IAS 1 – Presentation of Financial Statements: A Comprehensive Guide

Financial statements are the cornerstone of transparency, comparability, and accountability in the corporate world. The International Accounting Standards Board (IASB), through IAS 1 – Presentation of Financial Statements, lays down the foundational principles for how financial statements should be structured and presented under the IFRS framework.

Let’s dive deep into the key requirements, structure, and nuances of IAS 1.

What transforms a set of numbers into a reliable financial narrative?

Clarity begins with presentation. IAS 1 turns financial chaos into structured insight. Because when format aligns with function, decisions become powerful.

Objective of IAS 1

The objective of IAS 1 is to prescribe the basis for presentation of general-purpose financial statements, ensuring comparability both:

• With the entity’s previous financial statements
• Across entities globally adhering to IFRS

IAS 1 does not specify recognition, measurement, or disclosure of specific transactions, which are handled by other standards.

Components of a Complete Set of Financial Statements (IAS 1.10)

Under IAS 1, a complete set of financial statements comprises:

• Statement of Financial Position (Balance Sheet)
• Statement of Profit or Loss and Other Comprehensive Income (OCI)
• Statement of Changes in Equity
• Statement of Cash Flows (as per IAS 7)
• Notes to the Financial Statements
• Comparative Information (at least one preceding period)
• Third Statement of Financial Position (if required by IAS 8 due to restatement)

Fundamental Principles of Presentation

• Fair Presentation and Compliance (IAS 1.15–24): Entities must present fairly the financial position, performance, and cash flows. Compliance with IFRS ensures fair presentation.
• Going Concern (IAS 1.25): Statements must be prepared on a going concern basis unless management intends to liquidate or cease trading.
• Accrual Basis of Accounting (IAS 1.27): All statements must use the accrual method except for cash flow statements.
• Consistency of Presentation (IAS 1.45): Presentation and classification must remain consistent unless a change provides more reliable/relevant information.
• Materiality and Aggregation (IAS 1.29–31): Omit immaterial items; aggregate similar items for clarity.
• No Offsetting (IAS 1.32–35): Assets and liabilities, or income and expenses, should not be offset unless required or permitted by another IFRS.

Key Presentation Rules

📌 Statement of Financial Position (IAS 1.54–59)

• Must classify assets and liabilities as current or non-current, unless a liquidity-based presentation provides more reliable information.
• Must disclose specific line items such as PPE, inventories, receivables, equity, provisions, and financial liabilities.

📌 Statement of Profit or Loss and OCI (IAS 1.81A–105)

• Can be presented as a single statement or two statements:
  • Statement of profit or loss
  • Statement of other comprehensive income
• Items must be grouped into:
  • Those reclassifiable to P&L
  • Those not reclassifiable

📌 Statement of Changes in Equity (IAS 1.106–110)

Shows total comprehensive income, changes due to transactions with owners (like dividends, share capital), and reconciliation of each component of equity.

📌 Notes to Financial Statements (IAS 1.112–138)

Must disclose:

• Significant accounting policies
• Key judgments and estimation uncertainties
• Breakdown of line items
• Capital management information

Disclosures Specific to IAS 1

• Judgments Made in Applying Accounting Policies (IAS 1.122)
• Major Sources of Estimation Uncertainty (IAS 1.125)
• Capital Disclosures (IAS 1.134–136)
• Reclassification Adjustments and Nature of OCI Components

Comparability and Changes

• Comparative Information (IAS 1.38–41): Required for all presented amounts.
• Third Balance Sheet (IAS 1.40A): Required if there’s a retrospective restatement, reclassification, or correction per IAS 8.

Conclusion

IAS 1 forms the bedrock of IFRS reporting, ensuring that users of financial statements receive a clear, comparable, and comprehensive view of an entity’s financial health.

As global standards converge and stakeholders demand greater transparency, mastering IAS 1 is essential for professionals in finance, accounting, and audit.