Week 1 - Presentation Of Financial Statements

Question 1

Who is responsible for preparing financial statements?

Answer 1

Directors

Question 2

According to IAS1, what is the objective of general purpose financial statements?

Answer 2

To provide information abut financial position, performance and cash flows of an entity so it can be useful to a wide range of users

Question 3

What are the components of financial statements?

Answer 3

Statement of financial position
Statement of profit or loss
Statement of changes in equity
Statement of cash flows
Notes

Question 4

Should inventory and property, plant and equipment be disclosed separately?

Answer 4

Yes

Question 5

Why may a company consider changing to preparing their financial statements under IFRS?

Answer 5

• There are legal or stock exchange requirements to use IFRS since 2005
• There are benefits to the company from using IFRS - from time to time companies need to attract new capital from outside investors

Question 6

What is the key difference between current and non-current assets?

Answer 6

Non-current assets are expected to provide economic benefit beyond a year and current assets are realised within a year

Question 7

Under IAS 2, inventories should be measured at the lower of…

Answer 7

Cost or net realisable value

Question 8

Why is materiality (Hint: privacy) important in financial reporting?

Answer 8

It ensures that only information affecting the user’s decisions is disclosed

Question 9

What does the concept of prudence in financial reporting suggest?

Answer 9

Avoiding overstatement of the financial position

Question 10

Under IAS 7, what is classified as an operating cash flow?

Answer 10

Interest received

Question 11

The IASB requires all entities which comply with international standards to produce financial statements. True or False?

Answer 11

False

Question 12

What does the framework define an asset as?

Answer 12

A resource controlled by an entity as a result of past events and in which future economic benefits are expected to flow

Question 13

What does the framework define a liability as?

Answer 13

A present obligation of the entity arising from past events

Question 14

What are the elements; income and expenses, defined as?

Answer 14

Income - increases in assets or decreases in liabilities that result in increases in equity

Expenses - decreases in assets or increases in liabilities that result in decreases in equity