Topic Page
Lesson Name Examples and Questions
Index
M1 THE ROLE AND IMPORTANCE OF FINANCIAL REPORTING
1 The role and importance of financial reporting 2
2 Understanding the International Financial Reporting Standards 5
3 Interaction between financial reporting and the regulatory environment-Who must
7
prepare general purpose financial reports?
International Accounting Standards Board 7
Australian Accounting Standards Board 7
External Reporting Board of New Zealand 9
Other Jurisdictions 9
4 International initiatives toward sustainability-related financial reporting 11
5 The Conceptual Framework for Financial Reporting 12
TABLE 1.2 Structure of the Conceptual Framework for Financial Reporting 12
Principles established in the conceptual framework 15
1) Accrual Basis 15
Question 1.4 Accrual VS. Cash Basis 15
2) Going Concern 15
6 Qualitative characteristics of useful financial information 16
FIGURE 1.3 Qualitative characteristics of financial information 16
Fundamental qualitative characteristics 16
1) Relevance 16
TABLE 1.4 How relevant information helps users 16
2) Materiality 17
TABLE 1.5 Identifying financial information useful to users of financial reports 17
3) Faithful Representation 17
Enhancing qualitative characteristics 18
1) Comparability 18
2) Verifiability 19
TABLE 1.6 Form of verification 19
3) Timeliness 19
4) Understandability 19
The cost constraint on useful financial reporting 20
7 The elements of financial statements 21
Defining the elements of financial statements 21
1) Assets 21
FIGURE 1.4 Key decision areas in accounting for transactions and other events 22
2) Liabilities 23
FIGURE 1.5 Examples of how a liability might be settled 23
3) Equity 24
FIGURE 1.6 How recognition links the elements of financial statements 24
4) Income 24
5) Expenses 25
8 Criteria for recognising elements of financial statements 25
1) Recognition of income 26
2) Recognition of expenses 26
3) Derecognition of assets and liabilities 26
4) Constraints on international consistency of the application of recognition criteria
27
established by the conceptual framework
,9 Measurement of elements of financial statements 27
Cost-based and value-based measures used in the international financial reporting
28
standards
FIGURE 1.7 Measurement bases specified under International Accounting Standards
28
Board pronouncements
1) Cost/Historical Cost 28
2) Amortised Cost 30
Example 1.4 Effective Interest Rate 31
Example 1.5 Amortised cost at reporting date 31
3) Fair Value 32
3) Current Cost 33
Reproduction cost 33
Replacement cost 33
4) Fair Value Less Costs of Disposal 34
5) Net Realisable Value 34
6) Fulfilment Value 35
7) Value in Use 35
Present value as a valuation technique 36
1) Uncertainty of Future Cash Flows 36
2) Selection of Appropriate Discount Rates 36
Systematic risk 37
Unsystematic risk 37
Historical Rates 37
Current Rates 37
Application of measurement principles in the IFRSs 38
10 IFRS 16 Leases 38
TABLE 1.8 Recognition and measurement criteria for the lessee 39
LESSEE: Example 1.7: Accounting for leases by
40
lessee (Cal) + Question 1.11 Journals
TABLE 1.9 Recognition criteria for the lessor 43
LESSOR: Example 1.9: Accounting for leases by
43
lessor (Cal) + Question 1.13 Journals
11 IAS 19 Employee Benefits 45
1) Short-term Employee Benefits 45
Question 1.14 Provision for sick leave 45
2) Long-term Employee Benefits 45
Long Service Leave 45
47
Question 1.15 and Example 1.10 Provision for LSL
12 IFRS 2 Share-based Payment 49
Share-based payment arrangement 49
1) Cash-settled share-based payment transaction 49
2) Equity-settled share-based payment transaction 49
Example 1.11 Performance Bonuses for Share-
50
based Payment
13 IAS 40 Investment property 51
14 Professional judgment 52
15 Disclosures 53
, Topic Page
Lesson Name Examples and Questions
Index
M2 PRESENTATION OF FINANCIAL STATEMENTS
Part A Presentation of financial statements 62
1 Introduction of Presentation of financial statements 62
2 Components of a complete set of financial statements 63
3 Segment reporting 65
4
66
Fair presentation and compliance with international financial reporting standards
5 Other general features: 66
