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Presentation of Financial Statements (IAS 1)

Last updated: 17 May 2024

IAS 1 serves as the main standard that outlines the general requirements for presenting financial statements. It is applicable to ‘general purpose financial statements’, which are designed to meet the informational needs of users who cannot demand customised reports from an entity. Documents like management commentary or sustainability reports, which are often included in annual reports, fall outside the scope of IFRS, as indicated in IAS 1.13-14. Similarly, financial statements submitted to a court registry are not considered general purpose financial statements (see IAS 1.BC11-13).

The standard primarily focuses on annual financial statements, but its guidelines in IAS 1.15-35 also extend to interim financial reports (IAS 1.4). These guidelines address key elements such as fair presentation, compliance with IFRS, the going concern principle, the accrual basis of accounting, offsetting, materiality, and aggregation. For comprehensive guidance on interim reporting, please refer to IAS 34 .

Note that IAS 1 will be superseded by the upcoming IFRS 18 Presentation and Disclosure in Financial Statements .

Now, let’s explore the general requirements for presenting financial statements in greater detail.

Financial statements

Components of a complete set of financial statements.

Paragraph IAS 1.10 outlines the elements that make up a complete set of financial statements. Companies have the flexibility to use different titles for these documents, but each statement must be presented with equal prominence (IAS 1.11). The terminology used in IAS 1 is tailored for profit-oriented entities. However, not-for-profit organisations or entities without equity (as defined in IAS 32), may use alternative terminology for specific items in their financial statements (IAS 1.5-6).

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Compliance with IFRS

Financial statements must include an explicit and unreserved statement of compliance with IFRS in the accompanying notes. This statement is only valid if the entity adheres to all the requirements of every IFRS standard (IAS 1.16). In many jurisdictions, such as the European Union, laws mandate compliance with a locally adopted version of IFRS.

IAS 1 does consider extremely rare situations where an entity might diverge from a specific IFRS requirement. Such a departure is permissible only if it prevents the presentation of misleading information that would conflict with the objectives of general-purpose financial reporting (IAS 1.20-22). Alternatively, entities can disclose the impact of such a departure in the notes, explaining how the statements would appear if the exception were made (IAS 1.23).

Identification of financial statements

The guidelines for identifying financial statements outlined in IAS 1.49-53 are straightforward and rarely cause issues in practice.

Going concern

The ‘going concern’ principle is a cornerstone of IFRS and other major GAAP. It assumes that an entity will continue to operate for the foreseeable future (at least 12 months). IAS 1 mandates management to assess whether the entity is a ‘going concern’. Should there be any material uncertainties regarding the entity’s future, these must be disclosed (IAS 1.25-26). IFRSs do not provide specific accounting principles for entities that are not going concerns, other than requiring disclosure of the accounting policies used. One of the possible approaches is to measure all assets and liabilities using their liquidation value.

See also this educational material at IFRS.org.

Materiality and aggregation

IAS 1.29-31 emphasise the importance of materiality in preparing user-friendly financial statements. While IFRS mandates numerous disclosures, entities should only include information that is material. This concept should be at the forefront when preparing financial statements, as reminders about materiality are seldom provided in other IFRS standards or publications.

Generally, entities should not offset assets against liabilities or income against expenses unless a specific IFRS standard allows or requires it. IAS 1.32-35 offer guidance on what can and cannot be offset. Offsetting of financial instruments is discussed further in IAS 32 .

Frequency of reporting

Entities are required to present a complete set of financial statements at least annually (IAS 1.36). However, some Public Interest Entities (PIEs) may be obliged to release financial statements more frequently, depending on local regulations. However, these are typically interim financial statements compiled under IAS 34 .

IAS 1 also allows for a 52-week reporting period instead of a calendar year (IAS 1.37). This excerpt from Tesco’s annual report serves to demonstrate this point, showing that the group uses 52-week periods for their financial year, even when some subsidiaries operate on a calendar-year basis:

If an entity changes its reporting period, it must clearly disclose this modification and provide the rationale for the change (IAS 1.36). It is advisable to include an explanatory note with comparative data that aligns with the new reporting period for clarity.

Comparative information

As a general guideline, entities should present comparative data for the prior period alongside all amounts reported for the current period, even when specific guidelines in a given IFRS do not require it. However, there’s no obligation to include narrative or descriptive information about the preceding period if it isn’t pertinent for understanding the current period (IAS 1.38).

If an entity opts to provide comparative data for more than the immediately preceding period, this additional information can be included in selected primary financial statements only. However, these additional comparative periods should also be detailed in the relevant accompanying notes (IAS 1.38C-38D).

IAS 1.40A-46 outlines how to present the statement of financial position when there are changes in accounting policies, retrospective restatements, or reclassifications. This entails producing a ‘third balance sheet’ at the start of the preceding period (which may differ from the earliest comparative period, if more than one is presented). Key points to note are:

• The third balance sheet is required only if there’s a material impact on the opening balance of the preceding period (IAS 1.40A(b)).
• If a third balance sheet is included, there’s no requirement to add a corresponding third column in the notes, although this could be useful where numbers have been altered by the change (IAS 1.40C).
• Interim financial statements do not require a third balance sheet (IAS 1.BC33).

