Accounting Standard
AASB 101
September 2007
Presentation of Financial Statements
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ISSN 1036-4803
CONTENTS
Preface
Comparison With International Pronouncements
Accounting Standard
AASB 101 Presentation of Financial Statements
Paragraphs
Objective 1
Application Aus1.1 – Aus1.8
Scope 3 – 6
Definitions 7 – 8
Financial Statements
Purpose of Financial Statements 9
Complete Set of Financial Statements 10 – 14
General Features
Fair Presentation and Compliance with IFRSs 15 – 24
Going Concern 25 – 26
Accrual Basis of Accounting 27 – 28
Materiality and Aggregation 29 – 31
Offsetting 32 – 35
Frequency of Reporting 36 – 37
Comparative Information 38 – 44
Consistency of Presentation 45 – 46
Structure and Content
Introduction 47 – 48
Identification of the Financial Statements 49 – 53
Statement of Financial Position
Information to be Presented in the Statement of Financial Position 54 – 59
Current/Non-current Distinction 60 – 65
Current Assets 66 – 68
Current Liabilities 69 – 76
Information to be Presented either in the Statement of Financial Position or in the Notes 77 – 80
Statement of Comprehensive Income 81
Information to be Presented in the Statement of Comprehensive Income 82 – 87
Profit or Loss for the Period 88 – 89
Other Comprehensive Income for the Period 90 – 96
Information to be Presented in the Statement of Comprehensive Income or in the Notes 97 – 105
Statement of Changes in Equity 106 – 110
Statement of Cash Flows 111
Notes
Structure 112 – 116
Disclosure of Accounting Policies 117 – 124
Sources of Estimation Uncertainty 125 – 133
Capital 134 – 136
Other Disclosures 137 – Aus138.6
AUSTRALIAN IMPLEMENTATION GUIDANCE Page 51
DELETED IAS 1 TEXT Page 53
BASIS FOR CONCLUSIONS ON IAS 1
(available on the AASB website)
IMPLEMENTATION GUIDANCE ON IAS 1
(available on the AASB website)
TABLE OF CONCORDANCE
(available on the AASB website)
Australian Accounting Standard AASB 101 Presentation of Financial Statements is set out in paragraphs 1 – Aus138.6. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. Terms defined in this Standard are in italics the first time they appear in the Standard. AASB 101 is to be read in the context of other Australian Accounting Standards, including AASB 1048 Interpretation and Application of Standards, which identifies the Australian Accounting Interpretations. In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.
Preface
Reasons for Issuing AASB 101
The Australian Accounting Standards Board (AASB) is implementing the Financial Reporting Council’s policy of adopting the Standards of the International Accounting Standards Board (IASB) for application to reporting periods beginning on or after 1 January 2005. The AASB has decided it will continue to issue sector-neutral Standards, that is, Standards applicable to both for-profit and not-for-profit entities, including public sector entities. Except for Standards that are specific to the not-for-profit or public sectors or that are of a purely domestic nature, the AASB is using the IASB Standards as the “foundation” Standards to which it adds material detailing the scope and applicability of a Standard in the Australian environment. Additions are made, where necessary, to broaden the content to cover sectors not addressed by an IASB Standard and domestic, regulatory or other issues.
Main Features of this Standard
Application Date
This Standard is applicable to annual reporting periods beginning on or after 1 January 2009, with early adoption permitted for annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009.
Main Requirements
This Standard prescribes:
(a) the composition of a complete set of financial statements:
(i) a statement of financial position as at the end of the period;
(ii) a statement of comprehensive income for a period;
(iii) a statement of changes in equity for a period;
(iv) a statement of cash flows for a period;
(v) notes, comprising a summary of significant accounting policies and other explanatory notes;
(vi) a statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements;
(b) the general features of financial statements:
(i) fair presentation and compliance with IFRSs and Australian Accounting Standards;
(ii) going concern;
(iii) accrual basis of accounting;
(iv) consistency of presentation;
(v) materiality and aggregation;
(vi) offsetting;
(vii) frequency of reporting;
(viii) comparative information;
(c) the structure and content of financial statements;
(d) classification of items in the financial statements; and
(e) a range of disclosures about financial position and financial performance.
Consequential Amendments
Consequential amendments to other Australian Accounting Standards are included in AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101 (September 2007).
Differences between this Standard and AASB 101 as issued in October 2006
The main changes from AASB 101 as issued in October 2006 are described below.
A complete set of financial statements
This Standard introduces the notion of a ‘complete set of financial statements’ which is identified as:
(a) a statement of financial position as at the end of the period;
(b) a statement of comprehensive income for a period;
(c) a statement of changes in equity for a period;
(d) a statement of cash flows for a period;
(e) notes, comprising a summary of significant accounting policies and other explanatory notes;
(f) a statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements.
The previous version of AASB 101 used the titles ‘balance sheet’ and ‘cash flow statement’ to describe two of the statements within a complete set of financial statements. This Standard uses ‘statement of financial position’ and ‘statement of cash flows’ for those statements, although entities can use other statement titles.
This Standard requires an entity to disclose comparative information in respect of the previous period – that is, to disclose as a minimum two of each of the statements and related notes.
Reporting owner changes in equity and comprehensive income
The previous version of AASB 101 required the presentation of an income statement that included items of income and expense recognised in profit or loss. It required items of income and expense not recognised in profit or loss to be presented in the statement of changes in equity, together with owner changes in equity. It also labelled the statement of changes in equity comprising profit or loss, other items of income and expense and the effects of changes in accounting policies and correction of errors as ‘statement of recognised income and expense’. This Standard now requires:
(a) all changes in equity arising from transactions with owners in their capacity as owners (i.e. owner changes in equity) to be presented separately from non-owner changes in equity. An entity is not permitted to present components of comprehensive income (i.e. non-owner changes in equity) in the statement of changes in equity. The purpose is to provide better information to users by requiring aggregation of items with shared characteristics and separation of items with different characteristics;
(b) income and expenses to be presented in one statement (a statement of comprehensive income) or in two statements (a separate income statement and a statement of comprehensive income), separately from owner changes in equity;
(c) components of other comprehensive income to be displayed in the statement of comprehensive income; and
(d) total comprehensive income to be presented in the financial statements.
Other comprehensive income ─ reclassification adjustments and related tax effects
This Standard requires an entity to disclose income tax relating to each component of other comprehensive income. The previous version of AASB 101 did not include such a requirement.
This Standard also requires an entity to disclose reclassification adjustments relating to components of other comprehensive income. Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in previous periods.
Presentation of dividends
The previous version of AASB 101 permitted disclosure of the amount of dividends recognised as distributions to equity holders (now referred to as ‘owners’) and the related amount per share in the income statement, in the statement of changes in equity or in the notes. This Standard requires dividends recognised as distributions to owners and related amounts per share to be presented in the statement of changes in equity or in the notes. The presentation of such disclosures in the statement of comprehensive income is not permitted.
Comparison with
International Pronouncements
AASB 101 and IAS 1
AASB 101 Presentation of Financial Statements is equivalent to IAS 1 Presentation of Financial Statements issued by the IASB. Paragraphs that have been added to this Standard (and do not appear in the text of the equivalent IASB Standard) are identified with the prefix “Aus”, followed by the number of the relevant IASB paragraph and decimal numbering. IAS 1 text that has been deleted from this Standard (and does not affect IFRS compliance) is listed in a separate section after the Standard.
Compliance with IAS 1
For-profit entities that comply with AASB 101 will simultaneously be in compliance with IAS 1. Not-for-profit entities using the added “Aus” paragraphs in the Standard that specifically apply to not-for-profit entities may not be simultaneously complying with IAS 1. Whether a not-for-profit entity will be in compliance with IAS 1 will depend on whether the “Aus” paragraphs provide additional guidance for not-for-profit entities or contain requirements that are inconsistent with the corresponding IASB Standard and will be applied by the not-for-profit entity.
AASB 101 and IPSAS 1
International Public Sector Accounting Standards (IPSASs) are issued by the International Public Sector Accounting Standards Board of the International Federation of Accountants.
