PRESENTATION OF

FINANCIAL
STATEMENTS

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LEARNING OUTCOMES
1. Identify the components of financial statements
2. Determine the objectives of financial statements and financial
reporting
3. Enumerate and explain the general features in the preparation of
financial statements
4. Define and understand the nature and purpose of each of the
components of the financial statements
5. Prepare a complete set of financial statements
REFERENCE STANDARDS
PAS 1
Presentation of Financial Statements
PAS 7
Statement of Cash Flows
PAS 10
Events After the Reporting Period
IFRS 5
Non-Current Asset Held for Sale and
Discontinued Operations
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 Means of Communication

Structured financial
representation
FINANCIAL
STATEMENT
S
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USEFUL FOR THE FOLLOWING REASONS:
• To determine the ability of a business to generate cash, and
the sources and uses of that cash.
• To determine whether a business has the capability to pay
back its debts.
• To track financial results on a trend line to spot any looming
profitability issues.
• To derive financial ratios from the statements that can
indicate the condition of the business.
• To investigate the details of certain business transactions, as outlined in the
disclosures that accompany the statements
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GENERAL PURPOSE
FINANCIAL STATEMENTS
Those designed to meet the needs of users who are unable to request an
entity to prepare reports tailored to their specific information requirements

If reports are prepared to specifically meet the needs of the management or

bankers, they are not general-purpose financial statements
 GENERAL PURPOSE
FINANCIAL STATEMENTS
Its objective 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.
Meaning, the financial statements must provide information about the
following:
✘ Assets
✘ Liabilities
✘ Equity
✘ Income and Expenses, including gains and losses
✘ Owners’ contributions and distributions in their capacity as owners
✘ Cash Flows
COMPONENTS
1. Statement of Financial Position or Balance Sheet
2. Statement of Financial Performance or Income Statement
3. Statement of Comprehensive Income
4. Statement of Changes in Equity
5. Statement of Cash Flows
6. Notes to the Financial Statements

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FINANCIAL REPORTING
Provision of financial information about an entity
to external users that is useful in making economic
decisions and for assessing the effectiveness of the
entity’s management.
Includes not only financial, but also non-financial
such as description of major products and a listing of
corporate offices and directors

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OBJECTIVES OF
FINANCIAL REPORTING

Provide financial information about the reporting entity that is

useful to existing and potential investors, lenders, and other
creditors in making decision

Provide information useful in making investing and credit decisions

about providing resources in the entity

Provide information about entity resources, claims and changes in

resources and claims
Provide information useful in assessing the cash flow prospects of the
entity

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LIMITATIONS OF
FINANCIAL REPORTING

Limited information

More on estimates

Common information

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GENERAL FEATURES

Fair presentation
and compliance Going Concern Accrual Basis
with PFRS

Materiality and Frequency of

Offsetting
Aggregation Reporting

Comparative Consistency of
Information presentation

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FAIR
PRESENTATION
✘ It is the faithful representation of the effects of
transactions and other events in accordance with the
definitions and recognition criteria for assets,
liabilities, income and expenses laid down in the
Conceptual Framework

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FAIR
PRESENTATION
This requires an entity to:
✘ To select and apply accounting policies in accordance
with PFRS;
✘ To present information including accounting policies, in
a manner that provides relevant and faithfully
represented financial information;
✘ To provide additional disclosures necessary for the users
to understand the entity’s financial statements 14
FAIR PRESENTATION
Departure from Standard

An entity In an extremely rare circumstance

is
permitted When management concludes that compliance with the
standard would be so misleading
to depart
from a When the departure from the standard is necessary to
achieve fair presentation
standard
When the regulatory Conceptual Framework requires or
otherwise does not prohibit such a departure

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 FAIR PRESENTATION
Departure from Standard
In case of
departure
from a
The conclusion that the financial statements has been fairly presented
standard,
the
following
shall be
disclosed:
The entity has complied with applicable standards except the particular
requirement it has departed from
Title of the standard it has departed from; the nature of the departure, including the
required treatment; the reason why it would be misleading to follow such treatment;
and the treatment adopted

Financial impact for every year presented of the departure on each item in the
financial statements that would have been reported in complying with the
requirement 16
GOING CONCERN
✘ financial statements are
prepared normally on the
assumption that the entity
shall continue in operation for
the foreseeable future

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ACCRUAL BASIS
The effects of transactions and other events are recognized
when they occur and not as cash or cash equivalent is
received or paid, and they are recorded and reported in the
financial statements in the period which they relate.

Income is recognized when they are earned and expense

when they are incurred.

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 MATERIALITY AND
AGGREGATION
Materiality dictates that Aggregation means
an entity need not the entity shall
provide a specific present items of
disclosure required by similar
PFRS if the information classification under
is not material. one line item
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MATERIALITY AND AGGREGATION

When is an item material?

Information is material if omitting, misstating or obscuring it could reasonably be
expected to influence the economic decisions that primary users of general-purpose
financial statements make on the basis of those statements which provide financial
information about a specific reporting entity.

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 MATERIALITY AND
AGGREGATION
Obscuring information may be in the form of, but not limited
to the following:
1. Vague or unclear language
2. Scattered information throughout the financial statements
3. Aggregation of inappropriate items

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 MATERIALITY AND
AGGREGATION
Materiality of items depend on the relative size rather than
absolute size. Here are the factors affecting the materiality of
an item in the financial statement:

1. Relative size of the item in relation to the total of the

group to which the item belongs
2. Nature of the item
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 OFFSETTING

Assets and liabilities, and income and expense can only

be offset against each other if immaterial.

At the same time, offsetting can be done when it is

required by another PFRS

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FREQUENCY OF
REPORTING
An entity shall present a complete set of financial
statements at least annually.
In case an entity changes the end of the reporting period and
presents financial statements for a period longer or shorter, the
following shall be disclosed:
1. Period coverage
2. Reason
3. The fact that the amounts presented are not entirely comparable
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COMPARABLE
INFORMATION

The financial statements of

the current period shall be
presented with comparative
figures of the financial
statements of the
immediately preceding
year.
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COMPARABLE
INFORMATION

A third statement of financial position is

required when an entity:
1. Applies an accounting policy
retrospectively
2. Makes retrospective restatement of
items in the financial statements
3. Reclassifies items in the financial
statements 26
CONSISTENCY
Accounting methods and practices shall be
applied in a uniform basis from period to
period.
However, changes can be done
if it will result to more
faithfully represented and
more relevant information.
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