PRESENTATION OF FINANCIAL STATEMENTS(IAS-1) (1)

Chapter-1

INTERNATIONAL ACCOUNTING STANDARD 1

{PRESENTATION OF FINANCIAL STATEMENTS}
Definitions
1.

2. Purpose of financial statements

3. Complete set of financial statements

4. General features

4.1 Fair presentation and compliance with IFRSs

4.2 Going concern

4.3 Accrual basis of accounting

4.4 Materiality and aggregation

4.5 Offsetting
4.6 Frequency of reporting

Comparative information
4.7

4.8 Consistency of presentation

Structure and content

of financial statements
Identification
5.1
Statement of financial position
5.2
income
Statement of profit or loss and other comprehensive
5.3

5.4 Statement of changes in equity

5.5 Statement of cash flows

5.6 Notes
Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS(IAS-1) 2)
STATEMENTS (IAS-1)
PRESENTATION OF FINANCIAL

1. Definitions

with the meanings specified:

The following terms are used in this standard
are those intended to meet the
statements")
General purpose financial statements (referred to as "financial reports tailored to their particular
1.1 an entity to prepare
who are not in a position to require
needs of users
infcrmation needs.
the entity cannot apply it after making every
requirement is
impracticable when
1.2 Impracticable Applying a
reasonable effort to do so.
and interpretations adopted by the
Reporting (IFRS5) are standards
Standards
International Financial
1.3 comprise:
Standards Board (1ASB). They
International Accounting

International Financial Reporting Standards;

(a)
and
International Accounting Standards;
(b)
Committee (IFRIC)
the International Financial Reporting interpretations
(c) Interpretations developed by
Committee (SIC).
or the former Standing Interpretations

could, individually or collectively, influence

of items are material if they
omissions or misstatements depends on the
1.4 Material make the basis of the financial
on
statements. Materiality
the economic decisions that users
circumstances. The size or nature
omission or misstatement judged in the surrounding
size and nature of the
of the item, or a combination of both, could be the determining factor.
and so be
economic decisions of users,
misstatement could influence
Assessing whether an omission or the Preparation arnd
consideration of the of those users. The Framework for
characteristics
material, requires of
states that 'users are assumed
to have a reasonable knowledge
Presentation of Financial statements information with reasonable
the
business and economic activities
and accounting and a willingness to study
account how users with such attributes could
assessment needs to take into
diligence.' Therefore, the
influenced in making economic decision.
reasonably be expected to be

Example-1

of finalizing its financial statement for the year ended 30" June.
Ihsan Sports Private Limited is in the
course

2014.

The following information is available from draft financial statements:

Rs. 200,000,000
Sales
Rs. 50,000,000
Gross profit
Net profit Rs. 20,000,000

10,000,000.
(a)Sales made during the month of June are omitted from above records amounting to Rs.

records.
(b) Purchase of stationery on 30" June amounting to Rs. 5,000 is also omitted from above

Required: Which items are materials with respect to the above drafts of financial statements
Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS (IAS-1) (3)

Solution-1

Sales omitted are 5% of total sales recorded, while stationery purchased is 0.0025%
Sales omitted are 50% of net profit while stationery purchased is 0.025%

So, sales omitted are material, which could influence the economic decisions of users. While
stationary is not material because the amount is immaterial with respect to sales and net profit.
1.5 Notes contain information in addition
to that presented in the statement of financial
comprehensive income, separate position, statement of
income statement (if presented), statement of
statement of cash flows. Notes provide narrative changes in equity and
descriptions or disaggregation of items
presented in those
statements and information about items that do not
qualify recognition
for in those statements.
1.6 Other comprehensive income comprises items of income and
expense (including reclassification
adjustments), that are not recognized in profit or loss as required or permitted by other IFRSs.

1.7 Profit or loss is the total income less expenses, excluding the components of other comprehensive income.

1.8 Total comprehensive income is the change in

equity during a period resulting from transactions and other
events, other than those changes resulting from transactions with owners in
7 O
their capacity as owners. [Pora

2. Purposes of financial statements

Financial statements are a structured representation of the financial position and financial performance of an
entity. The objective of financial statements is to provide information about the financial position, financial
performance and cash flows of an entity that is useful to a wide range of users in making economic decisions. To
meet this objective, financial statements provide information about an
entity's:
la) assets;
(b) liabilities;
(c) equity;
(d) income and expenses, including gains and losses;

e contributions by and distributions to owners in their capacity as owners; and

() cash flows.

This information, along with other information in the notes, assists users of financial statements in predicting the
entity's future cash flows and, in particular, their timing and certainty. [Para 9)

3. Complete set of financial statements

A Complete set of financial statements comprises:
(a) a statement of financial position as at end of the period;
(b) a statement of comprehensive income for the year;
(c) a statement of changes in equity for the period;
(d) a statement of cash flows for the period
enotes, comprising significant accounting policies and other explanatory information; and
) a statement of financial position as at beginning of the earliest comparative period when an entity applies an
accounting policy retrospectively or makes a retrospective restatement of items in its financial statements,
or when it reclassifies itenis in its financial statements.
[Para 10]
 Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS (IAS-1)
General features

4.1 Fair presentotion and

complionce with iFRSS
4.1.1 Financial
statements shall present fairly the financ'al position, inancial pertormance
an entity.
Fair presentation
requires the faithful representation of the effects of and cash flows
events and conditions in accordance
incomes and expenses set out in
with definitions and
recognition criteria fortransactions, other
assets, liabilitiee
Framework. The application of IFRSs, with
necessary, is presumed to result in financial statements additional disclosure whe
that achieve a fair en
presentation. [Para 151
4.1.2 An entity whose financial statements comply with all the
fact.[Para 16] requirements of IFRSs should
disclose that
4.1.3 A fair
presentation also requires:
i)selecting and applying accounting policies in accordance with
1AS 8;
ii) presenting information including accounting policies in a
manner which
reliable, comparable and understandable provides relevant,
information; and
providing additional disclosures when the
to understand the requirements in IASs are insufficient to enable users
impact of transaction on the financial
position. [Para 17]
4.1.4 An entity cannot
rectify inappropriate accounting policies either
policies used or by notes or explanatory material. by disclosure of the accounting
[Para 18]
4.2 Going concern
4.2.1 An entity shall prepare financial statements on a
intends to liquidate the
going concern basis unless management either
entity or to cease trading, or has realistic alternative
Management should assess the appropriateness of going concern but to do so.
available information for the foreseeable assumption on the basis of all
future, which should be at least, but is not limited
months from the balance sheet date. to, twelve
[Para 25 & 26]
4.2.2 When management is aware, in making its assessment, of material
conditions that may cast significant doubt upon the uncertainties related to events or
entity shall disclose those uncertainties. [Para
entity's ability to continue as a
going concern, the
25]
4.2.3 When an entity does not prepare
financial statements on a
fact, together with the basis on which it going concern basis, it shall disclose that
prepared the financial statements and
the reason why the
entity is not regarded as a going concern. [Para
25]
Example-2
If the financial statements are not
realizable values in liquidity order.prepared
on going concern
basis, then these shall be
financial statements on a
The fact must be
disclosed that the entity has prepared using
going
concern basis. not prepared
Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS (IAS-1)
(S)
4.3 Accrual basis of accounting

