Financial statements

Purpose of financial statements

IAS 1 was comprehensively revised and reissued in September 2007 and applies to
accounting periods beginning on or after 1 January 2009.
The objective of IAS 1 is to prescribe the basis for presentation of general purpose
financial statements, to ensure comparability both with the entity's financial
statements of previous periods and with the financial statements of other entities.
The revision introduced some new terminology and changed the titles of financial
statements:

• 'balance sheet' became 'statement of financial position'

• 'income statement' became 'statement of profit or loss and other comprehensive
income'
• 'cash flow statement' became 'statement of cash flows'

Financial statements are a structured representation of the financial position and

financial performance of an entity. The objective of 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.
Financial statements also show the results of the management’s stewardship of the
resources entrusted to it.
To meet this objective, financial statements provide information about an entity’s:

(a) assets;
(b) liabilities;
(c) equity;
(d) income and expenses, including gains and losses;
(e) contributions by and distributions to owners in their capacity as
owners; and
(f) cash flows.
This information, along with other information in the notes, assists users of
financial statements in predicting the entity’s future cash flows and, in
particular, their timing and certainty.
Complete set of financial statements
A complete set of financial statements comprises:
(a) a statement of financial position as at the end of the period;
(b) a statement of profit or loss and other comprehensive income for
the period;
(c) a statement of changes in equity for the period;
(d) a statement of cash flows for the period;
(e) notes, comprising material accounting policy information and other
explanatory information;
(ea) comparative information in respect of the preceding period as
specified in paragraphs 38 and 38A; and
(f) a statement of financial position as at the beginning of the
preceding period when an entity applies an accounting policy
retrospectively or makes a retrospective restatement of items in its
financial statements, or when it reclassifies items in its financial
statements in accordance with paragraphs 40A–40D.

An entity may use titles for the statements other than those used in this
Standard. For example, an entity may use the title ‘statement of
comprehensive income’ instead of ‘statement of profit or loss and other
comprehensive income’.

An entity may present a single statement of profit or loss and other

comprehensive income, with profit or loss and other comprehensive
income presented in two sections. The sections shall be presented together,
with the profit or loss section presented first followed directly by the other
comprehensive income section.

An entity shall present with equal prominence all of the financial statements in a
complete set of financial statements.
Many entities present, outside the financial statements, a financial review by
management that describes and explains the main features of the entity’s
financial performance and financial position, and the principal uncertainties
it faces.
Such a report may include a review of:
(a) the main factors and influences determining financial performance,
including changes in the environment in which the entity operates,
the entity’s response to those changes and their effect, and the entity’s
policy for investment to maintain and enhance financial performance,
including its dividend policy;
(b) the entity’s sources of funding and its targeted ratio of liabilities to
equity; and
(c) the entity’s resources not recognised in the statement of financial
position in accordance with IFRSs.

Many entities also present, outside the financial statements, reports and statements
such as environmental reports and value added statements, particularly in industries
in which environmental factors are significant and when employees are regarded as
an important user group.
Reports and statements presented outside financial statements are outside the
scope of IFRSs.

General features
Fair presentation and compliance with IFRSs
Financial statements shall 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 and recognition criteria for
assets, liabilities, income and expenses set out in the Conceptual Framework
for Financial Reporting (Conceptual Framework)
An entity whose financial statements comply with IFRSs shall make an
explicit and unreserved statement of such compliance in the notes.
An entity shall not describe financial statements as complying with IFRSs
unless they comply with all the requirements of IFRSs.
An entity achieves a fair presentation by compliance with applicable IFRSs.
A fair presentation also requires an entity:
(a) to select and apply accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors.

IAS 8 sets out a hierarchy of authoritative guidance that management considers

in the absence of an IFRS that specifically applies to an item.
(b) to present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information.
(c) to 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 entity’s financial position and
financial performance.
An entity cannot rectify inappropriate accounting policies either by disclosure of the
accounting policies used or by notes or explanatory material

In the extremely rare circumstances in which management concludes that

compliance with a requirement in an IFRS would be so misleading that it would
conflict with the objective of financial statements set out in the Conceptual
Framework, the entity shall depart from that requirement in the manner set out in
paragraph 20 if the relevant regulatory framework requires, or otherwise does not
prohibit, such a departure

When an entity departs from a requirement of an IFRS in accordance

with paragraph 19, it shall disclose:
(a) that management has concluded that the financial statements present fairly the
entity’s financial position, financial performance and cash flows;
(b) that it has complied with applicable IFRSs, 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, the nature of the
departure, including the treatment that the IFRS would require, the reason why that
treatment would be so misleading in the circumstances that it would conflict with the
objective of
financial statements set out in the Conceptual Framework, and the treatment
adopted; and
(d) for each period presented, the financial effect of the departure on
each item in the financial statements that would have been reported in complying
with the requirement.