IAS 8 also requires comprehensive disclosures concerning changes in accounting policies and corrections of errors .

Statement of financial position

IAS 1.54 enumerates the line items that must, at a minimum, appear in the statement of financial position. Entities should note that separate lines are not required for immaterial items (IAS 1.31). Additional line items can be added for entity-specific or industry-specific matters. IAS 1 permits the inclusion of subtotals, provided the criteria set out in IAS 1.55A are met.

Additional disclosure requirements are set out in IAS 1.77-80A. Of particular interest are the requirements pertaining to equity (IAS 1.79), which begin with the number of shares and extend to include details such as ‘rights, preferences, and restrictions relating to share capital, including restrictions on the distribution of dividends and the repayment of capital.’ While these kinds of limitations are common across various legal jurisdictions (for example, not all retained earnings can be distributed as dividends), many companies neglect to disclose such limitations in their financial statements.

For guidance on classifying assets and liabilities as either current or non-current, please refer to the separate page dedicated to this topic.

Statement of profit or loss and other comprehensive income

IAS 1 provides two methods for presenting profit or loss (P/L) and other comprehensive income (OCI). Entities can either combine both P/L and OCI into a single statement or present them in separate statements (IAS 1.81A-B). Additionally, the P/L and total comprehensive income for a given period should be allocated between the owners of the parent company and non-controlling interests (IAS 1.81B).

Minimum contents in P/L and OCI

IAS 1.82-82A specifies the minimum items that must appear in the P/L and OCI statements. These items are required only if they materially impact the financial statements (IAS 1.31).

Entities are permitted to add subtotals to the P/L statement if they meet the criteria specified in IAS 1.85A. Operating income is often the most commonly used subtotal in P/L. This practice may be attributed to the 1997 version of IAS 1, which mandated the inclusion of this subtotal—although this is no longer the case. IAS 1.BC56 clarifies that an operating profit subtotal should not exclude items commonly considered operational, such as inventory write-downs, restructuring costs, or depreciation/amortisation expenses.

Profit or loss (P/L)

All items of income and expense must be recognised in P/L (or OCI). This means that no income or expenses should be recognised directly in the statement of changes in equity, unless another IFRS specifically mandates it (IAS 1.88). Direct recognition in equity may also result from intra-group transactions . IAS 1.97-98 require separate disclosure of material items of income and expense, either directly in the income statement or in the notes.

Expenses in P/L can be presented in one of two ways (IAS 1.99-105):

• By their nature (e.g., depreciation, employee benefits); or
• By their function within the entity (e.g., cost of sales, distribution costs, administrative expenses).

When opting for the latter, entities must provide additional details on the nature of the expenses in the accompanying notes (IAS 1.104).

Other comprehensive income (OCI)

OCI encompasses income and expenses that other IFRS specifically exclude from P/L. There is no conceptual basis for deciding which items should appear in OCI rather than in P/L. Most companies present P/L and OCI as separate statements, partly because OCI is generally overlooked by investors and those outside of accounting and financial reporting circles. The concern is that combining the two could reduce net profit to merely a subtotal within total comprehensive income.

All elements that constitute OCI are specifically outlined in IAS 1.7, as part of its definitions.

Reclassification adjustments

A reclassification adjustment refers to the amount reclassified to P/L in the current period that was recognised in OCI in the current or previous periods (IAS 1.7). All items in OCI must be grouped into one of two categories: those that will or will not be subsequently reclassified to P/L (IAS 1.82A). Reclassification adjustments must be disclosed either within the OCI statement or in the accompanying notes (IAS 1.92-96).

To illustrate, foreign exchange differences arising on translation of foreign operations and gains or losses from certain cash flow hedges are examples of items that will be reclassified to P/L. In contrast, remeasurement gains and losses on defined benefit employee plans or revaluation gains on properties will not be reclassified to P/L.

The practice of transferring items from OCI to P/L, commonly known as ‘recycling’, lacks a concrete conceptual basis and the criteria for allowing such transfers in IFRS are often considered arbitrary.

Tax effects

OCI items can be presented either net of tax effects or before tax, with the overall tax impact disclosed separately. In either case, entities must specify the tax amount related to each item in OCI, including any reclassification adjustments (IAS 1.90-91). Interestingly, there is no such requirement to disclose tax effects for individual items in the income statement.

Statement of changes in equity

IAS 1.106 outlines the minimum line items that must be included in the statement of changes in equity. Subsequent paragraphs specify the disclosure requirements, which can be addressed either within the statement itself or in the accompanying notes. It’s crucial to note that changes in equity during a reporting period can arise either from income and expense items or from transactions involving owners acting in their capacity as owners (IAS 1.109). This means that entities cannot adjust equity directly based on changes in assets or liabilities unless these adjustments result from transactions with owners, such as capital contributions or dividend payments, or are otherwise mandated by other IFRSs.

Statement of cash flows

The statement of cash flows is governed by IAS 7 .

