Module 19

Question 1

Accounting records must be sufficient to

Answer 1

• to show and explain the company’s transactions;
• to disclose with reasonable accuracy, at any time, the financial position of the company at that time; and
• to enable the directors to ensure that any accounts required to be prepared comply with the requirements of the CA 2006.

Question 2

Accounting records must, in particular, contain

Answer 2

• entries from day to day of all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place, and
• a record of the assets and liabilities of the company.

Question 3

If the company’s business involves dealing in goods, the accounting records must contain:

Answer 3

• statements of stock held by the company at the end of each financial year of the company;
• all statements of stocktaking from which any statement of stock has been or is to be prepared; and
• except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased,
showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified.

Question 4

How long should accounting records be kept?

Answer 4

• in the case of a private company, for 3 years from the date on which they are made;
• in the case of a public company, for 6 years from the date on which they are made.

Question 5

What is accounting reference date? (ARD)

Answer 5

the specific date the accounting reference period ends

Question 6

On which date does a company’s first financial year start and end?

Answer 6

• begins with the first day of its first accounting reference period; and
• ends with the last day of that period or such other date, not more than 7 days before or 7 days after the end of that period, as the directors may determine.

Question 7

Which date is the default first ARD for all newly formed companies?

Answer 7

the last day of the month in which the anniversary of its incorporation falls (e.g., a company incorporating on 10 October 20X7 would generally have its first accounting reference date on 31 October 20X8).

Question 8

How long does a company’s first accounting reference period

Answer 8

more than 6 months, but not more than 18 months, beginning with the date of its incorporation and ending with its accounting reference date.

Question 9

when should directors file accounts

Answer 9

• for a private company, 9 months after the end of the relevant accounting reference period; and
• for a public company, 6 months after the end of that period (4 months if listed)

Question 10

what’s the purpose of strategic report?

Answer 10

to inform members of the company and help them assess how the directors have performed their duty to promote the success of the company.

Question 11

The strategic report must contain

Answer 11

• a fair review of the company’s business; and
• a description of the principal risks and uncertainties facing the company.

Question 12

what can directors provide to shareholders instead of a full accounts and reports?

Answer 12

a copy of the strategic report together with the supplementary material

Question 13

The directors’ report for a financial year must state

Answer 13

• the names of the persons who, at any time during the financial year, were directors of the company
• the amount (if any) that the directors recommend should be paid by way of dividend, unless the company is entitled an exemption due to its size.

Question 14

if the company requires audit, the directors must a statement, approved by each directors at the time of the report, covering

Answer 14

• so far as the director is aware, there is no relevant audit information of which the company’s auditor is unaware; and
• the director has taken all the steps that ought to have been taken as a director in order to make themselves aware of any relevant audit information and to establish that the company’s auditor is aware of that information.

Question 15

directors report must be approved by who and signed by who?

Answer 15

approved by the board of directors and signed on behalf of the board by a director or the secretary of the company.

Question 16

On what occasion should directors approve accounts?

Answer 16

When they are satisfied that they give a true and fair view of the assets, liabilities, financial position and profit or loss.

Question 17

IFRS require that financial statements

Answer 17

shall present fairly the financial position, financial performance and cash flows of an entity

Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Conceptual Framework

Question 18

What is the central requirement for the preparation of financial statement in the UK

Answer 18

True and fair requirement

Question 19

FRC confirmed that what must be applied to ensure the financial statements give a true and fair view?

Answer 19

professional judgement

Question 20

Preparing financial statements cannot be reduced to a mechanistic following of the relevant accounting standards. What are the steps?

Answer 20

1. select appropriate accounting policies,
2. consider what is and what is not material, and
3. make judgements about things like valuation
   aimed at giving a true and fair view.

Question 21

In what situation can a management departs from a requirement of IFRS?

