Income Statement | WILEY IAS 2003: Interpretation and Application of International Accounting Standards

A. Minimum Disclosures on the Face of the Income Statement

Minimum disclosures on the face of the income statement should include the following:
1. Revenue;
2. Results of operating activities;
3. Finance costs;
4. Share of profits and losses of associates and joint ventures accounted for using the equity method;
5. Tax expense;
6. Profit or loss from ordinary activities;
7. Extraordinary items;
8. Minority interests; and
9. Net profit or loss for the period.
Additional line items on the face of the income statement

Additional line items, headings and subtotals should be presented on the face of the income statement when required by an IAS or when such a presentation is necessary in order to fairly present the enterprise's financial performance.

(IAS 1, Para 75)

B. Investment Property

Amounts included in income statement for
1. Rental income from investment property;
2. Direct operating expenses (including repairs and maintenance) arising from investment property that is the source of the rental income during the period; and
3. Direct operating expenses (including repairs and maintenance) arising from investment property that did not generate rental income for the period.
(IAS 40, Para 66)
In the case of investment property carried under the fair value model, as part of the reconciliation of the carrying amount of the investment at the beginning and the end of the period, the net gains or losses from the fair value adjustments and the net exchange differences arising from the translation of the financial statements of a foreign entity.

(IAS 40, Para 67)
In the case of investment property carried under the cost model, as part of the reconciliation of the carrying amount of the investment at the beginning and at the end of the period, the depreciation, the amount of impairment losses recognized and reversed and the net exchange differences arising from the translation of the financial statements of a foreign entity.

(IAS 40, Para 69)

C. Income Taxes

Tax expense related to profit or loss from ordinary activities should be presented on the face of the income statement.

(IAS 12, Para 77)
The major components of tax expense should be presented separately. These commonly would include the following:
1. Current tax expense;
2. Any adjustments recognized in the period for current tax of prior periods;
3. The amount of deferred tax expense relating to the origination and the reversal of timing differences;
4. The amount of deferred tax expense relating to changes in tax rates or the imposition of new taxes;
5. The amount of deferred tax expense or benefit relating to changes in tax rates or the imposition of new taxes;
6. The amount of the benefit arising from a previously unrecognized tax loss, tax credit, or temporary difference of a prior period that is used to reduce current taxes;
7. The amount of a benefit from a previously unrecognized tax loss, tax credit, or temporary difference of a prior period that is used to reduce deferred taxes;
8. Deferred tax expense related to a write-down of a deferred tax asset or the reversal of a write-down; and
9. The amount of tax expense relating to changes in accounting policies and correction of fundamental errors, accounted for consistent with the allowed alternative method under IAS 8.
(IAS 12, Paras 79 and 80)
The following items also require separate disclosure:
1. Tax expense relating to items which are charged or credited to equity;
2. Tax expense relating to extraordinary items;
3. An explanation of the relationship between tax expense or benefit and accounting profit or loss either (or both) as
  1. A numerical reconciliation between tax expense or benefit and the product of accounting profit or loss times the applicable tax rate(s), with disclosure of how the rate(s) was determined; or
  2. A numerical reconciliation between the average effective tax rate and the applicable rate, also with disclosure of how the applicable rate was determined.
4. An explanation of changes in the applicable tax rates vs. the prior period;
5. The amount and expiration date of deductible temporary differences, and unused tax losses and tax credits for which no deferred tax asset has been recognized;
6. Aggregate temporary differences associated with investments in subsidiaries, branches, and associates, and interests in joint ventures, for which deferred tax liabilities have not been recognized;
7. For each type of temporary difference, and for each type of unused tax loss or unused credit, the amount of deferred tax asset and liability recognized in the balance sheet and the amount of deferred tax expense or benefit recognized in the income statement, unless otherwise apparent from changes in the balance sheet accounts; and
8. With regard to discontinued operations, the tax expense relating to the gain or loss on discontinuance and the tax expense on the profit or loss from ordinary activities of the discontinued operation.
(IAS 12, Para 81)

D. Extraordinary Items

The net profit or loss for the period should be comprised of
1. Profit or loss from ordinary activities; and
2. Extraordinary items.
Each of the above components should be disclosed on the face of the income statement.

