Presentation of Financial Statements and Disclosure Requirements
IAS 1 governs the structure of a complete set of financial statements: a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity, a statement of cash flows, notes comprising significant accounting policies and other explanatory information, and comparative information. Candidates must know the minimum line items on the face of each statement, the requirement to present a classified statement of financial position (current/non-current) unless a liquidity presentation is more relevant, and the current/non-current criteria: an asset is current if realised in the normal operating cycle, held primarily for trading, expected to be realised within twelve months, or cash/cash equivalents unrestricted.
Traps
A frequent trap is the treatment of a liability refinanced after the reporting date: under IAS 1, if the entity had a right at the reporting date to defer settlement for at least twelve months, it is non-current even if the agreement is signed after year-end; if that right did not exist at year-end, it is current, and breach of a covenant can make a loan current unless a waiver existed at the reporting date. Another trap is the distinction between a change in accounting policy (retrospective), a change in estimate (prospective) and a prior period error (retrospective restatement), and where each appears in the statement of changes in equity. Watch for OCI reclassification adjustments, non-controlling interests within equity, and the disclosure of going concern uncertainties and capital management.
Worked example / rule of thumb
A company breaches a loan covenant at 30 June but obtains a waiver on 15 July before the financial statements are authorised for issue. Under IAS 1, the liability is classified as current at 30 June because the waiver came after the reporting date. Rule of thumb: classification is determined by rights and conditions existing at the reporting date; subsequent events inform disclosure, not classification, except for the specific refinancing-right rule.