Financial Statements AAT

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What is the formula for asset turnover?
Revenue/Total Equity + Non current liabilities
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What is the formula for return on shareholders funds?
Profit after tax/ Total Equity x 100
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What is the formula for interest cover?
Profit from operations/ finance costs
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What is the formula for ROCE?
Profit from operations/ Total equity + non current liabilities
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What is an adjusting event?
Any event which provides additional information about a condition that existed at the end of the reporting period.
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What is a non-adjusting event?
Any event which is indicative of conditions arising after the end of the reporting period.
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What is the formula for inventory holding period?
Inventories/ cost of sales x 365
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What are the advantages of using a principle based approach?
As there are no individual scenarios it is less likely to go out of date/ An individual must use their judgement rather than following a tick box exercise.
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What is the objective of financial statements?
Provide financial information about the reporting entitys assets, liabilities , equity, income and expenses that is useful to users.
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What is fair value?
This is the price that would be received to sell an asset in an ordinary arms-length transaction.
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What is the double entry for Bonus shares?
Dr Share Premium account, CR Share Capital
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What is the cost model?
Asset is carried at cost less accumulated depreciation
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What is the revaluation model?
Asset is carried at fair value less any subsequent accumulated depreciation
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When should an asset be derognised?
When it is disposed of/ When no future economic benefits are expected from its use or disposal
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What are the conditions to meet an intangible asset?
It is probable that the expected future economic benefits attributed to the asset will flow to the entity/ The cost of the asset can be measured reliably.
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What is carrying amount?
This is the amount at which an asset is recognised after the deduction of depreciation or amortisation.
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What is an impairment loss?
This is the amount by which the carrying amount of an asset exceeds its recoverable amount.
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What is a recoverable amount?
This is the value of an asset and is calculated as the higher of the value in use and its fair value less costs to sell.
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What is inventory?
They are assets held for sale or use in the ordinary course of business e.g. raw materials, work in progress, finished goods.
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What is a provision?
A provision is a liability of uncertain timing or amount.
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What is a contingent liability?
A possible obligation arising from past events whose existence will be confirmed only by the occurence of one or more uncertain future events. Less than 50%. Disclosure required.
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What is the 5 stage process for recognising revenue?
1- Identify contract with customer. 2- Identify seperate performance obligations. 3- Determine transaction price 4- Allocate transaction price 5- Recognise revenue as each performance obligation is satisfied.
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What are the limitations of ratio analysis?
Window dressing/ Historical information/ Comparison to other companies/ Non Financial information/ Markets and size/ Number of ways to calculate.
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What are the 5 stages of the standard setting process?
1- Topic identified. 2- Topic is discussed and working group is set up. 3- Discussion paper is issued for public comment. 4-An exposure draft is issued for public comment. 5-IASB consultation.
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What are examples of expenses by Nature and by function?
Nature- Rent/interest
/wages/salaries. Function- Cost of sales/distribution costs/admin expenses
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Define Verifiability?
Verifiability helps to assure users that information represents faithfully the economic reality of the transaction. It means different knowledgable observers could reach an agreement.
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What is the cost constraint on useful information?
The cost of collecting, processing, verifying and reporting the information needs to be weighed against the benefits to the users.
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Define Understandability?
Presenting information clearly and concisely will make it understandable. Some transactions are complex but excluding such information would make reports incomplete and potentially misleading.
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Define Income?
Income- Increases in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims.
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Define Expenses?
Decreases in assets, or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims.
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What headings come under Goodwill? (Consolidated SOFP)
-Consideration Transferred -NCI @ Date of Acqusition (Multiply by remaining small %) - (Less net assets acquired) -Share Capital (S) - Retained Earnings (S-Before YE) - Impairment = Goodwill carried forward
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What headings come under NCI? Year end Figures remember (Consolidated SFP)
- Share Capital x (S-small %) -Retained Earnings x (S-small %) =Non Controlling Interest
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What headings come under Retained Earnings? (Consolidated SFP)
-Retained Earnings (P) -Share Post acqusition (Increase in retained earnings of S X P%) -Less Goodwill impairment losses = Consolidated retained earnings
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Give examples of a non-adjusting event?
- Destruction of assets by a fire - Announcing a plan to discontinue an operation - Major ordinary share transactions - Dividends declared after the SFP Date
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What are the advantages of using a principle based approach to decision making?
- When following a principle it is harder to avoid the requirements ie. harder to find loopholes. -The spirit of the regulation can be followed when there is no specific accounting treatment.
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What is the role of the IFRS Advisory council?
They take recommendations from individuals, corporations , auditors and national standard setters and provide advice to the IASB on priority areas of accounting.
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What is the role of the IFRS Interpretations committee?
Reports to the IASB with interpretations of IFRSs and in the context of the framework, provides guidance on financial reporting issues not specifically addressed by IFRS's.
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When revaluing property plant and equipment, IAS 16 require which of the following?
-The entire class of assets should be revalued
-If the revaluation results in a decrease the decrease should initially be debited to the revaluation reserve and then to the profit and loss account
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According to IFRS 16, Leasing, which of the following would allow you to expense lease payments?
-The lease is for less than 12 months.
-The lease is for a low value asset.
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Other cards in this set

Card 2

Front

What is the formula for return on shareholders funds?

Back

Profit after tax/ Total Equity x 100

Card 3

Front

What is the formula for interest cover?

Back

Preview of the front of card 3

Card 4

Front

What is the formula for ROCE?

Back

Preview of the front of card 4

Card 5

Front

What is an adjusting event?

Back

Preview of the front of card 5
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