Contents
Underlying concepts and Ethics......................................................................................................... 4
Corporate Governance....................................................................................................................... 6
Financial statement analysis.............................................................................................................. 7
Performance ratios......................................................................................................................... 9
Liquidity ratios............................................................................................................................... 10
..................................................................................................................................................... 11
Solvency ratios............................................................................................................................. 11
Efficiency ratios............................................................................................................................ 11
Investor ratios............................................................................................................................... 13
Cash flow ratios............................................................................................................................ 13
IFRS 3 Business Combinations, Groups: Revision and update........................................................15
Consolidated statement of financial position.................................................................................15
Consolidated statement of profit or loss........................................................................................19
Step acquisitions within group accounts.......................................................................................22
Part disposal from a subsidiary holding........................................................................................23
Part disposal from an associate holding.......................................................................................24
IAS 21 Reporting overseas transactions..........................................................................................25
1) Translating the subsidiary’s balance sheet and income statements.........................................25
2) Calculating the exchange difference.........................................................................................26
3) Goodwill treatment in foreign currency on consolidation...........................................................26
Consolidated statement of cash flows..........................................................................................26
IAS 33 Earnings per share...............................................................................................................28
Leases (IFRS 16)............................................................................................................................. 30
Sale and leaseback transactions..................................................................................................30
Lessor Accounting........................................................................................................................ 31
IFRS 2 Share-based payments and distributable profits..................................................................32
Equity settled transactions............................................................................................................32
Cash settled transactions.............................................................................................................33
Choice of settlement..................................................................................................................... 33
IAS 19 Employee Benefits................................................................................................................35
IAS 32 Financial Instruments: Presentation.....................................................................................37
IFRS 9 Financial Instruments Classification and Measurement........................................................37
Financial Assets........................................................................................................................... 38
IFRS 9 Reclassification of Financial Assets..............................................................................39
1
, Financial Liabilities....................................................................................................................... 39
IFRS 9 Impairments...................................................................................................................... 40
IFRS 9 Hedge Accounting................................................................................................................ 41
Fair value hedge........................................................................................................................... 41
Cash flow hedge........................................................................................................................... 42
SWAPS........................................................................................................................................ 42
IFRS 13 – Fair Value Measurement.................................................................................................44
Embedded derivatives.................................................................................................................. 44
IAS 12 Income taxes........................................................................................................................ 46
Tax Base...................................................................................................................................... 47
Revaluations................................................................................................................................. 48
Losses.......................................................................................................................................... 48
Pensions (i.e. net pension liability)................................................................................................49
Share-based payments: a deduction for tax purposed is not given until the exercise date...........49
Business combinations.................................................................................................................49
IFRS 5 Assets held for sale and discontinued operations................................................................50
Discontinued operations...............................................................................................................51
IFRS 15 Revenue............................................................................................................................. 52
Step 1: Identify the contract.......................................................................................................... 52
Step 2: Identify the performance obligations.................................................................................52
Step 3: Determine the transaction price........................................................................................52
Step 4: Allocate the transaction price...........................................................................................53
Step 5: Recognise revenue based on performance obligations....................................................53
Consignment sales....................................................................................................................... 54
Bill and hold arrangements........................................................................................................... 54
Sale with a right of return (refunds)...............................................................................................55
Warranties.................................................................................................................................... 55
Customer Loyalty Programmes....................................................................................................55
Sale and repurchase:................................................................................................................... 55
IAS 36 Impairment of Assets............................................................................................................56
IAS 2 Inventories.............................................................................................................................. 57
IAS 16 PPE...................................................................................................................................... 57
IAS 23 Borrowing Costs................................................................................................................... 57
IAS 38 Intangible Assets.................................................................................................................. 58
IAS 37 Provisions, Contingent Liabilities and Assets.......................................................................59
IAS 40 Investment Property.............................................................................................................60
2
,IAS 24 Related party transactions....................................................................................................61
IAS 20 Government Grants..............................................................................................................62
IAS 41 Agriculture............................................................................................................................ 62
IFRS 7 Financial Instruments Disclosures........................................................................................63
IFRS 6 Exploration for and Evaluation of Mineral Resources...........................................................64
IFRS 4 Insurance contracts..............................................................................................................65
IFRS 8 Operating Segments............................................................................................................65
IAS 34 Interim accounts...................................................................................................................66
3
, Underlying concepts and Ethics
Quality control (ISQC1):
Leadership responsibilities for quality in the firm, Ethics, Acceptance and continuance of client
relationships and specific engagements, Human resources, Engagement performance, Monitoring.
