Chapter 7—Presentation and disclosure

Presentation and disclosure as communication tools | Presentation and disclosure objectives and principles | Classification | Classification of assets and liabilities | Offsetting | Classification of equity | Classification of income and expenses | Profit or loss and other comprehensive income | Aggregation

Classification of assets and liabilities

7.9

Classification is applied to the unit of account selected for an asset or liability (see paragraphs 4.48–4.55). However, it may sometimes be appropriate to separate an asset or liability into components that have different characteristics and to classify those components separately. That would be appropriate when classifying those components separately would enhance the usefulness of the resulting financial information. For example, it could be appropriate to separate an asset or liability into current and non-current components and to classify those components separately.

7.11

Offsetting assets and liabilities differs from treating a set of rights and obligations as a single unit of account (see paragraphs 4.48–4.55).

Classification of equity

7.12

To provide useful information, it may be necessary to classify equity claims separately if those equity claims have different characteristics (see paragraph 4.65).

7.13

Similarly, to provide useful information, it may be necessary to classify components of equity separately if some of those components are subject to particular legal, regulatory or other requirements. For example, in some jurisdictions, an entity is permitted to make distributions to holders of equity claims only if the entity has sufficient reserves specified as distributable (see paragraph 4.66). Separate presentation or disclosure of those reserves may provide useful information.

Classification of income and expenses

7.14

Classification is applied to:

(a)            income and expenses resulting from the unit of account selected for an asset or liability; or

(b)            components of such income and expenses if those components have different characteristics and are identified separately. For example, a change in the current value of an asset can include the effects of value changes and the accrual of interest (see Table 6.1). It would be appropriate to classify those components separately if doing so would enhance the usefulness of the resulting financial information.

Profit or loss and other comprehensive income

7.15

Income and expenses are classified and included either:

(a)            in the statement of profit or loss;[11] or

(b)            outside the statement of profit or loss, in other comprehensive income.

11

The Conceptual Framework does not specify whether the statement(s) of financial performance comprise(s) a single statement or two statements. The Conceptual Framework uses the term ‘statement of profit or loss’ to refer to a separate statement and to a separate section within a single statement of financial performance. Likewise, it uses the term ‘total for profit or loss’ to refer both to a total for a separate statement and to a subtotal for a section within a single statement of financial performance.

7.18

Income and expenses that arise on a historical cost measurement basis (see Table 6.1) are included in the statement of profit or loss. That is also the case when income and expenses of that type are separately identified as a component of a change in the current value of an asset or liability. For example, if a financial asset is measured at current value and if interest income is identified separately from other changes in value, that interest income is included in the statement of profit or loss.