Financial Reporting under IFRS: A Topic Based Approach

COVER......Page 1
TITLE......Page 5
COPYRIGHT......Page 6
CONTENTS......Page 7
FOREWORD......Page 9
1. USERS OF FINANCIAL AND ACCOUNTING INFORMATION......Page 11
3. OBJECTIVES OF THE IASB......Page 12
ACKNOWLEDGEMENTS......Page 15
1.1 FINANCIAL STATEMENTS......Page 17
1.1.1 Balance Sheet Content......Page 19
1.1.2 Income Statement (or Profit and Loss Account)......Page 25
1.1.3 Cash-Flow Statement......Page 26
1.1.4 Distinction between Income and Cash......Page 29
1.2.1 Accounting Principles......Page 36
1.2.2 Accounting Mechanisms......Page 37
1.3 SUMMARY......Page 45
1.4.1 Case Study: Global Ltd......Page 47
2.1.1 Date of Recognition of Sales......Page 53
2.1.2 Measuring of Sales......Page 60
2.2.1 Consumption of Goods......Page 65
2.2.2 Consumption of Materials......Page 69
2.2.3 Other Goods and Services Purchased and Consumed......Page 72
2.2.4 Taxes......Page 74
2.2.5 Personnel Expenses......Page 75
2.3 SUMMARY......Page 77
2.4 ACTIVITIES......Page 78
3.1 CURRENT FINANCIAL ASSETS......Page 81
3.1.1 Initial Valuation......Page 82
3.1.2 Valuation at Closing of the Period......Page 83
3.2 ACCOUNTS RECEIVABLE......Page 86
3.2.1 Initial Valuation of Receivables......Page 88
3.2.2 Financial Reductions......Page 90
3.2.3 Doubtful Accounts (or Bad Debts)......Page 92
3.2.4 Returns of Goods......Page 98
3.2.5 Credit Sales in Foreign Currency......Page 99
3.3 INVENTORY......Page 100
3.3.1 Physical Count......Page 101
3.3.2 Valuation Initial Valuation......Page 102
3.3.3 Depreciation of Inventory......Page 105
3.4.1 Introduction to Cost of Finished Goods......Page 107
3.5 SUMMARY......Page 109
3.6.2 Accounts Receivable......Page 110
3.6.3 Inventories......Page 111
4.1.1 General Case......Page 113
4.2 PROVISIONS......Page 116
4.2.1 Definition: Legal or Implicit Obligation......Page 117
4.2.2 Measurement......Page 119
4.2.3 Different types of provisions......Page 122
4.2.4 Information about Provisions in the Financial Statements......Page 133
4.3 CONTINGENT LIABILITIES......Page 134
4.4 SUMMARY......Page 136
4.5 ACTIVITIES......Page 137
4.5.1 Case Study: Biogas......Page 139
5.1 TANGIBLE AND INTANGIBLE ASSETS......Page 141
5.1.1 Recording Date......Page 142
5.1.2 Initial Value......Page 145
5.1.3 Carrying Value......Page 148
5.1.4 Derecognition......Page 166
5.2 FINANCIAL ASSETS......Page 167
5.2.1 Financial Assets Held to Maturity......Page 168
5.2.2 Available-for-Sale Financial Assets......Page 172
5.3 APPENDIX: HEDGE ACCOUNTING......Page 174
5.4 SUMMARY......Page 176
5.5 ACTIVITIES......Page 177
6.1 FINANCIAL LIABILITIES......Page 179
6.2 LEASE AGREEMENTS......Page 183
6.2.1 The Scope of Lease Agreements......Page 184
6.2.2 How to Differentiate a Operating Lease from a Finance Lease Agreement......Page 186
6.2.3 The Effects of Finance Lease Agreements on Accounting The Lessee’s Accounts......Page 190
6.3 EQUITY TRANSACTIONS......Page 194
6.3.1 Increasing Shareholders’ Equity Cash contributions......Page 195
6.3.2 Reducing Shareholders’ Equity......Page 198
