This series of blogs describes how the SAP® BusinessObjectsTM Financial Consolidation Starter Kit for IFRS has been configured to meet International Financial Reporting Standards (IFRS). It focuses on standards dedicated to:
In the How Starter kits Meet IFRS requirements - Introduction, we gave an overview of SAP® BusinessObjectsTM Financial Consolidation, Starter Kit for IFRS. In this blog, we focus on IAS 1 (Presentation of Financial Statements).
A complete set of financial statements comprises:
There is no prescribed format for the financial statements; however there are minimum disclosures to be displayed. The IFRS XBRL Taxonomy 2009, published by the IASC Foundation in April 2009, proposes formats that have been used as templates for configuring the starter kit.
An entity should present current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position, except when a presentation based on liquidity provides information that is reliable and more relevant.
It proposes two formats of the consolidated statement of financial position (non-current / current and by liquidity)
The statement of financial position delivered in the starter kit uses the XBRL current / non-current presentation. The distinction between current and non-current items is made through the chart of accounts.
For each kind of asset or liability that may comprise both current and non-current amounts, two accounts have been created. For example, borrowing are split into accounts L1510 (non-current portion) and L2510 (current portion).
An entity should present all items of income and expense recognized in a period either:
An analysis of expenses (by nature or by function) must be disclosed in the primary statements or in the notes.
All items of income and expense are deemed to arise from an entity's ordinary activities. No item should be presented as an extraordinary item.
For OCI, reclassification adjustments must be disclosed (in the statement or in the notes) as well as the income tax relating to each component (including reclassification adjustments). Components of OCI include:
The share of other comprehensive income of associates and joint-ventures accounted for using the equity method should be presented separately in the statement of comprehensive income.
The IFRS XBRL Taxonomy 2009 proposes two separate income statements (nature / function) and two statements of comprehensive income (with or without details on tax) that both exclude profit or loss items.
The starter kit comprises three statements for reporting comprehensive income:
As regards P&L items, expenses are analyzed by function, the most commonly used analysis.
Other components of comprehensive income are displayed:
Unlike P&L items, components of OCI (defined by IAS 1 as income or expenses that are not recognized in P&L) do not correspond to accounts at closing in the general ledger but are movements of the period booked in equity. In the starter kit, components of OCI are identified using dedicated equity accounts associated to one or more flows. For more information, see the Design description of the starter kit on SAP Service Marketplace.
An entity should present a statement of changes in equity displaying:
The statement of changes in equity delivered in the starter kit is based on XBRL templates, with some modifications.
The components of equity are the following: issued capital, share premium, treasury shares, other reserves, retained earnings, non-controlling interests.
Reconciliation between opening and closing shows the following items:
As for the statement of comprehensive income, data displayed in the statement of changes in equity is calculated by consolidation rules and can be analyzed, via dedicated reports, to retrieve the original accounts / flows.
IAS 1 does not provide a comprehensive list of required disclosures. These are listed by topic in each IFRS.
As disclosures required by IFRS are very numerous and as it is difficult to select those which are common to all entities, disclosure requirements have not been included in the starter kit.
In the next blog, we will focus on the Statement of Cash Flows (How Starter Kits meet IFRS - IAS 7).