HKAS 1 - Presentation of Financial Statements (Condensed)
| Section | Key Concept | Brief Description |
|---|---|---|
| Objective & Scope | Comparability & Applicability | Prescribes presentation of general purpose FS for comparability across periods and entities; applies to all entities preparing FS under HKFRSs. |
| Definitions | Key Terms | Defines materiality, OCI, profit or loss, total comprehensive income, and other essential terms. |
| Financial Statements | Complete Set & Purpose | A complete set includes 4 statements + notes + comparatives; provides info on assets, liabilities, equity, income, expenses, and cash flows. |
| General Features | True & Fair View, Going Concern, Materiality | Core principles: true and fair view, going concern assessment, accrual basis, materiality, no offsetting, consistency. |
| Structure & Content โ SOFP | Current/Non-current Classification | Minimum line items, current/non-current distinction based on operating cycle and 12-month rule, deferred tax always non-current. |
| Structure & Content โ P&L & OCI | Profit or Loss & OCI Presentation | Minimum line items, OCI grouped into items that will/will not be reclassified, expense analysis by nature or function. |
| Structure & Content โ Other Statements & Notes | Equity, Cash Flows, Notes | Statement of changes in equity, cash flow statement, notes structure, accounting policy disclosures, judgements, estimation uncertainty. |
Objective & Scope (Paragraphs 1-6)
Objective
HKAS 1 prescribes the basis for presentation of general purpose financial statements to ensure comparability both with:
- The entity's financial statements of previous periods
- The financial statements of other entities
The Standard sets out overall requirements for presentation, guidelines for structure, and minimum requirements for content.
Scope
Applicability: All entities preparing general purpose financial statements in accordance with HKFRSs, including consolidated and separate financial statements. Does NOT apply to condensed interim financial statements (HKAS 34), though paragraphs 15-35 apply to such statements.
Terminology: Uses terminology suitable for profit-oriented entities. Not-for-profit entities may need to amend descriptions. Entities without equity (e.g., mutual funds) may need to adapt presentation.
Definitions (Paragraphs 7-8A)
Key Terms Defined
| Term | Definition |
|---|---|
| General purpose financial statements | Those intended to meet needs of users who cannot require entity-specific reports |
| Impracticable | Cannot apply a requirement after making every reasonable effort |
| Material | Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions of primary users |
| Notes | Information additional to that presented in the primary statements |
| Other comprehensive income (OCI) | Items of income and expense not recognised in profit or loss as required/permitted by other HKFRSs |
| Owners | Holders of instruments classified as equity |
| Profit or loss | Total income less expenses, excluding OCI components |
| Reclassification adjustments | Amounts reclassified to profit or loss in current period that were recognised in OCI in current or prior periods |
| Total comprehensive income | Change in equity during a period from transactions and other events, excluding owner changes |
Components of Other Comprehensive Income
OCI includes: changes in revaluation surplus, remeasurements of defined benefit plans, foreign currency translation gains/losses, gains/losses on equity/debt instruments at FVOCI, effective portion of cash flow hedges, changes in fair value attributable to credit risk for liabilities designated at FVTPL, changes in time value of options, changes in forward elements of forward contracts, insurance finance income/expenses.
Examples of obscuring information: vague or unclear language, information scattered throughout financial statements, inappropriate aggregation of dissimilar items, inappropriate disaggregation of similar items, material information hidden by immaterial information.
Financial Statements (Paragraphs 9-14)
Purpose of Financial Statements
Financial statements provide information about: assets, liabilities, equity, income and expenses (including gains and losses), contributions by and distributions to owners, and cash flows. This information assists users in predicting the entity's future cash flows, their timing and certainty.
Complete Set of Financial Statements
A complete set includes:
- Statement of financial position as at the end of the period
- Statement of profit or loss and other comprehensive income for the period
- Statement of changes in equity for the period
- Statement of cash flows for the period
- Notes (comprising material accounting policy information and other explanatory information)
- Comparative information as specified in paragraphs 38 and 38A
- Statement of financial position as at the beginning of the preceding period when: entity applies an accounting policy retrospectively, makes a retrospective restatement, or reclassifies items in its financial statements
Presentation Options
An entity may present: Single statement approach (one statement of profit or loss and other comprehensive income) or Two statement approach (separate statement of profit or loss immediately preceding the statement of comprehensive income).
Reports Outside Financial Statements
Entities may present outside financial statements: financial review by management, environmental reports, value added statements. These are outside the scope of HKFRSs.
General Features (Paragraphs 15-46)
True and Fair View and Compliance with HKFRSs
Compliance Statement: Explicit and unreserved statement of compliance required in notes. Cannot describe as complying with HKFRSs unless all requirements are met.
Achieving True and Fair View: Select and apply accounting policies per HKAS 8, present information in a relevant, reliable, comparable and understandable manner, provide additional disclosures when necessary.
Departure from HKFRSs: Only in extremely rare circumstances when compliance would be so misleading it conflicts with the objective of financial statements. Must disclose: title of HKFRS departed from, nature of departure, treatment required vs. adopted, financial effect of departure.
