Financial Reporting · Preparation of single entity financial statements

IAS 1 Format of Financial Statements for ACCA FR

Updated 11 October 2026 · Fact-checked

IAS 1 sets out how a complete set of financial statements is presented. You show a statement of financial position, a statement of profit or loss and OCI, a statement of changes in equity, a cash flow statement and notes. Assets and liabilities are split into current and non-current. Expenses are shown by nature or by function.

Understand Format of Financial Statements under IAS 1

IAS 1 gives a standard layout so that financial statements are comparable between entities and between years. It does not say how to measure items. Other standards do that. IAS 1 only says how to present and group them.

A complete set of financial statements has: a statement of financial position, a statement of profit or loss and other comprehensive income (OCI), a statement of changes in equity, a statement of cash flows and notes including accounting policies. Comparative information for the previous period is required for all amounts reported in the current period's statements, plus narrative information where relevant.

Profit or loss and OCI can be shown as one statement or as two statements. Profit or loss covers income and expenses such as revenue, cost of sales, distribution costs, administrative expenses, finance costs and income tax. OCI covers items that IFRS Standards say bypass profit or loss, such as revaluation surplus gains on property, plant and equipment. Total comprehensive income is profit for the year plus OCI. Expenses can be analysed by function (cost of sales, distribution, administrative) or by nature (depreciation, staff costs, purchases). ACCA FR usually uses the function method.

On the statement of financial position, assets and liabilities are split into current and non-current. An asset is current if the entity expects to realise it in its normal operating cycle, holds it mainly for trading, expects to realise it within 12 months after the reporting date, or it is cash or a cash equivalent (unless restricted for more than 12 months). All other assets are non-current. A liability is current if it is expected to be settled in the normal operating cycle, held mainly for trading, due to be settled within 12 months after the reporting date, or the entity has no right at the reporting date to defer settlement for at least 12 months. All other liabilities are non-current.

IAS 1 also sets overall principles: fair presentation and compliance with IFRS, going concern, accrual basis, materiality and aggregation, consistency of presentation, and no offsetting of assets against liabilities or income against expenses unless a standard allows it. Deferred tax assets and liabilities are never shown as current.

Key rules to remember

Total comprehensive income: Total comprehensive income = Profit for the year + Other comprehensive income; Show OCI net of tax or show tax on OCI items separately.
Gross profit: Gross profit = Revenue − Cost of sales; Used in the function-of-expense format.
Gross profit to profit before tax: Profit before tax = Gross profit + other income − distribution costs − administrative expenses − finance costs; Finance costs must be shown separately on the face of the statement.
Current classification test: Current if due or realised within 12 months of the reporting date, or in the normal operating cycle, or held for trading (assets: or cash); A liability is also current if there is no right to defer settlement for at least 12 months at the reporting date.
Equity and liabilities: Total assets = Equity + Non-current liabilities + Current liabilities; The statement must balance. Use this as a check.
Share capital and reserves order: Equity: share capital, share premium, revaluation surplus, retained earnings; Dividends recognised as distributions to equity holders during the period (for example, those paid) go through the statement of changes in equity, not profit or loss. Dividends declared after the reporting date are only disclosed in the notes.

How to solve Format of Financial Statements under IAS 1 questions

Use this method for any question asking you to prepare or correct a statement under IAS 1.

1Read the requirement and note which statement(s) you need, and whether comparatives or notes are asked for.
2Set up the proforma layout first, with headings in IAS 1 order. This secures easy presentation marks.
3Work through the adjustments one by one on a separate working page. Show each in a clear working, for example depreciation, accruals, tax and revaluation.
4Place each figure in the correct line. Decide function of expense (cost of sales, distribution, administrative) and send revaluation gains to OCI.
5Classify each asset and liability as current or non-current using the 12-month and operating cycle tests. Split loans and lease liabilities into the part due within one year and the remainder.
6Total each section and check the statement of financial position balances. If it does not, find the missing adjustment.
7Add key notes only if asked, such as the property, plant and equipment movement or accounting policy points, and label all workings.

Quickest way: Proforma first, then tick off adjustments

When to use it: Use for Section C questions where time is tight and for Section A or B objective questions about classification.

Write the proforma headings straight away and leave spaces.
Read the notes and tick each adjustment as you post it to both statements.
For classification questions, ask one thing: is it settled or realised within 12 months or in the operating cycle? If yes, current.
For OCI questions, ask whether a standard sends the item to OCI. Revaluation gains do. Depreciation, impairment of cost-model assets and tax on profit do not.
Check that total assets equal equity plus liabilities before moving on.

