1. General Impact
IAS 1 requires the presentation of the statement of comprehensive income in two parts: Profit or Loss (P/L) statement and Other Comprehensive Income (OCI) statement. Along with recognizing the OCI, IAS 1 also requires presenting an equity item on the balance sheet, called the “Other Components of Equity”.
According to IAS 1, the profit or loss statement reflects all income and expenses incurred during the period, except for cases where income or expenses arise from changes in the carrying amount of assets or liabilities, which are recognized in the “Other Comprehensive Income” and the “Other Components of Equity” in the balance sheet.
These “Other Components of Equity” will be reclassified to the profit or loss statement in the next accounting periods if they meet the conditions to be recognized in the profit or loss statement.
Therefore, the current profit or loss statement under VAS will change, with some profit/loss items being excluded and shifted to the OCI statement.
The OCI statement presents two specific types of transactions:
- Transactions presented in the profit or loss statement, including foreign exchange differences, changes in fair value (excluding revaluation of fixed assets), and cash flow hedges.
- Transactions not presented in the profit or loss statement, including fixed asset revaluations, profit or loss from financial asset revaluations, etc.
| Content | IFRS | VAS |
IAS 1 and VAS 21 – Presentation of financial statements | ||
| Components of Financial Statements | Minimum required components: a) Balance sheet b) Statement of profit or loss (P/L) and other comprehensive income (OCI (separate or combined) c) Statement of changes in equity during the period d) Statement of cash flows during the period e) Notes, including a summary of significant accounting policies and other explanatory information f) Comparative information from the previous period g) Balance sheet at the beginning of the earliest comparative period (when applying restatement/retrospective changes in accounting policy, restatement, or reclassification of items) | Minimum required components: a) Balance sheet b) Statement of profit or loss (P/L) c) Statement of changes in equity during the period (as presented in the notes) d) Statement of cash flows during the period e) Notes to the financial statements |
| Classification between short-term and long-term | The report will separately present short-term and long-term assets, short-term and long-term liabilities. Or items will be presented based on liquidity in descending order to provide more reliable and relevant information. | The report should separately present short-term and long-term assets, short-term and long-term liabilities. When unable to classify, the report will be presented based on decreasing liquidity. |
| Financial statement format | No requirement. | Financial statements are presented according to specific regulations and guidance. |
| Income Statement / Statement of Comprehensive Income | There are two format options: a) Prepare only a statement of comprehensive income; b) Separate into two statements: Statement of profit or loss (P/L) and Statement of other comprehensive income (OCI). | Only prepare one statement of profit or loss. |
| Dividend Disclosure | Disclose in the notes or in the statement of changes in equity. | Enterprises should disclose the amount of dividend per share, the date of announcement, or the proposed payment. This information is presented in the notes to the financial statements. |
| Changes in Equity | Entities must present a statement of changes in equity. The statement must include: (a) Total comprehensive income for the period, separately showing amounts attributable to owners of the parent and to non-controlling interests; (b) For each component of equity, the effects of retrospective application or restatement as per IAS 8; (c) For each component of equity, a reconciliation between the carrying amount at the beginning and end of the period, showing separately: (i) Profit or loss; (ii) Other comprehensive income; (iii) Transactions with owners, showing separately contributions by and distributions to owners, and changes in ownership interests in subsidiaries that do not result in a loss of control. | Entities must disclose in the notes to the financial statements information reflecting changes in equity: (a) Annual profit or loss; (b) Income and expense items, profit or loss recognized directly in equity under other accounting standards and their total; (c) Cumulative effects of changes in accounting policies and corrections of fundamental errors recognized under the accounting method defined in the standard “Profit, loss for the year, fundamental errors, and accounting policy changes”; (d) Transactions with owners and distribution of dividends, profits to owners; (e) The balance of retained earnings at the beginning and end of the period, and movements during the year; and (f) Reconciliation between the carrying amount of each class of share capital, share premium, and each reserve at the beginning and end of the period, with separate disclosure of each movement. |
You can refer to the sample Financial Statements prepared under IFRS at: https://ifrs.vn/mau-bao-cao-ifrs/ to gain an overall view of the items in the financial statements and to prepare the appropriate knowledge for application within the Company.
2. Tasks to Implement?
- Prepare a statement of changes in equity as of the transition date for financial statements.
- Understand the nature and requirements of the statement of other comprehensive income, clearly distinguishing between “items not reclassified” and “items reclassified.”
- Identify transactions belonging to other comprehensive income at the transition date.
- Estimate the impact of applying changes on the statement of profit or loss and other comprehensive income.
- Determine key differences between short-term and long-term items on the balance sheet, the impact on financial ratios and loan covenant terms.