Professional scepticism!!! Always think of whether sufficient evidence exists to support numbers
and treatments.
Fundamental principles:
1. Integrity: straightforward & honest in all professional and business relationships.
2. Objectivity: should not allow bias, conflict of interest or undue influence of others to override
professional or business judgements.
Independence: freedom from conditions and relationships which, in the context of an
engagement, would compromise the integrity or objectivity of the firm or covered persons.
3. Professional competence and due care: maintain professional knowledge and skill at the
level required to ensure the client receives competent professional services based on
current development I practice, legislation and techniques. Act diligently and in accordance
with applicable technical and professional standards.
4. Confidentiality: do not use such information for the personal advantage of themselves or
others nor disclose confidential information to third parties without proper and specific
authority, even after the engagement has finished. May be required to disclose info by law /
for the public interest / or if consent is given.
5. Professional behaviour: comply with the relevant laws and regulations and do not act in a
way that discredits the profession.
Threats:
1. Self-interest threat
2. Self-review threat
3. Advocacy threat
4. Familiarity threat
5. Intimidation threat
6. Management threat (establish informed management)
Consider the legality of issues and materiality of numbers as well.
Safeguards:
o Education, training and experience requirements for entry into the profession
o CPD requirements
o Having appropriate firm procedures in place and ensuring staff are regularly communicated
about them
o Performance assessment and feedback/reward/discipline on a timely basis
o Strong internal controls
o Directions, supervision, review of work by a sufficiently senior staff member
o Discuss with line manager, follow internal complaints process, Report to the board or audit
committee if available, ICAEW helpline, legal advice, resignation as a last resort.
o Second partner review
o Ethics Partner
4
Underlying concepts and Ethics......................................................................................................... 4
Corporate Governance....................................................................................................................... 6
Financial statement analysis.............................................................................................................. 7
Performance ratios......................................................................................................................... 9
Liquidity ratios............................................................................................................................... 10
..................................................................................................................................................... 11
Solvency ratios............................................................................................................................. 11
Efficiency ratios............................................................................................................................ 11
Investor ratios............................................................................................................................... 13
Cash flow ratios............................................................................................................................ 13
IFRS 3 Business Combinations, Groups: Revision and update........................................................15
Consolidated statement of financial position.................................................................................15
Consolidated statement of profit or loss........................................................................................19
Step acquisitions within group accounts.......................................................................................22
Part disposal from a subsidiary holding........................................................................................23
Part disposal from an associate holding.......................................................................................24
IAS 21 Reporting overseas transactions..........................................................................................25
1) Translating the subsidiary’s balance sheet and income statements.........................................25
2) Calculating the exchange difference.........................................................................................26
3) Goodwill treatment in foreign currency on consolidation...........................................................26
Consolidated statement of cash flows..........................................................................................26
IAS 33 Earnings per share...............................................................................................................28
Leases (IFRS 16)............................................................................................................................. 30
Sale and leaseback transactions..................................................................................................30
Lessor Accounting........................................................................................................................ 31
IFRS 2 Share-based payments and distributable profits..................................................................32
Equity settled transactions............................................................................................................32
Cash settled transactions.............................................................................................................33
Choice of settlement..................................................................................................................... 33
IAS 19 Employee Benefits................................................................................................................35
IAS 32 Financial Instruments: Presentation.....................................................................................37
IFRS 9 Financial Instruments Classification and Measurement........................................................37
Financial Assets........................................................................................................................... 38
IFRS 9 Reclassification of Financial Assets..............................................................................39
1
, Financial Liabilities....................................................................................................................... 39
IFRS 9 Impairments...................................................................................................................... 40
IFRS 9 Hedge Accounting................................................................................................................ 41
Fair value hedge........................................................................................................................... 41
Cash flow hedge........................................................................................................................... 42
SWAPS........................................................................................................................................ 42
