Accountancy Tuition Centre (International Holdings) Ltd 2008 (i)
ACCA Professional Diploma in
International Financial Reporting
Accountancy Tuition Centre (International Holdings) Ltd 2008 (ii)
Typesetting by Jana Korcakova Printed in Romania by Rom Team Solutions, Srl Accountancy Tuition Centre (International Holdings) Ltd 2008 (iii)
ACCA Professional Diploma in International Financial Reporting
Technical Editor Phil Bradbury
Accountancy Tuition Centre (International Holdings) Limited 16 Elmtree Road Teddington TW11 8ST Telephone: +44 (0)208 943 1596 E-mail: diploma@atc-global.com Internet: http://www.atc-global.com Accountancy Tuition Centre (International Holdings) Ltd 2008 (iv) No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author, editor or publisher.
This training material has been published and prepared by Accountancy Tuition Centre (International Holdings) Limited
16 Elmtree Road Teddington TW11 8ST United Kingdom.
Editorial material Copyright Accountancy Tuition Centre (International Holdings) Limited, 2008. All other material copyright as credited. ISBN for complete set of 3 volumes: 1 903632 27 7. 4 th edition (1 903632 19 6. 3 rd edition)
ISBN for this volume: 1 903632 28 5. 4 th edition (1 903632 20 8. 3 rd edition)
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IASCF Copyright and Acknowledgement
International Financial Reporting Standards, International Accounting Standards, Interpretations, Exposure Drafts, and other IASB publications are copyright of the International Accounting Standards Committee Foundation. The approved text of International Financial Reporting Standards, International Accounting Standards and Interpretations is that published by the IASB in the English language. Copies may be obtained direct from IASB. Please address publications and copyright matters to:
All rights reserved. No part of IASBs publications 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 IASCF.
The various extracts of International Financial Reporting Standards or International Accounting Standards in this training material, are reproduced by the publisher, ATC (International Holdings) Ltd with the permission of IASCF.
IAS, IASB, IASC, IASCF, IASs, IFRIC, IFRS, International Accounting Standards, International Financial Reporting Standards and SIC are Trade Marks of the IASCF.
IASBs 2008 Bound Volume International Financial Reporting Standards contains the full text of all International Financial Reporting Standards including International Accounting Standards and Interpretations as at 1 January 2008 (ISBN 978-1-905590-54-4), price 60 each.
SYLLABUS Accountancy Tuition Centre (International Holdings) Ltd 2008 (v) Introduction This Study System is the Association of Chartered Certified Accountants Approved Study material specifically written for the Professional Diploma in International Financial Reporting. Together with the Question Bank, it provides comprehensive coverage of the syllabus and is designed to be used both as a reference text and interactively with the ATC Learning System, providing you with the knowledge, skill and confidence to succeed in your Diploma studies. Syllabus Aim To provide qualified accountants or graduates, possessing relevant country specific qualifications or work experience with an up to date and relevant conversion course, providing a practical and detailed knowledge of the key international financial reporting standards and how they are interpreted and applied. Objectives On completion of the Diploma candidates should be able to: Understand and explain the structure of the international conceptual framework of accounting. Apply relevant financial reporting standards to key elements of financial reports. Identify and apply disclosure requirements for companies relating to the presentation of financial reports and notes. Prepare financial statements of single entities and account for their key elements complying with specified International Financial Reporting Standards and other related pronouncements. Prepare group financial statements (excluding group cash flow statements) including subsidiaries, associates, and joint ventures. Position within the portfolio of ACCA's qualification framework Dip IFR builds on the technical and/or practical knowledge acquired from recognised country specific accountancy qualifications or relevant work experience. The course introduces the candidate to the wider international framework of accounting and the system of standard setting. This conversion course concentrates on the application of conceptual and technical financial accounting knowledge that candidates have already obtained to the specific requirements of financial reporting under international professional regulation and standards. Dip IFR also provides essential international financial reporting knowledge and principles that will prepare candidates for the increasingly global market place and keep them abreast of international developments and how they might apply to the companies and businesses. The prerequisite knowledge for Dip IFR can come from: membership of a recognised professional