1 - Statement of Financial Position & Notes to FS Flashcards
These are formal reports of the financial activities and position of an enterprise, organization, person, or other entity?
Financial statements
In what form is relevant financial information presented that presents a company’s financial health?
Structured form
What do shareholders use to evaluate the risk and return of their investment in the company and make investment decisions based on their analysis?
Financial statements
Who also uses the financial statements to assess the viability of investing in a company?
Prospective investors
Who needs financial statements in making informed decisions on providing credit to entities?
Creditors and suppliers
Who also uses them as tools to communicate the past performance of and future expectations from the company?
management
What is the basis of the presentation of financial statements in accordance with International Accounting Standards (IAS) 1?
(a) Components of financial statements(including SOFP as the beg. of the prior period that is required when an entity restates its comparative prior period fs)
(b) General features for the presentation of fs &
(c) Identification of fs
It is also called the statement of financial condition or the balance sheet?
Statement of financial position
What do you call the summary of an entity’s economic resources (assets), economic obligations (liabilities), and equity and their relationships to each other at a moment in time, which is the end of the reporting period?
SOFP
What is the detailed expression of the basic accounting equation?
Asset = liabilities + equity
The Statement of financial positions tells us about the firms?
(1) Economic resources,
(2) financial structure,
(3) liquidity,
(4) solvency, and
(5) it’s capacity(to adapt to changes in the environment in which it operates)
What consists of the financial position of an enterprise?
Assets, liabilities, and equity
They define an asset as a present economic resource controlled by an entity as a result of past events?
The IASB’s and FRSC’s Conceptual Framework
What do you call the resources that are controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise?
assets
What do you call a right that has the potential to produce economic benefits?
Economic resource
What rights are embodied in an asset that may correspond to an obligation of another party?
(a) rights to receive cash, goods or services
(b) right to exchange economic resources
What are the rights that do not correspond to an obligation of another party?
(a) right to use PPE, (b) right to sell inventories (c) rights to use intellectual property
It derives its value from a present potential to produce future economic benefits?
asset
In what following ways may assets flow to the entity?
(a) receiving cash or economic resource
(b) exchanging resource
(c) using the resource to produce good/service or enhance another asset
(d) allow others to use resource
(e) selling resources
(f) extinguishing liabilities
(g) distribute the resources to owners
What is a present obligation of an entity to transfer an economic resource as a result of past events?
Liabilities
What do you call the present obligations of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits?
liabilities
What are liabilities’ essential characteristics?
(a) the obligation of an entity
(b) obligation to transfer an economic resource
(c) present obligation arises from a past event
What do you call if the entity must not have an ability to avoid the obligation, which is a duty or a responsibility?
Obligation of an entity
What do you call that may be settled in the future by paying cash, delivering goods, providing services, exchanging economic resources on unfavorable terms(onerous), creating another obligation in replacement of the old, or issuing a financial instrument equivalent to ownership interest?
An obligation is to transfer an economic resource
In a past transaction, the entity has obtained economic benefits or taken action that obliges it to transfer an economic resource?
The present obligation arises from a past event
What is a term that broadly encompasses the capital of any form of business organization?
equity
What do you call the residual interest in the assets of the entity after deducting all of its liabilities?
Net assets
In a corporation, net assets are referred to as?
Stockholders’ equity or shareholders’ equity
What are the components of the shareholders’ equity that are presented in the statement of financial position?
Share capital, share premium (or additional paid-in capital), accumulated profits (or retained earnings), or cumulative OCI.
What should an entity disclose, either on the face of the statement of financial position or statement of changes in equity or in notes?
(a) each class of share capital
(b) description of nature and purpose of each reserve within equity
It is the actual intentions of the parties to a transaction?
Substance
Is the legal aspect of the legal document evidencing the transaction?
form
NORMALLY, the legal form of the transaction agrees with the ___?
Economic substance
What are others following that shall be considered in deciding whether additional line items shall be presented?
