ACCA paper f 7 financial reoirting F7FR session04 d08

SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS OVERVIEW Objective To prescribe the basis for presentation of general purpose financial statements by setting out: overall considerations; guidelines for structure; minimum requirements for content INTRODUCTION “Disclosure” Identification of financial statements Reporting date and period Terms used STRUCTURE AND CONTENT STATEMENT OF FINANCIAL POSITION The current/noncurrent distinction Current assets Current liabilities Overall structure Presentation of assets, liabilities and equity Representation Objectives of financial statements Components Supplementary statements Objective General purpose financial statements Application Terminology Fair presentation and compliance with IFRSs Emphasis Departure from IFRS Going Concern Accrual basis of accounting Consistency of presentation Materiality and aggregation Offsetting Comparative information FINANCIAL STATEMENTS STATEMENT OF COMPREHENSIVE INCOME Line items Other comprehensive income Material items Analysis of expense OVERALL CONSIDERATIONS STATEMENT OF CHANGES IN EQUITY A separate statement Structure Reclassification NOTES TO THE FINANCIAL STATEMENTS Structure Disclosure of accounting policies Key sources of estimation uncertainty Capital disclosures Other disclosures 0401 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS INTRODUCTION 1.1 Objective To prescribe the content of general purpose financial statements in order to ensure comparability with: the entity’s own financial statements, and financial statements of other entity’s To achieve this the standard sets out: overall considerations for the presentation, guidelines for the structure, and minimum requirements for content of financial statements 1.2 General purpose financial statements 1.2.1 Meaning Financial statements intended to meet the needs of users who are not in a position to demand reports tailored to specific information needs May be presented separately or within another public document (eg annual report or prospectus) 1.3 Application To financial statements of individual entity’s and consolidated financial statements of groups To all types of entity’s including banks, insurance and other financial institutions To entity’s with a profit objective (including public sector business entity’s) 1.4 Terminology When referring to standards (IFRS/IAS) and interpretations (IFRICs/SICs) in general then the term used is that of IFRS If reference is required of a specific standard or interpretation then the standard and its number should be referred to Wherever this study system uses the term IFRS then it is referring to accounting standards and interpretations in general 0402 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS FINANCIAL STATEMENTS 2.1 Representation Financial statements are a structured financial representation of financial position of, and transactions undertaken by an entity 2.2 Objectives of financial statements (see the Framework) To provide information useful to a wide range of users in making economic decisions about: financial position performance cash flows To show the results of management’s stewardship To meet this objective financial statements provide information about an entity’s: assets liabilities equity income and expenses including gains and losses cash flows 2.3 Components A complete set of financial statements includes Statement of financial position Statement of comprehensive income, this will include; − Profit or loss for the period, and − Other comprehensive income recognised in the period A statement of changes in equity Statement of cash flows Accounting policies and explanatory notes Commentary A complete set of financial statement should include comparable figures for the previous period, meaning there will be two statements of financial position etc However, if an entity changes an accounting policy or amends a prior period error then a third statement of financial position must be presented for comparison purposes 0403 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS 2.4 Supplementary statements Entity’s may also present additional information on a voluntary basis, e.g A financial review by management Environmental reports Value added statements Any additional statements presented are outside the scope of IFRSs OVERALL CONSIDERATIONS 3.1 Fair presentation and compliance with IFRSs Financial statements shall “present fairly” financial position financial performance cash flows Achieved by appropriate application of IFRSs (and any necessary additional disclosures) Inappropriate accounting treatments are NOT rectified by disclosure of accounting polices used notes or explanatory material 3.2 Emphasis In virtually all circumstances fair presentation is achieved by compliance in all material respects with applicable IFRSs Compliance with IFRSs shall be disclosed Fair presentation requires selection and application of appropriate accounting policies presentation of information (including accounting policies) in a manner which provides relevant, reliable, comparable and understandable information Additional disclosures when the requirements of IFRSs are insufficient to enable users to understand the impact of particular transactions on the financial position and performance of the entity 3.3 Departure from IFRS In extremely rare circumstances, if compliance would be misleading, and therefore departure from a standard is necessary to achieve a fair