Answer 21

compliance with a requirement in an IFRS would be so misleading that it would conflict with the objective of financial statements set out in the Conceptual Framework
But only when the relevant regulatory framework doesn’t prohibit such departure

Question 22

When an entity departs from a requirement of IFRS, it must disclose

Answer 22

• that management has concluded that the financial statements present fairly the entity’s financial position, financial performance and cash flows;
• that it has complied with applicable IFRS, except that it has departed from a particular requirement to achieve a fair presentation;
• the title of the IFRS from which the entity has departed, the nature of the departure, including the treatment that the IFRS would require, the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in the Framework, and the treatment adopted; and
• for each period presented, the financial effect of the departure on each item in the financial statements that would have been reported in complying with the requirement.

Question 23

Departure from accounting standards may be referred to as

Answer 23

true and fair override

Question 24

FCA requirements addressed on this course include?
Applicable to entities listed on?

Answer 24

• Listing Rules; and
• Disclosure Guidance and Transparency Rules.

on the main market of the LSE.

Question 25

Companies listed on LSE required to provide additional documents, including

Answer 25

Corporate governance statement

Directors’ remuneration report

Going concern statement

Preliminary statement of annual results (optional)

Statement of dividends

Annual financial report

Half-yearly financial reports

Question 26

Companies with premium listing on LSE must report (CGC)

Answer 26

how they have applied the UK Corporate Governance Code.

Any separate corporate governance statement must be approved by the board of directors and signed on behalf of the board by a director or the secretary of the company.

Question 27

What should be included in director’s remuneration statement?

Answer 27

amounts of directors’ remuneration and relevant remuneration policies.

Question 28

What is a going concern for the business

Answer 28

business to continue in operation for the foreseeable future

Question 29

What’s included in going concern statement?

Answer 29

the appropriateness of adopting the going concern basis of accounting and their assessment of the prospects of the company.

Question 30

What is Preliminary statement of annual results

Answer 30

gives an indication of the annual results while awaiting finalisation of annual results.

Question 31

When a listed company publishes a preliminary statement of annual results?

Answer 31

• the statement must be published as soon as possible after it has been approved by the board;
• the statement must be agreed with the company’s auditors prior to publication;
• the statement must show the figures in the form of a table, including the items required for a half-yearly report,n consistent with the presentation to be adopted in the annual accounts for that financial year;
• the statement must give details of the nature of any likely modification or emphasis-of-matter paragraph that may be contained in the auditors’ report required to be included with the annual financial report; and
• the statement must include any significant additional information necessary for the purpose of assessing the results being announced.

Question 32

How soon should Statement of dividends be published and what details should be given?

Answer 32

As soon as possible after after the board has approved any decision to pay or make
any dividend

Should include:

• the exact net amount payable per share;
• the payment date;
• the record date where applicable (i.e., the cut-off date used to determine which shareholders are entitled to
receive dividends); and
• any foreign income dividend election, together with any income tax treated as paid at the lower rate and not
repayable.

Question 33

When should annual financial report be made public?
How long should it remain publicly available?

Answer 33

at the latest 4 months after the end of each financial year
it must remain publicly available for at least 10 years.

Question 34

What must be included in annual financial report

Answer 34

• the audited financial statements;
• a management report (strategic report) – including a fair review of the issuer’s business and a description of the principal risks and uncertainties facing the issuer; and
• responsibility statements – directors must state that:
A. the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer; and
B. the management report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Question 35

What is covered in half yearly financial report?

Answer 35

covering the first six months of the financial year

Question 36

How soon should half yearly financial report be made public?
How long should it remain publicly available?

Answer 36

as soon as possible, but no later than three months, after the end of the period to which the report relates.

for at least 10 years

Question 37

What should be included in half yearly financial report?

Answer 37

Similar as annual financial report:
Condensed financial statement
Interim management report
Responsibility statements

Question 38

Should half yearly financial report be audited or reviewed?

Answer 38

Doesn’t have to -
If no, should include statement clearly saying it’s not