Title: MastersAdvanced Diploma in Accounting Financial Acounting
1Masters/Advanced Diploma in AccountingFinancial
Acounting
- Presented by
- Robert J Kirk
- Professor of Financial Reporting
2Financial AccountingACF 842 J1
- Rationale
- Aims
- Learning Outcomes
- Content
- Teaching and Learning Methods
- Assessment
- Reading List
3(No Transcript)
4More information
- www.iasb.org.uk
- www.iasplus.com.uk
- www.asb.org.uk
- www.company reporting.com.uk
5Module Handbook
- Lecturer
- Teaching Plan
- Questions and solutions
- Assignment
- Examination
6International Accounting Standards
7International 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)
8International Accounting Standards
- IAS 1 Presentation of Financial Statements
9IAS 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
10IAS 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
11IAS 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
12IAS 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
13IAS 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
14IAS 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
15IAS 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
16IAS 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
17IAS 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
18IAS 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
19IAS 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
20IAS 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
21IAS 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
22Example Balance Sheet XYZ Group Balance Sheet
as at 31 December 20-2 (excluding
comparatives)(in thousands of currency units)
23Example Balance Sheet XYZ Group Balance Sheet
as at 31 December 20-2 (excluding
comparatives)(in thousands of currency units)
24IAS 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
25Example 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)
26IAS 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
27IAS 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
28IAS 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
29IAS 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
30Published 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
31Published 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.)
32Questions at Home and Examination Questions
- Home Examinations
- Vincible Brescia (J2004Q1)
- Stilson Deventer (J2002Q1)
33IASB Framework
- Concepts Underlying Financial Reporting Standards
and Practice
34IASB 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
35IASB Framework
- Status - Non authoritative
- Standards prevail
- Aim of IASB to reduce conflicts between Framework
and standards - Living document
36IASB 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
38Users and Information Needs
- Investors
- Employees
- Lenders
- Suppliers and other trade creditors
- Customers
- Governments and their agencies
- Public
39IASB Framework Qualitative Characteristics
- Understandability
- Efficient markets
- Relevance
- materiality
- Reliability
- Faithful representation
- Substance over form
- Neutrality
- Prudence
- Completeness
- Comparability
40IASB Framework Constraints on Relevant and
Reliable Information
- Timeliness
- Balance between costs and benefits
- Balance between relevance and reliability
- True and fair presentation
41IASB Framework Underlying Assumptions
- Accrual basis
- Going Concern
42IASB Framework Elements of Financial Statements
- Assets
- Liabilities
- Equity
- Income
- revenue
- gains
- Expenses
- Capital maintenance adjustments
43IASB 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
44IASC Framework Measurement
- Bases of measurement
- Historical cost
- Current cost
- Realisable (selling) value
- Present value
45IASB Framework Financial Position
- Wealth (economic resources controlled)
- Financial structure
- Liquidity and solvency
- Capacity to adapt
46IASB Framework Financial Performance
- Changes in wealth
- Variability in generating changes in wealth
- Indicator of future cash flows
47IASB Framework Concepts of Capital/Capital
Maintenance
- Financial capital
- Nominal or constant purchasing power
- Physical capital - Operating Capability
- Command over cash equivalents
48IASB 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)
49International Accounting Standards
- IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors
50IAS 8
- Introduction
- Objective
- Scope
- Key definitions
- Accounting policies
- Selection and Application of Accounting
policies - Consistency of Accounting policies
- Changes in Accounting policies
- Disclosure
51IAS 8
- Changes in Accounting Estimates
- Definition
- Disclosure
- Errors
- Definition
- Limitations on Retrospective Restatement
- Disclosure of Prior Period Errors
52Home questions