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IFRS Disclosure in financial reporting And Its Uses

IFRS Disclosure in financial reporting

IFRS Disclosure in financial reporting: International Accounting Standard 1: Presentation of Financial Statements or IAS 1 is an international financial reporting standard adopted by the International Accounting Standards Board (IASB). It lays out the guidelines for the presentation of financial statements and sets out minimum requirements of their content; it is applicable to all general purpose financial statements that are based on International Financial Reporting Standards (IFRS).

IAS 1 was originally issued by the International Accounting Standards Committee in 1997, superseding three standards on disclosure and presentation requirements,and was the first comprehensive accounting standard to deal with the presentation of financial standards.It was adopted by the IASB in 2001, and as of 2012 the standard was last amended in June 2011; these amendments will be effective from July 1, 2012.

IFRS Disclosure in financial reporting: Purpose and Feature

IAS 1 sets out the purpose of financial statements as the provision of useful information on the financial position, financial performance and cash flows of an entity, and categorizes the information provided into assets, liabilities, income and expenses, contributions by and distribution to owners, and cash flows. It lists the set of statements, for example the statement of financial position and statement of profit and loss, that together comprise the financial statements.

IAS 1 also elaborates on the following features of the financial statements:

  • fairly presented and compliant with IFRSs;
  • prepared on a going concern basis;
  • prepared using the accrual basis of accounting;
  • has material classes presented separately;
  • does not offset assets and liabilities;
  • prepared at least annually;
  • includes comparison with previous periods; and
  • presented consistently across periods

IFRS Disclosure in financial Reporting: Disclosure

The money related report of a business incorporates something beyond the monetary articulations; a budgetary report likewise needs data called exposures. Supplementary things, for example, budgetary calendars and tables give one type of divulgence in money related reports.

A wide assortment of other data is additionally exhibited, some of which is required if the business is an open company subject to government controls with respect to money related answering to its stockholders. Other data is deliberate and not entirely required lawfully or as indicated by GAAP.

IFRS Disclosure in financial reporting

IFRS Disclosure in financial reporting : Financial statements are a structured representation of the financial positions 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:

  1. Assets
  2. liabilities
  3. Equity
  4. Income and expenses, including gains and losses
  5. Contributions by and distributions to owners in their capacity as owners and
  6. 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.

The following are the general features in IFRS:

  • Fair presentation and compliance with IFRS: Fair presentation requires the faithful representation of the effects of the transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework of IFRS.
  • Going concern: Financial statements are present on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.
  • Accrual basis of accounting: An entity shall recognise items as assets, liabilities, equity, income and expenses when they satisfy the definition and recognition criteria for those elements in the Framework of IFRS.
  • Materiality and aggregation: Every material class of similar items has to be presented separately. Items that are of a dissimilar nature or function shall be presented separately unless they are immaterial.
  • Offsetting: Offsetting is generally forbidden in IFRS. However certain standards require offsetting when specific conditions are satisfied (such as in case of the accounting for defined benefit liabilities in IAS 19  and the net presentation of deferred tax liabilities and deferred tax assets in IAS 12 ).
  • Frequency of reporting: IFRS requires that at least annually a complete set of financial statements is presented. However listed companies generally also publish interim financial statements (for which the accounting is fully IFRS compliant)for which the presentation is in accordance with IAS 34 Interim Financing Reporting.
  • Comparative information: IFRS requires entities to present comparative information in respect of the preceding period for all amounts reported in the current period’s financial statements. In addition comparative information shall also be provided for narrative and descriptive information if it is relevant to understanding the current period’s financial statements. The standard IAS 1 also requires an additional statement of financial position (also called a third balance sheet) 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. This for example occurred with the adoption of the revised standard IAS 19 (as of 1 January 2013) or when the new consolidation standards IFRS 10-11-12 were adopted (as of 1 January 2013 or 2014 for companies in the European Union).
  • Consistency of presentation: IFRS requires that the presentation and classification of items in the financial statements is retained from one period to the next unless:
    1. it is apparent, following a significant change in the nature of the entity’s operations or a review of its financial statements, that another presentation or classification would be more appropriate having regard to the criteria for the selection and application of accounting policies in IAS 8; or
    2. an IFRS standard requires a change in presentation.

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