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Presentation of Financial Statements

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COPYRIGHT

© 2007 Commonwealth of Australia

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ISSN 1036-4803

AASB 1011COPYRIGHT

CONTENTS

Preface

Comparison With International Pronouncements

Accounting Standard

AASB 101Presentation of Financial Statements

Paragraphs

Objective1

ApplicationAus1.1 – Aus1.8

Scope3–6

Definitions7–8

Financial Statements

Purpose of Financial Statements9

Complete Set of Financial Statements10–14

General Features

Fair Presentation and Compliance with IFRSs15–24

Going Concern25–26

Accrual Basis of Accounting27–28

Materiality and Aggregation29–31

Offsetting32–35

Frequency of Reporting36–37

Comparative Information38–44

Consistency of Presentation45–46

Structure and Content

Introduction47–48

Identification of the Financial Statements49–53

Statement of Financial Position

Information to be Presented in the Statement of Financial Position 54–59

Current/Non-current Distinction60–65

Current Assets66–68

Current Liabilities69–76

Information to be Presented either in the Statement of Financial Position or in the Notes 77–80

Statement of Comprehensive Income81

Information to be Presented in the Statement of Comprehensive Income 82–87

Profit or Loss for the Period88–89

Other Comprehensive Income for the Period90–96

Information to be Presented in the Statement of Comprehensive Income or in the Notes 97–105

Statement of Changes in Equity106–110

Statement of Cash Flows111

Notes

Structure112–116

Disclosure of Accounting Policies117–124

Sources of Estimation Uncertainty125–133

Capital134–136

Other Disclosures137– Aus138.6

AUSTRALIAN IMPLEMENTATION GUIDANCEPage51

DELETED IAS 1 TEXTPage 53

BASIS FOR CONCLUSIONS ON IAS 1

(available on the AASB website)

IMPLEMENTATION GUIDANCE ON IAS 1

(available on the AASB website)

TABLE OF CONCORDANCE

(available on the AASB website)

Australian Accounting Standard AASB 101Presentation of Financial Statementsis set out in paragraphs 1–Aus138.6. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. Terms defined in this Standard are in italics the first time they appear in the Standard. AASB101 is to be read in the context of other Australian Accounting Standards, including AASB1048 Interpretation and Application of Standards, which identifies the AustralianAccounting Interpretations. In the absence of explicit guidance, AASB108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.

AASB 1011CONTENTS

Preface

Reasons for Issuing AASB 101

The Australian Accounting Standards Board (AASB) is implementing the Financial Reporting Council’s policy of adopting the Standards of the International Accounting Standards Board (IASB) for application to reporting periods beginning on or after 1January 2005. The AASB has decided it will continue to issue sector-neutral Standards, that is, Standards applicable to both for-profit and not-for-profit entities, including public sector entities. Except for Standards that are specific to the not-for-profit or public sectors or that are of a purely domestic nature, the AASB is using the IASB Standards as the “foundation” Standards to which it adds material detailing the scope and applicability of a Standard in the Australian environment. Additions are made, where necessary, to broaden the content to cover sectors not addressed by an IASB Standard and domestic, regulatory or other issues.

Main Features of this Standard

Application Date

This Standard is applicable to annual reporting periods beginning on or after 1 January 2009, with early adoption permitted for annual reporting periods beginning on or after 1January2005 but before 1 January 2009.

Main Requirements

This Standard prescribes:

(a)the composition of a complete set of financial statements:

(i)a statement of financial position as at the end of the period;

(ii)a statement of comprehensive income for a period;

(iii)a statement of changes in equity for a period;

(iv)a statement of cash flows for a period;

(v)notes, comprising a summary of significant accounting policies and other explanatory notes;

(vi)a statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements;

(b)the general features of financial statements:

(i)fair presentation and compliance with IFRSs and Australian Accounting Standards;

(ii)going concern;

(iii)accrual basis of accounting;

(iv)consistency of presentation;

(v)materiality and aggregation;

(vi)offsetting;

(vii)frequency of reporting;

(viii)comparative information;

(c)the structure and content of financial statements;

(d)classification of items in the financial statements; and

(e)a range of disclosures about financial position and financial performance.

Consequential Amendments

Consequential amendments to other Australian Accounting Standards are included in AASB 2007-8Amendments to Australian Accounting Standards arising from AASB 101(September 2007).

Differences between this Standard and AASB 101 as issued in October 2006

The main changes from AASB 101 as issued in October 2006 are described below.

