Financial Statements PFRS18/PAS 1 Flashcards
_____ means by which information accumulated and process in financial accounting is periodically communicated to the users
Financial statements
______ are the statements intended to meet the needs of users who are not in a position it require an entity to prepare reports tailored to their particular information needs
General purpose financial statements
General purpose financial statements are directed to all ___
Common users and not to specific uses
PFRS 18 known as presentation and disclosure in financial statements that previously known as PAS 1 provides that a complete set of financial statement comprises:
- Statement of financial position
- Statement of financial performance
- Statement of changes in equity
- Statement of cash flow
- Notes to financial statements
- Comparative information with respect to the preceding period
- Statement of financial position as the beginning of the preceding period
Primary financial statements comprises:
- Statement of financial position
- Statement of financial performance
- Statement of changes in equity
- Statement of cash flow
What is the objective of financial statement?
It is to provide information about the financial position financial performance and cash flow of an entity that is useful to a wide range of users in making economic decisions
What are the limitations of financial statements?
A. It do not and cannot provide all of the information needed
B. It is not designed to show value of a reporting entity but these reports help primary users estimate the value of the entity
C. It is intended to provide common information to users and cannot accommodate every specific request
D. It is based on estimates and judgment rather than exact depiction
Who has the primary responsibility for the preparation and presentation of financial statements?
Management of an entity
Financial statements also show the results of the management ___
Stewardship of the resources and entrusted to it
Financial statement should be clearly identified and distinguish from other information the following info should be prominently displayed:
A. The name of the reporting entity
B. Whether the financial statements cover the individual entity or group of entities
C. The end of reporting period or the period covered by the financial statements or notes
D. The presentation currency
E. The level of rounding use in the amounts in financial statements
What are the general features of financial statements?
Consistency of presentation
Accrual basis
Comparative information
Aggregation and disagregation
Frequency of reporting
Offsetting
This means that income is recognized when earn regardless of when received and expenses recognize when incurred regardless of when paid
Accrual accounting
An empty tissue present a complete set of financial statement at least ___
Annually
When entity changes the end of the reporting period for a period longer or shorter than one year, the entity shall disclose:
A. Period covered by the financial statement
B. Reason for using longer or shorter period
C. Fact that amounts presented in the financial statements are not entirely comparable
Except when ______ otherwise by standard an entity shall disclosed comparative information in respect of the previous period for all amounts reported in the current periods financial statement. (E.g details of legal dispute)
Permitted (optional) or required (mandatory)
The principle of consistency requires that the accounting methods and practices shall be ___
Applied on a uniform basis from one period to the next period
A change in the presentation and classification of items in financial statement is allowed:
A. When it is required by an another standard
B. when significant change in nature of operation of the entity will demonstrate a more appropriate revised presentation and classification
If entity changes the presentation or classification of item in its financial statement it shall :
A. Reclassify comparative amounts- disclose the nature and reason for reclassification
B. When impracticable- disclose the reason and nature of adjustment that would have been made
Third statement of financial position is required when an entity?
A. Applies accounting policy retrospectively
B. Make retrospectives restatement of item in financial statement
C. Reclassifies items in financial statement
An entity shall present three statement of financial position as at:
- End of the current period
- End of previous period
3.; beginning of the earliest comparative period
Asset and liabilities and income and expenses when material shall not be ____
Offset against each other
Examples of offsetting
A. Gain or loss on disposal of asset is reported by deducting from the proceeds the carrying amount of assets
B. Foreign exchange gains and losses or gains and losses arising from trading securities are netted against each other
Not example of offsetting
A. Accounts receivable may be presented net of allowance
for doubtful accounts
B. Property plant and equipment net of accumulated depreciation
___ is the adding together of asset liabilities equity income expenses and cash flows that have similar characteristics and included in the same classification
Aggregation
__ sorting of assets liabilities equity income and expenses and cash flows based on similar characteristics
Classification
___ is the separation of an item into component parts that have similar characteristics
Disaggregation
Examples of aggregation
Cash on hand cash fund cash in bank and cash equivalent shall be presented as one item— cash and cash equivalent
Examples of disagregation
Financial assets should be disaggregate as financial assets held for trading financial assets at fair value through other comprehensive income and financial asset at amortized cost
The standard requires that the aggregation and disaggregation shall ensure that the financial statements do not __
Obscure material information
: What is the purpose of financial statements?
Provide information about financial position, performance, and cash flows.
Assist users in making economic decisions.
What are the components of a complete set of financial statements?
Statement of Financial Position.
Statement of Total Comprehensive Income.
Statement of Changes in Equity.
Statement of Cash Flows.
Notes to the Financial Statements.
What are the general features of financial statements?
Fair Presentation: Compliance with PFRS.
Going Concern: Assumes the entity will continue for at least 12 months.
Accrual Basis: Recognizes income/expenses when they are earned/incurred.
Consistency: Presentation should remain consistent unless justified.
What is included in the statement of financial position?
Assets: Current (e.g., cash, inventory) vs. Non-current (e.g., PPE, intangibles).
Liabilities: Current (due within 12 months) vs. Non-current (due after 12 months).
Equity: Includes issued capital and reserves.
: What does the statement of comprehensive income show?
Categories: Operating, Investing, Financing, Taxes, and Discontinued Operations.
Expense Presentation: By function (e.g., cost of goods sold) or nature (e.g., depreciation).
What is the statement of cash flows?
Prepared under PAS 7, showing inflows and outflows for operating, investing, and financing activities.
What is included in the notes to the financial statements?
Basis of preparation and accounting policies.
Disclosures required by IFRS.
Information relevant for understanding the financial statements.