1) Going concern 66
2) Accrual basis 67
3) Materiality and Aggregation 67
4) Offsetting 68
5) Frequency of reporting 68
6) Comparative information 68
7) Consistency 69
6 Accounting policies 69
Selection of accounting policies 69
Consistency of accounting policies 70
Disclosure of accounting policies 70
Changes in accounting policies 71
Example 2.1: Change in accounting policy –
71
change made retrospectively
7 Revision of accounting estimates and correction of errors 74
1) Changes in accounting estimates 74
74
Example 2.2: Change in an Accounting Estimate
2) Material errors in a prior period 75
Example 2.3: Material Errors in a Prior Period 76
8 Events after the reporting period 76
FIGURE 2.2 Application of IAS 10 Events after the Reporting Period 77
FIGURE 2.3 Types of events after the reporting period 77
1) Adjusting events 77
2) Non-adjusting events 78
FIGURE 2.4 Distinguishing between different types of events after the reporting period 78
Dividends declared after reporting period 80
Going concern issues after reporting period 80
Part B Statement of profit or loss and other comprehensive income 83
9 Presentation of comprehensive income 83
FIGURE 2.5 Components of comprehensive income and their presentation 84
10 The concept of other comprehensive income and total comprehensive income 84
11 IAS 1 — disclosures and classification 85
Single statement (Statement of P/L and OCI) 85
Two statements (A statement of P/L and a statement of comprehensive income) 86
Information Presented With Profit or Loss 86
Expenses — Nature or Function? 87
Separate Disclosure of Material Income and Expense Items 88
Information Presented with Other Comprehensive Income 88
TABLE 2.1 Relationship between statement of profit or loss and other comprehensive
89
income and statement of changes in equity
12 Reclassification 89
Q2.6: Derecognise PPE 89
Q2.7: Disposal foreign operation 90
13 Q2.8: Prepare a single statement of P/L and OCI,
and consider for separate disclosure in notes to 90
Comprehensive example - Case Study – Webprod Ltd the financial statements.
Lesson Name Examples and Questions
Index
M1 THE ROLE AND IMPORTANCE OF FINANCIAL REPORTING
1 The role and importance of financial reporting 2
2 Understanding the International Financial Reporting Standards 5
3 Interaction between financial reporting and the regulatory environment-Who must
7
prepare general purpose financial reports?
International Accounting Standards Board 7
Australian Accounting Standards Board 7
External Reporting Board of New Zealand 9
Other Jurisdictions 9
4 International initiatives toward sustainability-related financial reporting 11
5 The Conceptual Framework for Financial Reporting 12
TABLE 1.2 Structure of the Conceptual Framework for Financial Reporting 12
Principles established in the conceptual framework 15
1) Accrual Basis 15
Question 1.4 Accrual VS. Cash Basis 15
2) Going Concern 15
6 Qualitative characteristics of useful financial information 16
FIGURE 1.3 Qualitative characteristics of financial information 16
Fundamental qualitative characteristics 16
1) Relevance 16
TABLE 1.4 How relevant information helps users 16
2) Materiality 17
TABLE 1.5 Identifying financial information useful to users of financial reports 17
3) Faithful Representation 17
Enhancing qualitative characteristics 18
1) Comparability 18
2) Verifiability 19
TABLE 1.6 Form of verification 19
3) Timeliness 19
4) Understandability 19
The cost constraint on useful financial reporting 20
7 The elements of financial statements 21
Defining the elements of financial statements 21
1) Assets 21
FIGURE 1.4 Key decision areas in accounting for transactions and other events 22
2) Liabilities 23
FIGURE 1.5 Examples of how a liability might be settled 23
3) Equity 24
FIGURE 1.6 How recognition links the elements of financial statements 24
4) Income 24
5) Expenses 25
8 Criteria for recognising elements of financial statements 25
1) Recognition of income 26
2) Recognition of expenses 26
3) Derecognition of assets and liabilities 26
4) Constraints on international consistency of the application of recognition criteria
27
established by the conceptual framework
