Financial Reporting

Financial Reporting is designed to provide candidates with financial reporting, technical accounting and business skills and values that are applicable in a professional and global environment.   The segment is based on International Financial Reporting Standards (IFRSs) which are issued by the International Accounting Standards Board (IASB), thereby remaining jurisdiction neutral for professional learning and development purposes. Most international jurisdictions have adopted or are progressively adopting the IFRSs.

This segment's values and technical content are consistent and intertwined with the various segments in the CPA Program professional level. Financial reporting is a significant part of an entity's governance and accountability process, therefore building on the themes contained in the Ethics and Governance segment.

Compliance with the IFRSs results in the presentation of fairly stated financial reports except in rare circumstances. A fair presentation of financial reports is also an aim of audit and assurance services, which is emphasised in the Advanced Audit and Assurance segment. While taxation is covered in the Advanced Taxation segment, and is by and large distinct from financial reporting, the accounting for tax is recognised as material information and therefore included in this segment. Financial reporting provides information about the business operations and the financial results.

Financial Reporting is a compulsory segment in the CPA Program professional level for candidates commencing from semester 2, 2009. It is an elective segment for candidates who commenced prior to semester 2, 2009.

Segment aims

The primary aim of Financial Reporting is to provide candidates with globally transferable skills to prepare a set of general purpose financial statements in different jurisdictions. The segment encourages high quality financial reporting and the practice of strong ethical values in the accounting profession.

• effective financial analytical skills
• the ability to comprehend and use a stock-exchange listed entity's financial statements

General objectives

On completion of this segment, candidates should be able to:

• understand the application and basis of selected IFRSs
• develop the necessary skills to apply IFRSs including the Conceptual Framework in the preparation of general purpose financial statements
• develop the financial analytical skills and ability to comprehend and explain details relating to general purpose financial statements
• attain skills and experience in the design and development of an entity's accounting system to maintain financial information and facilitate the preparation of general purpose financial statements

Segment content

Module 1: The Conceptual Framework and its application in financial reporting

This module explains the role of a conceptual framework in the development of accounting standards, and identifies the constraints in light of other influences and factors in standard setting and in the application of principles in practice. It focuses on the major components of the Conceptual Framework issued by the IASB. The objectives of general purpose financial statements and the diversity of users’ information needs are considered, as well as the underlying assumptions and qualitative characteristics of financial reporting. Cases are used to explore the challenges that can arise in applying the qualitative characteristics.

The application of the Conceptual Framework’s definitions and recognition criteria of elements of financial statements in selected accounting standards is evaluated. We have included accounting standards that are currently under review, thus demonstrating the application of concepts and introducing you to some emerging developments in financial reporting.

The module considers the complex issue of measurement, including the measurement bases in the Conceptual Framework as well as others identified by the IASB. The application of the mixed measurement model is considered from a practical perspective in the context of accounting for leases, employee benefits and customer loyalty programs. From a conceptual perspective, the implications for the determination of income of alternative measurement bases and concepts of capital are also considered. The concepts, principles and measurement bases included in this module form an important foundation for your study of subsequent modules.

Contents:

• Part A: The role of a framework of accounting in global financial markets
• Part B: The Conceptual Framework for Financial Reporting 

Module 2: Presentation of financial statements

This module focuses on the preparation of a complete set of financial statements in accordance with IAS 1 Presentation of Financial Statements. IAS 10 Events after the Reporting Period is also discussed to highlight the importance of how post-reporting-date events are dealt with when preparing financial statements.

Contents:

• Part A: Presentation of financial statements
• Part B: Statement of comprehensive income
• Part C: Statement of changes in equity
• Part D: Statement of financial position 
• Part E: IAS 7 Statement of Cash Flows

Module 3: Provisions, contingent liabilities and contingent assets

This module focuses on the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets including the accounting for restructuring and the disclosures required for contingent assets and contingent liabilities.

Contents:

• Part A: Provisions
• Part B: Specific applications
• Part C: Contingent liabilities and contingent assets
• Part D: Future developments

Module 4: Income taxes

This module focuses on the requirements of IAS 12 Income Taxes and explores the methodology of tax-effect accounting. The module discusses the recognition and measurement of deferred tax assets and liabilities in detail, including the accounting for tax losses, and the tax effect of revaluation of assets.

Contents:

• Part A: Income tax fundamentals
• Part B: Recognition of deferred tax assets and deferred tax liabilities
• Part C: Assets carried at fair value or revalued amounts
• Part D: Financial statement presentation and disclosure
• Part E: Future developments
• Part F: Comprehensive example

Module 5: Financial instruments

The module focuses on financial reporting standards IAS 32 Financial Instruments: Presentation, IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosure. The emphasis is on the measurement of financial instruments (e.g. fair value, amortised costs) and hedging. The impairment test for financial instruments is also highlighted as being different from that in IAS 36 Impairment of Assets. Presentation and disclosure matters are given some focus, particularly the classification of liabilities and equity and IFRS 7 disclosures on the different types and characteristics of risk.

Contents:

• Part A: What are financial instruments?
• Part B: Recognition, measurement and derecognition
• Part C: Presentation issues
• Part D: Disclosure issues

Module 6: Business combinations and group accounting

This module reviews the main features of IFRS 3 Business Combinations’ acquisition method. This module also explores group accounting as required by IAS 27 Consolidated and Separate Financial Statements and accounting for associates in accordance with IAS 28 Investments in Associates. Preparation and presentation of consolidated financial statements is discussed with emphasis on pre-acquisition equity, intra-group transactions and non-controlling interests.

A set of consolidated financial statements is used to illustrate the nature of information provided.

Contents:

• Part A: IFRS 3 Business Combinations 
• Part B: IAS 27 Consolidated and Separate Financial Statements
• Part C: IAS 28 Investments in Associates

Module 7: Impairment of assets

The module focuses on the requirements of IAS 36 Impairment of Assets. The module includes the impairment requirements relating to individual assets such as property, plant and equipment, intangible assets as well as the impairment requirements of cash-generating units, including goodwill.

Contents:

• Part A: Impairment of assets - An overview
• Part B: Impairment of individual assets
• Part C: Impairment of CGUs
• Part D: IAS 36 - Disclosure