IPSAS 1 Presentation of Financial Statements (May 2000) is drawn primarily from IAS 1 Presentation of Financial Statements (revised 1997). The main differences between IPSAS 1 and AASB 101 are:
(a) IPSAS 1 allows the presentation of “extraordinary items”. In contrast, AASB 101 does not permit extraordinary items to be presented;
(b) IPSAS 1 requires the presentation of a statement showing all changes in net assets/equity, whereas AASB 101 requires an entity to present a separate statement of changes in equity;
(c) AASB 101 requires an entity to present a statement of financial position as at the beginning of the earliest comparative period in a complete set of financial statements when the entity applies an accounting policy retrospectively or makes a retrospective restatement, as defined in AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, or when the entity reclassifies items in the financial statements. IPSAS 1 does not have this requirement; and
(d) AASB 101 requires an entity to disclose reclassification adjustments and income tax relating to each component of other comprehensive income. IPSAS 1 does not have this requirement.
aCCOUNTING STANDARD AASB 101
The Australian Accounting Standards Board makes Accounting Standard AASB 101 Presentation of Financial Statements under section 334 of the Corporations Act 2001.
D.G. Boymal
Dated 24 September 2007
Chair – AASB
aCCOUNTING STANDARD AASB 101
Presentation of Financial Statements
Objective
1. This Standard prescribes the basis for presentation of general purpose financial statements to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities. It sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content.
Application
Aus1.1 This Standard applies to:
(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act;
(b) general purpose financial statements of each reporting entity; and
(c) financial statements that are, or are held out to be, general purpose financial statements.
Aus1.2 This Standard applies to annual reporting periods beginning on or after 1 January 2009.
Aus1.3 This Standard may be applied to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009. If an entity adopts this Standard for an earlier period, it shall disclose that fact.
Aus1.4 The requirements specified in this Standard apply to the financial statements where information resulting from their application is material in accordance with AASB 1031 Materiality.
Aus1.5 When applicable, this Standard supersedes AASB 101 Presentation of Financial Statements as made on 4 October 2006 and amended to 14 June 2007.
Aus1.6 Notwithstanding paragraph Aus1.1(a), the application of paragraphs 134-136 is limited to each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity.
Aus1.7 Notwithstanding paragraphs Aus1.1 and Aus1.6, a not‑for‑profit entity need not present the disclosures required by paragraphs 134-136.
Scope
2. [Deleted by the AASB]
3. Other Australian Accounting Standards set out the recognition, measurement and disclosure requirements for specific transactions and other events.
4. This Standard does not apply to the structure and content of condensed interim financial statements prepared in accordance with AASB 134 Interim Financial Reporting. However, paragraphs 15–35 apply to such financial statements. This Standard applies equally to all entities, including those that present consolidated financial statements and those that present separate financial statements as defined in AASB 127 Consolidated and Separate Financial Statements.
5. This Standard uses terminology that is suitable for profit-oriented entities, including public sector business entities. If entities with not-for-profit activities in the private sector or the public sector apply this Standard, they may need to amend the descriptions used for particular line items in the financial statements and for the financial statements themselves.
6. Similarly, entities that do not have equity as defined in AASB 132 Financial Instruments: Presentation (e.g. some mutual funds) and entities whose share capital is not equity (e.g. some co-operative entities) may need to adapt the financial statement presentation of members’ or unitholders’ interests.
Definitions
7. The following terms are used in this Standard with the meanings specified:
General purpose financial statements (referred to as ‘financial statements’) are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs.
Impracticable – Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.
International Financial Reporting Standards (IFRSs) are Standards and Interpretations adopted by the International Accounting Standards Board (IASB). They comprise:
(a) International Financial Reporting Standards;
(b) International Accounting Standards; and
(c) Interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC).
Material – Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make 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.
Assessing whether an omission or misstatement could influence economic decisions of users, and so be material, requires consideration of the characteristics of those users. The Framework for the Preparation and Presentation of Financial Statements states in paragraph 25 that ‘users are assumed to have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence’. Therefore, the assessment needs to take into account how users with such attributes could reasonably be expected to be influenced in making economic decisions.
Notes contain information in addition to that presented in the statement of financial position, statement of comprehensive income, separate income statement (if presented), statement of changes in equity and statement of cash flows. Notes provide narrative descriptions or disaggregations of items presented in those statements and information about items that do not qualify for recognition in those statements.
Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other Australian Accounting Standards.
The components of other comprehensive income include:
(a) changes in revaluation surplus (see AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets);
(b) actuarial gains and losses on defined benefit plans recognised in accordance with paragraph 93A of AASB 119 Employee Benefits;
(c) gains and losses arising from translating the financial statements of a foreign operation (see AASB 121 The Effects of Changes in Foreign Exchange Rates);
(d) gains and losses on remeasuring available-for-sale financial assets (see AASB 139 Financial Instruments: Recognition and Measurement); and
(e) the effective portion of gains and losses on hedging instruments in a cash flow hedge (see AASB 139).
Owners are holders of instruments classified as equity.
Profit or loss is the total of income less expenses, excluding the components of other comprehensive income.
Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods.
Total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners.
Total comprehensive income comprises all components of ‘profit or loss’ and of ‘other comprehensive income’.
Aus7.1 The following terms are also used in this Standard with the meanings specified.
Annual reporting period means the financial year or similar period to which annual financial statements relate.
Entity means any legal, administrative, or fiduciary arrangement, organisational structure or other party (including a person) having the capacity to deploy scarce resources in order to achieve objectives.
Related practice means in relation to the auditor’s practice:
(a) an entity through which an auditor provides professional services to clients and that has one or more partners or directors in common with the auditor’s practice; or
(b) an entity that is owned by the relatives of one or more partners of the auditor’s practice and that shares fees or profits with the auditor’s practice in respect of the entity that is subject to the financial reporting obligation; or
(c) any other entity that shares fees or profits with the auditor’s practice in respect of the entity that is subject to the financial reporting obligation.
Special purpose financial statements (referred to as ‘financial statements’) are financial statements other than general purpose financial statements.
8. Although this Standard uses the terms ‘other comprehensive income’, ‘profit or loss’ and ‘total comprehensive income’, an entity may use other terms to describe the totals as long as the meaning is clear. For example, an entity may use the term ‘net income’ to describe profit or loss.
Financial Statements
Purpose of Financial Statements
9. Financial statements are a structured representation of the financial position and financial performance of an entity. The objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions. Financial statements also show the results of the management’s stewardship of the resources entrusted to it. To meet this objective, financial statements provide information about an entity’s:
(a) assets;
(b) liabilities;
(c) equity;
(d) income and expenses, including gains and losses;
(e) contributions by and distributions to owners in their capacity as owners; and
(f) cash flows.
This information, along with other information in the notes, assists users of financial statements in predicting the entity’s future cash flows and, in particular, their timing and certainty.
Complete Set of Financial Statements
10. A complete set of financial statements comprises:
(a) a statement of financial position as at the end of the period;
(b) a statement of comprehensive income for the period;
(c) a statement of changes in equity for the period;
(d) a statement of cash flows for the period;
(e) notes, comprising a summary of significant accounting policies and other explanatory information; and
(f) a statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements.
An entity may use titles for the statements other than those used in this Standard.
11. An entity shall present with equal prominence all of the financial statements in a complete set of financial statements.
12. As permitted by paragraph 81, an entity may present the components of profit or loss either as part of a single statement of comprehensive income or in a separate income statement. When an income statement is presented it is part of a complete set of financial statements and shall be displayed immediately before the statement of comprehensive income.
13. Many entities present, outside the financial statements, a financial review by management that describes and explains the main features of the entity’s financial performance and financial position, and the principal uncertainties it faces. Such a report may include a review of:
(a) the main factors and influences determining financial performance, including changes in the environment in which the entity operates, the entity’s response to those changes and their effect, and the entity’s policy for investment to maintain and enhance financial performance, including its dividend policy;
(b) the entity’s sources of funding and its targeted ratio of liabilities to equity; and
(c) the entity’s resources not recognised in the statement of financial position in accordance with IFRSs.