Accounting concepts
The standard requires compliance with a series of accounting concepts:
• Going concern – the presumption is that the entity will not cease trading in the
foreseeable future.(This is generally taken to mean within the next 12 months).
• Accrual basis of accounting – with the exception of the statement of cash flows,
the information is prepared under the accruals concept; income and expenditure are
matched to the same accounting period.
International Accounting Standards 7
• Consistency of presentation – the presentation and classification of items in the
financial statements should be retained from one period to the next unless a change
is justified by a change in circumstances or the requirement of a new IFRS.
• Materiality and aggregation – information is material if omitting, misstating or
obscuring it could reasonably be expected to influence decisions by the primary
users of the financial statements. Each material class of similar items should be
presented separately in the financial statements. This would apply to a grouping
such as current assets.
• Offsetting – assets and liabilities, and income and expenditure may not be offset
unless required or
permitted by an IFRS. For example, it is not permitted to offset a bank overdraft with
another bank account not in overdraft.
• Comparative information – there is a requirement to show the figures from the
previous period for all the amounts shown in the financial statements. This is
designed to help users make relevant comparisons.

Structure and content of financial statements

IAS 1 identifies in detail how the financial statements should be presented. It also
sets out some general principles that must be adopted in those statements:
• a clear identification of the financial statements (statement of profit or loss,
statement of financial
position, etc.)
• the name of the entity (e.g. XYZ Limited)
• the period covered by the financial statements (year ended, etc.)
Note: Statements are usually prepared on an annual basis. If this is not the case, the
reason for the
change (for example to a short accounting period) must be disclosed and state that
the figures may
not be comparable with previous data.
• the currency used (e.g. £s, $s)
• the level of rounding used (e.g. if the statements are presented in thousands,
millions). For assessment purposes the figures will be presented in whole numbers
for financial statements and not rounded up or down.

Statement of financial position

Information to be presented in the statement of financial position
The statement of financial position shall include line items that present the
following amounts:
(a) property, plant and equipment;
(b) investment property;
(c) intangible assets;
(d) financial assets (excluding amounts shown under (e), (h) and (i));
(da) portfolios of contracts within the scope of IFRS 17 that are assets,
disaggregated as required by paragraph 78 of IFRS 17;
(e) investments accounted for using the equity method;
(f) biological assets within the scope of IAS 41 Agriculture;
(g) inventories;
(h) trade and other receivables;
(i) cash and cash equivalents;
(j) 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 Non-current Assets Held for Sale and Discontinued
Operations;
(k) trade and other payables;
(l) provisions;
(m) financial liabilities (excluding amounts shown under (k) and (l));
(ma) portfolios of contracts within the scope of IFRS 17 that are
liabilities, disaggregated as required by paragraph 78 of IFRS 17;
n) liabilities and assets for current tax, as defined in IAS 12 Income
Taxes;
(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;
(q) non-controlling interests, presented within equity; and
(r) issued capital and reserves attributable to owners of the parent.

An entity shall present additional line items (including by disaggregating

the line items listed in paragraph 54), headings and subtotals in the
statement of financial position when such presentation is relevant to an
understanding of the entity’s financial position.
When an entity presents subtotals in accordance with paragraph 55, those
subtotals shall:
(a) be comprised of line items made up of amounts recognised and
measured in accordance with IFRS;
(b) be presented and labelled in a manner that makes the line items that
constitute the subtotal clear and understandable;
(c) be consistent from period to period, in accordance with paragraph 45;
and
(d) not be displayed with more prominence than the subtotals and totals
required in IFRS for the statement of financial position.
When an entity presents current and non-current assets, and current and
non-current liabilities, as separate classifications in its statement of
financial position, it shall not classify deferred tax assets (liabilities) as
current assets (liabilities).
This Standard does not prescribe the order or format in which an entity
presents items. Paragraph 54 simply lists items that are sufficiently different
in nature or function to warrant separate presentation in the statement of
financial position.
In addition:
(a) line items are included when the size, nature or function of an item or aggregation
of similar items is such that separate presentation is relevant to an understanding of
the entity’s financial position; and (b) the descriptions used and the ordering of items
or aggregation of similar items may be amended according to the nature of the entity
and its transactions, to provide information that is relevant to an understanding of the
entity’s financial position. For example, a financial institution may amend the above
descriptions to provide information that is relevant to the operations of a financial
institution.