(IAS 8, Para 10)
The nature and the amount of each extraordinary item should be separately disclosed.

(IAS 8, Para 11)

E. Discontinuing Operations

Initial disclosure event
1. The financial statements beginning with period in which the "initial disclosure event" (as defined in IAS 35, para 16) occurs, should include the following information relating to a "discontinuing operation:"
  1. A description of the discontinuing operation;
  2. The business or geographical segment(s) in which it is reported;
  3. The date and the nature of the initial disclosure event;
  4. The date or period in which the discontinuance is expected to be completed if known or determinable;
  5. The carrying amounts, as of the balance sheet date, of the total assets and the total liabilities to be disposed of;
  6. The amounts of revenue, expenses, and pretax profit or loss from ordinary activities attributable to the discontinuing operation during the current financial reporting period, and the income tax expense relating thereto; and
  7. The amounts of net cash flows attributable to the operating, investing, and financing activities of the discontinuing operation during the current financial reporting period.
  (IAS 35, Para 27)
2. If the initial disclosure event occurs after the end of an enterprise's financial reporting period but before the financial statements for that period are approved by the board of directors (or similar governing body), those financial statements should include the above disclosures as well.
  
  (IAS 35, Para 29)
Disposal of assets and settlement of liabilities

On disposing of assets or settling liabilities attributable to a discontinuing operation or when an enterprise enters into binding agreements for the sale of such assets or the settlement of such liabilities, the enterprise's financial statements should include the following information on the occurrence of the event:
1. The amount of pretax gain or loss and the income tax expense relating to the gain or loss; and
2. The net selling price or range of prices, net of expected disposal costs, of the net assets for which the enterprise has entered into one or more binding sale agreements, the expected timing of the receipt of cash flows, and the carrying amount of those net assets.
(IAS 35, Para 31)
Updating disclosures

In addition to the disclosures required by IAS 34, paras 27 and 31 (outlined above), an enterprise should include in its financial statements for periods subsequent to the one in which the "initial disclosure event" occurs, a description of any significant changes in the amount or timing of cash flows relating to assets and liabilities to be disposed of or settled and the events causing those changes.

(IAS 35, Para 33)
Continuance of disclosures

The above disclosures should continue in financial statements for the periods up to and including the period in which the discontinuance is completed. If an enterprise abandons or withdraws from a plan that was previously reported as a discontinuing operation, that fact and its effect should be disclosed.

(IAS 35, Paras 35 and 36)
Separate disclosure for each discontinuing operation

All disclosures required by IAS 35 should be presented separately for each discontinuing operation.

(IAS 35, Para 38)
Presentation of disclosures

The disclosures required by IAS 35, paras 27 to 37, may be presented either in the notes to the financial statements or on the face of the financial statements except the disclosure of the amount of the pretax gain or loss recognized on the disposal of assets or settlement of liabilities attributable to the discontinuing operations (as required by IAS 35, para 31[a]) should be shown on the face of the income statement.

(IAS 35, Para 39)
Not an extraordinary item

A discontinuing operation should be not be presented as an extraordinary item.

(IAS 35, Para 41)
Restatement of prior periods

Comparative information for prior periods that is presented in financial statements prepared after the initial disclosure event should be restated to segregate continuing and discontinuing assets, liabilities, income, expenses, and cash flows in a manner similar to that required by IAS 35, paras 27 to 43.

(IAS 35, Para 45)
Disclosure in interim financials

The notes to an interim financial report should describe any significant activities or events since the end of the most recent annual reporting period relating to discontinuing operation and any significant changes in the amount or timing of cash flows relating to the assets and liabilities to be disposed of or settled.

