A 86045 Accounting and Financial Reporting 20172018 Session

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A 86045 Accounting and Financial Reporting (2017/2018) Session 1 Financial reporting under IFRS Paul

A 86045 Accounting and Financial Reporting (2017/2018) Session 1 Financial reporting under IFRS Paul G. Smith B. A. , F. C. A

COURSE OBJECTIVES AND OVERVIEW A 86045 Accounting and Financial Reporting 2

COURSE OBJECTIVES AND OVERVIEW A 86045 Accounting and Financial Reporting 2

Session 1 Overview Mins Course objectives and overview 15 The need for IFRS, their

Session 1 Overview Mins Course objectives and overview 15 The need for IFRS, their evolution, the IASs/IFRSs in force, the users of IFRS and link to the course 30 General requirements for financial statements, Linkages and presentation options 40 Class exercise on simple double entry basic bookkeeping 30 Required reading and research assignment 10 Summary, validation and overview of session 2 10 135 A 86045 Accounting and Financial Reporting 3

Course Objectives At the end of this course students will be able to: •

Course Objectives At the end of this course students will be able to: • Read and perform a high level interpretation of the financial statements of companies applying international accounting standards • Identify and evaluate the impact on a company’s accounts of alternative accounting methods/options • Carry out a high level assessment of the economic- financial position of a company reporting under IAS/IFRS. A 86045 Accounting and Financial Reporting 4

Course Overview 1. Financial reporting under IFRS 14. Construction contracts 2. Financial analysis: Ratio

Course Overview 1. Financial reporting under IFRS 14. Construction contracts 2. Financial analysis: Ratio analysis 15. Other Non-financial liabilities 3. Financial analysis: Segments and EPS 16. Review session 4. Review session 17. Mid term test 5. Revenues 18. Financial Instruments 1 PGS 6. Costs and expenses 7. Taxation - Direct and Indirect PT PGS 19. Financial Instruments 2 20. Review session 8. Non-current assets - Intangible assets 21. Cash Flow Statement 9. Non-current assets - Tangible assets 22. Group accounts/Business comb 10. Financial leases 23. Review session 11. Impairment of assets 24. Review session 12. Review session 25. Final test PT PGS 13. Inventories A 86045 Accounting and Financial Reporting 5

Reference materials Required Strongly recommended www. ifrs. org 20% student discount Paperback £ 48.

Reference materials Required Strongly recommended www. ifrs. org 20% student discount Paperback £ 48. 99 Part A Standards (IFRS/IAS) Interpretations (IFRIC/SIC) £ 75 (before student discount ) A 86045 Accounting and Financial Reporting 6

 Other reference materials Part B Basis for conclusions (BC) Illustrative examples (IE) Implementation

Other reference materials Part B Basis for conclusions (BC) Illustrative examples (IE) Implementation guidance (IG) Good Group Illustrative IFRS Financial Statements A 86045 Accounting and Financial Reporting 7

Teaching methods • • • Pre-reading Ground Rules Research 1. Be on time and

Teaching methods • • • Pre-reading Ground Rules Research 1. Be on time and don’t leave early Lecture 2. Mobiles and laptops off 3. Don’t come and go Discussion 4. Hand in assignments on time Exercises Assignments Memo - Rules Q&A Mid-term and final tests Please text or e-mail for an Office hour each week appointment beforehand A 86045 Accounting and Financial Reporting 8

SESSION 1 OBJECTIVES A 86045 Accounting and Financial Reporting 9

SESSION 1 OBJECTIVES A 86045 Accounting and Financial Reporting 9

Objectives of Session 1 At the end of this session students will be able

Objectives of Session 1 At the end of this session students will be able to: • Understand why there is a need for consistent international financial reporting • Be able to identify the international accounting standards currently in force • Know what the 5 components of financials statements required by IAS 1 are, the alternate presentations available for these and, understand the purpose of each of these • Understand how the financial statements interlink with each other. A 86045 Accounting and Financial Reporting 10

