IAS 1 Statement of profit or loss and other comprehensive income

Last Updated on 19/02/2020 by 75385885

IAS 1 Statement of profit or loss and other comprehensive incomeIAS 1 Presentation of Financial Statements

IAS 1 Statement of profit or loss and other comprehensive income

General

81 [Deleted]

81A The statement of profit or loss and other comprehensive income (statement of comprehensive income) shall present, in addition to the profit or loss and other comprehensive income sections:

  1. profit or loss;
  2. total other comprehensive income;
  3. comprehensive income for the period, being the total of profit or loss and other comprehensive income.

If an entity presents a separate statement of profit or loss it does not present the profit or loss section in the statement presenting comprehensive income.

81B An entity shall present the following items, in addition to the profit or loss and other comprehensive income sections, as allocation of profit or loss and other comprehensive income for the period:

  1. profit or loss for the period attributable to:
    1. non-controlling interests, and
    2. owners of the parent.
  2. comprehensive income for the period attributable to:
    1. non-controlling interests, and
    2. owners of the parent..

If an entity presents profit or loss in a separate statement it shall present (a) in that statement.

82 In addition to items required by other IFRSs, the profit or loss section or the statement of profit or loss shall include line items that present the following amounts for the period:

  1. revenue, presenting separately:
    1. interest revenue calculated using the effective interest method; and
    2. insurance revenue (see IFRS 17);
      (aa) gains and losses arising from the derecognition of financial assets measured at amortised cost;
      (ab) insurance service expenses from contracts issued within the scope of IFRS 17 (see IFRS 17);
      (ac) income or expenses from reinsurance contracts held (see IFRS 17);
  2. finance costs;
    (ba) impairment losses (including reversals of impairment losses or impairment gains) determined in accordance with Section 5.5 of IFRS 9;
    (bb) insurance finance income or expenses from contracts issued within the scope of IFRS 17 (see IFRS 17);
    (bc) finance income or expenses from reinsurance contracts held (see IFRS 17);
  3. share of the profit or loss of associates and joint ventures accounted for using the equity method;
    (ca) if a financial asset is reclassified out of the amortised cost measurement category so that it is measured at fair value through profit or loss, any gain or loss arising from a difference between the previous amortised cost of the financial asset and its fair value at the reclassification date (as defined in IFRS 9);
    (cb) if a financial asset is reclassified out of the fair value through other comprehensive income measurement category so that it is measured at fair value through profit or loss, any cumulative gain or loss previously recognised in other comprehensive income that is reclassified to profit or loss;
  4. tax expense;
  5. [deleted]
    (ea) a single amount for the total of discontinued operations (see IFRS 5).
    (f)–(i) [deleted]

Information to be presented in the other comprehensive income section

In Practice Where did Other Comprehensive Income come from?

82A The other comprehensive income section shall present line items for the amounts for the period of:

  1. items of other comprehensive income (excluding amounts in paragraph (b)), classified by nature and grouped into those that, in accordance with other IFRSs:
    1. will not be reclassified subsequently to profit or loss; and
    2. will be reclassified subsequently to profit or loss when specific conditions are met.
  2. the share of the other comprehensive income of associates and joint ventures accounted for using the equity method, separated into the share of items that, in accordance with other IFRSs:
    1. will not be reclassified subsequently to profit or loss; and
    2. will be reclassified subsequently to profit or loss when specific conditions are met.

83–84 [Deleted]

85 An entity shall present additional line items (including by disaggregating the line items listed in paragraph 82), headings and subtotals in the statement(s) presenting profit or loss and other comprehensive income when such presentation is relevant to an understanding of the entity’s financial performance.

85A When an entity presents subtotals in accordance with paragraph 85, those subtotals shall:

  1. be comprised of line items made up of amounts recognised and measured in accordance with IFRS;
  2. be presented and labelled in a manner that makes the line items that constitute the subtotal clear and understandable;
  3. be consistent from period to period, in accordance with paragraph 45; and
  4. not be displayed with more prominence than the subtotals and totals required in IFRS for the statement(s) presenting profit or loss and other comprehensive income.