Going Concern
Assessment covers at least 12 months from end of reporting period. Disclose material uncertainties that may cast significant doubt on going concern.
Accrual Basis of Accounting
Financial statements, except for cash flow information, shall be prepared using the accrual basis of accounting.
Materiality and Aggregation
- Present separately each material class of similar items
- Present separately items of dissimilar nature or function unless immaterial
- Do not reduce understandability by obscuring material information with immaterial information
- Need not provide specific disclosure if information is not material
Offsetting
Not Offsetting: Measuring assets net of valuation allowances (e.g., obsolescence allowances, doubtful debts allowances).
Permitted Netting: Gains/losses on disposal of non-current assets, expenditure related to a provision reimbursed under contractual arrangement, gains and losses from a group of similar transactions.
Frequency of Reporting
A complete set of financial statements shall be presented at least annually. If reporting period changes, disclose reason and that amounts are not entirely comparable.
Comparative Information
Minimum: Two statements of financial position, two statements of profit or loss and other comprehensive income, two separate statements of profit or loss (if presented), two statements of cash flows, two statements of changes in equity, related notes.
Third Statement of Financial Position: Required when entity applies an accounting policy retrospectively, makes a retrospective restatement, or reclassifies items with a material effect on the statement of financial position at the beginning of the preceding period.
Consistency of Presentation
An entity shall retain the presentation and classification of items from one period to the next unless a significant change in operations or review suggests another presentation is more appropriate, or a HKFRS requires a change.
Structure & Content โ Statement of Financial Position (Paragraphs 49-80A)
Identification of the Financial Statements
Required disclosures: name of reporting entity, whether financial statements are of an individual entity or a group, date of end of reporting period or period covered, presentation currency, level of rounding used.
Information to be Presented
Minimum line items:
| Assets | Liabilities | Equity |
|---|---|---|
| Property, plant and equipment | Trade and other payables | Non-controlling interests |
| Investment property | Provisions | Issued capital and reserves attributable to owners of parent |
| Intangible assets | Financial liabilities (excluding trade payables and provisions) | |
| Financial assets (excluding certain categories) | Portfolios of contracts within HKFRS 17 (liabilities) | |
| Portfolios of contracts within HKFRS 17 (assets) | Current tax liabilities | |
| Investments accounted for using equity method | Deferred tax liabilities | |
| Biological assets | Liabilities in disposal groups classified as held for sale | |
| Inventories | ||
| Trade and other receivables | ||
| Cash and cash equivalents | ||
| Assets classified as held for sale | ||
| Current tax assets | ||
| Deferred tax assets |
Current/Non-current Distinction
Current Assets (Paragraph 66): An asset is current when it meets ANY of these criteria: expected to be realised, sold, or consumed in the normal operating cycle; held primarily for trading; expected to be realised within 12 months after reporting period; cash or cash equivalent (unless restricted for at least 12 months).
Current Liabilities (Paragraph 69): A liability is current when it meets ANY of these criteria: expected to be settled in the normal operating cycle; held primarily for trading; due to be settled within 12 months after reporting period; does not have an unconditional right to defer settlement for at least 12 months.
| Scenario | Classification |
|---|---|
| Trade payables due >12 months but part of operating cycle | Current |
| Liability due within 12 months, refinanced after reporting period but before authorisation | Current |
| Entity has discretion to refinance/roll over for โฅ12 months under existing facility | Non-current |
| Breach of loan covenant at reporting date, lender grants grace period after reporting period | Current (unless grace period agreed by end of reporting period) |
| Lender agrees period of grace by end of reporting period to rectify breach (โฅ12 months) | Non-current |
Information in Statement of Financial Position or Notes
Disclose further subclassifications of line items (e.g., property, plant and equipment by class; receivables: trade, related parties, prepayments; inventories: merchandise, supplies, materials, WIP, finished goods; provisions: employee benefits, other items; equity: paid-in capital, share premium, reserves).
Share Capital Disclosures: For each class of share capital: number of shares authorised, number issued and fully paid, and issued but not fully paid, par value per share, reconciliation of shares outstanding, rights, preferences, and restrictions, shares held by entity or subsidiaries/associates, shares reserved for issue under options and contracts.
Structure & Content โ Statement of Profit or Loss and OCI (Paragraphs 81A-105)
Structure
The statement shall present: profit or loss, total other comprehensive income, and comprehensive income for the period (total of profit or loss and OCI). Present allocation of profit or loss and OCI to non-controlling interests and owners of the parent.
Information in Profit or Loss Section
Minimum line items: revenue (separately showing interest revenue using effective interest method and insurance revenue), gains/losses from derecognition of financial assets at amortised cost, insurance service expenses, income/expenses from reinsurance contracts held, finance costs, impairment losses, insurance finance income/expenses, finance income/expenses from reinsurance contracts held, share of profit or loss of associates and joint ventures, gains/losses on reclassification of financial assets, tax expense, single amount for total of discontinued operations.
