Everyone who partakes in activities in economics will be familiar with the term IAS 1. Though you might have seen the term every now and then, for quite a few people it is a hard concept to grasp. Well, it’s your lucky day. In this article, you’ll find a simplified version of the concept of IAS 1 and its key elements so you won’t have to change topics with your colleagues next time the term IAS 1 arises in a conversation. This article also takes a look at the most recent amendments and when they will go into effect so you will be fully up to date.
What is IAS 1?
In short, IAS 1 sets out the general requirements for financial statements. This includes the minimum content requirements, how they should be structured, and overriding concepts such as the accrual basis of accounting and the (non-)current distinction and going concern. In September 2007, IAS 1 was reissued and is applicable to annual periods beginning on or after the 1st of January 2009. More recently in 2018, the initial issued version was amended by the Definition of Material which applied to both IAS 1 and IAS 8. These changes went into effect for annual periods on or after the 1st of January 2020. Later in January 2020, another amendment was made to the Classification of Liabilities as Current of Non-current. In that same year in July, the IASB deferred the effective date of Classification of Liabilities as Current or Non-current to January 2022. This new amendment will officially be effective from the 1st of January 2023. To comprise a statement of financial position, the standard requires a complete set of financial statements. These statements include a statement of profit and loss, a statement of changes, a statement of cash flows and other comprehensive income. A complete set of financial statements include statements of:
- Financial position at the end of the period (Known as the balance sheet)
- Changes in equity for the period
- Cash flows for the period
- Explanatory notes, comprising a summary of significant accounting policies
- Comparative information prescribed by the standard
An entity must also present a statement of financial position at the beginning of the earliest comparative period if an accounting policy makes a retrospective restatement of items in its financial statements. This statement of financial position must also be included when an entity reclassifies items in its financial statements. Reports including financial reviews conducted by management, environmental reports or value-added statements that are presented outside of the financial statements are out of scope for IFRSs. All statements must be presented fairly. To ensure your documents are presented fairly you will need to have a faithful representation of the effects of transactions and conditions in accordance with the definitions and recognition criteria for liabilities, income and expenses and assets set out in the framework.
Ready to dive deeper?
If you want to get a deeper understanding of IAS 1 and its requirements, go to www.annualreporting.info. Here you will find all the detailed information you need for when you next need to gather your financial statements accordingly. If you have any questions about a subject within IAS 1, do not hesitate to virtually reach out to one of the friendly members of staff.