SBR Flashcards
(297 cards)
1
Q
What is investment property?
A
land/buildings for rentals/ capital appreciation
2
Q
how to account for g.ment grant?
A
recognise in the P+L over the period in which it occurs
3
Q
how often should PPE and IP be revalued under FV Model?
A
IP - yearly. PPE - regularly (3-5yrs)
4
Q
what are some egs of monetary assets
A
receivables and cash
5
Q
maximum gap for parent-subsidiary year end consolidation
A
3 months apart
6
Q
equity is
A
assets - liabilities
7
Q
six capitals of IR
A
Financial, Manufactured, Human, Intellectual, Natural and Social
8
Q
in what 2 situations should you make a prior period adjustment?
A
change in accounting policy / material error in prior year
9
Q
when should contingent liabilities and assets be disclosed
A
CL - possible
CA - probable
10
Q
in what circumstances can you recognise a provision for an organisation?
A
detailed plan AND announced to those affected
11
Q
define provision
A
liability of uncertain timing or amount
12
Q
in what circumstances should a deferred tax asset relating to loss be recognised
A
only if its likely the co will make future taxable profits it can offset the loss against
13
Q
how does Lessee recognise a Lease in FS
A
SPL - depreciation and finance cost
SFP - right of use asset and lease liability
14
Q
define lease
A
right to control/use an asset over a period of time for consideration
15
Q
five stages of revenue recognition model
A
1) identify contract
2) identify performance obligations
3) determine the price
4) allocate price to performance obligations
5) recognise revenue as performance obligations are satisfied
16
Q
define operating segment
A
segments whos results are regularly reviewed by CODM
17
Q
define derivative
A
value changes in response to change in value of some underlying asset / liability
requires little/no initial investment and settled ar a future date
18
Q
define liability
A
present obligation resulting in a transfer of economic resources resulting from a past event
19
Q
define financial liability
A
a liability with obligation to deliver cash
20
Q
should goodwill be amortised
A
NO it should be reviewed for impairment at each SFP date
21
Q
accounting for negative goodwill
A
negative goodwill should be credited to SPL immediately
22
Q
how to measure SPL charge for cash settled share based pay schemes
A
no. of instruments expected to vest
FV of instrument at SFP date
vesting period
23
Q
how to measure SPL charge for equity settled share based pay schemes
A
no. of instruments expected to vest
FV of instrument at GRANT date
vesting period
24
Q
which type of pension appears in an employers SFP
A
defined benefit pension scheme
25
what is a defined benefit pension scheme ?
employee promised to receive certain benefits upon retirement based on length of serviceand retirement salary
26
where in SFP would you record a NCA sale
below CA
27
where in P+L would you record a discontinued operation
after tax before NCI
28
at what value are NCA held for sale recognised in SFP
lower of CV OR FVLC
29
define Value in Use and its relevance
PV of future cash flows from the asset
30
when can you capitalise development costs?
if the project is commercially viable
31
in what circumstances should borrowing costs be capitalised?
if an asset is being constructed over time and if its then known as a qualifying asset
32
should you depreciate PPE and IP if held at FV?
PPE - yes
| IP - no
33
in CFS where would dividends from assosciate show?
investing activities
34
define functional currency
currency of the primary economic environment in which the entity operates
35
how are joint ventures accounted for ?
