The presentation of financial statements is addressed in IAS 1 Presentation of Financial Statements. The objective of IAS 1 is to prescribe the basis for presentation of general purpose financial statements, in order to ensure comparability both with the entity's financial statements of previous periods and with the financial statements of other entities. To achieve this objective, IAS 1 sets out the overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content.

Requirement:

(a) What are the objectives of a statement of financial position?

(b) What are the major limitations of a statement of financial position as a source of information for general users of financial statements?

(c) Expenses are required to be classified either on the face of the statement of profit or loss and other comprehensive income or in the notes according to their nature or function, whichever provides the more relevant and reliable information.

(i) What is meant by classification by nature or function?

(ii) Identify, and explain why, the types of organization that would ordinarily adopt each of these classifications.

(d) What is the objective of a statement of changes in equity?

(e) Why is a summary of accounting policies important to ensuring the understandability of financial statements to general users of the statements?

(f) Financial reporting, by its nature, involves a considerable number of judgements by preparers about a range of issues. What are some of the more important judgements made that can lead to estimation uncertainty at the reporting date?