IAS 12 Income Taxes deals with both current and deferred taxes on income. Various exceptions and non-ability to reflect the economies of transactions may create difficulty for the users to understand the complex nature of income tax accounting. To solve such a problem, the accounting treatment for taxes is prescribed in International accounting standards 12.

Current Tax

The deductible and taxable amounts for the current year are considered as the current tax expense. The amount to be paid or recovered by the tax authorities can be treated as current tax assets and liabilities for the current period. The authorities refer to the tax rates and laws that have been enacted by the date of financial statements.

Deferred Taxes

The items treated as income and expenses under tax law can be different from International Financial Reporting Standards (IFRS). Deferred taxation came into account to solve this mismatch. The difference between the carrying amount and the tax base is the taxable temporary difference. When this temporary difference is multiplied by the tax rate, you obtain deferred tax or liability. The unused tax loss or credits at a particular tax rate provides us the value of deferred tax assets.

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Tax Bases

The amount of Asset or liability that is recorded on the tax-based balance sheet is known as tax base of an item. It is used to calculate the temporary difference.

1. Asset

The amount which is deductible against taxable economic benefits (carrying amount of asset) is the tax base of an asset.

2. Revenue Received in Advance

Carrying amount which is the tax base of liability less the revenue which is not taxable in future.

3. Other Liabilities

Carrying less any amount that is deducted for some tax purpose.

4. Unrecognized Items

The carrying amount is nil if the tax base of any item is not recognised in the financial statement.

5. Tax Bases That Are Not Apparent Immediately

The tax base should be calculated in such a way that in future it is recognised as a deferred tax amount.

Deferred Tax Liabilities

According to IAS 12, for all the temporary differences deferred tax liability is recognised. Some exceptions are:

• Liabilities from goodwill.
• Liabilities from the asset or liability which is other than a business combination.
• Liabilities that are created due to temporary differences caused by investments in subsidiaries and interests in joint arrangements.

Deferred Tax Assets

For the deductible temporary differences, unused tax credits and tax losses, the deferred tax asset is recognised. The carrying amount is always reviewed and reduced at the end of the reporting period to ensure taxable profit.

How Deferred Tax is Measured?

The tax rates are used to determine deferred tax assets and liabilities. Tax rates are applied to the period when assets are realised and liabilities are settled.

IAS 12 has prescribed the following points related to the measurement of deferred taxes:

• When the manner in which the company recovers the assets and settles the liabilities has an impact on the tax rate, then the measurement is also consistent with it.
• When it comes to non-depreciable assets such as revalued land, the deferred tax determines the tax consequences after selling the assets.
• Fair value is used to calculate the deferred taxes that arise from investment property.
• In case the payable income taxes are higher or lower because the dividends are paid to shareholders, then the tax rate is used to measure deferred taxes.

Recognition of Income Tax

Annual tax to recognise for the period is the current tax for the period and the movement in deferred tax balances.

The tax consequences of transactions and events are the same as the tax consequences of items.

Mostly all the current and deferred taxes are considered as profit or loss except:

• Transactions and events that come outside the scope of profit or loss.
• The business combination where the tax amounts are treated as identifiable assets or liabilities.

Additional Guidance on IAS 12 Income Taxes Recognition

• The income tax amount that cannot be recognised as profit or loss is determined on pro-rata allocation. [IAS 12.63]
• If there is any impact on the tax rate due to payment of dividends, then the tax consequences are assumed to be related to the past transactions. [12.52 B]
• The pre-combination deferred tax assets are recognised separately and are not included in the determination of goodwill. [IAS 12.68]
• The acquired deferred tax benefits after the business combination are considered as measurement period adjustments. [IAS 12.68]

Also Read About: IAS 7 – Statement of Cash Flows

Presentation

If the entity has the right and intention to settle the assets and liabilities, then-current tax assets and liabilities can be balanced in the financial statement [IAS 12.71]. The offset of deferred tax and deferred liabilities can be done in the financial statement only if the entity has the right to the current tax amount and deferred tax amount by the same tax authority.

The tax expense or income amount related to profit or loss should be presented in the profit or loss financial statement. [IAS 12.77]

Disclosure

According to IAS 12.80, the following disclosures are necessary:

• Current tax income.
• Adjustments done in earlier periods.
• Deferred tax expense arising from the reversal of temporary differences.
• Deferred tax expense arising due to change in the tax rate.
• Benefits through an unrecognized tax credit or tax loss from the prior period.
• Write down a tax asset.
• Tax expenses caused due to changes in accounting policies.

