Financial Accounting II Lecture 45. The accounting policy adopted The total carrying amount and the carrying amount in classification appropriate to the.

Slides:



Advertisements
Similar presentations
Investment property IAS 40
Advertisements

SFRS FOR SMALL ENTITIES
Accounting Standard (AS) - 3 Cash Flow Statements - Pratap Karmokar (ACA)
Understanding the Balance Sheet and Statement of Owners’ Equity Chapter 3.
NZ IAS 1 Presentation of Financial Statements
Faculty: Ms. Luvnica Rastogi Amity International Business School Imp Website:
Other Reporting Issues
Cash Flow - Dr. varadraj Bapat, IIT Mumbai1 Module 6 Cash Flow.
Name DivRoll No Gufran Siddiqui A 53 Aabid Kalokhe a 20 Shehzad Khan A 30 Asif valsangkar a 61 Farhan Ansari a 04 Shoaib shaikh a 50 Zeeshan azmi a 06.
Balance Sheet Assets, Liabilities & Shareholders’ Equity “Old accountants never die; they just lose their balance” --Anonymous.
© Tata McGraw-Hill Publishing Company Limited, Management Accounting Generally Accepted Accounting Principles and Accounting Standards Prof. Seema.
Financial Accounting II Lecture 44.
ACCOUNTING FOR COMPANY STATEMENT OF FINANCIAL POSITION (ASSETS)
IAS 7: Cash Flow Statements. Agenda 1.Objective and Scope 2.Definitions 3.Direct and Indirect method 4.Operating activities, Investing activities, Financing.
Rangajewa Herath B.Sc. Accountancy and Financial Management(Sp.)(USJ) MBA-PIM(USJ)
Revise lecture Statement of cash flows – IAS 7 2.
A HIGHLIGHT OF THE DIFFERENCES
Revenues Key Definition Revenue: the gross inflow of economic benefits (cash, receivables, other assets) arising from the ordinary operating activities.
Connolly – International Financial Accounting and Reporting – 4 th Edition CHAPTER 13 INCOME TAXES.
Connolly – International Financial Accounting and Reporting – 4 th Edition CHAPTER 9 INTANGIBLE ASSETS.
International Accounting Standard 1 Presentation of Financial Statements Yousef ElMudallal Part 2.
Requirements of the Standard IAS 7
Chapter 12 Exchange of non-monetary assets. exchange of non-monetary assets  Non-monetary assets and monetary assets  Monetary assets: currency held.
IAS 2 INVENTORIES Orhan Balıkçı. Introduction The Standard prescribes the accounting treatment for inventories. The main issue with respect to accounting.
IAS 21 The Effects of Changes in Foreign Exchange Rates.
Preparation of Financial Statements- LKAS 1
(C) 2007 Prentice Hall, Inc.2-1 The Balance Sheet-Liabilities and Shareholders’ Equity “Old accountants never die; they just lose their balance” --Anonymous.
Understanding the Balance Sheet and Statement of Owners’ Equity Chapter 3 Robinson, Munter, Grant.
International Accounting Standard 12 Income Taxes.
Accounting (Basics) - Lecture 3 Property, plant and equipment.
Accounting (Basics) - Lecture 5 Lease. Contents Classification of leases Finance leases - financial statements of lessees and lessors Operating leases.
IPSAS I6: INVESTMENT PROPERTY Presented by: Georgina Muchai Date: 19/8/2015 A closer look 1.
International Financial Reporting Standards - IFRS.
Financial Accounting II Lecture 14. Presentation and Disclosure of Assets in Balance Sheet Areas Covered.
Financial Accounting II Lecture 08. Intangible Assets Companies Ordinance 1984.
F Designed to give you the knowledge and application of: Section C: Financial Statements C1. Statements of cash flows C2. Tangible non-current.
Financial Accounting II Lecture 16. Long Term Investments.
11 Chapter 17 statements Of Cash flow. CopyRight 2011 By 周冬华 博士 CPA 2 structure.
INCOME COMPUTATION & DISCLOSURE STANDARDS (ICDS).
Financial Accounting. 2 3 Section F: Preparing Basic Financial Statements Designed to give you knowledge and application of: F1. Statement of financial.
Purpose of Statement Operating, Investing, and Financing Activities Product Life Cycle Statement of Cash Flows – Indirect Method Direct Method.
Financial Accounting II Lecture 40. Another area that is to be considered carefully while preparing cash flows is the finance lease. At the time of inception.
Presentation of Financial Statements (LKAS 01)
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OF KENYA
Accounting (Basics) - Lecture 5 Lease
International Accounting Standard 16 Property, Plant and Equipment
Chapter 9 Impairment of Assets.
Mark Fielding-Pritchard
Financial Accounting II Lecture 34
Financial Accounting II Lecture 35
The statement of cash flows
Financial Accounting II Lecture 30
International Financial Reporting Standards (IFRSs)
Financial Accounting II Lecture 27
Financial Accounting II Lecture 07
13 The Statement of Cash Flows Financial and Managerial Accounting 10e
The Income Statement and Statement of Cash Flows
(2) Statement of Cash Flows
Depreciation of property, plant and equipment
Statement OF Cash Flows Ind As 7
FINANCIAL STATEMENT ANALYSIS
Cash Flow Statement Dr.S.Kishore Assistant Professor Department of MBA
FINANCIAL STATEMENT ANALYSIS
Section 7 Statement of Cash Flows
The Statement Of Cash Flows
Accounting Standard (AS) - 3
Understanding the financial statements required by IAS 1
LKAS18: Revenue Rangajeewa Herath
Accounting for Assets Cash Flows.
Presentation transcript:

