Gripping ifrs volume 1 pdf

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Gripping IFRS Complete - Ebook download as PDF File .pdf), Text File .txt) or 1. Chapter 1. Gripping IFRS. The Pillars of Accounting. Contents continued . In Past years it is much difficult to prepare IFRS because there was no proper practice material available in the market which guide the student to the poi. GRIPPING IFRS GRADED QUESTIONS-COMPLETE BOOK, 31 CHAPTERS IN COMBINED FORM. ACCA MOCKS-F5,F6,F7,F9,P1,P2,P3,P4,P6,P7 QUESTIONS ANSWERS COMBINED IN SINGLE FILE. Emmanuel Manda on ACCA MOCKS-F5,F6,F7,F9,P1,P2,P.

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All about Gripping IFRS Vol. 1: Pakistan edition () by ICAP CL Sowdwn- Services. LibraryThing is a cataloging and social networking site for booklovers. The Pakistan Accountant – January – March International Financial Reporting Standards (IFRS) GRIPPING IFRS Volume Ifrs vitecek.info - Adopting IFRS IFRS 1 Ð First-time Adoption of International Financial Reporting Standards A step-by-step illustration of the.

Chapter 1 The Pillars of Accounting Reference: Introduction 1. The Pillars 3. Presentation of financial statements 4. The Framework 4. Benefits earned over more than 1 period:

Chapter 1 The Pillars of Accounting Reference: Introduction 1. The Pillars 3. Presentation of financial statements 4. The Framework 4. Benefits earned over more than 1 period: Example 2: An inflow — income or liability? Example 3: Staff costs — an asset? Contents continued … 5.

IAS 1: Presentation of financial statements: Items with different functions Example 5: Items with different natures, but immaterial size Example 6: Items that are material in size, but not in nature or function. Sale of a machine set-off is allowed Example 8: Sale of a machine set-off is not allowed Example 9: Cost of a machine set-off is required 6. Reclassification of assets 6. Classification of liabilities 7. Liabilities and refinancing of due payments Example Refinancing of a loan 7.

Breach of covenants. Contents continued … 7.

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Sources of estimation uncertainty 7. Through the ages, very many languages developed; Latin, English, French, Spanish and Zulu, to name but a few. Now English, for instance, is used to communicate information and opinions to other English-speaking people or to those who are at least able to understand it. Accounting is also a language, but one that is used by accountants to communicate financial information and opinions to other accountants and, of course, to those other interested parties who are able and willing to try to understand it.

These rules are set out in detail and are commonly referred to as statements of generally accepted accounting practice GAAP. And this includes communication amongst accountants and amongst businesses! The problem is that with so many different languages, communication between different nationalities can sometimes become almost impossible; picture the scene where an Englishspeaking New Zealander and a Swahili-speaking East African are trying to have a conversation.

Even when speaking the same language, there are some accents that make a conversation between, for instance, an English-speaking American and an English-speaking Briton, just as amusing.

Accounting, as a language, is no different. Almost every country has its own accounting language. The language GAAP used in one country is often vastly different to that in another country; so different, in fact, that it is like comparing French with Ndebele. These differences, however small, will still result in miscommunication.

Whereas miscommunication on street level often leads to tragedies ranging from divorce to war, miscommunication between businesses often leads to court cases and sometimes even final liquidation of the businesses.

Its basic objective is to produce a language that is understandable and of a high quality. The process of harmonisation involves discussion amongst standard setters in any country wishing to be part of the process, during which the reporting processes currently used by these standard setters their local statements of GAAP are considered and then the best processes are selected to constitute or form the basis of the new international standard going forward. Although most countries participating countries as at 5 November , www.

This project is therefore expected to be a long and politically volatile one, but one which, in the end, will hopefully enable accountants all around the globe to communicate in one language.

All countries that adopt the global accounting language, must comply with these rules IFRSs in their financial statements for financial periods beginning on or after 1 January Over the years, this committee developed 41 global accounting standards, referred to as International Accounting Standards IAS.

This new board adopted all 41 IASs and started the development of more global accounting standards. We now, therefore, have a total of 49 global accounting standards IFRS: These interpretations are developed when accountants and auditors notify the board of difficulties in understanding and applying certain parts of a standard.

