分析案例講稿msc fa1lecture

1、1MN50318 Financial Accounting 1Lecture 2Presentation of Financial AccountsA Revision2DEBIT ENTRYCREDIT ENTRYAn increase in the value of an ASSET A decrease in the value of an ASSET A decrease in the value of a LIABILITYAn increase in the value of a LIABILITYAn item of EXPENDITUREAn item of E3DEBIT/C

2、REDIT MATRIXAccountFinancial StatementIncreaseDecrease AssetSFPDebitCreditLiabilitySFPCreditDebit CapitalSFPCreditDebit RevenueSCICreditDebitExpenditureSCIDebitCredit4DOUBLE ENTRY AND THE ACCOUNTING EQUATIONAssets = Liabilities + CapitalTo increaseDebitCreditCreditTo decrease CreditDebitDebitThe dou

3、ble entry rules for liabilities and capital are the same, but they are the opposite of those for assets. Looking at how this affects T accounts: 5T AccountsAny Asset AccountIncreasesDecreases+-Any Liability AccountDecreasesIncreases-+Capital AccountDecreasesIncreases-+6Examples of Recording of Trans

4、actions:1.Buy goods on credit:Increase CostsIncrease Liability(DR Purchases)(CR Payables)2.Pay creditor by cheque:Decrease AssetDecrease Liability(CR Bank)(DR Payables)3.Cash sales:Increase AssetIncrease e(DR Bank)(CR Sales)5.Share issueIncrease AssetIncrease Equity(DR Bank) (CR Share Capital)7DEPRE

5、CIATIONDepreciation is the measure of the wearing out, consumption or other reduction in the useful economic life of a non current asset, whether arising from use, (passage of) time or obsolescence through technological or market changes. Depreciation should be allocated so as to charge a fair propo

6、rtion of cost or valuation of the asset to each accounting period expected to benefit from its use.8CAUSES OF DEPRECIATION1. Physical Depreciation-wear and tear-erosion, rust, rot and decay2. Economic Factors-obsolescence-inadequacy3. Time Factor4. Depletion9METHODS OF DEPRECIATION1. Straight line d

7、epreciationCost of asset minus residual valueExpected useful life of the asset2. Reducing balance method calculates the annual depreciation charge as a fixed percentage of the net book value of the asset, as at the end of the previous accounting period.10DEPRECIATION EXAMPLE:A company with 31/12 yea

8、r end buys a machine on 1/1/X5 for 2,000. It is to be depreciated at 20% pa, reducing balance method. A full years depreciation charge applies in year of purchase.MachineryStatement of Compreh. eX5 X54001/1/X5Cash2,000X6320X7256Depreciation ProvisionStatement of Financial PositionX5X531.12.X5Machine

9、ry at cost200031/12 Bal. c/d40031/12 SCI400Depreciation at cost 4001600X6X631.12.X61/1 Bal. b/d400Machinery at cost200031/12 Bal. c/d72031/12 SCI320Depreciation 7207207201280X7X731.12.X71/1 Bal. b/d720Machinery at cost200031/12 Bal. c/d97631/12 SCI256Depreciation 976976976102411ACCRUALS AND PREPAYME

10、NTSCash AccountingEssentially records actual cash receipts and cash paymentsi.e. Cash movement triggers recordingAccruals AccountingIntroduces matching concept i.e. e and expenditure are matched and dealt with in the period to which they relateKey difference is that revenues and costs are recognised

11、 as they are earned or incurred not as money is received or paid12ACCRUALS are amounts which are charged against the profit for a particular period even though they are not paid for until after the end of the periodPREPAYMENTS are amounts paid in the period which should not be charged to that period

12、 because they relate to a subsequent period13ACCRUALSIf an amount is due at the year end but remains unpaid it is accruede.g.DR Expense A/C (SCI)CR Accruals (SFP)-SCI charge is correctly stated-When paid, SCI is not charged but liability is removedi.e.DR Accruals (SFP) No SCI effectCR Bank (SFP)14PR

13、EPAYMENTSIf an expense is overpaid or paid in advance at the year end, an asset is createde.g.DR Prepayments (SFP)CR Expense A/C (SCI) year 1-SCI charge is correctly stated-As the asset is being consumed in the following year, the asset should be removedi.e.Dr Expense A/C (SCI) year 2CR Prepayment (

14、SFP)15Possible January FA1 MN50318 Exam QuestionYou are given a trial balance (a list of debits and credits) and asked to produce a set of financial statementsAdjustments will be required for accruals, prepayments and depreciationAdjustments also for revaluations, impairment, tax and other items we

15、will study in future weeks16The Context of Financial Reporting Statement of Financial Position, Statement of Comprehensive e, Statement of Changes in Equity and Statement of Cash Flows17The Financial Reporting CycleAnnual financial statements example: Preliminary profit announcements, analyst meetin

16、gs and webcastsIn the UK and most of Europe we have six monthly interim accountsThe US have quarterly interim financial statements (Ryanairs depository receipts listed on NASDAQ therefore firm presents quarterly reports)18Interim Reporting (IAS 34 1998)Same primary statements as annual financial sta

17、tements Same accounting policies as annual financial statementsSlightly less disclosure requirementsPerformance compared with similar period in previous yearUnaudited but with an audit review statement19IAS 1 PRESENTATION OF FINANCIAL STATEMENTSPurposeContentPrinciples20IAS 1OBJECTIVE AND SCOPETo pr

18、escribe the basis for the presentation of general purpose financial statementscomparability between the enterprises own financial statements of previous periodscomparability with the financial statements of other enterprisesApplies to the presentation of all general purpose financial statements prep