6.3.3 Statement of Shareholders’ Equity......Page 200
6.5 ACTIVITIES......Page 202
7.1 INCOME TAX AND OTHER TAXES......Page 205
7.1.2 Sales Tax or Value-Added Tax......Page 206
7.1.3 Other taxes......Page 207
7.2.1 Determining Taxable Income......Page 208
7.2.2 Determining Tax Expense......Page 210
7.2.3 Recording Taxes on the Balance Sheet......Page 211
7.3 DEFERRED TAX......Page 215
7.3.1 Recognition of Deferred Tax on the Balance Sheet......Page 216
7.3.3 Reporting......Page 220
7.4.1 VAT Accounting Principles......Page 221
7.4.2 Recording VAT Collected......Page 222
7.4.3 Recording Deductible VAT......Page 223
7.4.4 Recording for the Monthly VAT Declaration......Page 225
7.5 SUMMARY......Page 227
7.6 ACTIVITIES......Page 228
8.1 TYPES OF FINANCIAL RELATIONSHIPS BETWEEN COMPANIES......Page 231
8.1.1 Control......Page 232
8.1.2 Joint Control......Page 236
8.2 THE REQUIREMENT TO ESTABLISH CONSOLIDATED FINANCIAL STATEMENTS......Page 237
8.3.1 Guiding Principle......Page 238
8.3.2 Exclusion from the Scope of Consolidation......Page 242
8.4.1 Guiding Principles......Page 243
8.4.2 Translation of Subsidiary Accounts Denominated in a Foreign Currency......Page 244
8.5 CONSOLIDATING INTERCOMPANY TRANSACTIONS......Page 252
8.6 ACQUISITION OF A SUBSIDIARY......Page 256
8.6.1 Revaluation of a Subsidiary’s Assets and Liabilities......Page 257
8.6.2 Identifying New Assets and Liabilities......Page 258
8.6.3 Goodwill......Page 260
8.7 ACCOUNTING TREATMENT OF EQUITY INVESTMENTS......Page 265
8.7.1 Shareholding in a Subsidiary: Full Consolidation......Page 266
8.7.2 Holdings in an Associate Company: The Equity Method......Page 269
8.7.3 Eliminating-Investment with Proportionate Consolidation......Page 272
8.8 SUMMARY......Page 273
8.9 ACTIVITIES......Page 274
9.1.1 Working Capital Requirement......Page 277
9.1.2 Working Capital......Page 279
9.1.3 The Cash Flow Statement......Page 282
9.1.4 Analyzing Fundamental Equilibrium......Page 284
9.2.1 Preparing Financial Statements......Page 288
9.2.2 The Relationship Between Return on Assets and Return on Equity......Page 289
9.2.3 Financial Analysis Integrated into Financial Statements......Page 292
9.3.1 The Statement of Comprehensive Income......Page 299
9.3.2 Statement of Changes in Shareholders’ Equity......Page 300
9.3.3 Accounting Methods and Other Explanations: Notes......Page 302
9.3.4 Segment Reporting......Page 306
9.3.5 Earnings per Share......Page 317
9.3.6 Discontinued Operations and Financial Analysis......Page 320
9.4 SUMMARY......Page 321
9.5 ACTIVITIES......Page 324
10.1 BACKGROUND AND CURRENT STRUCTURE OF THE IASB......Page 329
10.2 INTERNATIONAL RECOGNITION OF THE IFRS......Page 332
10.3.1 Adding a Topic to the Agenda (Step 1)......Page 334
10.3.2 Publishing a Discussion Document and an Exposure Draft (Step 2)......Page 336
10.3.3 The Comment Period and Publication of the Final Standard (Steps 3 and 4)......Page 337
10.4.1 Conceptual Framework......Page 338
10.4.4 Understandable Standards......Page 340
10.5 SUMMARY......Page 341
INDEX......Page 343