presentation, the entity must disclose that management has concluded that the financial statements fairly present the entity’s financial position, performance and cash flows 0404 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS that it has complied in all material respects with applicable IFRSs except that it has departed from a standard in order to achieve a fair presentation the standard from which the entity has departed, the nature of departure, including the treatment that the standard would require together with the reason why that treatment would be misleading in the circumstances and the treatment adopted the financial impact of the departure on the entity’s profit or loss, assets, liabilities, equity and cash flows for each period presented Where an IFRS is applied before its effective date, that fact shall be disclosed 3.4 Going Concern Management shall assess the entity’s ability to continue as a going concern (considering all information available for the foreseeable future) prepare financial statements on a going concern basis (unless management consider that it is probable that the entity will be liquidated/cease trading) disclose material uncertainties which may affect the going concern concept The degree of consideration depends on the facts in each case If the entity has a history of profitable operation and ready access to financial resources detailed analysis may not be required before a conclusion is reached In other cases management may need to consider a wide range of factors, eg current and expected future profitability debt repayment schedules sources of finance Foreseeable future is at least, but not limited to, 12 months from the end of the reporting period When financial statements are not prepared on a going concern basis, that fact shall be disclosed, together with the basis on which the financial statements are prepared and the reason for departing from the going concern concept 3.5 Accrual basis of accounting An entity shall prepare its financial statements (except the statement of cash flows) under the accrual basis of accounting 3.5.1 Concept Assets, liabilities, equity, income and expenses are recognised when they occur (not as cash or its equivalent is received or paid) and 0405 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS recorded in the accounting records and reported in the financial statements of the periods to which they relate 3.5.2 “Matching” concept Expenses are recognised on the basis of a direct association between costs incurred and earning of specific items of income 3.6 Consistency of presentation Presentation and classification of items in financial statements shall be retained from one period to the next 3.6.1 Exceptions The change will result in a more appropriate presentation (eg if there is a significant change in the nature of the entity’s operations) A change is required by an accounting standard or an interpretation 3.7 Materiality and aggregation IAS defines materiality as ‘omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions of users taken 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’ Material items Present separately in financial statements Immaterial amounts Aggregate with amounts of similar nature or function (on face of financial statements or in notes) Need not be presented separately Materiality provides that the specific disclosure requirements of IFRSs need not be met if a transaction is not material 3.8 Offsetting Assets and liabilities, and income and expenses, shall not be offset unless another standard or interpretation requires or allows the use of offsetting Commentary IAS 12 Income Taxes allows a tax liability to be offset against a tax asset under certain conditions 0406 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS Offsetting, except when the offset reflects the substance of a transaction, would detract the ability of users to understand the events that occurred and would inhibit the assessment of the entity’s future cash flows An allowance of bad or doubtful debts against receivables is not seen as offsetting The standard does allow some netting off of items within the statement of comprehensive income, e.g gains/losses on sale of non-current assets are reported after deducting the carrying value from the proceeds expenditure related to a recognised provision, where reimbursement occurs from a third party, may be netted off against the reimbursement gain/losses relating to a group of similar transactions will be reported on a net basis, e.g foreign exchange gains and losses Any material gain or loss shall be reported separately 3.9 Comparative information Numerical information in the previous period Narrative and descriptive information in the previous period DISCLOSE unless an IFRS permits/requires otherwise INCLUDE when relevant to understanding current period’s financial statements, e.g re legal disputes When the presentation/classification of items in the financial statements is amended if practicable, restate comparatives and disclose nature, amount and reason for restatement; if impracticable, disclose reason for not restating and the nature of the changes that would otherwise have been made STRUCTURE AND CONTENT 4.1 “Disclosure” IAS uses the term in a broad sense, encompassing items presented on the face of each financial statement as well as in the notes to the financial statements 4.2 Identification of financial statements Financial statements shall be clearly identified and distinguished from other