Financial Accounting and Reporting

This exam covers an understanding of the format and function of financial statements, including analysis and interpretation of financial statements. It also includes the production of financial statements for consolidated company groups, and foreign currency translation.

Topics:

1. Financial reporting and the regulatory framework
1.1 Explain the meaning of generally accepted accounting principles and identify the key elements of the IASB Framework and its relationship to accounting standards
1.2 Explain the objectives of financial reporting and general purpose financial reports
1.3 Analyse the qualitative characteristics of accounting information such as understandability, relevance, materiality, reliability, comparability
1.4 Analyse and apply the criteria for identifying a reporting entity

2. Statement of financial performance
2.1 Explain and apply the provisions of IAS 1 Presentation of Financial Statements for the determination of profit (loss) of an entity
2.2 Apply the provisions of IAS 1 for disclosures to be made in an income statement; statement of changes in equity; statement of financial position
2.3 Analyse and apply the guidelines for the selection of accounting policies and the disclosures required about changes in accounting policies (IAS 8 Accounting policies, changes in accounting estimates and errors)

3. Statement of financial position
3.1 Apply the provisions of IAS 1 for disclosures to be made in an income statement; statement of changes in equity; statement of financial position
3.2 Analyse and apply the guidelines for the selection of accounting policies and the disclosures required about changes in accounting policies (IAS 8 Accounting policies, changes in accounting estimates and errors)

4. Statements of cash flow
4.1 Examine the usefulness of the statements of cash flow
4.2 Explain and apply the definition of cash and cash equivalents
4.3 Distinguish among operating, investing and financing activities
4.4 Prepare a statement of cash flow using the indirect method

5. Ratio analysis and interpretation of financial statements
5.1 Prepare a  comparative analysis of financial reports
5.2 Identify and apply the tools of financial statement analysis
5.3 Identify and calculate ratios, describe their purpose and use in analysing an entity's liquidity, profitability and solvency
5.4 Explain ratio interrelationships
5.5 Analyse and interpret a set of accounts using ratios
5.6 Explain the limitations of financial statement analysis

6. Consolidated financial statements
6.1 Discuss the forms of business combinations
6.2 Explain how goodwill is measured and disclosed at date of acquisition
6.3 Explain how goodwill is measured subsequent to the date of acquisition including the requirements regarding impairment
6.4 Apply the requirements of Accounting for Income Tax and prepare associated journal entries
6.5 Explain the concept of control and how the existence of control is determined
6.6 Explain and prepare consolidation worksheet entries where a parent has ownership interest in a subsidiary
6.7 Explain why transactions within a group must be eliminated
6.8 Explain when profit from transactions within a group will be considered to be realised
6.9 Prepare consolidation worksheet entries to eliminate transactions within a group 6.10 Define and explain the concept of 'minority interest'

7. Equity accounting
7.1 Define 'significant influence' and briefly analyse the factors that may be used to determine whether significant influence exists
7.2 Explain the underlying methodology of the equity method and outline its basic features
7.3 Calculate the investor's share in an investee and explain why this concept is important
7.4 Prepare journal entries to account for the initial application of the equity method
7.5 Prepare equity accounting entries to record investee results and dividends
7.6 Outline the disclosure requirements for investments in associates (IAS 28)

8. Foreign currency translation
8.1 Explain and account for foreign currency transactions at transaction date and subsequent dates
8.2 Apply the requirements of IAS 21 to record foreign currency denominated transactions and exchange rate differences that arise on foreign currency monetary items
8.3 Explain and apply the IAS 21 method for translating financial statements from a functional currency to a presentation currency
8.4 Outline the disclosure requirements of IAS 21