4.3.1 An entity shall prepare its financial

basis of statements, except for cash flow information, using the accrual
accounting. [Para 27]
4.3.2 Under the accrual basis,
entity should recognize items as assets, liabilities,
expenses (the elements of financial equity, incomes and
criteria for those elements in statements) when they satisfy the definitions and
recognition
Framework.
Example-3

RS.
() Interest due but not received
2,000
(i) Rent paid in advance
5,000
(ii) Electricity bill due
10,000
(iv) Unearned fee
1,000
(v Outstanding wages 8,000

Required: How will your account for the above transactions/events at year end? Entries of (ii) and (iv)
in respect of payment and receipt have already been passed.

Solution-3

According to accrual basis revenues and costs are recognized as and when they are incurred and not
as cash or cash equivalent is received or paid. So, () and (ii) & () shall be recognized as income and
expenses respectively irrespective of cash not yet received or paid. Moreover to reflect fair position (ii)
and (iv) shall be regarded as asset and liability respectively and shall not be treated as expense and
income respectively irrespective of cash already paid or received.

4.4 Materiality and aggregation

4.4.1 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. [Para 29

4.4.1 Ifa line item is not individually material, it is aggregated with other items either in those statements or
in the notes. An item that is not sufficiently material to warrant separate presentation in those
statements may warrant separate presentation in the notes. [Para 30]

Example-4

RS.
Printing 5,000
Stationery 7,000
Photocopy charges 7,000
Advertisement 100,000

be aggregated
The above mentioned expenses printing, stationery and photocopy charges may
as

is to be shown separately in the notes to

printing and stationery expenses and advertisement
accounts.
Chapter-1 PRESENTATION OFFINANCIAL STATEMENTS(1AS-1)

4.5 Offsetting

An entity shall not offset assets and liabilities or income and expenses, unless required or permitted by
IFRS. (Para 32]

Example-5
A debtor has a balance of, Rs. 30,000 on account of sales; and he has also a credit balance of Rs. 3,000
account of services provided by him.

The above two balances may be offset against each other. The debtor shall
appear in Balance Sheet
Rs.27,000 in case of offsetting.

4.6 Frequency of reporting

An entity shall
present a complete set of financial statements (including
comparative information) at lea
annually. When an entity changes the end of its reporting period and financial statements for
period longer or shorter that one year, an entity shall presents
financial statements:
disclose, in addition to the period covered
by t
(a) the reason for using a longer or shorter period, and
(b6) the fact that amounts
presented in the financial statements are not entirely comparable. [Para 36]
4.7 Comparative Information
4.7.1 Comparative information should be disclosed in respect of the
reported in the current period's financial statements. An entity shallprevious
include
period for all amoun
for narrative and
descriptive information when it is relevant to an comparative informatih
period's financial statements. [Para 38) understanding of the curre

4.7.2 An entity disclosing comparative information shall

present, as a minimum, two statements of finand
position, two of each of the other
statements and related notes.
[Para 38A]
4.7.3 In some cases, narrative information
continues to be relevant in the currentprovided
in the financial
statements for the previous
period. For example, details of a legal dispute, the
period
which was uncertain at the last
Current
balance sheet date and is
yet to be
outcome
period. [Para 38B] resolved, are disclosed in t

4.7.4 When an entity applies accounting policy retrospectively or makes

an
items in its financial
statements, or when it reclassifies items in a retrospective restatement
present, as a minimum, three statements its financial
statements, it s
and related notes. An of financial
position,
entity presents statements of financial two of each of the other stateme
(a)the end of the current period, position as at;
(b) the end of the
previous period (which is the same as
the beginning of current period), and
()the beginning of earliest
comparative period. (Para 40A & B]
Example-6

Disclosure
The
contingency reported in respect of
malion as at March Development Infrastructure
status from March 31,2015 (March 31,2014: Rs. 257.11
frastructure fee
fee has
has increased to RS.265
31, 2014. million). There has been no to
Cho
Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS(IAS-1) (7
4.7.5 When the entity changes the presentation or classification of items in its financial statements, the
entity shall reclassify comparative amounts unless the reclassification is impracticable. When
comparative amounts are reclassified, an entity shall disclose:
(a) the nature of the reclassification;

(b) the amount of each items or class of items that is reclassified, and

(c) the reason for the reclassification. [Para 41)

Example-7

A car was used last year in sales department. Now it has been used in office for administration
purposes. So depreciation of car will be included in administration expenses in current year and in
comparative information it will also be reclassified in administration expenses, whereas it was shown
as selling expenses in last year's financial statements.

4.7.6 When it is impracticable to reclassify comparative amounts, an entity shall disclose:

(a) the reason for not reclassifying the amounts; and

(b) the nature of the adjustments that would have been made if the amounts had been reclassified.
TPara 42]

4.8 Consistency of presentation

An entity shall retain the presentation and classification of items in the financial statements from one period

to the next unless:

It is apparent, froma significant change in the nature of the operations of the enterprise or a review of
a)
its financial statements, that another presentation of classification would be more appropriate having
criteria for selection and application of accounting policies in IAS 8; or
regard to the
a change in presentation is required by an IFRS. [Para 45]
(b)

5. Structure and content

5.1 1dentification of the financial statements

statements and distinguish them from other information in

5.1.1 An entity shall clearly identify the financial
the same published document. [Para 49]

and not to other information presented in an annual repert

5.12 IFRSS apply only to financial statements,
or other document. Therefore, it
is important that users can distinguish information that is prepared
information that may be useful to users but is not the subject of those
using IFRSs from other
requirements. [Para 50
financial statement and the notes. In addition, an entity shat
5.13 An entity shall clearly identify each
and repeat it when necessary for the information
display the following information prominently
presented to be understandable

other means of identification, and any changes in that

(a) the name of the reporting entity or

information from the preceding reporting period;

whether the financial statements cover the individual entity or a group of entities
(b)
whichever s