(a) nature & liquidity of assets
(b) functions of assets within the entity
(c) amounts, nature, and timing of liabilities
In the general requirement of IAS 1, in what way the assets and liabilities should be classified?
Current and noncurrent
The presentation on liquidity can also be used when the enterprise assesses that the presentation will become ___?
more reliable and relevant to the users
What is the classification of an entity for current assets?
(a) It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
(b) It holds the asset for the purpose of trading;
(c) It expects to realize the asset within 12 months after the reporting period
(d) The asset is cash or cash equivalent, unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
What is the time between the acquisition of assets for processing and their realization in cash or cash equivalents?
Normal operating cycle
What type of entity is the length of time to complete the following processes: purchase of materials, production of goods, sales of goods, and collection from customers?
Manufacturing entity
What type of entity is the time required to complete purchase of goods, sales of goods and collection from customers?
merchandising
What type of entity is the normal operation consisting only of providing services and collection from customers?
Service entity
The duration of the normal operating cycle is presumed to be?
12 months
They are intended to meet the working capital requirements of the enterprise and classified as assets?
Financial assets at fair value through profit or loss (FVPL)
The category of non-current assets includes?
Tangible, intangible, operating, and financial assets of a long-term nature
This includes all tangible assets with an estimated useful life of beyond one year, that are held for rental to others, for production of goods and services, and/or for administrative purposes?
Property, plant and equipment
These are assets used in the ordinary course of business?
PPE
It is a property (land or a building - or part of a building or both) held (by the owner of by the lessee under a finance lease) to earn rentals or for capital appreciation, or both rather than for use in the production or supply of goods or services or for administrative purposes, or sale in the ordinary course of the business.
Investment property
This refer to an investment in equity securities of another enterprise that provides the investor significant influence over the investee?
Investment in associates
The purpose of such investments is other than for trading and the holding does not the intend to dispose of the investment within twelve month from the date of acquisition?
Investment in associates
What do you call results from inter-period tax allocation and is recognized for deductible temporary differences between book basis and tax basis of certain assets and liabilities?
Deferred Tax Asset
These are set off against deferred tax liabilities and the net is presented on the statement of financial position if, and only if there is a valid basis for offsetting?
Deferred Tax Asset
They arise from taxes imposed by only one taxing authority?
deferred tax asset and deferred tax liabilities
What are financial assets?
(a) Cash
(b) contractual right to receive cash or other financial assets from another enterprise
(c) contractual right to exchange financial instruments with another enterprise under conditions that are potentially favorable
(d) equity instrument of another enterprise
What are the identifiable non-monetary assets, without physical substance, controlled by the enterprise, and provide the enterprise some rights, privileges, and competitive advantages?
intangible assets
What are typical examples of intangible assets?
Patents, copyrights, trademarks and franchises.
What do you think which arises from business combination and is measured as the excess of the purchase price paid by the acquiring company over the fair value of net identifiable assets of the purchased entity?
goodwill
It is generally shown in a separate line presentation to segregate those intangibles that do not meet criterion of identifiability?
goodwill
These are living animals and plants held by the company engaged in raising livestock, forestry, cropping, cultivating orchards and plantation, floriculture, or aquaculture?
Biological assets
Examples of biological assets and agricultural produce?
Sheep is a biological asset, while wool is agricultural produce; vines are biological assets while grapes are agricultural produce
What are the classifications of current liabilities?
- Expected to settle in the entity’s normal operating cycle
- Purpose of trading
- Settled within 12 months after reporting period
- Does not have an unconditional right to defer settlement of the liability for at least 12 months after 12 reporting period
How do you classify obligations related to the normal conduct of the entity’s central revenue producing activities?
Current liabilities
Why are other obligations not part of the normal operating cycle but are still classified as current liabilities?
Because they are due for settlement within 12 months of the end of the reporting period OR for the purpose of traded
What do you call long-term liability maturing within twelve months from the reporting date?
