Acca: Balance Sheet and F 7 Financial Reporting Essay examples

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Summary of key provisions of IAS & IFRS which may be relevant to ACCA financial reporting and audit papers for 2013 examinations
Note – you may want to refer to your ACCA Paper F7 Financial Reporting and P2 Corporate Reporting study materials for further detailed information. Note – you should not rely upon this document for knowledge and understanding of all aspects of these reporting standards and other examinable documents; rather they should be used as an aid or as a prompt to your studies.

2010 Conceptual Framework for Financial Reporting • Relevant for both F7 Financial Reporting and P2 Corporate Reporting • Objectives: • Meets the needs of a range of users • Financial performance as per SOCI • Financial position as per SOFP • reporting entity: • Separate legal entity • Commercial substance of corporate group • qualitative characteristics: • fundamental characteristics of relevance and faithful representation • enhancing characteristics of comparability, verifiability, timeliness and understandability • elements of financial statements: • Assets – rights to future economic benefits as a result of a past transaction or event • Liabilities – future obligations to transfer economic benefits as a result of a past transaction or event • Equity – residual interest in an entity’s assets after deduction of all liabilities • Income – the increase in economic benefits during an accounting period • Expanses – decreases in economic benefits during an accounting period • recognition in financial statements: • Recognise if it meets the definition of an element of the financial statements, it is probable that there will be an inflow or outflow of economic benefits and it can be reliably measured. • measurement in financial statements • Usually historical cost or fair value, but could be present value or amortised cost • presentation of financial information – useful to users of FS • Primary statements plus disclosure notes • accounting for interests in other entities • Single company, associate and joint venture, subsidiary and group

Tony Sweetman – Kaplan Publishing & Kaplan Financial December 2012

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Note that the Conceptual Framework for Financial Reporting was published in September 2010 and becomes an examinable document for 2012 examinations. There is little change so far in comparison with the previous framework document – in effect, definitions etc have been carried forward to the 2010 Framework document, although there has been some change re qualitative characteristics. Note also that the 2010 Framework is part of a long-term convergence project between the IASB and US FASB, so the above content may change at some future date.

IAS 1 – Presentation of financial statements • Provides formats for classification and presentation of financial information • Identifies components of financial statements • Note items of OCI must now be classified as either items that may be reclassified to profit or loss in future periods, or those items which will not be reclassified in future periods

IAS 2 - Inventories • Valued at lower of cost and fair value less selling costs (i.e. NRV) for each separate item or product • Include all costs of getting item or product to current location and condition

IAS 7 – Statement of cash flows • Standard format – choice between direct or indirect method – indirect normally used • Three standard headings = operating, investing and financing – within standard heading, items can be in any order • Normally begin operating activities with profit before tax and adjust for non-cash items

IAS 8 – Accounting policies, changes in accounting estimates and errors • Accounting policies should be appropriate and relevant, be consistently applied and be disclosed • Changes in estimates are taken to SOCI – e.g. change in depreciation method or revised estimate of NRV • Changes in accounting policy and fundamental errors should be accounted for as a Prior Period Adjustment to re-state the opening…