Financial Reporting Standard 101-MASB (2024)

Home
Article
Financial Reporting Standard 101

Financial Reporting Standard 101

Presentation of Financial Statements

Objective

The objective of this Standard is to prescribe the basis for presentation of general purpose financial statements, to ensure comparability both with the entity's financial statements of previous periods and with the financial statements of other entities. To achieve this objective, this Standard sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. The recognition, measurement and disclosure of specific transactions and other events are dealt with in other Standards and in Interpretations.

Scope

2.	This Standard shall be applied to all general purpose financial statements prepared and presented in accordance with Financial Reporting Standards (FRSs).
3.	General purpose financial statements are those intended to meet the needs of users who are not in a position to demand reports tailored to meet their particular information needs. General purpose financial statements include those that are presented separately or within another public document such as an annual report or a prospectus. This Standard does not apply to the structure and content of condensed interim financial statements prepared in accordance with FRS 1342004 Interim Financial Reporting. However, paragraphs 13-41 apply to such financial statements. This Standard applies equally to all entities and whether or not they need to prepare consolidated financial statements or separate financial statements, as defined in FRS 127 Consolidated and Separate Financial Statements.
4.	IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions specifies additional requirements for banks and similar financial institutions that are consistent with the requirements of this Standard1.
5.	This Standard uses terminology that is suitable for profit-oriented entities, including public sector business entities. Entities with not-for-profit activities in the private sector, public sector or government seeking to apply this Standard may need to amend the descriptions used for particular line items in the financial statements and for the financial statements themselves.
6.	Similarly, entities that do not have equity as defined in FRS 132 Financial Instruments: Disclosure and Presentation (eg some mutual funds) and entities whose share capital is not equity (eg some co-operative entities) may need to adapt the presentation in the financial statements of members' or unitholders' interests.

Banks and financial institutions should refer to BNM/GP8 - Guidelines on Financial Reporting for Licensed Institutions for additional requirements. The same footnote will apply to all the paragraphs that make reference to IAS 30.

added

Purpose of Financial Statements

Financial statements are a structured representation of the financial position and financial performance of an entity. The objective of general purpose financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions. Financial statements also show the results of management's stewardship of the resources entrusted to it. To meet this objective, financial statements provide information about an entity's:

(a)	assets;
(b)	liabilities;
(c)	equity;
(d)	income and expenses, including gains and losses;
(e)	other changes in equity; and
(f)	cash flows.

This information, along with other information in the notes, assists users of financial statements in predirecting the entity's future cash flows and, in particular, their timing and certainty.

Components of Financial Statements

A complete set of financial statements comprises:

(a)

a balance sheet;

(b)

an income statement;

(c)

a statement of changes in equity showing either:

*(i)*	*all changes in equity, or*
*(ii)*	*changes in equity other than those arising from transactions with equity holders acting in their capacity as equity holders;*

(d)

a cash flow statement; and

(e)

notes, comprising a summary of significant accounting policies and other explanatory notes.

Many entities present, outside the financial statements, a financial review by management that describes and explains the main features of the entity's financial performance and financial position and the principal uncertainties it faces. Such a report may include a review of:

(a)	the main factors and influences determining financial performance, including changes in the environment in which the entity operates, the entity's response to those changes and their effect, and the entity's policy for investment to maintain and enhance financial performance, including its dividend policy;
(b)	the entity's sources of funding and its targeted ratio of liabilities to equity; and
(c)	the entity's resources not recognised in the balance sheet in accordance with FRSs.

10.

Many entities also present, outside the financial statements, reports and statements such as environmental reports and value added statements, particularly in industries in which environmental factors are significant and when employees are regarded as an important user group. Reports and statements presented outside financial statements are outside the scope of FRSs.

Definitions

11.

The following terms are used in this Standard with the meanings specified:

Impracticable Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.

International Financial Reporting Standards (IFRSs) are Standards and Interpretations adopted by the International Accounting Standards Board (IASB). They comprise:

(a) International Financial Reporting Standards;

(b) International Accounting Standards; and

(c) Interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC).

deleted

[Reason: Different nomenclature is used.]

Financial Reporting Standards (FRSs) are Standards and Interpretations issued by the Malaysian Accounting Standards Board (MASB). They comprise:

(a) Financial Reporting Standards; and

(b) Interpretations originated by the Issues Committee or the former Interpretation Committee.

added

Material Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circ*mstances. The size or nature of the item, or a combination of both, could be the determining factor.

Notes contain information in addition to that presented in the balance sheet, income statement, statement of changes in equity and cash flow statement. Notes provide narrative descriptions or disaggregations of items disclosed in those statements and information about items that do not qualify for recognition in those statements.

12.

Assessing whether an omission or misstatement could influence economic decisions of users, and so be material, requires consideration of the characteristics of those users. The Proposed Framework for the Preparation and Presentation of Financial Statements states in paragraph 39 that "users are assumed to have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence." Therefore, the assessment needs to take into account how users with such attributes could reasonably be expected to be influenced in making economic decisions.