As per IAS 12.81, the following disclosures are required:

• Combined current and deferred tax.
• Tax related to other comprehensive income.
• The relationship between tax expense and the expected tax based on the current tax.
• Changes occurred in the tax rates.
• All the relevant amounts and necessary details related to temporary differences, unused tax credits and tax losses.
• Tax related to discontinued operations.
• If there are any tax consequences arising due to dividends at the end of the reporting period.
• If there are any impacts of the business combinations on deferred tax assets.

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Measurement of IAS 2 Inventories

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There may be certain events which arise between the end of the reporting period and the date when financial statements are authorised for issue. Since they may present information that must be assessed in preparation of financial statements, IAS 10 was administered to deal with such cases. IAS 10 states when an entity should modify its financial statements for the events after the reporting period. 

It also prescribes the disclosures that a company has to go give about the date when the financial statements were authorized for issue and about events after the reporting period.

IAS 10 offers direction for the accounting treatment of such events which take place after the reporting period but before the date of authorization of final statements. Plus, these events can be favourable or unfavourable. International Accounting Standard 10 events after the reporting period provide a set of rules which defines both adjusting and non-adjusting events.

Date of Authorization for Issue

The Standard proposes that an entity must not prepare its financial statements on a going concern basis if events after the reporting period demonstrate that the going concern assumption is not relevant. Events that take place after the reporting period are those which occur between the end of the reporting period and when financial statements are authorized for issue.

The date when the board of directors approve the issue of the financial statement is usually considered as the date of authorization for the issue. If the management is required to issue its financial statements to a board or shareholders for their acceptance, the specific authorization is supposed to be complete upon the management’s authorization for the issue of financial statements.

This is better rather than when the supervisor’s board or shareholders give their consent.

Moreover, the entities should disclose the date when the financial statements were authorised for issue and also who gave that authorisation. If there is a possibility that the financial statements may be amended at a later date then the entity should positively disclose this fact too.

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Adjusting Events

The events that occur after the end of the reporting period which provides further evidence of conditions that prevailed at the end of the reporting period, also known as adjusting events then the financial statements have to be modified accordingly.

Here are some examples of adjusting events:

• Consider a settlement of litigation against the entity after the reporting date, in regard of events that have already happened before the end of reporting period. This may contribute evidence of the existence and amount of liability at the reporting date. Liability of the litigation may be documented in the financial statements if it is not recognized originally or even the amount of liability can be revised.
• Declaration of bankruptcy by a long receivable after the reporting date may deliver proof that the receivable was impaired at the reporting date. However, impairment can be acknowledged in the financial statements by decreasing the amount of receivable to its recoverable amount, in case if there is any.
• Detection of frauds or errors after the reporting period can imply that the financial statements are misrepresented. In this case, the financial statements may be modified to examine accounting for those errors that are relevant to the current or prior reporting periods.

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Non-Adjusting Events

In the possibility of non-adjusting events, the entity must not adjust the financial statements in respect of those events after the end of the reporting period that indicates situations that took place after the end of the reporting period.

Here are some examples of non-adjusting events:

• The announcement of dividends after the reporting date does not indicate the validity of liability to pay dividends at the reporting date. Plus, it shall not provoke the recognition of liability in financial statements which are by IAS 37 Provisions.
• If floods cause destruction of the assets of an entity after the reporting period then it does not reflect that the assets of the entity were impaired at the end of reporting period. Therefore, in such a case, the financial statements must not be modified to account for the impairment loss that took place after the end of the reporting period.
• Initiation of litigation against any company originating out of events that happened after the reporting period does not demonstrate the existence of liability at the reporting date. It shall not arouse the recognition of liability in the financial statements by IAS 37 Provisions.

Moreover, the nature of the financial impact of material non-adjusting events must be disclosed in the financial statements.

For non-adjusting events to be considered as material, they shall impact the economic as well as the financial decisions of the users of the financial statements.

Some examples of material non-adjusting events are as follows:

• The strategy of the management to terminate or curtail its activities in crucial geographic regions.  
• Initiation of important litigation against the company originating out of events that took place after the reporting period.
• Losses suffered as an outcome of a natural calamity occurring after the end of the reporting period.
• Business combinations or disposal of subsidiaries, purchases and disposal of assets, classification of assets as held for sales of operations, restructurings, declaration of dividends, changes in law enacted or announced after the reporting period and entering into significant commitments or contingent liabilities are all examples of material non-adjusting events according to IAS 10.