equity accounting
36
define joint arrangment
two or more parties have joint control and the right to veto important decisions
37
6 qualitative characteristics of financial information
Relevance, FR, Comparability, Verifiability, Timeliness,
| Understandability
38
ethical issue from failing to consolidate a subsidiary
lack of integrity - straightforward business conduct
39
how are derivatives recognised in the FS
SFP - Fair Value
| SPL - changes in Fair Value
40
how are derivatives recognised in the FS
SFP - Fair Value
| SPL - changes in Fair Value
41
SOFP shows
assets and liabilities (resources and claims against entity)
42
SOCE
changes in economic resources
43
SPL
efficiency and effectiveness of management
44
objective of FR
provide information that is useful to investors, lenders, creditors in making decisions about entity
45
fundamental characteristics
relevance and faithful representation
46
enhancing characteristics
comparability, verifiability, understandability and timeliness
47
liability definition
present obligation from past event leads to a transfer of economic resources
48
income definition
increase in asset
| reduction in liability
49
expense definition
reduction in asset
| increase in liability
50
recognition
include an item in FS if its relevant and FR
51
derecognition
removal of an asset
52
historical cost
price of the transaction that gave rise to the item
53
Fair value
amount you would receive if you sold that asset today
54
current cost
amount to buy it new minus any depreciation
55
value in use
present value of cash flows
| value * yrs * discount rate
56
development process
```
agenda consultation
discussion paper
exposure draft
revised exposure draft
new ifrs issued
new ifrs adopted
post implementation review
```
57
what is exposure draft
the draft of the standard, needs to ensure it meets principals from framework
58
IASB prepares
IFRS
59
SOFP has
Assets, Equities and liabilities
60
SPL
```
continuing operations
revenues
cost of sales
PBT
income tax
Profit from operations
OCI for the year
```
total comp income FY
61
an entity has a subsidiary IF
holds > 50%
holds voting rights which give control
has majority of voting rights
< 50% but the rest are widely distributed
62
an entity has an associate IF
20-50% control
representation on board
participation inpolicyy making process
interchange of managerial personell
63
6 steps to consolidate SOFP
1) group structure
2) net assets of sub
3) goodwill
4) NCI
5) group retained earnings
6) investment in associate
64
work out group structure
check midyear acquisition and NCI for sub (none for associate)
65
work out net assets of sub
```
Equity shares
SP
ret earnings
PUP - S
FV adjustment
```
@reporting date @acq @postacq
66
goodwill
FV of consideration
+ NCI @ acq
- FV of net assets
= goodwill in full
67
NCI
NCI @ acq
add NCI % * S post acq profits
less NCI impairment to date
68
group retained earnings
100% P's earnings
add P's % of S and A post acq earnings
less impairment to date
69
investment in associate
cost
add P% of A's post acq profit
less impairment to date
70
accounting for intracompany balances
```
remove payables (DR)
remove receivables (CR)
```
71
account for inventory in transit
on SFP
DR inventory
Cr payables
72
accounting for cash in transit
DR bank
| CR receivables
73
inventory PUP
CR inventory
| DR retained earnings
74
NCA PUP
CR PPE
| DR retained earnings
75
FV adjustments
bring fair value of assets and liabilities on a line by line basis in group accounts
76
uniform accounting policies
sub must adopt parents accounting policies in the group accounts
77
non consolidation IF
subsidiaries are being held for sale
78
an asset/cash generating unit is impaired IF
its carrying value falls below its recoverable amount
79
recoverable amount is
higher of value in use / FVLCTS
80
impairment amount is
carrying value - recoverable amount
81
carrying value is
S's NA + goodwill
82
account for impairment
CR Goodwill
DR group retained earnings (leftover % of goodwill credited)
DR NCI (nci% of goodwill credited)
83
impairment for an associate
associate treated like an asset
CV > recoverable amount
carrying value = cost + P's part of As post acq profit
84
what is a joint arrangement
two or more parties have joint control over an entity under a contractual agreement
85
what is a joint venture