(IAS 35, Para 47)

F. Segment Data

For each reportable segment based on the enterprise's primary reporting format
1. Segment revenue, with revenue from external customers distinguished from revenue from transactions with other segments;
  
  (IAS 14, Para 51)
2. Segment results (net profit or loss if this is computable without making arbitrary allocations; an other measure, such as gross margin, in other instances), with an indication if accounting policies other than those adopted for consolidated financial reporting have been employed;
  
  (IAS 14, Para 52)
3. Total carrying values for segment assets;
  
  (IAS 14, Para 55)
4. Total liabilities;
  
  (IAS 14, Para 56)
5. Total cost incurred during the period being reported upon for acquisitions of segment assets expected to be used for greater than one period (i.e., plant assets and intangibles), determined on an accrual (not cash) basis;
  
  (IAS 14, Para 57)
6. Total depreciation and amortization expense of segment assets during the period;
  
  (IAS 14, Para 58)
7. (Optional but recommended) The nature and amounts of any items of segment revenue or expense that are of such size, nature, or incidence as to be relevant to explain performance;
  
  (IAS 14, Para 59)
8. Total amounts of significant noncash expenses other than depreciation and amortization (this may be omitted if the segment cash flow data encouraged by IAS 7 is provided, however);
  
  (IAS 14, Para 61)
9. The aggregate of the enterprise's share of the net profit or loss of associates, joint ventures, or other equity method investments, if substantially all the associates' operations are within the single segment, and, if so, the aggregate amount of the investments in those associates; and
  
  (IAS 14, Paras 64 and 66)
10. A reconciliation between the information provided by segment and the aggregated information presented in the consolidated or enterprise financial statements (e.g., segment revenues from external customers reconciled to total revenues; segment results to the same measurement item on an enterprise-wide basis, etc.).
  
  (IAS 14, Para 67)
For each reportable segment based on the enterprise's secondary reporting format
1. If the primary reporting format is business segments, then the following should be presented:
  1. Segment revenue from external customers by geographical area based on location of customers, for each geographical segment whose revenues from external customers is 10% or greater of total enterprise revenues from external customers;
  2. Total carrying amount of segment assets by geographical location of assets, for each geographical segment whose segment assets are 10% or greater of total assets; and
  3. The total cost incurred during the period to acquire segment assets expected to be used for more than one period, by geographical location of assets, for each geographical segment whose segment assets are 10% or greater of total assets.
  (IAS 14, Para 69)
2. If the primary reporting format is geographical segments (whether based on location of assets or of customers), the following should be reported for each business segment whose revenue from external customers is 10% or greater of total enterprise revenue from external customers, or whose segment assets are 10% or greater of total assets of all segments:
  1. Segment revenues from external customers;
  2. Total carrying amounts of segment assets; and
  3. Total cost incurred during the period to acquire segment assets expected to be used for more than one period.
  (IAS 14, Para 70)
3. If the primary reporting format is geographical segments based on location of assets, and if location of customers differs from location of assets, then the enterprise should also report revenues from external customers for each customer-based geographical segment whose revenue from external customers is 10% or greater of total enterprise revenue from external customers.
  
  (IAS 14, Para 71)
4. If the primary reporting format is geographical segments based on location of customers, and if location of customers differs from location of assets, then the enterprise should also report the following for each asset-based geographical segment whose revenue from external customers or segment assets are 10% or greater of total enterprise revenue from external customers or consolidated assets, respectively:
  1. Total carrying amount of segment assets by geographical location; and
  2. Total cost incurred during the period to acquire segment assets expected to be used for more than one period.
  (IAS 14, Para 72)
If a business or geographical segment is not reportable because a majority of revenues are from sales to other segments, but nevertheless revenues from external customers is 10% or greater of total enterprise revenues, this fact should be disclosed and the amounts of revenues from external customers and from other segments must be stated.

(IAS 14, Para 74)
The bases of pricing intersegment transfers, and changes therein, should be disclosed.

(IAS 14, Para 75)
Changes in accounting policies for segment reporting having material effects on segment information should be disclosed, and prior period segment presented as comparative data should be restated, unless impracticable to do so. Disclosures should include description and nature of change, reasons for making the change, whether comparative data has been restated or the fact that it was impracticable to do so, and the financial effect of the change, if reasonably determinable. If segment definitions have changed and prior period data has not been restated, then the current period data should be prepared and presented under both the old and the new classification schemes, so that comparability will be preserved.