IFRS 13 – Fair Value Measurement.................................................................................................44
Embedded derivatives.................................................................................................................. 44
IAS 12 Income taxes........................................................................................................................ 46
Tax Base...................................................................................................................................... 47
Revaluations................................................................................................................................. 48
Losses.......................................................................................................................................... 48
Pensions (i.e. net pension liability)................................................................................................49
Share-based payments: a deduction for tax purposed is not given until the exercise date...........49
Business combinations.................................................................................................................49
IFRS 5 Assets held for sale and discontinued operations................................................................50
Discontinued operations...............................................................................................................51
IFRS 15 Revenue............................................................................................................................. 52
Step 1: Identify the contract.......................................................................................................... 52
Step 2: Identify the performance obligations.................................................................................52
Step 3: Determine the transaction price........................................................................................52
Step 4: Allocate the transaction price...........................................................................................53
Step 5: Recognise revenue based on performance obligations....................................................53
Consignment sales....................................................................................................................... 54
Bill and hold arrangements........................................................................................................... 54
Sale with a right of return (refunds)...............................................................................................55
Warranties.................................................................................................................................... 55
Customer Loyalty Programmes....................................................................................................55
Sale and repurchase:................................................................................................................... 55
IAS 36 Impairment of Assets............................................................................................................56
IAS 2 Inventories.............................................................................................................................. 57
IAS 16 PPE...................................................................................................................................... 57
IAS 23 Borrowing Costs................................................................................................................... 57
IAS 38 Intangible Assets.................................................................................................................. 58
IAS 37 Provisions, Contingent Liabilities and Assets.......................................................................59
IAS 40 Investment Property.............................................................................................................60
2
,IAS 24 Related party transactions....................................................................................................61
IAS 20 Government Grants..............................................................................................................62
IAS 41 Agriculture............................................................................................................................ 62
IFRS 7 Financial Instruments Disclosures........................................................................................63
IFRS 6 Exploration for and Evaluation of Mineral Resources...........................................................64
IFRS 4 Insurance contracts..............................................................................................................65
IFRS 8 Operating Segments............................................................................................................65
IAS 34 Interim accounts...................................................................................................................66
3
, Underlying concepts and Ethics
Quality control (ISQC1):
Leadership responsibilities for quality in the firm, Ethics, Acceptance and continuance of client
relationships and specific engagements, Human resources, Engagement performance, Monitoring.
Professional scepticism!!! Always think of whether sufficient evidence exists to support numbers
and treatments.
Fundamental principles:
1. Integrity: straightforward & honest in all professional and business relationships.
2. Objectivity: should not allow bias, conflict of interest or undue influence of others to override
professional or business judgements.
Independence: freedom from conditions and relationships which, in the context of an
engagement, would compromise the integrity or objectivity of the firm or covered persons.
3. Professional competence and due care: maintain professional knowledge and skill at the
level required to ensure the client receives competent professional services based on
current development I practice, legislation and techniques. Act diligently and in accordance
with applicable technical and professional standards.
4. Confidentiality: do not use such information for the personal advantage of themselves or
others nor disclose confidential information to third parties without proper and specific
authority, even after the engagement has finished. May be required to disclose info by law /
for the public interest / or if consent is given.
5. Professional behaviour: comply with the relevant laws and regulations and do not act in a
way that discredits the profession.
Threats:
1. Self-interest threat
2. Self-review threat
3. Advocacy threat
4. Familiarity threat
5. Intimidation threat
6. Management threat (establish informed management)
Consider the legality of issues and materiality of numbers as well.
Safeguards:
o Education, training and experience requirements for entry into the profession
o CPD requirements
o Having appropriate firm procedures in place and ensuring staff are regularly communicated
about them
o Performance assessment and feedback/reward/discipline on a timely basis
o Strong internal controls
o Directions, supervision, review of work by a sufficiently senior staff member
o Discuss with line manager, follow internal complaints process, Report to the board or audit
committee if available, ICAEW helpline, legal advice, resignation as a last resort.
o Second partner review
o Ethics Partner
4
