Explain the principles guiding the presentation of financial statements

May 31st, 2011 Comments off
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In the financial statements which comprise balance sheet, income statement , statement of changes in equity, cash flow and notes to the accounts there are certain principles that are guiding the preparation namely:

  • Aggregation. Each material class of similar items is presently separately. Dissimilar items are presented separately unless they are immaterial
  • No offsetting. Assets and liabilities, and income and expenses are not offset unless require d or permitted by an IFRS
  • Classified balance sheet. The balance sheet should distinguish between current and non-current assets and between current and non-current liabilities unless a presentation based on liquidity provides more relevant and reliable information ( e.g in the case of a bank or similar financial institution)
  • Minimum information on the face of the financial statement. IAS No.1 specifies the minimum line item disclosures on the fare of, or in the notes to, the balance sheet, the income statement, and the statement of changes in equity. For example, companies are specifically required to disclose the amount of their plant, property and equipment as a line item on the face of the balance sheet.
  • Minimum information in the notes ( or on face of financial statements). IAS No. I¬† specifies disclosures about information to be presented in the financial statements. This information must be provided in a systematic¬† and cross-referenced from the face of the financial statements to the notes
  • Comparative information. For all amounts reported in a financial statement, comparative information should be provided for the previous period unless another standard requires or permits otherwise.

 

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Financial Accounting

 
 

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