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ACCA Applied Knowledge · Financial Accounting · Statement of profit or loss and other comprehensive income

Which of the following is correct about the presentation of expenses in a statement of profit or loss prepared under IAS 1?

IAS 1 allows expenses to be analysed either by nature or by function, provided the chosen method is applied consistently. It does not require nature only, prohibits extraordinary items, and does not permit netting expenses against revenue.

  1. AExpenses may be analysed either by nature or by function, and the chosen method is applied consistentlyCorrect
  2. BExpenses must always be analysed by nature
  3. CExtraordinary items must be shown separately below profit after tax
  4. DExpenses must be netted against revenue so that only gross profit is shown

Explanation

IAS 1 permits an analysis of expenses by nature or by function, whichever is reliable and more relevant. Extraordinary items are prohibited. Offsetting expenses against revenue is not allowed unless required by a standard.

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