Objective
IAS 1 sets out the overall requirements for the presentation of financial statements, ensuring comparability, transparency, and fair presentation across periods and between entities.
1. Purpose of Financial Statements
The purpose is to provide information about:
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An entity’s financial position
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Financial performance
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Cash flows
That information helps users (investors, creditors, regulators, etc.) make economic decisions.
2. Components of Financial Statements
IAS 1 requires a complete set of financial statements to include:
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Statement of Financial Position (Balance Sheet)
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Statement of Profit or Loss and Other Comprehensive Income (OCI)
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Statement of Changes in Equity
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Statement of Cash Flows (IAS 7)
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Notes (summary of significant accounting policies and explanatory information)
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Comparative information for the preceding period
🧾 Example – Components
A manufacturing company’s financial report for 2024 includes:
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Statement of Financial Position as of 31 Dec 2024
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Statement of Profit or Loss and OCI for the year ended 31 Dec 2024
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Statement of Changes in Equity for 2024
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Statement of Cash Flows for 2024
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Notes explaining accounting policies, depreciation methods, etc.
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Comparative data for 2023
3. Fair Presentation and Compliance
Financial statements must:
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Present fairly the financial position, performance, and cash flows
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Comply with IFRS Standards
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Use consistent accounting policies
Any departure from IFRS is permitted only in extremely rare cases to achieve fair presentation.
4. Going Concern
An entity must prepare financial statements on a going concern basis, unless management intends to liquidate or cease trading.
Example
If a company loses its major customer but secures a new investor, it is still a going concern.
But if it plans to close within 6 months, statements must be prepared on a liquidation basis.
5. Accrual Basis of Accounting
All financial statements (except cash flow statement) must be prepared using the accrual basis, i.e., transactions are recognized when they occur, not when cash is received or paid.
Example
A company delivers goods in December 2024 but receives payment in January 2025.
→ Revenue is recognized in 2024, not in 2025.
6. Consistency of Presentation
Presentation and classification should be consistent year-to-year unless:
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There is a significant change in operations; or
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A new IFRS requires a change.
7. Materiality and Aggregation
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Present each material class of items separately.
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Immaterial items can be aggregated.
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Offsetting assets and liabilities or income and expenses is not allowed, except when permitted by IFRS.
Example
If “Office Supplies” = $100 and “Advertising Expense” = $10,000, you can combine both as Administrative Expenses since the smaller item is immaterial.
8. Current vs Non-current Classification
Assets and liabilities must be presented as current or non-current.
| Category | Definition | Example |
|---|---|---|
| Current Assets | Expected to be realized within 12 months | Inventory, trade receivables |
| Non-current Assets | Expected to be used >12 months | Property, Plant & Equipment |
| Current Liabilities | Payable within 12 months | Trade payables, short-term loans |
| Non-current Liabilities | Payable after 12 months | Long-term debt, pension obligations |
9. Structure and Content of the Statements
(a) Statement of Financial Position (Balance Sheet)
Minimum line items:
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Property, plant & equipment
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Intangible assets
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Inventories
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Trade receivables
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Cash & cash equivalents
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Trade payables
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Borrowings
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Share capital and reserves
Example:
| Assets | $ | Liabilities & Equity | $ |
|---|---|---|---|
| Cash | 10,000 | Trade Payables | 5,000 |
| Inventory | 15,000 | Loan Payable | 10,000 |
| PPE | 25,000 | Equity | 35,000 |
| Total | 50,000 | Total | 50,000 |
(b) Statement of Profit or Loss and Other Comprehensive Income
Can be presented as:
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Single Statement (profit + OCI together), or
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Two Statements (profit/loss separate from OCI)
Example:
| Item | $ |
|---|---|
| Revenue | 100,000 |
| Cost of Sales | (60,000) |
| Gross Profit | 40,000 |
| Operating Expenses | (15,000) |
| Profit Before Tax | 25,000 |
| Tax Expense | (5,000) |
| Profit for the Year | 20,000 |
| Other Comprehensive Income (gain on revaluation) | 2,000 |
| Total Comprehensive Income | 22,000 |
(c) Statement of Changes in Equity
Shows:
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Total comprehensive income
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Dividends paid
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Changes in capital and reserves
Example:
| Particulars | Share Capital | Retained Earnings | Total |
|---|---|---|---|
| Opening balance | 50,000 | 20,000 | 70,000 |
| Profit for the year | — | 10,000 | 10,000 |
| Dividend | — | (5,000) | (5,000) |
| Closing balance | 50,000 | 25,000 | 75,000 |
(d) Notes
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Provide accounting policies and explanations for figures.
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Disclose judgments, estimates, and risk management details.
10. Comparative Information
Show corresponding amounts from the previous period for all statements and notes, unless a standard permits otherwise.
✅ Key Summary Table
| Topic | Requirement |
|---|---|
| Objective | Fair presentation and comparability |
| Components | 5 main statements + notes |
| Basis | Accrual and going concern |
| Classification | Current vs non-current |
| Comparative info | Required |
| Offsetting | Not allowed unless IFRS permits |
| Consistency | Same presentation unless justified change |
Example in Practice
ABC Ltd prepares IFRS financial statements for the year ended 31 Dec 2024.
It uses the accrual basis, presents assets and liabilities as current/non-current, and includes a Statement of Profit or Loss and OCI and Notes.
When it changes depreciation method in 2025, it discloses and restates prior-year comparatives as required by IAS 8.