(IAS 14, Para 76)
The types of products and services included in each reportable business segment, and the composition of each reported geographical segment, both primary and secondary, should be disclosed unless otherwise reported in the financial statements.

(IAS 14, Para 81)

G. Construction Contracts

An enterprise which accounts for construction contracts in accordance with IAS 11 should disclose the following in its financial statements:
1. The amount of contract revenue recognized as revenue in the period;
2. The methods used to determine the contract revenue recognized in the period; and
3. The methods used to determine the stage of completion for contracts in progress.
(IAS 11, Para 39)
Each of the following should be disclosed for the contracts in progress:
1. The aggregate amount of costs incurred and recognized profits (net of any recognized losses) to date;
2. The amount of advances received; and
3. The amount of retentions.

H. Foreign Currency Translation

Disclosure is required of the following:
1. The amount of exchange differences included in net profit or loss for the period;
2. Net exchange differences classified as a separate component of equity, and a reconciliation of the amount of such exchange differences at the beginning and the end of the period; and
3. Amount of exchange differences that arose during the period and which is included in the carrying value of an asset in accordance with IAS 21, para 21, under the "allowed alternative treatment."
(IAS 21, Para 42)
If the reporting currency is different from the currency of the country in which the enterprise is domiciled, disclosure is required of the following:
1. The reason for using a different currency; and
2. The reason for any change in the reporting currency.
(IAS 21, Para 43)
When there is a change in classification of a significant foreign operation, the following disclosures are required:
1. The nature of the change;
2. The reason for the change;
3. The impact of the change in classification on the shareholders' equity; and
4. The impact on the net profit or loss for each period presented as if the change had occurred at the beginning of the period presented.
(IAS 21, Para 44)
Disclosure is required of the method selected to translate
1. Goodwill arising on the acquisition of a foreign entity; and
2. Fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign entity.
(IAS 21, Para 45)
A change in exchange rates occurring after the balance sheet date which is of such importance that nondisclosure would affect the ability of users of the financial statements to make proper evaluations and decisions should be disclosed.

(IAS 21, Para 46)
(Recommended additional disclosure) An enterprise is encouraged to disclose its foreign currency risk management policy.

(IAS 21, Para 47)
When the measurement currency is different from the currency of the country in which the enterprise is domiciled, the following should be disclosed:
1. The reason for using a different currency;
2. The reason for any change in the measurement currency or the presentation currency; and
3. When financial statements are presented in a currency different from the enterprise's measurement currency, the measurement currency, the reason for using a different presentation currency, and a description of the method used in the translation process.
(In consolidated financial statements, the references to measurement currency for the purpose of these disclosure requirements are to the measurement currency of the parent company.)

(SIC 19, Para 10)
When financial statements are presented in a currency other than the measurement currency determined under SIC 19, an enterprise should state the fact that the measurement currency reflects the economic substance of the underlying events and circumstances of the enterprise, in addition to disclosing the information required by SIC 19.

(SIC 30, Para 8)
When financial statements are presented in a currency other than the measurement currency determined under SIC 19, and the measurement currency is the currency of a hyperinflationary economy, an enterprise should disclose the closing exchange rates between the measurement currency existing at the date of each balance sheet presented, in addition to the disclosures by IAS 29.

(SIC 30, Para 9)
When additional information not mandated by IAS is displayed in financial statements and in a currency other than the currency used in presenting the financial statements, as a convenience to certain users, an enterprise should
1. Clearly identify the information as supplementary information to distinguish it from the information required by IAS and translated in accordance with SIC 30;
2. Disclose the measurement currency used to prepare the financial statements and the method of translation used to determine the supplementary information displayed;
3. Disclose the fact that the measurement currency reflects the economic substance of the underlying events and circumstances of the enterprises and that the supplementary information is displayed in another currency for convenience purposes only; and
4. Disclose the currency in which the supplementary information is displayed.
(The disclosures required by SIC 30, paragraphs 8 and 10(c), are required in consolidated financial statements in all circumstances except when the measurement currencies of the enterprises in the group are the presentation currency—and, when displaying additional information, the display currency—are the same. For the purpose of the disclosure requirements in SIC 30, paragraphs 9 and 10(b), in consolidated financial statements, the references to measurement currency are to the measurement currency of the parent.)