14. Many entities also present, outside the financial statements, reports and statements such as environmental reports and value added statements, particularly in industries in which environmental factors are significant and when employees are regarded as an important user group. Reports and statements presented outside financial statements are outside the scope of IFRSs.
General Features
Fair Presentation and Compliance with IFRSs
15. Financial statements shall present fairly the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework. The application of IFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation.
Aus15.1 The Corporations Act requires an entity’s financial report to comply with Australian Accounting Standards and, if necessary to give a true and fair view, further information to be disclosed in the notes.
Aus15.2 An entity shall disclose in the notes a statement whether the financial statements have been prepared in accordance with Australian Accounting Standards.
Aus15.3 The financial reporting framework applied in the preparation of the financial statements is identified in the summary of accounting policies so that users understand the basis on which the financial statements has been prepared. In addition to stating whether the financial statements have been prepared in accordance with Australian Accounting Standards, it may also be appropriate to indicate the relevant statutory and other requirements adopted in the preparation of the financial statements.
Aus15.4 An entity shall disclose in the notes that the financial statements are general purpose financial statements, or if applicable, special purpose financial statements.
16. An entity whose financial statements comply with IFRSs shall make an explicit and unreserved statement of such compliance in the notes. An entity shall not describe financial statements as complying with IFRSs unless they comply with all the requirements of IFRSs.
Aus16.1 Where an entity can make the explicit and unreserved statement of compliance in respect of only:
(a) the parent financial statements and notes; or
(b) the consolidated financial statements and notes;
the entity shall make the explicit and unreserved statement of compliance in accordance with paragraph 16 and clearly identify to which financial statements and notes it relates.
Aus16.2 In some circumstances compliance with Australian Accounting Standards by for-profit entities will not lead to compliance with IFRSs. These circumstances include, for example, when the entity is a for-profit public sector entity to which AAS 29 Financial Reporting by Government Departments applies and the entity has applied a requirement in that Standard that is inconsistent with an IFRS requirement.
Aus16.3 Not-for-profit entities need not comply with the paragraph 16 requirement to make an explicit and unreserved statement of compliance with IFRSs.
17. A fair presentation also requires an entity:
(a) to select and apply accounting policies in accordance with AASB108 Accounting Policies, Changes in Accounting Estimates and Errors. AASB 108 sets out a hierarchy of authoritative guidance that management considers in the absence of an Australian Accounting Standard that specifically applies to an item;
(b) to present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and
(c) to provide additional disclosures when compliance with the specific requirements in Australian Accounting Standards is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.
18. An entity cannot rectify inappropriate accounting policies either by disclosure of the accounting policies used or by notes or explanatory material.
19. [Deleted by the AASB]
20. [Deleted by the AASB]
21. [Deleted by the AASB]
22. [Deleted by the AASB]
23. In the extremely rare circumstances in which management concludes that compliance with a requirement in an Australian Accounting Standard would be so misleading that it would conflict with the objective of financial statements set out in the Framework, but the relevant regulatory framework prohibits departure from the requirement, the entity shall, to the maximum extent possible, reduce the perceived misleading aspects of compliance by disclosing:
(a) the title of the Australian Accounting Standard in question, the nature of the requirement, and the reason why management has concluded that complying with that requirement is so misleading in the circumstances that it conflicts with the objective of financial statements set out in the Framework; and
(b) for each period presented, the adjustments to each item in the financial statements that management has concluded would be necessary to achieve a fair presentation.
24. For the purpose of paragraphs 19 – 23, an item of information would conflict with the objective of financial statements when it does not represent faithfully the transactions, other events and conditions that it either purports to represent or could reasonably be expected to represent and, consequently, it would be likely to influence economic decisions made by users of financial statements. When assessing whether complying with a specific requirement in an Australian Accounting Standard would be so misleading that it would conflict with the objective of financial statements set out in the Framework, management considers:
(a) why the objective of financial statements is not achieved in the particular circumstances; and
(b) how the entity’s circumstances differ from those of other entities that comply with the requirement. If other entities in similar circumstances comply with the requirement, there is a rebuttable presumption that the entity’s compliance with the requirement would not be so misleading that it would conflict with the objective of financial statements set out in the Framework.
Going Concern
25. When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern, the entity shall disclose those uncertainties. When an entity does not prepare financial statements on a going concern basis, it shall disclose that fact, together with the basis on which it prepared the financial statements and the reason why the entity is not regarded as a going concern.
26. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. The degree of consideration depends on the facts in each case. When an entity has a history of profitable operations and ready access to financial resources, the entity may reach a conclusion that the going concern basis of accounting is appropriate without detailed analysis. In other cases, management may need to consider a wide range of factors relating to current and expected profitability, debt repayment schedules and potential sources of replacement financing before it can satisfy itself that the going concern basis is appropriate.
Accrual Basis of Accounting
27. An entity shall prepare its financial statements, except for cash flow information, using the accrual basis of accounting.
28. When the accrual basis of accounting is used, an entity recognises items as assets, liabilities, equity, income and expenses (the elements of financial statements) when they satisfy the definitions and recognition criteria for those elements in the Framework.
Materiality and Aggregation
29. An entity shall present separately each material class of similar items. An entity shall present separately items of a dissimilar nature or function unless they are immaterial.
30. Financial statements result from processing large numbers of transactions or other events that are aggregated into classes according to their nature or function. The final stage in the process of aggregation and classification is the presentation of condensed and classified data, which form line items in the financial statements. If a line item is not individually material, it is aggregated with other items either in those statements or in the notes. An item that is not sufficiently material to warrant separate presentation in those statements may warrant separate presentation in the notes.
31. An entity need not provide a specific disclosure required by an Australian Accounting Standard if the information is not material.
Offsetting
32. An entity shall not offset assets and liabilities or income and expenses, unless required or permitted by an Australian Accounting Standard.
33. An entity reports separately both assets and liabilities, and income and expenses. Offsetting in the statements of comprehensive income or financial position or in the separate income statement (if presented), except when offsetting reflects the substance of the transaction or other event, detracts from the ability of users both to understand the transactions, other events and conditions that have occurred and to assess the entity’s future cash flows. Measuring assets net of valuation allowances — for example, obsolescence allowances on inventories and doubtful debts allowances on receivables — is not offsetting.
34. AASB 118 Revenue defines revenue and requires an entity to measure it at the fair value of the consideration received or receivable, taking into account the amount of any trade discounts and volume rebates the entity allows. An entity undertakes, in the course of its ordinary activities, other transactions that do not generate revenue but are incidental to the main revenue-generating activities. An entity presents the results of such transactions, when this presentation reflects the substance of the transaction or other event, by netting any income with related expenses arising on the same transaction. For example:
(a) an entity presents gains and losses on the disposal of non-current assets, including investments and operating assets, by deducting from the proceeds on disposal the carrying amount of the asset and related selling expenses; and
(b) an entity may net expenditure related to a provision that is recognised in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets and reimbursed under a contractual arrangement with a third party (for example, a supplier’s warranty agreement) against the related reimbursement.
35. In addition, an entity presents on a net basis gains and losses arising from a group of similar transactions, for example, foreign exchange gains and losses or gains and losses arising on financial instruments held for trading. However, an entity presents such gains and losses separately if they are material.
Frequency of Reporting
36. An entity shall present a complete set of financial statements (including comparative information) at least annually. When an entity changes the end of its reporting period and presents financial statements for a period longer or shorter than one year, an entity shall disclose, in addition to the period covered by the financial statements:
(a) the reason for using a longer or shorter period; and
(b) the fact that amounts presented in the financial statements are not entirely comparable.
37. Normally, an entity consistently prepares financial statements for a one-year period. However, for practical reasons, some entities prefer to report, for example, for a 52-week period. This Standard does not preclude this practice.