accountancy body; or possessing a relevant degree (giving exemptions from F1 F4 of ACCAs Professional Scheme) and two years accounting experience; or having three years full-time relevant accounting experience, supported by an employers covering letter. SYLLABUS Accountancy Tuition Centre (International Holdings) Ltd 2008 (vi) Syllabus content 1 International sources of authority a The structure of the International Accounting Standards Board (IASB) b The standard setting process c The role of the International Financial Reporting Interpretations Committee (IFRIC) d Progress towards international harmonisation e The IASBs Framework for the Preparation and Presentation of Financial Statements f The first-time adoption of international financial reporting standards. 2 Elements of financial statements a Property plant and equipment b Intangible assets c Goodwill d Current assets including inventories e Construction contracts f Liabilities g Financial instruments h Provisions and contingencies i. Employment and post-employment benefits j Current and deferred tax k Biological assets and agricultural produce l Share-based payment m Exploration and evaluation expenditures. 3 Presentation and additional disclosures a Events after the reporting period b Earnings per share c Related party disclosures d Interim financial reporting e Effects of changes in foreign exchange rates f Operating segments. 4 Preparation of external financial reports for single entities a Statement of comprehensive income and discontinued operations b Statement of cash flows c Statement of changes in equity. SYLLABUS Accountancy Tuition Centre (International Holdings) Ltd 2008 (vii) 5 Preparation of external financial reports for combined entities and joint ventures a Definitions of subsidiaries, investments in associates and joint ventures b Preparation of consolidated statement of financial position and statement of comprehensive income c Equity accounting d Proportionate consolidation and joint ventures. Excluded topics The following topics are specifically excluded from the syllabus: Partnership and branch financial statements Complex group structures including sub-subsidiaries or mixed groups and foreign subsidiaries Piece-meal acquisitions, disposal of subsidiaries and group reconstructions Financial statements of banks and similar financial institutions Accounting and reporting by retirement benefit plans Information reflecting the effects of changing prices and financial reporting in hyperinflationary economies Multi-employer pension schemes Share-based payment transactions with cash alternatives Accounting for insurance entities Group cash flows Schemes of reorganisation/reconstruction Company/share valuation International Financial Reporting Standard Exposure Drafts and Discussion Papers The international public sector perspective. Key areas of the syllabus The key topic area headings are as follows: International sources of authority Elements of financial statements Presentation of accounts and additional disclosures Preparation of external financial reports of single entities Preparation of external reports for combined entities and joint ventures. SYLLABUS Accountancy Tuition Centre (International Holdings) Ltd 2008 (viii) Approach to examining the syllabus The examination is a three-hour paper in two sections. It will contain a mix of computational and discursive elements. Some questions will adopt a scenario/case study approach. Section A comprises a compulsory question requiring the preparation of consolidated group financial statements, and may include a related discussion element. Section B comprises four questions from which the candidate is required to answer three. Computations will be designed to test an understanding of principles. At least one of the optional questions in Section B will be a conceptual/discursive question that may include illustrative numerical calculations. An individual question may often involve elements that relate to different areas of the syllabus. For example a question on the preparation of financial statements for public issue could include elements relating to several accounting standards. In scenario questions candidates may be expected to comment on managements chosen accounting treatment and determine a more appropriate one, based on circumstances described in the question. Some International Financial Reporting Standards are very detailed and complex. In the Dip IFR exam candidates need to be aware of the principles and key elements of these Standards. Candidates will also be expected to have an appreciation of the background and need for international accounting standards and issues related to harmonisation of accounting in a global context. Examination structure Number of marks Section A: 1 compulsory question 25 Section B: Choice of 3 from 4 questions (25 marks each) 75
