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Paper P2 Corporate Reporting (International and United Kingdom) This ACCA Study Text for Paper P2 Corporate Reporting (International and United Kingdom) has been comprehensively reviewed by the ACCA examining team This review guarantees appropriate depth and breadth of content and comprehensive syllabus coverage For exams in September 2016, December 2016, March 2017 and June 2017 BPP House 142-144 Uxbridge Road London W12 8AA United Kingdom T 0845 075 1100 (UK) T +44 (0)20 8740 2211 (Overseas) E Learningmedia@bpp.com bpp.com/learningmedia • A user-friendly format for easy navigation • Exam focus points describing what the examining team will want you to • Regular Fast Forward summaries emphasising the key points in each chapter • Questions and quick quizzes to test your understanding • A practice question bank containing exam- standard questions with answers • A full index • All you need in one book Study Text Contact us In addition to ACCA examining team reviewed material you get: Corporate Reporting (International and UK) BPP Learning Media is dedicated to supporting aspiring business professionals with top-quality learning material as they study for demanding professional exams, often whilst working full time BPP Learning Media’s commitment to student success is shown by our record of quality, innovation and market leadership in paper-based and e-learning materials BPP Learning Media’s study materials are written by professionally qualified specialists who know from personal experience the importance of top-quality materials for exam success ACCA P2 ACCA approved content provider ACCA APPROVED CONTENT PROVIDER ACCA Approved Study Text Paper P2 Corporate Reporting (International and United Kingdom) Free access to our Exam Success site Look inside For exams in September 2016, December 2016, March 2017 and June 2017 February 2016 £32.00 ACP2ST16 (RICOH).indd 1-3 29/01/2016 13:22 ACCA APPROVED CONTENT PROVIDER As the first accredited publisher of ACCA materials, BPP Learning Media has set the benchmark for producing exceptional study materials for students and tutors alike Our Study Texts, Practice & Revision Kits and i-Passes (for exams on demand) are reviewed by the ACCA examining team and are written by our in-house authors with industry and teaching experience who understand what is required for exam success EXAM SUCCESS SITE To help maximise your chances of succeeding in your exams, we’ve put together a suite of exclusive ACCA resources Our Exam Success site provides you with access to a free digital version of this publication, as well as extra resources designed to focus your efforts on exams and study methods To access the Exam Success site, please email learningmedia@bpp.com with the subject line “Access to Exam Success site - eBook”, including your order reference number and the name of the book you’ve bought (ie ACCA F5 Study Text) for your access code Once you have received your code, please follow the instructions below: To access the BPP ACCA Exam Success site for this material please go to: www.bpp.com/ExamSuccessSite n Create a user account if you don’t already have one Make sure you reply to the confirmation email n Log in using your registered username and password Select the paper you wish to access n Enter the code you received when prompted You will only have to this once for each paper you are studying S T U D Y PAPER P2 CORPORATE REPORTING (INTERNATIONAL AND UNITED KINGDOM) BPP Learning Media is an ACCA Approved Content Provider This means we work closely with ACCA to ensure this Study Text contains the information you need to pass your exam  Highlight the most important elements in the syllabus and the key skills you need  Signpost how each chapter links to the syllabus and the study guide  Provide lots of exam focus points demonstrating what is expected of you in the exam  Emphasise key points in regular fast forward summaries  Test your knowledge in quick quizzes  Examine your understanding in our practice question bank  Reference all the important topics in our full index BPP's Practice & Revision Kit also supports this paper FOR EXAMS IN SEPTEMBER 2016, DECEMBER 2016, MARCH 2017 AND JUNE 2017 T E X T First edition 2007 Ninth edition February 2016 ISBN 9781 4727 4428 (Previous ISBN 9781 4727 2706 0) e-ISBN 9781 4727 4670 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by BPP Learning Media Ltd BPP House, Aldine Place 142-144 Uxbridge Road London W12 8AA www.bpp.com/learningmedia Printed in the United Kingdom by Ricoh UK Ltd Unit Wells Place Merstham RH1 3LG Your learning materials, published by BPP Learning Media Ltd, are printed on paper sourced from traceable, sustainable sources All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions The suggested solutions in the practice answer bank have been prepared by BPP Learning Media Ltd, unless otherwise stated BPP Learning Media is grateful to the IASB for permission to reproduce extracts from the International Financial Reporting Standards including all International Accounting Standards, SIC and IFRIC Interpretations (the Standards) The Standards together with their accompanying documents are issued by: The International Accounting Standards Board (IASB) 30 Cannon Street, London, EC4M 6XH, United Kingdom Email: info@ifrs.org Web: www.ifrs.org Disclaimer: The IASB, the International Financial Reporting Standards (IFRS) Foundation, the authors and the publishers not accept responsibility for any loss caused by acting or refraining from acting in reliance on the material in this publication, whether such loss is caused by negligence or otherwise to the maximum extent permitted by law © BPP Learning Media Ltd 2016 ii A note about copyright Dear Customer What does the little © mean and why does it matter? 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Copyright © IFRS Foundation All rights reserved Reproduction and use rights are strictly limited No part of this publication may be translated, reprinted or reproduced or utilised in any form either in whole or in part or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording, or in any information storage and retrieval system, without prior permission in writing from the IFRS Foundation Contact the IFRS Foundation for further details The IFRS Foundation logo, the IASB logo, the IFRS for SMEs logo, the “Hexagon Device”, “IFRS Foundation”, “eIFRS”, “IAS”, “IASB”, “IFRS for SMEs”, “IASs”, “IFRS”, “IFRSs”, “International Accounting Standards” and “International Financial Reporting Standards”, “IFRIC” “SIC” and “IFRS Taxonomy” are Trade Marks of the IFRS Foundation Further details of the Trade Marks including details of countries where the Trade Marks are registered or applied for are available from the Licensor on request Contents Page Introduction Helping you to pass Studying P2 Important note for UK students The exam paper v vii viii xxxiii Part A Regulatory and ethical framework Financial reporting framework Professional and ethical duty of the accountant 41 Part B Accounting standards 10 11 Non-current assets Employee benefits Provisions, contingencies and events after the reporting period Income taxes Financial instruments Leases Share-based payment Performance reporting Related parties 71 117 139 155 183 241 261 277 335 Part C Group financial statements 12 13 14 15 16 17 Revision of basic groups Complex groups and joint arrangements Changes in group structures Continuing and discontinued interests Foreign currency transactions and entities Group statements of cash flows 345 393 419 447 455 477 Part D Developments in reporting 18 19 20 21 Environmental and social reporting Current developments Reporting for specialised entities Reporting for small and medium-sized entities Practice question and answer bank Mathematical tables Index Review form 505 533 559 585 599 689 693 Contents iii iv Helping you to pass BPP Learning Media – ACCA Approved Content Provider As an ACCA Approved Content Provider, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examination team By incorporating the examination team’s comments and suggestions regarding the depth and breadth of syllabus coverage, the BPP Learning Media Study Text provides excellent, ACCA-approved support for your studies The PER alert Before you can qualify as an ACCA member, you not only have to pass all your exams but also fulfil a three year practical experience requirement (PER) To help you to recognise areas of the syllabus that you might be able to apply in the workplace to achieve different performance objectives, we have introduced the ‘PER alert’ feature You will find this feature throughout the Study Text to remind you that what you are learning to pass your ACCA exams is equally useful to the fulfilment of the PER requirement Your achievement of the PER should now be recorded in your on-line My Experience record Tackling studying Studying can be a daunting prospect, particularly when you have lots of other commitments The different features of the Study Text, the purposes of which are explained fully on the Chapter features page, will help you whilst studying and improve your chances of exam success Developing exam awareness Our Texts are completely focused on helping you pass your exam Our advice on Studying P2 outlines the content of the paper, the necessary skills you are expected to be able to demonstrate and any brought forward knowledge you are expected to have Exam focus points are included within the chapters to highlight when and how specific topics were examined, or how they might be examined in the future Using the Syllabus and Study Guide You can find the syllabus and study guide on pages ix – xxxii of this Study Text Testing what you can Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can recall what you have learnt We include Questions – lots of them – both within chapters and in the Practice Question Bank, as well as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content Introduction v Chapter features Each chapter contains a number of helpful features to guide you through each topic Topic list Topic list Syllabus reference What you will be studying in this chapter and the relevant section numbers, together with ACCA syllabus references Introduction Puts the chapter content in the context of the syllabus as a whole Study Guide Links the chapter content with ACCA guidance Exam Guide Highlights how examinable the chapter content is likely to be and the ways in which it could be examined Knowledge brought forward from earlier studies What you are assumed to know from previous studies/exams FAST FORWARD Summarises the content of main chapter headings, allowing you to preview and review each section easily Examples Demonstrate how to apply key knowledge and techniques Key terms Definitions of important concepts that can often earn you easy marks in exams Exam focus points When and how specific topics were examined, or how they may be examined in the future Formula to learn Formulae that are not given in the exam but which have to be learnt Gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER) vi Introduction Question Gives you essential practice of techniques covered in the chapter Case Study Real world examples of theories and techniques Chapter Roundup A full list of the Fast Forwards included in the chapter, providing an easy source of review Quick Quiz A quick test of your knowledge of the main topics in the chapter Exam Question