Comparative Information
38. Except when Australian Accounting Standards permit or require otherwise, an entity shall disclose comparative information in respect of the previous period for all amounts reported in the current period’s financial statements. An entity shall include comparative information for narrative and descriptive information when it is relevant to an understanding of the current period’s financial statements.
39. An entity disclosing comparative information shall present, as a minimum, two statements of financial position, two of each of the other statements, and related notes. When an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements or when it reclassifies items in its financial statements, it shall present, as a minimum, three statements of financial position, two of each of the other statements, and related notes. An entity presents statements of financial position as at:
(a) the end of the current period;
(b) the end of the previous period (which is the same as the beginning of the current period); and
(c) the beginning of the earliest comparative period.
40. In some cases, narrative information provided in the financial statements for the previous period(s) continues to be relevant in the current period. For example, an entity discloses in the current period details of a legal dispute whose outcome was uncertain at the end of the immediately preceding reporting period and that is yet to be resolved. Users benefit from information that the uncertainty existed at the end of the immediately preceding reporting period, and about the steps that have been taken during the period to resolve the uncertainty.
41. When the entity changes the presentation or classification of items in its financial statements, the entity shall reclassify comparative amounts unless reclassification is impracticable. When the entity reclassifies comparative amounts, the entity shall disclose:
(a) the nature of the reclassification;
(b) the amount of each item or class of items that is reclassified; and
(c) the reason for the reclassification.
42. When it is impracticable to reclassify comparative amounts, an entity shall disclose:
(a) the reason for not reclassifying the amounts; and
(b) the nature of the adjustments that would have been made if the amounts had been reclassified.
43. Enhancing the inter-period comparability of information assists users in making economic decisions, especially by allowing the assessment of trends in financial information for predictive purposes. In some circumstances, it is impracticable to reclassify comparative information for a particular prior period to achieve comparability with the current period. For example, an entity may not have collected data in the prior period(s) in a way that allows reclassification, and it may be impracticable to recreate the information.
44. AASB 108 sets out the adjustments to comparative information required when an entity changes an accounting policy or corrects an error.
Consistency of Presentation
45. An entity shall retain the presentation and classification of items in the financial statements from one period to the next unless:
(a) it is apparent, following a significant change in the nature of the entity’s operations or a review of its financial statements, that another presentation or classification would be more appropriate having regard to the criteria for the selection and application of accounting policies in AASB 108; or
(b) an Australian Accounting Standard requires a change in presentation.
46. For example, a significant acquisition or disposal, or a review of the presentation of the financial statements, might suggest that the financial statements need to be presented differently. An entity changes the presentation of its financial statements only if the changed presentation provides information that is reliable and more relevant to users of the financial statements and the revised structure is likely to continue, so that comparability is not impaired. When making such changes in presentation, an entity reclassifies its comparative information in accordance with paragraphs 41 and 42.
Structure and Content
Introduction
47. This Standard requires particular disclosures in the statement of financial position or of comprehensive income, in the separate income statement (if presented), or in the statement of changes in equity and requires disclosure of other line items either in those statements or in the notes. AASB 107 Statement of Cash Flows sets out requirements for the presentation of cash flow information.
48. This Standard sometimes uses the term ‘disclosure’ in a broad sense, encompassing items presented in the financial statements . Disclosures are also required by other Australian Accounting Standards. Unless specified to the contrary elsewhere in this Standard or in another Australian Accounting Standard, such disclosures may be made in the financial statements.
Identification of the Financial Statements
49. An entity shall clearly identify the financial statements and distinguish them from other information in the same published document.
50. Australian Accounting Standards apply only to financial statements, and not necessarily to other information presented in an annual report, a regulatory filing, or another document. Therefore, it is important that users can distinguish information that is prepared using Australian Accounting Standards from other information that may be useful to users but is not the subject of those requirements.
Aus50.1 The financial statements shall be presented in the English language.
51. An entity shall clearly identify each financial statement and the notes. In addition, an entity shall display the following information prominently, and repeat it when necessary for the information presented to be understandable:
(a) the name of the reporting entity or other means of identification, and any change in that information from the end of the preceding reporting period;
(b) whether the financial statements are of the individual entity or a group of entities;
(c) the date of the end of the reporting period or the period covered by the set of financial statements or notes;
(d) the presentation currency, as defined in AASB 121; and
(e) the level of rounding used in presenting amounts in the financial statements.
52. An entity meets the requirements in paragraph 51 by presenting appropriate headings for pages, statements, notes, columns and the like. Judgement is required in determining the best way of presenting such information. For example, when an entity presents the financial statements electronically, separate pages are not always used; an entity then presents the above items to ensure that the information included in the financial statements can be understood.
53. An entity often makes financial statements more understandable by presenting information in thousands or millions of units of the presentation currency. This is acceptable as long as the entity discloses the level of rounding and does not omit material information.
Statement of Financial Position
Information to be Presented in the Statement of Financial Position
54. As a minimum, the statement of financial position shall include line items that present the following amounts:
(a) property, plant and equipment;
(b) investment property;
(c) intangible assets;
(d) financial assets (excluding amounts shown under (e), (h) and (i));
(e) investments accounted for using the equity method;
(f) biological assets;
(g) inventories;
(h) trade and other receivables;
(i) cash and cash equivalents;
(j) the total of assets classified as held for sale and assets included in disposal groups classified as held for sale in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations;
(k) trade and other payables;
(l) provisions;
(m) financial liabilities (excluding amounts shown under (k) and (l));
(n) liabilities and assets for current tax, as defined in AASB 112 Income Taxes;
(o) deferred tax liabilities and deferred tax assets, as defined in AASB 112;
(p) liabilities included in disposal groups classified as held for sale in accordance with AASB 5;
(q) minority interest, presented within equity; and
(r) issued capital and reserves attributable to owners of the parent.
55. An entity shall present additional line items, headings and subtotals in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position.
56. When an entity presents current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position, it shall not classify deferred tax assets (liabilities) as current assets (liabilities).
57. This Standard does not prescribe the order or format in which an entity presents items. Paragraph 54 simply lists items that are sufficiently different in nature or function to warrant separate presentation in the statement of financial position. In addition:
(a) line items are included when the size, nature or function of an item or aggregation of similar items is such that separate presentation is relevant to an understanding of the entity’s financial position; and
(b) the descriptions used and the ordering of items or aggregation of similar items may be amended according to the nature of the entity and its transactions, to provide information that is relevant to an understanding of the entity’s financial position. For example, a financial institution may amend the above descriptions to provide information that is relevant to the operations of a financial institution.
58. An entity makes the judgement about whether to present additional items separately on the basis of an assessment of:
(a) the nature and liquidity of assets;
(b) the function of assets within the entity; and
(c) the amounts, nature and timing of liabilities.
59. The use of different measurement bases for different classes of assets suggests that their nature or function differs and, therefore, that an entity presents them as separate line items. For example, different classes of property, plant and equipment can be carried at cost or at revalued amounts in accordance with AASB 116.
Current/Non-current Distinction
60. An entity shall present current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position in accordance with paragraphs 66–76 except when a presentation based on liquidity provides information that is reliable and more relevant. When that exception applies, an entity shall present all assets and liabilities in order of liquidity.
61. Whichever method of presentation is adopted, an entity shall disclose the amount expected to be recovered or settled after more than twelve months for each asset and liability line item that combines amounts expected to be recovered or settled:
(a) no more than twelve months after the reporting period, and
(b) more than twelve months after the reporting period.
62. When an entity supplies goods or services within a clearly identifiable operating cycle, separate classification of current and non-current assets and liabilities in the statement of financial position provides useful information by distinguishing the net assets that are continuously circulating as working capital from those used in the entity’s long-term operations. It also highlights assets that are expected to be realised within the current operating cycle, and liabilities that are due for settlement within the same period.
63. For some entities, such as financial institutions, a presentation of assets and liabilities in increasing or decreasing order of liquidity provides information that is reliable and more relevant than a current/non-current presentation because the entity does not supply goods or services within a clearly identifiable operating cycle.