This committee developed 34 interpretations SIC 1 — SIC 34 , only 11 of which still stand, with the rest having been gradually withdrawn as a result of the harmonisation process. In considering which ideas or combination of ideas to adopt as the new standard, they use what is referred to as the Framework. This framework sets out the basic objectives, characteristics, concepts, definitions, recognition and measurement criteria relevant for a good set of financial statements.

In summary, the rules of our global accounting language consist of: A tabular summary of the above is as follows: There are approx 40 members who meet three times a year. Develop and pursue the technical agenda, issue interpretations, basis for conclusions with standards and exposure drafts.

They need 9 votes out of 14 to get standards, exposure drafts and interpretations published. The 12 members are unpaid but have expenses reimbursed.

They meet every second month. They make interpretations and consider public comments and get final approval from IASB. During the process of harmonisation, new ideas develop that result in changes having to be made to some of the existing standards and their interpretations. This is what is referred to as the Improvements Project. Before a new standard is issued, an exposure draft is first issued.

The exposure draft may only be issued after approval by at least nine of the fourteen members of the IASB and is issued together with: Any interested party may comment on these drafts.

The comments received are thoroughly investigated after which the draft is adopted as a new standard either verbatim or with changes having been made for the comments received or is re-issued as a revised exposure draft for further comment. Statements of Generally Accepted Accounting Practice. Legally, financial statements must generally comply with the national statutory requirements of the relevant country.

The problem is that most statutes laws of many countries currently require compliance with either generally accepted accounting practice or the statements of generally accepted accounting practice. In addition to the requirements of the legal statute of the country, IAS 1 Presentation of Financial Statements requires that where companies do comply with international financial reporting standards and the interpretations thereof in their entirety , disclosure of this fact must be made in their financial statements.

By implication, those companies that do not comply, may not make such a declaration. It is obviously beneficial to be able to make such a declaration since it lends credibility to the financial statements, makes them understandable to foreigners and thus encourages investment.

If you feel that there may be cracks in your foundation, right now is the time to fix them by revising your work from prior years. Please read this chapter very carefully because every other chapter in this book will assume a thorough understanding thereof. There are two areas of the global standards that make up these pillars: Presentation of Financial Statements. The Framework is technically not a standard but the foundation for all standards and interpretations. It sets out the: IFRSs are designed to be used by profit-orientated entities commercial, industrial and business entities in either the public or private sector when preparing general purpose financial statements i.

Presentation of financial statements. IAS 1 builds onto the Framework and in some areas tends to overlap a little.

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It is important to note that users are not limited to shareholders and governments, but include, amongst others, employees, lenders, suppliers, competitors, customers and the general public. These are discussed in more depth under overall considerations see Part 5: The four main qualities that a set of financial statements should have are listed as follows: Although one must try to achieve these qualitative characteristics, the Framework itself admits to the difficulty in trying to achieve a balance of characteristics.

For example: This emphasis on speed may, however, affect the reliability of the reports.

This balancing act is the fifth attribute listed to in the Framework, and is referred to as constraints on relevant and reliable information. If the four principal qualitative characteristics and the Standards are complied with, one should achieve fair presentation, which is the sixth and final attribute listed in the Framework. A user will use financial statements to predict, for example, the future asset structure, profitability and liquidity of the business and to confirm his previous predictions.

The predictive and confirmatory role of the financial statements is therefore very important to 9 Chapter 1. By way of example, unusual items should be displayed separately because these, by nature, are not expected to recur frequently; materiality of the items: Consider the materiality of the size of the item or the potential error in user-judgement if it were omitted or misstated; nature: For example, reporting a new segment may be relevant to users even if profits are not material.

Materiality is a term that you will encounter very often in your accounting studies and is thus important for you to understand. The Framework explains that you should consider something an amount or some other information to be material: For example, all revenue types above a certain amount may be considered to be material to an entity and thus the entity would disclose each revenue type separately.

Sometimes events or transactions can be so difficult to measure that the entity chooses not to include them in the financial statements. The most common example of this is the internal goodwill that the entity is probably creating but which it cannot recognise due to the inability to clearly identify it and the inability to measure it reliably.

A typical example here is a lease agreement the legal document. This lease is referred to as a finance lease, but as accountants, we will recognise the transaction as a purchase and not as a pure lease.

