International Accounting Standards (IASs)

Question 1

IAS 1

Answer 1

Presentation of Financial Statements

The standard states…..

1) Objective 2) financial position, Financial Performance 3) Useful in making decisions

“the objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users making economic decisions”

Question 2

IAS 2

Answer 2

Inventories

The principle of inventory valuation as set out in IAS 2…

• inventory should be valued at
• the lower of cost
• and net realisable value

Question 3

IAS 7

Answer 3

Statement of cashflows

Provides the guidelines for a format divided into three sections….

• operating activities (main revenue producing activities of the business together with payment of interest and tax)
• investing activities (acquisition and disposal of non-current assets, and other investments, together with interest and dividends received)
• financing activities (receipts from issue of new shares, payments to repay shares, changes in non-current borrowing, payment of dividends)

Question 4

IAS 10

Answer 4

Events after Reporting Period

1) Favourable or unfavourable events 2) Have been prepared 3) Before statements are authorised

“Events after the reporting period are favourable or unfavourable events that take place after the financial statements have been prepared at the year end and before the time when statements are authorised for issue to interested parties.

Question 5

IAS 12

Answer 5

Income taxes

Sets out the accounting treatment for taxes on income….

• Such as corporation tax (paid by UK companies based on profits)

Question 6

IAS 16

Answer 6

Plant, Property and Equipment

Sets out the accounting treatment for PPE.

• these are non-current tangible assets
• such as land and building, machinery, office equipment, shop fittings and vehicles

PPE definition

• tangible assets
• held for use in production and supply of goods
• expected to be used for more than one period

Question 7

IAS 17

Answer 7

Leases

Sets out the accounting treatment where assets are obtained for use by a business under….

• finance lease (all risks and rewards of ownership transferred to lessee)
• operating lease (no substantial transfer of risks and rewards of ownership to lessee)

Question 8

IAS 36

Answer 8

Impairment Of Assets

Sets out the accounting procedure to ensure assets are carried on the SFP at no more than their value or recoverable amount

• if recoverable amount is less than carrying amount
• carrying value is to be reduced
• this is an impairment loss
• show on SPL and other comprehensive income

Question 9

IAS 37

Answer 9

Provisions, Contingent Liabilities and Contingent Assets

The objective of IAS 37 is….

• to ensure appropriate recognition criteria and measurement bases are applied
• sufficient information is disclosed in the notes to financial statements
• to understand the nature, timing and amount

Question 10

IAS 38

Answer 10

Intangible Assets

Sets out the accounting treatment of expenditure on acquiring, developing, maintaining or enhancing intangible assets.

• scientific or technical knowledge
• design and implementation
• licences
• market knowledge
• trademarks (brand names)

Goodwill is not covered!