Overall Considerations

Fair Presentation and Compliance with FRSs

13.

Financial statements shall present fairly the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Proposed Framework. The application of FRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation.

14.

An entity whose financial statements comply with FRSs shall make an explicit and unreserved statement of such compliance in the notes. Financial statements shall not be described as complying with FRSs unless they comply with all the requirements of FRSs.

15.

In virtually all circ*mstances, a fair presentation is achieved by compliance with applicable FRSs. A fair presentation also requires an entity:

(a)	to select and apply accounting policies in accordance with FRS 108 Accounting Policies, Changes in Accounting Estimates and Errors. FRS 108 sets out a hierarchy of authoritative guidance that management considers in the absence of a Standard or an Interpretation that specifically applies to an item.
(b)	to present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information.
(c)	to provide additional disclosures when compliance with the specific requirements in FRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.

16.

Inappropriate accounting policies are not rectified either by disclosure of the accounting policies used or by notes or explanatory material.

17.

In the extremely rare circ*mstances in which management concludes that compliance with a requirement in a Standard or an Interpretation would be so misleading that it would conflict with the objective of financial statements set out in the Proposed Framework, the entity shall depart from that requirement in the manner set out in paragraph 18 if the relevant regulatory framework requires, or otherwise does not prohibit, such a departure.

18.

When an entity departs from a requirement of a Standard or an Interpretation in accordance with paragraph 17, it shall disclose:

(a)	that management has concluded that the financial statements present fairly the entity's financial position, financial performance and cash flows;
(b)	that it has complied with applicable Standards and Interpretations, except that it has departed from a particular requirement to achieve a fair presentation;
(c)	the title of the Standard or Interpretation from which the entity has departed, the nature of the departure, including the treatment that the Standard or Interpretation would require, the reason why that treatment would be so misleading in the circ*mstances that it would conflict with the objective of financial statements set out in the Proposed Framework, and the treatment adopted; and
(d)	for each period presented, the financial impact of the departure on each item in the financial statements that would have been reported in complying with the requirement.

19.

When an entity has departed from a requirement of a Standard or an Interpretation in a prior period, and that departure affects the amounts recognised in the financial statements for the current period, it shall make the disclosures set out in paragraph 18(c) and (d).

20.

Paragraph 19 applies, for example, when an entity departed in a prior period from a requirement in a Standard or an Interpretation for the measurement of assets or liabilities and that departure affects the measurement of changes in assets and liabilities recognised in the current period's financial statements.

21.

In the extremely rare circ*mstances in which management concludes that compliance with a requirement in a Standard or an Interpretation would be so misleading that it would conflict with the objective of financial statements set out in the Proposed Framework, but the relevant regulatory framework prohibits departure from the requirement, the entity shall, to the maximum extent possible, reduce the perceived misleading aspects of compliance by disclosing:

(a)	the title of the Standard or Interpretation in question, the nature of the requirement, and the reason why management has concluded that complying with that requirement is so misleading in the circ*mstances that it conflicts with the objective of financial statements set out in the Proposed Framework; and
(b)	*for each period presented, the adjustments to each item in the financial statements that management has concluded would be necessary to achieve a fair presentation.*

22.

For the purpose of paragraphs 17-21, an item of information would conflict with the objective of financial statements when it does not represent faithfully the transactions, other events and conditions that it either purports to represent or could reasonably be expected to represent and, consequently, it would be likely to influence economic decisions made by users of financial statements. When assessing whether complying with a specific requirement in a Standard or an Interpretation would be so misleading that it would conflict with the objective of financial statements set out in the Proposed Framework, management considers:

(a)	why the objective of financial statements is not achieved in the particular circ*mstances; and
(b)	how the entity's circmstances differ from those of other entities that comply with the requirement. If other entities in similar circmstances comply with the requirement, there is a rebuttable presumption that the entity's compliance with the requirement would not be so misleading that it would conflict with the objective of financial statements set out in the Proposed Framework.

Going Concern

23.

When preparing financial statements, management shall make an assessment of an entity's ability to continue as a going concern. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern, those uncertainties shall be disclosed. When financial statements are not prepared on a going concern basis, that fact shall be disclosed, together with the basis on which the financial statements are prepared and the reason why the entity is not regarded as a going concern.

24.

In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the balance sheet date. The degree of consideration depends on the facts in each case. When an entity has a history of profitable operations and ready access to financial resources, a conclusion that the going concern basis of accounting is appropriate may be reached without detailed analysis. In other cases, management may need to consider a wide range of factors relating to current and expected profitability, debt repayment schedules and potential sources of replacement financing before it can satisfy itself that the going concern basis is appropriate.

Accrual Basis of Accounting

*25.*	*An entity shall prepare its financial statements, except for cash flow information, using the accrual basis of accounting.*
26.	When the accrual basis of accounting is used, items are recognised as assets, liabilities, equity, income and expenses (the elements of financial statements) when they satisfy the definitions and recognition criteria for those elements in the Proposed Framework.