a new entity is created and parties involved have right to the net assets and shares of the new venture
86
what is a joint operation
parties have rights to assets and obligation to liabilities and each party accounts separately and records their shares
87
group structure
20%
20-50%
50% +
1) investment
2) significant influence
3) power to direct
88
accounting for 20% investment
cost accounting
89
accounting for 20 - 50% sign influence
equity accounting
90
accounting for 50% + power to direct
group accounting
91
account for no control to control acquisition
treat any original investment as being disposed of
1) remeasure original investment at FV
2) calculate goodwill
92
account for control to more control acquisition
increase in ownership causes reduction in NCI
NCI @ acq
plus NCI % * postacq profit
ANSWER
multiply by the percentage reduction in NCI
93
account for control to less control disposal
proceeds of sale
increase in NCI (NCI% of net assets)
adjustment amount
DR bank
CR NCI
CR cumulative retained earnings (this is adjustment amount)
94
account for control to no control disposal
```
proceeds
add investment still held and NCI
les
net assets @ disposal
less goodwill
```
equals group profit / loss on disposal
95
what is functional currency
currency of the primary economic environment in which the entity operates
96
what to consider when determining FC (3)
currency dominating sale price
currency in which finances are considered
currency influencing operating costs
97
transactions in other currencies (monetary)
retranslated using the closing rate @ reporting date
98
transactions in other currencies (non monetary)
not retranslated @ reporting date
99
overseas consolidation of a sub SFP
NCA, CA, NCL and CL translate using current rate
| equity share capital and reserves @ historical rate
100
overseas consolidation of a sub SPL
income and expense translate at average rate
101
overseas consolidation
all figures must be correctly stated in functional currency and then translated to presentation curency
102
consolidated SCF investing
dividend from A
| acq/disposal of S
103
consolidated SCF financing
dividend paid to NCI
104
consolidated SCF operating
```
depreciation
impairment
gain/loss on disposal of tangibles
gain/loss on sale of S
share of A's profit
```
105
IAS 16 PPE measurement @ recognition
purchase price
less costs directly attributable in collecting asset
less costs to dismantle/restore @ PV
106
revaluation - cost model
carried @ cost less accumulated depreciation and impairment losses
107
revaluation - revaluation model
carried @ revalued amount (FV less accum dep and impairment)
108
IAS 16 depreciation of PPE either
straight line or reducing balance
109
IAS 23 borrowing costs
borrowing costs must be capitalised over the period of construction
110
capitalisation of borrowing costs begins when (3)
expenditure on asset commences
borrowing costs are incurred
activities necessary to prepare the asset are in progress
111
capitalisation of borrowing costs must stop when
the asset is ready for use (even if its not being used)
112
IAS 20 government grants recognised when
entity complies with conditions attached to the grant
| entity will actually receive the grant
113
IAS 20 government grant recognition method
deferred income approach - recognised over the period in which the expenditure occurs
114
IAS 20 govt grants initial accounting
show PPE @ cost on SFP in NCA
| show govt grant on SFP as a liability in NCL
115
IAS 20 govt grants subsequent accounting
show depreciation on SPL
| show amortisation of deferred income on SPL (e.g. 2mill over 10 yrs is 0.2 per year)
116
IAS 40 investment properties are
properties to earn rentals for capital appreciation
| instead of production, admin purposes or future use as an IP
117
IAS 40 IP initial measurement
IPs should initially be measured @ cost plus directly attributable costs
118
IAS 40 IP subsequent measurement FV model
IPs are revalued to FV @ each reporting date
gains/lesses are recognised through SPL
properties DONT depreciate
119
IAS 40 IP subsequent measurement cost model
IP are held using benchmark method (cost)
| properties are depreciated like any other asset
120
change in IP.
| IP to owner occupied
FV @ date of change
121
change in IP.
| IP to inventory
FV @ date of transfer
122
change in IP.
| Inventory to IP
FV on gain/loss to PL
123
change in IP.