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Going Concern

The judgment of whether the going concern assumption is relevant needs to be evaluated by each entity. However, the assessment of going concerned is of more applicability for individual entities rather than for a government.

An entity must not prepare its financial statements on a going concern basis if those accountable for the preparation of the financial statements determine after the reporting date either that there is an intention to liquidate the entity or to terminate operating or that there is no rational alternative but to do so.

To evaluate whether the going concern assumption is appropriate for an individual entity, those responsible for this must consider a wide range of factors. The factors include the existing and anticipated performance of the entity, any announced and probable restructuring of organizational units and if vital, potential sources of replacement funding.

For entities whose procedures are budget funded, going concern issues arise only if the government declares its intention to cease funding the entity. Also, if the going concern is no longer relevant then this Standard needs to be reflected in the financial statements of an entity. The influence of this change depends upon the circumstances of any entity.

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Scope

An entity which organizes and presents financial statements under the basis of accounting shall apply this standard in the accounting for, and disclosure of, events after the reporting date.

Moreover, the Standard applies to all public sector entities, Government enterprises are exceptions. Also, IAS 10 prescribes that in the events after the reporting period, entities are required to distinguish between subsequent events IFRS that are adjusting and those which are non-adjusting.

Final Words

IAS 10 contains requirements and guidance for the times when events occur between the end of the reporting period and date when final statements were authorized. These should be modified in the financial statements.

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IFRS suggests that for a set of financial statements to be complete, there should be five statements which are presented with equivalent importance. One of these 5 statements is the statement of cash flows. The success of an entity does not only depend on its profit but also by the ability to generate and receive cash flows.

To understand how an entity generates, uses or obtains cash and to determine its future cash flows, the statement of cash flow is a must.

IAS 7 deals with the statement of cash flows which presents inflows and outflows of cash.

The main objective of IAS 7 is to expect the presentation of historical changes in cash equivalents of any entity.

Cash flows are classified into operating, investing as well as financing activities. Here is some information that will help you in understanding this better.

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Cash and Cash Equivalents

Cash equivalents are held for meeting short term commitments. They are highly liquid, readily convertible to the recognized amounts of cash and are subject to an insignificant risk of changes in value. To meet the short term agreements, IAS 7 specifies that an investment has a maturity of three months maximum from the date of obtainment.

This time period is generally considered as a criterion and there is no hard and fast rule for this in the IAS 7. Initially, the classification is unchanged when any investment approaches its maturity date.

Also, if a deposit has a maturity that exceeds 3 months but there is no interest loss for its early withdrawal then it is probable to treat such cases as a cash equivalent.

However, it should be held for fulfilling short term cash commitments and not investments or other purposes. It is clear that cash equivalents cannot include equity investments. Plus, they are presented in the statement of the final position within cash and cash equivalents. The numbers of cash and cash equivalents in the statement of the final position may not always be the same for which the statements of cash flow has come up with reconciliation.

Debt Instruments

The Institutional money market funds association specifies that triple-A-rated money market funds can be recognised as cash equivalents. Debt instruments like government bonds or corporate bonds can meet the standards of cash equivalent by using market funds in their cash management procedure. Money market funds must uphold amounts of overnight and one week’s security which should not be less than the prescribed minimum.

It should neither exceed the maximum laden average maturity nor the maximum laden average life to mitigate liquidity risk. Moreover, IRFIC clearly states that the amount of cash that is obtained should be identified at the time of initial investment.

If a unit is converted into cash at a given time then it will not be considered as a cash equivalent. To ensure that there is an insignificant risk of changes in value, an entity can select a fund that invests in debt instruments with the highest level of rating and also has a maturity of only 3 months.

These statements were laid down because auditors evaluate every situation based on individual merits and there is no one statement which can clarify if a market fund is going to be considered as cash equivalent or not.

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Central Pooling Arrangements

Intergroup cash pooling of cash and cash equivalents which leave subsidiaries with cash deposited with other companies can be classified as cash equivalents. Factors like terms and conditions of the intergroup pooling arrangements, the credit rating of the group, liquidity as well as the access to external financial resources should be taken into consideration.

When it comes to gold and cryptocurrencies, they cannot be assessed as a cash equivalent since they can’t be converted to known amounts of cash.

