Statement of Comprehensive Income
The statement of comprehensive income determines the entity 's financial performance in a certain accounting period. Under IAS 1 there are two main components of the statement of comprehensive income:
a) Profit or Loss for the period: This includes all the items which are either classified as an income or an expense for e.g. Revenue, COGS, Administrative expenses. b) Other comprehensive income: This includes the items which will be not be included in the profit and loss but will directly be identified under equity or reserves …show more content…
Under this approach the cost of sales are recorded separately from other expenses. The reason for giving preference to this approach is that it provides relevant information to the users but IASB says that using this approach may require an entity to make random allocations and considerable judgments for assigning different costs to functions (Sale, …show more content…
They must be prepared in accordance with the standards and should give a true and fair view of an entity 's financial performance, position and cash flows. But still IAS 1 is not perfect in every aspect. All the elements disclosed in the statements are not always properly described in a way, so there is no doubt to what should be recorded under what particular heading and IAS 1 does not give any guidance on how to deal with such issues. Furthermore using the function of expenses approach might give the issuers of statements an idea to tamper with the presentation of income statement which will not reflect the accurate performance of the company. Also IAS 1 requires the entity to give additional lines, heading and sub totals which allows the entity to use this in their favor and present the statements however they prefer (ESMA, 2013). The financial statements also take fair value into account which was one of the main reasons for recession in the economy because it inflated the balance sheets. Use of accrual base accounting in IAS 1, will provide the users with a properly presented financial statement but this does not keep record of the cash. This shows that IAS 1 has a few deficiencies and these should be taken into account by the IASB and they should take the required steps for its improvement. This will further enhance the presentation of financial statements and
The statement of comprehensive income determines the entity 's financial performance in a certain accounting period. Under IAS 1 there are two main components of the statement of comprehensive income:
a) Profit or Loss for the period: This includes all the items which are either classified as an income or an expense for e.g. Revenue, COGS, Administrative expenses. b) Other comprehensive income: This includes the items which will be not be included in the profit and loss but will directly be identified under equity or reserves …show more content…
Under this approach the cost of sales are recorded separately from other expenses. The reason for giving preference to this approach is that it provides relevant information to the users but IASB says that using this approach may require an entity to make random allocations and considerable judgments for assigning different costs to functions (Sale, …show more content…
They must be prepared in accordance with the standards and should give a true and fair view of an entity 's financial performance, position and cash flows. But still IAS 1 is not perfect in every aspect. All the elements disclosed in the statements are not always properly described in a way, so there is no doubt to what should be recorded under what particular heading and IAS 1 does not give any guidance on how to deal with such issues. Furthermore using the function of expenses approach might give the issuers of statements an idea to tamper with the presentation of income statement which will not reflect the accurate performance of the company. Also IAS 1 requires the entity to give additional lines, heading and sub totals which allows the entity to use this in their favor and present the statements however they prefer (ESMA, 2013). The financial statements also take fair value into account which was one of the main reasons for recession in the economy because it inflated the balance sheets. Use of accrual base accounting in IAS 1, will provide the users with a properly presented financial statement but this does not keep record of the cash. This shows that IAS 1 has a few deficiencies and these should be taken into account by the IASB and they should take the required steps for its improvement. This will further enhance the presentation of financial statements and