General requirements for financial statements (AASB18_06-24)

The objective of financial statements is to provide financial information about a reporting entity’s assets, liabilities, equity, income and expenses that is useful to users of financial statements in assessing the prospects for future net cash inflows to the entity and in assessing management’s stewardship of the entity’s economic resources.

A complete set of financial statements comprises:

(a) a statement (or statements) of financial performance for the reporting period (see paragraph 12);

(b) a statement of financial position as at the end of the reporting period; 

(c) a statement of changes in equity for the reporting period; 

(d) a statement of cash flows for the reporting period; 

(e) notes for the reporting period; 

(f) comparative information in respect of the preceding period as specified in paragraphs 31–32; and 

(g) a statement of financial position as at the beginning of the preceding period if required by paragraph 37.

The statements listed in paragraphs 10(a)–10(d) (and their comparative information) are referred to as the primary financial statements. An entity may use titles for the statements other than those used in this Standard. For example, an entity may use the title ‘balance sheet’ instead of ‘statement of financial position’. In addition, although this Standard uses terms such as ‘other comprehensive income’, ‘profit or loss’ and ‘total comprehensive income’, an entity may use other terms to label the totals, subtotals and line items required by this Standard as long as they are labelled in a way that faithfully represents the characteristics of the items, as required by paragraph 43. For example, an entity may use the term ‘net income’ to label ‘profit or loss’.

An entity shall present its statement(s) of financial performance as either:

(a)    a single statement of profit or loss and other comprehensive income, with profit or loss and other comprehensive income presented in two sections – if this option is chosen, an entity shall present the profit or loss section first followed directly by the other comprehensive income section; or 

(b)    a statement of profit or loss and a separate statement presenting comprehensive income that shall begin with profit or loss – if this option is chosen, the statement of profit or loss shall immediately precede the statement presenting comprehensive income.

In this Standard: 

(a) the profit or loss section described in paragraph 12(a) and the statement of profit or loss described in paragraph 12(b) are referred to as the statement of profit or loss; and 

(b) the other comprehensive income section described in paragraph 12(a) and the statement presenting comprehensive income described in paragraph 12(b) are referred to as the statement presenting comprehensive income.

An entity shall present each of the primary financial statements with equal prominence in a complete set of financial statements.

To achieve the objective of financial statements (see paragraph 9), an entity presents information in the primary financial statements and discloses information in the notes. An entity need only present or disclose material information (see paragraphs 19 and B1–B5).

The role of the primary financial statements is to provide structured summaries of a reporting entity’s recognised assets, liabilities, equity, income, expenses and cash flows, that are useful to users of financial statements for: 

(a) obtaining an understandable overview of the entity’s recognised assets, liabilities, equity, income, expenses and cash flows; 

(b) making comparisons between entities, and between reporting periods for the same entity; and 

(c) identifying items or areas about which users of financial statements may wish to seek additional information in the notes.

The role of the notes is to provide material information necessary: 

(a) to enable users of financial statements to understand the line items presented in the primary financial statements (see paragraph B6); and 

(b) to supplement the primary financial statements with additional information to achieve the objective of financial statements (see paragraph B7).

An entity shall use the roles of the primary financial statements and the notes, described in paragraphs 16–17, to determine whether to include information in the primary financial statements or in the notes. The different roles of the primary financial statements and the notes mean that the extent of the information required in the notes differs from that in the primary financial statements. The differences mean that: 

(a) to provide the structured summaries described in paragraph 16, information provided in the primary financial statements is more aggregated than information provided in the notes; and 

(b) to provide the information described in paragraph 17, more detailed information about the entity’s assets, liabilities, equity, income, expenses and cash flows, including the disaggregation of information presented in the primary financial statements, is provided in the notes.

Some Australian Accounting Standards specify information that is required to be presented in the primary financial statements or disclosed in the notes. An entity need not provide a specific presentation or disclosure required by Australian Accounting Standards if the information resulting from that presentation or disclosure is not material. This is the case even if Australian Accounting Standards contain a list of specific requirements or describe them as minimum requirements.

An entity shall consider whether to provide additional disclosures when compliance with the specific requirements in Australian Accounting Standards is insufficient to enable users of financial statements to understand the effect of transactions and other events and conditions on the entity’s financial position and financial performance.

Paragraph 16 establishes that the role of the primary financial statements is to provide structured summaries that are useful for the purposes specified in that paragraph (referred to hereafter as a useful structured summary). An entity shall use the role of the primary financial statements to determine what material information to present in those statements, as set out in paragraphs 22–24.

To provide a useful structured summary in a primary financial statement, an entity shall comply with specific requirements that determine the structure of the statement. The specific requirements are: 

(a) for the statement of profit or loss – the requirements in paragraphs 47, 69, 76 and 78; 

(b) for the statement presenting comprehensive income – the requirements in paragraphs 86–88; 

(c) for the statement of financial position – the requirements in paragraphs 96 and 104; 

(d) for the statement of changes in equity – the requirements in paragraph 107; and 

(e) for the statement of cash flows – the requirements in paragraph 10 of AASB 107.

