FAC1601 TESTBANK

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Contents Page Overview of the introduction to the preparation and presentation of financial statements ........................................................................................... ... .................... 3 1.1 Introduction ................................................................................................... 3 1.2 Conceptual framework for financial reporting ............................................... 6 1.2.1 Introduction ...................................................................................... 7 1.2.2 Financial statements as part of financial reporting .......................... 8 1.2.3 The objective of general purpose financial reporting ...................... 9 1.2.4 Underlying assumption when preparing financial statements ......... 9 1.2.5 Qualitative characteristics of useful financial information ................ 9 1.2.5.1 Fundamental qualitative characteristics .......................... 10 1.2.5.2 Enhancing qualitative characteristics .............................. 10 1.2.5.3 The cost constraint on useful financial reporting ............. 11 1.2.6 Elements of financial statements ..................................................... 11 1.2.6.1 Introduction ..................................................................... 11 1.2.6.2 Financial position (balance sheet)(statement of financial position) ............................................................ 11 1.2.6.3 Financial performance (income statement)(statement of profit or loss and other comprehensive income) ......... 13 1.2.7 Recognition of the elements of financial statements ....................... 14 1.2.8 Measurement of the elements of financial statements ..................... 16 1.2.9 The concepts of capital and capital maintenance ........................... 17 1.2.9.1 The concepts of capital ................................................... 17 1.2.9.2 The concepts of capital maintenance and the determination of profit ...................................................... 17 1.3 The South African regulatory reporting framework ....................................... 18 1.3.1 Introduction ...................................................................................... 18 1.3.2 The current South African financial reporting framework .................. 19 1.4 Presentation of financial statements (IAS 1) ................................................. 20 1.4.1 Introduction ...................................................................................... 21 1.4.2 Definitions ........................................................................................ 22 1.4.3 The purpose of financial statements ................................................ 23 1.4.4 Overall considerations when preparing financial statements .......... 23 1.4.4.1 Fair presentation .............................................................. 23 1.4.4.2 Going concern ................................................................. 24 2 About Financial Accounting: Volume 2 Page 1.4.4.3 Accrual basis ................................................................... 24 1.4.4.4 Materiality and aggregation ............................................. 24 1.4.4.5 Offsetting ......................................................................... 25 1.4.4.6 Frequency of reporting .................................................... 25 1.4.4.7 Comparative information ................................................. 25 1.4.4.8 Consistency of presentation ............................................ 25 1.4.5 Structure and contents of financial statements ................................ 25 1.4.5.1 Introduction ..................................................................... 25 1.4.5.2 Identification of financial statements ............................... 26 1.4.5.3 Statement of financial position ......................................... 26 1.4.5.4 Statement of profit or loss and other comprehensive income ............................................................................. 28 1.4.5.5 Statement of changes in equity ....................................... 29 1.4.5.6 Statement of cash flows ................................................... 29 1.4.5.7 Notes ............................................................................... 30 1.5 Financial instruments .................................................................................... 31 1.5.1 Introduction ...................................................................................... 32 1.5.2 Definitions ........................................................................................ 32 1.5.2.1 Financial instrument ........................................................ 32 1.5.2.2 Financial asset (IAS 32.11) .............................................. 33 1.5.2.3 Financial liability (IAS 32.11) ........................................... 33 1.5.2.4 Equity instrument (IAS 32.11) .......................................... 33 1.5.2.5 Fair value (IAS 32.11) ...................................................... 33 1.5.2.6 Contract ........................................................................... 34 1.5.3 Identification of financial assets and financial liabilities .................. 34 1.5.4 Classification, recognition and measurement of financial instruments ...................................................................................... 35 1.5.4.1 Classification of financial instruments ............................. 35 1.5.4.2 Classification of financial liabilities .................................. 36 1.5.4.3 Recognition ..................................................................... 36 1.5.4.4 Classification and measurement ..................................... 37 1.6 Practical applications of IAS 1 and financial instruments ............................. 39 1.7 Special notes to the reader of Volume 2 ....................................................... 44 1.7.1 Cash transactions ............................................................................ 44 1.7.2 Calculations ..................................................................................... 44 1.7.3 References to gender ...................................................................... 45 1.7.4 Taxation rates .................................................................................. 45 1.7.5 The use of account names in comparison with financial statement terminology ..................................................................... 45 1.7.6 Interest calculations ......................................................................... 45 1.7.6.1 Simple interest rates ........................................................ 45 1.7.6.2 Compound interest rates ................................................. 45 1.7.6.3 Effective interest rates ..................................................... 46 1.8 Summary ....................................................................................................... 46 [Show More]

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