64. In applying paragraph 60, an entity is permitted to present some of its assets and liabilities using a current/non-current classification and others in order of liquidity when this provides information that is reliable and more relevant. The need for a mixed basis of presentation might arise when an entity has diverse operations.
65. Information about expected dates of realisation of assets and liabilities is useful in assessing the liquidity and solvency of an entity. AASB 7 Financial Instruments: Disclosures requires disclosure of the maturity dates of financial assets and financial liabilities. Financial assets include trade and other receivables, and financial liabilities include trade and other payables. Information on the expected date of recovery of non-monetary assets such as inventories and expected date of settlement for liabilities such as provisions is also useful, whether assets and liabilities are classified as current or as non-current. For example, an entity discloses the amount of inventories that are expected to be recovered more than twelve months after the reporting period.
Current Assets
66. An entity shall classify an asset as current when:
(a) it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the reporting period; or
(d) the asset is cash or a cash equivalent (as defined in AASB 107) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
An entity shall classify all other assets as non-current.
67. This Standard uses the term ‘non-current’ to include tangible, intangible and financial assets of a long-term nature. It does not prohibit the use of alternative descriptions as long as the meaning is clear.
68. The operating cycle of an entity is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. When the entity’s normal operating cycle is not clearly identifiable, it is assumed to be twelve months. Current assets include assets (such as inventories and trade receivables) that are sold, consumed or realised as part of the normal operating cycle even when they are not expected to be realised within twelve months after the reporting period. Current assets also include assets held primarily for the purpose of trading (financial assets within this category are classified as held for trading in accordance with AASB 139) and the current portion of non-current financial assets.
Current Liabilities
69. An entity shall classify a liability as current when:
(a) it expects to settle the liability in its normal operating cycle;
(b) it holds the liability primarily for the purpose of trading;
(c) the liability is due to be settled within twelve months after the end of the reporting period; or
(d) the entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.
An entity shall classify all other liabilities as non-current.
70. Some current liabilities, such as trade payables and some accruals for employee and other operating costs, are part of the working capital used in the entity’s normal operating cycle. An entity classifies such operating items as current liabilities even if they are due to be settled more than twelve months after the reporting period. The same normal operating cycle applies to the classification of an entity’s assets and liabilities. When the entity’s normal operating cycle is not clearly identifiable, it is assumed to be twelve months.
71. Other current liabilities are not settled as part of the normal operating cycle, but are due for settlement within twelve months after the reporting period or held primarily for the purpose of trading. Examples are financial liabilities classified as held for trading in accordance with AASB 139, bank overdrafts, and the current portion of non-current financial liabilities, dividends payable, income taxes and other non-trade payables. Financial liabilities that provide financing on a long-term basis (i.e. are not part of the working capital used in the entity’s normal operating cycle) and are not due for settlement within twelve months after the reporting period are non-current liabilities, subject to paragraphs 74 and 75.
72. An entity classifies its financial liabilities as current when they are due to be settled within twelve months after the reporting period, even if:
(a) the original term was for a period longer than twelve months; and
(b) an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorised for issue.
73. If an entity expects, and has the discretion, to refinance or roll over an obligation for at least twelve months after the reporting period under an existing loan facility, it classifies the obligation as non-current, even if it would otherwise be due within a shorter period. However, when refinancing or rolling over the obligation is not at the discretion of the entity (for example, there is no arrangement for refinancing), the entity does not consider the potential to refinance the obligation as current.
74. When an entity breaches a provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand, it classifies the liability as current, even if the lender agreed, after the reporting period and before the authorisation of the financial statements for issue, not to demand payment as a consequence of the breach. An entity classifies the liability as current because, at the end of the reporting period, it does not have an unconditional right to defer its settlement for at least twelve months after that date.
75. However, an entity classifies the liability as non-current if the lender agreed by the end of the reporting period to provide a period of grace ending at least twelve months after the reporting period, within which the entity can rectify the breach and during which the lender cannot demand immediate repayment.
76. In respect of loans classified as current liabilities, if the following events occur between the end of the reporting period and the date the financial statements are authorised for issue, those events are disclosed as non-adjusting events in accordance with AASB 110 Events after the End of the Reporting Period:
(a) refinancing on a long-term basis;
(b) rectification of a breach of a long-term loan arrangement; and
(c) the granting by the lender of a period of grace to rectify a breach of a long-term loan arrangement ending at least twelve months after the reporting period.
Information to be Presented either in the Statement of Financial Position or in the Notes
77. An entity shall disclose, either in the statement of financial position or in the notes, further subclassifications of the line items presented, classified in a manner appropriate to the entity’s operations.
78. The detail provided in subclassifications depends on the requirements of Australian Accounting Standards and on the size, nature and function of the amounts involved. An entity also uses the factors set out in paragraph 58 to decide the basis of subclassification. The disclosures vary for each item, for example:
(a) items of property, plant and equipment are disaggregated into classes in accordance with AASB 116;
(b) receivables are disaggregated into amounts receivable from trade customers, receivables from related parties, prepayments and other amounts;
(c) inventories are disaggregated, in accordance with AASB 102 Inventories, into classifications such as merchandise, production supplies, materials, work in progress and finished goods;
(d) provisions are disaggregated into provisions for employee benefits and other items; and
(e) equity capital and reserves are disaggregated into various classes, such as paid-in capital, share premium and reserves.
79. An entity shall disclose the following, either in the statement of financial position or the statement of changes in equity, or in the notes:
(a) for each class of share capital:
(i) the number of shares authorised;
(ii) the number of shares issued and fully paid, and issued but not fully paid;
(iii) par value per share, or that the shares have no par value;
(iv) a reconciliation of the number of shares outstanding at the beginning and at the end of the period;
(v) the rights, preferences and restrictions attaching to that class including restrictions on the distribution of dividends and the repayment of capital;
(vi) shares in the entity held by the entity or by its subsidiaries or associates; and
(vii) shares reserved for issue under options and contracts for the sale of shares, including terms and amounts; and
(b) a description of the nature and purpose of each reserve within equity.
80. An entity without share capital, such as a partnership or trust, shall disclose information equivalent to that required by paragraph 79(a), showing changes during the period in each category of equity interest, and the rights, preferences and restrictions attaching to each category of equity interest.
Statement of Comprehensive Income
81. An entity shall present all items of income and expense recognised in a period:
(a) in a single statement of comprehensive income; or
(b) in two statements: 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 (statement of comprehensive income).
Information to be Presented in the Statement of Comprehensive Income
82. As a minimum, the statement of comprehensive income shall include line items that present the following amounts for the period:
(a) revenue;
(b) finance costs;
(c) share of the profit or loss of associates and joint ventures accounted for using the equity method;
(d) tax expense;
(e) a single amount comprising the total of:
(i) the post-tax profit or loss of discontinued operations; and
(ii) the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation;
(f) profit or loss;
(g) each component of other comprehensive income classified by nature (excluding amounts in (h));
(h) share of the other comprehensive income of associates and joint ventures accounted for using the equity method; and
(i) total comprehensive income.
83. An entity shall disclose the following items in the statement of comprehensive income as allocations of profit or loss for the period:
(a) profit or loss for the period attributable to:
(i) minority interest; and
(ii) owners of the parent; and
(b) total comprehensive income for the period attributable to:
(i) minority interest; and
(ii) owners of the parent.
84. An entity may present in a separate income statement (see paragraph 81) the line items in paragraph 82(a) – (f) and the disclosures in paragraph 83(a).
85. An entity shall present additional line items, headings and subtotals in the statement of comprehensive income and the separate income statement (if presented), when such presentation is relevant to an understanding of the entity’s financial performance.
86. Because the effects of an entity’s various activities, transactions and other events differ in frequency, potential for gain or loss and predictability, disclosing the components of financial performance assists users in understanding the financial performance achieved and in making projections of future financial performance. An entity includes additional line items in the statement of comprehensive income and in the separate income statement (if presented), and it amends the descriptions used and the ordering of items when this is necessary to explain the elements of financial performance. An entity considers factors including materiality and the nature and function of the items of income and expense. For example, a financial institution may amend the descriptions to provide information that is relevant to the operations of a financial institution. An entity does not offset income and expense items unless the criteria in paragraph 32 are met.
