3. Published financial statements of limited companies (IAS1)

Question 1

Statuary accounts

Answer 1

Required to be produced under company law and a copy to be filed with the Registrar of Companies

Question 2

Complete set of financial statements includes

Answer 2

• Statement of Profit and Loss and other comprehensive income
• Statement of Financial Position
• Statement of Changes in equity
• Statement of Cash Flow
• Accounting policies and explanatory notes
• Comparative information for the preceding period

Question 3

Annual reports and accounts (Corporate report)

Answer 3

Corporate report of the company available to shareholders:
- Financial statements
- Director’s report
- Auditor’s report

Question 4

IAS 1. Presentation of Financial Statements Objective

Answer 4

To set out how financial statements should be presented to ensure comparability with previous accounting periods and with other entities.

Question 5

Objective of financial statements (IAS 1.)

Answer 5

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.

Question 6

Objective of financial reporting (Conceptual framework)

Answer 6

To provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.

Question 7

IAS 1 requirements

Answer 7

• Entity produces information about assets, liabilities, equity, income and expenses, contributions by, and distributions to, owners, and cash flows.
• All statements must be given equal prominence in the published accounts.
• Statements must be clearly and prominently displayed, separately from other information in the accounts.
• Accounts must be prepared at least annually.

Question 8

IAS 1 requires compliance with accounting concepts

Answer 8

• Going concern.
• Accruals basis of accounting
• Materiality and aggregation (separate presentation of each material class of similar items, and aggregation of non-material items).
• Offsetting assets and liabilities is not permitted.
• Comparative information.

Question 9

Statement of profit or loss and other comprehensive income (IAS1 requirements)

Answer 9

• IAS1 requires these items: Revenue, Finance Cost, Tax expense, Other comprehensive income for the year.
• Expenses analysed by nature or function.
• The statement of comprehensive income may be shown together with the profit or loss in one statement, or as two separate statements

Question 10

The statement of changes in equity information to be given (IAS1 requirements)

Answer 10

• Total comprehensive income for the period
• Dividends paid to shareholders
• For each item a reconciliation between opening and closing balances

Question 11

Statement of Financial Position (IAS1 requirements)

Answer 11

• Separate out current and non-current assets and liabilities
• Specifies the items to be shown as a minimum.
• Disclosures about share capital: number of shares issued and payment status, par value per share.

Question 12

Auditor’s report

Answer 12

Gives the auditor’s opinion on the company’s financial statements as to whether they give a true and fair view of the financial position of the company.
Unqualified if prepared properly / Qualified if not.

Question 13

Accounting policies (IAS1)

Answer 13

Specific accounting methods selected by the directors and used by the company in the preparation of financial statements.
IAS1 requires disclosure of these as part of the notes.