Evolution of Accounting Standards 1970 s 1980 s US FAS 16 UK SSAP 13

Evolution of Accounting Standards 1970 s 1980 s US FAS 16 UK SSAP 13 IAS 1 EU 1990 s SSAP 25 FRS 1 FRS 5 IAS 41 IFRS 16 IFRS Endorsed OIC High inflation Growth in capital markets 2010 FAS 168 Codification IV & VII Directives Self-regulated professions. Mainly national standards 2000 Hi-tech, Dotcom boom Private equity Globalization Internet A 86045 Accounting and Financial Reporting OIC 1 OIC 32 Financial engineering Financial Crash Regulation Governments search for revenues 11

 • • • • • The development of accounting standards– a response to

• • • • • The development of accounting standards– a response to the evolution of business Cash accounting Accruals accounting Mergers and acquisitions/Joint ventures International trade/Barter arrangements International stakeholders Inflation/hyperinflation Foreign investments/Operations/Cross-border acquisitions Investment incentives by Government Venture capital/Private Equity Diversification/Conglomerates Leasing Global Capital Markets/Corporate Finance Pensions and OPEBS Stock options Corporate failures/restructurings Financial instruments/Risk Management Multiple element arrangements Governments’ need for tax revenues Accounting scandals A 86045 Accounting and Financial Reporting Growing need for consistency and comparability for the various stakeholders of companies’: Performance Financial Position Cash Flows 12

Accounting Scandals Not to mention other recent scandals: • Rolls Royce • FIFA •

Accounting Scandals Not to mention other recent scandals: • Rolls Royce • FIFA • BT Italy • HBOS A 86045 Accounting and Financial Reporting 13

Users of IFRS - Stakeholder needs Stakeholder Needs Shareholders Stewardship of management, Returns Creditors

Users of IFRS - Stakeholder needs Stakeholder Needs Shareholders Stewardship of management, Returns Creditors Safe to sell to? Banks Safe to lend to? Need to recall loan? Customers Safe source of supply? Tax authorities Share of profits, Sales taxes Employees Profit sharing, job stability Management Bonus calculation Sales force Commissions Credit rating agencies Assign rating Potential investors Future prospects How do you think that you might need to use published financial statements in the future? A 86045 Accounting and Financial Reporting 14

Motives of Preparers Sole Trader Owner Manager Partnership 2 or more Owner Managers Private

Motives of Preparers Sole Trader Owner Manager Partnership 2 or more Owner Managers Private Limited Company Family Owned & Managed Public Limited Company Publicly Owned Board of Directors Managers Tax Income/Divi dends Stewardship ✔ ✔ ✔ ✔ ✔ Share Price ✔ A 86045 Accounting and Financial Reporting 15

What is GAAP? Standard setters G A A P • Legislators/Governments • Company Law

What is GAAP? Standard setters G A A P • Legislators/Governments • Company Law • EU • Accounting bodies • IASB • OIC • FASB • Stock Exchanges • CONSOB • SEC Generally Accepted Accounting Principles US GAAP UK GAAP Italian GAAP International GAAP Any Jurisdiction GAAP IFRS Required for all Public Interest Entities in the EU since 01. 2005. IFRS Allowed for Foreign Private Issuers in the US. A 86045 Accounting and Financial Reporting 16

