policies and other explanatory
information, and
f) A balance sheet as at the beginning of the earliest
comparative period when:
i.
An accounting policy has been applied retrospectively.
ii. A retrospective restatement has been made.
iii. Items have been reclassified.

REVDEVT - TOA

F.H.Villamin

21

Required when:
1. An
entity
applies
an
accounting
policy
retrospectively.
2. An entity makes a retrospective restatement.
3. An entity reclassifies items in its financial
statements.

REVDEVT - TOA

F.H.Villamin

22

Required when reclassification to reflect current

period classifications as required by IAS1, a change to
comparatives as they were originally reported could
be necessary:
1. Following a change in accounting policy
2. To correct error discovered in previous financial
statement.
3. In relation to non-current assets held for sale,
disposal groups and discontinued operations.

REVDEVT - TOA

F.H.Villamin

23

The following is required to be displayed

prominently, and repeated when that is necessary for
the information presented to be understandable:
1. The name of the reporting entity or other means
of identification, and any change in that
information from the end of the preceding period.
2. Whether the financial statements are of an
individual entity or a group of entities.
3. The date of the end of the reporting period or the
period covered by the set of fs or the notes
4. The presentation currency, as defined by IAS 21
The Effects of Changes in Foreign Exchange Rates.

REVDEVT - TOA

F.H.Villamin

24

5. The level of rounding used in presenting amounts

in the financial statements.

REVDEVT - TOA

F.H.Villamin

25

IAS 1 requires that financial statements

complying with IFRSs make an explicit and
unreserved statement of such compliance in
the Notes.
As this statement itself is required for full
compliance, its absence render the whole
financial statements non-compliant, even if
there was otherwise full compliance.

REVDEVT - TOA

F.H.Villamin

26

a) A balance sheet as at the end of the period (IAS1

uses the phrase statement of financial position ,
but indicates that the other titles may be used.)
b) A statement of profit and loss and other
comprehensive income for the period to be
presented either as
1) One single statement of comprehensive income with a
section for profit and loss followed immediately by a
section for other comprehensive income.
2) A separate income statement and statement of
comprehensive income.

REVDEVT - TOA

F.H.Villamin

27

c) A statement of changes in equity for the period.

d) A statement of cash flows for the period.
e) Notes, comprising a summary of significant
accounting policies and other explanatory
information, and
f) A balance sheet as at the beginning of the earliest
comparative period when:
i.
An accounting policy has been applied retrospectively.
ii. A retrospective restatement has been made.
iii. Items have been reclassified.

REVDEVT - TOA

F.H.Villamin

28

Distinction between Current/Non-current

Assets and Liabilities
The basic requirement of the standard is
that current and non current assets and
current and non current liabilities, should
be presented as separate classifications on
the face of the balance sheet.

REVDEVT - TOA

F.H.Villamin

29

Criteria:
a) It is expected to be realized in, or it is
intended for sale or consumption in, the
entitys normal operating cycle.
b) It is held primarily for the purpose of
trading.
c) It is expected to be realized within
twelve months after the end of the
reporting period.
REVDEVT - TOA

F.H.Villamin

30

Criteria:
d) It is cash or cash equivalent unless it is
restricted from being exchanged or used
to settle a liability for at least twelve
months after the end of the reporting
period.

REVDEVT - TOA

F.H.Villamin

31

Criteria:
a) It is expected to be settled in the entitys
normal operating cycle
b) It is held primarily for the purpose of
trading.
c) It is due to be settled within twelve
months after the end of the reporting
period; or

REVDEVT - TOA

F.H.Villamin

32

Criteria:
d) The entity does not have unconditional
right to defer settlement of the liability
for at least twelve months after the end
of the reporting period.

REVDEVT - TOA

F.H.Villamin

33

A liability should be classified as current:

a) When it is due to be settled within twelve
months after the end of the reporting
period, even if
i.

The original term was for the period longer

than twelve months.
ii. The agreement to refinance , or to
reschedule payments, on a long-term basis
is completed after the period end and
before the fs are authorized for issue.
REVDEVT - TOA

F.H.Villamin

34

A liability should be classified as current:

b) When an entity breaches a provision of a
long-term loan arrangement on or
before the period end with the effect that
the liability becomes payable on
demand.