| owner occupied to IP
revalue then treat as IP
124
IAS 38 intangible assets
no physical substance but has value to the business - patent, brand names, licenses
125
IAS 38 intangible assets 3 factors to consider
identifiability
control
recognition (must have probably inflow of economic resources and measure reliably)
126
IAS 38 intangible assets separate acquisition
capitalised at cost plus any directly attributable costs (e.g. legal fees)
127
IAS 38 intangible assets research
charged immediately to P+L in the years its incurred
128
IAS 38 intangible assets development
capitalised when it meets ALL SECTOR criteria
129
IAS 38 intangible assets development SECTOR
```
sell/use
expense
commercially viable
technically feasible
overall probably future economic benefit
resources to complete
```
130
IAS 36 impairment indicators external
changes in technological, legal or economic environment
| decrease in assets market value more than expected
131
IAS 36 impairment indicators internal
operating losses from asset
physical damage
changes in the way the asset is used
132
IAS 36 impairment review
if CV is more than recoverable amount then it is impaired and should be written to its recoverable amount
133
IAS 36 impairment recoverable amount
FV less costs to sell + VIU
costs to sell is amount sold - cost of disposal
VIU is PV of future cash flows
134
IAS 36 impairment record the impairment
reduction in CV for individual assets is taken through P+L
135
IFRS 5 NCA held for sale
must be available for sale and must be highly probable
136
IFRS 5 NCA held for sale valued at
lower of CV and FVLCTS
137
IFRS 5 NCA held for sale models
cost model or revaluation model which revalues asset to FV before holding for sale
138
IFRS 5 NCA held for sale accounting
sale of the asset will give rise to profit or loss on disposal which goes to SFP
139
IFRS 5 Discontinued Operation definition
disposed of or held for sale AND separate line of business or geographical are of operations.
140
IFRS 5 Discontinued Operation years
held for sale - disclose in year held for sale
| disposed of in the yr - disclose in yr of disposal
141
IFRS 5 Discontinued Operation accounting
SFP - fully disposed, none. held for sale - "assets held for sale"
SCF - net cash flows from discontinued operations
142
IAS 19 Pensions covers
employee benefits, short term, long term, post employment and termination benefits
143
IAS 19 Pensions defined contribution pension scheme
company pays a fixed (annual amount) contribution into employee pension fund giving variable return (risk lying with employee)
144
IAS 19 Pensions defined contribution pension scheme accounting
debit expense
| credit cash/accruals
145
IAS 19 Pensions defined benefit pension scheme
company pays variable contribution into company pension fund and there is a guaranteed return to employee on retirement (% of final salary)
146
IAS 19 asset ceiling
if a company has an overall pension asset on SOFP it can only be recognised UP TO its asset ceiling
147
IAS 19 asset ceiling definition
PV of any future cash savings of not having to contribute to the ceiling as its in surplus
148
IAS 19 asset ceiling accounting
anything over the asset ceiling is recognised in OCI
DR OCI
CR net pension asset
149
IAS 19 curtailment
when a significant number of employees leave the scheme
asset and liability are remeasured to FV
any change is taken from P+L
150
IFRS 2 Share based payments
a payment for goods/ services in either share or share options
151
IFRS 2 Share based payments - equity settled
company issues shares in return for goods/services
debit SPL
credit equity
152
IFRS 2 Share based payments - cash settled
company pays cash for goods / services
debit SPL
credit liability
153
IFRS 2 Share based payments - Grant date (1)
terms of scheme agreeeed.
No of years
No of employees
No of options/rights
154
IFRS 2 Share based payments - Vesting date (2)
employees become entitled to the share based payment
155
IFRS 2 Share based payments - exercise date (3)
employees receive share based payment
| spread FV of share based payment over vesting period based on no of employees
156
IFRS 2 FV of equity settled
is the FV at grant date
157
IFRS 2 FV of cash settled
is the FV at reporting date
158
if the FV of goods/services is unkown then the option
should be reassessed @ each reporting date
159
IFRS 2 vesting conditions
condition that needs to met by the end of the period In order for options to be exercised
160
IFRS 2 vesting conditions non market based
conditions relating to an employee having to remain with the company for a fixed period - taken into account at each reporting date
161
IFRS 2 vesting conditions market based
conditions relating to market price of companys shares - ignored for the purpose of estimating number of options
162
Financial instruments intro
asset and liability must be shown In both companies
163
Financial assets - initial measurements
initially recognise at fair value + transaction costs
164
Financial assets - subsequent measurements for short term investments
FV through P+L
| remeasure to FV @ reporting date with gains and losses through P and L
165
Financial assets - initial measurements for long term investments
FV through OCI - remeasure to FV @ reporting date with gains and losses through OCI
166
why is a financial asset amortised?
