Preparing Financial Statements Flashcards
What workings do we need to calculate for all FS?
W1 - costs
W2 - revaluation surplus
W3 - building depreciation
W4 - convertible bonds
W5 - plant recoverable amount
W6 - RE
How do you work out costs?
3 types of costs needed
COS =
COS
Inventory impairment (closing inventory - new net realisable value)
Building depreciation (building revaluation/ no. of years of useful life) *if says to include
Distribution costs =
Distribution costs in trial balance
Admin costs =
Admin costs in trial balance
Accrued admin costs **(if given any accruals)
How do you work out revaluation surplus?
For land or building =
Sum of Revalued amount - current cost
Current cost = amount in trial balance - any acc. dep for item
How do you work out building depreciation?
Revalued amount/ no. of useful years
How do you work out convertible bonds?
Whole PV = amount of convertible bond issued
Coupon rate = amount given for cash payments
Market rate = used for discount factor
Year (goes to no. of years bond issued for)
Cash payments (bond amount * coupon rate) to give amount for yearly cash flows (last year = normal cash payment + whole bond amount)
Discount factor = cash flows/ 1+ market rate (to the power of no. of years)
PV = Cash payments * discount factor
Liability component = sum of all PVs
Equity component = bond amount - liability component
How do you work out plant recoverable amount?
Impairment = plant amount - plant acc. dep. - recoverable amount
How do you work out retained earnings?
Trial balance RE
Plus: profit after tax
Less: dividends
Layout the Statement of comprehensive income
*for year ended…
Income
Less: COS
Gross profit
Less: distribution costs
Less: administration costs
Less: impairment loss (any item with new recoverable amount not included in COS)
Operating profit
Less: finance cost
Profit before tax
Taxation (amount in trial balance - any deferred tax liability declined)
Profit after tax
Other comprehensive income:
Items will not be reclassified:
Net revaluation surplus (revalued amount - cost in trial balance - depreciation) (summed)
Total comprehensive income
Layout the Statement of financial position
*as at…
Non current assets
Land (new revalued amount)
Buildings (revalued amount)
Less: acc. dep. on building
NBV building
Plant (trial balance)
less: acc. dep. of plant
Less: acc. impairment
NBV plant
Total NCA
Current assets
Closing inventory (trial balance - impairment of inventory) *should equal new revalued amount
Receivables
Bank (trial balance + amount of convertible bond issued)
Total current assets
Total assets
Non current liabilities
Debentures
Convertible bonds (liability component)
Total non current liabilities
Current liabilities
Payables
Deferred tax (trial balance - deferred tax liab. declined)
Accruals (any given in notes)
Total non current liabilities
Total liabilities
Equities
Ordinary class A share capital
Ordinary class B share capital (trial balance + equity component of convertible bonds)
Retained profit calculated
Revaluation surplus (from OCI)
Total equities
Total equities + liabilities
Layout the statement of changes in equity
Along the top =
Ordinary class A share capital
Ordinary class B share capital
Retained profit
Fixed assets revaluation surplus
Total
Along the side =
Beginning of year (all from trial balance)
Convertible bond equity component (put equity component in ordinary class B share cap.)
Profit after tax (from OCI, put in retained profit)
Less: dividends (put in retained profit)
Revaluation surplus (put in reval. surplus)
Total (add all up)
What to do if ‘No holders elect for the conversion’?
Instead of adding the convertible bond amount to the bank amount, take it away instead.
Bank = convertible bond amount - bank
What to remember for Non-current assets: land, building and plant?
Land = revalued amount
Building = revalued amount - dep. we calculated
Plant = TB amount - acc. dep. - impairment
- for plant only we should end up with the NBV equal to the carrying amount.