87. An entity shall not present any items of income or expense as extraordinary items, in the statement of comprehensive income or the separate income statement (if presented), or in the notes.
Profit or Loss for the Period
88. An entity shall recognise all items of income and expense in a period in profit or loss unless an Australian Accounting Standard requires or permits otherwise.
89. Some Australian Accounting Standards specify circumstances when an entity recognises particular items outside profit or loss in the current period. AASB 108 specifies two such circumstances: the correction of errors and the effect of changes in accounting policies. Other Australian Accounting Standards require or permit components of other comprehensive income that meet the Framework’s definition of income or expense to be excluded from profit or loss (see paragraph 7).
Other Comprehensive Income for the Period
90. An entity shall disclose the amount of income tax relating to each component of other comprehensive income, including reclassification adjustments, either in the statement of comprehensive income or in the notes.
91. An entity may present components of other comprehensive income either:
(a) net of related tax effects; or
(b) before related tax effects with one amount shown for the aggregate amount of income tax relating to those components.
92. An entity shall disclose reclassification adjustments relating to components of other comprehensive income.
93. Other Australian Accounting Standards specify whether and when amounts previously recognised in other comprehensive income are reclassified to profit or loss. Such reclassifications are referred to in this Standard as reclassification adjustments. A reclassification adjustment is included with the related component of other comprehensive income in the period that the adjustment is reclassified to profit or loss. For example, gains realised on the disposal of available-for-sale financial assets are included in profit or loss of the current period. These amounts may have been recognised in other comprehensive income as unrealised gains in the current or previous periods. Those unrealised gains must be deducted from other comprehensive income in the period in which the realised gains are reclassified to profit or loss to avoid including them in total comprehensive income twice.
94 . An entity may present reclassification adjustments in the statement of comprehensive income or in the notes. An entity presenting reclassification adjustments in the notes presents the components of other comprehensive income after any related reclassification adjustments.
95. Reclassification adjustments arise, for example, on disposal of a foreign operation (see AASB 121), on derecognition of available-for-sale financial assets (see AASB 139) and when a hedged forecast transaction affects profit or loss (see paragraph 100 of AASB 139 in relation to cash flow hedges).
96. Reclassification adjustments do not arise on changes in revaluation surplus recognised in accordance with AASB 116 or AASB 138 or actuarial gains and losses on defined benefit plans recognised in accordance with paragraph 93A of AASB 119. These components are recognised in other comprehensive income and are not reclassified to profit or loss in subsequent periods. Changes in revaluation surplus may be transferred to retained earnings in subsequent periods as the asset is used or when it is derecognised (see AASB 116 and AASB 138). Actuarial gains and losses are reported in retained earnings in the period that they are recognised as other comprehensive income (see AASB 119).
Information to be Presented in the Statement of Comprehensive Income or in the Notes
97. When items of income or expense are material, an entity shall disclose their nature and amount separately.
98. Circumstances that would give rise to the separate disclosure of items of income and expense include:
(a) write-downs of inventories to net realisable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs;
(b) restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring;
(c) disposals of items of property, plant and equipment;
(d) disposals of investments;
(e) discontinued operations;
(f) litigation settlements; and
(g) other reversals of provisions.
99. An entity shall present an analysis of expenses recognised in profit or loss using a classification based on either their nature or their function within the entity, whichever provides information that is reliable and more relevant.
100. Entities are encouraged to present the analysis in paragraph 99 in the statement of comprehensive income or in the separate income statement (if presented).
101. Expenses are subclassified to highlight components of financial performance that may differ in terms of frequency, potential for gain or loss and predictability. This analysis is provided in one of two forms.
102. The first form of analysis is the ‘nature of expense’ method. An entity aggregates expenses within profit or loss according to their nature (for example, depreciation, purchases of materials, transport costs, employee benefits and advertising costs), and does not reallocate them among functions within the entity. This method may be simple to apply because no allocations of expenses to functional classifications are necessary. An example of a classification using the nature of expense method is as follows:
Revenue
X
Other income
X
Changes in inventories of finished goods and work in progress
X
Raw materials and consumables used
X
Employee benefits expense
X
Depreciation and amortisation expense
X
Other expenses
X
Total expenses
(X)
Profit before tax
X
103. The second form of analysis is the ‘function of expense’ or ‘cost of sales’ method and classifies expenses according to their function as part of cost of sales or, for example, the costs of distribution or administrative activities. At a minimum, an entity discloses its cost of sales under this method separately from other expenses. This method can provide more relevant information to users than the classification of expenses by nature, but allocating costs to functions may require arbitrary allocations and involve considerable judgement. An example of a classification using the function of expense method is as follows:
Revenue
X
Cost of sales
(X)
Gross profit
X
Other income
X
Distribution costs
(X)
Administrative expenses
(X)
Other expenses
(X)
Profit before tax
X
104. An entity classifying expenses by function shall disclose additional information on the nature of expenses, including depreciation and amortisation expense and employee benefits expense.
105. The choice between the function of expense method and the nature of expense method depends on historical and industry factors and the nature of the entity. Both methods provide an indication of those costs that might vary, directly or indirectly, with the level of sales or production of the entity. Because each method of presentation has merit for different types of entities, this Standard requires management to select the presentation that is reliable and more relevant. However, because information on the nature of expenses is useful in predicting future cash flows, additional disclosure is required when the function of expense classification is used. In paragraph 104, ‘employee benefits’ has the same meaning as in AASB 119.
Statement of Changes in Equity
106. An entity shall present a statement of changes in equity showing in the statement:
(a) total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to minority interest;
(b) for each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with AASB 108;
(c) the amounts of transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners; and
(d) for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing each change.
107. An entity shall present, either in the statement of changes in equity or in the notes, the amount of dividends recognised as distributions to owners during the period, and the related amount per share.
108. In paragraph 106, the components of equity include, for example, each class of contributed equity, the accumulated balance of each class of other comprehensive income and retained earnings.
109. Changes in an entity’s equity between the beginning and the end of the reporting period reflect the increase or decrease in its net assets during the period. Except for changes resulting from transactions with owners in their capacity as owners (such as equity contributions, reacquisitions of the entity’s own equity instruments and dividends) and transaction costs directly related to such transactions, the overall change in equity during a period represents the total amount of income and expense, including gains and losses, generated by the entity’s activities during that period.
110. AASB 108 requires retrospective adjustments to effect changes in accounting policies, to the extent practicable, except when the transition provisions in another Australian Accounting Standard require otherwise. AASB 108 also requires restatements to correct errors to be made retrospectively, to the extent practicable. Retrospective adjustments and retrospective restatements are not changes in equity but they are adjustments to the opening balance of retained earnings, except when an Australian Accounting Standard requires retrospective adjustment of another component of equity. Paragraph 106(b) requires disclosure in the statement of changes in equity of the total adjustment to each component of equity resulting, from changes in accounting policies and separately, from corrections of errors. These adjustments are disclosed for each prior period and the beginning of the period.
Statement of Cash Flows
111. Cash flow information provides users of financial statements with a basis to assess the ability of the entity to generate cash and cash equivalents and the needs of the entity to utilise those cash flows. AASB 107 sets out requirements for the presentation and disclosure of cash flow information.
Notes
Structure
112. The notes shall:
(a) present information about the basis of preparation of the financial statements and the specific accounting policies used in accordance with paragraphs 117 – 124;
(b) disclose the information required by Australian Accounting Standards that is not presented elsewhere in the financial statements; and
(c) provide information that is not presented elsewhere in the financial statements, but is relevant to an understanding of any of them.
113. An entity shall, as far as practicable, present notes in a systematic manner. An entity shall cross-reference each item in the statements of financial position and of comprehensive income, in the separate income statement (if presented), and in the statements of changes in equity and of cash flows to any related information in the notes.