(c) the balance sheet date or the period covered by the financial statements,

appropriate to that component of the financial statements;

the presentation currency, and

(d)
statements fPara 51/
the level of rounding off used arnounts in the financial
(e) in presenting
 Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS(IAS-1)
8
Example-8
(a)
Honda Atlas Cars (Pakistan) Limited
Statement of financial position
As on March 31, 2015

Rs. "O00
(b)
Honda Atlas Cars (Pakistan) Limited
Statement of comprehensive income
For the year ended March
31, 2015
Rs. "000"
5.2 Statement of
financial position
Informationto be presented in the statement of financial
position
5.2.1 The statement of
financial position shall include line items that
(a) present the following amounts:
property, plant and equipment;
(b) investment property;
(c) intangible assets;
(d) financial assets
(excluding. amounts shown under (e ), (h) and
(e) investments accounted for (i);
using the equity method;
( biological assets;
(E) inventories;
(h) trade and other
receivables;
(i) cash and cash
equivalents;
trade and other
payables;
(k) provisions;
financial liabilities
(excluding amounts shown under i) and
(m) liabilities and assets for current (k);
tax;
n) deferred tax liabilities and deferred tax assets;
(o) non-controlling interest, presented within
(p) issued capital and reserves
equity; and
attributable to equity holders
of the
5.2.2 An parent. [Para 54]
entity shall present additional line
position when such items, headings and subtotals in
[Para 55 presentation is relevant to an the statement of financial
understanding of the entity's financial position.
S.2.3 When an entity presents current and
separate classifications in its statementnon-current
of financial
assets, and current and non-current
liabilities, *
(liabilities) as current
assets position, it shall not classify deferred
Current/non-current distinction (liabilities). [Para 561
tax
as
5.2.4 Ar
Cy shall present current and
Eparate classifications on the face of non-current assets, and current and non-current
its balance sheet liabilnte
des information that is reliable
and is more except when a presentaton
OIies shall be
presented broadly in order of relevant. When that exception appue
acset
liquidity. [Para 60]
Chapter-1
PRESENTATION OF FINANCIAL STATEMENTS (IAS-1)
S.2.5 Whichever method of
presentation is adopted, an entity shall disclose the amount expected
recovered or settled after
more than twelve months for each asset and
to DE
combines amounts expected to be liability line item tnat
recovered or settled:
(a) no more than twelve months after the
reporting date, and
(b) more than twelve months after the
reporting date, [Para 61)
Current assets
5.2.6 An entity shall classify an asset as current when:
(a) it expects to realize the asset, or intended to sale or consumption it, in its normal operating
cycle;
(b) it holds the asset
primarily for the purpose of trading;
(c) it expects to realize the asset within twelve
months after the reporting period; or

(d) the asset is cash or a cash equivalent (as defined in IAS-7) unless the asset is restricted from
being exchanged or used to settle a liability for at least twelve months after the reporting
period.

An entity shall classify all other assets as non-current. [Para 66]

5.2.7 This standard uses the term "non-current" to include tangible, intangible and financial assets of a long
term nature. It does not prohibit the use of alternative description as long as the meaning is clear.
[Para 67]

5.2.8 The operating cycle of an entity is the time between the acquisition of assets for processing and their
realization in cash and cash equivalents. When the entity's normal operating cycle is not clearly
identifiable, its duration is assumed to be twelve months. [Para 68]

Example-9

Current assets Rs. '000

Stores and spares 8,847

Inventories 647,986

Trade receivables 7,590

Loans and advances 41,223
Short-term deposits & prepayments 9,860
Accrued mark-up 24,046

Other receivables 320,151

Current portion of long term loan 950,000

Cash & bank balances 2.050.184

4059,887

Currentliabilities
current when:
entity shall classify a liability
as
5.2.9 An
liablity in its normal operating cycle;
(a) it expects to settle the

liability primarily for the purpose of trading:

(b) it holds the
months after the reporting period; or
the liability is due to be settled within twelve
(c) the liability for
at least
twelve

right to defer settlements of

it does not have an unconditional
(d) months after the reporting period.

all other liabilities as

non-current. [Para 69
An entity shall classify
Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS (IAS-1) 10)
5.2.10 Some current liabilities, such as trade payables and some accruals for employee and other operatine
Such operating
are part of the working capital used in
the entity's normal operating cycle.
costs,
items are classified as current liabilities even if they are due to be settled more than twelve months
to the classification of an entitys
after the reporting date. The same normal operating cycle applies
cycle is not clearly identifiable, its duration
assets and liabilities. When the entity's normal operating
is assumed to be twelve months. [Para 70]

Exomple-10
Rs. '000
Current liabilities
638,366
Trade and other payables 378,852
Short term running finance
503,689
Current maturity of long term loan
to finance lease
27,555
Current maturity of liabilities against
assets subject
1267.183
Taxation 2,815,645

cycle, but are due for

5.2.11 Other current liabilities are part of the normal operating
not settled as
for the purpose of being
settlement within twelve months after
the reporting date or held primarily
non-current financial liabilities,
and the current portion of
traded. Examples are bank overdraft,
dividends payable, income taxes and
other non-trade payable. [Para 71]

twelve
when they are due to be settled within
liabilities as current
5.2.12 Anentity classifies its financial
the reporting date, even if:
months after
twelve month; and
(a) the original term was for a period longer than
term basis is completed after
or to reschedule payments, on a long
(b) an agreement to refinance, issue. [Para 72]
the financial statements are authorized for
the reporting date but before

offinancial position orin the notes

Informotion tobe presented eitherinthe statement
further sub-
either in the statement of financial position or in the notes,
5.2.13 An entity shall disclose, m a n n e r appropriate to the entity's
classifications of the line items presented, classified in a
operations. [Para 77]
of financial position or statement of
either in the statemen
5.2.14 An entity shall disclose the following,
changes in equity, or in the notes

for each class of share capital:

(a)
the number of shares authorized;

fully paid, and issued but not fully paid;

(i) the number of shares issued and
that the shares have no par value;
par value per share,
or
(ii)
at the beginning and at the end ol
number of shares outstanding
(iv) areconciliation of the
the period;
including restrictions on
restrictions attaching to that class
(v) the rights, preferences and
of capital;
the distribution of dividends and the repayment
subsidiaries or associates; and
(vi) shares in the entity hcld by the entity or by its

within equity. {Para 79

description of the nature and purpose of each
reserve
(b) a
Chapter-1
PRESENTATION OF FINANCIAL STATEMENTS (IAS-1) (11)
Example-11
Extract from statement of financial
Authorised share capital position Rs. '000'

75,000,000 ordinary shares @ Rs. 10 each

750,000
Issued, subscribed & paid up capital
42,000,000 ordinary shares @ Rs. 10 each
420,000
Extract from notes to the accounts
40,000,000 ordinary shares of Rs. 10 each fully
paid in cash 400,000
2,000,000 ordinary shares of Rs. 10 each issued as fully paid bonus shares 20,000
420,000
21,420,000 ordinary shares of the company are held by Honda Motors Company Ltd, Japan, the
holding company.