In order to determine the cash and cash equivalent along with the elements that comprise the overall balance, it is a must for the entities to disclose the policy. When the cash and cash equivalent balance has some restrictions on its use, it is known as restricted cash. Generally, the restrictions are disclosed on cash and cash equivalents but it is not quite specific in the IAS 7.

Operating Activities

A cash flow that impacts from a transaction or any other event that may have a direct effect on P/L comes under operating activities. These are the core profit-producing activities of a particular entity. From normal trading activities to provisions of services by an entity, everything comes under operating activities.

In simple words, all those activities that do not fall under-investing or financing activity classification are presented in operating activities. Such activities gain revenue and add to the profits of entities.

Be it cash receipts and payments from contractors held for trading purposes, related to loans and depositions or rendering of services, operating activities comprises all of them. Also, cash inflows and profits are not the same things. This is so because the entity may give long credit terms and the money will receive months or even years later.

Cash flow statement presentation from operating activities can be reported using direct or indirect methods.

Investing Activities

All the activities that are undertaken by an entity for the investment of long term assets fall under investing activities. However, the investments are not a part of a cash equivalent.

According to IAS 7, cash flows that are investing should conclude in a recognised asset in the statement of financial position. Some elements may relate to investing activities but if they are not recognized assets then they cannot be included in this category.

For instance, development expenditures can be operating if they are expensed but will fall under investing activities if they are capitalized.

Cash payments to acquire long term assets like property and plants, payments related to internally generated property or loans made to other parties in a non-financial institution and cash receipts from sales of property are some examples of investing activities.

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Financing Activities

Activities that relate to the changes in size, as well as the composition of the contributed equity and borrowing of the entity, are financing activities. Such activities enable you to see the financial structure of any entity, how much equity they have and also how much debt they are in.

This enables you to easily estimate the future necessities to either service this debt or deliver returns to the shareholders. Examples of financing activities include Cash outflows to pay dividends, cash inflows from the sale of equity and cash outflows from buying back equity.

Interest and Dividends

Cash flows from interests and dividends received and paid must be presented separately from time to time. Plus, interests and dividends paid can be categorized as operating or financing cash flow. It can be done either way but it has to be done consistently. To be more precise, interests paid are generally considered as a cash flow from operating activities.

On the other hand, dividends are usually financing activities as they are a source of gaining financial resources. Also, if you relate loans as to what interests they are for, it would be more suitable to categorize them in financing activities.

When it comes to dividends, only include those who have made a full payment during the year in the IAS 7 statement of cash flows. For instance, if any dividend has been submitted but not yet paid then do not include it in the statement of cash flow.

Direct and Indirect Method

For reporting cash flows, a company can choose either the direct method or the indirect method. In the direct method, information about major classes of gross receipts and gross cash payments are disclosed. This can be done from accounting records or by adjusting sales and other items in the statement. It provides you with more information that is understandable and is not disclosed under the indirect method.

Alongside, under the indirect method, the net cash flow from operating activities is speculated by modifying profit. Also, it can be presumed by changes during the period in inventories, undistributed profits of associates and also non-cash items such as depreciation and provisions.

Foreign Currency and Taxes

Foreign currency cash flows must be translated using the exchange rate at the date of cash flow. Whenever a foreign currency is involved, it has to be converted to the functional currency. The effect of exchange rate changes on cash as well as cash equivalents is indicated in the cash flow statement to reconcile opening and closing balances of cash and cash equivalents.

Also, unrealised year-end foreign exchange gains or losses cannot be included in the cash flows. These amounts have to be separately reconciled if they pertain to cash or cash equivalent. If you can individually identify taxes with investing or financing activities then those have to be reported too.

Final Words

These were the highlights on the IAS 7 statement of cash flows. It defines how to present information in a statement of cash flow regarding cash and cash equivalent to an entity.

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Requirements for preparing the financial statements are prescribed by IAS 1 Presentation of Financial Statements. As per the standard set by IAS 1, complete set of financial statements should include a statement of profit and loss, a statement of financial position, a statement of cash flows and a statement of changes in equity. These guidelines for presentation make it easier to make a comparison between the financial statements of one entity with another over the previous years. International accounting standards 1 has set clear guidelines regarding the structure of financial statements and different concepts like going concerns, current/non-current distinction and the accrual basis for accounting.

Scope of IAS 1

International accounting standard 1 applies to all financial statements and must comply with International Financial Reporting Standards (IFRS). [IAS 1.2]

What Is The Objective of IAS 1 Financial Statements?