An entity makes the judgement about whether to present additional items

separately on the basis of an assessment of:
(a) the nature and liquidity of assets
(b) the function of assets within the entity; and
(c) the amounts, nature and timing of liabilities.
The use of different measurement bases for different classes of assets suggests that
their nature or function differs and, therefore, that an entity presents them as
separate line items. For example, different classes of property, plant and equipment
can be carried at cost or at revalued amounts in accordance with IAS 16.
Current/non-current distinction
An entity shall present current and non-current assets, and current and non-current
liabilities, as separate classifications in its statement of financial position in
accordance with paragraphs 66–76 except when a presentation based on liquidity
provides information that is reliable and more relevant. When that exception applies,
an entity shall present all assets and liabilities in order of liquidity.
Whichever method of presentation is adopted, an entity shall disclose the
amount expected to be recovered or settled after more than twelve months
for each asset and liability line item that combines amounts expected to be
recovered or settled:
(a) no more than twelve months after the reporting period, and
(b) more than twelve months after the reporting period.
When an entity supplies goods or services within a clearly identifiable operating
cycle, separate classification of current and non-current assets and liabilities in the
statement of financial position provides useful information by distinguishing the net
assets that are continuously circulating as working capital from those used in the
entity’s long-term operations. It also highlights assets that are expected to be
realised within the current operating cycle, and liabilities that are due for settlement
within the same period.
For some entities, such as financial institutions, a presentation of assets and
liabilities in increasing or decreasing order of liquidity provides information
that is reliable and more relevant than a current/non-current presentation
because the entity does not supply goods or services within a clearly
identifiable operating cycle.
In applying paragraph 60, an entity is permitted to present some of its assets
and liabilities using a current/non-current classification and others in order of
liquidity when this provides information that is reliable and more relevant.
The need for a mixed basis of presentation might arise when an entity has
diverse operations.
Information about expected dates of realisation of assets and liabilities is
useful in assessing the liquidity and solvency of an entity.

IFRS 7 FinancialInstruments:
Disclosures requires disclosure of the maturity dates of financial assets and
financial liabilities. Financial assets include trade and other receivables, and financial
liabilities include trade and other payables.
Information on the expected date of recovery of non-monetary assets such as
inventories and expected date of settlement for liabilities such as provisions is
also useful, whether assets and liabilities are classified as current or as
non-current. For example, an entity discloses the amount of inventories that
are expected to be recovered more than twelve months after the reporting
period.
Current assets
An entity shall classify an asset as current when:
(a) it expects to realise the asset, or intends to sell or consume it, in its
normal operating cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the
reporting period; or
(d) the asset is cash or a cash equivalent (as defined in IAS 7) unless the
asset is restricted from being exchanged or used to settle a liability
for at least twelve months after the reporting period.
An entity shall classify all other assets as non-current.
This Standard uses the term ‘non-current’ to include tangible, intangible and
financial assets of a long-term nature. It does not prohibit the use of
alternative descriptions as long as the meaning is clear.
The operating cycle of an entity is the time between the acquisition of assets
for processing and their realisation in cash or cash equivalents. When the
entity’s normal operating cycle is not clearly identifiable, it is assumed to be
twelve months. Current assets include assets (such as inventories and trade
receivables) that are sold, consumed or realised as part of the normal
operating cycle even when they are not expected to be realised within twelve
months after the reporting period. Current assets also include assets held
primarily for the purpose of trading (examples include some financial assets
that meet the definition of held for trading in IFRS 9) and the current portion
of non-current financial assets.
Current liabilities
An entity shall classify a liability as current when:
(a) it expects to settle the liability in its normal operating cycle;
(b) it holds the liability primarily for the purpose of trading;
(c) the liability is due to be settled within twelve months after the
reporting period; or
(d) it does not have the right at the end of the reporting period to defer
settlement of the liability for at least twelve months after the
reporting period.
An entity shall classify all other liabilities as non-current.

