The formats

This chapter explains the prescribed formats for presenting the statement of profit or loss and the statement of financial position for both sole proprietorships and limited liability companies under IFRS 18.

Learning objective

By the end of this chapter, you should be able to:

• Explain the format for the statement of financial position and the statement of profit or loss as required by the IFRS standard

Sole proprietorships and limited liability companies often prepare financial statements differently, even though the final results reported (profit and net assets/equity) are usually similar.

Sole proprietorship

Sole proprietors typically present more detail directly on the face of the financial statements rather than in separate disclosure notes. Their presentation format is also not usually bound by strict regulatory frameworks like IFRS, which allows more flexibility and simplicity.

These financial statements are prepared mainly for:

• the owner (to support management decision-making)
• tax authorities (for compliance)

Limited liability companies

Limited liability companies are guided by IFRS 18 Presentation and Disclosure in Financial Statements. IFRS 18 requires summarized information to be presented on the face of the financial statements, with detailed breakdowns and supporting computations provided in the Notes to the Accounts.

The presentation must comply with regulatory requirements so that financial statements are consistent and comparable across entities. Limited liability companies are also often subject to statutory audit and regulatory filing requirements, which makes adherence to prescribed accounting standards and disclosure frameworks essential.

The statement of profit or loss

IFRS 18 requires that, at a minimum, the statement of profit or loss show:

• Revenue - income from ordinary business activities
• Finance costs - interest and other costs of borrowing
• Share of profit or loss of associates and joint ventures - accounted for using the equity method (applicable for group accounts)
• Tax expense - current and deferred tax charges
• Profit or loss - the net result for the period

In addition, IFRS 18 introduces specific categories and subtotals that must be presented:

• Operating profit or loss - results from the entity’s main business activities
• Investing category - income and expenses from investments that do not form part of the main operating business activities
• Financing category - income and expenses from financing activities

The statement must present expenses classified as either:

• by nature (e.g., depreciation, employee costs, raw materials), or
• by function (e.g., cost of sales, distribution costs, administrative expenses)

The choice depends on which classification provides more reliable and relevant information.

All items of income and expense must be included in the statement of profit or loss unless an IFRS specifically requires or permits otherwise. The presentation should help users understand the entity’s financial performance for the reporting period.

Format for sole proprietorship business

Name of Business

Statement of Profit or Loss and Other Comprehensive Income for the year ended …(date)

	$	$
REVENUE
Sales Revenue	xxx
Less: Sales Returns	(xxx)
Net Sales Revenue		xxx
COST OF SALES
Opening Inventory	xxx
Add: Purchases	xxx
Less: Purchases Returns	(xxx)
Add: Carriage Inwards	xxx
Goods Available for Sale	xxx
Less: Closing Inventory	(xxx)
Cost of Sales		(xxx)
GROSS PROFIT		xxx
EXPENSES
Salaries and Wages	xxx
Rent and Rates	xxx
Insurance	xxx
Electricity and Water	xxx
Telephone and Internet	xxx
Advertising and Marketing	xxx
Motor Vehicle Expenses	xxx
Repairs and Maintenance	xxx
Stationery and Printing	xxx
Bank Charges	xxx
Depreciation	xxx
Bad Debts	xxx
General Expenses	xxx
Total Expenses		(xxx)
NET PROFIT		xxx

Format for limited liability companies

The expenses have been classified by function.

Name of company

Statement of Profit or Loss and Other Comprehensive Income for the Year Ended…(date)

	$	$
Revenue		xxx
Cost of Sales		(xxx)
Gross Profit		xxx
Operating Expenses:
Administrative Expenses	(xxx)
Selling expenses	(xxx)
Other Expenses	(xxx)
		(xxx)
Operating profit		xxx
Investment income		xxx
Profit before interest and tax (PBIT)		xxx
Finance Cost		(xxx)
Profit Before Tax		xxx
Income Tax		(xxx)
Profit for the year		xxx
Other Comprehensive Income:
Revaluation Gain on PPE		xxx
Total Comprehensive Income for the Year		xxx

Note the categorisations in the statement of profit or loss as required by IFRS 18, which is within the FA syllabus.

The statement of financial position

IFRS 18 requires that, at a minimum, the statement of financial position show the following line items.

Assets:

• Property, plant and equipment
• Investment property
• Intangible assets
• Financial assets (excluding amounts shown under other headings)
• Investments are accounted for using the equity method
• Biological assets
• Inventories
• Trade and other receivables
• Cash and cash equivalents

Liabilities:

• Trade and other payables
• Provisions
• Financial liabilities (excluding amounts shown under other headings)
• Current tax liabilities and current tax assets
• Deferred tax liabilities and deferred tax assets

Equity:

• Issued capital and reserves attributable to owners of the parent
• Non-controlling interests (for consolidated statements)

The statement of financial position must classify assets and liabilities as either current or non-current, unless a liquidity-based presentation provides more reliable and relevant information. The presentation should provide information that is useful in assessing the entity’s financial position, liquidity, and solvency at the reporting date.

Format for sole proprietorship business

Name of business

Statement of Financial Position as at (date)

	Cost	Accumulated depreciation	Net book value
Non-current asset	$	$	$
Land	xxx	-	xxx
Plant and machinery	xxx	xxx	xxx
Current asset:
Inventory			xxx
Account receivables			xxx
Cash and bank			xxx
Total asset			xxx
Financed by:
Capital			xxx
Net profit			xxx
Drawings			(xxx)
Total equity			xxx
Non-current liabilities:
Loan			xxx
Current liabilities:
Account payable			xxx
Total equity and liabilities			xxx

Format for limited liability companies

Name of company

Statement of Financial Position as at (date)

	Note	$
Non-current asset
Property, plant and equipment	1	xxx
Intangible asset	2	xxx
Current asset:
Inventory		xxx
Account receivables	3	xxx
Cash and bank		xxx
Total asset		xxx

Equity:
Share capital		xxx
Retained earnings	5	xxx
Revaluation reserve (surplus)		xxx
Share premium		xxx
Total equity		xxx
Non-current liabilities:
Debenture		xxx
Redeemable preference shares		xxx
Current liabilities:
Account payable		xxx
Income tax payable		xxx
Total current liabilities		xxx
Total equity and liabilities		xxx