• Explanatory notes

Structure of explanatory notes

The structure for explanatory notes is detailed in IAS 1.112-116. In practice, there are several commonly adopted approaches to organising these notes:

Approach #1:

• Primary financial statements (P/L, OCI, etc.)
• Statement of compliance and basis of preparation
• Accounting policies

Approach #1 is logically coherent, as understanding accounting policies is crucial before delving into the financial data. However, in reality, few people read the accounting policies in their entirety. Consequently, users often have to navigate past several pages of accounting policies to reach the explanatory notes.

Approach #2:

• Primary financial statements (P/L, OCI, etc)

In Approach #2, accounting policies are treated as an appendix and positioned at the end of the financial statements. The advantage here is that all numerical data is clustered together, uninterrupted by extensive descriptions of accounting policies.

Approach #3:

• Explanatory notes integrated with relevant accounting policies

Approach #3 pairs accounting policies directly with the associated explanatory notes. For example, accounting policies relating to inventory would appear alongside the explanatory note that breaks down inventory components.

Management of capital

IAS 1.134-136 outline the disclosures related to capital management. These provisions apply to all entities, whether or not they are subject to external capital requirements. An important note here is that entities are not obligated to disclose specific values or ratios concerning capital objectives or requirements.

IAS 1.137 mandates disclosure of dividends proposed or declared before the financial statements were authorised for issue but not recognised as a distribution to owners during the period. Furthermore, entities are required to disclose the amount of any cumulative preference dividends not recognised.

Disclosure of accounting policies

IAS 1 specifies the requirements for disclosing accounting policy information which are discussed here .

Disclosing judgements and sources of estimation uncertainty

IAS 1 mandates disclosing judgements and sources of estimation uncertainty .

Other disclosures

Additional miscellaneous disclosure requirements are detailed in paragraphs IAS 1.138.

IFRS 18 Presentation and Disclosure in Financial Statements

On 9 April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements , which replaces IAS 1 and amends IAS 7. This new standard will be effective from 2027 with early application permitted.

Here are the key changes under IFRS 18:

• Two new subtotals have been added to the income statement: ‘Operating Profit’ and ‘Profit Before Financing and Income Taxes’. This change requires companies to categorise income and expenses into operating, investing, and financing activities.
• A new requirement mandates the reconciliation of non-GAAP measures with IFRS-specified subtotals, but this only applies to P/L measures such as adjusted profit. Other metrics like free/organic cash flow or net debt are not included.
• The statement of cash flows will start with operating profit for the indirect method, and the classification of cash flows related to interest and dividends has been standardised. Typically, dividends and interest paid will fall under financing activities, while those received will be recorded under investing activities.

While many IAS 1 provisions remain under IFRS 18, others, including the basis of financial statement preparation and disclosure of accounting policies, have moved to IAS 8, which will be retitled Basis of Preparation of Financial Statements . For further insights, see the IASB Project Summary .

© 2018-2024 Marek Muc

The information provided on this website is for general information and educational purposes only and should not be used as a substitute for professional advice. Use at your own risk. Excerpts from IFRS Standards come from the Official Journal of the European Union (© European Union, https://eur-lex.europa.eu). You can access full versions of IFRS Standards at shop.ifrs.org. IFRScommunity.com is an independent website and it is not affiliated with, endorsed by, or in any other way associated with the IFRS Foundation. For official information concerning IFRS Standards, visit IFRS.org.

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IAS 1 Presentation of Financial Statements: Summary

IAS 1 Presentation of Financial Statements represents a basis of the whole IFRS reporting, as it sets overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content.

Financial Statements

Purpose of the financial statements 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.

The complete set of financial statements compliant with IFRS comprises 5 elements:

• a statement of financial position as at the end of the period
• a statement of comprehensive income for the period
• a statement of changes in equity for the period
• a statement of cash flows for the period
• notes containing a summary of significant accounting policies and other explanatory information.

If some accounting policy is applied retrospectively, or some retrospective restatements or reclassifications were made, then also a statement of financial position as at the beginning of the earliest comparative period shall be presented.

IAS 1 explains the general features of financial statements, such as fair presentation and compliance with IFRS , going concern, accrual basis of accounting, materiality and aggregation, offsetting, frequency of reporting, comparative information and consistency of presentation.

Structure and Content

IAS 1 requires identification of the financial statements and distinguishing them from other information in the same published document.

Every element of the financial statements shall contain the name of the reporting entity, the information whether the financial statements are of an individual or of a group, the date of the reporting entity and period covered, the presentation currency and the level of rounding (thousands, millions…).

IAS 1 lists the minimum content to be presented in the financial statements, except for the statement of cash flows (subject to IAS 7). So let’s look at it in a detail.

Statement of Financial Position

Before significant amendments of IAS 1, this statement was simply called “balance sheet”, however, it was renamed.

IAS 1 requires presentation of classified statement of financial position where current assets or liabilities are separated from non-current assets or liabilities. Basically, the asset or liability is current when it is expected to be recovered or settled within 12 months after the reporting period.

With regard to a minimum content, the following line items shall be presented:

Further subclassifications of the line items shall be disclosed either directly in the statement of financial position or in the notes, such as disaggregation of property, plant and equipment into classes, and similar. Also, certain information related to the share capital, reserves and a few others shall be included in the statement of financial position, the statement of changes in equity or in the notes.