REVDEVT - TOA

F.H.Villamin

35

IAS 1 does not contain a prescriptive format

or order for the balance sheet. However, it
contains two mechanisms which require
certain information to be shown on the face
of balance sheet.
1. It contains a list of specific items for
which this is required, on the basis that
they are sufficiently different in nature or
function
to
warrant
separate
presentation.
REVDEVT - TOA

F.H.Villamin

36

2. It stipulates that additional line items,

headings and subtotals should be
presented on the face of the balance
sheet when such presentation is relevant
to understanding of the entitys financial
position.

REVDEVT - TOA

F.H.Villamin

37

Judgment as to whether additional line

items is based on the assessment of:
a) The nature and liquidity of assets.
b) The function of assets within the entity.
c) The amounts, nature and timing of
liabilities.

REVDEVT - TOA

F.H.Villamin

38

a)
b)
c)
d)

Property, plant and equipment.

Investment property.
Intangible assets.
Financial assets (excluding amounts
shown under (e), (h), (i)
e) Investments accounted for using the
equity method.
f) Biological assets.

REVDEVT - TOA

F.H.Villamin

39

g)
h)
i)
j)

Inventories.
Trade and other receivables.
Cash and cash equivalents.
The total of assets classified as held for
sale and assets included in disposal
groups classified as held for sale in
accordance with IFRS 5.
k) Trade and other payables.

REVDEVT - TOA

F.H.Villamin

40

l) Provisions.
m) Financial liabilities (excluding amounts
shown under (k) and (l)).
n) Liabilities and assets for current tax, as
defined in IAS 12.
o) Deferred tax liabilities and deferred tax
assets, as defined in IAS 12.
p) Liabilities included in disposal groups
classified as held for sale in accordance
with IFRS 5.
REVDEVT - TOA

F.H.Villamin

41

q) Non controlling interests, presented

within equity.
r) Issued capital and reserves attributable
to owners of parent.

REVDEVT - TOA

F.H.Villamin

42

Basis of Assessment:
a) The nature and liquidity of assets.
b) The function of assets within the entity.
c) The amounts, nature and timing of
liabilities.

REVDEVT - TOA

F.H.Villamin

43

a) Items of property, plant and equipment are

disaggregated into classes in accordance
with IAS 16.
b) Receivables are disaggregated into amounts
receivable
from
trade
customers,
receivables
from
related
parties,
prepayments and other amounts.
c) Inventories
are
disaggregated,
in
accordance with IAS 2 into classifications
such as merchandise, production supplies,
materials, work in progress and finished
goods.
REVDEVT - TOA

F.H.Villamin

44

d) Provisions
are
disaggregated
into
provisions for employee benefits and
other items.
e) Equity
capital
and
reserves
are
disaggregated into various classes, such
as paid-in capital, share premium and
reserves.

REVDEVT - TOA

F.H.Villamin

45

IAS 1 specifically requires that the following

information regarding equity and share capital
to be shown either on the face of the balance
sheet or in the notes:
a) For each class of share capital
i.
ii.

The number of shares authorized.

The number of shares issued and fully paid, and
issued but not fully paid.
iii. Par value per share, or that the shares have no
par value.
iv. A reconciliation of the number of shares
outstanding at the beginning and at the end of
the period

REVDEVT - TOA

F.H.Villamin

46

a) For each class of share capital

a)

The rights, preferences and restrictions

attaching to that class including restrictions
on the distribution of dividends and the
repayment of capital.
b) Shares in the entity held by the entity or by
its subsidiaries or associates.
c) Shares reserved for issue under options and
contracts for the sale of shares, including
terms and amounts.

REVDEVT - TOA

F.H.Villamin

47

b) A description of the nature and purpose

of each reserve within equity.
IAS 32 requires two specific classes of
liabilities to be reported as equity:
1. Puttable financial instruments.
2. Instruments that impose on the entity an
obligation to deliver to another party a
pro rata share of the net assets of the
entity only on liquidation.
REVDEVT - TOA

F.H.Villamin

48

Total comprehensive income is defined

as the change of equity during a period
resulting from transactions and other
events, other than those changes
resulting from transactions with owners
in their capacity as owners. It comprises
all components of profit or loss and of
other comprehensive income.

