Showing posts with label Financial statement. Show all posts
Showing posts with label Financial statement. Show all posts
  • Disclosure of Balance sheet Disclose the significance of financial instruments for an entity's financial position and performance. [IFRS 7.7] This includes disclosures for each of the following categories: [IFRS 7.8]
    * Financial assets measured at fair value through profit and loss, showing separately those held for trading and those designated at initial recognition.
    * Held-to-maturity investments.
    * Loans and receivables.
    * Available-for-sale assets.
    * Financial liabilities at fair value through profit and loss, showing separately those held for trading and those designated at initial recognition.
    * Financial liabilities measured at amortised cost.

    # Other balance sheet-related disclosures:

    * Special disclosures about financial assets and financial liabilities designated to be measured at fair value through profit and loss, including disclosures about credit risk and market risk and changes in fair values [IFRS 7.9-10]
    * Reclassifications of financial instruments from fair value to amortised cost or vice versa [IFRS 7.12]
    * Disclosures about derecognitions, including transfers of financial assets for which derecogntion accounting is not permitted by IAS 39 [IFRS 7.13]
    * Information about financial assets pledged as collateral and about financial or non-financial assets held as collateral [IFRS 7.14-15]
    * Reconciliation of the allowance account for credit losses (bad debts). [IFRS 7.16]
    * Information about compound financial instruments with multiple embedded derivatives. [IFRS 7.17]
    * Breaches of terms of loan agreements. [IFRS 7.18-19]

    Source : IFRS

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  • Financial statement Objective :
    is to prescribe the basis for presentation of general purpose financial statements, to ensure comparability both with the entity's financial statements of previous periods and with the financial statements of other entities.

    The objective of general purpose financial statements is to provide information about the financial position, financial performance, and cash flows of an entity that is useful to a wide range of users in making economic decisions. To meet that objective, financial statements provide information about an entity's: [IAS 1.7]

    * Assets.
    * Liabilities.
    * Equity.
    * Income and expenses, including gains and losses.
    * Other changes in equity.
    * Cash flows.

    That information, along with other information in the notes, assists users of financial statements in predicting the entity's future cash flows and, in particular, their timing and certainty.

    Components of Financial Statements

    A complete set of financial statements should include: [IAS 1.8]

    * a statement of financial position at the end of the period,
    * a statement of comprehensive income for the period,
    * a statement of changes in equity for the period
    * statement of cash flows for the period, and
    * notes, comprising a summary of accounting policies and other explanatory notes.

    When an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements, it must also present a statement of financial position as at the beginning of the earliest comparative period.

    An entity may use titles for the statements other than those stated above.

    Reports that are presented outside of the financial statements -- including financial reviews by management, environmental reports, and value added statements -- are outside the scope of IFRSs. [IAS 1.9-10]

    Sources : International Accounting Standard

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  • International Financial Accounting Standard- Framework Objective of financial statements

    A framework is the foundation of accounting standards. The framework states that the objective of financial statements is to provide information about the financial position, performance and changes in the financial position of an entity that is useful to a wide range of users in making economic decisions, and to provide the current financial status of the entity to its shareholders and public in general.

    Underlying assumptions

    The underlying assumptions used in IFRS are:
    * Accrual basis - the effect of transactions and other events are recognized when they occur, not as cash is received or paid
    * Going concern - the financial statements are prepared on the basis that an entity will continue in operation for the foreseeable future.


    Qualitative characteristics of financial statements

    The Framework describes the qualitative characteristics of financial statements as having

    * Understandability
    * Relevance
    * Reliability
    * Comparability and compatibility

    Elements of financial statements

    The Framework sets out the statement of financial position (balance sheet) as comprising:-
    * Assets - resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
    * Liabilities - a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
    * Equity - the residual interest in the assets of the entity after deducting all its liabilities and the statement of comprehensive income (income statement) as comprising:
    o Revenue is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or reductions in liabilities.
    o Expenses are decreases in such economic benefits.

    Recognition of elements of financial statements

    An item is recognized in the financial statements when:
    * it is probable that a future economic benefit will flow to or from an entity and
    * when the item has a cost or value that can be measured with reliability.

    Measurement of the Elements of Financial Statements

    Measurement is how the responsible accountant determines the monetary values at which items are to be valued in the income statement and balance sheet. The basis of measurement has to be selected by the responsible accountant.Accountants employ different measurement bases to different degrees and in varying combinations. They include, but are not limited to:

    * Historical cost
    * Current cost
    * Realisable (settlement) value
    * Present value

    Historical cost is the measurement basis chosen by most accountants.

    Concepts of Capital and Capital Maintenance

    Concepts of Capital

    A financial concept of capital, e.g. invested money or invested purchasing power, means capital is the net assets or equity of the entity. A physical concept of capital means capital is the productive capacity of the entity.

    Concepts of Capital Maintenance and the Determination of Profit

    Accountants can choose to measure financial capital maintenance in either Nominal monetary units or units of constant purchasing power

    Physical capital is maintained when productive capacity at the end is greater than at the start of the period.The main difference between the two concepts is the way asset and liability price change effects are treated.Profit is the excess after the capital at the start of the period has been maintained.

    When accountants choose nominal monetary units, the profit is the increase in nominal capital. When accountants choose units of constant purchasing power, the profit for the period is the increase in invested purchasing power. Only increases greater than the inflation rate are taken as profit. Increases up to the level of inflation maintain capital and are taken to equity.

    Source : Wikipedia

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  • Annual report.. learning more about the company Public listed companies send thousands of annual reports to their shareholders every year as they are required to disclose material information, meaning information that are important and affect the decision making of investor, and it is therefore up to the individual investor to pick up such information fro the quarterly and annual report.

    According to the requirements of a disclosure-based, directors and accountants of a company are required to disclosed information that affect the decision making of the investing public read and pick up such information.

    By the law, the directors must give a true and fair view of company's affairs and they must omit or misstate important information. While there are accounting standards to guide the presentation of financial statement, it takes experience, knowledge and skill for investor to sieve through all the information in the annual report.


    It is not easy to read annual report, to make profit as an investor, your judgment must be made on the basis on fact not hope. An annual report contain both.The important detail are sometimes hidden, and you need to know how to read between the lines to benefit.

    The main purpose of annual report is for the company to inform its share holders and potential investors, how it was performed for the past 12 months. For potential investor, the annual report provides important information that can be used to access if a company is worth - while investing in.

    A complete financial statement should include
    a. Balance sheet
    b. Income statement
    c. a statement showing
    (i) all change in equity
    (ii) changes in equity other than those arising from capital transactions with owner and distribution to owner
    d. Cash flow statement
    e. Accounting policies and explanatory notes

    The financial statement will give an overall picture of the company's financial well-being, while the front section will probably tell you about company's strategies, products and competitive positioning. This information may be incorporated into the chairmain's statement or message to shareholders.

    professional analyst and accountants would look at the audit commitee's report. There is also an independent auditor's report that should clearly set out the auditor's opinion on the presentation of financial statement of the company's financial position and the result of its operation.

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