Detailed Notes on IPSAS 1: Presentation of Financial Statements
IPSAS 1 establishes the fundamental requirements for presenting general-purpose financial
statements for public sector entities under the accrual basis of accounting. It ensures
consistency and comparability of financial statements over time and across different entities.
🔍 Objective of IPSAS 1
To set out the overall framework for presenting financial statements.
To ensure comparability both with the entity’s previous financial statements and with
those of other entities.
To provide transparency and accountability in the use of public resources.
📑 Scope of IPSAS 1
Applies to all public sector entities except Government Business Enterprises
(GBEs).
Applies when financial statements are prepared and presented under the accrual basis
of accounting.
🏛️Components of Financial Statements under IPSAS 1
According to IPSAS 1, a complete set of financial statements should include:
1. Statement of Financial Position (Balance Sheet)
o Shows assets, liabilities, and net assets/equity at the reporting date.
2. Statement of Financial Performance (Income Statement)
o Reflects revenue, expenses, and the surplus or deficit for the period.
3. Statement of Changes in Net Assets/Equity
o Shows changes in net assets/equity from transactions with owners and other
movements.
4. Cash Flow Statement
o Provides information about cash inflows and outflows from operating,
investing, and financing activities.
5. Comparison of Budget and Actual Amounts
o Required for entities that publish approved budgets.
6. Notes to the Financial Statements
o Includes a summary of significant accounting policies and other explanatory
information.
📊 Key Principles and Requirements
1. Fair Presentation and Compliance with IPSAS
o Financial statements must present fairly the financial position, performance,
and cash flows.
o Compliance with IPSAS is mandatory for fair presentation.
2. Going Concern
o Financial statements should be prepared on the assumption that the entity will
continue operating for the foreseeable future unless management intends
otherwise.
3. Accrual Basis of Accounting
o Revenues and expenses must be recorded when they occur, not when cash is
received or paid.
4. Consistency of Presentation
o The presentation and classification of items should remain consistent across
periods unless a change is justified.
5. Materiality and Aggregation
o Each material class of similar items should be presented separately; immaterial
amounts can be aggregated.
6. Offsetting
o Assets and liabilities, or income and expenses, should not be offset unless
specifically required or permitted by another IPSAS.
7. Comparative Information
o Comparative information from the previous period must be disclosed for all
amounts.
🔍 Structure and Content Requirements
1. Identification of the Financial Statements
o Name of the entity.
o Reporting period covered.
o Currency used.
o Level of rounding used (if any).
2. Statement of Financial Position Must Include:
o Assets: Current and non-current.
o Liabilities: Current and non-current.
o Net assets/equity: Contributed capital, accumulated surpluses/deficits, and
reserves.
3. Statement of Financial Performance Should Include:
o Revenue.
o Expenses.
o Surplus or deficit for the period.
o Gains and losses from exchange and non-exchange transactions.
📅 Disclosure Requirements
Entities must disclose:
Compliance with IPSAS.
Basis of preparation and measurement.
Accounting policies applied.
Judgments and key assumptions used in applying accounting policies.
Any changes in accounting policies or estimates and their effects.