114. An entity normally presents notes in the following order, to assist users to understand the financial statements and to compare them with financial statements of other entities:
(a) statement of compliance with Australian Accounting Standards (see paragraph 16);
(b) summary of significant accounting policies applied (see paragraph 117);
(c) supporting information for items presented in the statements of financial position and of comprehensive income, in the separate income statement (if presented), and in the statements of changes in equity and of cash flows, in the order in which each statement and each line item is presented; and
(d) other disclosures, including:
(i) contingent liabilities (see AASB 137) and unrecognised contractual commitments; and
(ii) non-financial disclosures, e.g. the entity’s financial risk management objectives and policies (see AASB 7).
115. In some circumstances, it may be necessary or desirable to vary the order of specific items within the notes. For example, an entity may combine information on changes in fair value recognised in profit or loss with information on maturities of financial instruments, although the former disclosures relate to the statement of comprehensive income or separate income statement (if presented) and the latter relate to the statement of financial position. Nevertheless, an entity retains a systematic structure for the notes as far as practicable.
116. An entity may present notes providing information about the basis of preparation of the financial statements and specific accounting policies as a separate section of the financial statements.
Disclosure of Accounting Policies
117. An entity shall disclose in the summary of significant accounting policies:
(a) the measurement basis (or bases) used in preparing the financial statements; and
(b) the other accounting policies used that are relevant to an understanding of the financial statements.
118. It is important for an entity to inform users of the measurement basis or bases used in the financial statements (for example, historical cost, current cost, net realisable value, fair value or recoverable amount) because the basis on which an entity prepares the financial statements significantly affects users’ analysis. When an entity uses more than one measurement basis in the financial statements, for example when particular classes of assets are revalued, it is sufficient to provide an indication of the categories of assets and liabilities to which each measurement basis is applied.
119. In deciding whether a particular accounting policy should be disclosed, management considers whether disclosure would assist users in understanding how transactions, other events and conditions are reflected in reported financial performance and financial position. Disclosure of particular accounting policies is especially useful to users when those policies are selected from alternatives allowed in Australian Accounting Standards. An example is disclosure of whether a venturer recognises its interest in a jointly controlled entity using proportionate consolidation or the equity method (see AASB 131 Interests in Joint Ventures). Some Australian Accounting Standards specifically require disclosure of particular accounting policies, including choices made by management between different policies they allow. For example, AASB 116 requires disclosure of the measurement bases used for classes of property, plant and equipment.
120. Each entity considers the nature of its operations and the policies that the users of its financial statements would expect to be disclosed for that type of entity. For example, users would expect an entity subject to income taxes to disclose its accounting policies for income taxes, including those applicable to deferred tax liabilities and assets. When an entity has significant foreign operations or transactions in foreign currencies users would expect disclosure of accounting policies for the recognition of foreign exchange gains and losses.
121. An accounting policy may be significant because of the nature of the entity’s operations even if amounts for current and prior periods are not material. It is also appropriate to disclose each significant accounting policy that is not specifically required by Australian Accounting Standards but the entity selects and applies in accordance with AASB 108.
122. An entity shall disclose, in the summary of significant accounting policies or other notes, the judgements, apart from those involving estimations (see paragraph 125), that management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
123. In the process of applying the entity’s accounting policies, management makes various judgements, apart from those involving estimations, that can significantly affect the amounts it recognises in the financial statements. For example, management makes judgements in determining:
(a) whether financial assets are held-to-maturity investments;
(b) when substantially all the significant risks and rewards of ownership of financial assets and lease assets are transferred to other entities;
(c) whether, in substance, particular sales of goods are financing arrangements and therefore do not give rise to revenue; and
(d) whether the substance of the relationship between the entity and a special purpose entity indicates that the entity controls the special purpose entity.
124. Some of the disclosures made in accordance with paragraph 122 are required by other Australian Accounting Standards. For example, AASB 127 requires an entity to disclose the reasons why the entity’s ownership interest does not constitute control, in respect of an investee that is not a subsidiary even though more than half of its voting or potential voting power is owned directly or indirectly through subsidiaries. AASB 140 Investment Property requires disclosure of the criteria developed by the entity to distinguish investment property from owner-occupied property and from property held for sale in the ordinary course of business, when classification of the property is difficult.
Sources of Estimation Uncertainty
125. An entity shall disclose information about the assumptions it makes about the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year. In respect of those assets and liabilities, the notes shall include details of:
(a) their nature; and
(b) their carrying amount as at the end of the reporting period.
126. Determining the carrying amounts of some assets and liabilities requires estimation of the effects of uncertain future events on those assets and liabilities at the end of the reporting period. For example, in the absence of recently observed market prices, future-oriented estimates are necessary to measure the recoverable amount of classes of property, plant and equipment, the effect of technological obsolescence on inventories, provisions subject to the future outcome of litigation in progress, and long-term employee benefit liabilities such as pension obligations. These estimates involve assumptions about such items as the risk adjustment to cash flows or discount rates, future changes in salaries and future changes in prices affecting other costs.
127. The assumptions and other sources of estimation uncertainty disclosed in accordance with paragraph 125 relate to the estimates that require management’s most difficult, subjective or complex judgements. As the number of variables and assumptions affecting the possible future resolution of the uncertainties increases, those judgements become more subjective and complex, and the potential for a consequential material adjustment to the carrying amounts of assets and liabilities normally increases accordingly.
128. The disclosures in paragraph 125 are not required for assets and liabilities with a significant risk that their carrying amounts might change materially within the next financial year if, at the end of the reporting period, they are measured at fair value based on recently observed market prices. Such fair values might change materially within the next financial year but these changes would not arise from assumptions or other sources of estimation uncertainty at the end of the reporting period.
129. An entity presents the disclosures in paragraph 125 in a manner that helps users of financial statements to understand the judgements that management makes about the future and about other sources of estimation uncertainty. The nature and extent of the information provided vary according to the nature of the assumption and other circumstances. Examples of the types of disclosures an entity makes are:
(a) the nature of the assumption or other estimation uncertainty;
(b) the sensitivity of carrying amounts to the methods, assumptions and estimates underlying their calculation, including the reasons for the sensitivity;
(c) the expected resolution of an uncertainty and the range of reasonably possible outcomes within the next financial year in respect of the carrying amounts of the assets and liabilities affected; and
(d) an explanation of changes made to past assumptions concerning those assets and liabilities, if the uncertainty remains unresolved.
130. This Standard does not require an entity to disclose budget information or forecasts in making the disclosures in paragraph 125.
131. Sometimes it is impracticable to disclose the extent of the possible effects of an assumption or another source of estimation uncertainty at the end of the reporting period. In such cases, the entity discloses that it is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are different from the assumption could require a material adjustment to the carrying amount of the asset or liability affected. In all cases, the entity discloses the nature and carrying amount of the specific asset or liability (or class of assets or liabilities) affected by the assumption.
132. The disclosures in paragraph 122 of particular judgements that management made in the process of applying the entity’s accounting policies do not relate to the disclosures of sources of estimation uncertainty in paragraph 125.
133. Other Australian Accounting Standards require the disclosure of some of the assumptions that would otherwise be required in accordance with paragraph 125. For example, AASB 137 requires disclosure, in specified circumstances, of major assumptions concerning future events affecting classes of provisions. AASB 7 requires disclosure of significant assumptions the entity uses in estimating the fair values of financial assets and financial liabilities that are carried at fair value. AASB 116 requires disclosure of significant assumptions that the entity uses in estimating the fair values of revalued items of property, plant and equipment.
Capital
134. An entity shall disclose information that enables users of its financial statements to evaluate the entity’s objectives, policies and processes for managing capital.
135. To comply with paragraph 134, the entity discloses the following:
(a) qualitative information about its objectives, policies and processes for managing capital, including:
(i) a description of what it manages as capital;
(ii) when an entity is subject to externally imposed capital requirements, the nature of those requirements and how those requirements are incorporated into the management of capital; and
(iii) how it is meeting its objectives for managing capital;
(b) summary quantitative data about what it manages as capital. Some entities regard some financial liabilities (e.g. some forms of subordinated debt) as part of capital. Other entities regard capital as excluding some components of equity (e.g. components arising from cash flow hedges);
(c) any changes in (a) and (b) from the previous period;
(d) whether during the period it complied with any externally imposed capital requirements to which it is subject; and
(e) when the entity has not complied with such externally imposed capital requirements, the consequences of such non-compliance.