Normal operating cycle (paragraph 69(a))

Some current liabilities, such as trade payables and some accruals for
employee and other operating costs, are part of the working capital used in
the entity’s normal operating cycle. An entity classifies such operating items
as current liabilities even if they are due to be settled more than twelve
months after the reporting period. The same normal operating cycle applies to
the classification of an entity’s assets and liabilities. When the entity’s normal
operating cycle is not clearly identifiable, it is assumed to be twelve months.

Other current liabilities are not settled as part of the normal operating cycle,
but are due for settlement within twelve months after the reporting period or
held primarily for the purpose of trading. Examples are some financial
Liabilities that meet the definition of held for trading in IFRS 9, bank
overdrafts, and the current portion of non-current financial liabilities,
dividends payable, income taxes and other non-trade payables. Financial
liabilities that provide financing on a long-term basis (ie are not part of the
working capital used in the entity’s normal operating cycle) and are not due
for settlement within twelve months after the reporting period are non-
current liabilities, subject to paragraphs 74 and 75.

An entity classifies its financial liabilities as current when they are due to be
settled within twelve months after the reporting period, even if:
(a) the original term was for a period longer than twelve months, and
(b) an agreement to refinance, or to reschedule payments, on a long-term
basis is completed after the reporting period and before the financial
statements are authorised for issue.

Right to defer settlement for at least twelve months (paragraph 69(d))

An entity’s right to defer settlement of a liability for at least twelve months
after the reporting period must have substance and, as illustrated in
paragraphs 73–75, must exist at the end of the reporting period. If the right to
defer settlement is subject to the entity complying with specified conditions,
the right exists at the end of the reporting period only if the entity complies
with those conditions at the end of the reporting period. The entity must
comply with the conditions at the end of the reporting period even if the
lender does not test compliance until a later date.

If an entity has the right, at the end of the reporting period, to roll over an
obligation for at least twelve months after the reporting period under an
existing loan facility, it classifies the obligation as non-current, even if it
would otherwise be due within a shorter period.

If the entity has no such right, the entity does not consider the potential to refinance
the obligation and classifies the obligation as current.
When an entity breaches a condition of a long-term loan arrangement on or before
the end of the reporting period with the effect that the liability becomes payable on
demand, it classifies the liability as current, even if the lender agreed, after the
reporting period and before the authorisation of the financial statements for issue,
not to demand payment as a consequence of the breach.
An entity classifies the liability as current because, at the end of the reporting period,
it does not have the right to defer its settlement for at least twelve months after that
date.
However, an entity classifies the liability as non-current if the lender agreed
by the end of the reporting period to provide a period of grace ending at least
twelve months after the reporting period, within which the entity can rectify
the breach and during which the lender cannot demand immediate
repayment.
Classification of a liability is unaffected by the likelihood that the entity will
exercise its right to defer settlement of the liability for at least twelve months
after the reporting period.
If a liability meets the criteria in paragraph 69 for classification as non-current, it is
classified as non-current even if
management intends or expects the entity to settle the liability within twelve
months after the reporting period, or even if the entity settles the liability
between the end of the reporting period and the date the financial statements
are authorised for issue. However, in either of those circumstances, the entity
may need to disclose information about the timing of settlement to enable
users of its financial statements to understand the impact of the liability on
the entity’s financial position (see paragraphs 17(c) and 76(d)).

If the following events occur between the end of the reporting period and the
date the financial statements are authorised for issue, those events are
disclosed as non-adjusting events in accordance with IAS 10 Events after the
Reporting Period:
(a) refinancing on a long-term basis of a liability classified as current (see
paragraph 72);
(b) rectification of a breach of a long-term loan arrangement classified as
current (see paragraph 74);
(c) the granting by the lender of a period of grace to rectify a breach of a
long-term loan arrangement classified as current (see paragraph 75);
and
(d) settlement of a liability classified as non-current (see paragraph 75A).
Settlement (paragraphs 69(a), 69(c) and 69(d))
For the purpose of classifying a liability as current or non-current,
settlement refers to a transfer to the counterparty that results in the
extinguishment of the liability. The transfer could be of:
(a) cash or other economic resources—for example, goods or services;
or
(b) the entity’s own equity instruments, unless paragraph 76B applies.
Terms of a liability that could, at the option of the counterparty, result in
its settlement by the transfer of the entity’s own equity instruments do not
affect its classification as current or non-current if, applying IAS 32
Financial Instruments: Presentation, the entity classifies the option as an
equity instrument, recognising it separately from the liability as an equity
component of a compound financial instrument.