85B An entity shall present the line items in the statement(s) presenting profit or loss and other comprehensive income that reconcile any subtotals presented in accordance with paragraph 85 with the subtotals or totals required in IFRS for such statement(s).

86 Because the effects of an entity’s various activities, transactions and other events differ in frequency, potential for gain or loss and predictability, disclosing the components of financial performance assists users in understanding the financial performance achieved and in making projections of future financial performance.

An entity includes additional line items in the statement(s) presenting profit or loss and other comprehensive income and it amends the descriptions used and the ordering of items when this is necessary to explain the elements of financial performance.

An entity considers factors including materiality and the nature and function of the items of income and expense. For example, a financial institution may amend the descriptions to provide information that is relevant to the operations of a financial institution. An entity does not offset income and expense items unless the criteria in paragraph 32 are met.

87 An entity shall not present any items of income or expense as extraordinary items, in the statement(s) presenting profit or loss and other comprehensive income or in the notes.

Profit or loss for the period

88 An entity shall recognise all items of income and expense in a period in profit or loss unless an IFRS requires or permits otherwise.

89 Some IFRSs specify circumstances when an entity recognises particular items outside profit or loss in the current period. IAS 8 specifies two such circumstances: the correction of errors and the effect of changes in accounting policies.

Other IFRSs require or permit components of other comprehensive income that meet the Framework’s1 definition of income or expense to be excluded from profit or loss (see paragraph 7).

Other comprehensive income for the period

90 An entity shall disclose the amount of income tax relating to each item of other comprehensive income, including reclassification adjustments, either in the statement of profit or loss and other comprehensive income or in the notes.

91 An entity may present items of other comprehensive income either:

  1. net of related tax effects, or
  2. before related tax effects with one amount shown for the aggregate amount of income tax relating to those items.

If an entity elects alternative (b), it shall allocate the tax between the items that might be reclassified subsequently to the profit or loss section and those that will not be reclassified subsequently to the profit or loss section.

92 An entity shall disclose reclassification adjustments relating to components of other comprehensive income.

93 Other IFRSs specify whether and when amounts previously recognised in other comprehensive income are reclassified to profit or loss. Such reclassifications are referred to in this Standard as reclassification adjustments. A reclassification adjustment is included with the related component of other comprehensive income in the period that the adjustment is reclassified to profit or loss.

These amounts may have been recognised in other comprehensive income as unrealised gains in the current or previous periods. Those unrealised gains must be deducted from other comprehensive income in the period in which the realised gains are reclassified to profit or loss to avoid including them in total comprehensive income twice.

94 An entity may present reclassification adjustments in the statement(s) of profit or loss and other comprehensive income or in the notes. An entity presenting reclassification adjustments in the notes presents the items of other comprehensive income after any related reclassification adjustments.

95 Reclassification adjustments arise, for example, on disposal of a foreign operation (see IAS 21) and when some hedged forecast cash flows affect profit or loss (see paragraph 6.5.11(d) of IFRS 9 in relation to cash flow hedges).

96 Reclassification adjustments do not arise on changes in revaluation surplus recognised in accordance with IAS 16 or IAS 38 or on remeasurements of defined benefit plans recognised in accordance with IAS 19. These components are recognised in other comprehensive income and are not reclassified to profit or loss in subsequent periods.

Changes in revaluation surplus may be transferred to retained earnings in subsequent periods as the asset is used or when it is derecognised (see IAS 16 and IAS 38). In accordance with IFRS 9, reclassification adjustments do not arise if a cash flow hedge or the accounting for the time value of an option (or the forward element of a forward contract or the foreign currency basis spread of a financial instrument) result in amounts that are removed from the cash flow hedge reserve or a separate component of equity, respectively, and included directly in the initial cost or other carrying amount of an asset or a liability. These amounts are directly transferred to assets or liabilities.

