CPA FR Note: Module 2 Presentation of Financial Statements

Complete Set of Financial Statements

Complete Set of Financial Statements

A set of financial statements includes a statement of financial position, a statement of P/L and OCI, a statement of changes in equity, a statement of cash flows, notes, and comparative information.

Segment Reporting

IFRS 8 requires disclosure of segment information to evaluate business activities and economic environments.

Fair Presentation and Compliance with IFRS

Financial statements must present fairly the entity's financial performance, position, and cash flows, complying with IFRS requirements.

Going Concern

Assumes the entity can meet its financial obligations and operate without liquidation threats, requiring disclosure if not applicable.

Accrual Basis

Financial statements, except for cash flow information, must be prepared under accrual accounting principles.

Materiality and Aggregation

Transactions are aggregated into classes based on nature or function, with material items presented separately.

Offsetting

Generally prohibited unless required or permitted by IFRS to avoid obscuring relevant information.

Frequency of Reporting

Entities must present a complete set of financial statements at least annually, with disclosure if the reporting period changes.

Comparative Information

Enhances comparability by presenting comparative information for all amounts reported in the current period's financial statements.

Consistency of Accounting Policies

Ensures consistent application of accounting policies for similar transactions, events, and conditions over time.

Selection of Accounting Policies

Refers to the principles, bases, rules, and practices applied in preparing financial statements, requiring professional judgment for relevant and reliable information.

Changes in Accounting Policies

Permitted only if required by IFRS and result in more reliable and relevant information, with specific disclosure requirements.

Revision of Accounting Estimates

Due to uncertainties, financial statement items often require estimations, such as bad debts, inventory obsolescence, and useful lives of assets.

Change in Accounting Estimate

Changes in accounting estimates must be recognized prospectively, either in the period of the change if it affects only that period or in the period of the change and future periods if it affects both.

Adjustments

Adjustments due to changes in estimates should be recognized in the current reporting period or both current and future periods, depending on the impact. Relevant adjustments to assets, liabilities, and equity items should be made in the period of the change.

Material Errors in Prior Period

Financial statements are non-compliant if they contain material errors or immaterial errors made intentionally. Retrospective correction is required for material errors discovered in subsequent reporting periods.

Events After the Reporting Period

Events after the reporting period can be adjusting or non-adjusting. Adjusting events provide new evidence of conditions existing at the end of the reporting period, while non-adjusting events reflect conditions arising after the reporting period.

Dividends Declared After Reporting Period

Dividends declared after the reporting period should not be recognized as a liability at the end of the reporting period. They are regarded as a non-adjusting event and disclosed in the notes to the financial statements.

Going Concern Issues After Reporting Period

If management decides to liquidate the entity or cease trading after the reporting period, financial statements should not be prepared on a going concern basis. The new information about going concern is treated as an adjusting event.