The idea behind prudence is to: This is because omission of information could be misleading and result in information that is therefore unreliable and not relevant. Immaterial items may be excluded if too costly to include. As a result of requiring comparability, users need to be provided with information for the comparative year and should be provided with the accounting policies used by the entity and any changes that may have been made to the accounting policies used in a previous year.

These constraints are essentially time and money: Bearing in mind that only fresh information is relevant, the financial statements of a business are not relevant to a user in who is trying to decide whether or not to invest in that business. The problem is, in the rush to produce relevant and timely financial statements, there is a greater risk that they now contain errors and omissions and are thus unreliable. This balancing act is compounded by the constraint of cost.

Money is obviously a constraint in all profit organisations whose basic idea is that the benefit to the business should outweigh the cost. To produce financial statements obviously costs the business money, but this cost increases the faster one tries to produce them due to costs such as overtime and the better one tries to do them more time and better accountants cost more money.

Businesses often 11 Chapter 1. It should be remembered, however, that the benefits are often hidden. If the user or bank is suitably impressed by your financial statements, the business may benefit by more investment, higher share prices, lower interest rates on bank loans and more business partners, ventures and opportunities.

Once recorded, the element will be included in the journals, trial balance and then in the financial statements. An item may only be recognised when it: The basic recognition criteria are as follows: Assets or liabilities must meet the recognition criteria in full must be measured reliably and the flow of benefits must be probable.

Income or expenses need not meet the recognition criteria in full: It is important to read the definition of income and expense again and grasp how these two elements may only be recognised when there is a change in the carrying amount of an asset or liability. This means that for an item of income or expense to be recognised, the definition of asset or liability would first need to be met. To do this, we need an amount. There are a number of different methods that may be used to measure the amounts of the individual elements recognised in the financial statements, some of which are listed below: There are a variety of combinations of the above methods, many of which are largely dictated by the relevant standard.

For instance, assets that are purchased with the intention of resale are measured in terms of IAS 2: Inventories, which states that inventories should be measured at the lower of cost or net realisable value. Assets that are purchased to be used over more than one period are measured in terms of IAS Property, Plant and Equipment, which allows an asset to be recognised at either historical cost or fair value determined in accordance with a discounted future cash flow technique: Redeemable debentures a liability are measured in terms of IAS Financial Instruments: Recognition and Measurement.

Although most companies seem to still be measuring many of their assets at historical cost, there appears to be a definite interest in fair value accounting, where present values and current costs are considered more appropriate than historical cost. There is an argument that says that the historical cost basis should be abandoned and replaced by fair value accounting since the generally rising costs caused by inflation results in the historical amount paid for an 13 Chapter 1.

A problem with fair value accounting, however, is its potentially subjective and volatile measurements which could reduce the reliability of the financial statements. The possibility of reduced reliability could be the reason why most companies still use historical costs for many of their assets, where the latest fair values are disclosed in their notes for those users who are interested. Once recorded, the element will be included in the journals, trial balance and then channelled into one of the financial statements: Some items that are recognised may require further disclosure.

Where this disclosure involves a lot of detail, this is normally given in the notes to the financial statements. Other items that are recognised may not need to be disclosed.

For example, the purchase of a computer would be recorded in the source documents, journals, trial balance and finally in the statement of financial position. Unless this computer was particularly unusual, it would be included in the total of the non-current assets on the face of the statement of financial position, but would not be separately disclosed anywhere in the financial statements since it would not be relevant to the user when making his economic decisions.

Conversely, some items that are not recognised may need to be disclosed. This happens where either the definition or recognition criteria or both are not met, but yet the information is still expected to be relevant to users in making their economic decisions.

A typical example is a law suit against the entity which has not been recognised because the financial impact on the entity has not been able to be reliably estimated but which is considered to be information critical to a user in making his economic decisions.

The structure of your answer depends entirely on the wording of the question. If the question asks for you to discuss the recognition of an element, it may require the word for word repetition of both the definitions and recognition criteria unless your question specifically 14 Chapter 1. The machine was delivered on the same day as the payment was made. A machine is purchased for C4 in cash. If you are only asked to discuss the measurement of an amount. In other cases.

At the end of the 4-year period. Since both recognition criteria are met. Discuss how the purchase of the machine should be recognised and measured. It is expected to be used over a 4-year period to make widgets that will be sold profitably.

