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IAS 1 Presentation of Financial Statements

Presentation of financial statements is overall requirements for fine financial statements.

The presentation of the financial statements includes:

  • The overall structure of the statements
  • Minimum and actual requirements of the content
  • The method of accounting
  • The complete set of financial statements showing financial position of the business
  • Statement showing profit and loss of the business.
  • Statement showing changes in the equity
  • Statements of cash flows.

Objectives International Accounting Standards 1

The main objective of the IAS 1 is to describe the main purpose of presentation of financial statements to compare the performance of the previous periods. It also provides a way to compare the financial statements with financial statements of other companies and organization of the same nature. (Nandakumar Ankarath, 2010)

Objectives Of The Financial Statements

The main objective of the Financial Statements is to provide comprehensive information about the financial position and cash flows of the firm. The financial statements provide information about these important factors such as.

  • Valuable assets
  • Payable liabilities
  • Capital
  • Income and Expenditure of the firm within a period
  • Cash inflows and outflows

This valuable information provides comprehensive information regarding the financial assets and liabilities of the firm.

IAS 1 Presentation of Financial Statements


Elements Of The Financial Statements

A complete and comprehensive financial statement will include the following components and elements in it.

  • A statement showing the profit and loss of the business within a financial year
  • A statement showing income received and expenditures occurred during a specific period of one year.
  • A statement showing the financial position of the business includes detailed information about the assets, liabilities and equity of the firm.
  • The statement showing the change in equity.
  • The statement showing the total cash in and cash outflows at the end of a period of one year. (Frascanada.ca, 2001)

The company may use the names of the statements as shown above or as shown in the international standards. The company may use a different name for these statements showing information about the company’s assets and liabilities.

Presentation Of The Financial Statements

The presentation of the financial statements must possess these two attributes.

  • Fair presentation
  • Compliance with IFRS (International Financial Reporting Standards)
Fair Presentation

The financial statements must be present fairly the current and actual financial position of the firm ability to pay the debts or liabilities. A fair presentation requires a truthful and faithful representation of all the financial statements including the profit and loss statements, balance sheet and cash flow statements.

Compliance With IFRS

The financial statements must be completed by using an appropriate method among one of them.

  • International Financial Reporting Standards
  • International Accounting Standards

Inappropriate use of accounting policies or standards may cause differences in results and the actual position of the financial assets may not be recognized by the users of the firms.

Comprehensive Information

The main purpose of the presentation of the financial statements is to disclose the actual position of the firm for the previous period. (Europa.EU, 2011)

Structure Of The Financial Statements Prescribed In IAS

IAS 1 clearly defines that the firm must represent its statements in a clear structure.

  • The name of the firm must be written on the top of the statement
  • It must clearly identify that a firm is a group or individual entity
  • The name of the financial statement
  • The reporting period of the firm

Reporting Period

The firm or the company must write the period for which it was preparing the financial statements. It was prepared for a period of one year.

The Statement Of Profit And Loss

The statements also called for the balance sheet, which shows the present situation of the current & non-current assets and current and non-current liabilities

The Format Of The Statement

IAS 1 or other accounting standards do not prescribe any relevant format for the subject statement. So the Assets or liabilities can be shown as Current and then non-current or vice versa. (Icaew.com, 2018)

Statement Of Cash Flows

The cash inflow and outflow statements can use the same reporting format as used for other reporting statements but must follow these requirements.

  • Fair representation
  • Faithful reporting information.

The company must disclose and represent the summary of the rules and policies used for preparing these statements.


All companies and firms must adopt GAAP (General Accepted Accounting Principles) to formulate and prepare Financial Reports except the small or medium-sized legal firms. The firm should totally comply itself with GAAP to fulfil all the requirements regarding a standard Financial Report. The GAAP is a term used to refer to a set of rules and regulations/ standards formulated to prepare financial that are issued outside the company.

The reports included in financial statements are broadly considered and have fruitful information regarding the company’s assets and liabilities. These statements are.

  1. Balance sheet to examine the Financial Position of the firm
  2. Income Statement to examine the information regarding income and expenditure.
  3. Cash flow statements to consider the cash inflows and outflows. (Readyratios.com, 2014)

IAS 1 Presentation of Financial Statements

Purpose Of Usage Of International Accounting System (GAAP)

The main purpose of General Accepted Accounting Principles is to prepare financial statements with following attributes.

  • To create understandability in all over the world
  • To create relevancy
  • To build reliable financial statement.
  • To make it comparable with financial statements of other companies.

Regularization Of GAAP

After the crash of Stock market of America in 1929, the Government passed laws to create harmony among the users of the GAAP. It is not the Government regulated body. It is a combined offer by top countries to create a link between government and the business firms.

Effects Of GAAP

GAAP is standard that is used for preparing reports and has the following effects upon the economy of the activity.

  • Gathering and disclosing information about an entity
  • Summarizing the required information.
  • Record of measurements at the end of the specific period. (Silvia, 2018)

Importance Of GAAP

The US Security and Exchange Commission require using GAAP as a mandatory accounting principle for the preparation of the Financial Reporting.

Users Of Financial Statements And GAAP

GAAP is an internationally recognized standard used in all over the world. The usage of GAAP is found to be helpful for these users.

  • Investors
  • Lenders
  • Auditors
  • Companies

Investors are persons who invest their capital with a future expectation of high return. However, any person can invest in the stock exchange and each person has its own perception about investing in a particular fund or investment portfolio.

Investors made an investment in the firm considering these points captured in mind:

  • The previous performance of the firm
  • Financial Position of the firms
  • Method of Accounting
  • The credit history of the firm

. There are different kinds of investors but some of them are:

  1. Active Investors
  2. Passive investors
  3. Speculators investors

Lenders are persons who have money and can give money to the other financial institutions when needed.