REVDEVT - TOA

F.H.Villamin

49

 Profit or loss is the total of income

less
expenses,
excluding
the
components of other comprehensive
income.
Other
comprehensive
income
comprises items of income and
expense (including reclassification
adjustments) that are not recognized
in profit or loss as required or
permitted by other IFRSs.
REVDEVT - TOA

F.H.Villamin

50

a) Changes
in
revaluation
surplus
relating to property, plant and
equipment and intangible assets.
b) Actuarial gains and losses (for periods
beginning on or after January 1, 2013
or earlier if the standard is adopted
early, remeasurements on defined
benefit
plan
when
these
are
recognized outside of profit and loss
as permitted by IAS 19.
REVDEVT - TOA

F.H.Villamin

51

c) Gains and losses arising from

translating the financial statements of
a foreign operation.
d) Gains and losses on remeasuring
available-for-sale financial assets.
e) The effective portion of gains and
losses on hedging instruments in a
cash flow hedge.

REVDEVT - TOA

F.H.Villamin

52

f) For periods beginning on or after 1

January 2015 or earlier if the standard
is adopted early, for liabilities
designated as at fair value through
profit and loss, fair value changes
attributable to changes in the
liabilitys credit risk.

REVDEVT - TOA

F.H.Villamin

53

IAS requires that all items of income and

expense be presented either:
1. In a single statement of profit or loss
and other comprehensive income
(with a separate section for each in
the order stated)
2. In two separate statements.

REVDEVT - TOA

F.H.Villamin

54

IAS requires that all items of income and

expense be presented either:
2. In two separate statements:
i. An income statement (containing
components of profit and loss).
ii. A statement of comprehensive
income beginning with profit and
loss and containing components of
other comprehensive income.

REVDEVT - TOA

F.H.Villamin

55

As a minimum, the face of income

statement should include line items that
present the following:
a) Revenue
b) Gains
and
losses
from
the
derecognition
of
financial
assets
measured at amortized cost.
c) Finance costs.

REVDEVT - TOA

F.H.Villamin

56

As a minimum, the face of income

statement should include line items that
present the following:
a) Revenue
b) Gains
and
losses
from
the
derecognition
of
financial
assets
measured at amortized cost.
c) Finance costs.

REVDEVT - TOA

F.H.Villamin

57

d) Share of the profit or loss of associates

and joint ventures accounted for using
the equity method.
e) Any difference between fair values and
the previous carrying amount at the
date of reclassification when a financial
asset is reclassified to be measured at
fair value.
f) Tax expense

REVDEVT - TOA

F.H.Villamin

58

g) A single amount comprising the total of:

i. The post-tax profit or loss of
discontinued operations.
ii. The post-tax gain or loss recognized on
the measurement to fair value less costs
to sell or on the disposal of assets or
disposal
group(s)
constituting
the
discontinued operation.

REVDEVT - TOA

F.H.Villamin

59

h) Profit or loss
i) Allocations of the profit or loss for the
period
i. Profit or loss attributable to noncontrolling interests.
ii. Profit or loss attributable to owners of
the parent.

REVDEVT - TOA

F.H.Villamin

60

h) Profit or loss
i) Allocations of the profit or loss for the
period
i. Profit or loss attributable to noncontrolling interests.
ii. Profit or loss attributable to owners of
the parent.

REVDEVT - TOA

F.H.Villamin

61

The whole purpose of accounting

standards
is
to
specify
required
accounting policies, presentation and
disclosure.

REVDEVT - TOA

F.H.Villamin

62

a. Fair Presentation and compliance with IFRS

IAS1 requires that financial statements
present fairly the financial position, financial
performance and cash flows of an entity.
Fair presentation requires the faithful
representation of the effects of transactions,
other events and conditions in accordance
with the definitions/recognition criteria for
assets, liabilities, income and expenses set
out in the Conceptual Framework.
REVDEVT - TOA

F.H.Villamin

63

a. Fair Presentation and compliance with IFRS

A fair presentation requires an entity to:
a)

Select and apply accounting policies in accordance

with IAS8, which also sets out a hierarchy of
authoritative guidance that should be considered in
the absence of an IFRS that specifically applies to an
item
b) Present information, including, accounting policies, in
a manner that provides relevant, reliable, comparable
and understandable information;
c) Provide additional disclosures when compliance with
the specific requirements in IFRSs is insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on the
entitys financial position and financial performance

