IAS1 : PRESENTATION OF FINANCIAL STATEMENTS
STRUCTURE AND CONTENT >
Statement of comprehensive income >
Information to be presented in the statement of comprehensive income or in the notes
When items of income or expense are material, [one] an entity shall disclose their nature and amount [two] separately.
Circumstances that would give rise to the separate [three] disclosure of items of income and expense include:
(a) write-downs [four] of inventories to net realisable value or of property, plant [five] and equipment to recoverable amount, as well as reversals of such [six] write-downs;
(b) restructurings of the activities of an entity and reversals of any [seven] provisions for the costs of restructuring;
(c) disposals of items of property, [eight] plant and equipment;
(d) disposals of investments;
(e) discontinued operations;
(f) [nine] litigation settlements; and
(g) other reversals of provisions.
An [ten] entity shall present an analysis of expenses recognised [one] in profit or loss using a classification based on either [two] their nature or their function within the entity, [three] whichever provides information that is reliable [four] and more relevant.
Entities are encouraged to present the analysis [five] in paragraph 99 in the statement of comprehensive income or in the separate [six] income statement (if presented).
Expenses are subclassified [seven] to highlight components of financial performance that may [eight] differ in terms of frequency, potential for gain or loss [nine] and predictability. This analysis is provided in one [ten] of two forms.
The first form of analysis is [one] the ‘nature of expense’ method. An entity aggregates expenses [two] within profit or loss according to their nature [three] (for example, depreciation, purchases of materials, transport [four] costs, employee benefits and advertising costs), and does [five] not reallocate them among functions within [six] the entity. This method may be simple [seven] to apply because no allocations of expenses to functional [eight] classifications are necessary. An example of a classification using [nine] the nature of expense method is as follows:
The second [ten] form of analysis is the ‘function of expense’ or ‘cost [one] of sales’ method and classifies expenses according to their [two] function as part of cost of sales or, for example, [three] the costs of distribution or administrative activities. At a minimum, an entity [four] discloses its cost of sales under this [five] method separately from other expenses. This method [six] can provide more relevant information to users [seven] than the classification of expenses by nature, but allocating costs [eight] to functions may require arbitrary allocations and involve [nine] considerable judgement. An example of a classification using the function [ten] of expense method is as follows:
Other income [one] X
Changes in inventories of finished goods and work in progress [two] X
Raw materials and consumables used X
Employee benefits [three] expense X
Depreciation and amortisation expense X
Other expenses [four] X
Total expenses (X)
Profit before tax X
Revenue [five] X
Cost of sales (X)
Gross profit X
Other income [six] X
Distribution costs (X)
Administrative expenses (X)
Other expenses [seven] (X)
Profit before tax X
An entity classifying [eight] expenses by function shall disclose additional information [nine] on the nature of expenses, including depreciation and amortisation expense [ten] and employee benefits expense.
The choice between the function [one] of expense method and the nature of expense method depends [two] on historical and industry factors and the nature of the entity. Both [three] methods provide an indication of those costs that [four] might vary, directly or indirectly, with the level [five] of sales or production of the entity. Because each method [six] of presentation has merit for different types of entities, [seven] this Standard requires management to select the presentation [eight] that is reliable and more relevant. However, [nine] because information on the nature of expenses is useful [ten] in predicting future cash flows, additional disclosure [one] is required when the function of expense classification [two] is used. In paragraph 104, ‘employee benefits’ [three] has the same meaning as in IAS 19.
Thus it appears, in what various ways Nature has taught man her first great lesson of love and union.
Nor did she give the same talents either in kind or in degree to all, evidently meaning that the inequality of her gifts should be ultimately equalized by a reciprocal interchange of good offices and mutual assistance.
Thus, in different countries, she has caused different commodities to be produced, that expediency itself might introduce commercial intercourse.
The Complaint of Peace