Consistency of Presentation

27.

The presentation and classification of items in the financial statements shall be retained from one period to the next unless:

*(a)*	it is apparent, following a significant change in the nature of the entity's operations or a review of its financial statements, that another presentation or classification would be more appropriate having regard to the criteria for the selection and application of accounting policies in FRS 108; or
*(b)*	*a Standard or an Interpretation requires a change in presentation.*

28.

A significant acquisition or disposal, or a review of the presentation of the financial statements, might suggest that the financial statements need to be presented differently. An entity changes the presentation of its financial statements only if the changed presentation provides information that is reliable and is more relevant to users of the financial statements and the revised structure is likely to continue, so that comparability is not impaired. When making such changes in presentation, an entity reclassifies its comparative information in accordance with paragraphs 38 and 39.

Materiality and Aggregation

*29.*	Each material class of similar items shall be presented separately in the financial statements. Items of a dissimilar nature or function shall be presented separately unless they are immaterial.
30.	Financial statements result from processing large numbers of transactions or other events that are aggregated into classes according to their nature or function. The final stage in the process of aggregation and classification is the presentation of condensed and classified data, which form line items on the face of the balance sheet, income statement, statement of changes in equity and cash flow statement, or in the notes. If a line item is not individually material, it is aggregated with other items either on the face of those statements or in the notes. An item that is not sufficiently material to warrant separate presentation on the face of those statements may nevertheless be sufficiently material for it to be presented separately in the notes.
31.	Applying the concept of materiality means that a specific disclosure requirement in a Standard or an Interpretation need not be satisfied if the information is not material.

Offsetting

32.

Assets and liabilities, and income and expenses, shall not be offset unless required or permitted by a Standard or an Interpretation.

33.

It is important that assets and liabilities, and income and expenses, are reported separately. Offsetting in the income statement or the balance sheet, except when offsetting reflects the substance of the transaction or other event, detracts from the ability of users both to understand the transactions, other events and conditions that have occurred and to assess the entity's future cash flows. Measuring assets net of valuation allowances?for example, obsolescence allowances on inventories and doubtful debts allowances on receivables?is not offsetting.

34.

FRS 1182004 Revenue defines revenue and requires it to be measured at the fair value of the consideration received or receivable, taking into account the amount of any trade discounts and volume rebates allowed by the entity. An entity undertakes, in the course of its ordinary activities, other transactions that do not generate revenue but are incidental to the main revenue-generating activities. The results of such transactions are presented, when this presentation reflects the substance of the transaction or other event, by netting any income with related expenses arising on the same transaction. For example:

(a)	gains and losses on the disposal of non-current assets, including investments and operating assets, are reported by deducting from the proceeds on disposal the carrying amount of the asset and related selling expenses; and
(b)	expenditure related to a provision that is recognised in accordance with FRS 1372004 Provisions, Contingent Liabilities and Contingent Assets and reimbursed under a contractual arrangement with a third party (for example, a supplier's warranty agreement) may be netted against the related reimbursem*nt.

35.

In addition, gains and losses arising from a group of similar transactions are reported on a net basis, for example, foreign exchange gains and losses or gains and losses arising on financial instruments held for trading. Such gains and losses are, however, reported separately if they are material.

Comparative Information

36.

Except when a Standard or an Interpretation permits or requires otherwise, comparative information shall be disclosed in respect of the previous period for all amounts reported in the financial statements. Comparative information shall be included for narrative and descriptive information when it is relevant to an understanding of the current period's financial statements.

37.

In some cases, narrative information provided in the financial statements for the previous period(s) continues to be relevant in the current period. For example, details of a legal dispute, the outcome of which was uncertain at the last balance sheet date and is yet to be resolved, are disclosed in the current period. Users benefit from information that the uncertainty existed at the last balance sheet date, and about the steps that have been taken during the period to resolve the uncertainty.

38.

When the presentation or classification of items in the financial statements is amended, comparative amounts shall be reclassified unless the reclassification is impracticable. When comparative amounts are reclassified, an entity shall disclose:

*(a)*	*the nature of the reclassification;*
*(b)*	*the amount of each item or class of items that is reclassified; and*
*(c)*	*the reason for the reclassification.*

39.

When it is impracticable to reclassify comparative amounts, an entity shall disclose:

*(a)*	*the reason for not reclassifying the amounts; and*
*(b)*	*the nature of the adjustments that would have been made if the amounts had been reclassified.*

40.

Enhancing the inter-period comparability of information assists users in making economic decisions, especially by allowing the assessment of trends in financial information for predictive purposes. In some circ*mstances, it is impracticable to reclassify comparative information for a particular prior period to achieve comparability with the current period. For example, data may not have been collected in the prior period(s) in a way that allows reclassification, and it may not be practicable to recreate the information.

41.

FRS 108 deals with the adjustments to comparative information required when an entity changes an accounting policy or corrects an error.