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MastersAdvanced Diploma in Accounting Financial Acounting

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Disposal of Non Current Assets and Presentation of Discontinued Operations (Now IFRS 5) ... Vincible Brescia (J2004Q1) Stilson Deventer (J2002Q1) IASB Framework ... – PowerPoint PPT presentation

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Title: MastersAdvanced Diploma in Accounting Financial Acounting


1
Masters/Advanced Diploma in AccountingFinancial
Acounting
  • Presented by
  • Robert J Kirk
  • Professor of Financial Reporting

2
Financial AccountingACF 842 J1
  • Rationale
  • Aims
  • Learning Outcomes
  • Content
  • Teaching and Learning Methods
  • Assessment
  • Reading List

3
(No Transcript)
4
More information
  • www.iasb.org.uk
  • www.iasplus.com.uk
  • www.asb.org.uk
  • www.company reporting.com.uk

5
Module Handbook
  • Lecturer
  • Teaching Plan
  • Questions and solutions
  • Assignment
  • Examination

6
International Accounting Standards
7
International Accounting Standards
  • IFRS
  • First Time Adoption of IFRSs (Now IFRS 1)
  • Share Based Payment (Now IFRS 2)
  • Business Combinations (Now IFRS 3)
  • Disposal of Non Current Assets and Presentation
    of Discontinued Operations (Now IFRS 5)
  • Insurance Contracts (now IFRS 4)
  • Evaluation for and Evaluation of Mineral
    Resources (IFRS 6)

8
International Accounting Standards
  • IAS 1 Presentation of Financial Statements

9
IAS 1 Presentation of Financial Statements
  • Objective and Scope
  • Objective is to prescribe the basis for the
    presentation of general purpose financial
    statements
  • Applies to the presentation of all general
    purpose financial statements prepared and
    presented in accordance with IASs

10
IAS 1 Presentation of Financial Statements
  • Content of Financial Statements
  • A complete set of financial statements must
    include
  • balance sheet
  • income statement
  • a statement of changes in equity or a statement
    of changes in equity other than those arising
    from transactions with owners as owners
  • cash flow statement
  • accounting policies and explanatory notes

11
IAS 1 Presentation of Financial Statements
  • Fair Presentation and Compliance with IFRSs
  • Financial statements are required to present
    fairly the financial position, financial
    performance and cash flows of an enterprise
  • Compliance with IASs will result, in virtually
    all circumstances, in financial statements that
    achieve fair presentation

12
IAS 1 Presentation of Financial Statements
  • Fair Presentation and Compliance with IASs
  • Financial statements, if they comply with IASs,
    must state that fact
  • Financial statements must not be described as
    complying with IASs unless they comply with each
    applicable IAS and each applicable SIC
    Interpretation

13
IAS 1 Presentation of Financial Statements
  • Fair Presentation Override
  • Non-compliance with a requirement in a standard
    is permitted where, in managements opinion,
    compliance would be misleading and would not give
    a fair presentation
  • This is expected to be extremely rare and would
    need to be accompanied by detailed disclosures
    outlining the reason for, the nature of, and the
    financial effect of the non-compliance

14
IAS 1 Presentation of Financial Statements
  • Offsetting
  • Not permitted in respect of assets and
    liabilities unless specifically required or
    permitted by another IAS
  • Income and expense items are to be offset only
  • if an IAS requires or permits or
  • gains, losses and related expenses arising from
    the same or similar transactions and events are
    not material

15
IAS 1 Presentation of Financial Statements
  • Comparatives
  • Required for the previous period unless
    specifically exempted in another IAS
  • Must be reclassified if the presentation and
    classification in the financial statements is
    amended, unless it is impracticable to do so

16
IAS 1 Presentation of Financial Statements
  • Identification of Financial Statements
  • The financial statements must be clearly
    identified and distinguished from other
    information in the financial report
  • Each component of the financial statements must
    be clearly identified and the following
    disclosed
  • (a)name of the enterprise
  • (b)whether individual or consolidated statements
  • (c)reporting date or period covered by the
    statement
  • (d)reporting currency
  • (e)the level of precision in the presentation of
    figures