Generally each aspect of the definition and recognition criteria should be discussed fully use your mark allocation as a guide but some questions may not require a full discussion but may require you to identify what element should be recognised and to support this with only a brief explanation. The measurement on initial recognition is the invoice price i. The Solution to example 1: Your question may ask for a discussion of the issues surrounding measurement. Recognition criteria: C4 already paid in full and final settlement.

The question may ask you to prove that the debit or credit entry is a certain element e. Since all aspects of the definition of an asset are met. If you were also asked to briefly prove that the initial acquisition did not involve an expense.

The amount by which the liability reduces is then released to income since it meets the definition of income: Had you not been asked to only discuss the initial lumpsum received. Since all aspects of the liability definition are met. Briefly discuss whether the lumpsum received should be recognised as income or a liability. Year 1: Since there is no increase in equity the receipt does not represent income — yet. Year 4: A gym receives a lumpsum payment of C4 from a new member for the purchase of a 4year membership.

Year 2: At the time of the receipt. Debit Journal in year 1. Solution to example 2: Liability definition: As time progresses. Year 3: Income definition: The definitions of both income and liability should be discussed ignore recognition criteria. Solution to example 3: In this way. Companies often maintain that their staff members constitute their biggest asset. Consider the following: If one were to use future expected salaries and other related costs.

In each of the 4 years during which the gym provides facilities to the member. Whether or not the staff member is controlled by the entity is highly questionable: It can be assumed that the entity would only employ persons who are expected to produce future economic benefits for the company.

How would one value one staff member over another? Perhaps one could calculate the present value of their future salaries. The signing of the employment contract could be argued to be the past event. It is probable that future economic benefits will flow to the entity otherwise the entity would not employ the staff.

Explain why staff members are not recognised as assets in the statement of financial position. In fact. In respect of the asset. Since it is evident that we cannot reliably measure the cost of a staff member. You will surely then agree that a reliable measure of their cost is really not possible. It is also not designed to meet the needs of condensed interim financial statements. It goes without saying that there would be absolutely no way of assessing this value reliably! Staff members may therefore not be recognised as assets in the statement of financial position for two main reasons: The main changes are as follows: The value of a staff member to an entity refers to the value that he or she will bring to the entity in the future.

It therefore is not designed to meet the needs of non-profit entities. Profit or loss: Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. The size or nature of the item.

Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. If an entity does not have such equity. Other comprehensive income: Materiality of omissions and misstatements of items: Omissions and misstatements are material if they could individually or collectively influence the economic decisions that users make on the basis of the financial statements.

Total comprehensive income: The statement of comprehensive income may be provided either as: The general features. This disclosure may only be made if absolutely all the IFRSs standards and interpretations have been complied with in full. The extra disclosure required when there has been departure from an IFRS is as follows: Accounting Policies. Changes in Accounting Estimates and Errors.

The obvious answer to this problem is to depart from the IFRS. In order to come to such a dramatic conclusion.

In order to ensure that fair presentation is achieved. This assessment should: It results in 22 Chapter 1. Such a detailed analysis is not required. Since the objective of financial statements is basically to provide useful information. It is interesting to note that it is only these published financial statements that are subjected to the disclosure requirements laid out in the IFRS. Gripping IFRS The Pillars of Accounting recognising transactions and events in the periods in which they occur rather than when cash is received or paid.

The accrual basis is applied to all components of a set of financial statements. The published annual financial statements do not show extensive detail because they are made available to a wide range of external users who would find that too much information would be confusing and irrelevant to their decision-making.

It is a subjective decision requiring professional judgement. Where a class of items is immaterial. Example 4: Solution to example 4: It is a threshold or cut-off point used to help identify whether something may be useful to a user. A class of items that is very material may require disclosure separately on the face of the financial statements whereas another class of items. For example. It is generally not considered necessary for an item to be material in nature.

IAS 1 refers to a class of items as having a bearing on the nature or function of the items. Example 5: Explain whether or not the furniture and land should be disclosed as two separate categories.

So in summary. Both the Framework and IAS 1 explain that you should consider something to be material if the economic decisions of the users could be influenced if it were misstated or omitted. The functions of these two assets are considered to be so different that they are considered sufficiently material to be disclosed separately on the face of the statement of financial position. Solution to example 5: Despite the fact that machine A is material in size.

For instance. An example of the setting off of income and expenses that is not allowed is revenue from a sale and the related cost of the sale since revenue is required.

