published company accounts 2014. documents required to be published annually by directors income...

Published Company Accounts 2014

Published Company Accounts


Documents required to be published annually by Directors

Income Statement Statements of changes in

Equity Statement of Financial

Position/ Balance Sheet Statement of Cash Flow Note s to the Financial

statements Directors` report Auditors` report Statement of the

company's Accounting policies


The Directors must ensure that the company`s accounting records contain:

Details of all monetary transactions

Disclose the financial position of the company with reasonable accuracy ( details of Assets & Liabilities)

Ensure that the Income statement and Statement of Financial show a true and fair view of the company`s financial position

Principles Governing the Disclosure Requirements


Window Dressing It is an attempt by Directors of

a company to present information in Financial statements so that the position appears to be better or worse than it really is.

Eg 1 cheques are paid to creditors on the last day of year but the cheques are not send to creditors until the next financial year, this artificial reduce liabilities

Eg 2 An attempt to inflate the profit figure by including unrealisable profits in the Income Statement

Maximized compensation

Lower intest rate

Lower income tax

Increase share price

Boots profit sharing bonuses

Improve debt rating


Reasons why business might wish to window dress their accounts

To fend off a takeover bid=making a company stronger than it really is ie a well performing company is more expensive to buy.

To attract investment=by exaggerating the financial strength of the business.

To increase the market price of shares

To lower the market price of shares

To reduce taxation


Accounting principles and bases IAS 1Accounting principles are

the concepts applied to the preparation of financial statements and these are

The going –concern conceptAccruals conceptThe concept of consistencyMaterialityPrudenceBusiness entityMoney measurementHistoricalDualitySubstance over form

Accounting base are the method of applying the principles to the financial statements to reduce subjectivity by applying acceptable methods such as

Methods of depreciationMethods of stock valuation etcThe general is that once an

entity adopts an accounting policy then it must be applied consistently for similar transaction

Any changes must be applied retrospectively ie previous figure must be changed as well.


Requirements provided by IAS 1Are intended to ensure that the FSs of an

entity are a faithful presentation of its Financial position, Financial performance and Cash Flow

Fair presentation and compliance with IFRSs Going concern Accrual basis of accounting Consistency and presentation Materiality and aggregation


Going concern IAS 1, § 23 states that FSs shall be prepared on a going concern

basis unless management intends to either liquidate the entity or cease trading, or has no realistic alternative but to do so

When management is aware of any material uncertainties that cast doubt upon the entity’s ability to continue as a going concern, those uncertainties must be disclosed

When FSs are not prepared on a going concern basis, that fact must be disclosed


Requirements provided by IAS 1Accrual basis of

accounting: FSs must be

prepared using the accrual basis of accounting

Consistency of presentation IAS 1, § 27 requires that:

The presentation and classification of items in the FSs shall be retained from one period to the next

When such a change is made, the comparative information must also be reclassified

Financial institutions (such as Banks) frequently use the presentation in order of liquidity


IAS sets out four qualitative characteristics of the financial statements

Relevance :the information may be used to influence economic decisions of users.

Reliability:the information is free from material error and bias.

Comparability :– the information enables comparisons over time to identify and evaluate trends.

Understandability :the information is readily understandable by users

Users of Accounting InformationWho are the users and why do they use

accounting information?- Banks-assess performance in relation to security of loan- Creditors- assess the ability to pay the debts - Customers- Employees- Managers- Government- Investors- assess the past performance on basis for future investment- Community



IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors Main issues addressed in IAS 8; Selecting and applying accounting policies Distinguishing between accounting policies,accounting estimates and errors Changes in accounting policies Changes in accounting estimates Correction of errors


Selecting and applying accounting policiesAS 8, § 5 defines “accounting policies” as The specific principles, bases, conventions,

rules and practices applied by an entity in preparing and presenting FSs

IFRSs prescribe accounting policies for certain topics, transactions or events

IAS 8 deals with areas where there are no accounting standards, and set outs the principles that entities must apply in selecting appropriate accounting policies


Selecting and applying accounting policies IAS 8, § 10In the absence of a Standard or an Interpretation that

specifically applies to a transaction or other event or condition, management shall use its judgement in developing and applying an accounting policy that results in information that is:

a) relevant to the economic decision-making needs of users; andb) reliable, in that the FSs:i) represent faithfully the financial position, financial

performance and cash flows of the entity;ii) reflect the economic substance of transactions, other events

and conditions, and not merely the legal formiii) are neutral, i.e. free from bias;iv) are prudent; andv) are complete in all material respects