Common mistakes in Format of Financial Statements under IAS 1

Putting a revaluation gain in profit or loss.
Students treat every gain as income.
Fix: Take a revaluation gain on property, plant and equipment to OCI and the revaluation surplus in equity. Only a reversal of a previous loss on the same asset goes to profit or loss.
Showing a whole loan as non-current when part is repayable within 12 months.
Students classify by the loan's overall term rather than by the repayment date.
Fix: Split the liability. The amount due within 12 months of the reporting date is current. The rest is non-current.
Including dividends paid on equity shares in the statement of profit or loss.
Dividends feel like a cost to the business.
Fix: Dividends on equity shares are a distribution of profit. Show them in the statement of changes in equity. Dividends on preference shares classified as liabilities are different: they are finance costs in profit or loss.
Classifying deferred tax as current.
Students link tax with the year-end tax payable.
Fix: Current tax payable is a current liability. Deferred tax is always non-current under IAS 1.
Omitting finance costs or burying them in administrative expenses.
Students rush and group all other costs together.
Fix: Show finance costs as a separate line before profit before tax.
Netting off assets and liabilities, such as a bank overdraft against cash at another bank.
Students want to show a single net figure.
Fix: Offsetting is not allowed unless a standard permits it. Show the overdraft as a current liability and the cash as a current asset.

Worked examples

Example 1

At 31 December 20X5 Delta has: a bank loan of $200,000 repayable in four equal annual instalments of $50,000 starting 31 March 20X6; trade payables $35,000; current tax payable $18,000; deferred tax liability $22,000; and an overdraft $9,000. Show the liabilities section of the statement of financial position.

Show the solution

Split the bank loan. The first instalment of $50,000 is due on 31 March 20X6, within 12 months, so it is current. The remaining $150,000 is non-current.
Trade payables of $35,000 are settled in the normal operating cycle, so they are current.
Current tax payable of $18,000 is due within a year, so it is current.
The deferred tax liability of $22,000 is always non-current.
The overdraft of $9,000 is repayable on demand, so it is current.
Non-current liabilities: loan 150,000 + deferred tax 22,000 = 172,000.
Current liabilities: loan 50,000 + trade payables 35,000 + tax 18,000 + overdraft 9,000 = 112,000.
Total liabilities: 172,000 + 112,000 = 284,000.

Answer: Non-current liabilities $172,000 (loan $150,000, deferred tax $22,000). Current liabilities $112,000 (loan $50,000, trade payables $35,000, tax $18,000, overdraft $9,000). Total liabilities $284,000.

Example 2

For the year ended 30 June 20X6 Omega has: revenue $850,000; cost of sales $510,000; distribution costs $60,000; administrative expenses $90,000; finance costs $20,000; income tax expense $38,000; and a revaluation gain on land of $40,000 (before tax effects, ignore deferred tax). Prepare the statement of profit or loss and OCI.

Show the solution

Gross profit = 850,000 − 510,000 = 340,000.
Deduct distribution costs and administrative expenses: 340,000 − 60,000 − 90,000 = 190,000. This is profit from operations.
Deduct finance costs: 190,000 − 20,000 = 170,000. This is profit before tax.
Deduct income tax: 170,000 − 38,000 = 132,000. This is profit for the year.
The revaluation gain of $40,000 is not in profit or loss. Show it as OCI.
Total comprehensive income = 132,000 + 40,000 = 172,000.

Answer: Gross profit $340,000; profit before tax $170,000; profit for the year $132,000; other comprehensive income $40,000; total comprehensive income $172,000.

Exam tips

In Section C, start with a clean proforma and label every line. Markers award marks for correct headings and structure.
Learn the 12-month test for current liabilities and the operating cycle test for current assets. Objective questions often hinge on a single loan, deposit or deferred tax item.
Always check that the statement of financial position balances before moving on. A difference points to a missing adjustment.
Know which items go to OCI, for example revaluation gains. Dividends on equity shares never go in profit or loss; they are shown in the statement of changes in equity. Dividends on preference shares classified as liabilities are finance costs in profit or loss.
Show workings for adjustments with references, so you earn method marks even if a number is wrong.

Practice questions from Preparation of single entity financial statements

Format of Financial Statements under IAS 1 in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Format of Financial Statements under IAS 1: frequently asked questions

What does a complete set of financial statements include under IAS 1?

It includes a statement of financial position, a statement of profit or loss and OCI, a statement of changes in equity, a statement of cash flows and notes. Comparative information for the previous period is also required for all amounts reported in the current period's statements, plus narrative information where relevant.

Can I show profit or loss and OCI as two separate statements?

Yes. IAS 1 allows one combined statement or two statements. In both cases, the profit for the year is the link between them, and total comprehensive income is the final figure.

How do I classify a loan as current or non-current?

Look at when repayment is due. Amounts due within 12 months of the reporting date are current. Anything later is non-current. Also check whether the entity has the right at the reporting date to defer settlement for at least 12 months.

Should expenses be shown by nature or by function in FR?

IAS 1 allows both. FR questions usually use the function method, with cost of sales, distribution costs and administrative expenses. Use whichever format the question asks for or implies.