The Current List of IAS and IFRS SM 1 Standard Date Issued Effective Date

The Current List of IAS and IFRS SM 1 Standard Date Issued Effective Date IFRS 1 IFRS 2 IFRS 3 IFRS 4 IFRS 5 IFRS 6 IFRS 7 IFRS 8 IFRS 9 IFRS 10 IFRS 11 IFRS 12 IFRS 13 IFRS 14 IFRS 15 IFRS 16 First-time adoption of International Financial Reporting Standards Share-Based Payment Business Combinations Insurance Contracts Non-current Assets Held for Sale and Discontinued Operations Exploration for and Evaluation of Mineral Resource Financial Instruments: Disclosures Operating Segments Financial Instruments Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement Regulatory Deferral Accounts Revenue from Contracts with Customers Leases Nov 2008 Feb 2004 Jan 2008 Dec 2005 Mar 2004 Dec 2004 Aug 2005 Nov 2006 Oct 2010 July 2014 May 2011 Jan 2014 May 2014 Jan 2016 From From From From From July 1 January 1 January 1 January 1 January 1 2009 2005 2006 2007 2009 2015 2018 2013 2016 2018 2019 IAS 1 IAS 2 IAS 3 IAS 4 IAS 5 IAS 6 IAS 7 IAS 8 IAS 9 IAS 10 IAS 11 IAS 12 IAS 13 IAS 14 IAS 15 IAS 16 IAS 17 IAS 18 IAS 19 IAS 20 IAS 21 IAS 22 IAS 23 IAS 24 IAS 25 IAS 26 IAS 27 IAS 28 IAS 29 IAS 30 IAS 31 IAS 32 IAS 33 IAS 34 IAS 35 IAS 36 IAS 37 IAS 38 IAS 39 IAS 40 IAS 41 Presentation of Financial Statements (Revised) Sep 2007 From Inventories Dec 2003 From Consolidated Financial Statements (Superseded by IAS 27 and 28) Depreciation Accounting (Replaced by IAS 16, 22 and 38) Information to be disclosed in Financial Statements (Replaced by IAS 1) Accounting Responses to Changing Prices (Superseded by IAS 15) Statement of Cash Flows Apr 2001 From Accounting Policies, Changes in Accounting Estimates and Errors Dec 2003 From Accounting for Research and Development Activities (Superseded by IAS 38) Events after the Reporting Period Dec 2003 From Construction Contracts (Will be superseded by IFRS 15) Apr 2001 From Income Taxes Apr 2001 From Presentation of Current Assets and Liabilities (Superseded by IAS 1) Segment Reporting (Superseded by IFRS 8) Information Reflecting the Effects of Changing Prices (Withdrawn in December 2003) Property, Plant and Equipment Dec 2003 From Leases (Will be superseded by IFRS 16) Dec 2003 From Revenue (Will be superseded by IFRS 15) Apr 2001 From Employee Benefits Jun 2011 From Accounting for Government grants and Disclosure of Government Assistance April 2001 From The Effects of Changes in Foreign Exchange Rates Dec 2003 From Business Combinations (Replaced by IFRS 3) Borrowing Costs Mar 2007 From Related Party Disclosures Nov 2009 From Accounting for Investments (Superseded by IAS 39 and 40) Accounting and Reporting by Retirement Benefit Plans Apr 2001 From Separate Financial Statements (Revised in 2008) May 2011 From Investments in Associates and Joint Ventures Dec 2003 From Financial Reporting in Hyperinflationary Economies Apr 2001 From Disclosures in Financial Statements of Banks and Similar Financial Institutions (Superseded by IFRS 7) Interests in Joint Ventures (Superseded by IFRS 11) Dec 2003 From Financial Instruments: Presentation Dec 2003 From Earnings per Share Dec 2003 From Interim Financial Reporting Apr 2001 From Discontinued Operations (Replaced by IFRS 5) Impairment of Assets Mar 2004 From Provisions, Contingent Liabilities and Contingent Assets Apr 2001 From Intangible Assets Mar 2004 From Financial Instruments: Recognition and Measurement Dec 2003 From Investment Property Dec 2003 From Agriculture Dec 2003 From January 1 2009 2005 January 1 1994 2005 January 1 2005 1998 January 1 January 1 2005 1995 2013 1984 2005 January 1 2009 2011 January 1 1988 2013 1990 January 1 2005 1999 March 31 July 1 March 31 January 1 2004 1999 2004 2005 2003 Replaced or superseded Under revision Early adoption possible Warning! Not all IASs and IFRSs have been endorsed by the EU. Latest position can be found at www. efrag. org A 86045 Accounting and Financial Reporting 17