Bank Found at the back of the Study Text with more comprehensive chapter questions Cross referenced for easy navigation Studying P2 Paper P2 Corporate Reporting is a tough paper, reflecting the demands that will be made upon the professional accountant in his or her working life At the Fundamentals level, you will have studied the essentials of financial statement preparation and analysis, including those of group accounts At the Professional level, these essentials will be assumed knowledge You will be required to apply them, assuming the role of a professional adviser and analyst to the management as well as the shareholders and other stakeholders What P2 is about The P2 syllabus comprises eight main areas: A B C D E F G H The professional and ethical duty of the accountant The financial reporting framework Reporting the financial performance of entities Financial statements of groups of entities Specialised entities Implications of changes in accounting regulation on financial reporting The appraisal of financial performance and position of entities Current developments There is, of course, some overlap between these areas For example, if you are discussing current developments (H), you might be talking about the proposed changes to accounting for business combinations (D) and considering the implications of changes in accounting regulation (F) and perhaps even the ethical duty of the accountant to report those changes fairly and accurately (A) Skills you have to demonstrate At the Fundamentals level, the questions would be more easily categorised into syllabus areas However, at this level you may need to demonstrate knowledge, skills and thinking from outside the syllabus area that the question seems to be about on the surface The examination team has stated: Students should be capable of relating professional issues to relevant concepts and practical situations The evaluation of alternative accounting practices and the identification and prioritisation of issues will be a key element of the paper Professional and ethical judgement will need to be exercised, together with the integration of technical knowledge when addressing corporate reporting issues in a business context So the paper is not predictable That said, clear guidance has been given The compulsory Section A question, worth 50 marks, will always be on group accounts It will also deal with issues in financial reporting and will be case study based In Section B, questions could be on any area of the syllabus, but we have been told that two questions will be scenario based and one question will be an essay You have a choice of two from three Increasingly, questions are discursive rather than numerical, so it is vital that you get practice at answering this type of question Introduction vii Important note for UK students If you are sitting the UK P2 paper you will be studying under International standards and up to 20 marks will be for comparisons between International and UK GAAP The ACCA UK Syllabus and Study Guide gives the following advice: International Financial Reporting Standards (IFRS) are the main accounting standards examined in the preparation of financial information The key differences between UK GAAP and International Financial Reporting Standards are looked at on a subject by subject basis The comparison between IFRS and UK GAAP will be based on the new UK GAAP as set out in FRSs 100-102, so the standard by standard comparisons that appeared in previous editions of this study guide are now combined in outcome C11 (d): Discuss the key differences between the IFRS for SMEs and UK GAAP This Study Text covers all the topics you need to know under International Financial Reporting Standards An online supplement will be available at www.bpp.com/learning-media, covering the additional UK issues Exam technique for P2 Do not be needlessly intimidated There is no shortcut to passing this exam It looks very difficult indeed, and many students wonder if they will ever pass But many How they this? Easy marks All the questions are demanding, but there are many easy marks to be gained Suppose, for example, you had a consolidated statement of cash flows with a disposal, some foreign exchange complications and an impairment calculation There will be easy marks available simply for the basic cash flow aspects, setting out the proforma, setting up your workings, presenting your work neatly If you recognise, as you should, that the disposal needs to be taken into account, of course you will get marks for that, even if you make a mistake in the arithmetic If you get the foreign exchange right, so much the better, but you could pass the question comfortably omitting this altogether If you’re short of time, this is what you should Be ruthless in ignoring the complications Look at the question Within reason, if there are complications – often only worth a few marks – that you know you will not have time or knowledge to do, cross them out It will make you feel better Than tackle the bits you can This is how people pass a seemingly impossible paper Answer all questions and all parts of questions The examination team frequently comments that students don't this, so they miss easy opportunities to gain marks Be ruthless in allocating your time At BPP, we have seen how very intelligent students one almost perfect question, one averagely good and one sketchy For a fifty mark question, the first twenty marks are the easiest to get Then you have to push it up to what you think is thirty to get yourself a clear pass For a twenty-five mark question, the first eight to ten marks are the easiest to get, and then you must try to push it up to fifteen Do your best question either first or second, and the compulsory question either first or second The compulsory question, being on groups, will always have some easy marks available for consolidation techniques viii Introduction Cumulative present value table This table shows the present value of £1 per annum, receivable or payable at the end of each year for n years Periods Discount rates (r) (n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 0.990 1.970 2.941 3.902 4.853 0.980 1.942 2.884 3.808 4.713 0.971 1.913 2.829 3.717 4.580 0.962 1.886 2.775 3.630 4.452 0.952 1.859 2.723 3.546 4.329 0.943 1.833 2.673 3.465 4.212 0.935 1.808 2.624 3.387 4.100 0.926 1.783 2.577 3.312 3.993 0.917 1.759 2.531 3.240 3.890 0.909 1.736 2.487 3.170 3.791 10 5.795 6.728 7.652 8.566 9.471 5.601 6.472 7.325 8.162 8.983 5.417 6.230 7.020 7.786 8.530 5.242 6.002 6.733 7.435 8.111 5.076 5.786 6.463 7.108 7.722 4.917 5.582 6.210 6.802 7.360 4.767 5.389 5.971 6.515 7.024 4.623 5.206 5.747 6.247 6.710 4.486 5.033 5.535 5.995 6.418 4.355 4.868 5.335 5.759 6.145 11 12 13 14 15 10.37 11.26 12.13 13.00 13.87 9.787 10.58 11.35 12.11 12.85 9.253 9.954 10.63 11.30 11.94 8.760 9.385 9.986 10.56 11.12 8.306 8.863 9.394 9.899 10.38 7.887 8.384 8.853 9.295 9.712 7.499 7.943 8.358 8.745 9.108 7.139 7.536 7.904 8.244 8.559 6.805 7.161 7.487 7.786 8.061 6.495 6.814 7.103 7.367 7.606 16 17 18 19 20 14.718 15.562 16.398 17.226 18.046 13.578 14.292 14.992 15.678 16.351 12.561 13.166 13.754 14.324 14.877 11.652 12.166 12.659 13.134 13.590 10.838 11.274 11.690 12.085 12.462 10.106 10.477 10.828 11.158 11.470 9.447 9.763 10.059 10.336 10.594 8.851 9.122 9.372 9.604 9.818 8.313 8.544 8.756 8.950 9.129 7.824 8.022 8.201 8.365 8.514 Periods 690 Discount rates (r) (n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 0.901 1.713 2.444 3.102 3.696 0.893 1.690 2.402 3.037 3.605 0.885 1.668 2.361 2.974 3.517 0.877 1.647 2.322 2.914 3.433 0.870 1.626 2.283 2.855 3.352 0.862 1.605 2.246 2.798 3.274 0.855 1.585 2.210 2.743 3.199 0.847 1.566 2.174 2.690 3.127 0.840 1.547 2.140 2.639 3.058 0.833 1.528 2.106 2.589 2.991 10 4.231 4.712 5.146 5.537 5.889 4.111 4.564 4.968 5.328 5.650 3.998 4.423 4.799 5.132 5.426 3.889 4.288 4.639 4.946 5.216 3.784 4.160 4.487 4.772 5.019 3.685 4.039 4.344 4.607 4.833 3.589 3.922 4.207 4.451 4.659 3.498 3.812 4.078 4.303 4.494 3.410 3.706 3.954 4.163 4.339 3.326 3.605 3.837 4.031 4.192 11 12 13 14 15 6.207 6.492 6.750 6.982 7.191 5.938 6.194 6.424 6.628 6.811 5.687 5.918 6.122 6.302 6.462 5.453 5.660 5.842 6.002 6.142 5.234 5.421 5.583 5.724 5.847 5.029 5.197 5.342 5.468 5.575 4.836 4.988 5.118 5.229 5.324 4.656 4.793 4.910 5.008 5.092 4.486 4.611 4.715 4.802 4.876 4.327 4.439 4.533 4.611 4.675 16 17 18 19 20 7.379 7.549 7.702 7.839 7.963 6.974 7.120 7.250 7.366 7.469 6.604 6.729 6.840 6.938 7.025 6.265 6.373 6.467 6.550 6.623 5.954 6.047 6.128 6.198 6.259 5.668 5.749 5.818 5.877 5.929 5.405 5.475 5.534 5.584 5.628 5.162 5.222 5.273 5.316 5.353 4.938 4.990 5.033 5.070 5.101 4.730 4.775 4.812 4.843 4.870 Mathematical tables Index 691 692 Note: Key Terms and their page references are given in bold Absolutism, 45 Accounting policies, 286, 324 Accounting profit, 156 Acquiree, 347 Acquirer, 347 Actuarial assumptions, 125, 127 Actuarial method, 248 Actuarial method (before tax), 248 Additional performance measures, 544 Age and gender, 49 Agricultural activity, 571 Agricultural produce, 571, 575 Amortised cost, 202 Amortised cost of a financial asset or financial liability, 202 Analysis of exchange differences, 467 Antidilution, 297 Asset ceiling, 124 Asset turnover, 312 Assets, 72, 73 Assets held for sale, 449 Associate, 174, 347, 348, 354, 376 Associates and joint ventures, 491 Authority, 51 Barriers to harmonisation, 555 Basic EPS, 298 Basis of provision of deferred tax, 168 Bearer biological assets, 78, 573 Behaviours, 53 Beliefs, 53 Benefits of cash flow information, 479 Benefits of harmonisation, 554 Big GAAP/little GAAP, 587 Biological asset, 571 Biological assets, 571, 573 Biological transformation, 571 Borrowing costs, 80, 81 Bribery, 43, 54 BS 7750 Environmental Management System, 509 Bureaucracy, 51 Business combination, 111, 347 Business combinations, 346 Carrying amount, 74, 83, 95, 571 Cash, 480 Cash and cash equivalents, 480 Cash equivalents, 480 Cash flow hedge, 221 Cash flows, 478, 480 Cash generating unit, 85 CERES Principles, 507 Change in accounting estimate, 286 Change in functional currency, 473 Changes in accounting policy, 324, 325 Changes in direct ownership, 441 Chemical Industries Association Responsible care programme, 508 Clarification of acceptable methods of depreciation and amortisation, 76, 105 Close members of the family of an individual, 337 Closing rate, 458 Code of Ethics and Conduct, 60 Cognitivism, 45 Collectivism, 49 Comparability, 11 Competence, 60 Component of an entity, 450 Compound financial instruments, 189 Conceptual framework, Conceptual nature of employee benefit costs, 118 Confederation of British Industry Agenda for voluntary action, 508 Confidentiality, 60 Conflict of interest, 63 Consequentialist ethics, 47 Consolidated financial statements, 355 Consolidated income statement, 378 Consolidated statement of financial position, 379 Consolidating sub-subsidiaries, 396 Constraints on useful information, 11 Constructive obligation, 126, 142, 150 Context-related factors, 51 Contingent asset, 146, 149 Contingent consideration, 348 Contingent liability, 146, 149 Contingent rent, 246 Contingent rights and obligations, 187 Contingent share agreement, 297 Contingently issuable ordinary shares, 297 Control, 337, 347, 353 Conversion, 456 Corporate culture, 58 Corporate governance, Index 693 Cost, 74, 95 Costs to sell, 450 Credit loss, 209 Credit-impaired financial asset, 208 Cross-sectional analysis, 309 