A complete set of financial statements

This Standard introduces the notion of a ‘complete set of financial statements’ which is identified as:

(a)a statement of financial position as at the end of the period;

(b)a statement of comprehensive income for a period;

(c)a statement of changes in equity for a period;

(d)a statement of cash flows for a period;

(e)notes, comprising a summary of significant accounting policies and other explanatory notes;

(f)a statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements.

The previous version of AASB 101 used the titles ‘balance sheet’ and ‘cash flow statement’ to describe two of the statements within a complete set of financial statements. This Standard uses ‘statement of financial position’ and ‘statement of cash flows’ for those statements, although entities can use other statement titles.

This Standard requires an entity to disclose comparative information in respect of the previous period – that is, to disclose as a minimum two of each of the statements and related notes.

Reporting owner changes in equity and comprehensive income

The previous version of AASB 101 required the presentation of an income statement that included items of income and expense recognised in profit or loss. It required items of income and expense not recognised in profit or loss to be presented in the statement of changes in equity, together with owner changes in equity. It also labelled the statement of changes in equity comprising profit or loss, other items of income and expense and the effects of changes in accounting policies and correction of errors as ‘statement of recognised income and expense’. This Standard now requires:

(a)all changes in equity arising from transactions with owners in their capacity as owners (i.e. owner changes in equity) to be presented separately from non-owner changes in equity. An entity is not permitted to present components of comprehensive income (i.e. non-owner changes in equity) in the statement of changes in equity. The purpose is to provide better information to users by requiring aggregation of items with shared characteristics and separation of items with different characteristics;

(b)income and expenses to be presented in one statement (a statement of comprehensive income) or in two statements (a separate income statement and a statement of comprehensive income), separately from owner changes in equity;

(c)components of other comprehensive income to be displayed in the statement of comprehensive income; and

(d)total comprehensive income to be presented in the financial statements.

Other comprehensive income─reclassification adjustments and related tax effects

This Standard requires an entity to disclose income tax relating to each component of other comprehensive income. The previous version of AASB101 did not include such a requirement.

This Standard also requires an entity to disclose reclassification adjustments relating to components of other comprehensive income. Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in previous periods.

Presentation of dividends

The previous version of AASB 101 permitted disclosure of the amount of dividends recognised as distributions to equity holders (now referred to as ‘owners’) and the related amount per share in the income statement, in the statement of changes in equity or in the notes. This Standard requires dividends recognised as distributions to owners and related amounts per share to be presented in the statement of changes in equity or in the notes. The presentation of such disclosures in the statement of comprehensive income is not permitted.

AASB 1011PREFACE

Comparison with International Pronouncements

AASB 101 and IAS 1

AASB 101Presentation of Financial Statementsis equivalent to IAS 1Presentation of Financial Statements issued by the IASB. Paragraphs that have been added to this Standard (and do not appear in the text of the equivalent IASB Standard) are identified with the prefix “Aus”, followed by the number of the relevant IASB paragraph and decimal numbering. IAS 1 text that has been deleted from this Standard (and does not affect IFRS compliance) is listed in a separate section after the Standard.

Compliance with IAS 1

For-profit entities that comply with AASB101 will simultaneously be in compliance with IAS 1. Not-for-profit entities using the added “Aus” paragraphs in the Standard that specifically apply to not-for-profit entities may not be simultaneously complying with IAS 1. Whether a not-for-profit entity will be in compliance with IAS 1 will depend on whether the “Aus” paragraphs provide additional guidance for not-for-profit entities or contain requirements that are inconsistent with the corresponding IASB Standard and will be applied by the not-for-profit entity.

AASB 101 and IPSAS 1

International Public Sector Accounting Standards (IPSASs) are issued by the International Public Sector Accounting Standards Board of the International Federation of Accountants.

IPSAS1Presentation of Financial Statements (May2000) is drawn primarily from IAS 1 Presentation of Financial Statements (revised 1997). The main differences between IPSAS1 and AASB101 are:

(a)IPSAS 1 allows the presentation of “extraordinary items”. In contrast, AASB 101 does not permit extraordinary items to be presented;

(b)IPSAS 1 requires the presentation of a statement showing all changes in net assets/equity, whereas AASB 101 requires an entity to present a separate statement of changes in equity;

(c)AASB 101 requires an entity to present a statement of financial position as at the beginning of the earliest comparative period in a complete set of financial statements when the entity applies an accounting policy retrospectively or makes a retrospective restatement, as defined in AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, or when the entity reclassifies items in the financial statements. IPSAS 1 does not have this requirement; and

(d)AASB 101 requires an entity to disclose reclassification adjustments and income tax relating to each component of other comprehensive income. IPSAS 1 does not have this requirement.