(SIC 30, Para 10)

I. Business Combinations and Consolidations

For all business combinations, the following disclosures are required in the period in which a business combination takes place:
1. The names and descriptions of the combining enterprises;
2. The method of accounting for the combination;
3. The effective date of the combination for accounting purposes; and
4. A description of any operations of the combining entities which are to be disposed of.
(IAS 22, Para 70)
For business combinations accounted for as acquisitions, the following disclosures are also required:
1. The percentage of voting shares acquired;
2. The cost of the acquisition and the nature of the consideration paid or payable; and
3. The nature and amount of any restructuring, plant closure, or similar costs provided for in connection with the acquisition and recognized at that time.
(IAS 22, Para 71)
The following disclosures are required in the financial statements:
1. The treatment being used to account for goodwill or negative goodwill, including the amortization period;
2. Justification of an estimated life for goodwill longer than five years, if applicable;
3. Justification for an amortization method other than straight-line, if applicable, including identification of the method used; and
4. A reconciliation of goodwill and negative goodwill at the beginning and end of the reporting period, showing
  1. The gross amount and the accumulated amortization at the beginning of the period;
  2. Any additional goodwill or negative goodwill recorded during the period;
  3. Amortization charged during the period;
  4. Any other write-offs during the period; and
  5. The gross amount and the accumulated amortization at the end of the period.
(IAS 22, Para 72)
If in an acquisition the fair values of assets and liabilities obtained or of consideration paid can only be provisionally determined at the end of the period in which it occurred, this must be stated and explained. Subsequent adjustments to the provisional fair values should be disclosed and explained in the financial statements of the period in which they occur.

(IAS 22, Para 73)
For unitings of interests, the following disclosures are also required:
1. A description and amount of shares issued, together with the percentage of each entity's voting shares exchanged to effect the uniting;
2. The amounts of assets and liabilities contributed by each entity; and
3. Sales revenue, other operating revenues, extraordinary items and net profit or loss of each enterprise prior to the date of the combination that are included in the net profit or loss of the combined entity as reported in the financial statements.
(IAS 22, Para 74)
If a business combination occurs after the date of the financial statements, the disclosures set forth above should nonetheless be made, unless impractical to do so, in which case that fact should be stated.

(IAS 22, Para 76)
Adjustments to carrying amounts, identifiable assets or liabilities, or goodwill or negative goodwill should be disclosed and explained in the financial statements of the period in which the adjustment is made. The amount of the adjustment to the prior and comparative period(s) should also be disclosed.

(SIC 22)
When published price of an equity instrument issued as purchase consideration exists at the date of exchange, but has not been used as the instruments' fair value, an enterprise should disclose
1. The fact (that published price has not been used as fair value);
2. The reason why the published price is not the fair value of the equity instruments;
3. The method and significant assumptions applied in determining the fair value; and
4. The aggregate amount of the difference between the published price and the amount determined to be fair value of the equity instruments.
(SIC 28, Para 7)
When an equity instrument issued as purchase consideration does not have a published price at the date of exchange, an enterprise should disclose that fact and the method and significant assumptions applied in determining the fair value.

(SIC 28, Para 8)

J. Earnings Per Share

Enterprises should present both basic EPS and diluted EPS on the face of the income statement for each class of ordinary shares that has a different right to share in the net profit for the period. Equal prominence should be given to both the basic EPS and diluted EPS figures for all periods presented.

(IAS 33, Para 47)
Enterprises should present basic EPS and diluted EPS even if the amounts disclosed are negative. In other words, the standard mandates disclosure of not just earnings per share but even loss per share figures.

(IAS 33, Para 48)
Enterprises should disclose amounts used as the numerator in calculating basic EPS and diluted EPS along with a reconciliation of those amounts to the net profit or loss for the period. Disclosure is also required of the weighted-average number of ordinary shares used as the denominator in calculating basic EPS and diluted EPS along with a reconciliation of these denominators to each other.