Cultural context, 53 Cultural context of ethics, 49 Cultural leadership, 56 Culture, 57 Current tax, 156 Date of effective control, 396 Davies, Hunter, 53 Debt ratios, 315 Debt versus equity, 542 Deductible temporary differences, 159, 165, 173 Deferral method, 168 Deferred tax assets, 159 Deferred tax liabilities, 159 Deferred taxation and business combinations, 171 Deficit or surplus, 124 Defined benefit liability, 127 Defined benefit plans, 122, 124 Defined contribution plans, 122, 123 Definition of an asset, 72 Demographic assumptions, 127 Deontology, 46 Depreciation, 307 Derivative, 186 Derivative instruments, 184 Determining functional currency, 461 Diluted EPS, 299 Dilution, 297 Direct holdings in sub-subsidiaries, 406 Direct method, 482, 485, 486 Disclosure initiative, 16, 539 Disclosure initiative: Amendments to IAS 1, 283, 539 Disclosure of financial instruments, 226 Discontinued operation, 450 Discount rate, 128 Disposal group, 448 Disposal of foreign entity, 473 Disposals, 429 Dividend in specie, 442 Divisionalisation, 444 Due care, 60 Eco-audit, 508 Eco-labelling, 509 694 Index Economic life, 245 ED Acquisition of an interest in a joint operation, 415 ED Classification and measurement of sharebased payment transactions – proposed amendments to IFRS 2, 271 ED Classification of liabilities – proposed amendments to IAS 1, 286, 535, 537 ED Disclosure initiative: Proposed amendments to IAS 7, 485, 539 ED Equity method: share of other net asset changes, 386 ED Improvements to IFRS, 538 ED Investment entities: applying the consolidation exception, 358 ED Leases, 253 ED Measuring quoted investments in subsidiaries, joint ventures and associates at fair value, 375, 537 ED Recognition of deferred tax assets for unrealised losses, 178 ED Sale or contribution of assets between an investor and its associate or joint venture, 386 Education and employment, 50 Effect of GAAP on gearing, 316 Effective date of disposal, 430 Effective interest method, 202 Effective interest rate, 202 Efficient market hypothesis, 310 Egoism, 48 Embedded derivative, 217 Employee benefits, 120 Environmental audit, 508 Environmental Impact Assessments (EIAs), 508 Environmental Quality Management (EQM), 508 Environmental report, 511 Environmental SWOT analysis, 508 Equity accounting, 541 Equity instrument, 185, 264 Equity instrument granted, 264 Equity interests, 348 Equity method, 354, 376, 377 Ethical absolutism, 45 Ethical framework, 60 Ethical relativism, 44 Ethical theory, 44 Ethics, 53 European Commission (EC), 552 Exchange difference, 458, 459 Exchange rate, 458 Exemption from preparing group accounts, 356 Expected credit losses, 208, 209 Expected losses, 208 Exposure Draft: Conceptual Framework for Financial Reporting, 12 Extortion, 43, 54 Fair value, 74, 95, 186, 264, 348, 367, 450, 571 Fair value adjustments, 367 Fair value hedge, 221 Fair value model, 96 Femininity, 50 Finance lease, 243 Finance lease transactions, 491 Financial Accounting Standards Board (FASB), 7, 73 Financial analysis, 309 Financial asset, 185 Financial assumptions, 127 Financial contracts and executory contracts, 192 Financial instrument, 185 Financial liability, 185 Financial Reporting Standards, Financing activities, 480, 481 Foreign associated undertakings, 473 Foreign currency, 307, 458 Foreign operation, 460 Forgivable loans, 79 Friends of the Earth Environmental charter for local government, 508 FRS 100, 553 FRS 101, 553 FRS 102, 554 FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime, 554 Functional currency, 458 Fundamental principles, 59 Generally Accepted Accounting Practice (GAAP), Gifts, 44, 54 Going concern, 577 Goodwill, 110, 111, 366 Goodwill and fair value adjustments, 468 Government grants, 79 Grant date, 264 Grants related to assets, 79 Grants related to income, 79 Grease money, 43, 54 Gross investment in the lease, 245 Group, 347 Group of biological assets, 571 Guaranteed residual value, 245 Harvest, 571 Hedge effectiveness, 219 Hedge of a net investment in a foreign operation, 221 Hedged item, 218 Hedging, 218 Hedging instrument, 218 Held for sale, 449 IAS Presentation of financial statements, 191, 278 IAS Statements of cash flows, 479 IAS Accounting policies, changes in accounting estimates and errors, 158, 286, 375 IAS 12 Income taxes, 156, 191 IAS 16 Property, plant and equipment, 74 IAS 17 Leases, 243 IAS 19 Employee benefits, 119 IAS 21 The effects of changes in foreign exchange rates, 458 IAS 23 Borrowing costs, 80 IAS 24 Related party disclosures, 336 IAS 28 Investments in associates and joint ventures, 376 IAS 32 Financial instruments: presentation, 188 IAS 34 Interim financial reporting, 303 IAS 36 Impairment of assets, 82 IAS 37 Provisions, contingent liabilities and contingent assets, 141 IAS 39 Financial instruments IAS 40 Investment property, 95 IAS 41 Agriculture, 264, 570 IASB Conceptual Framework, IASB liaison members, 550 IFAC's Code of Ethics, 59 IFRS First time adoption of International Financial Reporting Standards, 545 IFRS Share based payment, 262 IFRS Business combinations, 99, 111, 366 IFRS Non-current assets held for sale and discontinued operations, 83, 448 IFRS Financial Instruments disclosures, 226 IFRS Operating segments, 289 IFRS Financial Instruments, 185, 237 IFRS 10 Consolidated financial staments, 337 IFRS 11 Joint arrangements, 410 IFRS 12 Disclosure of interests in other entities, 387 IFRS 13 Fair value measurement, 228 Index 695 IFRS 15 Revenue from contracts with customers, 15, 18, 19 IFRS for SMEs, 590 Impaired asset, 83 Impairment, 83 Implications of high or low gearing, 316 Implicit interest rate, 257 Impracticable, 284, 287 Improvements to IFRS 2011 to 2013 Cycle, 538 Inception of the lease, 245 Independent, 60 Indirect method, 482 Indirect versus direct, 482 Individual influences, 49 Individualism, 49 Influences on ethics, 49 Initial direct costs, 245 Insider dealing, 310, 311 Intangible asset, 100 Intangible fixed asset, 110 Integrated reporting, 526 Integration with national standard setters, 550 Interest, dividends, losses and gains, 190 Interest rate implicit in the lease, 244 Interim financial report, 303 Interim period, 303 Internal reconstructions, 577 Internally generated goodwill, 101 International Accounting Standards Board, International Chamber of Commerce Business Charter for sustainable developments, 508 International Financial Reporting Standards (IFRSs), International Monetary Fund, 48 Inter-temporal analysis, 309 Intrinsic value, 264 Investing activities, 480, 481 Investment, 348 Investment entities: applying the consolidation exception, 358 Investment property, 95 Issue-related factors, 51 Joint arrangement, 347, 410 Joint control, 337, 347, 376, 410 Joint operation, 410 Joint venture, 174, 347, 348, 410 Jones, Thomas, 51 Kant, 46 Key management personnel, 337 696 Index Lease, 242, 243 Lease term, 245 Leasing, 242 Lessee's incremental borrowing rate of interest, 245 Lessor accounting, 250 Leverage, 316 Liability, 141, 149 Liability method, 168 Lifetime expected credit losses, 209 Liquidity, 313 Locus of control, 50 Management Commentary, 330 Manufacturer/dealer lessors, 251 Market based vesting conditions, 265 Masculinity, 50 Material, 10, 284 Materiality, 305 Measurement date, 264 Measurement of revenue, 19 Minimum lease payments, 244 Minimum premium value, 443 Minority interests, 398 Mintzberg, 517 Monetary items, 458 Moral framing, 51 Moral imagination, 50 Moral intensity, 51 Multi-employer plans, 122, 123 Multinational companies, 310 Narrow and broad approach, 541 National and cultural beliefs, 49 National context, 53 Nature of profit, 325 Net defined benefit liability, 124 Net investment in a foreign operation, 460 Net investment in the lease, 245 New top holding company, 441 Non-cognitivism, 44 Non-controlling interest, 348, 381, 490 Non-current asset, 73 Non-market based vesting conditions, 265 Onerous contract, 144, 151 Operating activities, 480 Operating lease, 243, 249 Operating segment, 290 Options, warrants and their equivalents, 297 Ordinary shares, 297 Organisational culture, 52 Organisational field, 52 Originating timing differences, 161 Other long term benefits, 135 Other long-term employee benefits, 120 Owner-occupied property, 95 Parent, 347 Past due, 209 PBIT, profit before interest and tax, 312 Pension schemes, 122 Permanent differences, 161 Personal integrity, 50 Plan assets, 124, 127 Pluralism, 48 Post-employment benefits, 120, 122 Potential ordinary share, 297 Power distance, 49 Present value of a defined benefit, 124 Presentation currency, 458 Presentation of financial instruments, 188 Principles-based approach, 553 Prior period errors, 286 Professional behaviour, 60 Profit margin, 312 Profit or loss versus other comprehensive income, 540 Profit smoothing, 141 Profitability, 312 Property, plant and equipment, 74 Prospective application, 286 Provision, 141 Psychological factors, 50 Purchased goodwill, 110 Purchased or originated credit-impaired financial asset, 209 Qualifying asset, 81 recognition and measurement, 193 Reconstruction scheme, 578 Recoverable amount, 84, 450 Related party, 337 Related party transaction, 337 Relativism, 44 Research and development costs, 101 Residual value, 74 Restructuring, 145 Restructuring provisions, 151 Retrospective application, 286 Retrospective restatement, 286 Revaluations, 77 Revalued assets, 163 Revenue, 19 Reversal of an impairment loss, 90 Reverse acquisitions, 375 Right-of-use asset, 254 Rules-based approach, 553 Sale and leaseback transactions, 252 Seasonal fluctuations, 326 Segment reporting, 289 Settlement, 131 Share option, 264 Share-based payment arrangement, 264 Share-based payment transaction, 264 Shareholders' investment ratios, 317 Short-term employee benefits, 120 Significant influence, 337, 347, 354, 376 Situational influences, 50 Social and political considerations, 309 Social attitudes, 53 Spot exchange rate, 458 Stock exchanges, 310 Structural adjustment programmes, 48 Structured entity, 387 Subsidiary, 347, 348, 353 Subsidiary moved along, 442 Subsidiary moved down, 443 Substance over form, 10 Sub-subsidiaries, 395 Sum of the digits method, 248 Supplier audits, 509 Systems of reward, 51 Taken for granted assumptions, 53 Tax, 307 Tax base, 159, 171 Tax expense (tax income), 156 Tax planning opportunities, 167 Taxable profit (tax loss), 156 Taxable temporary differences, 159, 173 Teleological ethics, 47 Teleological or consequentialist ethics: utilitarianism, 47 Temporary differences, 159 Termination benefits, 120 Transactions between a venturer and a joint venture, 415 Translation, 457 Treasury shares, 190 Trend analysis, 309 Index 697 Uncertainty avoidance, 50 Unearned finance income, 245 Unguaranteed residual value, 245, 256 Unprofessional behaviour, 63 Useful life, 245 Utilitarianism, 47 Value in use, 84, 450 Value of purchased goodwill, 110 698 Index Vest, 265 Vesting conditions, 265 Vesting period, 265 Voluntary liquidation, 581 Whistle-blowing, 59 Window dressing, 310, 327 Work roles, 52 Worldwide effect of IFRS, 551 Notes Notes Notes Notes Review Form – Paper P2 Corporate Reporting (International and UK) (02/16) Please help us to ensure that the ACCA learning materials we produce remain as accurate and user-friendly as possible We cannot promise to answer every submission we receive, but we promise that it will be read and taken into account when we update this Study Text Name: Address: During the past six months you 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  • Book Cover