An entity shall disclose the following, either in the statement of financial

position or the statement of changes in equity, or in the notes:
(a) for each class of share capital:
(i) the number of shares authorised;
(ii) 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;
(v) the rights, preferences and restrictions attaching to that
class including restrictions on the distribution of dividends
and the repayment of capital;
(vi) shares in the entity held by the entity or by its subsidiaries or
associates; and(vii) shares reserved for issue under options and contracts for the
sale of shares, including terms and amounts; and
(b) a description of the nature and purpose of each reserve within
equity.

If an entity has reclassified

(a) a puttable financial instrument classified as an equity instrument,
or
(b) an instrument that imposes on the entity an obligation to deliver to
another party a pro rata share of the net assets of the entity only on
liquidation and is classified as an equity instrument
between financial liabilities and equity, it shall disclose the amount
reclassified into and out of each category (financial liabilities or equity),
and the timing and reason for that reclassification.

Statement of profit or loss and other comprehensive

Income
The statement of profit or loss and other comprehensive income (statement
of comprehensive income) shall present, in addition to the profit or
loss and other comprehensive income sections:
(a) profit or loss;
(b) total other comprehensive income;
(c) Comprehensive income for the period, being the total of profit or
loss and other comprehensive income.

If an entity presents a separate statement of profit or loss it does not present the
profit or loss section in the statement presenting comprehensive income.
An entity shall present the following items, in addition to the profit or loss
and other comprehensive income sections, as allocation of profit or
loss and other comprehensive income for the period:
(a) profit or loss for the period attributable to:
(i) non-controlling interests, and
(ii) owners of the parent.
(b) comprehensive income for the period attributable to:
(i) non-controlling interests, and
(ii) owners of the parent.
If an entity presents profit or loss in a separate statement it shall present
(in that statement.
Information to be presented in the profit or loss section or the
statement of profit or loss