According to Script Consultants, The purpose of IAS 1 financial statements is to give information about an entity’s financial position, financial performance and cash flows. The financial statements are prepared for different users to help them in making their economic decisions. Financial statements include assets, liability, equity, income and expenses, contributions by and distributions to owner and cash flows. [IAS 1.9]

Different Components of Financial Statements

As per IAS 1.10, the following makes a complete set of financial statements:

• Balance sheet or a statement of financial position.
• A statement of profit or loss.
• A statement of changes in equity.
• Cash flows statement.
• Notes.
• Information for comparison.

Presentation of Financial Statements and Its Compliance with IFRS

There must be a fair presentation of all the components of financial statements. Fair representation includes an honest representation of:

• Effects of transactions.
• All conditions related to assets, incomes, expenses and liabilities according to international accounting standards.
• Application of IFRSs to financial statements.

The compliance with IFRS needs the financial statements means that the entity must follow the requirements such as International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations. The IFRS financial statements must include notes stating the compliance. [IAS 1.6]

If the compliance with IFRS requirement does not allow the entity to present the financial statement according to their objective or it can misleading, in such extreme or rare cases, the entity can avoid IFRS requirement. But the entity is required to disclose the reason, nature and impact of this departure from IFRS Foundation.

This is mentioned in IAS 1.19-21.

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Different Concepts of Accounting By IAS

Going Concerned

While preparing the financial statements, it is assumed that the company will remain in operation in foreseeable future. [Conceptual Framework, para 4.1]

Here the management has to:

• Make an assessment of an entity’s ability to continue.
• Disclose the uncertainties.
• Disclose if the entity is not a going concern.

Accrual Basis of Accounting

According to this concept, the business may recognize revenue when earned and expenses are recognized when the assets are consumed. IAS 1.27 mentions that entity can prepare its financial statements, expect for cash flow information.

Consistency Concept

When a business decides to use a specific presentation method, it should continue using that for next years as well. This ensures easy comparison of financial statements for various years. They must change the method only because of certain circumstances or change in IRFS’s requirement. [IAS 1.45]

Materiality and Aggregation Concept

The transactions that have the capacity to alter the decision of the readers must be recorded by the entity. [IAS 1.7]

There should be a segregation of different material classes with similar items. In case the items are individually immaterial, they can be aggregated together.

Offsetting

The assets cannot offset liabilities and income cannot offset expenses until and unless permitted by IFRS. [IAS 1.32]

Also See: International Accounting Standards Board (IASB)

Comparative Information of IAS 1

All the comparative information must be disclosed as per the requirement of IAS 1. All the transactions of all the amounts for the previous year must be reported in financial statements and notes.

At least two of the given financial statements are required for providing comparative information: [IAS 1.38]

• Financial position statement.
• Profit or loss statement.
• Separate statements of profit or loss.
• Cash flows statement.
• Changes in equity.
• Notes related to above-given items.

IAS 1 Prescribed Structure and Content For Financial Statements

According to IAS 1.49-51, the entity is required to identify:

• The financial statements, which must be different from other information-containing documents.
• Each financial statement and the notes related to them.

In addition, the content must have:

• Name of an entity or even if there is some change in the name.
• Information whether the financial statement is an individual entity or a group of entities.
• Details about the reporting period.
• The currency used.
• Level of rounding used such as thousands or millions.

Reporting Period

It is assumed that the financial statements are prepared annually. In case the business decides to change this period, it has to mention the reason for the change. [IAS 1.36]

Balance Sheet or Statement of Financial Position

Current and Non-Current Classification

There should be a clear classification of current and non-current assets and liabilities in a financial statement.

Current assets [IAS 1.66] are the assets that will be realized in normal operating cycle of the entity. These assets are used for the purpose of trading. They can be cash or cash equivalents. Within 12 months after the reporting period, they are expected to be realized. Assets that do not fulfil these criteria are categorized as non-current assets.

Current liabilities [IAS 1.69] are due to be settled within 12 months. Just like current assets, they are expected to be settled within the normal operating cycle of the entity and are used for trading purpose. There is no right of the entity on current liabilities at the end of the reporting period.

• The long term debt is classified as non-current if it is expected to be refinanced under any current loan facility.
• The liability is considered to be current if it becomes payable on demand. It can happen if the entity breaches a long-term loan agreement.
• Liability is classified as non-current, of the lender provides a period of at least 12 months grace period.

