Comprehensive Guide to Financial Statement Presentation
Objective of SB-FRS 1
SB-FRS 1 aims to prescribe the basis for presenting financial statements to ensure that are understandable, relevant, reliable, and comparable.
Scope of SB-FRS 1
SB-FRS 1 applies to all general-purpose financial statements prepared and presented in accordance with Statutory Board Financial Reporting Standards (SB-FRSs).
Therefore, the standard does not apply to the structure and content of condensed interim financial statements, except for certain specified paragraphs.
Key Definitions
- General Purpose Financial Statements: Financial reports intended for users who cannot demand customized reports.
- Materiality: Information is material if its omission or misstatement could influence economic decisions made by users based on the financial statements.
- Other Comprehensive Income: Items of income and expense not recognized in profit or loss but in equity.
General Features of Financial Statements
- Fair Presentation and Compliance with SB-FRSs: Financial statements must fairly present the financial position, financial performance, and cash flows of an entity. Thus compliance with SB-FRSs is presumed to result in fair presentation.
- Going Concern: Financial statements are prepared assuming the entity will continue operations in the foreseeable future.
- Accrual Basis of Accounting: Financial statements, except for cash flow information, are prepared using the accrual basis of accounting.
- Consistency of Presentation: The presentation and classification of items in the financial statements should be consistent from one period to another.
- Materiality and Aggregation: Entities must present separately each material class of similar items. In addition, insignificant amounts are aggregated with other amounts of a similar nature or function.
- Offsetting: Assets and liabilities, and income and expenses, should not be offset unless required or permitted by an SB-FRS.
Structure and Content of Financial Statements
Statement of Financial Position (Balance Sheet): Presents the entity’s assets, liabilities, and equity at a specific point in time. Key elements include:
- Current and Non-Current Assets: Segregation of assets expected to be realized within the normal operating cycle and those realized after more than 12 months.
- Current and Non-Current Liabilities: Segregation of obligations expected to be settled within the normal operating cycle and those due after more than 12 months.
- Equity: Residual interest in the assets after deducting liabilities, including issued capital, reserves, and retained earnings.
Statement of Profit or Loss and Other Comprehensive Income: Shows the entity’s financial performance over a period. Key elements include:
- Revenue and Expenses: Primary activities generating profit or loss.
- Other Comprehensive Income: Gains and losses that are not recognized in profit or loss but directly in equity.
Statement of Changes in Equity: Reflects changes in the entity’s equity during the reporting period. Key elements include:
- Total Comprehensive Income: Aggregated for the period.
- Transactions with Owners: Contributions from and distributions to owners.
Statement of Cash Flows: Provides information about the cash inflows and outflows from operating, investing, and financing activities. Moreover, key elements include:
- Operating Activities: Principal revenue-generating activities.
- Investing Activities: Acquisition and disposal of long-term assets.
- Financing Activities: Changes in equity and borrowings.
Notes to the Financial Statements: Provide additional information necessary for a complete understanding of the financial statements, including accounting policies, explanations of significant accounts, and other relevant details.
Presentation of Financial Statements
- Identification of Financial Statements: Each component of the financial statements must be clearly identified, including the name of the reporting entity, the period covered, and the currency used.
- Comparative Information: Comparative information must be disclosed in respect of the previous period for all amounts reported in the financial statements.
- Current/Non-Current Distinction: Entities must distinguish between current and non-current assets and liabilities unless a presentation based on liquidity provides more relevant and reliable information.
Transition and Effective Date
SB-FRS 1 is effective for annual periods beginning on or after January 1, 2023. However, earlier application is permitted. Entities must disclose the fact if they apply this standard before its effective date.
Conclusion
SB-FRS 1 ensures the transparency, consistency, and comparability of financial statements. Therefore, by adhering to this standard, entities can provide stakeholders with clear and reliable financial information, aiding in economic decision-making.
Disclaimer: This article is for informational purposes only and does not constitute any professional advice. Thus, feel free to contact us to consult with our professional advisors team for personalized advice and guidance.
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