FAC with verified questions and answers

IFRS International Financial Reporting Standards International Financial Reporting Standards A set of rules developed to make sure that financial statements are prepared consistently for companies so that users can compare the financial results and performance from the current year to prior years to the same company. Additionally, making it possible for users to compare the financial position and performance of one company with another. Profit Company A company that is incorporated for the purpose of financial gain for its shareholders. Include: state-owned companies (SOC Ltd), private companies [(Pty) Ltd], personal liability companies [Inc], and public companies [Ltd]. Purpose of Conceptual Framework a) assist the IASB in developing IFRS that is consistent concepts b) aid the prepares of financial statements to develop consistent accounting policies in the absence of a standard. c) assist all parties to understand and interpret IFRS. Objective of General Purpose Financial Reporting To provide financial information about a reporting entity to its existing and potential investors , lenders and other creditors. Financial Statements A specific form of financial reporting. They portray information about assets, liabilities, equity, income, and expenses. Based on Accrual Method of accounting. Accrual Basis Accounting reporting income when it is earned and expenses when they are incurred Qualitative Characteristics of Useful Financial Information ... Fundamental Qualitative Characteristics a) Relevance : Materiality b) Faithful representation Enhancing Qualitative Characteristics a) Comparability b) Verifiability c) Timeliness d) Understand-ability The Statement of Financial Position Contains information about the assets, liabilities and equity. The Statement of Profit or Loss and Other Comprehensive Income Contains information about income and expenses Statement of Changes in Equity A financial statement that summarises the changes in total shareholders' equity, as well as each component of shareholders' equity, for a specific period of time. Statement of Cash Flows Financial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing. Going Concern Assumption The assumption that the company will continue in operation for the foreseeable future. An Asset A present economic resource, controlled by a reporting entity as a result of past events. An Economic Resource A right that has the potential to produce economic benefits. A Liability A present obligation of a reporting entity to transfer an economic resource as a result of past events. Equity/Net wealth Includes issued share capital, reserves, members' contributions (Close Corporation "cc"), capital contributions ( partnerships), current accounts (partnerships). Unfavourable Equity Total Liabilities Total Assets Favourable Equity Total Liabilities Total Assets The Recognition Process ... Statement of Financial Position Components PPE, Investment Property, Intangible assets, Financial assets, Inventories, Trade and other receivables (debtors) , Cash and cash equivalents (Bank or petty cash), Trade and other payables (Creditors) , Financial liabilities, Issued capital and reserves Statement of Profit or Loss and Other Comprehensive Income Components ...