IAS 1 does NOT prescribe the precise format of the statement of financial position. Instead, several formats are acceptable if they fulfill all requirements outlined above.

Statement of Comprehensive Income

The statement of comprehensive income has 2 basic elements:

• Profit or loss for the period : here, all items of income and expenses must be recognized.
• Other comprehensive income : items recognized directly to equity or reserves, such as changes in revaluation surplus, gains or losses from subsequent measurement of available-for-sale financial assets, etc.

As a minimum , the statement of comprehensive income must contain the following items:

As opposed to US GAAP , IAS 1 prohibits to report any transaction or item as extraordinary items.

Profit or loss for the period, as well as total comprehensive income shall be both presented in allocation:

• attributable to non-controlling interests and
• attributable to owners of the parent.

The entity might choose to classify expenses recognized in profit or loss for the period by their nature or by their function.

IAS 1 requires disclosure of certain items separately , either in the statement of comprehensive income, or in the notes. These items are as follows: write-downs of inventories and property, plant and equipment, their reversals, restructuring of activities and reversals of related provisions, disposals of property, plant and equipment, disposals of investments, discontinuing operations, litigation settlements and other reversals of provisions.

Statement of Changes in Equity

As a minimum , the statement of changes in equity must contain the following items:

• total comprehensive income for the period, showing separately amounts attributable to owners of the parent and to non-controlling interests
• the effect of retrospective application or restatement for each component of equity (if applicable)
• those resulting from profit or loss
• resulting from other comprehensive income
• resulting from transactions with owners (contributions, distributions and changes in ownership)

Also, IAS 1 prescribes to present amount of dividends recognized as distributions and the related amount per share on the face of the statement of changes in equity or in the notes.

Notes to the Financial Statements

The notes are meant to be the document accompanying numerical financial statements listed above. They should provide additional information not contained in the numbers, the basis of preparation of the financial statements and some additional information that might be relevant.

IAS 1 sets that the notes shall contain a statement of compliance with IFRS , summary of significant accounting policies applied, supporting information for the numbers presented in the financial statements and other disclosures.

You can read more about the notes and how to write them in this article .

IAS 1 is shortly summarized in the following video:

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43 Comments

Thank you for simplifying this standard . It is very helpful in my study and revision . looking forward to the other standards

A speed point machine, is it an asset that needs to be recorded in a business if they are using it?

Dear Silvia, Are prudence and conservatism concepts still applicable now under the new Conceptual Framework?

Hi I want to know can we prepare multiyear financials (i.e. 2 years to show I comparatives) as per the international auditing standards

SILIVAIA I really apprentice the presentation please can i have the ppt.?

Hi Asmera, no sorry, we only provide pdf to our subscribed students of the IFRS Kit.

Hi i have case that we debit the account Other comprehensive income (Re-measurement losses / Gain on defined benefit liability) by amount 12 Million and credit two account one of them is end of service expenses ( P&L item) by 7 Million and other account is provision of end of service by 6 Million Dr/ Other comprehensive income 12 Million Cr/ End of service expense ( P&L Item). Cr/ Provision of end of service ( Balance sheet item). my question :- 1- Other comprehensive account will be appear in balance sheet and income statement 2- and if it must appear in income statement shall we put total balance of this account 12 Million or just put 6 Million which is came from PL and ignore the 7 Million which came from provision of end of service as it is balance sheet item

This video has made my understanding of IAS 1 more clearly and understandable.I can confidently say I`am ready for the test.

I didn’t see any explanatiins for Cash Flow statement. This is also an element of Financial Statement as whole. Or would that mean it is no longer considered as part the whole reported Financial Statement?

You did not see it because it is not covered by IAS 1 (and, you are reading the article about IAS 1). You should check out IAS 7 .

Hello Silvia, Can you please help me to know as to what is the objective of creating Other Comprehensive Income and how to decide what all items should go to Other comprehensive income and Profit or loss account ?

Hi Diksha, I think this article can give you the answer . S.

hello siliva, help me with tax expense computation when u have provision, some balance due

In my opinion the documents that you share through social media is more attractive and brief to understand. I would like to follow you! Please, would you like to share brief notes and explanation on IFRS 9. By focusing MFI in detail!

Til now, I don’t understand what is the main consideration, if any, the IASB classifies a transaction as profit or loss while another as other comprehensive income. Is there any theoretical foundation or something behind the existence of other comprehensive income items?

Dear Siklus, I think this article might help . S.

Dear Sylvia, if a Company made a decision to decrease share capital (due to accumulated loss that existed on December 31, 2016) on January 17, should this be treated as an adjusting event?

Thank you very much for your help!

It depends on when the decision was made. If after 31 Dec 2016, then no, it’s non-adjusting event. S.

amazing presentation of statement of financial position but other comprehensive income should elaborate clearly. Over all presentation was very good . I also learn from that.thank you very much

Very lucid explanations. Thanks

The presentation is very knowledgeable. Is it possible for you to mail me the ppt. It would be of great help.

Hi Silvia, is it required by the standard to present the subscribed share capital with the outstanding balance of subscription receivables or a presentation of share capital would be fine?

comprehensive and material indeed

helped me tounderstand the IFRS

dear waseem…we record purchase cost as 110000.coz we did not avail the discout optiom given by the seller.

