Presentation of Financial Statements (IFRS 18)

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Financial statements will present to the users of accounts:

Statement of financial position
Statement of profit or loss and other comprehensive income
Statement of changes in equity
Statement of cash flows
Notes to the accounts
Comparatives

Financial statements should provide a fair presentation of the results, which is achieved by compliance with IFRSs.

1 Statement of financial position as at [date]

	$’000s	$’000s
ASSETS
Non-current assets
Property, plant and equipment		X
Goodwill		X
Other intangibles		X
Financial assets		X
		X
Current assets
Inventories	X
Trade and other receivables	X
Financial assets	X
Cash and cash equivalents	X
	X
Non-current assets held for sale	X
		X
Total assets		X

EQUITY AND LIABILITIES
Equity
Equity shares ($1)		X
Retained earnings		X
Other components of equity		X
Total equity		X

Non-current liabilities
Long term borrowings	X
Lease liabilities	X
Deferred tax	X
Retirement benefit liability	X
		X
Current liabilities
Trade and other payables	X
Dividends payable	X
Tax payable	X
Lease liabilities	X
		X
Total equity and liabilities		X

2 Statement of profit and loss and other comprehensive income for the year ended [date]

*Continuing operations*	$’000s
Revenue	X
Cost of sales	(X)
Gross profit	X
Distribution expenses	(X)
Administrative expenses	(X)
Operating profit or loss	X
Share of profit of associates / joint ventures	X
Income from other investments	X
Profit or loss before financing and income tax	X
Interest expense	(X)
Profit or loss before income tax	X
Income tax expense	(X)
Profit or loss from continuing operations	X

*Discontinued operations*
Profit/(loss) for the period from discontinued operations	X
Profit/(loss) for the period	X

Other comprehensive income for the year (after tax):
Items that will not be reclassified to profit or loss:
Gain on non-current asset revaluations	X
Gain/(loss) on fair value through other comprehensive income investment	X/(X)
Re-measurement gain/(loss) on defined benefit plan	X/(X)
	X
Items that may be reclassified subsequently to profit or loss:
Ineffective element of gain/(loss) on cash flow hedge	X/(X)
Exchange difference on translation of foreign subsidiary	X/(X)
Other comprehensive income, net of tax	X
Total comprehensive income for the period	X

3 Statement of changes in equity for the year ended [date]

	Equity shares	Retained earnings	Other components of equity	Total
	$’000s	$’000s	$’000s	$’000s
B/f	X	X	X	X
Issue of share capital	X	-	-	X
Dividends	-	(X)	(X)	(X)
Total comprehensive income for the year	-	X	X	X
Transfer to retained earnings	-	X	(X)	-
C/f	X	X	X	X

4 Disclosure points

Companies must disclose their material accounting policies. (An earlier version of IAS 1 used the phrase significant accounting policies).
Notes must be presented in a systematic manner and cross-referenced.
The notes must disclose key judgements made in applying accounting policies.
Note that IFRS 18 requires the use of the following subheadings in the profit and loss:
- Operating profit or loss
- Profit or loss before financing and income tax
This has the effect of dividing the profit and loss into three clear sections:
- Operating
- Investing
- Financing
Note that IFRS 18 requires operating expenses to be analysed on the face of the profit and loss, not in the notes. The analysis may be by function (distribution costs, admin expenses) or by nature (purchases, staff costs). If disclosure is by function, then more detail will be needed in the notes.
Note that IFRS 18 requires goodwill to be shown as a separate line in the CSFP.
Finally, note that IFRS 18 discourages the use of the word ‘other’ in disclosure notes (e.g. other income, other assets). It would be better, for example, to use the words rental income or rent prepayment.

An IFRS 18 requirement asks which items breach the standard and what to change — not for the statement to be redrafted. Check the three required subtotals, the analysis of operating expenses, and above all the category each item belongs in: interest earned on loan notes held as an asset is investing income, not a finance cost.

Relevant examiner articles on the ACCA (students) website:

Profit, loss and other comprehensive income
(if you find this article tough, leave it until you have studied financial instruments)