(IAS 33, Para 49)
1. In addition to the disclosure of the figures for basic EPS and diluted EPS, as required above, if an enterprise chooses to disclose per share amounts using a reported component of net profit, other than net profit or loss for the period attributable to ordinary shareholders, such amounts should be calculated using weighted-average number of ordinary shares determined in accordance with the requirements of IAS 33; this will ensure comparability of the per share amounts disclosed;
2. In cases where an enterprise chooses to disclose the above per share amounts using a component of net profit not reported as a line item in the income statement, a reconciliation is mandated by the standard, which should reconcile the difference between the component of net income used with a line item reported in the income statement; and
3. When additional disclosure is made by an enterprise of the above per share amounts, basic and diluted per share amounts should be disclosed with equal prominence (just as basic EPS and diluted EPS figures are given equal prominence).
(IAS 33, Para 51)
Enterprises are encouraged to disclose the terms and conditions of financial instruments or contracts generating potential ordinary shares, since such terms and conditions may determine whether or not any potential ordinary shares are dilutive and, if so, the effect on the weighted-average number of shares outstanding and any consequent adjustments to the net profit attributable to the ordinary shareholders.

(IAS 33, Para 50)
If changes (resulting from bonus issue or share split etc.) in the number of ordinary or potential ordinary shares occur, after the balance sheet date but before issuance of the financial statements, and the per share calculations reflect such changes in the number of shares, such a fact should be disclosed.

(IAS 33, Para 43)
Enterprises are also encouraged to disclose a description of ordinary share transactions or potential ordinary share transactions, other than capitalization issues and share splits, occurring after the balance sheet date and which are of such importance that nondisclosure would affect the ability of the users of the financial statements to make proper evaluations and decisions.

(IAS 33, Para 45)

K. Dividends Per Share

An enterprise should disclose, either on the face of the income statement or in the notes, the amount of dividends per share, declared or proposed, for the period covered by the financial statements.

(IAS 1, Para 85)

L. Impairments of Assets

For each class of assets, the financial statements should disclose:
1. The amount of impairment losses recognized in the income statement during the period and the line item(s) of the income statements in which those impairment losses are included;
2. The amount of reversals of impairment losses recognized in the income statement during the period and the line item(s) of the income statement in which those impairment losses are reversed;
3. The amount of impairment losses recognized directly in equity during the period; and
4. The amount of reversals of impairment losses recognized directly in equity during the period.
(IAS 36, Para 113)
If impairment loss for an asset or a cash-generating unit is recognized or reversed during the period and is material to the financial statements as a whole, an enterprise should disclose
1. Events and circumstances that led to the recognition or reversal of the impairment loss;
2. Amount of the impairment loss recognized or reversed;
3. For an individual asset, its nature and the primary reportable segment to which it belongs, based on the enterprise's primary format (as defined in IAS 14, if that IAS applies to the enterprise);
4. For a cash-generating unit, a description of the cash-generating unit, the amount of the impairment loss recognized or reversed by the class of assets and by the reportable segment based on the enterprise's primary format (as defined by IAS 14, if that IAS applies to the enterprise) and if the aggregation of assets for identifying the cash-generating unit has changed since the previous estimate of the cash-generating unit's recoverable amount (if any), the enterprise should describe the current and former manner of aggregating assets and the reasons for the change;
5. Whether the recoverable amount of the asset (cash-generating unit) is its net selling price or its value in use;
6. The basis used to determine net selling price (such as with reference to an active market or any other manner) in case the recoverable amount is net selling price; and
7. If recoverable amount is value in use, the discount rate(s) used in the current estimate and previous estimate (if any) of value in use.
(IAS 36, Para 117)
If impairment losses recognized (reversed) during the period are material in aggregate to the financial statements of the enterprise as a whole, an enterprise should disclose a brief description of the following:
1. The main classes of assets affected by impairment losses (reversals of impairment losses) for which no information is disclosed under IAS 36, para 117); and
2. The main events and circumstances that led to the recognition (reversal) of these impairment losses for which no information is disclosed under IAS 36, para 117).
(IAS 36, Para 118)
Monetary or nonmonetary compensation recognized for the impairment or loss of items of property, plant and equipment should be disclosed separately.

(SIC 14)