Topic list Syllabus reference

Exam focus point
The format for a single statement of profit or loss and other comprehensive income is shown as follows in the standard. The section down to 'profit for the year' can be shown as a separate statement of profit or loss’ with an additional statement of other comprehensive income'. Note that not all of the items which would appear under 'other comprehensive income' are included in your syllabus.

In the examinations, if a 'statement of profit or loss and other comprehensive income' is referred to, this will always relate to the single statement format. If 'statements of profit or loss' are referred to, this relates to the statement from 'revenue' to profit for the year'. Exams may refer to 'other comprehensive income' which relates to the 'other comprehensive income' section of the statement. In practice, the item of other comprehensive income' you are most likely to meet is a revaluation surplus. Where we have used statement of profit or loss' in this Study Text, this can be taken to refer to the profit or loss section of the full statement or separate statement of profit or loss.
GENERIC GROUP - STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 20X7

	20X7 $'000	20X6 $000
Revenue	390,000	355,000
Cost of sales	(245,000)	(230,000)
Gross profit	145,000	125,000
Other income	20,667	11,300
Distribution costs	(9,000)	(8,700)
Administrative expenses	(20,000)	(21,000)
Other expenses	(2,100)	(1,200)
Finance costs	(8,000)	(7,500)
Share of profit of associates	35,100	30,100
Profit before tax	161,667	128,000
Income tax expense	(40,417)	(32,000)
Profit for the year from continuing operations	121,250	96,000
Loss for the year from discontinued operations	-	(30,500)
Profit for the year Other comprehensive income: Items that will not be reclassified to profit or loss:	121,250	65,500
Gains on property revaluation	933	3,367
Investments in equity instruments	(24,000)	26,667
Remeasurement gains (losses) on defined benefit pension plans	(667)	1,333
Share of gain(loss) on property revaluation of associates	400	(700)
Income tax relating to items that will not be reclassified	5,834	(7,667)
Items that may be reclassified subsequently to profit or loss	(17,500)	23,000
‘Exchange differences on translating foreign operations	5,334	10,667
‘Cash flow hedges	(667)	(4,000)
Income tax relating to items that may be reclassified	(1.167)	(1,667)
	3,500	5,000
Other comprehensive income for the year, net of tax	(14,000)	28,000
Total comprehensive income for the year Profit attributable to:	107,250	93,500
Owners of the parent	97,000	52,400
Non-controlling interest	24,250	13,100
Total comprehensive income attributable to	121,250	65,500
Owners of the parent	85,800	74,800
Non-controlling interest	21,450	18,700
	107,250	93,500
Earnings per share (in currency units) ‘Not in the Financial Reporting syllabus	0.46	0.30
This is the full statement as issued by the IASB.		(IAS 1: IG)

Note that the amendment to IAS 1 splits items of other comprehensive income into those which can be reclassified to profit or loss and those which can not be reclassified. In practice, none of the items which can be reclassified are examinable at Financial Reporting, so this is not an issue that you will encounter in your exam.

Companies are given the option of presenting this information in two statements:
GENERIC GROUP - STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 20X7

	20X7	20X6
	$'000	$'000
Revenue	390,000	355,000
Cost of sales	(245,000)	(230,000)
Gross profit	145,000	125,000
Other income	20,667	11,300
Distribution costs	(9,000)	(8,700)
Administrative expenses	(20,000)	(21,000)
Other expenses	(2,100)	(1,200)
Finance costs	(8,000)	(7,500)
Share of profit of associates	35,100	30,100
Profit before tax	161,667	128,000
Income tax expense	(40,417)	(32,000)
Profit for the year from continuing operations	121,250	96,000
Loss for the year from discontinued operations	-	(30,500)
Profit for the year	121,250	65,500
Profit attributable to:
Owners of the parent	97,000	52,400
Non-controlling interest	24,250	13,100
	121,250	65,500

GENERIC GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 20X7 (TWO STATEMENT FORMAT)