REVDEVT - TOA

F.H.Villamin

64

b. The fair presentation override

When the relevant regulatory framework allows a departure, an

entity should make it and disclose:
a) that management has concluded that the financial
statements present fairly the entitys financial position,
financial performance and cash flows;
b) that it has complied with applicable IFRS, except that it has
departed from a particular requirement to achieve a fair
presentation;
c) the title of the IFRS from which the entity has departed
including the nature of the departure;
d) for each period presented, the financial impact of the
departure on each item in the financial statements that
would have been reported in complying with the
requirement
e) when there is a departure from a requirement of an IFRS in a
prior period, and that departure affects the amounts
recognized in the financial statements for the current
period, the disclosures set out in c) and d) above.
REVDEVT - TOA

F.H.Villamin

65

It requires that financial statements should be

prepared on a going concern basis unless
management either intends to liquidate the
entity or to cease trading, or has no realistic
alternative but to do so.
It requires that when management is aware, in
making its assessment, of material uncertainties
related to events or conditions that may cast
significant doubt upon the entitys ability to
continue as a going concern, these uncertainties
should be disclosed.
REVDEVT - TOA

F.H.Villamin

66

IAS 1 requires that financial statements be

prepared, using the accrual basis of
accounting.
When the accrual basis of accounting is used,
items are recognized as assets, liabilities,
equity, income and expenses when they
satisfy the definitions and recognition for
those elements in the Framework.

REVDEVT - TOA

F.H.Villamin

67

Accrual accounting depicts the effects of

transactions
and
other
events
and
circumstances on a reporting entitys
economic resources and claims in the periods
in which those effects occur, even if the
resulting cash receipts and payments occur in
a different period.

REVDEVT - TOA

F.H.Villamin

68

IAS1 requires that the presentation and

classification of items in the financial statements
be retained from one period to the next unless:
a) it is apparent, following a significant change
in the nature of the entitys operations or a
review of its financial statements, that
another presentation or classification would
be more appropriate having regard to the
criteria for the selection and application of
accounting policies in IAS 8; or
b) an IFRS requires a change in presentation.

REVDEVT - TOA

F.H.Villamin

69

a. Materiality and aggregation

Financial statements result from processing
large numbers of transactions or other events
that are aggregated into classes, according to
their nature or function. The final stage in
the process of aggregation and classification
is the presentation of condensed and
classified data, which form line items in the
financial statements or in the notes.

REVDEVT - TOA

F.H.Villamin

70

a. Materiality and aggregation

Definition: Omissions or misstatements of
items are material if they could, individually
or collectively, influence the economic
decisions that users make on the basis of the
financial statements.
It depends on the size and nature of the
omission or misstatement judged in the
surrounding circumstances.
REVDEVT - TOA

F.H.Villamin

71

b. Offset
IAS1 considers it important that assets and
liabilities, and income and expenses, are
reported separately.
IAS 1 requires that assets and liabilities, and
income and expenses, should not be offset
unless required or permitted by an IFRS.

REVDEVT - TOA

F.H.Villamin

72

b. Offset
IAS 1 notes that:

a) IAS 18 Revenue defines revenue and

requires it to be measured at the fair
value of the consideration received or
receivable, taking into account the
amount of any trade discounts and
volume rebates allowed by the entity.

REVDEVT - TOA

F.H.Villamin

73

b. Offset
IAS 1 notes that:
b) entities can undertake, in the course of their
ordinary activities, other transactions that do
not generate revenue but are incidental to the
main revenue-generating activities.
c)

gains and losses arising from a group of

similar transactions should be reported on a
net basis.

REVDEVT - TOA

F.H.Villamin

74

Income is increases in economic benefits

during the accounting period in the form of
inflows or enhancements of assets or
decreases of liabilities that result in increases
in equity, other than those relating to
contributions from equity participants

REVDEVT - TOA

F.H.Villamin

75

Expenses are decreases in economic benefits

during the accounting period in the form of
outflows or depletions of assets or
incurrences of liabilities that result in
decreases in equity, other than those relating
to contributions from equity participants

REVDEVT - TOA

F.H.Villamin

76

IAS 8 defines accounting policies as the

specific principles, bases, conventions, rules
and practices applied by an entity in
preparing
and
presenting
financial
statements. In particular, IAS 8 considers a
change in measurement basis to be a
change in accounting policy (rather than a
change in estimate).