information in the same published document (e.g annual report or prospectus) 0407 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS 4.2.1 Importance IFRSs apply only to the financial statements and not to other information so users must be able to distinguish information prepared using IFRSs from other information not subject to accounting requirements 4.2.2 Information to be prominently displayed (and repeated where necessary) Component of the financial statements presented (e.g statement of financial position) Name of reporting entity Whether financial statements cover an individual entity or a group End of reporting period or the period covered by the financial statements (as appropriate) Presentation currency Level of precision used (e.g 000, millions, etc) 4.3 Reporting date and period Financial statements shall be presented at least annually In exceptional circumstances where an entity’s end of reporting period changes and the statements are presented for a period longer or shorter than a year the entity shall disclose reason for a period other than one year being used fact that comparative amounts for the statement of comprehensive income, changes in equity, statement of cash flows and related notes are not comparable 4.4 Terms used The standard applies a terminology that is consistent with all other standards but it does not prohibit the use of other terms as long as the meaning is clear (eg non-current assets = fixed assets) STATEMENT OF FINANCIAL POSITION 5.1 The current/non-current distinction An entity shall present current and non-current assets and current and non-current liabilities as separate classifications on the face of the statement of financial position, unless when presentation based on liquidity order provides more relevant and reliable information This may be the case for financial institutions Whichever method is adopted, where a classification includes amounts that will be recovered in less than 12 months and more than 12 months, an entity shall disclose the amount to be settled or recovered after more than 12 months 0408 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS A separate classification: distinguishes net assets that are continuously circulating as working capital from those used in long-term operations, highlights assets expected to be realised within the current operating cycle, and liabilities due for settlement in the same period Other useful information maturity dates of trade and other receivables and payables inventories expected to be recovered more than one year from the end of the reporting period 5.2 Current assets An asset shall be classified as “current” when it satisfies one of the following criteria: is expected to be realised, or is intended for sale or consumption, in the normal course of the operating cycle, or is held primarily for trading purposes is expected to be realised within 12 months of the end of the reporting period, or is cash or cash equivalent which is not restricted in use Note there are two conceptual views of the term current Liquidity approach Classification of assets and liabilities into current and non-current is intended to give an approximate measure of an entity’s liquidity (i.e it’s ability to carry on it’s activities on a day to day basis without encountering financial stringencies) (Criterion: – Will items be realised / liquidated in the near future?) Operating cycle approach Classification is intended to identify those resources and obligations of the entity that are continuously circulating (Criterion: – Will items be consumed or settled within the normal operating cycle of the entity?) All other assets shall be classified as “non-current” 0409 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS Illustration Accounting policies (extract) Assets and liabilities are classified as current if they mature within one year Accordingly, assets and liabilities are classified as noncurrent if they remain in the Bayer Group for more than one year Trade accounts receivable and payable and inventories are always presented as current items, deferred tax assets and liabilities as noncurrent items Notes to Consolidated Financial Statements Bayer 2005 5.3 Current liabilities A liability shall be classified as “current” when expected to be settled in the normal course of the operating cycle held primarily for the use of being traded due to be settled within 12 months of the end of the reporting period the entity does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period All other liabilities shall be classified as “non-current” Refinancing of a long-term loan, falling due within 12 months, after the end of the reporting period will still require the loan to be classed as a current liability Any refinancing or restructuring of loan payments after the end of the reporting period will qualify for disclosure as a non-adjusting event in accordance with IAS 10 Events after the Reporting Period 5.4 Overall structure There is no prescribed format though IAS presents a format as an illustration There are main types of format found in practice They differ in respect of which form of the accounting equation that they are an expansion of Net assets (assets – liabilities) = Capital Assets = Capital + Liabilities 0410 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS Illustration IAS suggested format UK format ASSETS $ Non current assets 50 Non current assets Current assets 40 Current assets $ Current liabilities (30) 10 Total assets less current