In addition to items required by other IFRSs, the profit or loss section or

the statement of profit or loss shall include line items that present the
following amounts for the period:
(a) revenue, presenting separately:
(i) interest revenue calculated using the effective interest
method; and
(ii) insurance revenue (see IFRS 17);
(aa) gains and losses arising from the derecognition of financial assets
measured at amortised cost;
(ab) insurance service expenses from contracts issued within the scope
of IFRS 17 (see IFRS 17);
(ac) income or expenses from reinsurance contracts held (see IFRS 17);
(b) finance costs;
(ba) impairment losses (including reversals of impairment losses or
impairment gains) determined in accordance with Section 5.5 of
IFRS 9;
(bb) insurance finance income or expenses from contracts issued within
the scope of IFRS 17 (see IFRS 17);
(bc) finance income or expenses from reinsurance contracts held (see
IFRS 17);
(c) share of the profit or loss of associates and joint ventures accounted
for using the equity method;
(ca) if a financial asset is reclassified out of the amortised cost
measurement category so that it is measured at fair value through
profit or loss, any gain or loss arising from a difference between the
previous amortised cost of the financial asset and its fair value at
the reclassification date (as defined in IFRS 9);
(cb) if a financial asset is reclassified out of the fair value through other
comprehensive income measurement category so that it is measured
at fair value through profit or loss, any cumulative gain or loss
previously recognised in other comprehensive income that is
reclassified to profit or loss;
(d) tax expense;
(e) [deleted]
(ea) a single amount for the total of discontinued operations (see IFRS 5).
(f)–(i) [deleted]
Information to be presented in the other comprehensive income Section
The other comprehensive income section shall present line items for the
amounts for the period of:
(a) items of other comprehensive income (excluding amounts in
paragraph (b)), classified by nature and grouped into those that, in
accordance with other IFRSs:
(i) will not be reclassified subsequently to profit or loss; and
(ii) will be reclassified subsequently to profit or loss when
specific conditions are met.
(b) the share of the other comprehensive income of associates and joint
ventures accounted for using the equity method, separated into the
share of items that, in accordance with other IFRSs:
(i) will not be reclassified subsequently to profit or loss; and
(ii) will be reclassified subsequently to profit or loss when
specific conditions are met.
[Deleted]
An entity shall present additional line items (including by disaggregating
the line items listed in paragraph 82), headings and subtotals in the
statement(s) presenting profit or loss and other comprehensive
income when such presentation is relevant to an understanding of the
entity’s financial performance.
When an entity presents subtotals in accordance with paragraph 85, those
subtotals shall:
(a) be comprised of line items made up of amounts recognised and
measured in accordance with IFRS;
(b) be presented and labelled in a manner that makes the line items that
constitute the subtotal clear and understandable;
(c) be consistent from period to period, in accordance with paragraph 45;
and
(d) not be displayed with more prominence than the subtotals and totals
required in IFRS for the statement(s) presenting profit or loss and other
comprehensive income.
An entity shall present the line items in the statement(s) presenting profit or
loss and other comprehensive income that reconcile any subtotals presented
in accordance with paragraph 85 with the subtotals or totals required in IFRS
for such statement(s).
Because the effects of an entity’s various activities, transactions and other
events differ in frequency, potential for gain or loss and predictability,
disclosing the components of financial performance assists users in
understanding the financial performance achieved and in making projections
of future financial performance. An entity includes additional line items in
the statement(s) presenting profit or loss and other comprehensive income
and it amends the descriptions used and the ordering of items when this is
necessary to explain the elements of financial performance. An entity
considers factors including materiality and the nature and function of the
items of income and expense. For example, a financial institution may amend
the descriptions to provide information that is relevant to the operations of a
financial institution. An entity does not offset income and expense items
unless the criteria in paragraph 32 are met.
An entity shall not present any items of income or expense as
extraordinary items, in the statement(s) presenting profit or loss and other
comprehensive income or in the notes.

Profit or loss for the period

An entity shall recognise all items of income and expense in a period
in profit or loss unless an IFRS requires or permits otherwise.
Some IFRSs specify circumstances when an entity recognises particular items
outside profit or loss in the current period. IAS 8 specifies two such
circumstances: the correction of errors and the effect of changes in
accounting policies. Other IFRSs require or permit components of other
comprehensive income that meet the Conceptual Framework’s definition of
income or expense to be excluded from profit or loss (see paragraph 7).

Other comprehensive income for the period

An entity shall disclose the amount of income tax relating to each item
of other comprehensive income, including reclassification adjustments,
either in the statement of profit or loss and other comprehensive income
or in the notes.
An entity may present items of other comprehensive income either:
(a) net of related tax effects, or
(b) before related tax effects with one amount shown for the aggregate
amount of income tax relating to those items.
If an entity elects alternative (b), it shall allocate the tax between the items
that might be reclassified subsequently to the profit or loss section and those
that will not be reclassified subsequently to the profit or loss section.
An entity shall disclose reclassification adjustments relating to components
of other comprehensive income

Other IFRSs specify whether and when amounts previously recognised in

other comprehensive income are reclassified to profit or loss. Such
reclassifications are referred to in this Standard as reclassification
adjustments. A reclassification adjustment is included with the related
component of other comprehensive income in the period that the adjustment
is reclassified to profit or loss. These amounts may have been recognised in
other comprehensive income as unrealised gains in the current or previous
periods. Those unrealised gains must be deducted from other comprehensive
income in the period in which the realised gains are reclassified to profit or
loss to avoid including them in total comprehensive income twice.
An entity may present reclassification adjustments in the statement(s) of
profit or loss and other comprehensive income or in the notes. An entity
presenting reclassification adjustments in the notes presents the items
of other comprehensive income after any related reclassification adjustments.
Reclassification adjustments arise, for example, on disposal of a foreign
operation (see IAS 21) and when some hedged forecast cash flows affect profit
or loss (see paragraph 6.5.11(d) of IFRS 9 in relation to cash flow hedges).
Reclassification adjustments do not arise on changes in revaluation surplus
recognised in accordance with IAS 16 or IAS 38 or on remeasurements of
defined benefit plans recognised in accordance with IAS 19. These components
are recognised in other comprehensive income and are not reclassified to
profit or loss in subsequent periods. Changes in revaluation surplus may be
transferred to retained earnings in subsequent periods as the asset is used or
when it is derecognised (see IAS 16 and IAS 38). In accordance with IFRS 9,
reclassification adjustments do not arise if a cash flow hedge or the
accounting for the time value of an option (or the forward element of a
forward contract or the foreign currency basis spread of a financial
instrument) result in amounts that are removed from the cash flow hedge
reserve or a separate component of equity, respectively, and included directly
in the initial cost or other carrying amount of an asset or a liability. These
amounts are directly transferred to assets or liabilities