REVDEVT - TOA

F.H.Villamin

77

IAS 1 gives examples of measurement bases

as follows:
historical cost
current cost
net realizable value
fair value
recoverable amount

REVDEVT - TOA

F.H.Villamin

78

A change in accounting estimate is an

adjustment of the carrying amount of an asset or
a liability, or the amount of the periodic
consumption of an asset, that results from the
assessment of the present status of, and
expected future benefits and obligations
associated with, assets and liabilities. Changes
in accounting estimates result from new
information or new developments and are not
corrections of errors.
REVDEVT - TOA

F.H.Villamin

79

Accounting estimates by their nature are

approximations that may need revision as
additional information becomes known.

REVDEVT - TOA

F.H.Villamin

80

IFRS set out accounting policies that the IASB

has concluded result in financial statements
containing relevant and reliable information
about the transactions, other events and
conditions to which they apply.

REVDEVT - TOA

F.H.Villamin

81

The primary requirement of the standard is that

management should use its judgment in developing
and applying an accounting policy that results in
information that is:
a) relevant to the economic decision-making needs
of users; and
b) reliable, in that financial statements:
i. represent faithfully the financial position,
financial performance and cash flows of the
entity
ii. reflect the economic substance of transactions,
other events and conditions, and not merely
the legal form;
iii. are neutral, i.e. free from bias;
iv. are prudent; and
v. are complete in all material respects.
REVDEVT - TOA

F.H.Villamin

82

IAS 8 permits a change in accounting policies

if the change:
a) is required by an IFRS; or
b) results in the financial statements
providing reliable and more relevant
information
about
the
effects
of
transactions, other events or conditions
on the entitys financial position, financial
performance or cash flows

REVDEVT - TOA

F.H.Villamin

83

IAS 8 addresses changes of accounting policy

arising from three sources:
a) the initial application of an IFRS containing
specific transitional provisions;
b) the initial application of an IFRS which
does not contain specific transitional
provisions
c) voluntary changes in accounting policy

REVDEVT - TOA

F.H.Villamin

84

The making of estimates is a fundamental

feature of financial reporting reflecting the
uncertainties inherent in business activities.
IAS 8 notes that the use of reasonable
estimates is an essential part of the
preparation of financial statements and it
does not undermine their reliability.

REVDEVT - TOA

F.H.Villamin

85

Examples of estimates:
bad debts
inventory obsolescence
the fair value of financial assets or
financial liabilities
the useful lives of , or expected pattern of
consumption of the future economic
benefits embodied in, depreciable assets
warranty obligations

REVDEVT - TOA

F.H.Villamin

86

IAS 8 requires that changes in estimate be accounted

for prospectively; defined as recognizing the effect of
the change in the accounting estimate in the current
and future periods affected by the change. This
means:
adjusting the carrying amount of an asset, liability
or item of equity in the balance sheet in the
period of change;
recognizing the change by including it in profit
and loss in:
o the period of change, if it affects that period
only
o the period of change and future periods, if it
affects both

REVDEVT - TOA

F.H.Villamin

87

Errors can arise in respect of the recognition,

measurement, presentation or disclosure of
elements of financial statements. IAS 8 states
that financial statements do not comply with IFRS
if they contain errors that are:
a) material; or
b) immaterial but are made intentionally to
achieve a particular presentation of an
entities
financial
position,
financial
performance or cash flows.

REVDEVT - TOA

F.H.Villamin

88

Prior period errors are omissions from, and

misstatements in, an entitys financial statements
for one or more prior periods arising from a
failure to use, or misuse of, reliable information
that:
a) was available when financial statements for
those periods were authorized for issue
b) could reasonably be expected to have been
obtained and taken into account in the
preparation and presentation of those
financial statements
REVDEVT - TOA

F.H.Villamin

89

When it is discovered that material prior period errors

have occurred, IAS 8 requires that they be corrected
in the first set of financial statements prepared after
their discovery. The correction should be excluded
from profit or loss for the period in which the error is
discovered. Rather, any information presented about
prior periods should be restated as far back as
practicable. This should be done by:
a) restating the comparative amounts for the prior
period(s) in which the error occurred; or
b) if the error occurred before the earliest prior
period presented, restating the opening balances
of assets, liabilities and equity for the earliest
period presented.