I have doubt in IAS 2. Lets say for a example, a manufacturer purchased raw material by giving 4 months pd cheque for 110,000. If they had paid by cash, price would be 100,000. What is treatment for this difference? Can we record this difference of 10,000 as finance charges?

Hey Silvia, I was about to subscribe. But I found that the name of my country (Bangladesh) is not in the list. Please let me know.

thank you for help

wow, made my studies simpler and to make sense…a superb summary indeed.

clearly and comprehensive IAS1 elaborated

Great site and well summarized IASs

very well summarized and it is very good for accounting students. thank you.

Verry good!IAS 1 !

very good indeed.impressed for days

great work………..

Great Vedio…

IT IS WELL ARRANGED OF STATEMENT.

Excellent summarized information of IAS-1

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IAS 1 Presentation of Financial Statements

Presentation of financial statements sets out the overall requirements for the presentation of financial statements, guidelines for their structure, and minimum requirements for their content., access the standard, current proposals, recent amendments, related ifric interpretations, uk reduced disclosures – frs 101, icaew factsheets and guides, icaew articles, other resources.

• 2023 Issued Standard – IAS 1 The 2023 Issued Standards include all amendments issued up to and including 1 January 2023.

Registration is required to access the free version of the Issued Standards, which do not include additional documents that accompany the full standard (such as illustrative examples, implementation guidance and basis for conclusions).

A complete set of financial statements includes:

• A statement of financial position (balance sheet) at the end of the period
• A statement of profit or loss and other comprehensive income (income statement) for the period
• A statement of changes in equity for the period
• A statement of cash flows (cash flow statement) for the period
• Notes to the accounts.

The names of the main statements are not mandatory.

IAS 1 Revised also requires a statement of financial position at the start of the earliest comparative period where there has been a retrospective adjustment to the accounts or reclassification of items.

The statement of profit or loss and other comprehensive income, as the name suggests, presents profit and loss for the period as well as other comprehensive income. Other comprehensive income includes income and expenses not recognised in profit or loss such as revaluation surpluses. The statement of profit or loss and other comprehensive income may be presented either as one statement or a separate statement of profit or loss and statement showing other comprehensive income.

The standard provides guidance on the form and content of the financial statements and the underlying accounting concepts. It also requires financial statements to present fairly the position, performance and cash flows of an entity. This is normally achieved by the application of IFRS.

ED/2019/7 General Presentation and Disclosures was issued in December 2019. This is the exposure draft of a proposed new standard that would replace IAS 1. The standard would carry forward most of the current requirements of IAS 1 and add supplementary requirements, including:

• Categorising items in profit or loss as operating, investing or financing
• Requiring additional profit subtotals
• Distinguishing between integral and non-integral associates and joint ventures
• Removing the choice of how to present cash flows from dividends and interest
• Requiring additional disclosure about unusual items
• Providing disclosure of management performance measures.

All amendments issued up to and including the publication date of 1 January 2022 are included within the IFRS Foundation’s latest version of the issued standard: 2022 Issued Standard – IAS 1 . Issued amendments may, therefore, have a mandatory effective date that is later than 1 January 2022 – see below for details.

Any amendments issued after 1 January 2022 will not be included in the IFRS Foundation’s 2022 Issued Standards but will be listed below and identified as such.

See the Corporate Reporting Faculty’s annual IFRS factsheets  for a more detailed discussion of recent IFRS amendments.

Mandatory date: Annual periods beginning on or after 1 January 2024. Earlier application is permitted.

Issue date: October 2022 (not included within the IFRS Foundation’s 2022 Issued Standards).

The amendments specify that the classification of a liability as current or non-current is only affected by covenants that an entity must comply with on or before the end of the reporting period. They also require disclosure of information that allows users of financial statements to understand the risk that non-current liabilities with covenants could become repayable within 12 months.

This amendment has been endorsed for use in the UK. It is not yet endorsed for use in the EU as at 25 July 2023. Read more on UK endorsement  and EU endorsement  of IFRS standards.

For a more detailed discussion of the amendment, read the faculty’s factsheet:

• 2022 IFRS Accounts

Mandatory date: Annual periods beginning on or after 1 January 2024 (deferred from 2023). Earlier application is permitted.

IAS 1 is amended to clarify that the classification of liabilities as current or non-current should be based on rights that exist at the end of the reporting period. Expectations about whether an entity will exercise a right to defer settlement of a liability do not affect its classification. The amendments also clarify that settlement is the transfer of cash, equity instruments, other assets or services.

The deferral of the effective date to 2024 is included in the Non-current Liabilities with Covenants amendment to IAS 1.

Mandatory date: Annual periods beginning on or after 1 January 2023. Earlier application is permitted.

The amendments to IAS 1:

• Require an entity to disclose material accounting policy information rather than significant accounting policies.
• Explain that accounting policy information is material if, together with other information in the financial statements, it can reasonably be expected to influence decisions that primary users make.
• Provide examples of material accounting policies.
• Clarify that accounting policy information relating to immaterial transactions need not be disclosed.