Ordinary shares of the company held by associated undertakings as at year end are as follows:

Muslim Insurance Company Limited

250,000
Shirazi Investments (Private) Limited
82,250
332,250
5.3 Statement of profit or loss and other comprehensive income

5.3.1 The statement of profit or loss and other comprehensive income (Statement of comprehensive
income) shall present in addition to the profit or loss and other comprehensive income sections:

(a) profit or loss;

(b) other comprehensive income; and

(c) total comprehensive income [Para 81A]

Exam note:

At FAR IH evel, only other comprehensive income is "changes in revaluation surplus" as per IAS
16 and IAS 38.

Informationto bepresentedin the profitorloss section

S.3.2 In addition to items required by other IFRSs, the statement of comprehensive income shall include line
items that present the following amounts for the period:

(a) revenue;

(b) finance costs;

(c) tax expense; [Para 82]

5.3.3 Additional line items, headings and subtotals shall be presented in the statement of comprehensive
income when such presentation is relevant to an understanding of the entity's financial performance
IPara 85]
the statement
items, in
5.3.4 An entity shall present any items of income and expense as extraordinary
not
[Para 871
statement or in the notes.
of comprehensive income or the separate income
 PRESENTATION OF FINANCIAL STATEMENTs (IAS-1) (12)
Chapter-1

Profit orlossfor thepericd

S.3.5 All items of income and expense recognized in a period shall be included in profit or loss unless an IFRS

requires otherwise. /Para 88)

Informationto bepresented inthestatementofcomprehensiveincome or notes

s36 When items of income and expense are material, their nature and amount shall be disclosed
separately. [Para 97]

5.3.7 Circumstances that would give rise to the separate disclosure of items of income and expense include:

(a) write-downs of inventories to net realizable value or of property, plant and equipmentto
recoverable amount, as well as reversals of such write-downs;

restructurings of the activities of an entity and reversals of any provisions for the costs of
restructuring;
(c) disposals of items of property, plant and equipment;

(d) disposals of investments;

(e) litigation settlements; and

(f other reversals of provisions. [Para 98]
5.3.8 An entity shali present an analysis of expenses recognized in profit or loss using a classification based
on either their nature or
their function within the entity, whichever provides information thatis
reliable and more relevant. [Para 99]
5.3.9 Expenses are sub-classified to highlight components of financial
of
performance that may differ in terms
frequency, potential for gain or loss and predictability. This analysis is provided in one of two forms.
[Para 101]

5.3.10 The first form of

analysis
is the "nature of expense" method. An
example of a classification using the
nature of expense method is as follows:
[Para 102]

Revenue
Other income X
Changes inventories of finished goods and WIP X
Raw materials and
consumables used X
Employee benefits expense X
Depreciation and amortization expense X
Other expenses
Total expenses
Profit before tax
X
Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS (IAS-1) (13)
5.3.11 The second form of
analysis is the "function of
expense" or "cost of sales" method and clasSITies
expenses according to their function as part of cost of sales
or, for example,
the costs of distribution
or administrative activities. An example of a classification using the function of expense method is as
follows: [Para 103]

Revenue
Cost of sales
Gross profit (X)
X
Other income
X
Distribution costs
(X)
Administrative expenses
Other expenses (X)
Profit before tax (X)

This method can provide more relevant

information to users than the classification of expenses by
nature, but allocating costs to functions may require
arbitrary allocations and involve considerable
judgment e.g. salary of Chief Executive Officer.

5.3.12 An entity classifying expenses by function shall disclose additional information on the nature of
expenses, including depreciation and amortization expense and employee benefits expense.
[Para 104
5.4 Statement of changes in equity

Informationto be presented in the statement ofchanges in equity

5.4.1 An entity shall present a statement of changes in equity showing on the face of the statement:

(a) total comprehensive income for the period, showing separately the total amounts attributable
to owners of the parent and to non-controlling interests;

(b) for each component of equity, the effects of retrospective application or retrospective
restatement recognized in accordance with IAS 8; and

(c) for each component of equity, a reconciliation between the carrying amount at the beginning
and the end of the period, separately disclosing changes resulting from:

() profit or lo55;

(ii) each item of other comprehensive income; and

(ii) transactions with owners in their capacity as owners, showing separately contributions
by the distributions to owners. [Para 106]

5.4.2 An entity shall present, either in the statement of changes in equity or in the notes, the amount of
dividends recognized as distributions to equity holders during the period, and the related amount per
share. [Para 107]

5.5 Statement of cash flows

the entity to
Cash flow information provides users of financial statements with a basis to assess the ability of
utilize those cash flows. IAS-7 sets out
generate cash and cash equivalents and the needs of the entity to
requirements for the presentation of the cash flow statement and related disclosures. [Para 111)
h

Chapter-1 PRESENTATION OFFINANCIALSTATEMENTS (IAS-1) (14)

5.6 Notes

Structure
5.6.1 The notes shal:
present information about the basis of preparation of the financial statements and the specific
(a)
accounting policies used;
(b) disclose the information required by IFRSs that is not presented on the face of the balance
sheet, income statement, statement of changes in equity or cash flow statement; and

(C) provide additional information that is not presented elsewhere in the financial statements but
is relevant to an understanding of any of them. [Para 112

S.6.2 An entity shall, as far as practicable, present notes in a systematic manner. An entity shall cross-
reference each item in the statement of financial position and of comprehensive income, in separate
income statement (if presented) and in statement of changes in equity and of cash flow to any related
information in the notes. [Para 113]

5.6.3 Notes are normally presented in the following order, which assists users in understanding the financial
statements and comparing them with financial statements of other entities:

(a) a statement of compliance with IFRS;

(b) significant accounting policies applied;

c) supporting information for items presented in statements of financial position and of
comprehensive income, in the separate income statement (if presented), statement of changes
in equity and cash flow statement, in the order in which
each statement and each line item is
presented; and

