(Intermediate Accounting 3) 6.

A statement of financial position as at the beginning of the preceding period

when an entity applies an accounting policy retrospectively or makes a
retrospective restatement of items in its financial statements, or when it
Chapter 1 Statement of Financial Position
reclassifies items in its financial statements.
Related standard: PAS 1 Presentation of Financial Statements
Learning Objectives
General features
• Enumerate and describe the components of a complete set of financial
1. Fair Presentation and Compliance with PFRSs - The application of PFRSs, with
statements.
additional disclosure when necessary, is presumed to result in financial statements
• Classify assets and liabilities into current and noncurrent.
that achieve a fair presentation.
• Prepare a statement of financial position.

2. Going concern - An entity is not a going concern if, as of financial reporting date or
Objective of PAS 1
prior to the date of authorization of financial statements for issue, management
PAS 1 prescribes the basis for presentation of general purpose financial statements to
either
improve comparability both with the entity's financial statements of previous periods and
with the financial statements of other entities.
a. Intends to liquidate the entity or to cease trading, or
General purpose financial statements are those intended to serve users who do not have b. Has no realistic alternative but to do so.
the authority to demand financial reports tailored for their own needs. General purpose
financial statements are those statements that cater to most of the common needs of a • The assessment of going concern is at least 12 months.
wide range of external users. General purpose financial statements are the subject matter
of the Conceptual Framework and the PFRSs. 3. Accrual Basis of Accounting - An entity shall prepare its financial statements,
except for cash flow information, using the accrual basis of accounting.
• Types of comparability
• Intra-comparability 4. Materiality & Aggregation - Each material class of similar items must be presented
• Inter-comparability separately in the financial statements.

Complete set of financial statements 5. Offsetting - Assets and liabilities, and income and expenses, shall not be offset
unless required or permitted by a PFRS.
1. Statement of financial position
2. Statement of profit or loss and other comprehensive income • Measuring assets net of valuation allowances, for example, obsolescence
3. Statement of changes in equity allowances on inventories, allowances for doubtful accounts on receivables, and
4. Statement of cash flows accumulated depreciation on property, plant, and equipment are not offsetting.
5. Notes
6. Frequency of reporting – An entity shall present a complete set of financial
(5a) comparative information in respect of the preceding period; and statements (including comparative information) at least annually.
 • When an entity changes the end of its reporting period and presents financial …..and the effect of the event to the statement of financial position as at the
statements for a period longer or shorter than one year, an entity shall disclose beginning of the preceding period is material.
the following,
Statement of financial position
1.The period covered by the financial statements:
A statement of financial position may be presented as either
2.The reason for using a longer or shorter period, and
1.Classified (current/non-current distinction) – showing current and noncurrent assets
3.The fact that amounts presented in the financial statements are not entirely comparable. and liabilities, or

7. Comparative Information 2.Unclassified (based on liquidity) – showing no distinction between current and
noncurrent items
An entity shall present comparative information in respect of the preceding period for
all amounts reported in the current period’s financial statements, unless other Current Assets
standards permit or require otherwise. An entity shall classify an asset as current when:

8. Consistency of presentation - An entity shall retain the presentation and 1. it expects to realize the asset or intends to sell or consume it, in its normal operating
classification of items in the financial statements from one period to the next unless: cycle;
a.it is apparent that another presentation or classification would be more appropriate
following a significant change in the nature of the entity’s operations or a review of its 2. it holds the asset primarily for the purpose of trading;
financial statements; or
3. it expects to realize the asset within twelve months after the reporting period; or
b.a PFRS requires a change in presentation.

4. the asset is cash or a cash equivalent unless the asset is restricted from being exchanged
or used to settle a liability for at least twelve months after the reporting period.
Additional Statement of financial position
A statement of financial position as at the beginning of the preceding period shall be Current Liabilities
presented when an entity
An entity shall classify a liability as current when:
1. Applies an accounting policy retrospectively or 1. it expects to settle the liability in its normal operating cycle;

2. Makes a retrospective restatement of items in its financial statements, or 2. it holds the liability primarily for the purpose of trading;

3. When it reclassifies items in its financial statements. 3. the liability is due to be settled within twelve months after the reporting period; or

4. the entity does not have an unconditional right to defer settlement of the liability for at
least twelve months after the reporting period. g. Inventories;
h. Trade and other receivables;
i. Cash and cash equivalents;
j. Assets classified as held for sale (Groups classified as held for sale) in accordance
Currently maturing long-term liabilities
with PFRS 5;
Trade and other payables;
General rule: Currently maturing long term liabilities are presented as current liabilities.
k. Provisions;
l. Financial liabilities (excluding amounts shown under (k) and (l));
Exceptions: m. Liabilities and assets for current tax, as defined in PAS 12 Income Taxes;
n. Deferred tax liabilities and deferred tax assets, as defined in PAS 12;
1.Refinancing agreement fully completed on or before the balance sheet date – non- o. Liabilities included in disposal groups classified as held for sale in accordance
current liability with PFRS 5;
p. Non-controlling interests, presented within equity; and
2.Refinancing agreement after the balance sheet date but before the financial statements q. Issued capital and reserves attributable to owners of the parent
are authorized for issue – non-current liability if the refinancing is at the discretion of the
entity. Order/ Format of Presentation

Breach of loan agreement PAS 1 does not prescribe the order or format in which an entity presents items.

General rule: A liability that is payable on demand is a current liability.

Exception: It is presented as non-current liability if the lender provides the entity, on or

before the balance sheet date, a grace period ending at least 12 months after the balance
sheet date to rectify a breach of loan covenant.

Presentation of Deferred taxes

Deferred tax liabilities (assets) shall be presented as noncurrent items in a classified

statement of financial position, irrespective of their expected dates of reversal.

a. Minimum line items in the statement of financial position

Property, plant and equipment;
b. Investment property;
c. Intangible assets;
d. Financial assets (excluding amounts shown under (e), (h) and (i));
e. Investments accounted for using the equity method;
f. Biological assets;