Current liabilities
How do you classify at the reporting date the entity that has the discretion to refinance or roll over the obligation for at least 12 months after the reporting period under an existing loan facility?
Non-current liabilities
It takes the form of either extending the maturity date or entering into a borrowing transaction with the same lender, proceeds of which will be used to settle the maturing obligation?
refinancing
The currently maturing obligation shall be reported as non-current only if the agreement to refinance is completed ___?
On or before the reporting date
If the agreement to refinance is completed after the reporting period, even before the issuance of the financial statement, the maturing obligation shall be classified as? And why?
Current, because as of the end of the reporting date, the enterprise does not have the right to defer the settlement of liability.
If an entity expects, and has the discretion, to refinance or roll over an obligation for more than twelve months after the reporting date under an existing loan facility, it classifies as?
Non-current, even if it would be due within short period
What is the classification when an entity breaches an undertaking under a long-term loan agreement on or before the reporting date with the effect that the liability becomes payable on demand, the liability is classified as?
Current, even if the lender has agreed, for issue not to demand payment as a consequence of the breach
What is the classification if the lender agreed at or before the reporting date to provide a grace period ending at least 12 months from that date, within which the entity can rectify the breach and during which the lender cannot demand immediate payment?
Non current
The following are the events disclosed as non-adjusting events in the notes to the financial statements?
(a) refinancing on long-term basis
(b) rectification of a breach of long-term loan arrangement
(c) rectify a breach of a long-term loan arrangement ending at least 12 months after reporting period
Where should the liability that has been excluded from current liabilities as a result of refinancing should be described and disclosed?
Notes to the financial statements
The general rule for the presentation of assets and liabilities on the face of the financial statements is to classify them into?
Current and noncurrent
An exception is when the enterprise believes that presentation based on liquidity provides information that is more?
More reliable and more relevant
What are the two methods adapted for the presentation of asset and liabilities under IAS 1 that requires for each asset and liability?
(1) amounts expected to be received or settled within 12 months from the reporting date
(2) amounts expected to be received or settled more than 12 months after the reporting date
What is the judgment on whether additional items are presented separately based on the assessment of?
(a) nature and liquidity of assets
(b) function of assets within the entity
(c) amounts, nature and timing liabilities
What are the three known forms of presenting the statement of financial position?
Report form, account form, or financial position form?
What kind of form where assets, liabilities, and equity are shown in that order in a vertical manner, which is followed by liabilities and equity are immediately followed below by asset presentation?
Report form
This form allows a T-account format where assets are shown on the left side, while liabilities and equity are shown on the right side of the statement of financial position?
Account form
This form emphasized the working capital position of an enterprise?
Financial position form
This a form presented in vertical form, the current liabilities are deducted from current assets to derive working capital?
Financial position form
What do you classify the events after the reporting period?
(1) adjusting events after the reporting period
(2) non-adjusting events after the reporting period
Since all of the relevant financial information pertaining to a company’s activities cannot be disclosed directly on the face of the financial statements, additional disclosed are made in accompanying notes, the notes shall:
(a) Present information about the basis of preparation of the financial statements and the specific accounting policies used
(b) Disclosed the information by IFRS that is not presented on the face of the SOFP, SOCI, SOCE or SOCF
Provide additional information that is not presented on the face of the financial statements, but is relevant to an understanding of any of them
The notes shall be arranged in?
Logical sequence, cross referenced and properly numbered
What are the orders normally presented for notes, which assists users in understanding the financial statements and comparing them with financial statements of other entities?
(1) Statement of compliance with IFRS
(2) Summary of significant accounting policies applied
(3) Supporting information for items presented on the face if the SOFP,SOCI SOCE, & SOCF in the order which each statement and each line item is presented
(4) Other disclosures, including:
a. Contingent liabilities, and unrecognized contractual commitments
b. Non-financial disclosures