(d) other disclosures, including:

contingent liabilities and unrecognized contractual

commitments; and
ii) non-financial disclosures, e.g. the entity's financial
risk management objectives and
policies. [Para 114]
Disclosure of occountina policies
5.6.4 An entity shall disclose its significant
accounting policies comprising:
(a) the measurement basis used in
preparing the financial statements; and
(b) the other accounting
policies used that are relevant to an
statements. [Para 117] understanding of the financial
5.6.5 An entity shall
disclose, along with its
apart from those
involving estimations, significant accounting policies or other notes, the
accounting policies that have the most
management has made in the judgments,
process of applying the
statements. [Para 122) significant effect on the amounts entity
recognized in the
financld
Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS (IAS-1) (15)
Sources of estimation uncertainty
5.6.6 An entity shall disclose in the notes
information about the key assumptions concerning the future, and
other key sources of estimation
risk of causing a material
uncertainty at the end of the
reporting period, that have a signiticant
adjustment to the carrying amounts of assets and liabilities within the next
financial year. In respect of those assets and
liabilities, the notes shall include details of
(a) their nature; and
(b) their carrying amount as at the end of the reporting period. [Para 125)
Other disclosures
5.6.7 An entity shall disclose in the notes:

(a) the amount of dividends proposed or declared before the financial statements were authorized
for issue but not recognized as a distribution to equity holders during the period, and the
related amount per share; and

(b) the amount of any cumulative preference dividends not recognized. [Pora 137]

Example-12
Disclosure

The board of directors has proposed a final dividend for the year ended March 31, 2015 of
Rs.2.25 per share, amounting to Rs. 94.50 million at their meeting held on May 05, 2015 for
approval by the members at the Annual General Meeting to be held on June 07, 2015.

s6.8 An entity shall disclose the following, if not disclosed elsewhere in information published with the

financial statements:
the domicile and legal form of the entity, its country of incorporation and the address of its
(a)
registered office (or principal place of business, if different from the registered office);
and its principal activities; and
(b) a description of the nature of the entity's operations
the of the parent and the ultimate parent of the group. [Para 138]
(c) name

Exomple-13

Extract from notes to the financial

statements.

November 4, 1992. The company is listed on the

The company was incorporated on

Stock Exchanges. Its principal activities are the assembly

Karachi, Islamabad and Lahore
sale of Honda vehicles and spare parts.
and progressive manufacture and
company is situated at
1-Mecload Road, Lahore
The registered office of the

Honda Motors Ltd., Japan.

2. Our holding company is
 STATEMENTS(AS-1)|
PRESENTATION OFFINANCIAL
Chapter-1 COMPANIES
ACT 2017
OF
below, keeping in view the
REQUIREMENTS

DISCLOSURE summarized
2017 are
Companies Act
included in
requirements as
disclosure
Theadditionalstudents:
level of CAF 7
FOURTH SCHEDULE

(See Section 225)

SUBSIDIARIES
COMPANIES AND THEIR
STATEMENTS OF LISTED
FINANCIAL
DISCLOSURE
REQUIREMENTS AS TO

PART II

STATEMENTOF
FINANCIAL POSITIOON
REQUIREMENTS AS TO

Fixed Assets

not held in the name of the company

with the funds of the company and is
Where any property or asset acquired reasons for the property or
asset not
or is not in the possession and
control of the company, this fact along with
shall be stated; and the description
and
or control of the company
being in the name of or possession control it is held shall be disclosed;
asset, the person in whose name and possession or
value of the property or

2. Land and building shall be distinguished between free-hold and leasehold;

In the case of sale of fixed assets, if the aggregate book value of assets exceeds five hundred thousand rupees,
3.
following particulars of each asset shall be disclosed,
) cost or revalued amount, as the case may be;
(i) the book value;
(ii) the sale price and the mode of disposal (e.g. by tender or negotiation);
(iv) the particulars of the purchaser;
(v) gain or loss; and
(vi) relationship, if any of purchaser with Company or any of its directors.

Long Term Investments

4. Investments in associated companies or undertakings have been made in accordance with the requirements
under the Act;

Long Term Loans And Advances

5 With regards to loans and advances to directors following shall be disclosed:

i) that the loans and advances have been
made in compliance with the
requirements of the Act;
(i) the purposes for which loans or advances were made; and
(i) reconciliation of the carrying amount at the
repayments;
beginning and end of the
period, showing disbursements and
6. In case of any loans or advances
be disclosed; obtained/provided, at terms other than arm's length
basis, reasons thereof shall
tn
respect of loans and advances to associates and
() related parties there shall
the name of each be disclosed,-
associate and related
(i) the terms of party;
loans and
(ii) the
advances;
particulars
of collateral
(iv) the
security held, if any;
maximum
ageregate amount
month-end balances outstanding at any time during the
(v) year calculated t0
provisions for doubtful loans and by
reieic
(ui) loans and
advances written off, if
advances; and
any.
Chapter-1
PRESENTATION OF FINANCIAL STATEMENTS (IAS-1) (17)
Current Assets

In respect of
debts/receivables from associates and related
8.
parties there shall be disclosed,
the name of each associate and
related party;
(i) the maximum
aggregate amount outstanding at any time
month-end balances; during the year calculated by reterence to

(ii) receivables, that are either

past due or impaired, along with
debts, loans, advances and other age analysis distinguishing between trade
receivables;
(iv) debts written off as
irrecoverable, distinguishing between trade debts and other receivables,
(v provisions for doubtful or bad debts
receivables; and distinguishing between trade debts, loans, advances and other

(vi) justification for reversal of provisions of doubtful

debts, if any;
9. Inrespect of loans and advances, other than those to the
borrower and terms of repayment if the loan or
suppliers of goods or services, the name of the
advance exceeds rupees one million, together with the
particulars of collateral security, if any, shall be disclosed separately;
10. Provision, if any, made for bad or doubtful loans and advances or for diminution in the
value of or loss in respect
of any asset shall be shown as a deduction from the
gross amounts;
Share Capital And Reserves
11. Capital and Revenue reserves shall be clearly distinguished. Any reserve required to be maintained under the Act
shall be separately disclosed. Any legal or other restrictions, on the ability of the company to distribute or
otherwise, shall be disclosed for all kind of reserves maintained by the company;
12. In respect of issued share capital of a company following shall be disclosed separately:

shares allotted for consideration paid in cash;

(ii) shares allotted for consideration other than cash, showing separately shares issued against property
and others (to be specified);

(i) shares allotted as bonus shares; and

Non-Current Liabilities

13 Amount due to associated companies and related parties shall be disclosed separately;

Current Liabilities

14. Following items shall be disclosed as separate line items:

(i) Payable to provident fund;

() Deposits, accrued liabilities and advances

(i) Loans from banking companies and other financial institutions, other than related parties;

Loans and advances from related parties including sponsors and directors along with purpose and
(iv)
utilization of amounts; and

Loans and advances shall be classified as secured and unsecured.

