30 October 2013

ESMA: Agenda item requests related to the application of IAS 1 and IAS 34

NCAs and ESMA have identified issues related to the application of IAS 1 'Presentation of Financial Statements' and IAS 34 'Interim Financial Reporting', which they have brought to the attention of the IFRS Interpretations Committee for further consideration.

IAS 1 Presentation of Financial Statements

ESMA is concerned that the absence of definitions of some concepts in IAS 1 and the lack of implementation guidance gives a lot of flexibility to entities to present their financial statements in ways that may impair the comparability and understandability of the financial statements.

In what follows ESMA provides some examples to illustrate the concerns mentioned above. They are grouped based on the nature of the issuers raised:

a.       presentation of expense by function

b.      additional lines, headings and subtotals

c.       additional statements or columns in the primary statements

d.      materiality and aggregation

Letter-to-IFRS-IC

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IAS 34 Interim Financial Reporting

As a part of its monitoring and supervisory activities, ESMA and national enforcers have identified divergent application of IFRS requirements regarding presentation of the condensed statement of cash flows in the interim financial statements.

Issuers have divergent views on the application of the IAS 34 requirements regarding presentation and content of the condensed statement of cash flows. Some issuers present in their condensed interim financial statement a three-line condensed statement of cash flows that shows only a total for each of operating, investing and financing activities even though the nature of activities under each total might be diverse. Other issuers present a more detailed structure of the condensed statement of cash flows reflecting the different nature of activities.

Pursuant to paragraph 8 of IAS 34 an entity shall present a condensed statement of cash flows in its interim financial report. Paragraph 10 of IAS 34 requires the condensed statement of cash flows to include, at a minimum, each of the headings and subtotals included in the most recent annual financial statements and requires additional line items to be included if their omission would make the condensed interim financial statements misleading.

Letter-to-IFRS-IC

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