Lenders also consider some main points while lending money to a company such as:

  • The financial position of the firm to pay loans.
  • Method of accounting
  • Return on investment
  • Methods used preparing financial reports

There are different kinds of lenders including:

  1. Breaking down lenders
  2. Small business lenders

Auditors are also played a very vital role in GAAP because they must know the techniques that are used for preparing financial reports. Auditors are the person who conducts an audit.

The auditor is trained qualified persons who conduct an audit of firms to highlight:

  • Frauds in preparing financial reports
  • Misrepresentation in Financial Reporting
  • The actual position of the Firms
  • The method used for preparing Annual reports

There are different kinds of Auditors some of them are:

  1. Internal Auditor
  2. External Auditor
  3. Government Auditor
  4. Independent Auditor

A company is a legal entity made up to carry out business to gain profit and made investment in different sectors to increase the dividend.

Companies used financial statements to get:

  • Information about other companies
  • To know the financial position of other firms
  • To examine the procedure adopt to prepare a financial position.

Kinds Of Companies:

  1. Public limited company
  2. Private limited company
  3. Company limited by guarantee
  4. Unlimited company

Different studies are made on this topic to examine the impact of users of GAAP (Generally accepted accounting principles) and non-GAAP users. The focus to analyze the users and non-users of this accounting principle is income statement and other financial reports.

The users of GAAP are facing following limitations due to:

  1. Misrepresentation in financial reports
  2. Misstatements of financial positions
  3. Fraudulent and bankruptcy
  4. Litigation against the company or firm

Also Study,

Role of Financial Accounting in Modern Era

Analysis Of Financial  Statements


Financial statement analysis is a process of analyzing the firm’s financial statements for the further decision-making process. For effective and faithful financial analysis, the firm may analyze its financial data with other firms to know the actual position of the company among the competitors. This process is used to review the data collected for the preparation of financial statements, to make the better financial position of the firm. (Holzmann, 2008)

Purpose Of FSA

The main purpose of financial statement analysis is to perform a comprehensive analysis of the financial statement of the firm. The Financial statement analysis is usually performed on these financial statements.

  • Income statement
  • Balance sheet
  • Cash Flow statement

There are some basic and compulsory steps to understand the effectiveness of the analysis of the financial statement. For a financial analyst, there are some key factors that an analyst must understand.

  • The method used for preparing Financial Statements.
  • The characteristics of the economy in which the firm is operating its business.
  • The mission and vision statement, which separate the firm from its opponents.

The Effectiveness Of The Financial Statements

There is a smooth procedure, which can use to develop an effective Financial Statement.

  • Characteristics of the Economy
  • The strategy of the firm
  • Quality of the firm’s financial statement
  • Analyze Profitability ratio
  • Prepare a future forecasted financial statement

Now we can use these steps to check the effectiveness of the Financial Statements of Briscoe Group of the industry. Briscoe Group of the industry is listed as the best company in New Zealand stock exchange with a net profit of 61.3 million in the previous year.

  • Characteristics Of The Economy

The Briscoe Group is a leading company in New Zealand and listed with New Zealand Stock Exchange. The figures of the firm’s capability to pay the loan are shown in New Zealand dollars. This group has a record sale of 604.3 billion dollars.

  • The Strategy Of The Firm:

The firm’s strategy is to increase sale at the end of the year January 2019 from 604.3 billion to 627.96 million. Furthermore, it has another forecasting policy for the end of year January 2020 at a record sale of 653.50 million. (Pete, 2018)

  • Quality Of The Firm’s Financial Statement

The quality of the firm’s financial statement can be analyzed from the past 4 years as data is prepared and collected from the official website of the Briscoe Group industry New Zealand. The quality of the firm’s financial statement can be examined due to the use of GAAP financial reporting system while preparing its financial reports at the end of each year.

  • Analyze Profitability Ratio

So far as sales were increases due to the strong strategy of the firm’s management. Earnings per share also increasing, at the end of January 2018 the earning per share is valued at 27.70 which is further increasing in January 2019 at 28.80. The estimation strategy for the year ended January 2020 describes an increase in the earnings per share from 27.70 to 30.03.

  • Prepare A Future Forecasted Financial Statement

The analyst must prepare a forecasted financial statement itself to recognize the originality and faithfulness in the making of Financial Statements. As in the case of Briscoe Group industry where they are estimating the revenues, sales and earnings per share for future years.

  • eu. (2011). Presentation of Financial Statements. 1-23.
  • ca. (2001). International Accounting Standard 1 Presentation of Financial Statements. 1-21.
  • Holzmann, E. H. (2008, October 22). Financial statement presentation. Retrieved from https://onlinelibrary.wiley.com/doi/pdf/10.1002/jcaf.20455
  • com. (2017). IAS 1 — Presentation of Financial Statements. Retrieved from https://www.iasplus.com/en/standards/ias/ias1
  • com. (2018). IAS 1: Presentation of financial statements. Retrieved from https://www.icaew.com/library/subject-gateways/accounting-standards/ifrs/ias-01
  • Nandakumar Ankarath, K. J. (2010). Understanding IFRS Fundamentals: International Financial Reporting Standards. John Wiley & Sons,
  • (2018, March 19). Accounting Policies – Fair Presentation and Faithful Representation for IFRS. Retrieved from https://www.charterededucation.com/ifrs/accounting-policies-fair-presentation-and-faithful-representation-for-ifrs/
  • com. (2014, May 14). IAS 1 – Presentation of Financial Statements (detailed review). Retrieved from https://www.readyratios.com/articles/ifrs/ias-1-presentation-of-financial-statements.html
  • (2018). IAS presentation of financial statement. Retrieved from https://www.ifrsbox.com/ias-1-presentation-of-financial-statements/


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