Topic list Syllabus reference

Workings

1 Cost of sales Opening inventory Purchases (2,152 + 34) Closing inventory	$'000 190 2,186 (220) 2,156
2 Administrative expenses
	$'000
Wages, salaries and commission (254 + 20)	274
Sundry expenses (113-6)	107
Light and heat (31 -20 + 3)	14
Depreciation: buildings	2
plant	36
Audit fees	4
	437
WISLON CO
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20X7
	$000 $'000
Assets
Non-current assets
Property, plant and equipment
Property at valuation	800
Plant: cost	480
accumulated depreciation	(182)
	298
Goodwill	20
Equity investments	231
Current assets
Inventories	220
Trade accounts receivable	179
Prepayments	6
Cash and cash equivalents	126
	531
Total assets	1,880

Equity and liabilities
Equity
50c ordinary shares	500
Share premium	70
Revaluation surplus	392
General reserve	187
Retained earnings	319	1,468
Non-current liabilities
10% loan stock (secured)		200
Current liabilities
Trade and other payables	195
Accrued expenses	17	212
Total equity and liabilities		1,880

$'000


$'000

WISLON CO

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 20X7

Share		Share	Retained	General	Revaluation
	capital	premium	earnings	reserve	Surplus	Total
	$000	$'000	$'000	$000	$000	$000
Balance at 1.1.X7	450	—	242	171	—	863
Issue of share capital	50	70				120
Dividends			(15)			(15)
Total comprehensive income for the year			108		392	500
Transfer to reserve			(16)	16
Balance at 31.12.X7	500	70	319	187	392	1,468

Note, that the total comprehensive income is analysed into its components.
Chapter Roundup
IAS 1 covers the form and content of financial statements. The main components are:
Statement of financial position
Statement of profit or loss and other comprehensive income
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
IAS 1 suggests a format for the statement of financial position. Certain items are specified for disclosure on the face of the financial statements.
You should appreciate the distinction between current and non-current assets and liabilities and their different treatments.
IAS 1 offers two possible formats for the statement of profit or loss or separate profit or loss section - by function or by nature. Classification by function is more common.
The Study Guide requires you to be able to prepare a basic set of company accounts
IAS 1 requires a statement of changes in equity. This shows the movement in the equity section of the statement of financial position. A full set of financial statements includes a statement of changes in equity.
Some items need to be disclosed by way of note.
Quick Quiz

1. 
   Which of the following are examples of current assets?
   

1. 
   Property, plant and equipment
   
2. 
   Prepayments
   
3. 
   Cash equivalents
   
4. 
   Manufacturing licences
   
5. 
   Retained earnings
   

2. 
   Provisions must be disclosed in the statement of financial position.
   

True
False

3. 
   Which of the following must be disclosed on the face of the statement of profit or loss?
   

1. 
   Tax expense
   
2. 
   Analysis of expenses
   
3. 
   Net profit or loss for the year
   

4. 
   Where are revaluation gains shown in the financial statements?
   
5. 
   Which THREE of the following MAY be included within a Note to the financial statements?
   

1. 
   The basis on which the financial statements were prepared
   
2. 
   The specific accounting policies applied
   
3. 
   Dividends paid
   
4. 
   Assets classified as held for sale under IFRS 5
   
5. 
   
   Profit or loss attributable to the parent
   

Answers to Quick Quiz

1. 
   (b) and (c) only
   
2. 
   True
   
3. 
   (a) and (c) only, (b) may be shown in the notes.
   
4. 
   In other comprehensive income and in the statement of changes in equity.
   
5. 
   (a) The basis on which the financial statements were prepared
   

2. 
   The specific accounting policies applied
   
3. 
   Dividends paid
   

Answers (d) & (e) must be shown on the face of the primary statement not included within a Note to the Financial Statements
Now try the question below from the Practice Question Bank

Number	Level	Marks	Time
	-

300


16: Presentation of published financial statements Financial Reporting


BPP
LEARNING MEDIA

Topic list	Syllabus reference
1 IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors	B9
2 Changes in accounting polices	A1/B9
3 Errors	B9
4 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations	B9
5 IAS 21 Foreign currency transactions	B12

Introduction
IAS 8 deals with accounting policies. It also looks at certain circumstances and transactions which require different treatment to normal profit or loss items.
IFRS 5 on assets held for sale and discontinued operations is an important standard which gives users additional information regarding the sources of the entity's profit and losses.
IAS 21 on foreign currency is a relatively new addition to the Financial Reporting syllabus but will only be tested at a basic level.
Study guide

		Intellectual level
A1	The need for a conceptual framework and the characteristics of useful information
(g)	Discuss the principle of comparability in accounting for changes in accounting policies	2
B9	Reporting financial performance
(a)	Discuss the importance of identifying and reporting the results of discontinued operations	2
(b)	Define and account for non-current assets held for sale and discontinued operations	2
(c)	Indicate the circumstances where separate disclosure of material items of income and expense is required	2
(d)	Account for changes in accounting estimates, changes in accounting policy and correction of prior period errors	2
B12	Foreign currency transactions
(a)	Explain the difference between functional and presentation currency and explain why adjustments for foreign currency transactions are necessary.	2
(b)	Account for the translation of foreign currency transactions and monetary/non-monetary foreign currency items at the reporting date.	2

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11AS 8 Accounting Policies, Changes in Accounting Estimates and Errors
IAS 8 deals with changes in accounting estimates, changes in accounting policies and errors.

1.