17
IAS 1 Presentation of Financial Statements
  • Balance Sheet
  • Assets and liabilities can be presented either
  • on a current/non-current basis or
  • in order of their liquidity
  • But must disclose the amounts of assets and
    liabilities expected to be recovered or settled
    after more than twelve months

18
IAS 1 Presentation of Financial Statements
  • Current Assets
  • Are assets
  • (a) expected to be realised, consumed or disposed
    of in the normal course of the enterprises
    operating cycle or
  • (b) held primarily for trading purposes or the
    short-term and expected to be realised within 12
    months of balance date or
  • (c) is a cash or cash equivalent asset not
    restricted in its use

19
IAS 1 Presentation of Financial Statements
  • Current Liabilities
  • Are liabilities
  • Expected to be settled in the normal course of
    the enterprises operating cycle or
  • Due to be settled within 12 months of balance
    date

20
IAS 1 Presentation of Financial Statements
  • Long-term Interest Bearing Liabilities
  • Continue to be classified as long-term even if
    due for settlement within 12 months provided that
    the enterprise has the intention and ability to
    roll over the obligation

21
IAS 1 Presentation of Financial Statements
  • Information to be Presented on the Face of the
    Balance Sheet
  • Paragraph 68 of IAS 1 specifies the asset,
    liability and equity line items that must, as a
    minimum, be presented on the face of the balance
    sheet
  • Additional line items, headings and sub-totals
    are to be presented on the face of the balance
    sheet if required by another IAS or if considered
    necessary to present fairly the enterprises
    financial position

22
Example Balance Sheet XYZ Group Balance Sheet
as at 31 December 20-2 (excluding
comparatives)(in thousands of currency units)
23
Example Balance Sheet XYZ Group Balance Sheet
as at 31 December 20-2 (excluding
comparatives)(in thousands of currency units)
24
IAS 1 Presentation of Financial Statements
  • Income Statement
  • Paragraph 81 of IAS 1 specifies the line items
    that, as a minimum, should be presented on the
    face of the income statement
  • Additional line items, headings and sub-totals
    are to be presented on the face of the income
    statement if required by another IAS or if
    considered necessary to present fairly the
    enterprises financial performance

25
Example Income Statement XYZ Group Income
Statement for the year ended 31 December 20-2
(excluding comparatives)(illustrating the
classification of expenses by function)(in
thousands of currency units)
26
IAS 1 Presentation of Financial Statements
  • Additional Information Disclosed on Face of the
    Income Statement or in the Notes
  • Enterprises must present an analysis of expenses
    using a classification based on either the nature
    of expenses or their function within the
    enterprise

27
IAS 1 Presentation of Financial Statements
  • Additional Information Disclosed on Face of the
    Income Statement or in the Notes
  • If functional classification is adopted, must
    also disclose information on the nature of
    expenses, including depreciation and staff costs
  • Dividends per share, declared or proposed, must
    be disclosed

28
IAS 1 Presentation of Financial Statements
  • Statement of Changes in Equity
  • A statement showing the change in equity for the
    period resulting from income, expenses, gains and
    losses (including prior period adjustments) must
    be presented
  • Other changes in equity must also be disclosed
    either as part of the statement or in the notes

29
IAS 1 Presentation of Financial Statements
  • Notes to the Financial Statements
  • Must include an Accounting Policies Section
    identifying the measurement basis used in
    preparing the financial statements and the
    significant accounting policies adopted
  • Must include other information required by IASs
    or necessary for a fair presentation

30
Published Accounts
  • Building Blocks
  • Knowledge of the formats in IAS 1
  • Disclosure requirements in IASs/IFRSs
  • Knowledge of IASs/IFRSs
  • Taxation including deferred tax
  • Examination technique

31
Published Accounts - Examination Technique
  • Read carefully the question noting to the side
    key points
  • (i.e. distinguish between
    adjustments and disclosure notes)
  • Go down the TB and note whether IS or B/S
  • Commence workings
  • (cost of sales, distribution
    costs, administrative expenses)
  • (leave 1 clear page for Income
    Statement and Balance Sheet
  • respectively)
  • (taxation and interest payable
    should be separate notes)
  • (property, plant etc should be a
    separate note)
  • (dividends included in reserves
    note)
  • Complete Income Statement and Balance Sheet after
    all adjustments entered
  • Ensure Disclosure notes are entered at the end
  • (directors remuneration, profit
    before tax etc.)

