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CR – May 2023 – L3 – Q5b – Presentation of Financial Statements (IAS 1)

Discuss the importance of optimal disclosure and barriers to reducing excessive disclosures in annual reports.

There have been various arguments globally about the extent of disclosures in the annual reports of companies. Some argue that annual reports should include more extensive disclosures, while others believe that efforts should focus on reducing the quantity of information to avoid overwhelming users of financial statements.

The latter perspective suggests that excessive disclosure is burdensome and may obscure key information. Conversely, some argue that there is no such thing as providing too much useful information to users of financial statements.

Required:

Discuss why it is important to ensure that an optimal level of disclosure is made in annual reports. Also, identify and explain the barriers that may exist when trying to reduce excessive disclosure of information in an annual report. (7 Marks)

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CR – May 2023 – L3 – Q1b – Financial Instruments (IFRS 9, IAS 32, IAS 39)

Discuss IFRS 9 rules on derecognition of financial assets, apply these rules to factoring, and analyze ethical implications of falsifying a land sale.

The directors of Omi PLC reviewed the group statement of financial position as of November 30, 2020. Concerned about meeting future loan agreements, they proposed the following actions to improve liquidity:

  1. Factoring of Receivables:
    • Factoring N400 million of receivables.
    • 80% cash is received immediately (N320 million), and the factoring company charges N32 million.
    • The balance will be paid 30 days later.
  2. Adjusting Financial Statements:
    • The executive director suggested falsifying financial statements to show that land located in Ikoyi was sold before year-end to improve liquidity.

Required:

  • Discuss the rules of IFRS 9 – Financial Instrument on derecognition of financial assets.
  • Apply these rules to factoring in part (1).
  • Discuss the ethical implications of falsifying the sale of land in part (2).

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FR – Nov 2023 – L2 – Q7b – Presentation of Financial Statements (IAS 1)

Lists minimum line items for the statement of financial position and changes in equity as per IAS 1

IAS 1- Presentation of Financial Statements provides a list of line items that, as a minimum, must be shown on the face of the statement of financial position.

Required:

i. Give FIVE examples of minimum line items to be shown on the face of the statement of financial position. (5 Marks)
ii. State FIVE items that should be accounted for in the statement of changes in equity. (5 Marks)

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FR – Nov 2014 – L2 – Q4a – Presentation of Financial Statements

Explain the essential characteristics of assets and features of liabilities per IAS 1.

The International Financial Reporting Standards (IFRS) through the International Accounting Standards Board (IASB) set out the definition and essential characteristics of assets and liabilities in the presentation of financial statements, which users of the statements are likely to rely on when making major economic decisions.

Required:

Identify the essential characteristics of assets and comment on the features of liabilities in accordance with provisions of IAS 1 on the presentation of financial statements. (10 Marks)

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FR – Nov 2019 – L2 – Q1b – Presentation of Financial Statements (IAS 1)

Prepare financial statements for Uchena Nigeria Plc, including profit or loss, changes in equity, and financial position.

The Chief Accountant of Uchena Nigeria plc has just forwarded the trial balance of the company to you for review before the preparation of draft financial statements for the year ended December 31, 2018.

The trial balance is as follows:

Description Debit (N’m) Credit (N’m)
Ordinary share capital 43,200
Revenue 125,280
Staff cost 18,720
Leasehold building 21,600
Patent rights 4,320
Work-in-progress (Jan 1, 2018) 9,000
Accum. Depreciation on building (Jan 1, 2018) 4,320
Inventories of finished goods (Jan 1, 2018) 11,160
Consultancy fee 3,168
Directors’ salaries 25,920
Computer at cost (Hardware) 3,600
Accum. Depreciation on computer (Jan 1, 2018) 1,440
Retained earnings (Jan 1, 2018) 8,712
Dividend paid 9,000
Cash and bank 31,680
Trade receivables 30,240
Trade payables 6,624
Sundry expenses 21,168
Totals 189,576 189,576

Additional information:

  1. On January 1, 2018, buildings were revalued to N25,920 million. This has not been reflected in the accounts.
  2. Computer (hardware) is depreciated over five years. Buildings are now to be depreciated over 30 years.
  3. The patent rights relate to a computer software with a 3-year life span.
  4. An allowance for bad debts of 5% is to be created.
  5. Closing inventories of finished goods are valued at N12,960 million. Work-in-progress has increased to N10,080 million.
  6. There is an estimated liability for current tax of N8,640 million, which has not been recognized.

Required:

  1. Prepare a draft statement of profit or loss (analyzing expenses by nature) for the year ended December 31, 2018. (6 Marks)
  2. Prepare a statement of changes in equity for the year ended December 31, 2018. (4 Marks)
  3. Prepare a statement of financial position as at December 31, 2018. (6 Marks)

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FR – Nov 2020 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Prepare the Statement of Profit or Loss and Other Comprehensive Income for Gbenga Nigeria Plc based on provided trial balance.