liabilities 60 90 BALANCES TO; 40 Net current assets Non current liabilities Total assets 50 (10) 50 BALANCES TO; EQUITY AND LIABILITIES Capital and reserves 50 Non current liabilities 10 Current liabilities 30 Capital and reserves 90 50 50 Each of the above would be consistent with IAS practice 5.5 Presentation of assets, liabilities and equity Certain items must be shown on the face of the statement of financial position The minimum requirements for these line items are as follows (note that the order in which they appear is not specified) Property, plant and equipment Investment property Intangible assets Financial assets Assets and assets included in disposal groups classed as held for sale Investments accounted for under the equity method Biological assets Inventories Trade and other receivables Cash and cash equivalents Trade and other payables 0411 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS Liabilities included in disposal groups classed as held for sale Current tax assets or liabilities Deferred tax assets or liabilities Provisions Financial liabilities Non-controlling interest, to be presented as part of equity Issued equity capital and reserves An entity shall disclose either on the face of the statement of financial position or in the notes further sub classifications of the line items presented classified in a manner appropriate to the entity’s operations The detail provided in sub classifications depends on specific requirements of other IFRSs and the size, nature and amounts involved The disclosures will vary for each item Typically companies will present the main headings on the face of the statement of financial position and the detail in the notes to the accounts STATEMENT OF COMPREHENSIVE INCOME All items of income and expense recognised in a period must be presented either: in a single statement of comprehensive income; or in two statements: − − 6.1 a statement displaying components of profit or loss (separate income statement); and a second statement beginning with profit or loss and displaying components of other comprehensive income Line items The minimum requirements for the statement of comprehensive income are as follows: Revenue; Finance costs; Share of profits and losses of associates and joint ventures accounted for under the equity method; Tax expense; Aggregate of post-tax profit or loss arising from: − − 0412 discontinued operations; and the measurement to fair value less costs to sell on the disposal of assets or disposal groups SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS Commentary Disclosure of discontinued operations is detailed in a later session Profit or loss (i.e the total of income less expenses, excluding the components of other comprehensive income (see below); Commentary ALL items of income and expense in a period MUST be included in profit or loss unless an IFRS requires or permits otherwise Each component of other comprehensive income classified by nature; Share of the other comprehensive income of associates and joint ventures accounted for using the equity method; and Total comprehensive income Both profit or loss and total comprehensive income must be attributed to: minority interest; and owners of the parent Commentary This disclosure is required in the statement of comprehensive income 6.2 Other comprehensive income Components of other comprehensive income may be presented either: net of related tax effects (see Illustration 3); or before related tax effects with one amount shown for the aggregate amount of related tax effects (see Illustration 4) Commentary The income tax relating to each component must be disclosed in the notes if not in the statement of comprehensive income Reclassification adjustments (i.e reclassification of amounts previously recognised in other comprehensive income to profit or loss) are included with the related component of other comprehensive income and may be presented in the statement of comprehensive income or in the notes Commentary Reclassification adjustments not arise on changes in a revaluation surplus (IAS 16 “Property, Plant and Equipment”) 0413 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS Illustration Year ended 31 December Exchange differences on translating foreign operations 2007 Before-tax Tax (expense) Net-of-tax Amount benefit amount X (X) X (X) X (X) Cash flow hedges X (X) X Gains of property revaluation X (X) X (X) X (X) _ _ Available-for-sale financial assets Actuarial losses on defined benefit pension plans Share of other comprehensive income of associates X _ Other comprehensive income X X (X) X _ _ _ Commentary Comparative information must be disclosed similarly Illustration Year ended 31 December Exchange differences on translating foreign operations 2007 2006 X (X) (X) X Cash flow hedges X (X) Gains of property revaluation X X Actuarial gains (losses) on defined benefit pension plans X (X) Available-for-sale financial assets Share of other comprehensive income of associates Other comprehensive income Income tax relating to components of other comprehensive income Other comprehensive income for the year 0414 X X _ _ X (X) (X) X _ _ X (X) _ _ SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS Commentary Using this format the income tax relating to each component must be disclosed in the notes 6.3 Material items The nature and amount of material items of income or expense should be disclosed separately For example: write-downs of assets (and reversals thereof); costs of restructurings asset