The entity bases these disclosures on the information provided internally to key management personnel.
136. An entity may manage capital in a number of ways and be subject to a number of different capital requirements. For example, a conglomerate may include entities that undertake insurance activities and banking activities and those entities may operate in several jurisdictions. When an aggregate disclosure of capital requirements and how capital is managed would not provide useful information or distorts a financial statement user’s understanding of an entity’s capital resources, the entity shall disclose separate information for each capital requirement to which the entity is subject.
Other Disclosures
137. An entity shall disclose in the notes:
(a) the amount of dividends proposed or declared before the financial statements were authorised for issue but not recognised as a distribution to owners during the period, and the related amount per share; and
(b) the amount of any cumulative preference dividends not recognised.
138. An entity shall disclose the following, if not disclosed elsewhere in information published with the financial statements:
(a) the domicile and legal form of the entity, its country of incorporation and the address of its registered office (or principal place of business, if different from the registered office);
(b) a description of the nature of the entity’s operations and its principal activities; and
(c) the name of the parent and the ultimate parent of the group.
Aus138.1 An entity, other than a group, shall disclose the amounts paid or payable to:
(a) the auditor of the entity for an audit or a review of the financial statements of the entity;
(b) the auditor of the entity for non-audit services in relation to the entity, disclosing separately the nature and amount of each of the non‑audit services provided by the auditor; and
(c) a related practice of the auditor for non-audit services in relation to the entity, disclosing separately the nature and amount of each category of non-audit service.
Aus138.2 The following information shall be disclosed in relation to a group, the amounts paid or payable to:
(a) the auditor of the parent of the group, for an audit or a review of the financial statements of any entity in the group;
(b) the auditor of the parent of the group, for non-audit services in relation to any entity in the group, disclosing separately the nature and amount of each of the non‑audit services provided by the auditor;
(c) a related practice of the auditor of the parent of the group, for non-audit services in relation to any entity in the group, disclosing separately the nature and amount of each of the non‑audit services provided by the auditor;
(d) the auditors of the subsidiaries in the group, other than those disclosed in accordance with paragraph Aus126.2(a), for an audit or a review of the financial statements of those subsidiaries;
(e) the auditors of the subsidiaries in the group, other than those disclosed in accordance with paragraphs Aus126.2(b) and (c), for non-audit services in relation to any entity in the group, disclosing separately the nature and amount of each of the non‑audit services provided by the auditor; and
(f) a related practice of the auditors of the subsidiaries in the group, other than those disclosed in accordance with paragraphs Aus126.2(b) and (c), for non-audit services in relation to any entity in the group, disclosing separately the nature and amount of each of the non‑audit services provided by the auditor.
Aus138.3 An entity shall disclose for each class of shares included in equity, where either dividends payable were first recognised as a liability during the reporting period or dividends were paid during the reporting period without previously being recognised as a liability:
(a) the amount, in aggregate and per share, of those dividends that have been or will be franked and the tax rate at which those dividends have been or will be franked; and
(b) the amount, in aggregate and per share, of those dividends that have not been or will not be franked.
Aus138.4 An entity shall disclose the amount of franking credits available for subsequent reporting periods to the equity holders in the entity if it is not a group or the parent in a group, by disclosing the balance of the franking account as at the reporting date, adjusted for:
(a) franking credits that will arise from the payment of the amount of the provision for income tax;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
Aus138.5 An entity shall disclose the impact on the franking account of dividends proposed or declared before the financial statements were authorised for issue but not recognised as a distribution to equity holders during the period.
Aus138.6 An entity shall disclose the nature and amount of each individual and each class of capital commitments and of other expenditure commitments contracted for as at the reporting date, other than commitments for the supply of inventories, which have not been recognised as liabilities. The disclosures shall be made in the following time bands, according to the time that is expected to elapse from the reporting date to their expected date of settlement:
(a) within twelve months;
(b) twelve months or longer and not longer than five years; and
(c) longer than five years.
Transition and Effective Date
139. [Deleted by the AASB]
Withdrawal of IAS 1 (Revised 2003)
140. [Deleted by the AASB]
Australian IMPLEMENTATION Guidance
Australian implementation guidance accompanies, but is not part of, AASB 101. The following example illustrates the application of the disclosure requirements in paragraphs Aus138.3 to Aus138.5 of the Standard, which relate to dividend and franking details. The example does not illustrate all possible circumstances. The illustrative example is not intended to be a template or model and is therefore not exhaustive.
Example Note – Dividends Paid or Provided For on Ordinary Shares
Consolidated
Parent
20X2
20X1
20X2
20X1
(i) Dividends Paid or Provided For
$’000
$’000
$’000
$’000
Dividends paid or provided for during the reporting period
Current year interim
Franked dividends
X
X
X
X
Previous year final
Franked dividends
X
X
X
X
X
X
X
X
Dividends proposed and not recognised as a liability
Current year final
Franked dividends
X
X
X
X
Consolidated
Parent
(ii) Dividends Per Share
20X2
20X1
20X2
20X1
Dividends paid or provided for during the reporting period
Current year interim
Franked dividends – cents per share
X
X
X
X
Previous year final
Franked dividends – cents per share
X
X
X
X
X
X
X
X
Dividends proposed and not recognised as a liability
Current year final
Franked dividends – cents per share
X
X
X
X
Parent
20X2
20X1
(iii) Franking Account Balance
$’000
$’000
Franking credits available for subsequent annual reporting periods:
– franking account balance as at the reporting date at 30% (20X1: 30%)
X
X
– franking credits that will arise from the payment of income tax payable as at the reporting date
X
X
– franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
−
−
– franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
X
X
Franking credits available for future reporting periods
X
X
– franking debits that will arise from the payment of dividends proposed or declared before the financial statements were authorised for issue but not recognised as a distribution to equity holders during the period
(X)
(X)
Net franking credits available
X
X
DELETED ias 1 TEXT
Deleted IAS 1 text is not part of AASB 101.
Paragraph 2
An entity shall apply this Standard in preparing and presenting general purpose financial statements in accordance with International Financial Reporting Standards (IFRSs).
First sentence of paragraph 17
In virtually all circumstances, an entity achieves a fair presentation by compliance with applicable IFRSs.
Paragraph 19
In the extremely rare circumstances in which management concludes that compliance with a requirement in an IFRS would be so misleading that it would conflict with the objective of financial statements set out in the Framework, the entity shall depart from that requirement in the manner set out in paragraph 20 if the relevant regulatory framework requires, or otherwise does not prohibit, such a departure.
Paragraph 20
When an entity departs from a requirement of an IFRS in accordance with paragraph 19, it shall disclose:
(a) that management has concluded that the financial statements present fairly the entity’s financial position, financial performance and cash flows;
(b) that it has complied with applicable IFRSs, except that it has departed from a particular requirement to achieve a fair presentation;
(c) the title of the IFRS from which the entity has departed, the nature of the departure, including the treatment that the IFRS would require, the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in the Framework, and the treatment adopted; and
(d) for each period presented, the financial effect of the departure on each item in the financial statements that would have been reported in complying with the requirement.
Paragraph 21
When an entity has departed from a requirement of an IFRS in a prior period, and that departure affects the amounts recognised in the financial statements for the current period, it shall make the disclosures set out in paragraph 20(c) and (d).
Paragraph 22
Paragraph 21 applies, for example, when an entity departed in a prior period from a requirement in an IFRS for the measurement of assets or liabilities and that departure affects the measurement of changes in assets and liabilities recognised in the current period’s financial statements.
Paragraph 139
An entity shall apply this Standard for annual periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity adopts this Standard for an earlier period, it shall disclose that fact.
Paragraph 140
This Standard supersedes IAS 1 Presentation of Financial Statements revised in 2003, as amended in 2005.