Gbenga Nigeria Plc trial balance as at December 31, 2019 is shown below:

Item N’000 N’000
Revenue 2,290,125
Administrative expenses 237,150
Selling and distribution expenses 175,200
Legal and professional expenses 81,150
Allowance for receivables 8,625
Inventories – finished goods – 31/12/18 276,750
Work-in-progress – 31/12/18 49,125
Inventories – raw materials at cost – 31/12/18 162,600
Purchases – raw materials 1,125,900
Carriage inwards – raw materials 15,750
Manufacturing wages 375,000
Manufacturing overheads 187,500
Authorised and issued 900,000 ordinary shares of 50 kobo each fully paid 450,000
150,000 8.4% cumulative preference shares of N1 each fully paid 150,000
Revaluation surplus 65,000
Share premium 150,000
General reserve 85,000
Retained earnings – 31/12/18 425,250
Patents and trademarks 323,250
Motor vehicle at cost 112,500
Freehold property at cost 375,000
Leasehold property at cost 112,500
Plant and equipment at cost 225,000
Furniture and fittings at cost 75,000
Amortisation of leasehold property – 31/12/18 22,500
Accumulated depreciation @ 31/12/2018:
– Plant and equipment 102,750
– Furniture and fittings 23,625
– Motor vehicles 37,500
10% loan notes 150,000
Trade payables 146,250
Trade receivables 266,445
Bank overdraft 76,875
Cash 7,680
4,183,500 4,183,500

Additional information:
(i) A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
(ii) Inventories at December 31, 2019 were:

  • Raw materials: N168,900
  • Finished goods: N413,025
  • Work-in-progress: N56,700

(iii) Legal and professional expenses include solicitor’s fees for purchase of new freehold land during the year of N7,500.
(iv) Provision is to be made for full year’s interest on the loan notes.
(v) The leasehold land and buildings are held on a 50-year lease, with 40 years unexpired life left as at the end of December 31, 2018.
(vi) Depreciation for the year is to be charged as follows:

  • Plant and equipment 8% on cost – charged to production
  • Furniture and fittings 10% on cost – charged to administration
  • Motor vehicles 20% on carrying amount – charged 25% to administration and 75% to selling and distribution.

(vii) Income tax on the profit for the year is estimated at N68,900 and is due for payment on February 28, 2020.

Required:
Prepare the statement of profit or loss and other comprehensive income for the year ended December 31, 2019.

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FA – Nov 2020 – L1 – SB – Q2 -Accounting Concepts (e.g., Going Concern, Accruals, Materiality)

Explain accounting concepts, provide examples, and list users of financial statements.

a. Explain the term ‘accounting concepts’. (2 Marks)

b. With particular reference to the accounting treatments, explain the following accounting concepts:
i. Entity (2 Marks)
ii. Going concern (2 Marks)
iii. Accrual (2 Marks)
iv. Materiality and aggregation (2 Marks)
v. Consistency (2 Marks)

c. In accordance with IAS 1 – Presentation of Financial Statements, highlight six qualitative characteristics of general-purpose financial statements. (4 Marks)

d. Financial statements provide information to users, and each user’s information requirement is not always the same.

Required:
Using the table below and the example provided, list four users of financial statements and their information needs.

S/N Users Information Needs
1 Employees Wage negotiation and determination of job security
2
3
4

(Total: 20 Marks)

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FA – Nov 2020 – L1 – SA – Q13 – Elements of Financial Statements

Identifies a component that is not part of the financial statements as defined by IAS 1.

Which of the following is NOT a component of financial statements under IAS 1?
A. Statement of financial position
B. Statement of profit or loss and other comprehensive income
C. Statement of equity
D. Statement of changes in equity
E. Statement of cash flows

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FA – Nov 2021 – L1 – SA – Q10 – Financial Statement

This question tests the knowledge of the components of financial statements as per IAS 1.

In accordance with IAS 1-Presentation of Financial Statements, which of the following is NOT a component of financial statements?
A. Statement of financial position
B. Statement of profit or loss and other comprehensive income
C. Statement of changes in equity
D. Statement of affairs
E. Statement of cashflows

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FA – May 2022 – L1 – SB – Q6b – Elements of Financial Statements

Define an asset, explain the conditions for current assets, and provide examples of current and non-current assets.

An important requirement of IAS 1 with regard to the financial statements is that current and non-current assets should be separately disclosed.

i. Define the term “asset.” (2 Marks)
ii. What are the conditions to be satisfied for an asset to be termed a current asset? (6 Marks)
iii. State TWO examples each of current and non-current assets. (2 Marks)

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CR – May 2023 – L3 – Q5b – Presentation of Financial Statements (IAS 1)

Discuss the importance of optimal disclosure and barriers to reducing excessive disclosures in annual reports.