Information to be presented in the statement(s) of profit or loss and other comprehensive income or in the notes

97 When items of income or expense are material, an entity shall disclose their nature and amount separately.

98 Circumstances that would give rise to the separate disclosure of items of income and expense include:

  1. write-downs of inventories to net realisable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs;
  2. restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring;
  3. disposals of items of property, plant and equipment;
  4. disposals of investments;
  5. discontinued operations;
  6. litigation settlements; and
  7. other reversals of provisions.

99 An entity shall present an analysis of expenses recognised in profit or loss using a classification based on either their nature or their function within the entity, whichever provides information that is reliable and more relevant.

100 Entities are encouraged to present the analysis in paragraph 99 in the statement(s) presenting profit or loss and other comprehensive income.

101 Expenses are subclassified to highlight components of financial performance that may differ in terms of frequency, potential for gain or loss and predictability. This analysis is provided in one of two forms.

102 The first form of analysis is the ‘nature of expense’ method. An entity aggregates expenses within profit or loss according to their nature (for example, depreciation, purchases of materials, transport costs, employee benefits and advertising costs), and does not reallocate them among functions within the entity. This method may be simple to apply because no allocations of expenses to functional classifications are necessary. An example of a classification using the nature of expense method is as follows:

Revenue

X

Other income

X

Changes in inventories of finished goods and work in progress

X

Raw materials and consumables used

X

Employee benefits expense

X

Depreciation and amortisation expense

X

Other expenses

X

Total expenses

(X)

Profit before tax

X

103 The second form of analysis is the ‘function of expense’ or ‘cost of sales’ method and classifies expenses according to their function as part of cost of sales or, for example, the costs of distribution or administrative activities. At a minimum, an entity discloses its cost of sales under this method separately from other expenses.

This method can provide more relevant information to users than the classification of expenses by nature, but allocating costs to functions may require arbitrary allocations and involve considerable judgment. An example of a classification using the function of expense method is as follows:

Revenue

X

Cost of sales

(X)

Gross profit

X

Other income

X

Distribution costs

(X)

Administrative expenses

(X)

Other expenses

(X)

Profit before tax

X

104 An entity classifying expenses by function shall disclose additional information on the nature of expenses, including depreciation and amortisation expense and employee benefits expense.

105 The choice between the function of expense method and the nature of expense method depends on historical and industry factors and the nature of the entity. Both methods provide an indication of those costs that might vary, directly or indirectly, with the level of sales or production of the entity.

Because each method of presentation has merit for different types of entities, this Standard requires management to select the presentation that is reliable and more relevant. However, because information on the nature of expenses is useful in predicting future cash flows, additional disclosure is required when the function of expense classification is used. In paragraph 104, ‘employee benefits’ has the same meaning as in IAS 19.

Previous: IAS 1 Statement of financial position

Next: IAS 1 Statement of changes in equity

Source EU rules on financial information disclosed by companies

Last Updated on 19/02/2020 by 75385885

Excerpts from IFRS Standards come from the Official Journal of the European Union (© European Union, https://eur-lex.europa.eu). Individual jurisdictions around the world may require or permit the use of (locally authorised and/or amended) IFRS Standards for all or some publicly listed companies.  The information provided on this website is for general information and educational purposes only and should not be used as a substitute for professional advice. The specific status of IFRS Standards should be checked in each individual jurisdiction. Use at your own risk. Annualreporting is an independent website and it is not affiliated with, endorsed by, or in any other way associated with the IFRS Foundation. For official information concerning IFRS Standards, visit IFRS.org or the local representative in your jurisdiction.

IAS 1 Statement of profit or loss and other comprehensive income

IAS 1 Statement of profit or loss and other comprehensive income

IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income

IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income

IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income IAS 1 Statement of profit or loss and other comprehensive income