  • ACCA Approved Content Provider

  • Title

  • Copyright

  • Contents

  • Introduction

    • Helping you to pass

      • BPP Learning Media – ACCA Approved Content Provider

      • The PER alert

      • Tackling studying

      • Developing exam awareness

      • Using the Syllabus and Study Guide

      • Testing what you can do

    • Chapter features

    • Studying P2

      • 1 What P2 is about

      • 2 Skills you have to demonstrate

    • Important note for UK students

    • Exam technique for P2

      • Do not be needlessly intimidated

      • Easy marks

      • Be ruthless in ignoring the complications

      • Answer all questions and all parts of questions

      • Be ruthless in allocating your time

    • Syllabus and Study Guide

      • International

      • United Kingdom

    • The exam paper

    • Analysis of past papers – by sitting

      • December 2015 Sample Exam

      • June 2015

      • December 2014

      • June 2014

      • December 2013

      • June 2013

      • December 2012

      • June 2012

      • Analysis of past papers – by syllabus topic

  • Part A Regulatory and ethical framework

    • Chapter 1 Financial reporting framework

      • Introduction

      • Study guide

      • Exam guide

      • 1 International Financial Reporting Standards (IFRSs)

        • 1.1 Current accounting standards and documents examinable at P2

      • 2 Corporate governance

      • 3 Conceptual framework 12/07

        • 3.1 The search for a conceptual framework

        • 3.2 Advantages of a conceptual framework

        • 3.3 Counter-argument

        • 3.4 Generally Accepted Accounting Practice (GAAP)

        • 3.5 GAAP and a conceptual framework

        • 3.6 The IASB Conceptual Framework

        • 3.7 Introduction to the Conceptual Framework

        • 3.8 Chapter 1: The Objective of General Purpose Financial Reporting

        • 3.9 Chapter 3: Qualitative Characteristics of Useful Financial Information

          • 3.9.1 Materiality

          • 3.9.2 Enhancing qualitative characteristics

          • 3.9.3 Underlying assumption

        • 3.10 Exposure Draft: Conceptual Framework for Financial Reporting

          • 3.10.1 Background and approach

          • 3.10.2 Structure

          • 3.10.3 Introduction

          • 3.10.4 Chapter 1: The Objective of General Purpose Financial Reporting

          • 3.10.5 Chapter 2: Qualitative characteristics of useful financial information

          • 3.10.6 Chapter 3: Financial Statements and the reporting entity

          • 3.10.7 Chapter 4: The elements of financial statements

          • 3.10.8 Chapter 5: Recognition and derecognition

          • 3.10.9 Chapter 6: Measurement

          • 3.10.10 Chapter 7: Presentation and disclosure

          • 3.10.11 Chapter 8: Concepts of capital and capital maintenance

        • 3.11 Possible criticisms

          • 3.11.1 EY

          • 3.11.2 The Financial Reporting Council (FRC)

      • 4 Revenue recognition 6/08, 12/08, 6/11, 12/11, 6/13, 12/13, 6/14, 12/15

        • 4.1 Introduction

        • 4.2 IFRS 15 Revenue from contracts with customers

        • 4.3 Scope

        • 4.4 Definitions

        • 4.5 Recognition and measurement of revenue

          • 4.5.1 Example: identifying the separate performance obligation

          • 4.5.2 Example: determining the transaction price

        • 4.6 Contract costs

        • 4.7 Performance obligations satisfied over time

        • 4.8 Performance obligations satisfied at a point in time

        • 4.9 Sale with a right of return

        • 4.10 Warranties

        • 4.11 Principal versus agent

          • 4.11.1 Example: principal versus agent

        • 4.12 Options for additional goods or services

        • 4.13 Customers’ unexercised rights

        • 4.14 Non-refundable upfront fees

        • 4.15 Licensing

        • 4.16 Repurchase agreements

          • 4.16.1 Example: contract with a call option

          • 4.16.2 Example: contract with a put option

        • 4.17 Consignment arrangements

        • 4.18 Bill-and-hold arrangements

          • 4.18.1 Example: bill and hold arrangement

        • 4.19 Example: applying the IFRS five-step model

        • 4.20 Presentation

        • 4.21 Disclosure

        • 4.22 Contracts where performance obligations are satisfied over time

        • 4.23 Likely impact on companies

          • 4.23.1 Timing of revenue

          • 4.23.2 Use of judgement

          • 4.23.3 Retrospective application

          • 4.23.4 Practical implications

        • 4.24 Topical example

        • 4.25 Recommended articles

        • 4.26 Question practice

      • 5 Professional skills: guidance from the ACCA

        • 5.1 Professional Skills – Basis of the award of marks

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 2 Professional and ethical duty of the accountant

      • Introduction

      • Study guide

      • Exam guide

      • 1 Ethical theories

        • 1.1 An introduction to ethics

          • 1.1.1 Do ethics change over time and place?

          • 1.1.2 Should you consider the consequences of your actions when making ethical decisions?

          • 1.1.3 What thought processes do people use when making ethical decisions?

        • 1.2 Role of ethical theory

        • 1.3 Ethical relativism and non-cognitivism

          • 1.3.1 Strengths of relativism

          • 1.3.2 Criticisms of relativism

        • 1.4 Ethical absolutism and cognitivism

        • 1.5 Deontological ethics

          • 1.5.1 Criticisms of Kant

        • 1.6 Teleological or consequentialist ethics: utilitarianism

          • 1.6.1 Problems with utilitarianism

        • 1.7 Teleological or consequentialist ethics: egoism

          • 1.7.1 Criticisms of egoism

        • 1.8 Pluralism

      • 2 Influences on ethics

        • 2.1 The cultural context of ethics and corporate social responsibility

        • 2.2 Individual influences

          • 2.2.1 Age and gender

          • 2.2.2 National and cultural beliefs

          • 2.2.3 Education and employment

          • 2.2.4 Psychological factors

          • 2.2.5 Locus of control

          • 2.2.6 Personal integrity

          • 2.2.7 Moral imagination

        • 2.3 Situational influences

        • 2.4 Issue-related factors

          • 2.4.1 Moral intensity

          • 2.4.2 Moral framing

        • 2.5 Context-related factors

          • 2.5.1 Systems of reward

          • 2.5.2 Authority

          • 2.5.3 Bureaucracy

          • 2.5.4 Work roles

          • 2.5.5 Organisational field

          • 2.5.6 Organisational culture

          • 2.5.7 National and cultural context

      • 3 The social and ethical environment 12/07 – 12/15

        • 3.1 Ethical problems facing managers

        • 3.2 Examples of social and ethical objectives

        • 3.3 Social responsibility and businesses

      • 4 Ethics in organisations

        • 4.1 Leadership practices and ethics

        • 4.2 Two approaches to managing ethics

          • 4.2.1 Compliance-based approach

          • 4.2.2 Integrity-based programmes

      • 5 Principles and guidance on professional ethics

        • 5.1 The public interest

        • 5.2 The fundamental principles

        • 5.3 Ethical framework

      • 6 Practical situations 12/07 – 12/15

        • 6.1 Examination questions

        • 6.2 The problem

        • 6.3 Example: the problem

        • 6.4 Relationships

        • 6.5 Consequences

        • 6.6 Actions

      • 7 Examination questions: an approach

        • 7.1 Dealing with questions

        • 7.2 Step-by-step approach

        • 7.3 Regurgitating the question

        • 7.4 Justifying your decision

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

  • Part B Accounting standards

    • Chapter 3 Non-current assets

      • Introduction

      • Study guide

      • Exam guide

      • 1 The definition of an asset

        • 1.1 IASB definition

        • 1.2 Accounting Standards Board (ASB): UK

        • 1.3 Financial Accounting Standards Board (FASB): USA

        • 1.4 Comparison of definitions

        • 1.5 Definition of a non-current asset

      • 2 Revision of IASs 16, 20 and 23 12/08, 12/12, 6/13, 6/14, 12/14, 12/15

        • 2.1 IAS 16 Property, plant and equipment

          • 2.1.1 2014 Amendments to IAS 16

          • 2.1.2 Measurement subsequent to initial recognition

          • 2.1.3 Revaluations

          • 2.1.4 Example: revaluation surplus

          • 2.1.5 Example: revaluation decrease

          • 2.1.6 Example: revaluation and depreciation

          • 2.1.7 On disposal

          • 2.1.8 Bearer biological assets

        • 2.2 IAS 20: Government grants

        • 2.3 IAS 23 Borrowing costs

      • 3 IAS 36 Impairment of assets 12/07, 12/11, 12/12, 12/13, 12/14

        • 3.1 Scope

        • 3.2 Identifying a potentially impaired asset

        • 3.3 Measuring the recoverable amount of the asset

          • 3.3.1 Composition of estimates of future cash flows

        • 3.4 Recognition and measurement of an impairment loss

        • 3.5 Example: Recoverable amount and carrying amount

        • 3.6 Goodwill and the impairment of assets

          • 3.6.1 Allocating goodwill to cash-generating units

          • 3.6.2 Testing cash-generating units with goodwill for impairment

        • 3.7 Example: Non-controlling interest

        • 3.8 Corporate assets

        • 3.9 Accounting treatment of an impairment loss

        • 3.10 Example 1: Impairment loss

        • 3.11 Example 2: Impairment loss

        • 3.12 Example: Impairment loss and revaluation

        • 3.13 Reversal of an impairment loss

        • 3.14 Impairment loss and goodwill

        • 3.15 Example: Impairment loss and goodwill: partial goodwill

        • 3.16 Example: Impairment loss and goodwill: full goodwill

        • 3.17 Disclosure

        • 3.18 Section summary

      • 4 IAS 40 Investment property 12/12, 6/13

        • 4.1 IAS 40

        • 4.2 Recognition

        • 4.3 Initial measurement

        • 4.4 Measurement subsequent to initial recognition

          • 4.4.1 Fair value model 6/15

          • 4.4.2 Cost model

          • 4.4.3 Changing models

        • 4.5 Transfers

        • 4.6 Disposals

        • 4.7 Disclosure requirements

          • 4.7.1 Fair value model – additional disclosures

          • 4.7.2 Cost model – additional disclosures

        • 4.8 Decision tree

      • 5 IAS 38 Intangible assets 12/08, 6/11, 12/11, 12/14, 6/15, 12/15

        • 5.1 Definition of an intangible asset

        • 5.2 Intangible asset: must be identifiable

        • 5.3 Intangible asset: control by the entity

        • 5.4 Intangible asset: expected future economic benefits

        • 5.5 Exchanges of assets

        • 5.6 Internally generated goodwill

        • 5.7 Research and development costs

          • 5.7.1 Research

          • 5.7.2 Development

          • 5.7.3 Other internally generated intangible assets

          • 5.7.4 Cost of an internally generated intangible asset

          • 5.7.5 Example: Computer software and hardware

        • 5.8 Recognition of an expense

        • 5.9 Measurement of intangible assets subsequent to initial recognition

        • 5.10 Useful life

          • 5.10.1 2014 Amendments to IAS 38

        • 5.11 Amortisation period and amortisation method

        • 5.12 Intangible assets with indefinite useful lives

        • 5.13 Disposals/retirements of intangible assets

        • 5.14 Disclosure requirements

        • 5.15 Section summary

      • 6 Goodwill

        • 6.1 Purchased goodwill

        • 6.2 How is the value of purchased goodwill decided?

