CHAPTER SEVEN

New presentation formats

AS WITH CHANGES IN IFRS, new forms of financial statement presentation can arise, as this section will show.

7.1 MODEL FINANCIAL STATEMENTS

All the large accounting firms provide model financial statements for an easy way to start implementing IFRS. In fact, when the first IFRS XBRL taxonomy was developed, it was based on a summative comparison of the various model financial statements available at the time. That way, best practice for presenting financial information using IFRS could be captured.

It is noteworthy that financial statements must be prepared in accordance with IFRS, as well as with the specific requirements of the reporting entity, such as whether an entity is a first-time user of IFRS (if so, see IFRS 1 First-time Adoption of International Financial Reporting Standards). Or consider the possible need for consolidation of several entities (as per of IAS 27 Consolidated and Separate Financial Statements). Similarly, accounting professionals who are charged with the preparation of final statements will take into account the suitability of IFRS to particular jurisdictions as can be affected by local laws and regulations.

As will become apparent, disclosure requirements will vary, as can the related statements of financial position, and so on. Of course, to aid related comparisons over time, there must be consistency in applying the same principles, such as to the preferred form of presentation.

For model financial statements, see the Deloitte publication International Financial Reporting Standards – Model financial statements 2011 (www.iasplus.com/en/publications/model-financial-statements-and-checklists/2011/2011-model-financial-statements-with-early-adoption/view).

Particularly, this publication provides a sound guide to the main options available for the accounting practitioner and contains information captured under the following headings:

• Consolidated statement of comprehensive income
  • Alt 1 – Single statement presentation, with expenses analysed by function
  • Alt 2 – Presentation as two statements, with expenses analysed by nature
• Consolidated statement of financial position
• Consolidated statement of changes in equity
• Consolidated statement of cash flows
  • Alt 1 – Direct method of reporting cash flows from operating activities
  • Alt 2 – Indirect method of reporting cash flows from operating activities
• Notes to the consolidated financial statements
• Auditor's report

Furthermore, the publication reviews notes to the consolidated financial statements, with these being:

• General information
• Application of new and revised International Financial Reporting Standards
• Significant accounting policies
• Critical accounting judgements and key sources of estimation uncertainty
• Revenue
• Segment information
• Investment income
• Other gains and losses
• Finance costs
• Income taxes relating to continuing operations
• Discontinued operations
• Assets classified as held for sale
• Profit for the year from continuing operations
• Earnings per share
• Property, plant and equipment
• Investment property
• Goodwill
• Other intangible assets
• Subsidiaries
• Investments in associates
• Joint ventures
• Other financial assets
• Other assets
• Inventories
• Trade and other receivables
• Finance lease receivables
• Amounts due from (to) customers under construction contracts
• Issued capital
• Reserves
• Retained earnings and dividends on equity instruments
• Non-controlling interests
• Borrowings
• Convertible notes
• Other financial liabilities
• Provisions
• Other liabilities
• Trade and other payables
• Obligations under finance leases
• Retirement benefit plans
• Financial instruments
• Deferred revenue
• Share-based payments
• Related party transactions
• Business combinations
• Disposal of subsidiary
• Cash and cash equivalents
• Non-cash transactions
• Operating lease arrangements
• Commitments for expenditure
• Contingent liabilities and contingent assets
• Events after the reporting period
• Approval of financial statements

Clearly, much is involved when preparing financial reports for any entity, and especially so when complexity increases. Of particular note is that the Deloitte publication identifies which IFRS relate to each line item of the report examples. Accompanying explanatory notes are particularly instructive in giving an understanding of what IFRS are appropriate and why that might be so. An instance of this approach is presented in Figure 7.1, where relevant IFRS are evident on the left-hand side, and in line with key items of the illustrative financial report shown to the right.

FIGURE 7.1 Explanatory notes.

Source: www.iasplus.com/en/publications/model-financial-statements-and-checklists/2011/2011-model-financial-statements-with-early-adoption/view

7.2 NEW FINANCIAL STATEMENT PRESENTATION

For several years the IASB has tried to present Financial Statements in a different, more modern, format. The associated project was originally called ‘Performance Reporting' and also ‘Reporting Comprehensive Income'. The latest project title ‘Financial Statement Presentation'. The idea of this initiative is to present financial information using the same captions (such as operating, financing, investing, etc.) in all three statements, being Statement of Financial Position, Statement of Comprehensive Income and Statement of Cash Flows.

In October 2008, the IASB published for public comment a Discussion Paper entitled ‘Preliminary Views on Financial Statement Presentation'. On 1 July 2010, the IASB and the US FASB jointly posted to their websites a staff draft of a proposed standard on financial statement presentation. The draft reflects the cumulative, tentative decisions made by the boards, concluding with their joint meeting in April 2010. Several field tests with outreach and analysis were performed. Examples of the various attempts to accomplish this endeavour are shown in the two tables presented below.

One of the most significant changes will be the integration of the various reporting formats (financial position, income and cash flow statements). Table 7.1 visualises the proposed presentation formats in the IASB and FASB discussion paper.

Table 7.1 Proposed presentation formats in the IASB and FASB discussion paper.

Source: Adapted from various sources

Note: see www.ifrs.org/Current+Projects/IASB+Projects/Financial+Statement+Presentation/Phase+B/Staff+draft+of+proposed+standard.htm.

In comparison with previous information just presented, Table 7.2 shows common totals and subtotals.

Table 7.2 Common totals and subtotals for the proposed standard

Source: Adapted from various sources

Note: see www.ifrs.org/Current+Projects/IASB+Projects/Financial+Statement+Presentation/Phase+B/Staff+draft+of+proposed+standard.htm.