Line Items

The line items mentioned in IAS 1.54 are property, plant and equipment, intangible assets, investment property, financial assets, biological assets, inventories, trade and other receivables, cash and cash equivalents, assets for sale, trade and other payables, provisions, financial liabilities, current tax liabilities and assets, deferred tax liabilities and assets, disposal groups liabilities, non-controlling interests and issued capital and reserves.

In the financial statement or in notes, the sub-classification of line items can be: disaggregation of receivables, classes of property, plant and equipments, disaggregation of inventories, classes of equity and reserves and disaggregation of provisions for benefit of employees.

 Format of Statement

There is no specific format for preparing the financial statement. When it comes to assets, current or non-current assets, anything can come first. Similarly the position of current and non-current can be determined as per the requirement of business. One widely used format is fixed assets+ current assets-short term payables= long-term debt+ equity.

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Disclosures Required Regarding Share Capitals and Reserves [IAS 1.79]

• Par value of shares
• Number of shares (authorized, issued and fully paid, issued but not fully paid)
• Rights, preferences and restrictions
• Number of outstanding shares
• Treasury shares
• Shares that are kept in reserve for issuance under options and contracts
• Nature and purpose of each reserve

Profit or Loss Statement

The total of income minus expenses determines the profit or loss. The components of other comprehensive income are excluded while calculating the profit or loss. The other comprehensive income includes the items (income or expenses) that are not considered as profit or loss by IFRSs. Total comprehensive income for a given time period is equal to profit or loss plus other comprehensive income.

Choices available for presentation of profit or loss statement

There are two choices of presentation that an entity can choose:

• Financial position of an entity can be presented through a single statement of profit or loss and other comprehensive income. In this there can be two sections for profit or loss and other comprehensive income.
• Two statements can also be chosen by an entity i.e. a separate statement of profit or loss and a separate statement of comprehensive income.

The line items such as revenue, finance costs, tax expense, any gain or loss due to de-recognition financial assets, any gain or loss due to reclassification of financial assets must be included in profit or loss section. [IAS 1.82-82 A]

Disposals of investments, litigation settlements, discontinuing operations, disposals of items of plant, property and equipment, restructuring of activities and other reversals of provisions are some of the examples of items that must be disclosed in the comprehensive income statement or in notes separately.

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Statement of changes in equity

According to the requirement of IAS 1, a statement of equity must show:

• Total comprehensive income for the period.
• Any effects of the application of accounting policies and restatements.
• The reconciliation of amounts for each component of equity that were recorded in the beginning and end of the period should disclose profit or loss, other comprehensive income and transactions with owners.
• In the statement of change in equity or notes, amount of dividends and related amount per share can also be presented.

Notes to the financial statements

According to IAS 1.112, the notes:

• Contain all the information related to basis of preparation of financial statement and the use of accounting policies.
• Disclose the important information that cannot be found anywhere in the financial statement.
• Provide any additional information, if required.

According to IAS 1.114, the order of the notes can be presented in the following manner:

Firstly, the statement that financial statement complies with IFRSs.

• Summary of used accounting policies.
• Supporting information related to balance sheet, profit or loss statement, cash flow statement and so on.
• Disclosures such as contingent liabilities and non-financial aspects like financial risk management policies and objectives.

Judgments and Key Assumptions

The judgment made by the management while applying the accounting policies in the presentation of financial statements and its effect on the amounts should be disclosed. [IAS 1.122]

Dividends

The entity must disclose the following information in the statement of change in equity: [IAS 1.137]

• The proposed amounts of dividends that were declared before preparing the financial statement but not recognized as a distribution to the owner.
• Total cumulative preference dividends.

Disclosures Related To Capital

According to IAS 1.135, the entity must disclose the following details about the capital:

• What is the objective, processes and policies of entity in order to manage the capital?
• What changes happened from one period to another?
• What is the nature and description of capital requirement?
• How the entity is meeting its objectives?
• Is the entity complying with all the requirements?
• What is the quantitative data available for the capital?

Other Information To Be Disclosed:

While presenting the financial position of entity through financial statements, the following information can also be disclosed:

• Information related to principal activities and operations
• Legal form of entity
• Country and address of the registered office
• Name of the parent group, if any.
• Length of life, if the entity has a limited life

International accounting standards 1 has set some requirements for the proper presentation of the financial position of any entity. The above-mentioned points can be helpful in understanding the requirements for different financial statements in an easy and concise way.

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