_____ 100
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For all three hour examination papers, ACCA has introduced 15 minutes reading and planning time. This additional time is allowed at the beginning of each three-hour examination to allow candidates to read the questions and to begin planning their answers before they start writing in their answer books. This time should be used to ensure that all the information and exam requirements are properly read and understood. During reading and planning time candidates may only annotate their question paper. They may not write anything in their answer booklets until told to do so by the invigilator. Additional information Candidates need to be aware that questions involving knowledge of new examinable regulations will not be set until at least six months after the last day of the month in which the regulation was issued. SYLLABUS Accountancy Tuition Centre (International Holdings) Ltd 2008 (ix) Examinable documents Session Conceptual framework reference Framework for the Preparation and Presentation of Financial Statements 2 International Financial Reporting Standards IAS 1 Presentation of Financial Statements 3 IAS 2 Inventories 7 IAS 7 Statement of Cash Flows 30 IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 4 IAS 10 Events After the Reporting Period 33 IAS 11 Construction Contracts 6 IAS 12 Income Taxes 20 IAS 16 Property, Plant and Equipment 8 IAS 17 Leases 11 IAS 18 Revenue 5 IAS 19 Employee Benefits 18 IAS 20 Accounting for Government Grants and Disclosure of Government Assistance 9 IAS 21 The Effects of Changes in Foreign Exchange Rates 28 IAS 23 Borrowing Costs 10 IAS 24 Related Party Disclosures 34 IAS 27 Consolidated and Separate Financial Statements 22 IAS 28 Investments in Associates 26 IAS 31 Interests In Joint Ventures 27 IAS 32 Financial Instruments: Presentation 21 IAS 33 Earnings Per Share 29 IAS 34 Interim Financial Reporting 35 IAS 36 Impairment of Assets 15 IAS 37 Provisions, Contingent Liabilities and Contingent Assets 17 IAS 38 Intangible Assets 12 IAS 39 Financial Instruments: Recognition and Measurement 21 IAS 40 Investment Property 13 IAS 41 Agriculture 14 SYLLABUS Accountancy Tuition Centre (International Holdings) Ltd 2008 (x) Session International Financial Reporting Standards (continued) reference IFRS 1 First-Time Adoption of International Financial Reporting Standards 36 IFRS 2 Share-based Payment 19 IFRS 3 Business Combinations 22 25 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations 32 IFRS 6 Exploration for and Evaluation of Mineral Resources 16 IFRS 7 Financial Instruments: Disclosure 21 IFRS 8 Operating Segments 31 SIC Interpretations SIC-10: Government Assistance No Specific Relation to Operating Activities 9 SIC-12: Consolidation Special Purpose Entities 22 SIC-15: Operating Leases Incentives 11 SIC-31: Revenue Barter Transactions Involving Advertising Services 5 SIC-32: Intangible Assets Web Site Costs 12 IFRIC Interpretations IFRIC-1: Changes in Existing Decommissioning, Restoration and Similar Liabilities 17 IFRIC-5: Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds 17 IFRIC-10: Interim Financial Reporting and Impairment 35 IFRIC-11: IFRS 2 Group and Treasury Share Transactions 19 IFRIC-12: Service Concession Arrangements 5 IFRIC-13: Customer Loyalty Programmes 5
Examinable documents are also listed in the Exam Notes section of student accountant available on http://www.accaglobal.com/students/dipifr/examinabledocs.pdf.
CONTENTS Accountancy Tuition Centre (International Holdings) Ltd 2008 (xi) Session Page Introduction 1 Introduction to International Financial Reporting Standards 0101 2 Framework for the Preparation and Presentation of Financial Statements 0201 3 IAS 1 Presentation of Financial Statements 0301 4 IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 0401 Income 5 IAS 18 Revenue 0501 6 IAS 11 Construction Contracts 0601 Assets 7 IAS 2 Inventories 0701 8 IAS 16 Property, Plant and Equipment 0801 9 IAS 20 Accounting for Government Grants and Disclosure of Government Assistance 0901 10 IAS 23 Borrowing Costs 1001 11 IAS 17 Leases 1101 12 IAS 38 Intangible Assets 1201 13 IAS 40 Investment Properties 1301 14 IAS 41 Agriculture 1401 15 IAS 36 Impairment of Assets 1501 16 IFRS 6 Exploration for and Evaluation of Mineral Resources 1601 CONTENTS Accountancy Tuition Centre (International Holdings) Ltd 2008 (xii) Session Page Liabilities 17 IAS 37 Provisions, Contingent Liabilities and Contingent Assets 1701 18 IAS 19 Employee Benefits 1801 19 IFRS 2 Share-based Payments 1901 20 IAS 12 Income Taxes 2001 21 Financial Instruments 2101 Group accounts 22 Regulatory framework 2201 23 Consolidated statement of financial position 2301 24 Further adjustments 2401 25 Consolidated statement of comprehensive income 2501 26 IAS 28 Investments in Associates 2601 27 IAS 31 Interests in Joint Ventures 2701 28 IAS 21 The Effects of Changes in Foreign Exchange Rates 2801 Disclosure and analysis 29 IAS 33 Earnings Per Share 2901 30 IAS 7 Statement of Cash Flows 3001 31 IFRS 8 Operating Segments 3101 32 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations 3201 33 IAS 10 Events After the Reporting Period 3301 34 IAS 24 Related Party Disclosure 3401 35 IAS 34 Interim Financial Reporting 3501 36 IFRS 1 First-time Adoption of International Financial Reporting Standards 3601 Index 3701