Thursday, August 30, 2012

Framework for the preparation and presentation of financial statements


IAS 1 PRESENTATION OF FINANCIAL STATEMENTS

The objective of IAS 1 (revised 1997) is to prescribe the basis for presentation of general purpose financial statements based on International Financial Reporting Standards. [IAS 1.2]
Objective of Financial Statements The objective of general purpose financial statements is to provide information about the financial position, financial performance, and cash flows of an entity that is useful to a wide range of users in making economic decisions. To meet that objective, financial statements provide information about an entity's: [IAS 1.7]
  • Assets.
  • Liabilities.
  • Equity.
  • Income and expenses, including gains and losses.
  • Other changes in equity.
  • Cash flows.
Components of Financial Statements A complete set of financial statements should include: [IAS 1.8]
  • a statement of financial position at the end of the period,
  • a statement of comprehensive income for the period,
  • a statement of changes in equity for the period
  • statement of cash flows for the period, and
  • notes, comprising a summary of accounting policies and other explanatory notes.
Fair Presentation and Compliance with IFRSs
·         The financial statements must "present fairly" the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events, and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework. The application of IFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. [IAS 1.13]
·         IAS 1 requires that an entity whose financial statements comply with IFRSs make an explicit and unreserved statement of such compliance in the notes. Financial statements shall not be described as complying with IFRSs unless they comply with all the requirements of IFRSs (including Interpretations). [IAS 1.14]
·         Inappropriate accounting policies are not rectified either by disclosure of the accounting policies used or by notes or explanatory material. [IAS 1.16]
·         IAS 1 acknowledges that, in extremely rare circumstances, management may conclude that compliance with an IFRS requirement would be so misleading that it would conflict with the objective of financial statements set out in the Framework. In such a case, the entity is required to depart from the IFRS requirement, with detailed disclosure of the nature, reasons, and impact of the departure. [IAS 1.17-18] 

Tuesday, August 7, 2012

IFRS 9 Financial Instruments

The first part of two articles considers the definition of accounting for financial instruments. It establishes how those issuing financial instruments need to classify these as either financial liabilities (eg loans and bonds) or equity instruments (eg ordinary shares)
                     DOWNLOAD ACCA TECHNICAL ARTICLE : PART 1

The second part of this article considers accounting for financial assets, and includes a focus on debt instruments and equity instruments.
                     DOWNLOAD ACCA TECHNICAL ARTICLE : PART 2

Friday, August 3, 2012

IAS 38 INTENGIBLE ASSETS

An intangible asset is an identifiable non-monetary asset without physical substance.

Research and development expenditure

Definition

Research       -investigation undertaken to gain new scientific knowledge and understanding

Development -application of research findings before the start of the commercial production or use

Accounting treatment
Research costs                - write off to income statement
Development costs          - capitalize if criteria met
Note: Amortize capitalized development costs over useful life

Download ACCA Technical Article on  Research and development expenditure