Chapter 1
Published financial statements
1 Preparation of financial statements for companies:
● Preparation of financial statements means gathering all of a company's day-
to-day financial transactions over a specific period (usually a year or a
quarter) and organizing them into structured, easy-to-read reports.
● IFRS 18 is basically a set of global rules for how companies must
organize and present their financial reports so they are easy to read,
understand, and compare .IFRS 18 is all about transparency and
consistency.
● IFRS 18 comprises that statement of financial position , p and L
account ,changes in equity ,cash flows ,other comprehensive incomes &
accounting polices and explanatory notes …
[Link] and disaggregation
It means grouping and breaking down information in financial statements.
!. Aggregation (Grouping Together)
Aggregation means combining many small, similar items or transactions into a
single sum on the main financial statements
Ex. For presentation purposes, assets, liabilities, equity, income and expenses
should be combined (or aggregated) where those items have shared
characteristics.
Disaggregation (Breaking Down)
Disaggregation means taking a big total number and breaking it down into
smaller, more detailed parts, usually in the explanatory notes.
Ex. Where items do not share characteristics, these items should be
shown separately (or disaggregated).
Examples 👍
Think of it like shopping at a supermarket:
● Aggregation is putting all your items into one final total on your receipt
("Groceries: $150").
● Disaggregation is showing every individual item line-by-line ("Milk: $4,
Bread: $3, Eggs: $5...").
!!!.In some cases, it may provide clearer information to present items separately
on the face of the statement of profit or loss or statement of financial position.
Examples could include:
impairment of property, plant and equipment
restructuring costs
litigation settlements
reversals of provisions
lease liabilities
goodwill
[Link] OF FINANCIAL POSITION 👍
it is built on a simple formula that must always be "Statement of FP stands
for Statement of Financial Position (traditionally known as the Balance
Sheet).
In simple terms, it is a financial snapshot of a company at one exact
moment in time (like midnight on December 31st). It shows everything the
company owns, everything it owes, and what is left over for the owners.
{Assets} = {Liabilities} + {Equity}
The three main parts ;
Assets
Liabilities
Equity
Format of statement of financial position ;
Assets
Non-current assets:
Property, plant and equipment
Investments
Intangible asset
Current assets:
Inventories
Trade receivables
Cash and cash equivalents
Total assets
Equity and liabilities
Capital and reserves:
Share capital
Retained earnings
Other components of equity
Total equity
Non-current liabilities:
Borrowings
Deferred tax
Current liabilities:
Trade and other payables
Income taxes payable
Provision
Total equity and liabilities
(Note that IFRS 18 requires an asset or liability to be classified as current if:
it will be settled within 12 months of the reporting date, or
it is part of the entity's normal operating cycle.)
[Link] of changes in equity (SOCIE)
"What happened to the owners' money in the business over the past
year?"This includes the effect of share issues and [Link] non-owner
changes in equity, such as comprehensive income, are disclosed in aggregate only.
Format of SOCIE 👍
XYZ Group
Statement of changes in equity for the year ended
31 December 20X8Share
Capital share capital premium revolution surplus retained earrings total equity
$ $ $ $ $
Balance at 31
December 20X7
Prior year
adjustment (IAS 8)
(See Chapter 8)
Restated balance
Dividends
Issue of share
capital
Total
comprehensive
income
Transfer to
retained earnings
(See Chapter 2)
Balance at 31
December 20X8
III. A STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
A statement of profit or loss and other comprehensive income is a financial report showing a
company's total money earned, money spent, and overall value changes over a set time. It
has two main parts: profit or loss and other comprehensive income (OCI).
otal comprehensive income is the realised profit or loss for the period,
plus other comprehensive income.
Other comprehensive income (OCI) is income and expenses that are not recognisprofit or loss
(i.e. they are recorded in reserves rather than as an element of the realised profit for the period).
For the purposes of [Link] comprehensive income includes any change in the revaluation of
non-current assets (IAS 16, see Chapter 2) and fair value through other comprehensive income
financial assets (IFRS 9, see Chapter 9).
FORMAT
Revenue
Cost of sales
Gross profit
Other operating income
Distribution expenses
Administrative expense
Other operating expenses
Operating profit
Share of associate profit (see Chapter 20)
Income from other investments
Profit before financing and income taxes
Interest expenses
Profit before income taxes
Income tax expense
Profit for the year
Other comprehensive income
Gain/loss on revaluation (see Chapter 2)
Gain/loss on fair value through other comprehensive
income financial assets (see Chapter 9)
Total comprehensive income for the year
(Descriptions in bold are mandatory per IFRS 18. For example, ‘Distribution costs’ may
be replaced by‘Selling expenses’.)
A published financial statement is an official financial report made available to the public
and external users. It includes the balance sheet, the income statement, and the cash flow
statement. components are balance sheet ,income and cash flow statement , why they
matter this for investor ,banks and rules ).
Example of how to do the published financial statements
3 Not-for-profit and public sector entities;
Not-for-profit and public sector entities are organizations that run to help people or the
community, not to make money. Key types include not-for-profit organizations (NPOs),
public sector bodies, and charities. Any money they make is put back into their work instead
of being paid out to owners.
Accounting standards and not-for-profit and public sector entities:
● Standards are designed to measure and report the financial position and performance
accurately and [Link] for the directors' stewardship of resources and
assets.
Not-for-profit and public sector organisations:
do not aim to achieve a profit but have to account for their income
and costs
have to account for their effectiveness, economy and efficiency
do not have to produce financial statements for the public (but in
many cases may do so)
Some measurement accounting standards will be relevant such as
those relating to inventory, non-current assets, leasing, etc. Others
relating purely to reporting such as earnings per share (eps) will not be
so relevant