IFRS FINANCIAL STATEMENTS

Question 1

What include a complete set of IFRS financial statements?

Answer 1

A complete set of IFRS financial statements is as follows:

*A statement of financial position (=balance sheet)
*A statement of profit or loss and other comprehensive income for the period (=Statement of comprehensive income)
*A statement of changes in equity for the period
*A statement of cash flows for the period
* Notes to the financial statements
*Comparative information in respect of the preceding period

Question 2

How are classified asset and liabilities in the statement of financial position?

Answer 2

Assets and liabilities are classified as current or non current in the statement of financial position, except when a presentation based on liquidity would provide information that is reliable and more relevant.

Question 3

What is an Asset (IASB’s definition)

Answer 3

An asset is a resoutce controlled by the enterprise as a result of past event and from which future economic benefits are exepcted to flow to the enterprise.

Question 4

What items are classified as current?

Answer 4

Items classified as current are part of the entity’s working capital, or are assets expected to be realized, used or sold within the entity’s normal operating cycle, or are liabilities due to be settled within twelve months after the reporting period.

The classification is based on conditions at the end of the reporting period, and is not affected by events, after that date.

Question 5

What is a non current asset held for sale? How is it classified in the statement of financial position?

Answer 5

A non current asset is regarded as ‘held for sale ’ if its carrying amount will be recovered principally through a sale transaction, rather than through continuing use.

Non current assets are reclassified as current assets when they are held for sale.

Question 6

What are the condition for an asset to be classified as a non-current asset held for sale?
How are they measured (IFRS 5)?

Answer 6

To be classified as a non-current asset held for sale, an asset must be available for immediate sale in its present condition and the sale must be highly probable;

Non current assets held for sale (IFRS 5) are not depreciated; they are measured at the lower of fair value less costs to sell and carrying amount (prior to reclassification as held for sale)

Question 7

What is a liability (IASB’s definition)?

Answer 7

A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enity of resources ebodying economic benefits.

Question 8

When a liability is classified as current?

Answer 8

A liability is classified as current if the financial liability is due to be settled within 12 months of the reporting period even if an agreement to refinance or reschedule on a long term basis is completed after reporting period, but before financial statements are signed

Question 9

When a liability is classified as non-current?

Answer 9

A liability is classified as non-current if entity has the discretion to roll over/refinance a liability for at least 12 months after the reporting period even it would otherwise be classified as current

Question 10

Which sections shall present the statement of profit or loss and other comprehensive income?

Answer 10

• Profit or loss
• Total other comprehensive income
• Comprehensive income for the period, being the total of profit or loss and other comprehensive income.

Question 11

What items shall present an entity, 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?

Answer 11

Profit or loss for the period attributable to and comprehensive income for the period attributable to :
- Non-controlling interests, and
- Owners of the parent

Question 12

What Other comprehensive income includes?

Answer 12

Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other IFRSs.

For example:
Gains and losses arising from translating the financial statements of a foreign operation (IAS 21)
Changes in revaluation surplus (IAS 16)

Question 13

On which classification base are presented expenses recognized in profit or loss?

Answer 13

Expenses recognized in profit or loss are presented using a classification based on their nature, or instead basing the analysis on their function within the entity (e.g. cost of sales), depending on which information is most reliable and relevant.

Question 14

What is a Discontinued operation?

Answer 14

A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale and represents a separate major line of business or geographical area of operations for which there is a single coordinated disposal plan.

Question 15

Where are discontinued operations presented?

Answer 15

Discontinued operations (IFRS 5) are presented separately within profit or loss in the statement of comprehensive income.

Question 16

What are listed entities required to present in the statement of comprehensive income (IAS 33)?

Answer 16

Listed entities are required to present basic and diluted earnings per share

Question 17

Which informations an entity shall include in the Statement of change in equity?

Answer 17

1.Total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non controlling interests;
2.For each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with IAS 8; and
3. Share of the profit or loss of associates and joint ventures accounted for using the equity method
4. For each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from:
*profit or loss;
*other comprehensive income; and
*transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control.

Question 18

Who is addressed to and which information provides the Statement of Cash Flows (IAS7)?

Answer 18

A statement of cash flows (IAS 7), used in conjunction with the rest of the financial statements, provides useful information to existing and potential investors, lenders and other creditors in assessing the ability of the entity to generate cash and cash equivalents.

Question 19

What do cash and cash equivalent include?

Answer 19

Cash comprises cash on hand and demand deposits.
Cash equivalents are short term, highly liquid investments that are readily convertible to a
known amount of cash and that are subject to an insignificant risk of change in value.

Question 20

How is classified the Statement of Cash Flows?

Answer 20

‐ ** Investing activities**:are the acquisition and disposal of long term assets and investments that are not cash equivalents (for example, a cash payment to purchase machinery)
‐ Financing activities: are changes in the equity capital and borrowings of the entity.
‐ Operating activities: are the revenue producing activities of the entity, and all activities that are not investing or financing

Question 21

What are the two way (method) to report cash flow from operating activities?

Answer 21

There are two ways to report cash flows
from operating activities:
‐ the direct method: major classes of gross cash receipts and gross cash payments are shown ; or
‐ the indirect method: profit or loss is adjusted to determine operating cash flow.

Question 22

What information shall an entity include in the Notes?

Answer 22

• Basis of preparation of the Financial Statements and the Accounting policies used;
• Disclosures required by the IAS and IFRS standards;
• Additional information that is not presented elsewhere in the financial statements, but is relevant to an understanding of any of them.

Question 23

What informations need to be included when showing, in the Notes, the Basis of preparation of financial statements and the Accounting policis used?

Answer 23

1. An entity whose financial statements comply with IFRSs shall make an explicit and unreserved statement of such compliance in the notes.
2. An entity shall disclose, along with its significant accounting policies or other notes, the judgments and estimations that management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
3. An entity shall disclose its significant accounting policies comprising:
   - the measurement basis (or bases) used in preparing the financial statements; and
   - the other accounting policies used that are relevant to an understanding of the financial statements.

Question 24

Which disclosures are required by the IAS and IFRS standards?

Answer 24

1. FAIR VALUE DISCLOSURE (IFRS 13):
   An entity shall disclose information that helps users of its financial statements assess both of the following:
   -valuation techniques and inputs used to develop measurements at FV
   -the effect of the measurement on profit or loss or other comprehensive income for the period.
2. FOREIGN EXCHANGE RISK (IFRS 7):
   An entity shall disclose information that enables users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the end of the reporting period;
3. INCOME TAX (IAS 12):
   An entity should disclose separately an explanation of the relationship between tax expense (income) and accounting profit;
4. EARNING PER SHARE (IAS 33):
   IAS 33 only applies to financial statements of an entity whose ordinary shares or potential ordinary shares are traded in a public market;
5. SEGMENT INFORMATION (IFRS 8):
   IFRS 8 requires the disclosure of information about an entity’s operating segments, its products and services, the geographical areas in which it
   operates, and its major customers.