What the ISAs and IFRSs Contain Objective Scope (What’s in/not in) Definitions Recognition, measurement,

What the ISAs and IFRSs Contain Objective Scope (What’s in/not in) Definitions Recognition, measurement, and subsequent accounting • Disclosures • Effective date • Transition provisions • • A 86045 Accounting and Financial Reporting 18

Link Between IFRS and Course Sessions Session Day Date Time 1 2 Monday Thursday

Link Between IFRS and Course Sessions Session Day Date Time 1 2 Monday Thursday 19 February 09. 00 - 12. 00 22 February 09. 00 - 11. 00 3 4 Monday Thursday 5 6 Hours Session Teacher Melville Chapter Primary IAS/IFRS 3 2 Financial reporting under IFRS Financial analysis: Ratio Analysis 26 February 09. 0 0 - 12. 00 1 March 09. 00 - 11. 00 3 2 Monday Thursday 5 March 8 March 09. 00 - 12. 00 09. 00 - 11. 00 7 8 Monday Thursday 12 March 15 March 9 10 11 Monday Tuesday Thursday 12 13 Paul Smith 1, 2, 3, 4, 8, 21, 22 IAS 1 Financial analysis: Segments and EPS Review session Paul Smith 23, 24 IFRS 8/IAS 33 3 2 Revenues Costs and expenses Paul Smith 13 14 IFRS 15 09. 00 - 12. 00 09. 00 - 11. 00 3 2 Taxation - Direct & Indirect Non-current assets - Intangible assets Paul Smith 15 6 IAS 12 IAS 38 IFRS 13 IFRS 6 19 March 20 March 22 March 09. 00 - 12. 00 09. 00 - 11. 00 3 2 2 Non-current assets -Tangible assets Financial leases Impairment of assets Paul Smith 5 9 7 IAS 16 IAS 17/IFRS 16 IAS 36 IFRS 13 IAS 23 Monday 26 March 09. 00 - 12. 00 3 Review session Paul Smith Thursday 5 April 10. 00 - 13. 00 3 Inventories Patrizia Tettamanzi 10 IAS 2 IFRS 13 14 15 16 Monday Tuesday Thursday 9 April 10 April 12 April 09. 00 - 12. 00 09. 00 - 11. 00 3 2 2 Construction Contracts Other Non-Financial Liabilities Review Session Paul Smith 10 12 IFRS 15 IAS 37 IFRS 13 IAS 19 17 Monday 16 April 11. 00 - 13. 00 Mid-term test Paul Smith 18 19 20 Monday Tuesday Thursday 23 April 24 April 26 April 09. 00 - 12. 00 09. 00 - 11. 00 3 2 2 Financial Instruments 1 Financial Instruments 2 Review session Paul Smith 11 11 IFRS 9 IFRS 13 IFRS 7 IAS 32 IAS 39 21 Wednesday 2 May 14. 00 - 17. 00 3 Cash flow statement Patrizia Tettamanzi 16 IAS 7 22 Thursday 17 May 10. 00 - 13. 00 3 Group accounts/Business Combinations Patrizia Tettamanzi 6, 17, 18, 19, 20 IFRS 10/IFRS 3 IFRS 11 IFRS 12 IAS 27 23 24 Tuesday Thursday 21 May 24 May 10. 00 - 13. 00 09. 00 - 13. 00 3 4 Review session Patrizia Tettamanzi 25 Monday 28 May 11. 00 - 13. 00 Final test Paul Smith IASs and IFRSs not addressed First time adoption Insurance contracts Regulatory deferral accounts Retirement benefit plans Agriculture IFRSs for SMEs 25 IFRS 1 IFRS 4 IFRS 14 IAS 26 IAS 41 60 SM 2 Additional relevant IASs/IFRSs IFRS 5 IFRS 8 IAS 8 IFRS 13 IFRS 2 IAS 19 IAS 10 IAS 21 IAS 28 IAS 29 IAS 40 IAS 24 IAS 34