if it passes these tests its amortised:
| intent to hold the asset until its maturity date + contractual cash receipts on holding the asset
167
how are financial liabilities initially measured?
recognised @ FV net of transaction costs
168
how are financial liabilities subsequently measured?
amortised cost, FV through profit or loss
169
how are financial liabilities derecognised?
when they are paid in full or transferred to another party
170
what is a convertible instrument ?
when it is issued it becomes a combination of a liability and equity and is accounted for with split equity accounting
171
what is the liability element of a convertible debenture?
this is calculated using the discount rate which is the interest rate on any similar debt without an conversion option
172
what is the equity element of a convertible debenture?
difference between proceeds on issue and the initial liability element
173
how are issue costs relating to convertible debentures accounted for ?
theyre recognised by adjusting the effective rate of interest on the debenture
174
impairment of financial assets
expected credit loss model is used to recognise credit losses before default occurs
175
stage 1 of credit loss model
initial recognition - PV of ecpected credit losses 12 month after reporting date
176
stage 2 of credit loss model
significant deterioration in credit quality (e.g. 30 days overdue)
impairment is recognised at PV
177
stage 3 of credit loss model
objective evidence of an impairment such as the borrower becoming insolvent - the impairment is recognised at PV of credit shortfalls
178
what is a derivative?
a financial instrument that is either an asset or liability
179
what three things must a derivative have ?
it requires no initial investments
its settled at a future date
its value changes in response to an underlying item
180
how is a derivative measured ?
initially measured at fair value
| subsequently measured with gains/losses through P and L
181
what is an example of a derivative?
forward contracts and options
182
what is hedging ?
a process of managing risk trough the use of financial instruments so the variability in FV of changes in future cash flows are reduced
183
what is hedge accounting ?
the specific matching of changes in FV of instrument with changes in FV through the FS (P/L/OCI)
184
what is a hedging instrument ?
a financial instrument whose chane in value is expected to offset the changes in FV of cash flows of designated items
185
what is a hedged item ?
a specific item that exposes the company to risk of changes in FV or future cash flows
186
what is a hedged risk ?
specific risk being hedged against market risk
187
what is a cash flow hedge ?
aims to protect the value of a highly probable future cash flow
188
how to account for a cash flow hedge ?
when the item is recognised its gains / losses are put through P and L
when its not the effective portion goes to OCI and the ineffective portion goes to profit or loss
189
what is a fair value hedge
it aims to porrect the fair value of an item ALREADY recognised in the FS
190
how is a fair value hedge accounted for ?
gain or loss on the instrument and the hedged item are recognised through P and L
191
what are the conditions of hedge accounting ?
must be formally designated and documented
must consist of eligible hedging instruments and items
must be effective and have a risk management strategy
192
what is overhedging ?
change in instrument > change in itme
ineffectiveness in the hedge and gain/loss recognised through OCI are equivalent to change in the item
193
what is underhedging ?
change in instruments < change in item
| no ineffectiveness in the hedge and gains/losses recognised through OCI are equivalent to change in instrument
194
What is fair value
the price that would be received to sell an asset or paid to transfer a liability in a transaction @ measurement date
195
what is the fair value method
measures asset and liabilities because historical costs isn't relevant
196
level 1 input of fair value IFRS 13
quoted prices in an active market for identical assets / liabilities that the entity can access @ measurement date
197
level 2 input of fair value IFRS 13
inputs other than quoted market prices such as similar assets and liabilities in active or inactive markets
198
level 3 input of fair value IFRS 13
inobservable inputs, so using their own data to make assumptions
199
what is an operating segment IFRS 8 ?
results are reviewed regularly by chief operating decision maker (CODM)
200
why is disclosure required for an operating segment ?
to understand past performance
to understand risks and rewards
to make better informed judgements
201
what must be disclosed for an operating segment ?