IAS 1 is amended to:

• Add finance income and expenses to the list of components of other comprehensive income;
• Require line items to be presented in the statement of financial position in respect of contracts that are within the scope of IFRS 17;
• Require line items to be presented in the statement of profit or loss in respect of amounts related to contracts within the scope of IFRS 17.

IAS 1 is amended to refer to portfolios of contracts rather than groups of contracts within the scope of IFRS 17.

Mandatory date: Annual periods beginning on or after 1 January 2020. Earlier application is permitted.

The definition of material is amended to be as follows:

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.

Examples of circumstances that may result in material information being obscured are added to the standard as a result of the amendment, as is guidance on users of financial statements.

• 2020 IFRS Accounts

Mandatory date: Annual periods beginning on or after 1 January 2020. Earlier application is permitted if an entity also applies the amendments to other IFRS Accounting Standards at the same time.

IAS 1 is updated to refer to the 2018 Conceptual Framework rather than the Framework for the Preparation and Presentation of Financial Statements when referring to materiality, definitions of elements and their recognition criteria and the objective of financial statements.

• IFRIC 1 Existing Decommissioning, Restoration and Similar Liabilities Addresses accounting for a change in a provision that is included in the carrying amount of an item of PPE.
• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction Provides general guidance on how to assess the limit in IAS 19 on the amount of the surplus that can be recognised as an asset. Explains how the pensions asset or liability may be affected when there is a statutory or contractual minimum funding requirement.
• IFRIC 17 Distribution of Non-cash Assets to Owners Addresses the accounting for dividends of non-cash assets, including those where there is a cash alternative.
• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments Addresses the accounting by an entity which issues equity instruments in order to settle, in full or part, a financial liability.
• IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine Addresses the accounting treatment of mine waste materials, which are the materials removed by mining entities in order to gain access to mineral ore deposits.
• IFRIC 21 Levies Provides guidance on when to recognise liability for a levy imposed by a government.
• IFRIC 23 Uncertainty over Income Tax Treatments Clarifies how to apply the recognition and measurement requirements of IAS 12 when there is uncertainty over income tax treatments.
• SIC 7 Introduction of the Euro The effective start of the EMU after the reporting date does not alter the requirements of IAS 21 at the reporting date.
• SIC 25 Income Taxes – Changes in the Tax Status of an Enterprise or its Shareholders Addresses the deferred tax consequences of changes in tax status of an enterprise or its shareholders.
• SIC 29 Disclosure – Service Concession Arrangements Prescribes disclosures required by a concession operator and concession provider joined by a service concession arrangement.
• SIC 32 Intangible Assets – Website Costs Addresses accounting for costs associated with the development of a website.

UK qualifying parents and subsidiaries can take advantage of FRS 101 Reduced Disclosure Framework. Our FRS 101 page  gives more information on which entities qualify and the criteria to be met.

The following amendments must be made to IAS 1 in order to achieve compliance with the Companies Act and related Regulations:

• The statement of financial position must comply with the balance sheet format requirements of the Companies Act.
• The statement of profit or loss and other comprehensive income must comply with the profit and loss account format requirements of the Companies Act.
• Ordinary activities of an entity are defined and extraordinary items are described as highly abnormal material items arising from events falling outside an entity’s ordinary activities.
• It is clarified that items of income or expense are not recognised in profit or loss where such recognition is prohibited by the Companies Act.

FRS 101 paragraph 8(f) states that a qualifying entity is exempt from the IAS 1 requirement to present the following within a set of financial statements:

• A statement of cash flows for the period;
• A third statement of financial position when a retrospective adjustment or reclassification is made;
• A statement of compliance with IFRS;
• A reconciliation of property, plant and equipment, intangible assets, investment properties, biological assets and the number of shares outstanding at the beginning and end of the comparative period;
• Capital management disclosures (this exemption is not available to a financial institution);
• All remaining IAS 1 disclosures must be applied.

IAS 1 paragraphs for which exemption is available: 10(d), 10(f), 16, 38A-D, 40A-D, 111, 134-6.

The Corporate Reporting Faculty's annual IFRS factsheets  provide a more detailed discussion of recent IFRS amendments.

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Introduction to IFRS - IAS 1 Presentation of Financial Statements

If you would like to dive into the world of international financial reporting standards (IFRS), you have to be aware what IFRS and IAS means, what the difference between the standards and the conceptual framework is, what the fundamental definition of assets and liabilities is, etc. This course provides answers to these questions using practical examples.

The course consists of two parts. First part, after the introduction to the IFRS, explains the most important concepts of the Conceptual Framework. In the second part IAS 1 Presentation of financial statements standard's requirements are presented including practical examples and interim tests to enhance understanding. 

This course will enable you to:

• understand the concept of international financial reporting standards
• identify main features of the Conceptual Framework
• understand the qualitative characteristics of useful financial information (fundamental and enhancing)
• decide whether the standard or the conceptual framework prevail in case they are in conflict with each other
• understand  the definition of control
• distinguish main accounting considerations and define which are applicable to the primary statements (statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and notes)

Further information:

• Training hours: 60 minutes 
• Languages: English, Hungarian, Russian, Serbian, Croatian

This e-learning course is part of an e-learning series designed by PwC Academy Hungary which aims to provide a comprehensive overview of the application of IFRS (IAS) standards to finance and accounting experts who are already familiar with fundamental (local) accounting and reporting processes.