REVDEVT - TOA

F.H.Villamin

90

The standard states that applying a requirement is

impracticable when an entity cannot apply it after
making every reasonable effort to do so.
It is
impracticable to apply a change in an accounting
policy retrospectively or to make a retrospective
restatement to correct an error if:
a) the effects of the retrospective application or
retrospective restatement are not determinable;
b) the retrospective application or retrospective
restatement requires assumptions about what
managements intent would have been in that
period;
c) the retrospective application or retrospective
restatement requires significant estimates of
amounts and that it is impossible to distinguish
objectively information about those estimates
that:
REVDEVT - TOA

F.H.Villamin

91

i. provides evidence of circumstances that

existed on the date(s) as at which those
amounts are to be recognized, measured
or disclosed and
ii. would have been available when the
financial statements for that prior period
were authorized for issue.

REVDEVT - TOA

F.H.Villamin

92

Retrospectively applying a new accounting

policy or correcting a prior period error
requires distinguishing information that:
a. provides evidence of circumstances that
existed on the date(s) as at which the
transaction, other event or condition
occurred; and
b. would have been available when the
financial statements for that prior period
were authorized for issue

REVDEVT - TOA

F.H.Villamin

93

When it is impracticable to determine

period-specific effects of changing an
accounting policy on a comparative
information for one or more periods
presented:
The new accounting policy should be
applied to the carrying amounts of
assets and liabilities as at the beginning
of the earliest period for which
retrospective application is practicable
and
REVDEVT - TOA

F.H.Villamin

94

 A corresponding adjustments to the

opening balance of each affected
component of equity for that period
should be made.

REVDEVT - TOA

F.H.Villamin

95

When it is impracticable to determine the

cumulative effect, at the beginning of the
current period, of applying a new
accounting policy to all prior periods, the
cumulative effect requires an adjustment
to the comparative information to apply
the new accounting policy prospectively
from the earliest date practicable.

REVDEVT - TOA

F.H.Villamin

96

Defined as applying the new accounting

policy to transactions, other events and
conditions occurring after the date as at
which the policy is changed. This means
that the portion of the cumulative
adjustment to assets, liabilities and
equity arising before that date is
disregarded.

REVDEVT - TOA

F.H.Villamin

97

IAS 8 requires that a prior period error should

be corrected by retrospective restatement
except to the extent that it is impracticable to
determine either the period-specific effects
or the cumulative effect of the error.

REVDEVT - TOA

F.H.Villamin

98

When it is impracticable to determine the

period-specific effects of an error
on
comparative information on one or more
prior periods presented, the opening
balances of assets, liabilities and equity
should be restated at the earliest period for
which
retrospective
restatement
is
practicable.

REVDEVT - TOA

F.H.Villamin

99

When it is impracticable to determine the

cumulative effect, at the beginning of the
current period, of an error on all prior
periods, the comparative information should
be restated to correct the error prospectively
from the earliest date practicable .

REVDEVT - TOA

F.H.Villamin

100

Disclosure of accounting policies

1. Summary
of
significant
accounting
policies
a) The measurement basis (or bases) used
in preparing the financial statements.
b) The other accounting policies used that
are relevant to an understanding of the
financial statements.

REVDEVT - TOA

F.H.Villamin

101

Disclosure of accounting policies

2. Judgments made in applying accounting
policies
a) Whether the financial assets are held-tomaturity investments.
b) When substantially all the significant
risks and rewards of ownership of
financial assets and lease assets are
transferred to other entities.

REVDEVT - TOA

F.H.Villamin

102

Disclosure of accounting policies

2. Judgments made in applying accounting
policies
c) Whether, in substance, particular sales of
goods are financing arrangements and
therefore do not give rise to revenue
d) Whether
the
substance
of
the
relationship between the entity and a
special purpose entity indicates that the
special purpose entity is controlled by
the entity.
REVDEVT - TOA

F.H.Villamin

103

Disclosure of changes in accounting policies

pursuant to the initial application of an IFRS
a) The title of the IFRS
b) When applicable, that the change in
accounting policy is made in accordance
with its transitional provisions
c) The nature of the change in accounting
policy
d) When applicable, a description of the
transitional provisions;

