3. Presentation of single entity published FS

Question 1

Statement of financial position accounting equation

Answer 1

Assets = Equity + Liabilities

Question 2

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

Answer 2

1. Revenue = customer
2. Cost of sales = suppliers
3. Administrative expenses = employees, managers, landlords, internet provider
4. Distribution costs (sales people commission, advertising, warehouse) = sales people
5. Finance cost = interest/ debentures and the bank
6. Tax = government
7. Profit for the year = shareholders (last in the queue)
8. Net profit belongs to the SH

Question 3

5 types of expenses on a Statement of Profit or Loss

Answer 3

Cost of sales
Administrative expenses,
Distribution costs,
Finance costs,
Income tax expenses

Question 4

4 types of profit on a Statement of Profit or Loss

Answer 4

Gross profit
Operating profit (PBIT)
Profit before tax
Profit for the year

Question 5

Under IAS 7 what are the 3 activities that cash flows from?

Answer 5

Operating activities
Investing activities
Financing activities

Question 6

When is the statement of financial position prepared?

Answer 6

At the end of the year (as at 31 December 2024)

Question 7

How is the Statement of Profit or Loss dated?

Answer 7

P&L for year ended 31 December 2024

Question 8

What are the components of financial statements?

Answer 8

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

Question 9

What is IAS 1?

Answer 9

Entity must present a complete set of financial statements (including prior period comparative information) on at least an annual basis and included:
SOFP, SOCIE, SOPL, SOCF, Notes

Must be comparative and consistent

Question 10

What does a fair presentation of fs require?

Answer 10

• 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.

Question 11

What are some important principles and overriding concepts that apply in the preparation and presentation of financial statements?

Answer 11

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 to be accounted for in the period when income is earned or expenses are incurred, not when they are received and paid in cash.

Question 12

What is another term for accruals basis of accounting?

Answer 12

Matching principle

Question 13

Materiality importance

Answer 13

Information may be material or relevant simply because of its magnitude or because its omission from the financial statements could affect decision making. (Directors rem)

Question 14

Offsetting rules

Answer 14

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

Question 15

SOFP
Items included under assets?

Answer 15

• 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

Question 16

SOFP
Items included under liabilties

Answer 16

• 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

Question 17

SOFP
Items included under equity

Answer 17

• 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

Question 18

Difference between current and non-current?

Answer 18

assets and liabilities expected to be settled after the reporting
date into the following separate classifications:

• less than 12 months after the reporting period (current); or
• more than 12 months after the reporting period (non-current).

Question 19

When is an asset current under IAS 1?

Answer 19

• 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.

Question 20

When is a liability current under IAS 1?

Answer 20

• expected to be settled in the entity’s normal operating cycle;
• held primarily for the purpose of trading;
• due to be settled within 12 months after the reporting date; or
• it does not have an unconditional right to defer settlement of the liability.

Question 21

Under IAS 1 what disclosures are required regarding issued share capital?

Answer 21

• number 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

Question 22

What are the minimum items that should be presented in a PNL section?

Answer 22

• 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

Question 23

What items will be shown in the OCI?

Answer 23

• 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

Question 24

Which elements are included in the movements in SH equity?

Answer 24

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