3. Presentation of single entity published FS Flashcards
(31 cards)
Statement of financial position accounting equation
Assets = Equity + Liabilities
On a statement of Profit or Loss + OCI who relates to each expense?
1. Revenue
2. Cost of sales
3. Administrative expenses
4. Distribution costs
5. Finance costs
6. Tax
7. Profit for the year
8. Net profit
- Revenue = customer
- Cost of sales = suppliers
- Administrative expenses = employees, managers, landlords, internet provider
- Distribution costs (sales people commission, advertising, warehouse) = sales people
- Finance cost = interest/ debentures and the bank
- Tax = government
- Profit for the year = shareholders (last in the queue)
- Net profit belongs to the SH
5 types of expenses on a Statement of Profit or Loss
Cost of sales
Administrative expenses,
Distribution costs,
Finance costs,
Income tax expenses
4 types of profit on a Statement of Profit or Loss
Gross profit
Operating profit (PBIT)
Profit before tax
Profit for the year
Under IAS 7 what are the 3 activities that cash flows from?
Operating activities
Investing activities
Financing activities
When is the statement of financial position prepared?
At the end of the year (as at 31 December 2024)
How is the Statement of Profit or Loss dated?
P&L for year ended 31 December 2024
What are the components of financial statements?
SOFP - Assets - liabilities = equity
SOCIE - Transactions with SH, e.g. contributions by and distributions to owners
SOPL - Revenue - costs = profit
SOCF - IAS 7 (Cash Flow Statements)
Notes - Accounting policies Explanatory notes
What is IAS 1?
Entity must present a complete set of financial statements on at least an annual basis and included:
SOFP, SOCIE, SOPL, SOCF, Notes
Must be comparative and consistent (presentation and classification)
What does a fair presentation of fs require?
IAS 1 - present info fairly and accurately
- selection and application of appropriate accounting policies and practices;
- presentation of information which is relevant, reliable, comparable and understandable and
- additional disclosures where required to ensure that the financial statements give a fair representation of the results,
financial position and cash flow.
What are some important principles and overriding concepts that apply in the preparation and presentation of financial statements?
Going concern
FS prepared on the assumption that the entity is a going concern and will continue in operation for the foreseeable future
Accruals basis of accounting
Requires transactions accounted for in the period when income is earned or expenses are incurred, not when they are received and paid in cash.
What is another term for accruals basis of accounting?
Matching principle
Materiality importance
IAS 1 - similar items presented separately
Applies to all parts of fs and disclosures
Judgement required
Info may be material or relevant due to magnitude or its omission from the fs could affect decision making. (Directors rem)
Offsetting rules
Assets and liabilities and income and expenses shall not be offset unless required or permitted by a standard or an interpretation.
Can give false picture and disguise transactions
SOFP
Items included under assets?
- property, plant and equipment
- investment property
- intangible assets
- financial assets (excluding amounts shown under (5), (8) and (9))
- investments accounted for using the equity method
- biological assets
- inventories
- trade and other receivables
- cash and cash equivalents
- assets held for sale
SOFP
Items included under liabilties
- trade and other payables
- provisions
- financial liabilities (excluding amounts shown under (1) and (2))
- current tax liabilities (or as a current tax asset)
- deferred tax liabilities (or as a deferred tax asset)
- liabilities included in disposal groups classified as held for sale
SOFP
Items included under equity
- issued share capital and other components of equity (attributable to owners of the parent in a consolidated statement of financial position)
- non-controlling interests (NCI) presented as part of equity (in a consolidated statement of financial position)
- non-controlling interest
Difference between current and non-current?
A+L settled after reporting
date into below classifications:
- less than 12 months after the reporting period (current); or
- more than 12 months after the reporting period (non-current).
When is an asset current under IAS 1?
- expected to be realised (sold or consumed) in the entity’s normal operating cycle;
- held primarily for the purpose of trading and expected to be realised within 12 months after the reporting date; or
- cash or a cash equivalent which is not restricted in its use.
When is a liability current under IAS 1?
*settled in normal operating cycle;
* held primarily for trading;
* due to be settled within 12m after the reporting date; or
* it does not have an unconditional right to defer settlement of the liability.
Under IAS 1 what disclosures are required regarding issued share capital?
- no. of shares issued and fully paid and issued but not fully paid
- par or nominal share value per share (or that shares do not have a par value)
- reconciliation of the number of shares outstanding at the start and end of the period
- rights, preferences and restrictions attached to the shares
- shares in the entity held by the entity itself or by related group companies
- shares reserved for issuance under options and sales contracts
- a description of the nature and purpose of each reserve within equity
What are the minimum items that should be presented in a PNL section?
- revenue
- finance costs
- share of profits and losses of associates and joint ventures accounted for using the equity method (see Chapter 6)
- a single amount for the total of discontinued operations
- tax expense
- a total for profit or loss for the period
- gains and losses from the derecognition of financial assets measured at amortised cost
What items will be shown in the OCI?
- changes in the revaluation surplus on non-current assets
- actuarial gains and losses on the re-measurement of defined benefit plans
- exchange differences (gains and losses) arising from the translation of the financial statements of a foreign
operation - certain gains and losses relating to financial instruments, including on certain instruments used for hedging
- correction of prior period errors and the effect of changes in
accounting policies
Which elements are included in the movements in SH equity?
Capital injections or withdrawals by the shareholders
Dividends
Prior period adjustments
PnL attributable to SH
Revaluation gains and losses
Any other gains and losses
Transfer between components of equity
