Going Concern

1. When preparing financial statements, management should make an assessment of an enterprise's ability to continue as a going concern. Financial statements should be prepared on a going concern basis unless management either intends to liquidate the enterprise 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 which may cast significant doubt upon the enterprise's ability to continue as a going concern, those uncertainties should be disclosed. When the financial statements are not prepared on a going concern basis, that fact should be disclosed, together with the basis on which the financial statements have been prepared and the reason why the enterprise is not considered to be a going concern.

2. In assessing whether the going concern assumption is appropriate, management takes into account all available information for the foreseeable future, which should be at least, but not limited to, twelve months from the balance sheet date. The degree of consideration depends on the facts in each case. When an enterprise 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 surrounding 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

1. An enterprise should prepare its financial statements, except for cash flow information, under the accrual basis of accounting.

2. Under the accrual basis of accounting, transactions and events are recognised when they occur (and not as cash or its equivalent is received or paid) and they are recorded in the accounting records and reported in the financial statements of the period to which they relate. Expenses are recognised in the income statement on the basis of a direct association between costs incurred and the earning of specific items of income (matching). In general, the application of the matching concept does not allow the recognition of items in the balance sheet which do not meet the definition of assets or liabilities. However, in certain exceptional circumstances, expenditures may be carried forward and allocated as expenses in future periods, if a direct association between the probable future economic benefits and expenditures incurred can be established. Examples of expenditures that may be deferred are product development expenditure and prospecting expenditure.

Consistency of Presentation

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

   1. a significant change in the nature of the operation of the enterprise or a review of its financial statement presentation demonstrates that the change will result in a more appropriate presentation of events or transactions; or

   2. a change in presentation is required by a Financial Reporting Standard and any other technical pronouncements issued by MASB or other directive or regulation.

2. A significant acquisition or disposal, or a review of the financial statement presentation, might suggest that the financial statements should be presented differently. Only if the revised structure is likely to continue, or if the benefit of an alternative presentation is clear, should an enterprise change the presentation of its financial statements. When such changes in presentation are made, an enterprise reclassifies its comparative information in accordance with paragraph 38.

Materiality and Aggregation

1. Each material item should be presented separately in the financial statements. Immaterial items should be aggregated with amounts of a similar nature or function and need not be presented separately.

2. Financial statements result from processing large quantities of transactions which are structured by being aggregated into groups 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 either on the face of the financial statements or in the notes. If a line item is not individually material, it is aggregated with other items either on the face of the financial statements or in the notes. An item that is not sufficiently material to warrant separate presentation on the face of the financial statements may nevertheless be sufficiently material that it should be presented separately in the notes.

3. In this context, information is material if its non-disclosure could influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size and nature of the item judged in the particular circumstances of its omission. In deciding whether an item or an aggregate of items is material, the nature and the size of the item are evaluated together. Depending on the circumstances. either the nature or the size of the item could be the determining factor. For example, individual assets with the same nature and function are aggregated even if the individual amounts are large. However, large items which differ in nature or function are presented separately. Hence, where an aggregate of items recognised on the face of the financial statements includes amounts not related to the core activities of the enterprise and/or material in amount, those items should be disaggregated and disclosed separately in the notes to the financial statements.

4. Materiality provides that the specific disclosure requirements of Financial Reporting Standards need not be met if the resulting information is not material.