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Investors in large businesses are demanding greater transparency and the inclusion of more relevant information on financial statements. The International Accounting Standards Board has responded with new International Financial Reporting Standards – IFRS 18.

IFRS 18 ‘Presentation and Disclosure in Financial Statements’ was issued earlier in 2024 and is mandatorily applicable for accounting periods starting on or after 1 January 2027, with earlier application permitted.

The new standard replaces the oldest standard “IAS 1 Presentation of Financial Statements” which will no longer applicable.

It will impact every reporting entity that currently uses International Financial Reporting Standards (IFRS). The objective of the Standard is to improve how information is communicated in an entity’s financial statements, particularly in the statement of profit or loss and in its notes to the financial statements.

It is important to note that IFRS 18 is required to be applied retrospectively, with the restatement of the comparative period along with a reconciliation between the current and comparative periods. It means that if you apply IFRS 18 from 2027, the numbers for 2026 must also be presented in line with the new rules.

Overall, the majority of changes made in IFRS 18 impact the statement of profit or loss and notes to the financial statements, but there are also limited changes to specific requirements that are set out in IAS 7 ‘Statement of Cash Flows’. Only minimal changes were made to the disclosures required for the statement presenting comprehensive income, the statement of changes in equity and the statement of financial position.

We focus on the key presentational changes required to the statement of profit or loss below.

Changes to presentation requirements in the statement of profit or loss The main change introduced by IFRS 18 is to the way in which reporting entities will structure their statement of profit or loss.

The Standard introduces two new defined subtotals: • Operating profit, and • Profit before financing and income taxes.

These new required subtotals are intended to increase comparability by ensuring that information presented for investors is consistent across different entities.

Additionally, the Standard requires an entity to classify all income and expenses into one of the following five categories: • operating • investing • financing • income taxes, and • discontinued operations.

The investing category includes income and expenses from investments in associates, joint ventures and unconsolidated subsidiaries, cash and cash equivalents, and any other assets (such as cash and cash equivalents) that generate returns separately from the entity’s other resources.

The financing category distinguishes between transactions that are solely for the purpose of raising finance, and those that are not. Income and expenses from all liabilities that result solely from the raising of finance are included in this category, along with some elements of interest income or expense recognised by applying other IFRS. This category, together with the subtotal for profit before financing and income taxes enables investors to assess the reporting entity’s performance before the effects of its financing.

The income taxes and discontinued operations categories include income and expenses resulting from the application of IAS 12 ‘Income taxes’ and any related foreign exchange differences, and IFRS 5 ‘Non-current assets held for sale and discontinued operations’ respectively.

Finally, the operating category includes all other items of income and expense that are not allocated to one of the other four categories. It is a default category, so it is important to note this category will include income and expenses from an entity’s main business activities, regardless of whether the income or expenses are volatile or unusual. The operating profit subtotal provides not only a measure of past performance, but also a starting point for forecasting an entity’s future cash flows.

IFRS 18 requires foreign exchange differences to be classified in the same category of the statement of profit or loss as the income and expenses from items that gave rise to the foreign exchange differences.

For more information contact Gary Wong at +441923634453 or [email protected]

Do you need extra information?

Gary has over 20 years of audit experience and brings a wealth of experience from his time at Grant Thornton, Deloitte and RSM, working with various industry sectors from owner managed businesses through to large international groups and AIM listed businesses.

Contact Gary at [email protected] or on +44 (0)1923 634453

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Home » Publications » IFRS 18 Presentation and Disclosure in Financial Statements

IFRS 18 Presentation and Disclosure in Financial Statements

UKEB Surveys: IFRS 18 Presentation and Disclosure in Financial Statements

Date: 03 September 2024

The IASB published IFRS 18 Presentation and Disclosure in Financial Statements with an effective date of annual reporting periods beginning on or after 1 January 2027. As part of the UKEB’s endorsement and adoption work, it is now seeking UK stakeholder views on the IASB’s standard. To aid its endorsement work, the UKEB has launched surveys for UK users of accounts and preparers to gather their views on IFRS 18. The surveys take around 20–40 minutes to complete (depending on stakeholders’ familiarity with IFRS 18) and are available online and in PDF. Stakeholder comments are welcome until 6 September 2024.

Click to participate in our user and preparer surveys. If you have any questions regarding the surveys, please contact us at [email protected] .

The recording of the UKEB Webinar on IFRS 18 and a webcast of discussion between UKEB Technical Director, Seema Jamil-O’Neill, and IASB Member, Nick Anderson, introducing the key requirements of IFRS 18, is now available . For further information on IFRS 18 see the UKEB project page and the IASB website .

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Sorry, there are no results matching your search., digital assets under ifrs® accounting standards vs us gaap: the basics.

Understanding cryptocurrencies and other digital assets and the accounting issues they raise.