19、ared and presented in accordance with IASs21IAS 1 TerminologyGB and IrelandInternationalProfit and loss accountStatement of comprehensive e ( e statement)Balance sheetStatement of financial positionReconciliation of movements in shareholders fundsStatement of changes in equityCash flow statementStat

20、ement of cash flowsTurnover, or Sales, or Sales revenue, or eRevenueTaxation e taxFixed assetsNon-current assets22IAS 1 TerminologyGB and IrelandInternationalTangible fixed assetsProperty, plant and equipmentDebtorsReceivablesCreditorsPayablesStockInventoryShareholders funds and / or Capital and res

21、ervesEquityAcquisition accounting Purchase accounting23CONTENTA complete set of financial statements must include:Statement of financial positionStatement of comprehensive eStatement of changes in equityStatement of cash flows IAS 7Accounting policies and explanatory notes 24Example: Statement of Fi

22、nancial Position XYZ Group Statement of Financial Position as at 31st December 20X9 (excluding comparatives)XTotal AssetsXXCash and cash equivalentsXPrepaymentsXTrade and other receivablesXInventoriesCurrent AssetsXXAvailable-for-sale investmentsXInvestments in associatesXOther intangible assetsXGoo

23、dwillXProperty, plant and equipmentNon Current AssetsASSETS20X900020X900025Example: Statement of Financial Position XYZ Group Statement of Financial Position as at 31st December 20X9 (excluding comparatives)20X900020X9000EQUITY AND LIABILITIESEquity Attributable to Owners of the ParentIssued share c

24、apitalXRetained earningsXOther components of equityXXNon-controlling interestsXNon Current LiabilitiesLong-term borrowingsXDeferred taxXLong-term provisionsXXCurrent LiabilitiesBank overdraftXTrade and other payablesXCurrent portion of long-term borrowingsXTax payableXXTotal Equity and LiabilitiesX2

25、6Example: Statement of Comprehensive e XYZ Group Statement of Comprehensive e for the Year Ended 31st December 20X9(excluding comparatives)20X9000RevenueXCost of sales(X)Gross profitXOther operating eXDistribution costs(X)Administrative expenses(X)Profit from operationsXFinance costs(X)Share of prof

26、it/(loss) of associatesXProfit before taxX e tax expense(X)Profit for the yearXOther Comprehensive e:Continued .27Example: Statement of Comprehensive e XYZ Group Statement of Comprehensive e for the Year Ended 31st December 20X9(excluding comparatives)20X9000Continued .Other comprehensive e:Exchange

27、 differences on translating foreign operationsXGain/(loss) on property revaluationXGain/(loss) on available-for-sale investmentsXOther comprehensive e for yearXTotal comprehensive e for yearXProfit/(loss) attributable to:Owners of the parentXNon-controlling interestsXXTotal comprehensive e/(loss) at

28、tributable to:Owners of the parentXNon-controlling interestsXX28IAS 1 Presentation of Financial StatementsStatement of Changes in Equity (SCE)Third component of a set of financial statements Components that make up comprehensive e must not be shown in the SCE (only totals shown)Main purpose is to sh

29、ow: the amounts of transactions with owners (e.g. shares and dividends); and to reconcile opening and closing balance of each equity and reservesStatement of Changes in EquitySh. Cap.000Other Reserves000Retained Earnings000Total000Opening equityxxxxChanges in Accounting policies prior year adjustmen

30、ts-xxRestated opening balancexxxxChanges in equity for yearDividends(x)(x)Total comprehensive exxxIssue of share capitalx-xTotal changes in equityxxxxClosing equityxxxxStatement of Cash FlowsNet cash from operating activities1,420Cash flows from investing activitiesPurchases of property(1,000)Procee

31、ds of sale of equipment 20Interest received 200Dividends received 200Net cash used in investing activities(580)Cash flows from financing activitiesProceeds from issue of shares 250Proceeds from long-term borrowings 450Payment of finance lease liabilities (90)Dividends paid(1,200)Net cash used in fin

32、ancing activities(590)Net increase in Cash 250Cash at beginning of period 160Cash at end of period 41031Student Activity Take a look at this Talk to your neighbour for five minutes and try to work out why BP made a loss in 201032IAS 1 Presentation of Financial Statements （列報）Fair Presentation Overri

33、de （更重要） pliance with a requirement in a standard is permitted where, in managements opinion, compliance would be misleading and would not give a fair presentationThis is expected to be extremely rare and would need to be panied by detailed disclosures outlining the reason for, the nature of, and th

34、e financial effect of the pliance33Fair Presentation OverrideThere is an overriding requirement that financial statements should give a true and fair view of the financial position, performance and financial adaptability of an enterprise. In the United Kingdom, the ASB considers it to be a dynamic c

35、oncept whose content will evolve in response to matters such as advances in accounting and changes in business practice. The board considers that the evolution of the interpretation of the concept will be influenced over time by the accounting standards and other statements that the board issues.34F

36、air Presentation OverrideIt is an important concept in the United Kingdom because it allows companies to override statutory requirements. In such a case the company is required to include a note to the accounts giving particulars of any such departure, the reasons for it and its effect. The use of t

37、he override has been considered at various times by the Financial Reporting Review Panel 35Social and Environmental ReportingThere is no legal UK requirement for companies to issue social, environmental or sustainability reports. They are all voluntary reports.Their use reflects the move towards a s

38、takeholder view of society and companies claims to be socially responsibleCompanies use them as part of their public relations activities, for example, BAT: 36Triple Bottom LineTriple bottom line reporting profit, people and planet. The profit bottom line is normally confused with the one we know but should really be the economic benefit of the entity to society, rather than the profit to investors. Sometimes the data is expressed in a value added statement where returns to investors are de-emphasised. 37Tripl