9. Presentation of FS

Question 1

What are the objectives of financial reporting – why do entities prepare financial statements?

Answer 1

General purpose is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in their decision making.

Question 2

What are the financial statements required for limited companies under IAS 1 Presentation of Financial Statements?

Answer 2

• Statement of profit or loss and other comprehensive income
• Statement of financial position
• Statement of changes in equity
• Statement of cash flows
• Notes to the financial statements

Question 3

What are the key considerations for preparing and presenting the financial statements?

Answer 3

1. Frequency
2. Aggregation
3. Consistency of presentation
4. Comparative information

Question 4

What are the presentation requirements for the SPLOCI under IAS 1?

Answer 4

You must have the following headings:
 Revenue
 Finance costs
 Profit before tax
 Tax expense
 Profit for the period (year)
 Total other comprehensive income for the period (year)
 Comprehensive income for the period (which is the profit plus other comprehensive income added together)

Question 4

What is the purpose of the SPLOCI?

Answer 4

To provide information about an entities financial performance in a year.

Question 5

What is the purpose of the SOFP?

Answer 5

To present the assets, liabilities and equity of the entity as at the reporting date to assist users in evaluating the financial position of an entity.

Question 5

What is the 4 step process for preparing an SOFP?

Answer 5

Step 1 - Create your pro-forma with the name of the company, the name of the financial statement and the date. Remember that the SOFP represents the position at the end of the reporting period so it will be ‘as at [REPORTING DATE]’.

Step 2 - Identify the items in the trial balance that will be used in the SOFP – assets, liabilities and equity.

Step 3 - Work through any additional information given in the question to make any adjustments using the final trial balance model that you learnt in the module Adjusting the Nominal Ledger and Completing the Accounting Cycle.

Step 4 - Prepare the SOFP.

Question 6

What is the 4 step process for preparing a SPLOCI?

Answer 6

Step 1 - Create your pro- forma with the name of the company, the name of the financial statement and the date. Remember that the SPLOCI will cover the whole reporting period so it will be ‘for the year ended [REPORTING DATE]’.

Step 2 - Identify the items in the trial balance that will be used in the SPLOCI – income, expenses, gains and losses.

Step 3 - Work through any additional information given in the question to make any adjustments using the final trial balance model that you learnt in module on Adjusting the Nominal Ledger and Completing the Accounting Cycle.

Step 4 - Prepare the SPLOCI.

Question 7

What are the presentation requirements for the SOFP under IAS 1?

Answer 7

That the list of items should be listed as they represent different nature and functions.

Items:
 Property, plant and equipment
 Inventories
 Trade and other receivables
 Cash and cash equivalents
 Trade and other payables
 Current tax liabilities (taxation payable)

Question 8

What are the trial balance and period-end adjustments?

Answer 8

Correcting journal entries to ensure everything is accounted for in that accounting period.

e.g. accruals, prepayments, closing inventories, bank interest, taxation.

Question 9

What are the typical workings you would need to do to the balances in the SoFP?

Answer 9

• PPE = Cost - Accumulated depreciation
• Trade and other receivables = TR - Allowance for doubtful debts
• Retained earnings = Opening Retained earnings + Profit for year - Dividends paid + Any transfers from revaluation surplus