32
Questions at Home and Examination Questions
  • Home Examinations
  • Vincible Brescia (J2004Q1)
  • Stilson Deventer (J2002Q1)

33
IASB Framework
  • Concepts Underlying Financial Reporting Standards
    and Practice

34
IASB Framework
  • Purposes
  • To assist IASB in setting standards
  • To serve as a basis for harmonisation
  • To assist national standard-setters
  • To assist preparers, auditors and users
  • To assist in understanding of standard-setting

35
IASB Framework
  • Status - Non authoritative
  • Standards prevail
  • Aim of IASB to reduce conflicts between Framework
    and standards
  • Living document

36
IASB Framework Objective
  • to provide information about the financial
    position, performance and changes in financial
    position that is useful to a wide range of users
    in making economic decisions

37
IASB Framework
1.Financial reporting
2.Reporting entity
38
Users and Information Needs
  • Investors
  • Employees
  • Lenders
  • Suppliers and other trade creditors
  • Customers
  • Governments and their agencies
  • Public

39
IASB Framework Qualitative Characteristics
  • Understandability
  • Efficient markets
  • Relevance
  • materiality
  • Reliability
  • Faithful representation
  • Substance over form
  • Neutrality
  • Prudence
  • Completeness
  • Comparability

40
IASB Framework Constraints on Relevant and
Reliable Information
  • Timeliness
  • Balance between costs and benefits
  • Balance between relevance and reliability
  • True and fair presentation

41
IASB Framework Underlying Assumptions
  • Accrual basis
  • Going Concern

42
IASB Framework Elements of Financial Statements
  • Assets
  • Liabilities
  • Equity
  • Income
  • revenue
  • gains
  • Expenses
  • Capital maintenance adjustments

43
IASB Framework Recognition of the Elements
  • Probability of future economic benefits
  • Reliability of measurement
  • Recognition of assets
  • Recognition of liabilities
  • Recognition of income
  • Recognition of expenses

44
IASC Framework Measurement
  • Bases of measurement
  • Historical cost
  • Current cost
  • Realisable (selling) value
  • Present value

45
IASB Framework Financial Position
  • Wealth (economic resources controlled)
  • Financial structure
  • Liquidity and solvency
  • Capacity to adapt

46
IASB Framework Financial Performance
  • Changes in wealth
  • Variability in generating changes in wealth
  • Indicator of future cash flows

47
IASB Framework Concepts of Capital/Capital
Maintenance
  • Financial capital
  • Nominal or constant purchasing power
  • Physical capital - Operating Capability
  • Command over cash equivalents

48
IASB Framework Implications
  • Most heavily employed in definition and
    recognition of elements, and in determining the
    borders of a reporting entity
  • Most challenged in area of measurement and
    classification (eg financial instruments,
    impairments, equity based compensation, debt
    versus equity distinctions)

49
International Accounting Standards
  • IAS 8 Accounting Policies, Changes in Accounting
    Estimates and Errors

50
IAS 8
  • Introduction
  • Objective
  • Scope
  • Key definitions
  • Accounting policies
  • Selection and Application of Accounting
    policies
  • Consistency of Accounting policies
  • Changes in Accounting policies
  • Disclosure

51
IAS 8
  • Changes in Accounting Estimates
  • Definition
  • Disclosure
  • Errors
  • Definition
  • Limitations on Retrospective Restatement
  • Disclosure of Prior Period Errors

52
Home questions
  • Myriad
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