IAS 10 Event After the BS Date IAS 10 defines these events as follow:

Events after the BS date are those events, favourable and unfavourable, that occur between the BS date and the date when the FSs are authorised for issue

Usually the date at which FSs are authorised for issue is the date on which the directors or other governing body formally approve the FSs for issue to shareholders and/or other users


IAS 10, 2 types of events can be identified: Those that provide evidence of conditions

that existed at the BS date (adjusting events after the balance sheet date); and

Those that are indicative of conditions that arose after the BS date (non-adjusting events after the balance sheet date)


Adjusting events after the BS date The sale of inventories after the BS date may give

evidence of their net realisable value at the BS date The settlement after the BS date of a court case

confirms that the entity had a present obligation at the BS date

The purchase price or proceeds from sale of NCAAssets where valuation shows impairment is

required .Trade Receivable where a customer has become

insolventDiscovery of fraud or errors which shows the

financial statement to be incorrect.


Non-adjusting events after the balance sheet date IAS 10,A major business combination after the balance sheet

dateThe destruction of property by fire, floods, or strike

action of employees after the balance sheet date The issue of new share capital after the balance sheet

date Commencing major litigation arising solely out of

events that occurred after the balance sheet dateMajor purchase of AssetsDividend declared Cease of trading , not alter native to the course of

action


IAS 16 Property, Plant and EquipmentThis IAS deal with the NCA of PPE and it

covers :The recognition of assetsThe determination of carrying amountThe depreciation charges Their impairment loses


Property, Plant and EquipmentThese are tangible assets held for use in the production or

supply of goods or services or for rental to other business and for administrative purposes.

They are expected to be used more than a yearCost of PPE include :Purchase priceAny import duties, taxes to bring asset to present location

and conditionThe cost of preparing the siteInitial delivery and handling costInstallation and assembly costCost of testing the assetProfessional fees, say architects or legal fees


Definition of terms related to PPE Depreciation : is the lost of value of and asset or is the allocation of the

cost of an asset over its useful life. Depreciable amount: is the cost or valuation of the asset less the

residual value or amount Useful life : is the length of time for which the asset is expected to be

used . Residual value : is the amount that a company expect to obtain from an

asset less any disposal costs at the end of its useful life. Fair value : is the amount for which the NCA could be sold less any cost

incurred in the sale Carrying amount : is the cost or valuation of NCA less aggregate

depreciation to date Value in use: is calculated by discounting the future cash inflows

generated by the use of a NCA or the present value of future cash flows Recoverable amount : Is the higher of the fair value and the value in

use ie compare the two which is higher is the recoverable amount.


IAS 37 Provision , Contingent LiabilitiesItems that represent uncertainties at the time final

accounts are preparedThey should be accounted for on a consistent basis so that

the users can understandProvisions- is a liability of uncertain amount or timing eg

Provision for bad debtsLiability is the present of an obligation, a business has to

pay money.eg CreditorsContingent liability is a possible liability to the business

which arises from past events or when a decision has been made eg court case & damages have to paid

Contingent is not recorded in the accounts but it is disclosed as way of notes


IAS 37 cont contingent Asset Contingent asset is a possibility of an asset arising from

past events which will materialised when something has happened, company not in complete control of the event.

A contingent asset should never be recognised in the accounts, it should recorded when it certain

IAS uses three words when it talks about Provision , contingent assets and liabilities

A. Proble > 50 % chance that it will occur: Shown as note

B. Possible < 50 % chance that it will occur : shown as a note ( only for liabilities nothing for assets)

C. Remote – little or no chance of the event occurring.


IAS 38 Intangible assetsThese are non- monetary assets without physical substance eg

Goodwill which is either purchased of internally generatedOnly purchased intangible (goodwill) is recorded in the

accountsInternally intangible (goodwill) or brand names cannot be

recognised in the accountsGoodwill=Purchase price –NBV of assets taken overIntangible assets include: Computer software, Licence ,

Trademarks, Patents, Films, Copyrights Customer list or suppliers and Import quotas

Research expenditure is written of as an expense in the ISDevelopment expenditure needs to meet a certain criteria to

be an intangible asset eg if the asset can be sold otherwise it is written of as an expense


Director`s reportPrinciple activities of the company and any significant

changesReview of Company activities +likely developments

research & development activitiesNames of Directors and their shareholdings Proposed dividendsSignificant difference between NBV and market value

of Land and buildings Political and charitable donation made by the companyCompany`s policy on disable peopleHealth and safety at work of employees Company ` s policy on payment of suppliers