Financial Accounting II Lecture 45

The accounting policy adopted The total carrying amount and the carrying amount in classification appropriate to the enterprise. The carrying amount of the inventories carried at NRV. The amount of any reversal of any write down that is recognized as the income. The circumstances and events that led to the reversal of write down The carrying amount of any securities pledged for security. Disclosure Requirements – IAS 02

If the inventories are recorded using allowed alternative treatment then the difference of inventories under benchmark treatment and allowed alternative treatment is also required to be disclosed. The financial statements should also disclose the cost of inventories recognized as expense during the period. Disclosure Requirements – IAS 02

An entity shall disclose; a. The accounting policies adopted for the recognition of revenue, including the methods adopted to determine the stage of completion of transitions involving rendering of services; b. The amount of each significant category of revenue recognized during the period including revenue arising from; Disclosure - IAS 18

i.The sale of goods; ii. The rendering of services; iii. Interest; iv. Royalties; v. Dividend; and c. The amount of revenue arising from exchanges of goods or services included in each significant category of revenue. Disclosure - IAS 18

Under the benchmark treatment of IAS 23 borrowing cost should be treated as expense in the period they are incurred regardless of the of how the loan is used. Recognition of Borrowing Costs

If benchmark treatment is used the enterprise is only required to disclose the policy adopted for borrowing costs. Disclosure Requirements- Borrowing Cost

Disclosure must still be made where the EPS figures (basic and/or diluted) are negative (i.e. a loss per share) The amounts used as the numerators in calculating basic and diluted EPS, and a reconciliation of those amounts to the net profit or loss for the period. The weighted average number of ordinary shares used as the denominator in calculating basic and diluted EPS, and a reconciliation of these denominators to each other. Disclosure of EPS

All entities should disclose, together with a commentary by management, any other information likely to be of importance, for example: a)Restrictions on the use of or access to any part of cash equivalents. b)The amount of un-drawn borrowing facilities which are available. Disclosures – Cash Flows

c)The separate disclosure of cash flows that represent increases in operating capacity and cash flows that are required to maintain operating capacity is useful in enabling the user to determine whether the entity is investing adequately in the maintenance of its operating capacity. An entity that does not invest adequately in the maintenance of its operating capacity may be prejudicing future profitability for the sake of current liquidity and distributions to owners. Disclosures – Cash Flows

d)The disclosure of segmental cash flows enables users to obtain a better understanding of the relationship between the cash flows of the business as a whole and those of its components parts and the availability and variability of segmental cash flows. Disclosures – Cash Flows

(Para 22) subject to Para 23, when a change in accounting policy is applied retrospectively in accordance with Para 19, the entity shall adjust the opening balance of each affected component of equity for the earliest period presented and the other comparative amounts disclosed for each prior periods presented as if the new accounting policy has always been applied. Retrospective Application – IAS 8

The company is incorporated in Pakistan and is listed on Karachi, Lahore and Islamabad Stock Exchanges. It is principally engaged in the manufacture and sale of paper, paperboard, packaging materials and tissue products. 1.Legal status and nature of business

2.1Basis of preparation 2.1.1These financial statements have been prepared in accordance with the requirements of the Companies Ordinance, 1984 and International Accounting Standards (IAS) as applicable in Pakistan. Approved Accounting Standards comprise of such IASs as notified under the provisions of the Companies Ordinance, Wherever, the requirements of the Companies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan (SECP) differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives take precedence. 2.Significant accounting policies

2.1.2During the year, the SECP substituted the Fourth Schedule to the Companies Ordinance, 1984 which is effective from financial year ending on or after July 5, This has resulted in the change in accounting policy pertaining to the recognition of dividends proposed subsequent to year end (note 11.1) and capitalization of exchange differences

2.2Accounting convention These financial statements have been prepared under the historical cost convention, except for revaluation of certain financial instruments at fair value and recognition of certain employee retirement benefits at present value.

