Lecture 16 - Published Accounts Of Companies

Question 1

The annual reports for a company can be broken down into two main sections, what are they?

Answer 1

1. The financial data.

2. The narrative.

Question 2

The format of the statement of comprehensive income and the balance sheet must comply with…

Answer 2

IAS 1 and/or national statutory requirements

Question 3

The minimum information content on the face of the statement of comprehensive income includes:

Answer 3

• revenue
• finance costs
• impairment losses
• share of profit or loss of associate ventures
• profit or loss
• total comprehensive income

Question 4

IAS 1 requires an entity to present an analysis of expenses classified either by their…

Answer 4

Function or nature

Question 5

Classifying expenses by function refers to…

Answer 5

Grouping expenses such as manufacturing, research and development and admin into groups such as Cost Of Sales, administrative expenses and Distribution Costs

Question 6

Classifying expenses due to their nature refers…

Answer 6

To grouping expenses into nature’s such as depreciation, amortization, raw materials etc

Question 7

If an entity chooses to analyze expenses by function, they must also provide…

Answer 7

Additional information on the nature of the expenses

Question 8

If expenses are grouped by function, administrative costs refer to… and include…

Answer 8

All other costs arising from ordinary activity but not classified as either COGS or distribution costs.

Included in administrative costs are:

• salaries
• pensions
• costs associated with the premises
• amount written off the receivables
• professional fees

Question 9

‘Other income or expense’ refers to…

Answer 9

Income or expense derived from ordinary activities that are not normally included in the revenue or other cost figures and includes things such as royalties and commissions.

Question 10

If items of income or expense are material…

Answer 10

An entity shall disclose their nature and amount separately

Question 11

Examples of items that require separate disclosure include…

Answer 11

• the write down of assets
• restructuring activities
• Disposal of PPE
• discontinued operations
• litigation settlements

Question 12

What is the definition of ‘discontinued operations’?

Answer 12

Operations that represent a major line of business or geographical area that are no longer running. An operation is classified as discontinued when the carrying amount will be recovered principally through a sale rather than continuing use and it is available for immediate sale.

Question 13

In regards to discontinued operations, what 2 figures must be included?

Answer 13

1. Post-tax profit or loss on discontinued operations.

2. Post-tax gain or loss on measurement to “fair value less cost of sale”.

Question 14

IAS 1 does not stipulate a single way for the balance sheet to be organized however, give one example of how some firms do organize it

Answer 14

In order of liquidity

Question 15

Name 5 things that must be included in the balance sheet

Answer 15

• PPE
• investment property
• intangible assets
• financial assets
• trade and other receivables
• inventories
• cash and cash equivalents
• provisions

Question 16

What is the U.K. format of the balance sheet?

Answer 16

Fixed assets + current assets - current liabilities = total assets less current liabilities - non current liabilities = total net assets = shareholders equity

Question 17

Under IFRS 14, firms with different segments are required to report segments on 2 bases, what are they?

Answer 17

1. Related products and services

2. Geographical area

Question 18

Information on a segment must be presented if the value of its…

Answer 18

Sales, profit or loss or assets exceed 10% of all operating segments

Question 19

Give two cons of disclosing commercially sensitive information about segments.

Answer 19

1. Competitors can identify areas of high or low profitability.
2. Unions can ‘drill down’ in the same way

Question 20

What is the ‘statement of changes in equity’?

Answer 20

The statement of changes in equity reports all movements that can affect the change in shareholders equity during the period p

Question 21

The statement of changes in equity includes information pertaining to:

Answer 21

• total comprehensive income
• changes in accounting policy that effect the way equity is calculated
• dividends paid during the year
• changes in share capital (new issue, share options granted, repurchase of shares)