disposals; discontinued operations; and legal settlements 6.4 Analysis of expenses An entity should provide an analysis of expenses using a classification based on either: nature; or function Commentary Although this can be performed either in the statement of comprehensive income or in the notes the former is encouraged Nature of expenditure method Expenses are aggregated by nature e.g.: Depreciation and amortisation materials consumed employee benefit expense Advantages – nature Simple to apply in many small entities No arbitrary allocations More objective Less judgement required Function of expenditure method Classifies expenses as cost of sales distribution administrative activities Advantage – function Provides more relevant information to users Disadvantage – function Cost allocation can be arbitrary and involves considerable judgement 0415 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS Commentary The “function of expense” method is also called “cost of sales” method as it classifies expenses according to their function within cost of sales Illustration — Alternative classifications BY NATURE $ BY FUNCTION Revenue X Revenue Other income X Cost of sales Changes in inventories of finished goods and work in progress Work performed by entity and capitalised X/(X) X $ X (X) Gross profit/(loss) X Other income X Distribution costs (X) Administrative expenses (X) Raw materials and consumables used (X) Staff costs (X) Depreciation and amortisation expense (X) Other expenses (X) Other expenses (X) Finance cost (X) Finance cost (X) Share of profit from associates X Share of profit from associates X Profit before tax X Profit before tax X Commentary Entities classifying expenses by function must disclose additional information on the nature of expenses, including depreciation and amortisation expense and staff costs 0416 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS Illustration Bayer Group Consolidated Statements of Income Note 2005 2006 € million Net sales [8] Cost of goods sold Gross profit Selling expenses [9] 24,701 28,956 (13,412) (15,275) 11,289 13,681 (5,247) (6,534) Research and development expenses (1,729) (2,297) General administration expenses (1,307) (1,599) Other operating income [10] 775 730 Other operating expenses [11] (1,267) (1,219) 2,514 2,762 (10) (25) Operating result [EBIT] Equity-method loss [13.1] Non-operating income Non-operating expenses Non-operating result [13] Income before income taxes Income taxes [14] Income from continuing operations after taxes 632 931 (1,224) (1,688) (602) (782) 1,912 1,980 (538) (454) 1,374 1,526 Income from discontinued operations after taxes [7.2] 221 169 Income after taxes of which attributable to minority interest of which attributable to Bayer AG stockholders (net income) [15] 1,595 (2) 1,597 1,695 12 1,683 2005 figures restated * The ordinary shares to be issued upon conversion of the mandatory convertible bond are treated as already issued shares Commentary Note the allocation of profit for the period (i.e income after taxes) between minority interest and stockholders (i.e shareholders) Also, as this is pre-IAS (revised 2007) these are not statements of comprehensive income 0417 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS STATEMENT OF CHANGES IN EQUITY 7.1 A separate statement An entity should present as a separate component of its financial statements, a statement showing: total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to minority interest;; for each component of equity, the effects of retrospective application or retrospective restatement (per IAS 8); the amounts of transactions with owners in their capacity as owners, showing separately contributions and distributions; and for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, disclosing each change separately Commentary Components of equity include, for example, each class of contributed equity, the accumulated balance of each class of other comprehensive income and retained earnings Changes in equity reflect the increase or decrease in net assets Except for changes resulting from transactions with owners (including direct transaction costs) the overall change clearly represents the total amount of income and expense, including gains and losses, generated by the entity’s activities In addition an entity should present, either in this statement or in the notes dividends recognised as distributions to owners during the period, and the related amount per share 0418 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS 7.2 Structure The requirements are most easily satisfied in a columnar format with a separate column for each component of equity Attributable to owners of the parent Retained Revaluation2 Share Share earnings reserve premium capital $ $ $ $ Balance at January X X X Change in accounting policy Restated balance X X X Minority interest Total equity $ X X X (X) (X) (X) X X X Changes in equity for period Issue of share capital X X Dividends (X) Total comprehensive income for the year Transfer to retained earnings Balance at 31 December X X X X (X) X X X (X) X X X X Commentary A full year’s comparative information must also be shown 7.3 Reclassification This is where a transaction reported within other comprehensive income is later reported again within net profit or loss usually when the item is realised) IFRSs may require or prohibit this foreign exchange differences arising on translation of a net investment in a foreign entity under IAS 21, The Effects of