From the IFRS Institute – September 6, 2024

Authors: Scott Muir, Nick Tricarichi, Komal Ahuja 

The FASB has issued ASU 2023-08 1 specifying new subsequent measurement, presentation and disclosure requirements for all digital assets in its scope. The initial measurement, recognition and derecognition requirements for digital assets under US GAAP are unchanged by the ASU. With still only interpretative guidance under IFRS Accounting Standards, differences compared to US GAAP arise. In this article, we level-set on what digital assets and crypto assets are and the key differences in the accounting treatment under IFRS Accounting Standards versus US GAAP (after the adoption of ASU 2023-08).

What are digital and crypto assets?

There are several forms of digital assets that serve various purposes in the digital economy. Terms used in this area are not universally defined and different terms are often used interchangeably. For purposes herein, ‘crypto assets’ or ‘cryptocurrencies’ refers to assets like bitcoin, ether and litecoin. ‘Digital assets’ refers to any asset that resides on a blockchain (or similar distributed ledger technology) and is secured by cryptography. Digital assets include crypto assets, but also include (not exhaustive): security and utility tokens, digital assets that meet the definition of a financial asset or financial instrument (e.g. certain ‘stablecoins’), Central Bank Digital Currencies (CBDCs) and Non-Fungible Tokens (NFTs).

But to get to the right accounting, labelling is much less important than understanding the specific attributes and characteristics of the digital asset in question, who owns it for accounting purposes and the business purpose for owning it.

What are the key differences in accounting for digital assets under US GAAP and IFRS Accounting Standards?

IFRS preparers apply a 2019 IFRS Interpretations Committee (IC) Agenda Decision 2 , which addresses some accounting considerations when holding cryptocurrencies. The accounting generally depends on the company’s business model (e.g. investors, miners or broker-traders of digital assets) and the characteristics of the digital asset in question (i.e. contractual terms, rights and obligations). Consensus is still forming in many areas, and many issues have not yet been addressed particularly around emerging transaction types such as those characterized as decentralized finance.

Under US GAAP, all digital assets in the scope of Subtopic 350-60, which becomes effective in 2025 3 , will be measured at fair value through net income. We believe this includes bitcoin, ether and many smaller (by market capitalization) crypto assets (e.g. cardano, litecoin, polkadot). ASU 2023-08, which also addresses presentation and disclosure, applies equally to public and private companies; however, certain provisions do not apply to companies applying industry-specific US GAAP (e.g. Topic 946 on investment companies). Read KPMG Defining Issues and Issues In-Depth to learn more.

Here we provide snapshots of three of the most important accounting differences between IFRS Accounting Standards and US GAAP (after the adoption of ASU 2023-08).

Besides the above-mentioned differences, another key difference is regarding the disclosure requirements. Subtopic 350-60 for in-scope crypto intangible assets require specific disclosures in both interim and annual reporting period. While under IFRS Accounting Standards, the disclosures are less prescriptive and driven by the requirements of the relevant IFRS Accounting standards that are applied in accounting for them which may result in substantial differences between both GAAPs.

Can we hope for more explicit accounting guidance soon under IFRS Accounting Standards?

Since the IASB’s 2021 agenda consultation, many stakeholders have suggested adding accounting for cryptocurrencies to the IASB’s workplan. However, the Board has not yet done so because of concerns about the prevalence and impact of such transactions, the complexity of accounting for different types of crypto assets and liabilities and the existing guidance provided via the 2019 IFRS IC Agenda Decision on ‘holdings of cryptocurrencies’. That said, the IASB’s project on intangible assets more broadly may review the scope of IAS 38, including the treatment of cryptocurrencies, but we do not expect that project to produce any IFRS Accounting Standards changes in the near-term.

There is presently no indication that the FASB will pursue additional standard setting around crypto or other digital assets anytime soon. Therefore, differences outlined earlier between IFRS Accounting Standards and US GAAP post ASU 2023-08 are not likely to significantly change in the near-term.

Further, the SEC staff have expressed views on other aspects of accounting for digital assets through staff accounting bulletins, statements and speeches. Dual reporters should keep an eye on such views to understand and evaluate potential accounting differences.

Given the recent issuance of authoritative guidance under US GAAP on accounting for and reporting of certain crypto assets, companies reporting under both IFRS Accounting Standards and US GAAP must carefully assess potential divergences. It is imperative for dual reporters to thoroughly evaluate the contrasting requirements between IFRS Accounting Standards and US GAAP to ensure accurate and compliant financial reporting. Read KPMG publications below for further insights:

• FASB issues final ASU on crypto asset accounting
• Issues In-Depth: Crypto intangible assets

Start the conversation now with your KPMG representatives.

• ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets
• IFRS IC Agenda Decision, Holdings of cryptocurrencies , IFRS IC Update June 2019
• ASU 2023-08 creates Subtopic 350-60 which will be effective for fiscal years beginning after December 15, 2024, and may be early adopted
• IAS 38, Intangible Assets
• IAS 2, Inventories
• Under US GAAP, some companies conclude that revenue they earn from mining or staking activities is not revenue from a contract with a customer, and therefore apply Topic 606 (revenue from a contract with a customer) only by analogy. See KPMG Hot Topic, Accounting for crypto staking rewards

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