An example of the allowed off-setting of income and expenses would be in the calculation of the profit or loss on sale of a non-current asset. The proceeds of the sale income may be set off against the carrying amount of the asset now expensed together with any selling expenses. Although office furniture and machinery represent two dissimilar classes on the basis that their functions are so diverse. It should be noted. Explain whether or not: Solution to example 6: What is more important on the face of the statement of financial position is that different categories of assets.

The detail of the material classes within the categories of property. Furniture and office equipment: Example 8: It cost C30 IAS 16 paragraph 17 requires that the cost of the asset be calculated after deducting net proceeds from selling any items produced when testing.

Disclose the machine in the statement of financial position as at 31 December 20X Example 9: Disclose the above transaction in the statement of comprehensive income. This is the only item of property. Before the machine could be brought into use. During the testing process. Solution to example 7: Example 7: Revenue and must therefore be shown gross i.

Plant and Equipment. Profit on sale of machine 20X2 C 10 30 — 20 Explanation: Since the sale of the machine is considered to be incidental to the main revenue generation of the business. Solution to example 8: This is fine!

Some entities prefer. An example: The entity must then disclose: With regard to narrative information. In order to ensure comparability from one year to the next. This requirement for comparative information applies equally to both numerical and narrative information. On the other hand. Solution to example The amount of the item that has been reclassified is as follows: Example Disclose the assets in the statement of financial position and notes as at 31 December 20X3.

The reason for the change in the classification is that the nature of the business changed such that vehicles previously held for use are now held for trade. Reclassification of assets Previously inventory was classified as part of property.

IAS 2: Inventories requires inventories to be classified separately on the face of the statement of financial position. C C80 being machinery and C70 being vehicles. The unadjusted property. These could be included voluntarily.

Since the IFRSs only apply to the financial statements. The purpose of financial statements is to provide information regarding financial position. Other examples include: If the presentation in the current year changes. The assets and liabilities are then generally separated into two further categories: No matter whether your statement of financial position separates the assets and liabilities into the categories of current and non-current or simply lists them in order of liquidity.

This may be done in the notes rather than in the statement of financial position. Other items may need to be prominently displayed and repeated where necessary e. There were no prizes for guessing that one!

The Framework explains that the position of the entity is represented by: For obvious reasons. Examples of these other items include: These three elements are then categorised under two headings: The statement of financial position summarises the trial balance into the three main elements: Land is another example of a non-monetary asset.

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It is interesting to note that assets that are part of the normal operating cycle for example: Non-current assets are simply defined as those assets that: Marketable securities e. An example of a monetary liability is a lease liability. An example of a monetary asset is an investment in a fixed deposit.

Examples of liabilities that are not part of the normal operating cycle include dividends payable. Where the assets and liabilities are non-monetary assets or liabilities. Non-current liabilities are simply defined as those liabilities that: It is interesting to note that liabilities that are considered to be part of the normal operating cycle e.

For these 31 Chapter 1. A provision is an example of a non-monetary liability. Bank loan Total loan Portion repayable within 12 months Portion repayable after 12 months 20X3 C 8 20X3 C 40 The bank loan is expected to be settled in 5 annual instalment of C Solution to example 11A: Solution to example 11B: Disclose the liabilities in the statement of financial position and notes at 31 December 20X3 assuming that the entity discloses its assets and liabilities: A In order of liquidity B Under the headings of current and non-current.

Ignore comparatives. If it was possible to refinance this liability resulting in the repayment being delayed beyond 12 months after the end of the reporting period. There are. Show the statement of financial position at 31 December 20X4 year-end assuming that: A the agreement is signed on 5 January 20X5. An agreement is reached. B the agreement is signed on 27 December 20X4. Bank loan C Total loan Portion repayable within 12 months Portion repayable after 12 months The bank loan is expected to be settled in 5 annual instalment of C When a liability that was once non-current e.

This loan is to be repaid in 2 instalments as follows: If a covenant is breached broken. The first instalment is due to be repaid on 30 June 20X4. B provides the entity with the option to refinance the first instalment for a further 4 months and the entity plans to utilise this facility C provides the entity with the option to refinance the first instalment for a further 7 months but the entity does not plan to postpone the first instalment D provides the bank with the option to allow the first instalment to be delayed for 7 months.