REVDEVT - TOA

F.H.Villamin

104

Disclosure of changes in accounting policies

pursuant to the initial application of an IFRS
e) For the current period and each prior
period
presented,
to
the
extent
practicable,
the
amount
of
the
adjustment:
i. for each financial statement line item
affected
ii. if IAS 33 Earnings per Share applies
to
the entity, for basic and diluted
earnings
per share
REVDEVT - TOA

F.H.Villamin

105

Disclosure of changes in accounting policies

pursuant to the initial application of an IFRS
g) the amount of adjustment relating to
periods before those presented, to the
extent practicable;
h) if retrospective application required by IAS 8
is impracticable for a particular prior period,
or for periods before those presented, the
circumstances that led to the existence of
that condition and a description of how and
from, when the change in accounting policy
has been applied.
REVDEVT - TOA

F.H.Villamin

106

Disclosure of changes in accounting policies

pursuant to the initial application of an IFRS
g) the amount of adjustment relating to
periods before those presented, to the
extent practicable;
h) if retrospective application required by IAS 8
is impracticable for a particular prior period,
or for periods before those presented, the
circumstances that led to the existence of
that condition and a description of how and
from, when the change in accounting policy
has been applied.
REVDEVT - TOA

F.H.Villamin

107

Disclosure of voluntary changes in accounting

policy
a. the nature of the change in accounting policy
b. the reasons why applying the new accounting
policy provides reliable and more relevant
information
c. for the current period and each prior period
presented, to the extent practicable, the
amount of the adjustment:
i. for each financial statement line item
affected;
ii. if IAS 33 applies to the entity, for basic and
diluted earnings per share;

REVDEVT - TOA

F.H.Villamin

108

Disclosure
of
voluntary
changes
in
accounting policy
d. the amount of the adjustment relating to
periods before those presented, to the
extent practicable
e. if
retrospective
application
is
impracticable for a particular prior period,
or for periods before those presented, the
circumstances that led to the existence of
that condition and a description of how
and from when the change in accounting
policy has been applied
REVDEVT - TOA

F.H.Villamin

109

When an entity has not applied a new IFRS

that has been issued but is not yet effective,
it should disclose:
a) that fact
b) known
or
reasonably
estimable
information relevant to assessing the
possible impact that application of the
new IFRS will have ion the financial
statements in the period of initial
application

REVDEVT - TOA

F.H.Villamin

110

When correction has been made for a

material prior period error, IAS 8 requires
disclosure of the following:
a) the nature of the prior period error
b) for each prior period presented, to the
extent applicable, the amount of the
correction:
i. for each financial statement line item
affected
ii. if IAS 33 applies to the entity, for basic
and diluted earnings per share;

REVDEVT - TOA

F.H.Villamin

111

When correction has been made for a

material prior period error, IAS 8 requires
disclosure of the following:
c) the amount of the correction at the
beginning of the earliest prior period
presented
d) if
retrospective
restatement
is
impracticable for a particular prior period,
the circumstances that led to the
existence of that condition and a
description of how and from when the
error has been corrected
REVDEVT - TOA

F.H.Villamin

112

IAS 1 also requires disclosure:

a) in the notes of:
i. the amount of dividends proposed or
declared before the financial statements
were authorized for issue but not
recognized as a distribution to owners
during the period, and the related
amount per share
ii. the
amount
of
any
cumulative
preference dividends not recognized
REVDEVT - TOA

F.H.Villamin

113

IAS 1 also requires disclosure:

b) in accordance with IAS 10 Events after the
Reporting Period the following nonadjusting events in respect of loans classified
as current liabilities, if they occur between the
end of the reporting period and the date the
financial statements are authorized for issue:
i. refinancing on a long-term basis
ii. rectification of a breach of a long-term
loan arrangement
iii. the granting by the lender of a period of
grace to rectify a breach of long term
arrangement
ending at least twelve
months after the reporting period
REVDEVT - TOA

F.H.Villamin

114

IAS 1 also requires disclosure:

c) the following if not disclosed elsewhere in
information
published
with
the
financial
statements:
i. the domicile and legal form of the entity, its
country of incorporation and the address of its
registered office (or principal place of
business, if different from the registered
office)
ii. a description of the nature of the
entitys
operations and its principal activities
iii. the name of the parent and the ultimate
parent of the group
iv. if it is a limited life entity, information
regarding the length of its life

REVDEVT - TOA

F.H.Villamin

115

REVDEVT - TOA

F.H.Villamin

116