FINANCIAL STATEMENT PRESENTATION

Section 3.

Scope of this section

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3. 1 This section explains fair presentation of financial statements, what compliance with the IFRS for SMEs requires and what a complete set of financial statements is.

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3. 2 Financial statements shall present fairly the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in Section 2 Concepts and Pervasive Principles:
   1. the application of the IFRS for SMEs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation of the financial position, financial performance and cash flows of SMEs.
   2. as explained in paragraph 1.5, the application of this Standard by an entity with public accountability does not result in a fair presentation in accordance with this Standard.

The additional disclosures referred to in (a) are necessary when compliance with the specific requirements in this Standard is insufficient to enable users to understand the effect of particular transactions, other events and conditions on the entity’s financial position and financial performance.

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3. 1 An entity whose financial statements comply with the IFRS for SMEs shall make an explicit and unreserved statement of such compliance in the notes. Financial statements shall not be described as complying with the IFRS for SMEs unless they comply with all the requirements of this Standard.

3. 4 In the extremely rare circumstances when management concludes that compliance with this Standard would be so misleading that it would conflict with the objective of financial statements of SMEs set out in Section 2, the entity shall depart from that requirement in the manner set out in paragraph 3.5 unless the relevant regulatory framework prohibits such a departure.

3. 5 When an entity departs from a requirement of this Standard in accordance with paragraph 3.4, it shall disclose the following:
   1. that management has concluded that the financial statements present fairly the entity’s financial position, financial performance and cash flows;
   2. that it has complied with the IFRS for SMEs, except that it has departed from a particular requirement to achieve a fair presentation; and
   3. the nature of the departure, including the treatment that the IFRS for SMEs would require, the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in Section 2 and the treatment adopted.

3. 6 When an entity has departed from a requirement of this Standard in a prior period, and that departure affects the amounts recognised in the financial statements for the current period, it shall make the disclosures set out in paragraph 3.5(c).

3. 7 In the extremely rare circumstances when management concludes that compliance with a requirement in this Standard would be so misleading that it would conflict with the objective of financial statements of SMEs set out in Section 2, but the relevant regulatory framework prohibits departure from the requirement, the entity shall, to the maximum extent possible, reduce the perceived misleading aspects of compliance by disclosing the following:
   1. the nature of the requirement in this Standard and the reason why management has concluded that complying with that requirement is so misleading in the circumstances that it conflicts with the objective of financial statements set out in Section 2; and
   2. for each period presented, the adjustments to each item in the financial statements that management has concluded would be necessary to achieve a fair presentation.

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3. 8 When preparing financial statements, the management of an entity using this Standard shall make an assessment of the entity’s ability to continue as a going concern. An entity is a going concern unless management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the reporting date.

3. 9 When management is aware, in making its assessment, of material uncertainties related to events or conditions that cast significant doubt upon the entity’s ability to continue as a going concern, the entity shall disclose those uncertainties. When an entity does not prepare financial statements on a going concern basis, it shall disclose that fact, together with the basis on which it prepared the financial statements and the reason why the entity is not regarded as a going concern.

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3. 10 An entity shall present a complete set of financial statements (including comparative information–see paragraph 3.14) at least annually. When the end of an entity’s reporting period changes and the annual financial statements are presented for a period longer or shorter than one year, the entity shall disclose the following:
   1. that fact;
   2. the reason for using a longer or shorter period; and
   3. the fact that comparative amounts presented in the financial statements (including the related notes) are not entirely comparable.

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3. 11 An entity shall retain the presentation and classification of items in the financial statements from one period to the next unless:
   1. it is apparent, following a significant change in the nature of the entity’s operations or a review of its financial statements, that another presentation or classification would be more appropriate having regard to the criteria for the selection and application of accounting policies in Section 10 Accounting Policies, Estimates and Errors; or
   2. this Standard requires a change in presentation.

3. 12 When the presentation or classification of items in the financial statements is changed, an entity shall reclassify comparative amounts unless the reclassification is impracticable. When comparative amounts are reclassified, an entity shall disclose the following:
   1. the nature of the reclassification;
   2. the amount of each item or class of items that is reclassified; and
   3. the reason for the reclassification.

3. 13 If it is impracticable to reclassify comparative amounts, an entity shall disclose why reclassification was not practicable.

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3. 14 Except when this Standard permits or requires otherwise, an entity shall disclose comparative information in respect of the previous comparable period for all amounts presented in the current period’s financial statements. An entity shall include comparative information for narrative and descriptive information when it is relevant to an understanding of the current period’s financial statements.

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3. 15 An entity shall present separately each material class of similar items. An entity shall present separately items of a dissimilar nature or function unless they are immaterial.

3. 16 Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions of users made on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor.

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3. 17 A complete set of financial statements of an entity shall include all of the following:
   1. a statement of financial position as at the reporting date;
   2. either:
      1. a single statement of comprehensive income for the reporting period displaying all items of income and expense recognised during the period including those items recognised in determining profit or loss (which is a subtotal in the statement of comprehensive income) and items of other comprehensive income.
      2. a separate income statement and a separate statement of comprehensive income. If an entity chooses to present both an income statement and a statement of comprehensive income, the statement of comprehensive income begins with profit or loss and then displays the items of other comprehensive income.
   3. a statement of changes in equity for the reporting period;
   4. a statement of cash flows for the reporting period; and
   5. notes, comprising a summary of significant accounting policies and other explanatory information.

3. 18 If the only changes to equity during the periods for which financial statements are presented arise from profit or loss, payment of dividends, corrections of prior period errors, and changes in accounting policy, the entity may present a single statement of income and retained earnings in place of the statement of comprehensive income and statement of changes in equity (see paragraph 6.4).

3. 19 If an entity has no items of other comprehensive income in any of the periods for which financial statements are presented, it may present only an income statement or it may present a statement of comprehensive income in which the ‘bottom line’ is labelled ‘profit or loss’.

3. 20 Because paragraph 3.14 requires comparative amounts in respect of the previous period for all amounts presented in the financial statements, a complete set of financial statements means that an entity shall present, as a minimum, two of each of the required financial statements and related notes.

3. 21 In a complete set of financial statements, an entity shall present each financial statement with equal prominence.

3. 22 An entity may use titles for the financial statements other than those used in this Standard as long as they are not misleading.

3. 23 An entity shall clearly identify each of the financial statements and the notes and distinguish them from other information in the same document. In addition, an entity shall display the following information prominently and repeat it when necessary for an understanding of the information presented:
   1. the name of the reporting entity and any change in its name since the end of the preceding reporting period;
   2. whether the financial statements cover the individual entity or a group of entities;
   3. the date of the end of the reporting period and the period covered by the financial statements;
   4. the presentationcurrency, as defined in Section 30 Foreign Currency Translation; and
   5. the level of rounding, if any, used in presenting amounts in the financial statements.

3. 24 An entity shall disclose the following in the notes:
   1. the domicile and legal form of the entity, its country of incorporation and the address of its registered office (or principal place of business, if different from the registered office); and
   2. a description of the nature of the entity’s operations and its principal activities.

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3. 25 This Standard does not address presentation of segment information, earnings per share, or interim financial reports by a small or medium-sized entity. An entity making such disclosures shall describe the basis for preparing and presenting the information.