Information to be presented in the statement(s) of profit or loss

and other comprehensive income or in the notes

When items of income or expense are material, an entity shall disclose

their nature and amount separately.
Circumstances that would give rise to the separate disclosure of items of
income and expense include:
(a) write-downs of inventories to net realisable value or of property, plant
and equipment to recoverable amount, as well as reversals of such
write-downs;
(b) restructurings of the activities of an entity and reversals of any
provisions for the costs of restructuring;
(c) disposals of items of property, plant and equipment;
(d) disposals of investments; (e) discontinued operations;
(f) litigation settlements; and
(g) other reversals of provisions.
An entity shall present an analysis of expenses recognised in profit or loss
using a classification based on either their nature or their function within
the entity, whichever provides information that is reliable and more
relevant.
Entities are encouraged to present the analysis in paragraph 99 in the
statement(s) presenting profit or loss and other comprehensive income.
Expenses are subclassified to highlight components of financial performance
that may differ in terms of frequency, potential for gain or loss and
predictability. This analysis is provided in one of two forms.
The first form of analysis is the ‘nature of expense’ method. An entity
aggregates expenses within profit or loss according to their nature (for
example, depreciation, purchases of materials, transport costs, employee
benefits and advertising costs), and does not reallocate them among functions
within the entity. This method may be simple to apply because no allocations
of expenses to functional classifications are necessary. An example of a
classification using the nature of expense method is as follows:

The second form of analysis is the ‘function of expense’ or ‘cost of sales’

method and classifies expenses according to their function as part of cost of
sales or, for example, the costs of distribution or administrative activities. At a
minimum, an entity discloses its cost of sales under this method separately
from other expenses. This method can provide more relevant information to
users than the classification of expenses by nature, but allocating costs to
functions may require arbitrary allocations and involve considerable
judgement. An example of a classification using the function of expense
method is as follows:
 The choice between the function of expense method and the nature of
expense method depends on historical and industry factors and the nature of
the entity. Both methods provide an indication of those costs that might vary,
directly or indirectly, with the level of sales or production of the entity.
Because each method of presentation has merit for different types of entities,
this Standard requires management to select the presentation that is
reliable and more relevant.
IAS 27
Separate Financial Statements
The objective of this Standard is to prescribe the accounting and disclosure
requirements for investments in subsidiaries, joint ventures and associates
when an entity prepares separate financial statements.
This Standard does not mandate which entities produce separate financial
statements. It applies when an entity prepares separate financial statements
that comply with International Financial Reporting Standards

Definitions
Consolidated financial statements are the financial statements of a group in
which the assets, liabilities, equity, income, expenses and cash flows of the
parent and its subsidiaries are presented as those of a single economic
entity.
Separate financial statements are those presented by an entity in which the
entity could elect, subject to the requirements in this Standard, to account
for its investments in subsidiaries, joint ventures and associates either at
cost, in accordance with IFRS 9 Financial Instruments, or using the equity
method as described in IAS 28 Investments in Associates and Joint Ventures
Separate financial statements are those presented in addition to consolidated
financial statements or in addition to the financial statements of an investor
that does not have investments in subsidiaries but has investments in
associates or joint ventures in which the investments in associates or joint
ventures are required by IAS 28 to be accounted for using the equity method,
other than in the circumstances set out in paragraphs 8–8A

The financial statements of an entity that does not have a subsidiary, associate
or joint venturer’s interest in a joint venture are not separate financial
statements

An entity that is exempted in accordance with paragraph 4(a) of

IFRS 10 from consolidation or paragraph 17 of IAS 28 (as amended in 2011)
from applying the equity method may present separate financial
statements as its only financial statements.