2.3Taxation Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year if enacted. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years.

2.4Fixed capital expenditure and depreciation / amortisation 2.4.1Property, plant and equipment Property, plant and equipment except freehold land are stated at cost less accumulated depreciation and any identified impairment loss. Freehold land is stated at cost less any identified impairment loss. Cost in relation to certain plant and machinery signifies historical cost and interest, mark up etc. as referred to in note Depreciation on all operating property, plant and equipment is charged to profit on the straight-line method so as to write off the historical cost of an asset over its estimated useful life at the following annual rates:

Plant and machinery6.25% to 20% Buildings2.5% to 10% Other equipment10% to 33.33% Furniture and fixtures10% to 20% Vehicles20%

Where an impairment loss is recognised, the depreciation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life. Major repairs and improvements are capitalized. Minor repairs and renewals are charged to income. The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognised as an income or expense.

2.4.2Intangible assets Expenditure incurred to acquire computer software and Enterprise Resource Planning System (ERP) are capitalized as intangible assets and stated at cost less accumulated amortisation and any identified impairment loss. Intangible assets are amortised using the straight line method over a period of three years.

2.4.3Capital work in progress Capital work in progress is stated at cost less any identified impairment loss. 2.5Leases Finance leases Leases where the company has substantially all the risks and rewards of ownership are classified as finance leases. Assets subject to finance lease are stated at the lower of present value of minimum lease payments under the lease agreements and the fair value of the assets.

The related rental obligations, net of finance charges, are included in liabilities against assets subject to finance lease as referred to in note 6. The liabilities are classified as current and long-term depending upon the timing of the payment.

2.6Investments Investments in equity instruments of subsidiaries and associated companies Investments are initially measured at cost. Cost in relation to investments made in foreign currency is determined by translating the consideration paid in foreign currency into rupees at exchange rates prevailing on the date of transactions.

Other investments The other investments made by the company are classified for the purpose of measurement into the following categories: Held to maturity Investments with fixed maturity that the management has the intent and ability to hold to maturity are classified as held to maturity and are initially measured at cost and at subsequent reporting dates measured at amortised cost using the effective yield method.

Available for sale Investments classified as available for sale are initially measured at cost, being the fair value of consideration given. At subsequent reporting dates, these investments are re- measured at fair value (quoted market price), unless fair value cannot be reliably measured. The investments for which a quoted market price is not available, are measured at cost as it is not possible to apply any other valuation methodology. Realized and un-realized gains and losses arising from changes in fair value are included in the net profit or loss for the period in which these arise.

2.7Stores and spares Usable stores and spares are valued principally at moving average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon.

2.8 Stock-in-trade Stock of raw materials, except for those in transit, work-in-process and finished goods are valued principally at the lower of weighted average cost and net realizable value. Cost of work-in-process and finished goods comprises cost of direct materials, labour and appropriate manufacturing overheads. Materials in transit are stated at cost comprising invoice value plus other charges paid thereon.

2.9Financial instruments 2.10Trade debts 2.11Cash and cash equivalents 2.12Borrowings 2.13Creditors, accrued and other liabilities

2.10Trade debts Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified.

2.12Borrowings Loans and borrowings are recorded at the proceeds received. In subsequent periods, borrowings are stated at amortised cost using the effective yield method. Finance costs are accounted for on an accrual basis and are included in creditors, accrued and other liabilities to the extent of the amount remaining unpaid.

2.14Provisions Provisions are recognised when the company has a present obligation as a result of past event which it is probable will result in an outflow of economic benefits and a reliable estimate can be made of the amount of the obligation.

2.15Revenue recognition Revenue is recognised on dispatch of goods or on the performance of services except for management fee, which is recognised on receipt. Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and the applicable rate of return. Dividend income on equity investments is recognised as income when the right of receipt is established.

2.16Borrowing costs Mark up, interest and other charges on long-term borrowings are capitalized up to the date of commissioning of the related plant and machinery, acquired out of the proceeds of such long-term borrowings. All other mark up, interest and other charges are charged to profit.