Changes in Foreign Exchange Rates (reclassification to profit or loss is required when the investment is disposed of); and cumulative gains/losses included in equity for Available For Sale financial assets are reclassified when the financial asset is disposed A column showing the sub-total of amounts attributable to equity holders of the parent should also be included A translation reserve might similarly be presented as a separate column 0419 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS Reclassifying to profit or loss is prohibited for surpluses on the revaluation of property, plant and equipment (IAS 16, Property, Plant and Equipment) If the asset is sold the surplus is taken to retained earnings as a reserve transfer The IASB decisions on whether to report changes in values to profit or loss or other comprehensive income, and if reported initially in other comprehensive income whether they should be reclassified, have been made on an ad hoc basis NOTES TO THE FINANCIAL STATEMENTS 8.1 Structure Objectives of notes to the financial statements to present information about − − the basis of preparation of the financial statements specific accounting policies selected and applied for significant transactions and events to disclose information required by IFRSs that is not presented elsewhere to provide additional information which is not presented on the face of the financial statements but is necessary for a fair presentation Presentation notes shall be presented in a systematic manner each item on the face of the statement of financial position, statement of comprehensive income and statement of cash flows shall be cross-referenced to notes Normal order of presentation is as follows: statement of compliance with IFRSs, statement of measurement basis and accounting policies applied, supporting information for items presented on the face of each financial statement in the order in which each line item and each financial statement is presented, other disclosures, including − − 0420 contingencies, commitments and other financial disclosures non-financial disclosures SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS 8.2 Disclosure of accounting policies Matters to be disclosed in respect of significant accounting policies measurement basis (or bases) used each specific accounting policy that is significant to a fair presentation Disclosure is required of judgements management has made in the process of applying an entity’s accounting policies that have the most significant effect on amounts recognised 8.3 Key sources of estimation uncertainty Disclosure shall be made about key assumptions concerning the future, and key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities within the next financial year The disclosure shall include information of: their nature; and their carrying amount at the end of the reporting period 8.4 Capital disclosures IAS requires an entity to make specific disclosures in respect of capital The entity must disclose information that enables users of its financial statements to evaluate the entity’s objectives, policies and processes for managing capital In order to meet the requirements an entity will disclose the following: qualitative information about objectives, policies and processes for managing capital, to include: − − − what is managed as capital; what, if any, externally imposed capital requirements an entity is subjected to; how it meets its objectives if managing capital; summary quantitative data about what it manages as capital; any changes in the above from the previous period; that it complied with externally imposed capital requirements; where compliance is not met, what are the consequences of non-compliance 0421 SESSION 04 – IAS PRESENTATION OF FINANCIAL STATEMENTS 8.5 Other disclosures Amount of dividends declared but not recognised as a distribution during the period Amount of cumulative preference dividends not recognised Domicile and legal form of the entity, to include country of incorporation Description of the nature of the entity’s operations and its principal activities Name of the parent and ultimate parent of the group FOCUS You should now be able to: describe what is meant by financial statements achieving a faithful representation; discuss whether faithful representation constitutes more than compliance with accounting standards; indicate the circumstances and required disclosure where a “true and fair” override may apply; describe the structure (format) and content of financial statements presented under IFRS; prepare an entity’s financial statements in accordance with the prescribed structure and content; indicate the circumstances where separate disclosure of material items of income and expense is required; prepare and explain the contents and purpose of the statement of changes in equity; describe and prepare a statement of changes in equity 0422 ... (X) Finance cost (X) Finance cost (X) Share of profit from associates X Share of profit from associates X Profit before tax X Profit before tax X Commentary Entities classifying expenses by function... the scope of IFRSs OVERALL CONSIDERATIONS 3.1 Fair presentation and compliance with IFRSs Financial statements shall “present fairly” financial position financial performance cash flows Achieved... presented on the face of each financial statement as well as in the notes to the financial statements 4.2 Identification of financial statements Financial statements shall be clearly identified and distinguished