        • 6.3 IFRS 3 (Revised) Business combinations

          • 6.3.1 Goodwill and non-controlling interests

          • 6.3.2 Bargain purchase

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 4 Employee benefits

      • Introduction

      • Study guide

      • Exam guide

      • 1 IAS 19 Employee benefits 12/07, 6/08, 6/12, 12/13, 6/14, 6/15

        • 1.1 The conceptual nature of employee benefit costs

        • 1.2 Accounting for employee benefit costs

        • 1.3 IAS 19 Employee benefits

        • 1.4 Categories of employee benefits

        • 1.5 Definitions

      • 2 Short-term employee benefits

        • 2.1 Recognition and measurement

        • 2.2 Short-term paid absences

        • 2.3 Measurement

        • 2.4 Example: Unused holiday leave

        • 2.5 Profit sharing or bonus plans

        • 2.6 Example: Profit sharing plan

        • 2.7 Disclosure

      • 3 Post-employment benefits

        • 3.1 Definitions

        • 3.2 Multi-employer plans

        • 3.3 Section summary

      • 4 Defined contribution plans

      • 5 Defined benefit plans: recognition and measurement 6/11, 6/12, 6/15

        • 5.1 Outline of the method

        • 5.2 Constructive obligation

        • 5.3 The Projected Unit Credit Method

        • 5.4 Example: Defined benefit obligations and current service cost

        • 5.5 Actuarial assumptions

        • 5.6 The statement of financial position

        • 5.7 Plan assets

        • 5.8 The statement of profit or loss and other comprehensive income

        • 5.9 Service costs

        • 5.10 Net interest on the defined benefit liability (asset)

          • 5.10.1 Interest calculation

          • 5.10.2 Discount rate

        • 5.11 Re-measurements of the net defined benefit liability

          • 5.11.1 Actuarial gains and losses

          • 5.11.2 Return on plan assets

        • 5.12 Example

        • 5.13 Section summary

      • 6 Defined benefit plans: other matters

        • 6.1 Past service cost and gains and losses on settlement

          • 6.1.1 Past service cost

          • 6.1.2 Gains and losses on settlement

          • 6.1.3 Accounting for past service cost and gains and losses on settlement

        • 6.2 Asset ceiling test

        • 6.3 Net defined benefit assets

        • 6.4 Suggested approach and question

      • 7 Other long term benefits

        • 7.1 Definition

        • 7.2 Accounting treatment for other long-term benefits

      • 8 Disclosures

        • 8.1 Principles of disclosures required by IAS 19

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 5 Provisions, contingencies and events after the reporting period

      • Introduction

      • Study guide

      • Exam guide

      • 1 Revision of IAS 10 Events after the reporting period

      • 2 IAS 37 Provisions, contingent liabilities and contingent assets 12/07, 6/11, 6/12, 12/12, 6/13, 6/14

        • 2.1 Objective

        • 2.2 Provisions

        • 2.3 Recognition

        • 2.4 Meaning of obligation

          • 2.4.1 Probable transfer of economic benefits

        • 2.5 Example: Transfer of economic benefits

          • 2.5.1 Measurement of provisions

          • 2.5.2 Future events

          • 2.5.3 Expected disposal of assets

          • 2.5.4 Reimbursements

          • 2.5.5 Changes in provisions

          • 2.5.6 Use of provisions

          • 2.5.7 Future operating losses

          • 2.5.8 Onerous contracts

        • 2.6 Examples of possible provisions

          • 2.6.1 Provisions for restructuring

          • 2.6.2 Costs to be included within a restructuring provision

          • 2.6.3 Disclosure

        • 2.7 Contingent liabilities

          • 2.7.1 Treatment of contingent liabilities

        • 2.8 Contingent assets

          • 2.8.1 Disclosure: contingent liabilities

          • 2.8.2 Disclosure: contingent assets

          • 2.8.3 'Let out'

        • 2.9 Section summary

      • 3 Proposed amendments 6/12

        • 3.1 Scope and terminology

        • 3.2 Contingent liabilities

          • 3.2.1 IAS 37 treatment

          • 3.2.2 The proposals

        • 3.3 Contingent assets

          • 3.3.1 IAS 37 treatment

          • 3.3.2 The proposals

        • 3.4 Constructive obligations

          • 3.4.1 IAS 37 treatment

          • 3.4.2 The proposals

        • 3.5 Probability recognition criterion

          • 3.5.1 Rationale for proposed treatment

          • 3.5.2 Example: Product warranty

        • 3.6 Measurement

        • 3.7 Reimbursement

        • 3.8 Onerous contracts

        • 3.9 Restructuring provisions

          • 3.9.1 IAS 37 treatment

          • 3.9.2 The proposals

        • 3.10 Example of change from IAS 37

          • 3.10.1 Example: Present obligation

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 6 Income taxes

      • Introduction

      • Study guide

      • Exam guide

      • 1 Current tax revised

        • 1.1 Definitions

        • 1.2 Recognition of current tax liabilities and assets

        • 1.3 Example: Tax losses carried back

        • 1.4 Measurement

        • 1.5 Recognition of current tax

        • 1.6 Presentation

      • 2 Deferred tax 12/07, 6/10, 6/12, 12/12, 6/14, 12/15

        • 2.1 What is deferred tax?

        • 2.2 Definitions

        • 2.3 Tax base

        • 2.4 Temporary differences

        • 2.5 Section summary

      • 3 Taxable temporary differences

        • 3.1 Transactions that affect the statement of profit or loss and other comprehensive income

        • 3.2 Transactions that affect the statement of financial position

        • 3.3 Fair value adjustments and revaluations

          • 3.3.1 Example: Taxable temporary differences

        • 3.4 Revalued assets

        • 3.5 Initial recognition of an asset or liability

        • 3.6 Example: Initial recognition

      • 4 Deductible temporary differences

        • 4.1 Transactions that affect the statement of profit or loss and other comprehensive income

        • 4.2 Fair value adjustments and revaluations

        • 4.3 Recognition of deductible temporary differences

          • 4.3.1 Example: Deductible temporary differences

        • 4.4 Taxable profits in future periods

        • 4.5 Initial recognition of an asset or liability

        • 4.6 Unused tax losses and unused tax credits

        • 4.7 Reassessment of unrecognised deferred tax assets

        • 4.8 Section summary

      • 5 Measurement and recognition of deferred tax

        • 5.1 Basis of provision of deferred tax

        • 5.2 Example: Full provision

        • 5.3 Deferral/liability methods: changes in tax rates

        • 5.4 Different rates of tax

        • 5.5 Manner of recovery or settlement

        • 5.6 Example: Manner of recovery/settlement

        • 5.7 Discounting

        • 5.8 Carrying amount of deferred tax assets

        • 5.9 Recognition

        • 5.10 Section summary

      • 6 Deferred taxation and business combinations

        • 6.1 Tax bases

          • 6.1.1 Circumstances that give rise to taxable temporary differences

          • 6.1.2 Circumstances that give rise to deductible temporary differences

        • 6.2 Taxable temporary differences

        • 6.3 Deductible temporary differences

        • 6.4 Investments in subsidiaries, branches and associates and interests in joint arrangements

        • 6.5 Deferred tax assets of an acquired subsidiary

        • 6.6 Example: Deferred tax adjustments 1

        • 6.7 Example: Deferred tax adjustments 2

        • 6.8 ED Recognition of deferred tax assets for unrealised losses

          • 6.8.1 The issue

          • 6.8.2 Proposed change

          • 6.8.3 Example: deferred tax asset and unrealised loss

        • 6.9 Section summary

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 7 Financial instruments

      • Introduction

      • Study guide

      • Exam guide

      • 1 Financial instruments 6/12 – 12/15

        • 1.1 Background

        • 1.2 Definitions

        • 1.3 Derivatives

        • 1.4 Section summary

      • 2 Presentation of financial instruments

        • 2.1 Objective

        • 2.2 Scope

        • 2.3 Liabilities and equity

        • 2.4 Contingent settlement provisions

        • 2.5 Settlement options

        • 2.6 Compound financial instruments

        • 2.7 Example: Valuation of compound instruments

        • 2.8 Treasury shares

        • 2.9 Interest, dividends, losses and gains

        • 2.10 Offsetting a financial asset and a financial liability

        • 2.11 Puttable financial instruments and obligations arising on liquidation

        • 2.12 Section summary

      • 3 Recognition of financial instruments

        • 3.1 Background

          • 3.1.1 Effective date

        • 3.2 Scope

          • 3.2.1 Financial contracts and executory contracts

        • 3.3 Initial recognition

        • 3.4 Example: initial recognition

        • 3.5 Derecognition of financial assets 6/12

        • 3.6 Derecognition of financial liabilities

        • 3.7 Classification of financial assets 6/12

          • 3.7.1 Basis of classification

          • 3.7.2 Business model test in more detail

          • 3.7.3 Business model test examples: collecting contractual cash flows

          • 3.7.4 Contractual cash flow test in more detail

          • 3.7.5 Examples of instruments that pass the contractual cash flows test

          • 3.7.6 Examples of instruments that do not pass the contractual cash flows test

          • 3.7.7 Business model test examples: both collecting contractual cash flows and selling financial assets

        • 3.8 Classification of financial liabilities

        • 3.9 Re-classification of financial assets

          • 3.9.1 Examples: Reclassification permitted

          • 3.9.2 Examples: Reclassification not permitted

          • 3.9.3 Gains and losses on reclassification of financial assets

        • 3.10 Section summary

      • 4 Measurement of financial instruments 6/11 – 12/15

        • 4.1 Initial measurement: financial assets

        • 4.2 Initial measurement: financial liabilities

        • 4.3 Subsequent measurement of financial assets

        • 4.4 Financial assets measured at amortised cost

        • 4.5 Example: Financial asset at amortised cost

        • 4.6 Financial assets measured at fair value

        • 4.7 Example: Asset measurement

          • 4.7.1 Subsequent measurement of financial liabilities

        • 4.8 Financial liabilities measured at amortised cost

        • 4.9 Example: Financial liability at amortised cost

        • 4.10 Financial liabilities at fair value through profit or loss

          • 4.10.1 Exceptions

          • 4.10.2 Credit risk

          • 4.10.3 Example of IFRS 9 presentation

          • 4.10.4 Accounting mismatch

        • 4.11 Impairment of financial assets

        • 4.12 Expected credit loss model

          • 4.12.1 Background

          • 4.12.2 Objective of the IFRS 9 impairment model

          • 4.12.3 Key definitions

          • 4.12.4 Scope

          • 4.12.5 Basic principle behind the model

          • 4.12.6 On initial recognition

          • 4.12.7 Subsequent years

          • 4.12.8 Rebuttable presumption: provide if 30 days past due

          • 4.12.9 Financial instruments with low credit risk

          • 4.12.10 Amount of impairment

          • 4.12.11 Interest

          • 4.12.12 Summary

          • 4.12.13 Measuring expected credit losses

          • 4.12.14 Example: portfolio of mortgages and personal loans

          • 4.12.15 Undrawn facilities

          • 4.12.16 Recognition of impairment

          • 4.12.17 Adjustment of loss allowance

          • 4.12.18 Presentation

          • 4.12.19 Simplified approach for trade and lease receivables

          • 4.12.20 Example: trade receivable provision matrix

          • 4.12.21 Purchased or originated credit-impaired financial assets

          • 4.12.22 Disclosures

          • 4.12.23 Possible effects

        • 4.13 Section summary

      • 5 Embedded derivatives

        • 5.1 Examples of host contracts

        • 5.2 Examples of embedded derivatives

        • 5.3 Accounting treatment of embedded derivatives

          • 5.3.1 Financial asset host contract

          • 5.3.2 Other host contracts

        • 5.4 Section summary

      • 6 Hedging

        • 6.1 Introduction

        • 6.2 IFRS 9’s new model for hedge accounting

          • 6.2.1 Why change the hedge accounting requirements?

