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ACCA Strategic Professional · Strategic Business Reporting (International) · Presentation and disclosure in financial statements

The finance director of Norvik asks the reporting accountant to describe a heavily loss-making segment's results as part of 'other items' and to omit the line item 'impairment loss' from the face of the statement of profit or loss, although the amount ($6m) is material to a total profit of $25m. Which response is most consistent with IAS 1 and professional ethics?

The accountant should refuse. IAS 1 requires material items, such as a $6m impairment against profit of $25m, to be presented separately, and aggregating them to obscure information undermines fair presentation. It would also breach ethical duties of integrity and objectivity, regardless of the auditor's views.

  1. AComply, since aggregation of line items is permitted for any item the board considers sensitive
  2. BComply, provided the impairment is mentioned in the strategic report
  3. CRefuse, because material items must be presented separately and misleading aggregation breaches the requirement for fair presentation and professional integrityCorrect
  4. DRefuse only if the auditor has already challenged the presentation

Explanation

IAS 1 requires material classes of items to be presented separately and prohibits aggregation that obscures useful information. Hiding a material impairment would also breach the accountant's duty of integrity and objectivity. Mentioning it elsewhere or waiting for the auditor does not cure the misleading presentation.

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