```
seg
segment revenue if > 10% total revenue
segment profits if > 10% total profits
segment assets > 10% total assets
AND
if total reported segment is not > 75% of external revenue, additional segments are required to be disclosed
```
202
when can operating segments be combined ?
if they have similar economic characteristics e.g. nature of products / services / production, type of customer or nature of regulatory environment
203
what is disclosed in regards to an operating segment ?
```
segment revenue
segment results
segment assets
segment liabilities
capital exp
dep/amortisation
other non cash expenses
```
204
IFRS 15 revenue from contracts with customers 5 steps
```
COPAR
contract
obligations
price of transaction
allocation price to performance obligations
recognise revenue
```
205
IFRS 15 revenue from contracts with customers step 1
contracts must be commercially substance and probably consideration
206
IFRS 15 revenue from contracts with customers step 2
obligations - performance obligations are accounted for separately if promised goods/services are distinct (software + license)
207
IFRS 15 revenue from contracts with customers step 3
price of transaction, expected to receive for goods but must adjust for financing components and any amount payable to customers like refunds
208
IFRS 15 revenue from contracts with customers step 4
obligation - transaction price is allocated in proportion to each obligation
209
IFRS 15 revenue from contracts with customers step 5
recognise revenue when control of goods/ services has been transferred to the customer and the obligation is satisfied
210
IFRS 16 lease identification
a contract has a lease if it conveys the right to control the use of an asset for a period of time in exchange for consideration
211
what is an advance and arrear ?
advance is the start of the lease period
| arrears are the end of the lease period
212
in IFRS 16 leases how is control conveyed ?
where the customer has both the right to direct the identified assets use and to obtain all the economic benefits from the asset
213
IFRS 16 leases what is a combined contract ?
where part of the payment is for the lease of the asset and other part for a service (e.g. maintenance)
214
IFRS 16 leases Lessee accounting initial recognition
DR right of use asset - measured @ lease liability plus initial direct costs
CR lease liability - measured at PV of lease payments payable
215
IFRS 16 leases Lessee accounting subsequent recognition
DR costs less accumulared depreciation
| CR financial liability plus any amortised costs
216
IFRS 16 lessor accounting - finance lease
derecognise the asset and record a receivable (SFP)
record finance lease receipts as a reduction in the receivable (SFP)
record interest income on receivable (P/L)
217
IFRS 16 lessor accounting - operating lease
income receipts recognised as income through P and L
| depreciation continues over its useful life
218
IFRS 16 finance lease definition
if the risks and rewards of ownership are transferred to lessee
219
IFRS 16 operating lease definition
any lease other than a finance lease
220
IAS 41 agriculture - biological asset
living plant/animal
FV less estimated point of sale costs initially and at each reporting date
gain / loss to profit or loss
221
IAS 41 agriculture - agricultural produce
produce from a biological asset
| measured at FV at point of harvest less estimated point of sale costs
222
IAS 2 inventory measurement
lower of cost or NRV
223
IAS 12 deferred tax calculation step 1
calculate the temp difference as the difference between the carrying value and the tax base
224
IAS 12 deferred tax calculation step 2
multiply the temporary difference by the income tax rate to get closing deferred tax provision
225
IAS 12 deferred tax calculation step 3
closing deferred teax provision is an asset or liability dependent on whether its more than the carrying value
e.g. carrying value > tax base - taxable temp difference = liability
226
IAS 12 deferred tax calculation step 4
movement in deferred tax position goes to P and L
| closing position - open position = movement
227
IAS 12 deferred tax individual company accounts PPE
carrying value vs tax base
| X vs X
228
IAS 12 deferred tax individual company accounts provisions
carrying value vs tax base
| X < nil
229
IAS 12 deferred tax individual company accounts intangibles
carrying value vs tax base
| X > nil
230
IAS 3 how to acount for an onerous contract ?