Disclose the loan in the statement of financial position of Needy Limited as at 31 December 20X3 year-end assuming that the existing loan agreement: A provides the entity with the option to refinance the first instalment for a further 7 months and the entity plans to utilise this facility. Solution to example 12B: C 31 December 20X3. A 31 December 20X3. In scenario D.

The company reached an agreement with the bank such that they were granted a grace period. The loan agreement includes the following condition: D 2 January 20X4. B 31 December 20X3. If such an agreement is signed after the end of the reporting period but before the financial statements are authorised for issue.

At 31 January 20X4.


At 31 December 20X3 unit sales were 9 The sub-classifications to be provided depend on: IAS 16 Property. C of a C long-term loan is repayable within 12 months of reporting date. Plant and Equipment requires that the total be broken down into the different classes of land. Whether or not to disclose additional line items on the face of the statement of financial position requires an assessment of the following: These sub-classifications may be shown either as: Disclosure of the required extra detail may be provided: For each reserve within equity.

The line items needed for your entity might be fewer or more than those shown in these examples: For each class of share capital. If you are required to present both a statement of financial position and a statement of changes in equity.

In a situation where an entity has no share capital. There is nothing stopping you from listing the types of equity on the statement of financial position. It is generally. The total equity on the statement of financial position is equal to the total equity on the statement of changes in equity.

This example includes more line-items than the previous simplified example: The statement of financial position of this single entity has been further simplified to show a very basic situation where. You will notice that where a statement of financial position shows a group of entities.

Comprehensive income basically includes two parts: The net of the income and expenses results in either a profit or loss. This profit or loss is then included in total comprehensive income. If one uses the function method. The function method is therefore more comprehensive than the nature method.

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The function method actually requires that expenses be shown in both ways since: Exactly the same profits or losses will result no matter which method is used. The function method is designed for larger businesses that have the ability to allocate expenses to their functions on a reasonable basis. It provides information that is more relevant.

The total of these five components is then included in total comprehensive income. Information relating to the nature of expenses is crucial information to those users attempting to predict future cash flows. The nature method is intended for a smaller. These components may be shown in the statement of comprehensive income either: There are five components to other comprehensive income as defined: The amount of tax for each of the five components must be disclosed.

This can be given either in the statement of comprehensive income or in the notes. This analysis could be included in the statement of comprehensive income or in the notes. This method suits small businesses because of its simplicity. An example of the layout using the nature method appears next.

B Apple Limited uses the two-statement layout. Trial Balance at 31 December 20X1 Revenue Cost of sales Cost of distribution Cost of administration Interest expense Tax expense Debit 80 70 Credit 1 Other comprehensive income included one item: Prepare the statement of comprehensive income for the year ended 31 December 20X1 assuming: A Apple Limited uses the single-statement layout. Solution to example 15A: Revaluation surplus increase Total comprehensive income 42 Chapter 1.

The adjustment may either be reflected in: It is important that any reclassification adjustment is: This can occur with the following three components of other comprehensive income: Changes in revaluation surplus and actuarial gains and losses are recognised directly in retained earnings and never through profit and loss.

These adjustments do not apply to the other two components of other comprehensive income: When the assets are sold. All the assets were: Available-forsale financial assets are measured at fair value at the end of each year.

This must happen in the same period to avoid double-counting the gain or loss in income. B Present the statement of comprehensive income as a single statement. Ignore tax. Trial balance extracts Revenue Cost of sales Cost of distribution Cost of administration Interest expense Tax expense Debit 80 70 Credit 1 The following was extracted before any journals related to these assets had been processed: A Show all the journal entries relating to the financial assets ignore tax.

Solution to example 16A: Gain on available-for-sale financial asset Gains arising during the year Less reclassification adjustment: Where the comprehensive income is shared between a parent company and other minority owners.

These two instances include: No item may be classified as extraordinary. Any changes due to these changes will be reflected in the statement of changes in equity and should not appear in the statement of comprehensive income. Examples of some material items given in IAS 1 include: It has also been simplified to show a very basic statement where there are no associates or discontinued operations.

