Week 2 - Preparation of company accounts Flashcards
Ordinary vs Preference shares
*Authorised share capital - the maximum amount of relevant shares that can be issued by a co.
^Companies Act 2006 abolished this concept for companies incorporated in the UK
Ordinary shares
1. Carry the main risk
2. {usually but} May not necessarily have voting rights. for co. to retain power
Preference shares
1. Usually have fixed rate % of dividend
2. Usually no voting rights
Loan providers have 1st priority in getting paid, then preference shareholders, finally ordinary shareholders
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance - How are government grants presented in the SOFP & in the SOCI? (2 ways)
*1. Either set up grant as a DEFERRED INCOME (liability)!
- recognised in profit/loss on a systematic basis over the useful life of the asset
- Or by deducting the grant in arriving at the CARRYING AMOUNT of the asset
- recognised in profit/loss over the life of a depreciable asset as a reduced depreciation charge
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance - Government grants related to assets & Grants related to income
A govt. grant is NOT recognised until…
- Grants related to assets
- government grants whose primary condition is that an entity qualifying for them should purchase, construct, or otherwise acquire long-term assets
> helpful for biz as gov subsidises assets for them - Grants related to income
- government grants other than those related to assets - A government grant is not recognised until there is REASONABLE ASSURANCE that the entity will COMPLY with the conditions attaching to it, and that the grant will be RECEIVED.
IAS 10 Events after the Reporting Period - 4 examples of adjusting events (an ADJUSTMENT is required to be made to fin. stt.s)
- After-SOFP-date sale of inventory provides evidence that NRV at reporting date (SOFP date) is lower than cost
- b/c IAS 2 Inventories requires inventories to be stated at the lower of cost and net realisable value - Final year dividends declared and RECOGNISED as an OBLIGATION
- The REVALUATION of a NON-CURRENT ASSET that indicates likelihood of impairment at reporting date
- Discovery of fraud/errors that show that the fin. stt.s are incorrect
eg. stolen cash must be written off
IAS 10 Events after the Reporting Period - 3 examples of non-adjusting events (explanatory information is required to be DISCLOSED by way of a note)
- Dividends proposed but NOT announced/recognised as an obligation
- New issue or redemption of ORDINARY SHARES
- DISPOSAL of a non-current asset after the reporting year-end before the fin. stt.s authorised for issue
- will be disposal for next reporting period