Some Australian Accounting Standards require specific line items to be presented separately in the primary financial statements (for example paragraphs 75 and 103 of this Standard). An entity need not present separately a line item in a primary financial statement if doing so is not necessary for the statement to provide a useful structured summary. This is the case even if Australian Accounting Standards contain a list of specific required line items or describe the line items as minimum requirements (see paragraph B8).

An entity shall present additional line items and subtotals if such presentations are necessary for a primary financial statement to provide a useful structured summary. When an entity presents additional line items or subtotals, those line items or subtotals shall (see paragraph B9): 

(a) comprise amounts recognised and measured in accordance with Australian Accounting Standards; 

(b) be compatible with the statement structure created by the requirements listed in paragraph 22; 

(c) be consistent from period to period, in accordance with paragraph 30; and 

(d) be displayed no more prominently than the totals and subtotals required by Australian Accounting Standards.

An entity shall clearly identify the financial statements and distinguish them from other information in the same published document (see paragraph B10).

Australian Accounting Standards apply only to financial statements, and not necessarily to other information provided in an annual report, a regulatory filing or another document. Therefore, it is important that users of financial statements can distinguish information that is prepared using Australian Accounting Standards from other information that may be useful to users but is not the subject of those requirements.

An entity shall clearly identify each primary financial statement and the notes. In addition, an entity shall disclose prominently, and repeat when necessary for the information provided to be understandable: 

(a) the name of the reporting entity or other means of identification, and any change in that information from the end of the preceding reporting period; 

(b) whether the financial statements are of an individual entity or a group of entities; 

(c) the date of the end of the reporting period or the period covered by the financial statements; 

(d) the presentation currency, as defined in AASB 121 The Effects of Changes in Foreign Exchange Rates; and 

(e) the level of rounding used for the amounts in the financial statements (see paragraph B11).

An entity shall provide a complete set of financial statements at least annually. When an entity changes the end of its reporting period and provides financial statements for a period longer or shorter than one year, the entity shall disclose, in addition to the period covered by the financial statements: 

(a) the reason for using a longer or shorter period; and 

(b) the fact that amounts included in the financial statements are not entirely comparable.

Normally, an entity consistently prepares financial statements for a one-year period. However, for practical reasons, some entities prefer to report, for example, for a 52-week period. This Standard does not preclude this practice.

An entity shall retain the presentation, disclosure and classification of items in the financial statements from one reporting period to the next unless: 

(a) it is apparent, following a significant change in the nature of the entity’s operations or a review of its financial statements, that another presentation, disclosure or classification would be more appropriate having regard to the criteria for selecting and applying accounting policies in AASB 108 Basis of Preparation of Financial Statements (see paragraph B12); or 

(b) an Australian Accounting Standard requires a change in presentation, disclosure or classification.

Except when Australian Accounting Standards permit or require otherwise, an entity shall provide comparative information (that is, information for the preceding reporting period) for all amounts reported in the current period’s financial statements. An entity shall include comparative information for narrative and descriptive information if it is necessary for an understanding of the current period’s financial statements (see paragraph B13).

An entity shall present a current reporting period and preceding period in each of its primary financial statements and in the notes. Paragraphs B14–B15 set out requirements relating to additional comparative information.

If an entity changes the presentation, disclosure or classification of items in its financial statements, it shall reclassify comparative amounts unless reclassification is impracticable. When an entity reclassifies comparative amounts, it shall disclose (including as at the beginning of the preceding period): 

(a) the nature of the reclassification; 

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

(c) the reason for the reclassification.

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.

Enhancing the inter-period comparability of information assists users of financial statements in making economic decisions, especially by allowing the assessment of trends in information for predictive purposes. In some circumstances, it is impracticable to reclassify comparative information for a particular prior reporting period to achieve consistency with the current period. For example, an entity may not have collected data in the prior period(s) in a way that allows reclassification, and it may be impracticable to recreate the information.

AASB 108 sets out the adjustments to comparative information required when an entity changes an accounting policy or corrects an error.

An entity shall present a third statement of financial position as at the beginning of the preceding period in addition to the comparative information required in paragraphs 31–32 if: 

(a) it applies an accounting policy retrospectively, makes a retrospective restatement of items in its financial statements or reclassifies items in its financial statements; and 

(b) the retrospective application, retrospective restatement or reclassification has a material effect on the information in the statement of financial position as at the beginning of the preceding period.

In the circumstances described in paragraph 37 an entity shall present three statements of financial position – a statement of financial position as at: 

(a) the end of the current reporting period; 

(b) the end of the preceding period; and 

(c) the beginning of the preceding period.

When an entity is required to present a third statement of financial position applying paragraph 37, it shall disclose the information required by paragraphs 33⁠–36 and AASB 108. However, it need not provide the related notes to the statement of financial position as at the beginning of the preceding period.

The date of that third statement of financial position shall be as at the beginning of the preceding period regardless of whether an entity’s financial statements provide comparative information for earlier periods (as permitted by paragraphs B14–B15).