recognise a provision at the lower of PV under the contract vs PV of exiting the contract
231
IAS 12 deferred tax group accounts FV adjustments
FV of consolidates A/L are usually higher than their book value causing a deferred tax liability - this goes in SOFP
232
IAS 12 deferred tax group accounts goodwill
tax authorities don't recognise this as its an estimated number
233
IAS 12 deferred tax group accounts PUP
any tax made on the profit will need to be eliminated giving rise to a deferred tax asset
234
IFRS 1 first time adoption
an entity adopting ifrs for the firs time must state it is doing so and do these three
- prepare current yr under IFRS
- restate prior yr according to IFRS
- reconcile current year profit under IFRS
235
IAS 3 what is a provision ?
a present obligation as a result of a past event resulting in probably transfer of economic resources
236
IAS 3 measurement of a provision
best estimate of the expenditure
EV
discount to PV
237
IAS 3 subsequent treatment of a provision
review the provision annually
| only use the provision for the expense originally created
238
IAS 3 what is a liability ?
possible obligation or a present obligation with a possible transfer of resources
239
IAS 3 what are the three types of contingent assets
possible - ignore
probable disclose
virtually certain - recognise as an asset
240
IAS 3 what is a future operating loss ?
no provision can be made for anticipated losses as theres no third party obligation
241
IAS 3 what is a onerous contract ?
where the cost of fulfilling the contract exceed the benefits received from the contract
242
IAS 3 what is restructuring ?
make a provision if there is a plan and its announced
| examples - closure of a line of business, relocating activities, reorganisation
243
IAS 10 events after reporting - adjusting events
information relating to a condition which existed at reporting date e.g. settlement of court case / bankruptcy of customer
244
IAS 10 events after reporting - nonadjusting events
a condition that didn't exist at the reporting date
| e.g. major purchase of asset/ announcing discontinuation/ fall in investments
245
IAS 8 accounting policies are ?
the specific principles, bases, conventions and rules applied by an entity in preparing FS
246
IAS 8 how to select an accounting policy ?
apply standard specifically dealing with the transaction or a relavant and reliable one (with similar item)
247
IAS 8 a change in accounting policy ?
if there is a new IFRS that is better suited follow that of if theres a more relevant IFRS, adjust b/f figures in SOCE
248
IAS 8 what is an accounting estimate ?
changes in accounting estimates are recognised prospectively by a period of change or a future period
249
IAS 8 what is a prior period error ?
error in applying accounting policy, oversight or fraud - can be corrected retrospectively
250
IAS 24 related parties parent sub and associate
parent and sub RP
parent and associate RP
sub and associate RP
251
IAS 24 related parties joint ventures
JV and Co A are RP
JV and Co B are RP
Co A and Co B are NOT RP
252
IAS 24 related parties 2 subs
parent, sub 1 and sub 2 are all RP
253
IAS 24 related parties other examples (5)
```
director
supplier
customer
bank
government
```
254
IAS 33 EPS - basic EPS formula
profit attributable to SH of the parent / weighted average number of shares
255
IAS 33 EPS - full price issue
normal w a calculation
256
IAS 33 EPS - bonus issues
assume bonus shares have always been in issue
257
IAS 33 EPS - rights issues
assumes shares issued are a mix of bonus and full price
258
IAS 33 EPS - diluted EPS
calculated where potentially ordinary shares have been outstanding during the period
259
IAS 34 interim financial reporting requirement
only condensed with focus on new activities events and circumstances
260
IAS 34 interim financial reporting is specified as
SOFP at interim date
SPLOCI for interim/cumulatively to date for the yr and previous years
SOCE cumulatively to interim date
SOCF cumulatively to interim date and comparable period
261
what is a small and medium sized
unlisted entities that don't have public accountability and aren't registered
262
what are the IFRS for small and medium sized
small and designed to meet the capabilities of small companies, written in clear and easily translatable language
263
what do the small and medium sized show
irrelevant topics are omitted and theres a 90% reduction in disclosures required. revisions are limited to every 3 yrs and principles are simplified
264
IAS 2 inventory measurement of cost
costs incurred in bringing inventory to its present condition and location
265
IAS 2 inventory measurement of NRV
selling price less costs to complete and cost of selling is NRV
266
What is an integrated report?
