Key IAS Principles and Application
IAS 1 – Presentation of Financial Statements
Objective
To establish a comprehensive framework for presenting general-use financial statements, including guidelines for structure and content.
Abstract
This standard outlines the basic principles for preparing financial statements. These include the going concern assumption, consistent presentation and classification, accrual accounting, and materiality.
- Assets, liabilities, income, and expenses cannot be offset unless permitted or required by another IFRS.
- Comparative information for the prior year must be presented for all amounts in the financial statements and accompanying notes.
- Financial statements are typically prepared annually. If the reporting period changes and statements cover a period other than a year, this must be disclosed.
A complete set of financial statements includes:
- 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 to the financial statements
IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors
Objective
To establish criteria for selecting and changing accounting policies, along with the accounting treatment and disclosure requirements for changes in accounting policies, changes in estimates, and corrections of errors.
Summary
This standard establishes a hierarchy for selecting accounting policies:
- IASB Standards and Interpretations, considering any implementation guidance from the IASB.
- If no directly applicable IFRS exists, consult the requirements and guidance in other IFRSs addressing similar and related issues, and the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework for the Preparation and Presentation of Financial Statements.
- Consider recent pronouncements of other standard-setting bodies using a similar conceptual framework, other accounting literature, and accepted industry practices.
- Accounting policies should be applied consistently for similar transactions.
- Changes in accounting policies should only be made if required by an IFRS or if they result in more relevant and reliable information.
- If an IFRS mandates a change, follow its transition requirements. If none are specified, or if the change is voluntary, apply the new policy retrospectively by restating prior periods unless impracticable. If impracticable, apply prospectively from the earliest feasible period.
- All material errors should be corrected by restating prior period amounts. If the error occurred before the earliest period presented, restate the opening statement of financial position.
IAS 10 – Events After the Reporting Period
Objective
To specify when an entity should adjust its financial statements for events after the reporting period and the disclosures required about the date the financial statements were authorized for issue and events after that date.
Abstract
Events after the reporting period are those occurring between the reporting date and the date of authorization for issue of the financial statements, whether favorable or unfavorable.
- Adjusting Events: Financial statements should be adjusted to reflect events providing evidence of conditions existing at the reporting date (e.g., settlement of a lawsuit after the reporting date).
- Non-Adjusting Events: No adjustment is needed for events occurring after the reporting date that do not reflect conditions at the reporting date (e.g., decline in market prices after the reporting period not affecting the valuation of investments at the reporting date).
- Dividends proposed or declared after the reporting date should not be recognized as a liability at the reporting date, but should be disclosed.
- Financial statements should not be prepared on a going concern basis if post-reporting period events indicate this assumption is inappropriate.
- The date of authorization for issue of the financial statements must be disclosed.