(v)
In the case of provident fund/provident fund trust, maintained by the company a statement that, investments
15
in collective investment schemes, listed equity and listed debt securities out of provident fund/trust have been
made in accordance with the provisions of section 218 of the Act and the Rules formulated for this purpose.

be disclosed:
16 in respect of security deposit payable, following shall
delivered/provided, into
Bifurcation of amount received as security deposits for goods/services to be
amounts utilizable for company business and others;
accordance with
Amount utilized for the purpose of the business from the security deposit
in
(1)
requirements of written agreements, in terms of section 217 of the Act; and
Amount kept in separate bank account;
 PRESENTATION OF
FINANCIAL STATEMENTS(IAS-1)
Chapter-1

Contingencies and Commitments

government authority,
whether local or forei
In describing legal proceedings, under any
court, agency or the date instituted,
17. are pending, he
or authority in which the proceedings
include name of the court, agency and the relief sought;
principal parties thereto, a description
of the factual basis of the proceeding
PART I
ACCOUNT
REQUIREMENTS AS TO PROFIT AND LOSS

from turnover as separate line items:

items shall be disclosed as deduction
18. Following
) trade discount; and
sales.
(i) sales and other taxes directly attributed to
remuneration for
of
amountauditors' remuneration, showing separately fees, expenses and other
19. The aggregate nature of such other
rendered as auditors and for services rendered
in any other capacity and stating the
services of the joint
information shall be shown separately for each
services. In the case of joint auditors, the aforesaid
auditors;
In case, donation to a single party exceeds Rs. 500,000, name of donee(s) shall be disclosed and where any
20.
director or his spouse has interest in the donee(s), irrespective of the amount, names of such directors along with
their interest shall be disclosed;

21 Management assessment of suficiency of tax provision madein the company's financial statements shall be clearly
stated along with comparisons of tax provision as per accounts viz a viz tax assessment for last three years;

22. Complete particulars of the aggregate amount charged by the company shall be disclosed separately for
the directors, chief executive and executives together with the number of such directors and executives such as:

fees;
(i) managerial remuneration;
(ii) commission or bonus, indicating the nature thereof;
(iv) reimbursable expenses which are in the nature of a perquisite or benefit;
(v) pension, gratuities, company's con.ibution to provident,
superannuation and other staff funds,
compensation for loss of office and in connection with retirement from office;
(v)other perquisites and benefits in cash or in kind stating their nature and, where practicable, their
approximate money values; and
(vi) amount for any other services
rendere.
23. in case of royalties paid to
companies/entities/inaividuals, following shall be disclosed:
() Name and
registered address; and
(i) Relationship with company or dircctors, if
any.
 (19)
Chapter-1 PRESENTATION OF FINANCIALSTATEMENTS(IAs-1)
FIFTH SCHEDULE
(See Section 225)

THEIR SUBSIDIARIES
DISCLOSURE REQUIREMENTS AS TO FINANCIAL STATEMENTS OF NON-LISTED COMPANIES AND

PART II

REQUIREMENTS AS TO STATEMENT OF FINANCIAL POSITION

Fixed Assets

and is not held in the name of the company

1 Where any property or asset acquired with the funds of the company
or asset not
or is not in the possession and control
of the company, this fact along with reasons for the property
and
control of the company shall be stated; and the description
being in the name of or possession or held shall be disclosed;
name and possession or control it is
value of the property or asset, the person in whose
free-hold and leasehold;
2. Land and building shall be distinguished between
if the aggregate book value of assets exceeds five hundred thousand rupees,
3 In the case of sale of fixed assets,
following particulars of each asset shall be disclosed
cost or revalued amount, as the case may be;

(i) the book value;

tender or negotiation);
(i) the sale price and the mode of disposal (e.g. by
the particulars of the purchaser;
(iv)
gain or loss; and
(v) any of its directors.
relationship, if any of purchaser with Company
or
(vi)
Long Term Investments
accordance with the requirements
in associated companies or undertakings have been made in
4. Investments

under the Act;

Long Term Loans And Advances

directors following shall be disclosed
5. With regards to loans and advances to
advances were made; and
the purposes for which loans or disbursements and
amount at the beginning and end of the period, showing
reconciliation of the carrying
(i)
repayments;
thereof shall
at terms other than arm's length basis, reasons

6 In case of any loans or advances obtained/provided,

be disclosed;
advances to associates there
shall be disclosed,-
respect of loans and
in

the name of each associate and related party:

(i) the terms ofloans and advances;

the particulars of collateral security held, if any;
(ia)
reference to
at any time during the year calcuBated by
(1V) the maximum ageregate amount outstanding
month-end balances

(v) provisions for doubtful loans and advances, and

(v) loans and advances written off, if any.

Current Assets
8. in respect of debts/receivables from associates and related parties there shall be disclosed,
the name of each associate and related party,
he maxImum aggregate amount outstand1ng al any time durng the year calculated by reterence t

month-end balances,
 Chapter 1 PRESENTATION OF FINANCIAL STATEMENTS
(IAS-1)
receivables, that are either
past due or impaired, along with
debts, loans, advances and other age analysis distinguishing between Cha
receivables, t
(iv) debts written off
trad
as
irrecoverable, distinguishing between trade debts and other
(v) provisions for doubtful
receivables,
or bad debts
receivables; and distinguishing between trade debts, loans, advances
and oth
the
(vi) 17
justification for reversal of
provisions of doubtful debts, if any;
Provision, if any,
made for bad or doubtful
of any asset shall be
loans and advances or for diminution
in the value of loss
shown as a deduction from the or in
respeeec
gross amounts;
Share Capital And Reserves
10 Capital and Revenue reserves shall be
shall be
clearly distinguished. Any reserve required to be
separately disclosed. Any legal or other restrictions, maintained under the At
on the
otherwise, shall be disclosed for all kind of reserves ability of the company to
maintained by the company; distribute
11 In respect of issued share
capital of a
company following shall be disclosed
separately:
shares allotted for consideration
paid in cash;
shares allotted for consideration other
than cash, showing separately
and others (to be specified); shares issued against
property
shares aliotted as bonus
shares; and
Non-Current Liabilities
12 Amount due to associated
companies shall be disclosed
separately;
Current Liabilities
13 Following items shall be disclosed as separate line items:
) Payable to provident fund;
(i) Deposits, accrued liabilities and advances;
(ii) Loans from banking companies and other financial
institutions, other than associated company;
(iv) Loans and advances from associated company,
sponsors and directors along wih purpose and utilization of
amounts; and

(v) Loans and advances shall be classified as secured and unsecured.