Profit for the year	20X7 $'000 121,250	20X6 $000 65,500
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Gains on property revaluation	933	3,367
Investments in equity instruments	(24,000)	26,667
‘Actuarial gains (losses) on defined benefit pension plans	(667)	1,333
Share of gain(loss) on property revaluation of associates	400	(700)
Income tax relating to items that will not be reclassified	5,834	(7,667)
	(17,500)	23,000
Items that may be reclassified to profit or loss:
‘Exchange differences on translating foreign operations	5,334	10,667
‘Cash flow hedges	(667)	(4,000)
Income tax relating to items that may be reclassified	(1,167)	(1,667)
	3,500	5,000
Other comprehensive income for the year, net of tax	(14,000)	28,000
Total comprehensive income for the year	107,250	93,500
Total comprehensive income attributable to
Owners of the parent	85,800	74,800
Non-controlling interest	21,450	18,700
	107,250	93,500

‘Not in the Financial Reporting syllabus

4. 
   
   FAST FORWARD
   Statement of profit or loss
   

IAS 1 offers two possible formats for the statement of profit or loss or separate profit or loss section - by function or by nature. Classification by function is more common.

1. 
   Examples of separate statements of profit or loss
   

GENERIC GROUP STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 20X8

Illustrating the classification of expenses by function	20X8 $'000	20X7 $000
Revenue	X	X
Cost of sales	(X)	(X)
Gross profit	X	X
Other income	X	X
Distribution costs	(X)	(X)
Administrative expenses	(X)	(X)
Other expenses	(X)	(X)
Finance costs	(X)	(X)
Share of profit of associates	X	X
Profit before tax	X	X
Income tax expense	(X)	(X)
Profit for the year	X	X
Profit attributable to: Owners of the parent	X	X
Non-controlling interest	X	X
	X	X
Illustrating the classification of expenses by nature	20X8	20X7
	$'000	$'000
Revenue	X	X
Other operating income	X	X
Changes in inventories of finished goods and work in progress	(X)	X
Work performed by the entity and capitalised	X	X
Raw material and consumables used	(X)	(X)
Employee benefits expense	(X)	(X)
Depreciation and amortisation expense	(X)	(X)
Impairment of property, plant and equipment	(X)	(X)
Other expenses	(X)	(X)
Finance costs	(X)	(X)
Share of profit of associates	X	X
Profit before tax	X	X
Income tax expense	(X)	(X)
Profit for the year	X	X
Profit attributable to: Owners of the parent	X	X
Non-controlling interest	X	X
	X	X

Note. The usual method of presentation is expenses by function and this is the format likely to appear in your exam.

2. 
   Information presented in the statement of profit or loss
   

The standard lists the following as the minimum to be disclosed on the face of the statement of profit or loss.

1. 
   Revenue
   
2. 
   Finance costs
   
3. 
   Share of profits and losses of associates and joint ventures accounted for using the equity method
   
4. 
   A single amount for the total of discontinued operations
   
5. 
   Tax expense
   

(IAS 1: para. 82)
The following items must be disclosed as allocations of profit or loss for the period.

1. 
   Profit or loss attributable to non-controlling interest
   
2. 
   Profit or loss attributable to owners of the parent (IAS 1: para. 81)
   

The allocated amounts must not be presented as items of income or expense. (These relate to group accounts, covered later in this Text.)

3. 
   Information presented either in the statement or in the notes
   

An analysis of expenses must be shown either in the profit or loss section (as above, which is encouraged by the standard) or by note, using a classification based on either the nature of the expenses or their function. This sub-classification of expenses indicates a range of components of financial performance; these may differ in terms of stability, potential for gain or loss and predictability. (IAS 1: paras. 99-106)

1. 
   Nature of expense method
   

Expenses are not reallocated amongst various functions within the entity, but are aggregated in the statement of profit or loss according to their nature (eg purchase of materials, depreciation, wages and salaries, transport costs). This is by far the easiest method, especially for smaller entities.
(IAS 1: para. 102)

2. 
   Function of expense/cost of sales method
   

You are likely to be more familiar with this method. Expenses are classified according to their function as part of cost of sales, distribution or administrative activities. This method often gives more relevant information for users, but the allocation of expenses by function requires the use of judgement and can be arbitrary. Consequently, perhaps, when this method is used, entities should disclose additional information on the nature of expenses, including staff costs, and depreciation and amortisation expense.
(IAS 1: para. 103)