AASB 1011COMPARISON

aCCOUNTING STANDARD AASB 101

The Australian Accounting Standards Board makes Accounting Standard AASB101Presentation of Financial Statements under section334 of the Corporations Act 2001.

aCCOUNTING STANDARD AASB 101

Presentation of Financial Statements

Objective

1.This Standard prescribes the basis for presentation of general purpose financial statements to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities. It sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content.

Application

Aus1.1This Standard applies to:

(a)each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act;

(b)general purpose financial statements of each reporting entity; and

(c)financial statements that are, or are held out to be, general purpose financial statements.

Aus1.2This Standard applies to annual reporting periods beginning on or after 1January 2009.

Aus1.3This Standard may be applied to annual reporting periods beginning on or after 1January 2005 but before 1January2009. If an entity adopts this Standard for an earlier period, it shall disclose that fact.

Aus1.4The requirements specified in this Standard apply to the financial statements where information resulting from their application is material in accordance with AASB1031 Materiality.

Aus1.5When applicable, this Standard supersedes AASB 101 Presentation of Financial Statements as made on 4October2006 and amended to 14 June 2007.

Aus1.6Notwithstanding paragraphAus1.1(a), the application of paragraphs134-136 is limited to each entity that is required to prepare financial reports in accordance with Part2M.3 of the Corporations Act and that is a reporting entity.

Aus1.7Notwithstanding paragraphsAus1.1 and Aus1.6, a notforprofit entity need not present the disclosures required by paragraphs134-136.

Scope

2.[Deleted by the AASB]

3.Other Australian Accounting Standards set out the recognition, measurement and disclosure requirements for specific transactions and other events.

4.This Standard does not apply to the structure and content of condensed interim financial statements prepared in accordance with AASB134 Interim Financial Reporting. However, paragraphs 15–35 apply to such financial statements. This Standard applies equally to all entities, including those that present consolidated financial statements and those that present separate financial statements as defined in AASB 127 Consolidated and Separate Financial Statements.

5.This Standard uses terminology that is suitable for profit-oriented entities, including public sector business entities. If entities with not-for-profit activities in the private sector or the public sector apply this Standard, they may need to amend the descriptions used for particular line items in the financial statements and for the financial statements themselves.

6.Similarly, entities that do not have equity as defined in AASB132 Financial Instruments: Presentation (e.g. some mutual funds) and entities whose share capital is not equity (e.g. some co-operative entities) may need to adapt the financial statement presentation of members’ or unitholders’ interests.

Definitions

7.The following terms are used in this Standard with the meanings specified:

General purpose financial statements (referred to as ‘financial statements’) are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs.

Impracticable– Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.

International Financial Reporting Standards (IFRSs) are Standards and Interpretations adopted by the International Accounting Standards Board (IASB). They comprise:

(a)International Financial Reporting Standards;

(b)International Accounting Standards; and

(c)Interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC).

Material– Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor.

Assessing whether an omission or misstatement could influence economic decisions of users, and so be material, requires consideration of the characteristics of those users. The Framework for the Preparation and Presentation of Financial Statements states in paragraph 25 that ‘users are assumed to have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence’. Therefore, the assessment needs to take into account how users with such attributes could reasonably be expected to be influenced in making economic decisions.

Notes contain information in addition to that presented in the statement of financial position, statement of comprehensive income, separate income statement (if presented), statement of changes in equity and statement of cash flows. Notes provide narrative descriptions or disaggregations of items presented in those statements and information about items that do not qualify for recognition in those statements.

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 Australian Accounting Standards.

The components of other comprehensive income include:

(a)changes in revaluation surplus (see AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets);

(b)actuarial gains and losses on defined benefit plans recognised in accordance with paragraph 93A of AASB 119 Employee Benefits;

(c)gains and losses arising from translating the financial statements of a foreign operation (see AASB 121 The Effects of Changes in Foreign Exchange Rates);

(d)gains and losses on remeasuring available-for-sale financial assets (see AASB 139 Financial Instruments: Recognition and Measurement); and

(e)the effective portion of gains and losses on hedging instruments in a cash flow hedge (see AASB 139).

Owners are holders of instruments classified as equity.

Profit or loss is the total of income less expenses, excluding the components of other comprehensive income.

Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods.

Total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners.

Total comprehensive income comprises all components of ‘profit or loss’ and of ‘other comprehensive income’.

Aus7.1The following terms are also used in this Standard with the meanings specified.

Annual reporting period means the financial year or similar period to which annual financial statements relate.