14 in
the case of
provident fund/provident fund trust, maintained by the
incoliective investment schemes, listed company a statement that, investments
equity and listed debt securities out of provident fund/trust have been
made in accordance with the
provisions of section 218 of the Act and the Rules formulated for this
purpose.
5 in
respect of security deposit payable, following shall be disclosed:
i) Bifurcation of amount received as security deposits for goods/services to be
amounts utilizable for company business and delivered / provided, into
others;
() Armnount utilized for the
purpose of the business from the security
requirements of written agreements, in terms deposit in accordance witn
of section 217 of the Act; and
Amount kept in
separate bank account;
Contingencies And Commitments
16
Gescribing legal proceedings, under
any court, agency
narne ot the
court, agency
or
government authority, whether local or tore
principal parties
thereto,
or
authority which the
in
proceedings are pending, the date instituteu the
a
description of the factual basis
of the proceeding and the relief sought;
Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS (IAS-1) (21)
PART II

REQUIREMENTS AS TO PROFIT AND LOSS ACCoUNT

Following items shall be disclosed as deduction from turnover as separate line items:
17.
(i) trade discount; and

(i) sales and other taxes directly attributed to sales.

18. The aggregate amount of auditors' remuneration, showing separately fees, expenses and other remuneration for
services rendered as auditors and for services rendered in any other capacity and stating the nature of such other
services. In the case of joint auditors, the aforesaid information shall be shown separately for each of the joint
auditors;
In case, donation to a single party exceeds Rs. 500,000, name of done(s) shall be disclosed and where any
19 director or his spouse has interest in the donee(s), irrespective of the amount, names of such directors along with
their interest shall be disclosed;

20. Management assessment of sufficiency of tax provision made in the company's financial statements shall be clearly
stated along with comparisons of tax provision as per accounts viz-a-viz tax assessment for last three years;

21. Complete particulars of the aggregate amount charged by the company shall be disclosed separately for
the directors, chief executive and executives together with the number of such directors and executives such as:

fees
i) managerial remuneration;
ii) commission or bonus, indicating the nature thereof;

(iv) reimbursable expenses which are in the nature of a perquisite or benefit;

pension, gratuities, company's contribution to provident, superannuation and other staff funds,
(v)
compensation for loss of office and in connection with retirement from office;
other perquisites and benefits in cash or in kind stating their nature and, where practicable, their
(vi)
approximate money values; and

(vii) amount for any other services rendered.

23. In case of royalties paid to companies/entities/individuals, following shall be disclosed:

() Name and registered address; and

(i) Relationship with company or directors, if any.

 PRESENTATION OF FINANCIAL STATEMENTS (IAS-1)
Chapter-1

PRACTICE QUESTIONS C
Q-1
Following trial balance relates to Kohinoor Limited for the year ending December 31, 2015:
Dr.
Cr.
o - * * * * KS, *********-

Bank 370,000
Finished goods inventory as at January 1, 2015 1,100,000
General expenses 750,000
Heatingand lighting_ 120,000
Marketing andadvertisingexpenses 345,000
Wages andsalaries 510,000
Building at cost 6,000,000
Vehicles at cost 640,000
Plantand equipment at cost 800,000
Retained earnings 3,115,500
Deferred taxliability 156,000
Tradereceivables 440,000
Rawmaterial consumed 2,400,000
Loaninterest paid 28,000
8% Bank Loan 700,000
5,945,000
Sales
475,000
Tradepayables
1,800,000
Share capital
Accumulated depreciation atJanuary 1,2015:
600,000
Building 384,000
Motor vehicles 327,500
Plant and equipment
13,503,000 13,503,000

Additional information:
December 31, 2015 was valued at Rs. 920,000.
1) Finished goods inventory at
at
were not yet approved or rejected
on approval basis. These goods
2) goods sold for Rs. 180,000
Debtors include
transaction.
of 20% was earned in this
year end. A profit margin
on July 1, 2014 was erroneously charged
license purchased for Rs. 1,200,000
3)It has been discovered that import
June 30, 2024.
as expense. It will expire on Whereas
loan on 1st January every year.
obtained some years ago. Rs. 100,000 is repaid out of
4)8% loan was
and 1st July.
interest is paid six monthly on every 1st January
follows:
Depreciation is to be provided for
as
5) costs
their original cost, allocated 50% to cost of sales, 20% to distribution
buildings at 5% per annum on
and 30% to administrative expenses.
costs.
(i) motor vehicles at 25% per of their written down value, allocated to distribution
annum
to cost of sales.
(ii) plant and equipment at 20% per annum of their written down value, allocated
he
6) The tax consultant of company has determined tax profit for the year at Rs. 700,000, after all adjustme
anent
difference between accounting profit and tax profit upto Rs. 18,500 should be considered as permo
difference whereas remaining difference is timing difference. Corporate tax rate is 32%.
7) The audit fee of Rs.100,000 is to be provided for the year.
8) The expenses listed below should be
apportioned as follows:
Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS (AS-1) (23)

Cost of Distribution Admin

sales cost expenses
General expenses 10% 40% 50%
Heating and lighting 50% 30% 20%
Wages and salaries 60% 30% 10%
Required:
Prepare statement of comprehensive income for the year ending December 31, 2015 and statement of financial
as at December 31, 2015. (20)
position
(PAC)
Clay Pakistan Limited (CPL), a public listed company is in the process of finalizing its accounts for the year ended
Q-2
30 June 2011. The following information is available:
The profit after tax and other comprehensive income for the years ended 30 June 2009, 2010 and 2011
(based on draft financial statements) are as follows:
2011 2010 2009
Rs. in million

Profit after tax 5,240 4,120 3,710

Other comprehensiveincome 110
Exchangedifference on translation of foreign operations 155 120

Revaluation gain 2,000

Total comprehensive income 7,395 4,240 3,820
to first-in first out (FIFO), for
CPL changed the method of valuation of inventories from weighted average
the year ended 30 June 2011. The impact of this change on inventory valuation is given in the following

table.

