IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

Wiley IFRS: Practical Implementation Guide and Workbook

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but also on the "nature" of the item). For instance, in some cases, transactions with "related parties" (as defined under lAS 24), although not material when the size of the transactions is considered, may be considered "materia l" because they are with related parties (This is where the "qualitative" aspect of the definition of the term "materia l" comes into play). Materiality is therefore a very subjec tive concept. 4. PURPOSE OF FINANCIAL STATEMENTS Financial statements provide stakeholders with information about the entity' s financial positron, financial performance, and cash flows by providing information about its assets, liabilities, equity,

income and expenses, other changes in equity, and cash flows. 5. COMPONENTS OF FINANCIAL STATEMENTS

Income and expenses

Income Statement

All changes in equity or changes other than those with equ ity holders

Statement of Changesf-_ _

--.j

in Equity

Components of Financial Statements

Cash inflows & outflows from c-----<.~ operating, financi ng, and investi ng activities

Signifi cant I----~ accounting policies & explanatory notes

Notes

6. OVERALL CONSIDERAnONS 6.1 Fair Presentation and Compliance with IFRS

6.1.1 "Fair presentation" implies that the financial statements "present fairly" (or alternatively, in some juri sdictions [countries], present a "true and fair" view) of the financial position, financial performance, and cash flows of an entity. 6.1.2 "Fair presentation" requires f aithf ul representation of the effects of transactions and other events and conditions in accordance with the definitions and recognition criteria for assets, liabili– ties, income, and expenses laid down in the IASB' s Framework. The application ofiFRS, with ad– ditional disclosure where required, is expected to result in financial statements that achieve a "fair presentation." 6.1.3 Under lAS I, entities are required to make an explicit statement of compliance with [FRS in their notes if their financial statements comply with IFRS. 6.1.4 By disclosure of the accounting policies used or notes or expl anatory material, an entity cannot correct inappropriate accounting policies. Practical In sight In practice, some entities believe that even if an inappropriate accounting policy were used in presenting the financial statements (say, use of "cash basis" as opposed to the "accrual basis" to account for certain expenses), as long as it is disclosed by the entity in notes to the financial statements, the problem would be rectified. Recognizing this tendency, lAS 1 categorically prohibits such shortcut methods from being employed by entities presenting financial state– ments under IFRS.