IAS 1

IAS 1 Presentation of Financial Statements is the standard within International Financial Reporting Standards that sets out how a complete set of financial statements is to be presented. It does not deal with how individual transactions are recognised or measured, which other standards cover. It states which statements an entity must produce, the general principles they must follow, and the minimum line items and notes they must contain, so that statements are comparable with the entity's own earlier periods and with those of other entities.

The standard is maintained by the International Accounting Standards Board. A version was first issued by the Board's predecessor in the 1970s, and the standard was substantially revised in 1997, 2003 and 2007. In April 2024 the Board issued IFRS 18 Presentation and Disclosure in Financial Statements, which replaces IAS 1 for annual periods beginning on or after 1 January 2027, with earlier application permitted.

Under IAS 1 a complete set comprises the following.

• A statement of financial position at the end of the period, commonly called the balance sheet.
• A statement of profit or loss and other comprehensive income for the period, presented as one statement or as two linked statements, the first being the income statement.
• A statement of changes in equity for the period.
• A statement of cash flows for the period, prepared under IAS 7.
• Notes, comprising material accounting policy information and other explanatory material.
• Comparative information for the preceding period, and an additional opening statement of financial position when a policy is applied retrospectively or items are restated with a material effect.

Each statement must be given equal prominence. The titles used in the standard are not mandatory, so many entities keep traditional names.

IAS 1 lays down principles that apply to all statements. They must present fairly the financial position, performance and cash flows of the entity, and an entity that complies with every IFRS requirement makes an explicit and unreserved statement of compliance in the notes. Management must assess whether the entity is a going concern, and disclose material uncertainties that cast significant doubt on its ability to continue; the going concern assumption underlies measurement throughout the statements.

Statements other than the cash flow statement are prepared on the accrual basis of accounting. Each material class of similar items is presented separately, applying the concept of materiality, and immaterial items are aggregated. Assets and liabilities, and income and expenses, are not offset unless another standard requires or permits it. Statements are presented at least annually, and presentation and classification are kept consistent from one period to the next unless a change is justified.

In the statement of financial position, an entity normally separates current from non-current assets and liabilities; a presentation in order of liquidity is allowed where it is more relevant, as it is for banks. A liability is current if it is due to be settled within twelve months or the entity has no right at the reporting date to defer settlement for at least twelve months. Amendments effective from 2024 clarified how loan covenants affect this classification.

In the performance statement, IAS 1 requires certain line items, such as revenue, finance costs, tax expense and profit or loss, but does not define operating profit or prescribe subtotals. Expenses are analysed either by nature or by function, whichever is more reliable and relevant. No item may be described as extraordinary. Items of other comprehensive income are grouped according to whether they may later be reclassified to profit or loss.

The notes disclose the basis of preparation, accounting policies, the judgements management has made in applying them, the main sources of estimation uncertainty, and information about how the entity manages capital. Further detail on notes is given under notes to financial statements.

Investors had long complained that income statements under IAS 1 were hard to compare, because companies defined their own subtotals. IFRS 18 keeps much of IAS 1 unchanged but adds three main sets of requirements. Income and expenses are classified into operating, investing and financing categories, alongside income taxes and discontinued operations, and two new subtotals are mandatory: operating profit, and profit before financing and income taxes. Performance measures defined by management and used in public communications must be disclosed in a single note and reconciled to the nearest defined subtotal. Guidance on grouping items in the primary statements and the notes is strengthened.

Some paragraphs of IAS 1, including those on fair presentation, going concern and accounting policy disclosure, have been moved to IAS 8, which is retitled Basis of Preparation of Financial Statements. Entities applying IFRS 18 for the first time will restate comparative figures.

US generally accepted accounting principles have no single equivalent standard. Presentation rules are spread across the codification of the Financial Accounting Standards Board and, for listed companies, regulations of the Securities and Exchange Commission, which prescribe the format of statements in more detail. US practice presents expenses mainly by function, while IAS 1 allows either basis.

• IFRS Foundation