Year ended Impact oninventory valuation

30 June 2009 Increased by Rs. 20 million
30 June 2010 Decreased by Rs.30 million
30 June 2011 Increased by Rs.20 million
financial statements.
The above change has not been incorporated in the
Cash dividend and bonuses declared/paid during the three years are as follows:
(ii)
Cash dividend Bonus
Final Interim Final
Interim
For the year ended 30June 2009 15% 25%
20% 10% 10%
For theyear ended 30June 2010
20% 30%
LFor the vear ended 30lune 2011
(iv) CPL follows a policy of transferring 30% of its profit after tax to general reserve.

and at 30 June 2009 and 2010 were as follows:

(v Share capital reserves as

2010 L 2009
Rs. in million

Sharecapital 10,340 9,400

Revaluationsurplus 6,441 8,210
870 750
Translation reserve
General reserve 10,141 8,905
Un-appropriated profit 6,242 5,410
applicable the company is 30%.
to
(vi) Tax rate
Transfer from revaluation surplus to retained earnings amount to Rs. 1,769 million and Rs. 1,483 million
(vi)
in 2010 and 2011 respectively
Required: or
30 June 2011 in accordance with the requirements
Prepare Statement of Changes in Equity for the year ended
Standards.
Companies Act, 2017 and International Finançial Reporting (20)
(Q-1, Aut-11)
 Chapter-1 PRESENTATION OF FINANCIALSTATEMENTS(IAS-1)
Q-3 Supreme Cement Company Limited (SCCL), a company listed on the Karachi and Lahore Stock Exchan.
process of finalization of its accounts for the year ended 31 December 2012. The following infor
available:

(i) Shareholders' equity as at 31 December 2011 and 2010 consisted of:

nformation
2011 2010
Rs. in million
Sharecapital (Rs. 10 each) 10,340 7,833
Unappropriated profit 6,945 4,508
(ii) The total comprehensive income for the years ended 31 December 2010, 2011 and 2012
was Rs. 4,240 million, Rs. 4,944 million and Rs. 5,090 million (unaudit.
respectively. ted
(ii) During the year ended 31 December 2012 it was observed that
Rs. 35 million, was erroneously debited to
machinery purchased on 01 July 2011 t
stock-in-trade instead of property, plant and
depreciates machinery at the rate of 20% per annum on the reducing balance equipment. Sco
has been made in respect of this material method. No adjustmem
error
(iv) Cash dividends and bonuses
declared/paid during the last three years are as follows:
Cash dividend Bonus
Interim Final Interim Final
Forthe year ended 31 December 2010 10%
For the year ended 31 December 2011 20%
15% 10% 10%
Forthe year ended 31 Decembr: 2012
Interim 10% 5% 5%
dividend/bonus was declared at tis : time of announcement of half-yearly financial
(v) Right shares were issued
30 Novembar 2012 in the ratio of 4
on
results
right shares for every 5 shares held by
the shareholders of the compan. The right issue was made at Rs. 18 per share.
(vi) Applicable tax rate for the company is 35%.
Required:
Prepare the Statement of Changes in Equity for the year ended 31 December 2012 in accordance with
the
requirements of the Companies Act, 2017 and International Financial Reporting Standards.
(13)
(Q-1, Spr-13)
Q4 The following is the summarised trial balance as at 31 December 2013 of Hi-tech Limited (HL), a company listed
at the Karachi Stock Exchange
Dr. Cr.
Description Rs. in million
Sales revenue 21,100
Cost ofsales 15,000
Operating expenses 4,000
Financial charges 45
Taxation charge 620
Property, plant and equipment 5,100
Accumulated depreciation 1,745
Closing inventory_ 1,250
Goods under sale or return (at cost) 65
Cash and bank balances 13
Trade receivables 1,490
Provision for bad debts
85
Prepayments and otherreceivables 12
12%Long term loan payable 500
Trade payables 1,782
Accruals and provisions 395
Deferred taxation (asset) 30
Issued, subscribed and paid-up capital 1,200
Surplus on revaluation 150
Retained earnings 1 January 2013
668
27,625 27,625
Chapter-1 PRESENTATION OF FINANCIAL STATEMENTS(IAS-1) (25)

The following matters are required to be incorporated to finalise the financial statements of the company

(i) Goods under sale or relurn include goods costing Rs. 26 million sent to a customer under sale or return
agreement, at cost plus 50%. The last date of return of the goods was 30 December 2013. Sale of these
goods has been accounted for in January 2014.

On 1 January 2013, a software costing Rs. 20 million was purchased along with a processing plant. The
()
cost of software has been included in the cost of plant. HL has depreciated the total cost of plant using
straight line method over a life of 10 years. The software is considered as an identifiable asset and will be
replaced after 5 years.
(ii) Principal portion of long term loan, repayable in equal installments of Rs. 62.5 million each, will be paid on
31 March and 30 September 2014. Interest on loan has been correctly accounted for.
(iv) On 18 January 2014, a customer lodged a claim of Rs. 10 million for the goods delivered in November
2013 being not according to the agreed specifications. However HL's legal counsel is uncertain about the
outcome of claim.
As at 31 December 2013, outstanding purchase orders and agreements for capital expenditure amounted
(v)
to Rs. 65 million.

Required:
a note on contingencies and
Prepare a statement of financial positioi1 d. at 31 December 2013 along with
commitments in accordance with the requircments of the Companies Act, 2017 and the International Financial

Reporting Standards. (Ignore tax adjustments and comparative figures) (15)

(Q-1, Spr-14)

Q-5 The following information pertains to a listed coinpany, Fu-tech (Pakistan) Limited.

() Shareholders' equity as at 1 January 2013:

|Share capital (Rs. 10 each) Rs. 116 million

Retained earnings Rs. 58 million

Profit after tax for the year ended 31 December 2013 amounted to Rs. 47 million. (2012: Rs. 38 million)
(i)
inventories costing Rs. 18 million have been
(ii) In May 2013 the management discovered that
it is estimated that inventories
misappropriated. The entire loss has been recorded in 2013. However,
costing Rs. 13 million and Rs. 5 million were misappropriated in the years 2012 and 2013 respectively

(iv) Right shares were issued on 15 September 2013 at Rs. 12 per share in the ratio of 1 right share for every 4
shares held by the shareholders of the company.

(v) Dividend information is as under:

2011
2013 2012
Cash dividend-Interim 18% 10%
Cash dividend - Final 14% 15%
Bonus shares Final 16%

interim dividend was announced before the issue of right shares.

(vi) Applicable tax rate for the company is 34%

Required:
Prepare a statement of changes in equity for the year ended 31 December 2013 in accordance with te
requirements of the Companies Act, 2017. (Show comparativefigures) (13)
(Q-7, Spr-14)