There have been various arguments globally about the extent of disclosures in the annual reports of companies. Some argue that annual reports should include more extensive disclosures, while others believe that efforts should focus on reducing the quantity of information to avoid overwhelming users of financial statements.

The latter perspective suggests that excessive disclosure is burdensome and may obscure key information. Conversely, some argue that there is no such thing as providing too much useful information to users of financial statements.

Required:

Discuss why it is important to ensure that an optimal level of disclosure is made in annual reports. Also, identify and explain the barriers that may exist when trying to reduce excessive disclosure of information in an annual report. (7 Marks)

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CR – May 2023 – L3 – Q1b – Financial Instruments (IFRS 9, IAS 32, IAS 39)

Discuss IFRS 9 rules on derecognition of financial assets, apply these rules to factoring, and analyze ethical implications of falsifying a land sale.

The directors of Omi PLC reviewed the group statement of financial position as of November 30, 2020. Concerned about meeting future loan agreements, they proposed the following actions to improve liquidity:

  1. Factoring of Receivables:
    • Factoring N400 million of receivables.
    • 80% cash is received immediately (N320 million), and the factoring company charges N32 million.
    • The balance will be paid 30 days later.
  2. Adjusting Financial Statements:
    • The executive director suggested falsifying financial statements to show that land located in Ikoyi was sold before year-end to improve liquidity.

Required:

  • Discuss the rules of IFRS 9 – Financial Instrument on derecognition of financial assets.
  • Apply these rules to factoring in part (1).
  • Discuss the ethical implications of falsifying the sale of land in part (2).

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FR – Nov 2023 – L2 – Q7b – Presentation of Financial Statements (IAS 1)

Lists minimum line items for the statement of financial position and changes in equity as per IAS 1

IAS 1- Presentation of Financial Statements provides a list of line items that, as a minimum, must be shown on the face of the statement of financial position.

Required:

i. Give FIVE examples of minimum line items to be shown on the face of the statement of financial position. (5 Marks)
ii. State FIVE items that should be accounted for in the statement of changes in equity. (5 Marks)

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FR – Nov 2014 – L2 – Q4a – Presentation of Financial Statements

Explain the essential characteristics of assets and features of liabilities per IAS 1.

The International Financial Reporting Standards (IFRS) through the International Accounting Standards Board (IASB) set out the definition and essential characteristics of assets and liabilities in the presentation of financial statements, which users of the statements are likely to rely on when making major economic decisions.

Required:

Identify the essential characteristics of assets and comment on the features of liabilities in accordance with provisions of IAS 1 on the presentation of financial statements. (10 Marks)

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FR – Nov 2019 – L2 – Q1b – Presentation of Financial Statements (IAS 1)

Prepare financial statements for Uchena Nigeria Plc, including profit or loss, changes in equity, and financial position.

The Chief Accountant of Uchena Nigeria plc has just forwarded the trial balance of the company to you for review before the preparation of draft financial statements for the year ended December 31, 2018.

The trial balance is as follows:

Description Debit (N’m) Credit (N’m)
Ordinary share capital 43,200
Revenue 125,280
Staff cost 18,720
Leasehold building 21,600
Patent rights 4,320
Work-in-progress (Jan 1, 2018) 9,000
Accum. Depreciation on building (Jan 1, 2018) 4,320
Inventories of finished goods (Jan 1, 2018) 11,160
Consultancy fee 3,168
Directors’ salaries 25,920
Computer at cost (Hardware) 3,600
Accum. Depreciation on computer (Jan 1, 2018) 1,440
Retained earnings (Jan 1, 2018) 8,712
Dividend paid 9,000
Cash and bank 31,680
Trade receivables 30,240
Trade payables 6,624
Sundry expenses 21,168
Totals 189,576 189,576

Additional information:

  1. On January 1, 2018, buildings were revalued to N25,920 million. This has not been reflected in the accounts.
  2. Computer (hardware) is depreciated over five years. Buildings are now to be depreciated over 30 years.
  3. The patent rights relate to a computer software with a 3-year life span.
  4. An allowance for bad debts of 5% is to be created.
  5. Closing inventories of finished goods are valued at N12,960 million. Work-in-progress has increased to N10,080 million.
  6. There is an estimated liability for current tax of N8,640 million, which has not been recognized.

Required:

  1. Prepare a draft statement of profit or loss (analyzing expenses by nature) for the year ended December 31, 2018. (6 Marks)
  2. Prepare a statement of changes in equity for the year ended December 31, 2018. (4 Marks)
  3. Prepare a statement of financial position as at December 31, 2018. (6 Marks)

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FR – Nov 2020 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Prepare the Statement of Profit or Loss and Other Comprehensive Income for Gbenga Nigeria Plc based on provided trial balance.

