International Accounting Standards AAT level 4

IAS 1 Presentation of Financial Statements

• Emphasises the general objective that accounts should be useful to existing & potential investors, lenders & other creditors
• Financial statements must be produced annually
• A complete set of financial statements must include:
• Statement of Financial Position
• Statement of Profit or Loss & other comprehensive income
• Statement of changes in equity
• Statement of Cash Flows
• Notes including significant accounting policies & explanatory information
• Must show name of company, dates of accounts, currency, rounding

IAS 2 Inventories

• Must be valued at the lower of cost or net realisable value
• Value inventories items separately
• FIFO and AVCO can be used to establish the value of closing inventory not LIFO

IAS 7 Statement of Cash Flows

• Cash changes described as:
• Operating activities (normal business)
• Investing activities ( purchase of ppe, disposal of ppe, dividends received from other companies
• Finance activities (dividends paid, share issues, bank loans)

IAS 10 Events after the reporting period

• Events which happen between the year end and the date when the financial statements are authorised for issue
• IAS 10 distinguishes between adjusting and non adjusting events
• Adjusting events
• Evidence of conditions that existed at the year end if material changes should be made to the statements
• e.g. inventories nrv below cost
• trade receivables where customer goes insolvent
• settlement of court case if obligation at year end
• Non adjusting events
• If material disclose as a note and give estimate
• e.g.purchase of assets, losses due to fire, flood, strikes
• Going concern - if the directors decide after the year end to cease trading the financial statements must be adjusted

IAS 16 Property, Plant & Equipment (PPE)

• PPE tangible items that are used in the production or supply of goods or services
• Will be used for more than 1 period
• Must be able to measure cost reliably and expect future cash inflows as a result
• Cost can include purchase price and any directly attributable costs e.g. site prep but not administration or training
• Can measure at cost or revaluation
• If you revalue you must revalue everything in that class of asset
• Revaluation gain classed as other comprehensive income, gains in revaluation reserve
• Depreciation included - the systematic allocation of the depreciable amount over the assets estimated useful life

IAS 18 Revenue

• Revenue measured at the fair value of consideration received or receivable, when seller has transferred the risks and rewards of ownership of the goods (usually when despatched)
• Amount must be able to be measured reliably

IAS 17 LEASES

• Must account for leases in accordance with commercial reality rather than legal form
• May be finance or operating
• Finance - lease transfers substantially all risk and rewards of ownership of the asset to the lessee
• 5 situations which could lead to a finance lease
• lease transfers ownership
• option to purchase
• lease term is for major part of assets economic life
• present value of minimum lease payments amounts to assets fair value
• lease is so specialised only lessee can use it
• 2 methods actuarial and sum of digits
• Actuarial ( treat as loan with % interest)
• Sum of digits (interest calculated using 1 + 2 + 3 etc highest first to allocate interest

IAS 36 IMPAIRMENT OF ASSETS

• If an assts carrying amount is greater than is recoverable amount it is impaired (worth less than stated in accounts)
• Impairment loss is difference between carrying amount and recoverable amount.
• Carrying amount is the amount stated in accounts (cost less depreciation)
• Recoverable amount is the HIGHER of its fair value less costs of selling or value in use
• Value in use is the present value of any future cash flows arising on disposal
• Recognise the loss immediately in the accounts

IAS 37 Provisions, Contingent Assets/Liabilities

• Provision - recognised if the company has a present obligation as a result of a past event and it is PROBABLE that there will be an outflow as a result and that can be reliably estimated.
• Contingent liability - possible obligation from past events but will be confirm when future events occur or don't occur which is not wholly in the company's control, or
• A present obligation arising from past events but not recognised because it is not probable that there will be an outflow or it can't be measured reliably
• Disclose as a note
• Contingent Asset disclose only if inflow is probable

IAS 38 INTANGIBLE ASSETS

• Identifiable, non monetary asset with no physical substance
• e.g. goodwill, research and development
• Research and development
• research write off as expense
• development , recognise as intangible asset once PIRATE criterial met
• Probable future economic inflows
• Intention to complete and sell
• Resources adequate to complete
• Ability to use or sell asset
• Technical feasibility
• Expenditure can be measured reliably