Read the summary and the most important questions on F1 - Financial Reporting and Taxation

• CIMA F1 - Financial Reporting and Taxation - Part B

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• What is the purpose of financial statements and who is responsible for the preparation

  The purpose of financial statements is to provide users with information about the financial position, performance and cashflow of an entity. They show the result of management's stewardship.
  
  The board of director is responsible for the preparation and presentation an entity's financial statements.

• What should the financial review by management cover?

  -Factors/influences determining performance
  -Sources of funding, the policy on gearing and its risk management policies
  -Strengths and resources of the entity whose value is not reflected in the statements.

• In the rare case that compliance to a standard would not present a true and fair picture, management can depart from the requirements. What do they need to disclose?

  -That the financial statements are a fair presentation the entity's position
  -That the entity has complied with all other IFRSs
  -Details from the departure from an IFRS, why it was necessary and the financial impact of the departure

• What is accruals basis?

  IAS 1 requires entities to prepare its financial statements, except for the statement of cash flow, on the accruals basis of accounting.
  
  Accrual basis accounting recognises income when it is earned and expenses when they are incurred, whether or not and cash has been received or paid.

• How should management decide whether to show additional items separately in the statement of financial position?

  Their decision should consider:
  -Nature and liquidity of assets and their materiality
  -Function within the entity. Inventories, receivable and cash and cash equivalents are therefore shown seperatelz
  -Amounts, nature and timing of liabilities (interest bearing and non interest bearing liabilities and provision will be shown separately, classified as current or non-current as appropriate.

• Explain the share capital disclosure and name 3 componenents

  IAS1 lists some specific disclosures which must be made.
  
  The share capital disclosure must be made for each class of shares and includes:
  -Numbers of shares authorised
  -Numbers of shares issues and fully paid
  -Par Value per share
  -Reconciliation of shares outstanding at the beginning and end of Reporting Period
  -Rights, preferences and restrictions
  -Shares held by entity itself
  -Shares reserved

• What is a current asset?

  An asset can be classified as a current asset when:
  -Is expected to be realised, or is held for sale or consumption in, the normal course of the entity operating cycle
  -is held primarily for trading purposes
  -is expected to be realised within 12 months of the end of the reporting period
  - is cash or cash equivalent asset which is not restricted in its use

• What is a current liability?

  A liability can be classified as current when:
  -it is expected to be settled in the normal course of the entity's operating cycle
  -is primarily held for the purpose of trading
  -is due to be settled within twelve months after the reporting period
  -the entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period

• IAS1 allows income and expense to be presented in two ways, what are they?

  1. In a single statement of profit or loss and other comprehensive income
  
  or
  
  2. In two statements, one statement of profit or loss plus a separate statement of other comprehensive income.

• Name the main categories of the statement of Profit & Loss and the other Comprehensive income component, as a minimum must show

  -Revenue
  -Finance Cost
  -Share of P&L of associates accounted for using the equity method
  -Pre-tax gains or loss attributable to discontinued operations
  -Tax expense
  -Profit or Loss
  
  -Each component of comprehensive income classified by nature
  -Share of other comprehensive income of associates
  -Total Comprehensive income