Status & recent changes
- IFRS 18 Presentation and Disclosure in Financial Statements was issued in April 2024 and is effective for annual reporting periods beginning on or after 1 January 2027 (earlier application permitted). It replaces IAS 1, carrying many IAS 1 requirements forward while adding new ones on the structure of the income statement.
- Until IFRS 18 applies (or is adopted early), IAS 1 remains the standard in force, so exams set before the 2027 changeover still test IAS 1.
- Amendments effective from 1 January 2024 clarify that a liability is non-current only if, at the reporting date, the entity has a right to defer settlement for at least 12 months; covenants that must be met only after the reporting date do not affect that classification but must be disclosed.
Objective
Sets the overall framework for general purpose financial statements: what a complete set contains, the general principles behind them and minimum line items.
Scope
- Applies to all general purpose financial statements prepared under IFRS Accounting Standards.
- Does not set recognition or measurement rules for specific transactions; those come from the other standards.
- Condensed interim reports are covered by IAS 34, although the general features in IAS 1 still apply.
Key definitions
- Complete set of financial statements
- Statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cash flows and notes, all with comparatives. A third statement of financial position is needed when a policy is applied retrospectively or items are restated or reclassified and the effect is material.
- Material
- Information is material if leaving it out, misstating it or obscuring it could reasonably be expected to influence decisions that primary users make based on the financial statements.
- Other comprehensive income (OCI)
- Income and expense items that other standards require or permit to be kept out of profit or loss, such as revaluation gains and remeasurements of defined benefit plans.
- Reclassification adjustment
- An amount previously recognised in OCI that is moved ('recycled') to profit or loss in the current period.
Recognition & measurement
General features
- Fair presentation and an explicit, unreserved statement of compliance with IFRS.
- Going concern basis unless management intends to, or has no realistic alternative but to, liquidate or stop trading; material uncertainties must be disclosed.
- Accrual basis for everything except cash flow information.
- Each material class of similar items presented separately; immaterial items may be aggregated.
- No offsetting of assets and liabilities, or income and expenses, unless a standard requires or permits it.
- Report at least annually, with comparative information and consistent presentation from period to period.
Statement of financial position
- Classify assets and liabilities as current and non-current, unless a liquidity-order presentation is more reliable and relevant (common for banks).
- An asset is current if it is expected to be realised or consumed in the normal operating cycle, held mainly for trading, expected to be realised within 12 months, or is unrestricted cash.
- A liability is current if it is expected to be settled in the normal operating cycle, held mainly for trading, due within 12 months, or the entity has no right at the reporting date to defer settlement for at least 12 months.
- Management's intention or expectation to refinance or settle early does not change classification; what matters is the right existing at the reporting date.
Profit or loss and OCI
- Present one combined statement or two statements (profit or loss, then comprehensive income).
- Group OCI items into those that may be reclassified to profit or loss later and those that will not.
- Analyse expenses by nature or by function, whichever is more reliable and relevant; if by function, disclose additional information on the nature of expenses (including depreciation and employee benefits).
- No item may be presented as 'extraordinary'.
Key disclosures
- Material accounting policy information (not every policy).
- Judgements management made in applying policies that most affect amounts recognised.
- Major sources of estimation uncertainty that carry a significant risk of material adjustment within the next year.
- Capital management objectives, policies and processes.
- Dividends proposed or declared before the financial statements are authorised but not recognised.
Common exam traps
- A loan in breach of covenants at the year end is current, even if the lender agrees a waiver after the year end (unless the grace period was agreed by the reporting date and runs for at least 12 months).
- Intent to refinance a loan due within 12 months does not make it non-current.
- Revaluation surplus movements are OCI that will not be reclassified; exchange differences on foreign operations will be reclassified on disposal.
- Departing from a standard is allowed only in extremely rare cases where compliance would be so misleading it conflicts with the Conceptual Framework's objective.
Practise MCQs on this standard
Test your understanding of IAS 1 with free chapter-wise MCQs and explanations in these question banks.