must be a specific and identifiable communication that can be either a standalone report or an accessible part of another report
267
what does an integrated report provide insight to
the connectivity of the information and how value is created over time
268
what are the objectives of integrated reporting ?
improve quality of information
enhance accountability
promote understanding
support integrated decision making, thinking and actions
269
what are the underlying concepts of integrated reporting ?
the capitals
value creation process
value creation for the organisation
270
what are the six capitals of integrated reporting ?
```
financial
manufactured
intellectual
human
natural
social
```
271
IR financial
how finance is used to add value
272
IR manufactured
tangible assets such as machinery and offices and how theyre used
273
IR intellectual
ideas created and how they can be used in the future
274
IR human
maintain staff levels and how to ensure key individuals remain
275
IR natural
resources, reusable energy,and technology from earth/wind
276
IR social
interact with the wider community, charity, advice and local businesses
277
6 guiding principals
```
strategic focus
stakeholder relationships
materiality
conciseness
reliability
and completeness
```
278
what should be included in the IR (8)
```
external environment
business model
risks and opportunities
strategy and resource allocation
performance
outlook
basis of preparation
governance
```
279
what is management commentary ?
it provides users of FS with historical and prospective commentary
280
IFRS practice statement on management commentary
its not an IFRS but suggests the commentary that should include narratice and numerate information
281
what is in the practice statement for management commentary (6)
```
nature of business
management objectives
strategies for achieving objectives
entitys most significant resources
results of operations
critical performance measures
```
282
interpretation of FS - stakeholder analysis
investors interested in profitability (SPL)
| lenders interested in liquidity and solvency (SOFP)
283
interpretation of FS - alternative performance measurements
EBITDA and EBITDAR (this ads in rental expenses)
don't take into account movement in working capital
284
traditional ratio analysis
```
ROCE
current ratio
acid test ratio
asset turnover
gearing ratio
```
285
gearing ratio
-
286
asset turnover
-
287
acid test ratio
-
288
current ratio
-
289
ROCE
ebit
------------
total assets- current liabilities
290
EPS
-
291
Ethics - ways in which directors can manipulate information
window dress year end of FS
inappropriate recording of transactions
exercise judgement in applying accounting standards
292
Ethics - why directors may try to manipulate information
increase pay
deliver specific targets
reduce risk of insolvency
reduce tax liabilities by understating revenue
improve appearance of a business prior to a disposal
293
3 areas where ethical issues could arise
leases - classified as short term
financial assets - impairment
intangibles - research and development
294
exam techniques for ethics part 1 / 4
explain any relevant accounting rules which have been breached
295
exam techniques for ethics part 2 / 4
mention that the directors actions aren't in line with ACCA code of ethics
296
exam techniques for ethics part 3 / 4
apply and explain which principals have been breached
integrity - not good conduct
professional competence - failed to be knowledgable on all the rules
professional behaviour - could discredit the directors profession if behave with misconduct
297
exam techniques for ethics part 4 / 4
consider where theres been a threat to objectivity where directors acted to maximise their own pay - self interest threat.
