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Test Bank for International Accounting Standards 6th Edition by Timothy Doupnik
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Test Bank for International Accounting Standards 6th Edition by Timothy Doupnik
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Test Bank for International AccountingStandards 6th Edition by Timothy Doupnik
Why use international accounting standards? - ANS* Provides a framework - 'rules' - for
preparing financial statements
* Ensures accountants follow the same set of rules
* Reduce number of different accounting treatments
* Meet the director's duty to ensure the FS comply with IAS
* Meet the auditor's report requirements
Benefits of international accounting standards - ANS* Standardise financial statements
internationally
* Reduce variations of accounting treatments
* Allow users of FS to make inter-firm comparisons
IAS 1 Presentation of Financial Statements - ANS"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"
* Requires compliance with accounting concepts
IAS2 Inventories - ANS* Requires inventories are valued at the lower of cost and net realisable
value
* COST - purchase price + any costs incurred to bring product to where it is
* NRV - estimated selling price - costs necessary to bring product into a selling condition
IAS 7 Cash Flow Statements - ANS* Requires a cash flow statement is included in the FS
* Compliments IS & BS - IS reports on financial performance, BS reports on financial position,
CFS focuses on the changes in financial position
* OPERATING ACTIVITIES - main revenue-producting activities, interest & tax
* INVESTING ACTIVITIES - acquisition/disposal of NCA & other investments
* FINANCING ACTIVITIES - issue of new shares, payments to repay shares, changes in LT
borrowing, dividends
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - ANS* Refers to
accounting PRINCIPLES (eg. consistency, gc, accruals), BASES (methods for applying
principles eg. use of historic cost or revaluation) and POLICIES (bases followed by a company
eg. method of dep)
* Accounting policies must be applied consistently for similar transactions, changes may only
occur when:
* Another IAS requires it, or;
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