Preparation of separate financial statements

Separate financial statements shall be prepared in accordance with all
applicable IFRSs, except as provided in paragraph 10.
When an entity prepares separate financial statements, it shall account for
investments in subsidiaries, joint ventures and associates either:
(a) at cost;
(b) in accordance with IFRS 9; or
(c) using the equity method as described in IAS 28.

If an entity elects, in accordance with paragraph 18 of IAS 28 (as amended

in
2011), to measure its investments in associates or joint ventures at fair value
through profit or loss in accordance with IFRS 9, it shall also account for those
investments in the same way in its separate financial statements.

If a parent is required, in accordance with paragraph 31 of IFRS 10, to measure

its investment in a subsidiary at fair value through profit or loss in accordance
with IFRS 9, it shall also account for its investment in a subsidiary in the same
way in its separate financial statements.

When a parent ceases to be an investment entity, or becomes an investment

entity, it shall account for the change from the date when the change in
status occurred, as follows:

Dividends from a subsidiary, a joint venture or an associate are recognised

in the separate financial statements of an entity when the entity’s right to
receive the dividend is established. The dividend is recognised in profit or
loss unless the entity elects to use the equity method, in which case the
dividend is recognised as a reduction from the carrying amount of the
investment.
When a parent reorganises the structure of its group by establishing a new
entity as its parent in a manner that satisfies the following criteria:
(a) the new parent obtains control of the original parent by issuing equity
instruments in exchange for existing equity instruments of the
original parent;
(b) the assets and liabilities of the new group and the original group are
the same immediately before and after the reorganisation; and
(c) the owners of the original parent before the reorganisation have the
same absolute and relative interests in the net assets of the original
group and the new group immediately before and after the
reorganisation,
and the new parent accounts for its investment in the original parent in
accordance with paragraph 10(a) in its separate financial statements, the new
parent shall measure cost at the carrying amount of its share of the equity
items shown in the separate financial statements of the original parent at the
date of the reorganisation.
Similarly, an entity that is not a parent might establish a new entity as its
parent in a manner that satisfies the criteria in paragraph 13. The
requirements in paragraph 13 apply equally to such reorganisations. In such
cases, references to ‘original parent’ and ‘original group’ are to the ‘original
entity’

Disclosure
An entity shall apply all applicable IFRSs when providing disclosures in its
separate financial statements, including the requirements in paragraphs
16–17.
When a parent, in accordance with paragraph 4(a) of IFRS 10, elects not to
prepare consolidated financial statements and instead prepares separate
financial statements, it shall disclose in those separate financial
statements:
(a) the fact that the financial statements are separate financial
statements; that the exemption from consolidation has been used;
the name and principal place of business (and country of
incorporation, if different) of the entity whose consolidated
financial statements that comply with International Financial
Reporting Standards have been produced for public use; and the
address where those consolidated financial statements are
obtainable.
(b) a list of significant investments in subsidiaries, joint ventures and
associates, including:
(i) the name of those investees.
(ii) the principal place of business (and country of incorporation,
if different) of those investees.
(iii) its proportion of the ownership interest (and its proportion
of the voting rights, if different) held in those investees.
(c) a description of the method used to account for the investments
listed under (b).
When an investment entity that is a parent (other than a parent covered
by paragraph 16) prepares, in accordance with paragraph 8A, separate
financial statements as its only financial statements, it shall disclose that
fact. The investment entity shall also present the disclosures relating to
investment entities required by IFRS 12 Disclosure of Interests in Other
Entities.
When a parent (other than a parent covered by paragraphs 16–16A) or an
investor with joint control of, or significant influence over, an investee
prepares separate financial statements, the parent or investor shall identify
the financial statements prepared in accordance with IFRS 10, IFRS 11 or
IAS 28 (as amended in 2011) to which they relate. The parent or investor
shall also disclose in its separate financial statements:
(a) the fact that the statements are separate financial statements and
the reasons why those statements are prepared if not required by
law.
(b) a list of significant investments in subsidiaries, joint ventures and
associates, including:
(i) the name of those investees.
(ii) the principal place of business (and country of incorporation,
if different) of those investees.
(iii) its proportion of the ownership interest (and its proportion
of the voting rights, if different) held in those investees.
(c) a description of the method used to account for the investments
listed under (b).