          • 6.2.2 Principles-based model

        • 6.3 Conditions for hedge accounting

        • 6.4 Example: Hedging

        • 6.5 Accounting treatment

          • 6.5.1 Fair value hedges

          • 6.5.2 Example: fair value hedge

          • 6.5.3 Cash flow hedges

          • 6.5.4 Example: Cash flow hedge

          • 6.5.5 Rebalancing hedging relationships

          • 6.5.6 Discontinuing

          • 6.5.7 Premium paid for options

          • 6.5.8 Forward element of forward contracts and foreign currency basis spreads

          • 6.5.9 Hedges of a group of items

          • 6.5.10 Accounting for hedges of credit risk using credit derivatives

          • 6.5.11 Option to use IAS 39 rules

          • 6.5.12 Disclosures

        • 6.6 Section summary

      • 7 Disclosure of financial instruments 6/13

        • 7.1 General requirements

        • 7.2 Objective

        • 7.3 Classes of financial instruments and levels of disclosure

          • 7.3.1 Statement of financial position

          • 7.3.2 Statement of comprehensive income

          • 7.3.3 Other disclosures

          • 7.3.4 Example: Fair value disclosures

        • 7.4 Nature and extent of risks arising from financial instruments

          • 7.4.1 Qualitative disclosures

          • 7.4.2 Quantitative disclosures

        • 7.5 Capital disclosures

      • 8 Fair value measurement 6/12, 12/12, 6/15

        • 8.1 Objective

        • 8.2 Definitions

        • 8.3 Scope

        • 8.4 Measurement

          • 8.4.1 Example: unit of account

          • 8.4.2 Example: principal or most advantageous market

          • 8.4.3 Non-financial assets

        • 8.5 Valuation techniques

          • 8.5.1 Valuation approaches

          • 8.5.2 Examples of inputs used to measure fair value

        • 8.6 Measuring liabilities

          • 8.6.1 Entity’s own credit risk

          • 8.6.2 Example: Entity’s own credit risk

        • 8.7 IFRS 13 and business combinations

        • 8.8 Disclosure

        • 8.9 Was the project necessary?

          • 8.9.1 Advantages and disadvantages of fair value (v historical cost)

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 8 Leases

      • Introduction

      • Study guide

      • Exam guide

      • 1 Forms of lease 12/12, 6/13

        • 1.1 Other definitions

        • 1.2 Section summary

      • 2 Lessee accounting 12/07, 6/12, 6/13

        • 2.1 Finance leases

          • 2.1.1 Accounting treatment

          • 2.1.2 Lease payments

          • 2.1.3 Lessees' disclosure for finance leases

          • 2.1.4 Arguments against capitalisation

          • 2.1.5 Allocating finance charge

        • 2.2 Example: Actuarial method

        • 2.3 Operating leases

          • 2.3.1 Lessees' disclosures for operating leases

        • 2.4 Section summary

      • 3 Lessor accounting

        • 3.1 Finance leases

        • 3.2 Accounting treatment

        • 3.3 Manufacturer/dealer lessors

        • 3.4 Lessors' disclosures for finance leases

        • 3.5 Operating leases

          • 3.5.1 Accounting treatment

          • 3.5.2 Lessors' disclosures for operating leases

        • 3.6 Sale and leaseback transactions 6/12, 12/13

      • 4 Criticism and proposed changes 6/10

        • 4.1 Treatment of operating leases unsatisfactory?

        • 4.2 IASB Exposure Draft

          • 4.2.1 Basic principle of May 2013 ED – recognition in the statement of financial position

          • 4.2.2 Scope

          • 4.2.3 Measuring lease assets and liabilities

          • 4.2.4 Lease term

          • 4.2.5 Dual recognition approach

          • 4.2.6 Recognition of lease expenses and cash outflows

          • 4.2.7 Lessor accounting

          • 4.2.8 Impact

        • 4.3 Unguaranteed residual value

        • 4.4 Example: Unguaranteed residual value

        • 4.5 Implicit interest rate

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 9 Share-based payment

      • Introduction

      • Study guide

      • Exam guide

      • 1 IFRS 2 Share-based payment Pilot paper, 12/08, 12/10, 6/12, 12/13, 6/14

        • 1.1 Background

          • 1.1.1 Arguments against recognition of share-based payment in the financial statements

        • 1.2 Objective and scope

          • 1.2.1 Share-based payment among group entities

          • 1.2.2 Transactions outside the scope of IFRS 2

        • 1.3 Vesting conditions

        • 1.4 Recognition: the basic principle

        • 1.5 Equity-settled share-based payment transactions

          • 1.5.1 Measurement

          • 1.5.2 Determining the fair value of equity instruments granted

          • 1.5.3 Transactions in which services are received

        • 1.6 Example: Equity-settled share-based payment transaction

        • 1.7 Cancellation and reissuance

        • 1.8 Cash-settled share-based payment transactions

        • 1.9 Example: Cash-settled share-based payment transaction

        • 1.10 Transactions which either the entity or the other party has a choice of settling in cash or by issuing equity instruments

        • 1.11 ED Classification and measurement of share-based payment transactions – proposed amendments to IFRS 2

        • 1.12 Section summary

      • 2 Deferred tax implications

        • 2.1 Issue

        • 2.2 Measurement

        • 2.3 Example: Deferred tax implications of share-based payment

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 10 Performance reporting

      • Introduction

      • Study guide

      • Exam guide

      • 1 Reporting financial performance 6/11

        • 1.1 Revision of IAS 1 Presentation of Financial Statements

          • 1.1.1 Format of statement of financial position and statement of changes in equity

        • 1.2 Amendment: Presentation of items of other comprehensive income

          • 1.2.1 Background

          • 1.2.2 Change

          • 1.2.3 Illustrative example

          • 1.2.4 Possible advantages

          • 1.2.5 Possible disadvantages

        • 1.3 Disclosure initiative: Amendments to IAS 1

          • 1.3.1 Materiality

          • 1.3.2 Disaggregation and subtotals

          • 1.3.3 Notes

          • 1.3.4 Disclosure of accounting policies

          • 1.3.5 Other comprehensive income arising from investments accounted for under the equity method

        • 1.4 Other aspects of IAS 1

        • 1.5 ED Classification of liabilities – proposed amendments to IAS 1.

        • 1.6 Revision of IAS 8 12/13

      • 2 Segment reporting 6/08, 12/11, 6/13, 6/15

        • 2.1 Introduction

        • 2.2 Objective

        • 2.3 Scope

        • 2.4 Definition of operating segment

        • 2.5 Aggregation

        • 2.6 Determining reportable segments

          • 2.6.1 Decision tree to assist in identifying reportable segments

        • 2.7 Disclosures

          • 2.7.1 Disclosure example from IFRS 8

          • 2.7.2 Suggested proforma

        • 2.8 Advantages and disadvantages of the old and new segment definition approaches

        • 2.9 Criticisms of IFRS 8

        • 2.10 Example: Determining operating segments

        • 2.11 Section summary

      • 3 IAS 33 Earnings per share

        • 3.1 Definitions

          • 3.1.1 Ordinary shares

          • 3.1.2 Potential ordinary shares

        • 3.2 Scope

        • 3.3 Basic EPS

          • 3.3.1 Earnings

          • 3.3.2 Per share

        • 3.4 Diluted EPS

          • 3.4.1 Earnings

          • 3.4.2 Per share

        • 3.5 Example: Diluted EPS

        • 3.6 Presentation

        • 3.7 Alternative EPS figures

        • 3.8 Significance of earnings per share

        • 3.9 The P2 exam

        • 3.10 Section summary

      • 4 IAS 34 Interim financial reporting

        • 4.1 Scope

        • 4.2 Minimum components

        • 4.3 Form and content

          • 4.3.1 Selected explanatory notes

        • 4.4 Periods covered

        • 4.5 Materiality

        • 4.6 Recognition and measurement principles

          • 4.6.1 Revenues received occasionally, seasonally or cyclically

          • 4.6.2 Costs incurred unevenly during the financial year

          • 4.6.3 Payroll taxes or insurance contributions paid by employers

          • 4.6.4 Cost of a planned major periodic maintenance or overhaul

          • 4.6.5 Other planned but irregularly-occurring costs

          • 4.6.6 Year-end bonus

          • 4.6.7 Holiday pay

          • 4.6.8 Non-mandatory intangible assets

          • 4.6.9 Depreciation

        • 4.7 Foreign currency translation gains and losses

          • 4.7.1 Tax on income

          • 4.7.2 Inventory valuations

        • 4.8 Use of estimates

        • 4.9 Section summary

      • 5 Ratio analysis

        • 5.1 Financial analysis

          • 5.1.1 Inter-temporal analysis

          • 5.1.2 Cross-sectional analysis

        • 5.2 Social and political considerations

        • 5.3 Multinational companies

        • 5.4 The efficient market hypothesis and stock exchanges

        • 5.5 Insider dealing

        • 5.6 The broad categories of ratios

        • 5.7 Profitability and return on capital

          • 5.7.1 A warning about comments on profit margin and asset turnover

        • 5.8 Liquidity and working capital

        • 5.9 Long-term solvency: Debt and gearing/leverage

          • 5.9.1 The implications of high or low gearing

          • 5.9.2 The effect of GAAP on gearing/leverage

        • 5.10 Shareholders' investment ratios

      • 6 Impact of changes in accounting standards and policies 12/08

        • 6.1 The effect of choice of accounting policies

        • 6.2 Changes in accounting policy

        • 6.3 Changes in accounting standards

        • 6.4 The impact of change and the P2 examination

        • 6.5 Practise case study questions

      • 7 Accounting theory and practice

        • 7.1 The nature of profit

          • 7.1.1 IAS 2 Inventories

          • 7.1.2 IAS 16 Property, plant and equipment

        • 7.2 Other problems with financial analysis

          • 7.2.1 Seasonal fluctuations

          • 7.2.2 Window dressing

        • 7.3 Is accounting theory too remote?

          • 7.3.1 Users of accounts

          • 7.3.2 Bridging the gap

      • 8 Management Commentary – a global Operating and Financial Review?