Gbenga Nigeria Plc trial balance as at December 31, 2019 is shown below:

Item N’000 N’000
Revenue 2,290,125
Administrative expenses 237,150
Selling and distribution expenses 175,200
Legal and professional expenses 81,150
Allowance for receivables 8,625
Inventories – finished goods – 31/12/18 276,750
Work-in-progress – 31/12/18 49,125
Inventories – raw materials at cost – 31/12/18 162,600
Purchases – raw materials 1,125,900
Carriage inwards – raw materials 15,750
Manufacturing wages 375,000
Manufacturing overheads 187,500
Authorised and issued 900,000 ordinary shares of 50 kobo each fully paid 450,000
150,000 8.4% cumulative preference shares of N1 each fully paid 150,000
Revaluation surplus 65,000
Share premium 150,000
General reserve 85,000
Retained earnings – 31/12/18 425,250
Patents and trademarks 323,250
Motor vehicle at cost 112,500
Freehold property at cost 375,000
Leasehold property at cost 112,500
Plant and equipment at cost 225,000
Furniture and fittings at cost 75,000
Amortisation of leasehold property – 31/12/18 22,500
Accumulated depreciation @ 31/12/2018:
– Plant and equipment 102,750
– Furniture and fittings 23,625
– Motor vehicles 37,500
10% loan notes 150,000
Trade payables 146,250
Trade receivables 266,445
Bank overdraft 76,875
Cash 7,680
4,183,500 4,183,500

Additional information:
(i) A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
(ii) Inventories at December 31, 2019 were:

  • Raw materials: N168,900
  • Finished goods: N413,025
  • Work-in-progress: N56,700

(iii) Legal and professional expenses include solicitor’s fees for purchase of new freehold land during the year of N7,500.
(iv) Provision is to be made for full year’s interest on the loan notes.
(v) The leasehold land and buildings are held on a 50-year lease, with 40 years unexpired life left as at the end of December 31, 2018.
(vi) Depreciation for the year is to be charged as follows:

  • Plant and equipment 8% on cost – charged to production
  • Furniture and fittings 10% on cost – charged to administration
  • Motor vehicles 20% on carrying amount – charged 25% to administration and 75% to selling and distribution.

(vii) Income tax on the profit for the year is estimated at N68,900 and is due for payment on February 28, 2020.

Required:
Prepare the statement of profit or loss and other comprehensive income for the year ended December 31, 2019.

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FA – Nov 2020 – L1 – SB – Q2 -Accounting Concepts (e.g., Going Concern, Accruals, Materiality)

Explain accounting concepts, provide examples, and list users of financial statements.

a. Explain the term ‘accounting concepts’. (2 Marks)

b. With particular reference to the accounting treatments, explain the following accounting concepts:
i. Entity (2 Marks)
ii. Going concern (2 Marks)
iii. Accrual (2 Marks)
iv. Materiality and aggregation (2 Marks)
v. Consistency (2 Marks)

c. In accordance with IAS 1 – Presentation of Financial Statements, highlight six qualitative characteristics of general-purpose financial statements. (4 Marks)

d. Financial statements provide information to users, and each user’s information requirement is not always the same.

Required:
Using the table below and the example provided, list four users of financial statements and their information needs.

S/N Users Information Needs
1 Employees Wage negotiation and determination of job security
2
3
4

(Total: 20 Marks)

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FA – Nov 2020 – L1 – SA – Q13 – Elements of Financial Statements

Identifies a component that is not part of the financial statements as defined by IAS 1.

Which of the following is NOT a component of financial statements under IAS 1?
A. Statement of financial position
B. Statement of profit or loss and other comprehensive income
C. Statement of equity
D. Statement of changes in equity
E. Statement of cash flows

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FA – Nov 2021 – L1 – SA – Q10 – Financial Statement

This question tests the knowledge of the components of financial statements as per IAS 1.

In accordance with IAS 1-Presentation of Financial Statements, which of the following is NOT a component of financial statements?
A. Statement of financial position
B. Statement of profit or loss and other comprehensive income
C. Statement of changes in equity
D. Statement of affairs
E. Statement of cashflows

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FA – May 2022 – L1 – SB – Q6b – Elements of Financial Statements

Define an asset, explain the conditions for current assets, and provide examples of current and non-current assets.

An important requirement of IAS 1 with regard to the financial statements is that current and non-current assets should be separately disclosed.

i. Define the term “asset.” (2 Marks)
ii. What are the conditions to be satisfied for an asset to be termed a current asset? (6 Marks)
iii. State TWO examples each of current and non-current assets. (2 Marks)

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