IAS 1 – Presentation of Financial Statement
Objective: set out the overall framework for presenting general purpose of Financial Statement.
Preparation of financial statements including going concern assumption.
Asset and Liabilities, and income and expenses may not be offset, unless required by other IFRS.
Comparative prior-period information must be presented.
A complete set of financial statement should include:
Balance Sheet, (1)
(2) Income Statement,
) Statement of Changes in Equity, 3)
Cash-Flow Statement, (4)
(5) Accounting Policies and explanatory Notes.
The statement of changes in equity must show all changes in equity without those arising from transaction with equity holders. Financial statement generally to be prepared annually. Current \ Non-Current distinction for assets and liabilities is required. The balance sheet, Income statement, and statement of changes in equity will specify minimum line items to be presented. The note disclosures must include information about: accounting policies, judgment that management applying on entity's accounting policies, key assumption concerning the future, what is the significant risk of causing adjustment to the amount of assets and liabilities.
Sic 29 – Service Concession Arrangements – If an entity agrees to provide services that give the public access to major economic and social facilities, Disclosure is required.
The Differences and Similarities between US GAAP Law and IFRS
Similarities: In both frameworks the components of complete set of financial statement include: balance sheet, Income statement, statement in equity or other comprehensive income, cash flows, and accompanying notes to the financial statements, also both US GAAP Law and IFRS require that financial statements be prepared on accrual basis of accounting (101), with the exception of cash flow statement.
Significant Differences:
IFRS | US Law GAAP | |
Comparative information must be disclosed in respect of the previous period for all amount reported in the financial statement. | Generally comparative financial statement are presented, however a single year may be presented. In public companies that must follow SEC rules which Require balance sheets for the two most recent years, and other statements must cover three year period. | Financial period required |
IAS 1 Presentation of Financial Statement does not prescribe a standard layout, but include a list of minimum items. The list of minimum items is less prescriptive then the SEC regulation. | There is no general rule to prepare the balance sheet and income statement in accordance to specific layout. In public companies that must follow SEC rules there are detailed requirements that must be followed. | Layout of Balance Sheet and Income Statement |
Debt must presented as current if the agreement terms allow covenant violation (102), unless the lender agreement was done prior to the balance sheet date. Deferred taxes are presented as non-current. | Debt may be presented as non-current if the lender agreement demands repayment for more than one year. Deferred taxes are presented as current or non-current based on the nature of the related asset or liability. | Presentation of debt as current and Presentation of debt as not current in the Balance sheet |
An entity may present expenses based on function or nature, however if function is selected, a disclosure about the nature of the expenses must be included in the Notes. | SEC rules required to present expenses based on function for example: cost of sale, administration expenses | Income statement classification of expenses |
Significant Differences:
IFRS | US Law GAAP | |
Prohibited | Restricted to items that is unusual and infrequent. | Income statement extraordinary items |
Discontinued operation classification is for components held for sale or to be disposed of, that are: (1) a separate major line of business (2) a subsidiary acquire. With intention to resell. | Discontinued operation classification is for components held for sale or to be disposed of, and only when there is no continuing cash flows or involvement with the disposed component. | Income statement discontinued operations presentation |
Concept such as "operating profit" are not defined and for an understanding of the entity financial performance, there for in such case disclosure of performance measures is allowed. | In the case of some sub totals or headings the SEC regulation defines performance measures. In the case of public companies a discloser of performance measure is prohibited, in the financial statement, and accompanying notes. | Disclosure of performance |
Not required, but will be presented when an entity restate its financial statement, or applies a new accounting policy. | Not required | Third Balance sheet |
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