        • 8.1 Need for management commentary

        • 8.2 IFRS Practice Statement

          • 8.2.1 Scope

          • 8.2.2 Definition of management commentary

          • 8.2.3 Principles for the preparation of a management commentary

          • 8.2.4 Elements of management commentary

          • 8.2.5 Advantages and disadvantages of a compulsory management commentary

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 11 Related parties

      • Introduction

      • Study guide

      • Exam guide

      • 1 IAS 24 Related party disclosures 6/11

        • 1.1 Objective

        • 1.2 Scope

        • 1.3 Definitions

        • 1.4 Exemption for government-related entities

        • 1.5 Disclosure

        • 1.6 Section summary

      • 2 Question

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

  • Part C Group financial statements

    • Chapter 12 Revision of basic groups

      • Introduction

      • Study guide

      • Exam guide

      • 1 IFRS 3 (revised): Main points 12/08, 6/11, 6/12

        • 1.1 Objective of IFRS 3 (revised)

        • 1.2 Definitions

        • 1.3 Identifying a business combination

        • 1.4 The acquisition method

        • 1.5 Acquisition-related costs

        • 1.6 Contingent consideration

          • 1.6.1 IFRS 3

          • 1.6.2 Post-acquisition changes in the fair value of the contingent consideration

        • 1.7 Goodwill and the non-controlling interest 6/13

          • 1.7.1 IFRS 3 (revised) methods – an introduction

          • 1.7.2 IFRS 3 (revised) goodwill calculation

          • 1.7.3 BPP proforma goodwill calculation

          • 1.7.4 Valuing non-controlling interest at acquisition

          • 1.7.5 Goodwill calculation: simple examples

          • 1.7.6 Non-controlling interest at the year end (fair value method)

          • 1.7.7 Example: Goodwill and non-controlling interest

          • 1.7.8 Effect on non-controlling interest of fair value

          • 1.7.9 Your P2 exam

        • 1.8 Other aspects of group accounting

          • 1.8.1 Investment in subsidiaries

          • 1.8.2 Investments in associates

          • 1.8.3 Accounting for investments in joint arrangements

          • 1.8.4 Other investments

      • 2 IFRS 10 Consolidated financial statements 12/12, 12/13, 12/14, 12/15

        • 2.1 Introduction

          • 2.1.1 Power

          • 2.1.2 Returns

          • 2.1.3 Link between power and returns

        • 2.2 Exemption from preparing group accounts

        • 2.3 Potential voting rights

        • 2.4 Exclusion of a subsidiary from consolidation

        • 2.5 Different reporting dates

        • 2.6 Uniform accounting policies

        • 2.7 Date of inclusion/exclusion

        • 2.8 Accounting for subsidiaries, associates and joint ventures in the parent's separate financial statements

          • 2.8.1 Amendment to IAS 27

        • 2.9 Investment entities: applying the consolidation exception

          • 2.9.1 Background

          • 2.9.2 Main issues

        • 2.10 Disclosure

          • 2.10.1 Disclosure of subsidiaries

          • 2.10.2 Disclosure of associates and joint arrangements

        • 2.11 Attribution of losses

        • 2.12 Revision: summary of techniques

      • 3 IFRS 3 (revised), IFRS 13 and fair values

        • 3.1 What is fair value?

        • 3.2 Fair value adjustment calculations

        • 3.3 Example: Fair value adjustments

        • 3.4 IFRS 3 (revised) and IFRS 13: Fair values

          • 3.4.1 Examples of fair value and business combinations

          • 3.4.2 Restructuring and future losses

          • 3.4.3 Intangible assets

          • 3.4.4 Contingent liabilities

          • 3.4.5 Other exceptions to the recognition or measurement principles

        • 3.5 Goodwill arising on acquisition

        • 3.6 Adjustments after the initial accounting is complete

          • 3.6.1 Reverse acquisitions

        • 3.7 ED Measuring quoted investments in subsidiaries, joint ventures and associates at fair value

          • 3.7.1 Specific amendments

      • 4 IAS 28 Investments in associates and joint ventures 12/14

        • 4.1 Separate financial statements of the investor

        • 4.2 Application of the equity method: consolidated accounts

          • 4.2.1 Consolidated statement of profit or loss and other comprehensive income

          • 4.2.2 Consolidated statement of financial position

          • 4.2.3 Example: Associate

        • 4.3 Consolidated statement of profit or loss and other comprehensive income

          • 4.3.1 Pro-forma consolidated statement of profit or loss and other comprehensive income

        • 4.4 Consolidated statement of financial position

        • 4.5 Other accounting considerations

        • 4.6 'Upstream' and 'downstream' transactions

        • 4.7 Example: Downstream transaction

          • 4.7.1 Associate’s losses

        • 4.8 Impairment losses

        • 4.9 Non-controlling interest/associate held by a subsidiary

        • 4.10 Comprehensive question

        • 4.11 ED Sale or contribution of assets between an investor and its associate or joint venture

        • 4.12 ED Equity method: share of other net asset changes

      • 5 IFRS 12 Disclosure of interests in other entities

        • 5.1 Objective

        • 5.2 Scope

        • 5.3 Structured entities

        • 5.4 Main disclosures

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 13 Complex groups and joint arrangements

      • Introduction

      • Study guide

      • Exam guide

      • 1 Complex groups

        • 1.1 Introduction

        • 1.2 A parent company which has several subsidiaries

        • 1.3 Sub-subsidiaries

        • 1.4 Date of effective control

      • 2 Consolidating sub-subsidiaries 6/10, 12/12

        • 2.1 Example: Subsidiary acquired first

        • 2.2 Date of acquisition

        • 2.3 Example: Sub-subsidiary acquired first

        • 2.4 Example: Subsidiary acquired first: non-controlling interest at fair value

        • 2.5 Section summary

      • 3 Direct holdings in sub-subsidiaries 6/13

      • 4 IFRS 11 Joint arrangements 6/12, 12/14

        • 4.1 Definitions

        • 4.2 Forms of joint arrangement

          • 4.2.1 Contractual arrangement

          • 4.2.2 Section summary

        • 4.3 Accounting treatment

          • 4.3.1 Accounting for joint operations

          • 4.3.2 Joint ventures

          • 4.3.3 Application of IAS 28 (2011) to joint ventures

          • 4.3.4 Transactions between a joint venturer and a joint venture

          • 4.3.5 Accounting for acquisition of an interest in a joint operation

          • 4.3.6 Section summary

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 14 Changes in group structures

      • Introduction

      • Study guide

      • Exam guide

      • 1 Business combinations achieved in stages 12/07, 6/09, 12/09, 12/11, 6/12, 12/14, 6/15

        • 1.1 Types of business combination achieved in stages

        • 1.2 General principle: 'Crossing an accounting boundary'

        • 1.3 Investment or associate becomes a subsidiary: calculation of goodwill

          • 1.3.1 Analogy: trading in a small car for a larger one

        • 1.4 Comprehensive example: Acquisition of a subsidiary in stages

        • 1.5 Section summary

      • 2 Acquisitions and disposals where control is retained 6/14, 12/14, 6/15

        • 2.1 Increase in previously held controlling interest: adjustment to parent's equity

        • 2.2 Example: Increase in previously held controlling interest: adjustment to parent's equity

        • 2.3 Disposals where control is retained

        • 2.4 Section summary

      • 3 Disposals 6/10, 6/14, 6/15

        • 3.1 Types of disposal

          • 3.1.1 Disposals where control is lost

          • 3.1.2 Disposals where control is retained

        • 3.2 General principle: 'crossing an accounting boundary'

        • 3.3 Effective date of disposal

        • 3.4 Control lost: calculation of group gain on disposal

          • 3.4.1 Analogy: trading in a large car for a smaller one

        • 3.5 Calculation of gain in parent's separate financial statements

        • 3.6 Disposals where control is lost: accounting treatment

        • 3.7 Disposals where control is retained

          • 3.7.1 Statement of profit or loss and other comprehensive income

          • 3.7.2 Statement of financial position

          • 3.7.3 Adjustment to the parent's equity

          • 3.7.4 Gain in the parent's separate financial statements

        • 3.8 Example: Partial disposals

        • 3.9 Section summary

      • 4 Changes in direct ownership 12/11

        • 4.1 New top parent company

        • 4.2 Subsidiary moved up

        • 4.3 Subsidiary moved along

        • 4.4 Subsidiary moved down

        • 4.5 Example: Minimum premium value

        • 4.6 Divisionalisation

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 15 Continuing and discontinued interests

      • Introduction

      • Study guide

      • Exam guide

      • 1 IFRS 5 Non-current assets held for sale and discontinued operations 12/07, 6/10, 12/12, 6/13, 6/14

      • 2 Classification of assets held for sale 6/14

      • 3 Measurement of assets held for sale 12/13

      • 4 Presenting discontinued operations

        • 4.1 Illustration

        • 4.2 Presentation of a non-current asset or disposal group classified as held for sale

        • 4.3 Additional disclosures

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 16 Foreign currency transactions and entities

      • Introduction

      • Study guide

      • Exam guide

      • 1 Foreign currency translation 12/12

        • 1.1 Conversion gains and losses

        • 1.2 Translation

        • 1.3 Consolidated accounts

      • 2 IAS 21: Individual company stage 6/14

        • 2.1 Definitions

        • 2.2 Foreign currency transactions: initial recognition

        • 2.3 Reporting at subsequent year ends

        • 2.4 Recognition of exchange differences

      • 3 IAS 21: Consolidated financial statements stage 6/08, 6/11, 6/14, 12/15

        • 3.1 Definitions

        • 3.2 Determining functional currency

          • 3.2.1 Same functional currency as the reporting entity

          • 3.2.2 Different functional currency from the reporting entity

        • 3.3 Accounting treatment: Different functional currency from the reporting entity

        • 3.4 Example: Different functional currency from the reporting entity

        • 3.5 Some practical points

        • 3.6 Summary of method

        • 3.7 Analysis of exchange differences

        • 3.8 Non-controlling interests

        • 3.9 Goodwill and fair value adjustments

        • 3.10 Example: including goodwill and non-controlling interests

        • 3.11 Further matters relating to foreign operations

          • 3.11.1 Consolidation procedures

          • 3.11.2 Disposal of foreign entity

          • 3.11.3 In the parent's accounts

        • 3.12 Change in functional currency

          • 3.12.1 Tax effects of exchange differences

          • 3.12.2 Foreign associated undertakings

        • 3.13 Section summary

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 17 Group statements of cash flows

      • Introduction

      • Study guide

      • Exam guide

      • 1 Cash flows 12/13

      • 2 IAS 7 Statement of cash flows: Single company

        • 2.1 Scope

        • 2.2 Benefits of cash flow information

        • 2.3 Definitions

        • 2.4 Cash and cash equivalents

        • 2.5 Presentation of a statement of cash flows

          • 2.5.1 Operating activities

          • 2.5.2 Investing activities

          • 2.5.3 Financing activities

        • 2.6 Reporting cash flows from operating activities

          • 2.6.1 Using the direct method

          • 2.6.2 Using the indirect method

          • 2.6.3 Indirect versus direct 12/10

        • 2.7 Interest and dividends

        • 2.8 Taxes on income

        • 2.9 Components of cash and cash equivalents

        • 2.10 Other disclosures

        • 2.11 Example of a statement of cash flows

          • 2.11.1 Direct method

          • 2.11.2 Indirect method

        • 2.12 Criticisms of IAS 7

        • 2.13 ED Disclosure initiative: Proposed amendments to IAS 7

          • 2.13.1 Improved information about an entity's financing activities, excluding equity items

          • 2.13.2 Improved disclosures about the liquidity of an entity

          • 2.13.3 Changes to the IFRS Taxonomy

        • 2.14 Section summary

      • 3 Consolidated statements of cash flows Pilot paper, 12/08, 12/10, 12/13

        • 3.1 Acquisitions and disposals of subsidiaries and other business units

        • 3.2 Consolidation adjustments and non-controlling interest

        • 3.3 Example: Non-controlling interest

        • 3.4 Associates and joint ventures

        • 3.5 Example: Associate

        • 3.6 Finance lease transactions

        • 3.7 Section summary

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

  • Part D Developments in reporting

    • Chapter 18 Environmental and social reporting

      • Introduction

      • Study guide

      • Exam guide

      • 1 Environmental reporting 12/07

        • 1.1 What is environmental accounting?

