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Wiley IFRS: Practical Implementation Guide and Workbook
(2) At the balance sheet date, the working capital deficiency (current liabilities of $25 million) ex–
ceeds its current assets (of $20 million) by $5 million
However, there are two mitigating factors:
(I )
The shareholders' ability to arrange funding for the entity's expansion and working capital
needs
(2) Projected future profitability due to expected favourable changes in government policies for the
industry the entity is operating within
Based on these sets of factors-both negative and positive (mitigating) factors-it may be possible for
the management of the entity to argue that the going concern assumption is appropriate and that any
other basis of preparation of financial statements would be unreasonable at the moment. However, if
mailers deteriorate further instead of improving, then in the future another detailed assessment would be
needed to ascertain whether the going concern assumption is still valid.
6.3 Accrual Basis of Accounting
Excl uding the cash flow statement, all other financial statements must be prepared on an accrua l
basis, whereby assets and liabilities are recogni zed when they are receivable or payabl e rather than
when actually received or paid.
6.4 Consistency of Presentation
Entities are required to retain their present ation and classifi cation of items in success ive period s
unless an alternative would be more appropri ate or if so required by a Standard.
6.5 Materiality and Aggregation
Each mate rial cla ss of similar items shall be present ed separately in the financ ial statements. Mate–
rial items that are dissimilar in nature or functi on should be separately discl osed .
6.6 Offsetting
Asset s and liabilities, income and expenses ca nnot be offse t aga inst each other unless requ ired or
permitted by a Standard or an Interpretation . Measuring assets net of allow anc es, for instance, pre–
senting receivables net of allowance for doubtful debt s, is not offsetting. Furthermore, there are
transactions other than those that an entity undertakes in the ordinary course of business that do not
generate "revenue" (as defined under lAS 18); instead they are incidental to the main revenue–
genera ting activities. The result s of these tran sacti ons are presented, when this presentation refle cts
the substance of the transaction or eve nt, by nettin g any income with related expenses arising on
the same tran sactions. For instance, gai ns or losses on disposal of noncurrent asse ts are reported by
dedu cting from the proceeds on disposal the carryi ng amount of the asse ts and related selling ex–
penses.
6.7 Comparative Information
6.7.1
Comparative inform ation (incl uding narrati ve disclosur es) rela ting to the previous period
should be reported alongside current period disclo sure , unle ss otherwise required .
6.7.2
In case there is a change in the present ation or cl assificat ion of items in the financial
statements, the compa rative info rmat ion needs to be appropriately reclassified, unless it is
impractic abl e to do so.
7. STRUCTURE AND CONTENT
7.1 Identification of the Financial Statements
Financial statements should be clearly identified from other inform ation in the same publi shed
document (such as an annua l report). Furthermore, the name of the entity, the period covered, pre–
senta tion currency, and so on also must be displayed prominentl y.
7.2 Reporting Period
Fin ancial stateme nts should be presented at lea st annually. In all other cases, that is, when a peri od
shorte r or longer than one year is used , the reason for using a different peri od and lack of total
compa rability with previous peri od information must be disclosed.