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ACCA Financial Reporting Exam Study Guide

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ACCA Financial Reporting Exam Study Guide IAS 1 Presentation of Financial Statements - ANSWERStates that a complete set of financial statements comprises: - A statement of financial position - A statement of profit or loss and other comprehensive income - A statement of changes in equity - ...

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  • October 28, 2024
  • 56
  • 2024/2025
  • Exam (elaborations)
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ACCA Financial Reporting Exam Study

Guide


IAS 1 Presentation of Financial Statements - ANSWER✔✔States that a complete set of financial

statements comprises:




- A statement of financial position


- A statement of profit or loss


and other comprehensive income


- A statement of changes in equity


- A statement of cash flows


- Accounting policies and explanatory notes


Property, plant, and equipment (IAS 16) - ANSWER✔✔Tangible assets held by an entity for more than

one accounting period for use in the production or supply of goods or services, for rental to others, or for

administrative purposes


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Property, plant and equipment: Recognition - ANSWER✔✔Recognised as an asset when:


- it is probable that future economic benefits associated with the asset will flow to the entity; and


- the cost of the asset can be measured reliably (IAS 16, para 7).


Property, plant and equipment: Initial measurement - ANSWER✔✔- All costs involved in bringing the

asset into working condition


- Initial cost capital costs such as the cost of site preparation, delivery costs, installation costs, borrowing

costs


- Dismantling costs - the present


value of these costs should be


capitalised




- Expense items, such as fuel,


training and warranty costs, should be written off as incurred


Present Value: Discounting fraction - ANSWER✔✔1/(1 + r)^n


i.e. Present value = Cost x 1/(1+r)^n


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r = Rate or Interest rate


n = Number of years


Depreciation - ANSWER✔✔Depreciation is the systematic allocation of the depreciable amount of an

asset over its useful life (IAS 16, para 6).




Depreciable amount is the cost of


an asset, or other amount substituted for cost, less its residual value (IAS 16, para 6)




Methods:


- Straight line


- Reducing balance


- Machine hours


Revaluation of non-current assets - ANSWER✔✔IAS 16 treatments:


- The cost model: valued at cost less accumulated depreciation

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- The revaluation model: carried at a revalued amount less any


subsequent accumulated depreciation




Journal (assuming revalued amount is greater than original cost):


Dr Non-current assets cost/valuation (revalued amount - cost)


Dr Accumulated depreciation


(eliminate accumulated balance)


Cr Other Comprehensive Income (revaluation surplus)


Depreciation of revalued assets - ANSWER✔✔- Depreciation must be charged, based on valuation less

residual value, over the remaining useful life of the asset


- The whole charge must go to the statement of profit or


loss for the year


- An annual reserves transfer


may be made, from revaluation surplus to retained earnings, for the additional depreciation charged on

the revalued



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