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It depends entirely on what line-items are relevant to the entity e. Please remember that the line items in your statement of comprehensive income might be fewer or more than those shown below. When there is a group of entities. This example also includes more line-items that the first simplified example of a statement of comprehensive income: Such a change is represented by one or more of the following: Components of equity include: It is therefore only on the date of declaration that a journal is passed to recognise the liability to pay dividends no journal is processed when the dividend is proposed: Debit Xxx Credit Xxx Dividends declared distribution of equity Dividends payable liability Dividend declared Remember that a dividend declared is not recognised as an expense but rather as a distribution of equity because it does not meet the definition of an expense read this definition again.

A dividend distribution normally follows the following life-cycle: Declaring a dividend means publicly announcing that the dividend will be paid on a specific date in the future. These include dividends that are: If the financial statements are being prepared for a group of companies as opposed to a single company.

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Some dividends are not recognised as distributions to equity holders since there is no obligation to pay them at the end of the reporting period. The total of the above dividends that have not been recognised must be disclosed in the notes: According to IAS 10 paragraph It is only when the declaration is made.

If there has been a change in accounting policy or a correction of error. If the proposal is accepted. It depends on: If the statement of comprehensive income shows a group of entities.

Some other equity accounts that you may find that would require separate columns include: This example also includes more columns that the first simplified example of a statement of comprehensive income: The columns in the statement of changes in equity for your entity might be fewer or more than those shown in the examples.

This statement of changes in equity has been further simplified to show a very basic spread of equity types i. If you are required to present both a statement of comprehensive income and a statement of changes in equity. The following order or structure is normally followed: Current cost. The other four statements making up the financial statements must be cross-referenced to the notes. Recoverable amounts. Fair values. Notes supporting items in the other four components should be listed in the same order that each line item and each financial statement is presented on occasion.

Historical cost. Net realisable value. Judgements made by management in making actual estimates are referred to as sources of estimation uncertainty. These estimates involve both an assessment of sources of uncertainty at reporting date and in the future.

Investment property is used to account for that building instead of IAS Sources of estimation uncertainty are discussed below in more depth. These judgements may be disclosed either with the list of significant accounting policies or as a separate note.

For this reason. These estimates involve professional judgements. Making estimates requires a subjective assessment of many things. Whether an accounting policy is relevant to an entity depends largely on the nature of its operations. When deciding whether or not to disclose an accounting policy.

Where an assumption has been made regarding uncertainties e. Here are a few examples of accounting policies that may be relevant to an entity: Accounting policies may be considered significant even if the amounts related thereto are immaterial.

Judgements made by management in the application of accounting policies i.

In this regard. This will require assumptions regarding the amounts and timings of the likely cash flows. It has recently been presented with numerous legal claims from residents in the surrounding neighbourhood. If an asset or liability is measured at fair value based on market prices. In so doing. The disclosure would need to include: The notes must also include the following information relating to unrecognised dividends: Other disclosure required in the notes IAS 1.

Gripping IFRS 8. Underlying assumptions. Accounting policies. Cash movements analysed into: Statement of financial position Financial position: Yes Disclose No Ignore 57 Chapter 1. VAT on purchase of goods Example 4: VAT on purchase of goods 4. Transaction tax 3. Different types of taxation 3. VAT on sale of goods Example 2: VAT on sale of goods 3.

Normal tax: Definitions 2. IAS 12 Contents: Taxation expense 6. Summary Page 80 80 81 82 82 82 83 84 85 87 59 Chapter 2. Brief introduction to the disclosure of taxes 8. Different types of taxation There are many different taxes levied around the world. Permanent differences: Effective tax rate: This is a tax on salaries earned by employees: For consistency. Normal tax is paid to the tax authority using a provisional tax payment system.

Dividends tax This tax is levied on dividends received by shareholders and will be in the form of a withholding tax i. The same type of differences may arise when dealing with expenses. The following are a list of some of the common taxes: This is a tax on goods bought: Normal tax on companies: Applicable tax rate: Current tax: Taxable profit tax loss: Definitions The following definitions are some of the definitions provided in IAS Countries often have many other hidden taxes.

You will notice that this system is quite an onerous system in terms of the paperwork that has to be sent to the tax authorities supporting amounts owing and claimed. Chapters 2 4: Kieso, Jerry J. Weygandt, Terry D. Warfield, Wiley, 2 , Practical Implementation Guide and Workbook. Download our gripping ifrs volume 2 eBooks for free and learn more about gripping ifrs volume 2. These books contain exercises and tutorials to improve your practical skills, at all levels!

Ifrs 1 gripping pdf volume

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