8 Flashcards
What is IAS 1 presentation objective and purpose
Objective - basis for presentation of general purpose financial statements, requirements for presentation of financial statements, guidelines for the structure and minimum requirements for their content.
Purpose – to give useful information to investors in particular to help and make economic decisions
What is fair presentation
Requires faithful representation of effects of transactions, other events and conditions. In extremely rare circumstances in which management concludes that compliance with a requirement in a standard or an interpretation would be so misleading, entity shall depart from that requirement
What is going concern
Financial statements shall be prepared on a going concern basis unless management either intends to liquidate entity or to cease training or has no realistic alternative but to do so
What is accrual basis
Entity shall prepare its financial statements except for cash flow information using accrual basis of accounting
What is offsetting
Assets, liabilities, income and expenses shall not be offset unless required or permitted by a standard or an interpretation. It’s important that they are reported separately
What is consistency
Entity shall retain presentation and classification of items in financial statements from one period to next
What statements are included in presentation
Statement of financial position
Statement of profit or loss and other comprehensive income
Statement of changes in equity
Statement of cash flows
What are the gains and losses on foreign currency
Transactions
Unsettled monetary balances
Settlement of monetary balances
Financial statements of foreign subsidiaries
Which items go into other comprehensive income under IFRS

Currency gains/losses on foreign subsidiaries
Revaluations on PPE and some financial assets
Pension remeasurements
What does the statement of changes in equity include
Total from statement of profit and loss and other comprehensive income
Policy changes and error corrections
Contributions from and distribution to owners (dividends)
What is earnings per share
Ratio gives idea of what business has achieved during year for benefits of all ordinary shareholders divided by number of such shares. Earnings is net profit available to ordinary shareholders. In mini companies, this is profit or loss, profit before other comprehensive income. Some companies have issued preference shares so preference dividends paid should be deducted in calculation of earnings in order to calculate profit available for ordinary shareholders. 
What does price/earnings ratio represent
How much must be paid in order to acquire 1 share
What is cash and cash equivalents
Cash compromises cash on hand and demands deposit. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value
What are the three main headings of cash flow statements
Operating, investing, financing
What is the cash flow statement
Reports cash flows during period classified by operating, investing and financing activities. Direct method (gross cash) or indirect method (adjusted income statement)
How do you measure operating cash flow
Measure cash coming from customers paid to suppliers however companies choose to start with net profit figure and then adjust for all income and expense that was not in cash. For example, since depreciation and impairment were deducted in calculating net profit, they must be added back in order to calculate operating cash flows
How can interest and dividends be classified
Cash flows from interest and dividends received and paid shall each be disclosed separately. Each shall be classified in a consistent manner from period to period as either operating, investing or financing activities. Non-cash transactions should be disclosed elsewhere, not in cash flow statement
What are accounting policies
Specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.
Implementation guidance should be considered but is not a requirement – when IFRS specifically applies to a transaction, other event or condition, accounting policy or policies apply to that item shall be determined by applying IFRS.
Guidance that is an integral part of IFRS is mandatory. Guidance that is not an integral part of IFRS does not contain requirements for financial statements.
Selection of policies immaterial departures 
Immaterial departures allowed unless designed for a particular effect – Those policies need Not to be applied when effect of applying them is immaterial. However, it is inappropriate to make, or leave uncorrected, immaterial departures from IFRSs to achieve a particular presentation of entities financial position, financial performance or cash flows
Selection of policies choose policies
Choose policies by reference to framework and any analogous standards – in absence of a standard or an interpretation that specifically applies to a transaction, other events or condition, management shall use its judgement in developing and applying in accounting policy.
May use standards or other bodies if no standard is applicable.
Apply policies consistently to similar transactions
When are changes in policies allowed
When required by an accounting standard or give me us more relevant information. Changes in measurements are covered by IAS 16/38. There are two ways of doing change retrospective (change applies to past too) prospective (from now on). Change caused by an IFRS should follow rule in that IFRS – IFRS 16 – nearly all leases including old ones became finance leases. Other changes apply retrospectively unless impracticable. Impracticable If f(x) not determinable previous intent has to be estimated or impossible to estimate the past then disclose reasons, amounts, effect on comparative. Double entry for retrospective adjustment is via statement of changes in equity
What are changes in estimates
As a result of uncertainties in business activities, many items and financial statements cannot be measured with precision but can only be estimated.
Estimation involves judgements based on latest available, reliable information. When in doubt, the change is a change of estimates not the policy – perspective. Includes effects in current periods, and future periods where relevant. Include in same line as estimates. Disclose nature and amount.
What is correction of errors
Retrospective correction unless impracticable. An entity shall correct material prior period errors retrospectively in first set of financial statements authorised for issue after their discovery by restating comparative amounts for prior periods presented in which error occurred or if error occurred before restating opening balance of assets liabilities and equity finance prior period presented. Double entry for retrospective adjustments via statement of changes in equity. Disclose the nature and amount.