        • 1.2 Management information and accounting

        • 1.3 Environmental audit

        • 1.4 Financial reporting

        • 1.5 Example: Environmental liabilities

        • 1.6 The environmental report and the exam

        • 1.7 Example: Environmental report

      • 2 Sustainability

        • 2.1 What is sustainability?

        • 2.2 The Global Reporting Initiative (GRI)

        • 2.3 GRI Guidelines

        • 2.4 Indicators in the GRI framework

        • 2.5 Influence of GRI

        • 2.6 Example: BT

      • 3 Social responsibility

        • 3.1 Social responsibility and businesses

          • 3.1.1 Externalities

      • 4 Human resource accounting

        • 4.1 Introduction

        • 4.2 Implications of regarding people as organisational assets

        • 4.3 Intellectual assets

      • 5 Integrated reporting 6/15

        • 5.1 Rise of integrated reporting

        • 5.2 Wider performance appraisal

        • 5.3 Value creation

        • 5.4 Types of capital

        • 5.5 Interaction of capitals

        • 5.6 Short term v long term

        • 5.7 Monetary values

        • 5.8 Materiality

        • 5.9 Implications of introducing integrated reporting

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 19 Current developments

      • Introduction

      • Study guide

      • Exam guide

      • 1 Current issues in corporate reporting 6/08 – 12/15

        • 1.1 Hot topics

      • 2 Conceptual Framework ED and other recent documents

        • 2.1 ED Conceptual Framework for Financial Reporting

        • 2.2 IFRS 15 Revenue from contracts with customers

        • 2.3 IFRS 9 Financial instruments (July 2014)

        • 2.4 ED Classification of liabilities – proposed amendments to IAS 1.

        • 2.5 ED Recognition of deferred tax assets for unrealised losses

        • 2.6 ED Measuring quoted investments in subsidiaries, joint ventures and associates at fair value

        • 2.7 ED Classification and measurement of share-based payment transactions – proposed amendments to IFRS 2

        • 2.8 Initial comprehensive review of the IFRS for SMEs

        • 2.9 Improvements to IFRS 2012 to 2014 Cycle

          • 2.9.1 IFRS 5 Non-current assets held for sale and discontinued operations

          • 2.9.2 Amendments to IFRS 7 Financial instruments: disclosures

          • 2.9.3 Amendment to IAS 19 Employee benefits

          • 2.9.4 Amendments to IAS 24 Interim financial reporting

      • 3 Other current issues and debates

        • 3.1 Disclosure initiative

          • 3.1.1 Overview

          • 3.1.2 Current status of projects

          • 3.1.3 Disclosure initiative: Amendments to IAS 1

          • 3.1.4 ED Disclosure initiative: Proposed amendments to IAS 7

          • 3.1.5 Disclosure initiative: other projects

        • 3.2 Profit or loss versus other comprehensive income

          • 3.2.1 The classification issue

          • 3.2.2 Profit or loss items

          • 3.2.3 Other comprehensive income

          • 3.2.4 Profit or loss v OCI ≠ realised v unrealised

          • 3.2.5 OCI as the ‘dumping ground’

          • 3.2.6 Approach in Conceptual Framework

        • 3.3 Equity accounting

          • 3.3.1 Separate financial statements of the investor

          • 3.3.2 ED Equity method: share of other net asset changes

        • 3.4 Debt versus equity 12/13, 6/14

          • 3.4.1 Classification differences

          • 3.4.2 Significance of the classification

          • 3.4.3 Equity versus liabilities in the 2013 Conceptual Framework Discussion Paper

        • 3.5 Additional performance measures

          • 3.5.1 Purpose and common types of APMs

          • 3.5.2 Potential problems with APMS

          • 3.5.3 ESMA guidance

      • 4 Managing the change to IFRS 6/08, 6/11

        • 4.1 IFRS 1 First-time Adoption of International Financial Reporting Standards

          • 4.1.1 General principles

          • 4.1.2 Opening IFRS statement of financial position

          • 4.1.3 Estimates

          • 4.1.4 Transition process

          • 4.1.5 Main exemptions from applying IFRS in the opening IFRS statement of financial position

        • 4.2 Practical issues

          • 4.2.1 Financial reporting infrastructure

        • 4.3 Other implementation challenges

          • 4.3.1 More detailed rules

          • 4.3.2 Presentation

          • 4.3.3 Concepts and interpretation

          • 4.3.4 Choice of accounting treatment

          • 4.3.5 Inconsistency in recognition or measurement methods

          • 4.3.6 Timing and exemptions taken

          • 4.3.7 Subjectivity

      • 5 Progress towards global harmonisation

        • 5.1 Integration with national standard setters

        • 5.2 IASB liaison members

        • 5.3 Worldwide effect of IFRS and the IASB

          • 5.3.1 Europe

          • 5.3.2 Japan

          • 5.3.3 America

          • 5.3.4 Other

        • 5.4 Harmonisation in Europe

          • 5.4.1 The EC regulation

        • 5.5 IFRS in the USA

          • 5.5.1 Progress

          • 5.5.2 Rules-based versus principles-based approach

        • 5.6 UK Accounting Standards Board convergence approach

          • 5.6.1 Three standards

          • 5.6.2 Purpose

          • 5.6.3 Micro-entities

      • 6 Benefits of and barriers to global harmonisation

        • 6.1 Benefits of harmonisation

        • 6.2 Barriers to harmonisation

      • 7 IASB Work Plan

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 20 Reporting for specialised entities

      • Introduction

      • Study guide

      • Exam guide

      • 1 Specialised entities and the exam 12/07 – 12/15

        • 1.1 Examiner's approach

        • 1.2 Typical specialist entity questions

          • 1.2.1 An agricultural college

          • 1.2.2 A football club

        • 1.3 Other possibilities

        • 1.4 Section summary

      • 2 The not-for-profit sector: Primary aims

        • 2.1 Conceptual framework for not-for profit entities

        • 2.2 Accountability/stewardship

        • 2.3 Users and user groups

        • 2.4 Cash flow focus

        • 2.5 Budgeting

      • 3 The not-for-profit sector: Regulatory framework

        • 3.1 International public sector accounting standards

        • 3.2 Characteristics of not-for-profit entities

          • 3.2.1 Private sector

          • 3.2.2 Public sector

        • 3.3 Not-for-profit entities – specific issues

          • 3.3.1 Cost of transition

          • 3.3.2 Definition of a liability

        • 3.4 Charities

          • 3.4.1 Statement of financial activities

      • 4 The not-for-profit sector: Performance measurement

        • 4.1 Public sector entities

        • 4.2 Charities

      • 5 IAS 41 Agriculture

        • 5.1 Definitions

        • 5.2 Scope

        • 5.3 Biological assets

          • 5.3.1 Bearer biological assets

          • 5.3.2 Recognition of biological assets

          • 5.3.3 Measurement of biological assets

          • 5.3.4 Measuring fair value

          • 5.3.5 Recognition

          • 5.3.6 Presentation and disclosure

        • 5.4 Agricultural produce

          • 5.4.1 Measurement and presentation

        • 5.5 Government grants

        • 5.6 Section summary

      • 6 Entity reconstructions

        • 6.1 Background

        • 6.2 Going concern

        • 6.3 Internal reconstructions

          • 6.3.1 First example: Reconstruction scheme

          • 6.3.2 Accounting procedures for internal reconstructions

        • 6.4 External reconstructions

          • 6.4.1 Second example: Reconstruction scheme

        • 6.5 Transfer of assets to a new company

          • 6.5.1 Accounting procedures for a transfer to a new company

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

    • Chapter 21 Reporting for small and medium-sized entities

      • Introduction

      • Study guide

      • Exam guide

      • 1 Background 12/10

        • 1.1 Scope of IFRS

        • 1.2 Application

      • 2 Application of IFRS to smaller entities 12/10

        • 2.1 Big GAAP/little GAAP divide

        • 2.2 Possible solutions

        • 2.3 Differential reporting

        • 2.4 Exemptions from IFRS

          • 2.4.1 Cost of compliance

          • 2.4.2 Materiality

      • 3 International Financial Reporting Standard for Small and Medium-sized Entities 12/10

        • 3.1 Scope

        • 3.2 Effective date

        • 3.3 Accounting policies

        • 3.4 Overlap with full IFRS

        • 3.5 Omitted topics

        • 3.6 Examples of options in full IFRS not included in the IFRS for SMEs

        • 3.7 Initial comprehensive review of the IFRS for SMEs

        • 3.8 Principal recognition and measurement simplifications

      • 4 Consequences, good and bad 12/10

        • 4.1 Likely effect

        • 4.2 Advantages and disadvantages of the IFRS for SMEs

          • 4.2.1 Advantages

          • 4.2.2 Disadvantages

      • Chapter Roundup

      • Quick Quiz

      • Answers to Quick Quiz

  • Practice question and answer bank

    • Questions

      • 1 Conceptual Framework

      • 2 Fundamental principles

      • 3 Tree

      • 4 Camel Telecom 49 mins

      • 5 Acquirer 49 mins

      • 6 Investor 49 mins

      • 7 Radost 23 mins

      • 8 Clean 49 mins

      • 9 DT Group 49 mins

      • 10 PQR 20 mins

      • 11 Hedging

      • 12 Sirus (June 2008 Q3) 49 mins

      • 13 Able 49 mins

      • 14 Vident (June 2005 Q2) 49 mins

      • 15 Grow by acquisition

      • 16 Ace

      • 17 Highland 35 mins

      • 18 Armoury 20 mins

      • 19 Murder, Mystery and Suspense 35 mins

      • 20 Burley (December 2009 Q3) 49 mins

      • 21 Holmes & Deakin 43 mins

      • 22 Ghorse 49 mins

      • 23 Harvard 35 mins

      • 24 Porter 49 mins

      • 25 German competitor

      • 26 Public sector organisations

      • 27 Small and medium-sized entities 49 mins

      • 28 Peter Holdings

      • 29 Planet 49 mins

      • 30 Jay 98 mins

    • Answers

      • 1 Conceptual Framework

      • 2 Fundamental principles

      • 3 Tree

      • 4 Camel Telecom

      • 5 Acquirer

      • 6 Investor

      • 7 Radost

      • 8 Clean

      • 9 DT Group

      • 10 PQR

      • 11 Hedging

      • 12 Sirus

      • 13 Able

      • 14 Vident

      • 15 Grow by acquisition

      • 16 Ace

      • 17 Highland

      • 18 Armoury

      • 19 Murder, Mystery and Suspense

      • 20 Burley

      • 21 Holmes & Deakin

      • 22 Ghorse

      • 23 Harvard

      • 24 Porter

      • 25 German competitor

      • 26 Public sector organisations

      • 27 Small and medium-sized entities

      • 28 Peter Holdings

      • 29 Planet

      • 30 Jay

  • Mathematical tables

    • Present value table

    • Cumulative present value table

  • Index

  • Review Form

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