Information in Other Comprehensive Income Section
OCI items shall be grouped into: Items that will not be reclassified subsequently to profit or loss and Items that will be reclassified subsequently to profit or loss when specific conditions are met. Also present share of OCI of associates and joint ventures, separated into the same two categories.
Additional Line Items and Subtotals
Requirements for subtotals: comprised of amounts recognised and measured per HKFRS, presented and labelled clearly, consistent from period to period, not displayed with more prominence than required subtotals and totals, must reconcile with required subtotals or totals.
Profit or Loss for the Period
All items of income and expense shall be recognised in profit or loss unless a HKFRS requires or permits otherwise.
Other Comprehensive Income for the Period
Tax Effects: Disclose income tax relating to each OCI item, either in the statement of comprehensive income or in the notes. OCI may be presented net of related tax effects, or before tax with one amount for aggregate tax.
Reclassification Adjustments: An entity shall disclose reclassification adjustments relating to components of OCI. No reclassification adjustments for changes in revaluation surplus and remeasurements of defined benefit plans.
Expense Analysis
Two methods permitted:
| Method | Description | Example |
|---|---|---|
| Nature of Expense Method | Aggregates expenses by nature (depreciation, purchases, transport, employee benefits, advertising) | Revenue, Other income, Changes in inventories, Raw materials and consumables used, Employee benefits expense, Depreciation and amortisation expense, Other expenses, Total expenses, Profit before tax |
| Function of Expense (Cost of Sales) Method | Classifies expenses by function (cost of sales, distribution, administration) | Revenue, Cost of sales, Gross profit, Other income, Distribution costs, Administrative expenses, Other expenses, Profit before tax |
Structure & Content โ Other Statements and Notes (Paragraphs 106-138)
Statement of Changes in Equity
The statement includes: total comprehensive income for the period (separately attributable to owners of parent and non-controlling interests), effects of retrospective application or restatement for each component of equity, and reconciliation for each component of equity between beginning and end of period, showing profit or loss, other comprehensive income, and transactions with owners.
Information in statement or notes: analysis of OCI by item for each component of equity, amount of dividends recognised as distributions to owners and related per share amount.
Statement of Cash Flows
Cash flow information provides basis to assess entity's ability to generate cash and cash equivalents and entity's needs to utilise those cash flows. HKAS 7 sets out requirements for presentation and disclosure.
Notes
Structure: Notes shall present information about basis of preparation and specific accounting policies, disclose information required by HKFRSs not presented elsewhere, and provide information relevant to understanding any statement. Cross-reference each item in primary statements to related note information.
Disclosure of Accounting Policy Information
When Accounting Policy Information is Material: Entity changed accounting policy during period with material effect, entity chose from options permitted by HKFRSs, policy developed in absence of specific HKFRS, policy relates to area requiring significant judgements or assumptions, accounting required is complex.
Entity-Specific Information: Accounting policy information that focuses on how an entity has applied HKFRSs to its own circumstances provides more useful information than standardised information or duplication of HKFRS requirements.
Judgements
Disclose judgements (apart from estimations) that management has made in applying accounting policies that have the most significant effect on amounts recognised. Examples: whether substantially all risks and rewards of ownership are transferred, whether sales are financing arrangements, whether contractual terms give rise to SPPI cash flows.
Sources of Estimation Uncertainty
Disclose assumptions about the future and other major sources of estimation uncertainty at end of reporting period that have a significant risk of causing material adjustment to carrying amounts within next financial year. Required disclosures: nature of assumptions/estimation uncertainty, carrying amount of affected assets and liabilities.
Capital Disclosures
Required information: qualitative information about objectives, policies, and processes for managing capital, summary quantitative data about what is managed as capital, changes from previous period, compliance with externally imposed capital requirements, consequences of non-compliance.
Other Disclosures
Dividends proposed or declared before authorisation but not recognised, cumulative preference dividends not recognised, domicile and legal form, country of incorporation, registered office address, nature of operations and principal activities, name of parent and ultimate parent, if limited life entity, information about length of life.
Transition & Effective Date (Paragraphs 139-139V)
Effective Dates
Original Effective Date: Annual periods beginning on or after 1 January 2009.
Key Amendments
| Amendment | Effective Date |
|---|---|
| HKAS 27 (2008) โ Amended paragraph 106 | 1 July 2009 |
| Puttable Financial Instruments (June 2008) | 1 January 2009 |
| Improvements to HKFRSs (October 2008) | 1 January 2009 |
| Improvements to HKFRSs (May 2009) | 1 January 2010 |
| Improvements to HKFRSs (May 2010) | 1 January 2011 |
| Presentation of Items of OCI (July 2011) | 1 July 2012 |
| Annual Improvements 2009-2011 Cycle (June 2012) | 1 January 2013 |
| Disclosure Initiative (January 2015) | 1 January 2016 |
| Definition of Material (January 2019) | 1 January 2020 |
| Amendments to References to Conceptual Framework (2018) | 1 January 2020 |
| Disclosure of Accounting Policies (April 2021) | 1 January 2023 |
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