,9 Measurement of elements of financial statements 27
Cost-based and value-based measures used in the international financial reporting
28
standards
FIGURE 1.7 Measurement bases specified under International Accounting Standards
28
Board pronouncements
1) Cost/Historical Cost 28
2) Amortised Cost 30
Example 1.4 Effective Interest Rate 31
Example 1.5 Amortised cost at reporting date 31
3) Fair Value 32
3) Current Cost 33
Reproduction cost 33
Replacement cost 33
4) Fair Value Less Costs of Disposal 34
5) Net Realisable Value 34
6) Fulfilment Value 35
7) Value in Use 35
Present value as a valuation technique 36
1) Uncertainty of Future Cash Flows 36
2) Selection of Appropriate Discount Rates 36
Systematic risk 37
Unsystematic risk 37
Historical Rates 37
Current Rates 37
Application of measurement principles in the IFRSs 38
10 IFRS 16 Leases 38
TABLE 1.8 Recognition and measurement criteria for the lessee 39
LESSEE: Example 1.7: Accounting for leases by
40
lessee (Cal) + Question 1.11 Journals
TABLE 1.9 Recognition criteria for the lessor 43
LESSOR: Example 1.9: Accounting for leases by
43
lessor (Cal) + Question 1.13 Journals
11 IAS 19 Employee Benefits 45
1) Short-term Employee Benefits 45
Question 1.14 Provision for sick leave 45
2) Long-term Employee Benefits 45
Long Service Leave 45
47
Question 1.15 and Example 1.10 Provision for LSL
12 IFRS 2 Share-based Payment 49
Share-based payment arrangement 49
1) Cash-settled share-based payment transaction 49
2) Equity-settled share-based payment transaction 49
Example 1.11 Performance Bonuses for Share-
50
based Payment
13 IAS 40 Investment property 51
14 Professional judgment 52
15 Disclosures 53
, Topic Page
Lesson Name Examples and Questions
Index
M2 PRESENTATION OF FINANCIAL STATEMENTS
Part A Presentation of financial statements 62
1 Introduction of Presentation of financial statements 62
2 Components of a complete set of financial statements 63
3 Segment reporting 65
4
66
Fair presentation and compliance with international financial reporting standards
5 Other general features: 66
1) Going concern 66
2) Accrual basis 67
3) Materiality and Aggregation 67
4) Offsetting 68
5) Frequency of reporting 68
6) Comparative information 68
7) Consistency 69
6 Accounting policies 69
Selection of accounting policies 69
Consistency of accounting policies 70
Disclosure of accounting policies 70
Changes in accounting policies 71
Example 2.1: Change in accounting policy –
71
change made retrospectively
7 Revision of accounting estimates and correction of errors 74
1) Changes in accounting estimates 74
74
Example 2.2: Change in an Accounting Estimate
2) Material errors in a prior period 75
Example 2.3: Material Errors in a Prior Period 76
8 Events after the reporting period 76
FIGURE 2.2 Application of IAS 10 Events after the Reporting Period 77
FIGURE 2.3 Types of events after the reporting period 77
1) Adjusting events 77
2) Non-adjusting events 78
FIGURE 2.4 Distinguishing between different types of events after the reporting period 78
Dividends declared after reporting period 80
Going concern issues after reporting period 80
Part B Statement of profit or loss and other comprehensive income 83
9 Presentation of comprehensive income 83
FIGURE 2.5 Components of comprehensive income and their presentation 84
10 The concept of other comprehensive income and total comprehensive income 84
11 IAS 1 — disclosures and classification 85
Single statement (Statement of P/L and OCI) 85
Two statements (A statement of P/L and a statement of comprehensive income) 86
Information Presented With Profit or Loss 86
Expenses — Nature or Function? 87
Separate Disclosure of Material Income and Expense Items 88
Information Presented with Other Comprehensive Income 88
TABLE 2.1 Relationship between statement of profit or loss and other comprehensive
89
income and statement of changes in equity
12 Reclassification 89
Q2.6: Derecognise PPE 89
Q2.7: Disposal foreign operation 90
13 Q2.8: Prepare a single statement of P/L and OCI,
and consider for separate disclosure in notes to 90
Comprehensive example - Case Study – Webprod Ltd the financial statements.
