Had completed one paper and going onto P1 this coming Wednesday. Here's a post that was meant to be posted a month back :p
Who knows, could be useful for P2 next sem.
---------
In exactly one month's time, I'll be seating for F7 Financial Reporting. A much dreaded topic since there's almost zlich interaction between me and Mr. FS (Financial Statements) in my daily work routine.
Perhaps F7 will get demystified if I write out my thoughts & analysis on it.
*Yawnz*
Eh... Oops. Guess it bored me before I even got started on it.
FR. Framework. Objective? Whether it's rules based or principles based. Whether it's material then relevant, reliable, comprehensible and... eh.. oh oh, comparable! And just what does the above meant? Too much info to type in here. Pls refer to:
http://www.iasplus.com/standard/framewk.htm
With that, you've "Standards" to adhere to as best corporate practices, especially for those organisations that are listed/ getting loans/ getting assessed, any deviation from the standards will require explanations in disclosure notes.
[Ahem. Hope that I'm still on the right track]
Examinable standards for F7 are as follow and can be found at
http://www.asc.gov.sg/frs/index.htm
Framework
FRS 1 Presentation of Financial Statements
SFP Assets: NCA
XYZ Group – Statement of financial position as at 31
December 20X7
(in thousands of currency units)
|
|
|
31 Dec
|
|
31 Dec
|
|
20X7
|
|
20X6
|
ASSETS
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
Property, plant and equipment (FRS 16 PPE + FRS 36 Impairement of Assets)
PPE under Finance Lease FRS 17
Investment Property FRS 40 IP
|
350,700
|
|
360,020
|
Goodwill (Purchased, FRS 103 Business Combinations)
|
80,800
|
|
91,200
|
Other intangible assets (FRS 38 IA)
Development expenditure capitalised FRS 38 IA
Borrowing costs capitalised (as part of qualifying PPE) FRS 23 BC
|
227,470
|
|
227,470
|
Investments in associates (FRS 28 IIA)
|
100,150
|
|
110,770
|
Available-for-sale financial assets (FRS 32 Financial Instruments Presentation + FRS 39 FI Recognition & Measurement)
|
142,500
|
|
156,000
|
|
901,620
|
|
945,460
|
Current assets
|
|
|
|
Inventories (FRS 2 Inventories + Substance over form)
Amount due from customers FRS 11 Construction Contracts
|
135,230
|
|
132,500
|
Trade receivables (FRS 39 FI R&M)
Grant Receivable FRS 20 Accounting for Gov. Grants & Disclosure of Gov. Assistance
|
91,600
|
|
110,800
|
Other current assets
|
25,650
|
|
12,540
|
Cash and cash equivalents
|
312,400
|
|
322,900
|
|
564,880
|
|
578,740
|
Total assets
|
1,466,500
|
|
1,524,200
|
|
|
|
|
EQUITY AND LIABILITIES
|
|
|
|
Equity attributable to owners of the parent
|
|
|
|
Share capital
|
650,000
|
|
600,000
|
|
Retained earnings
|
243,500
|
|
161,700
|
|
Other components of equity
Other Reserves - Option to Convert to Equity FRS 32 FI P + FRS 39 FI R&M + FRS 107
|
10,200
|
|
21,200
|
|
|
903,700
|
|
782,900
|
|
Minority interest
|
70,050
|
|
48,600
|
|
Total equity
|
973,750
|
|
831,500
|
|
Non-current liabilities
|
|
|
|
|
Lease Obligations > 12 months FRS 17 Leases
10% Convertible Debts FRS 32 + FRS 39 + FRS 107 Financial Instruments
Provision for additional finance cost FRS 32 + FRS 39 + FRS 107 Financial Instruments
Redeemable Preference Share Capital FRS 32 + FRS 39 + FRS 107 Financial Instruments
Long-term borrowings
|
120,000
|
|
160,000
|
|
Deferred tax (FRS 12 Income Taxes)
|
28,800
|
|
26,040
|
|
Long-term provisions
|
28,850
|
|
52,240
|
|
Total non-current liabilities
|
177,650
|
|
238,280
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
Amount due to customers FRS 11 CC
Lease obligations < 12 months FRS 17 Leases
Accrued interest FRS 17 Leases
Provision for taxation FRS 12 Income taxes
|
115,100
|
|
187,620
|
|
Short-term borrowings
|
150,000
|
|
200,000
|
|
Current portion of long-term borrowings
|
10,000
|
|
20,000
|
|
Current tax payable
|
35,000
|
|
42,000
|
|
Short-term provisions (FRS 37 Provisions, Contingent Liabilities, Contingent Assets + FRS 10 Events after the Balance Sheet Date)
|
5,000
|
|
4,800
|
|
Total current liabilities
|
315,100
|
|
454,420
|
|
Total liabilities
|
492,750
|
|
692,700
|
|
Total equity and liabilities
|
1,466,500
|
|
1,524,200
|
|
XYZ Group – Statement of comprehensive income for the year ended
31 December 20X7
(illustrating the presentation of comprehensive income in one statement
and the classification of expenses within profit by function)
(in thousands
of currency units)
|
|
20X7
|
|
20X6
|
Revenue (FRS 18 Revenue + FRS 11 CC)
|
390,000
|
|
355,000
|
Cost of sales (FRS 11 CC)
|
(245,000)
|
|
(230,000)
|
Gross profit
|
145,000
|
|
125,000
|
Other income
|
20,667
|
|
11,300
|
Distribution costs
|
(9,000)
|
|
(8,700)
|
Administrative expenses
Depreciation FRS 16 PPE + FRS 17 if finance lease
|
(20,000)
|
|
(21,000)
|
Other expenses
|
(2,100)
|
|
(1,200)
|
Finance costs (FRS 17 Leases)
|
(8,000)
|
|
(7,500)
|
Share of profit of associates(a)
|
35,100
|
|
30,100
|
Profit before tax
|
161,667
|
|
128,000
|
Income tax expense (FRS 12 Income Taxes)
|
(40,417)
|
|
(32,000)
|
Profit for the year from continuing
operations
|
121,250
|
|
96,000
|
Loss for the year from discontinued operations
|
–
|
|
(30,500)
|
PROFIT FOR THE YEAR
|
121,250
|
|
65,500
|
Other comprehensive income:
|
|
|
|
Exchange differences on translating foreign
operations(b)
|
5,334
|
|
10,667
|
Available-for-sale financial assets(b)
|
(24,000)
|
|
26,667
|
Cash flow hedges(b)
|
(667)
|
|
(4,000)
|
Gains on property revaluation
|
933
|
|
3,367
|
Actuarial gains (losses) on defined benefit
pension plans
|
(667)
|
|
1,333
|
Share of other comprehensive income of
associates(c)
|
400
|
|
(700)
|
Income tax relating to components of other
comprehensive income(d)
|
4,667
|
|
(9,334)
|
Other comprehensive income for the year,
net of tax
|
(14,000)
|
|
28,000
|
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR
|
107,250
|
|
93,500
|
|
|
|
|
|
20X7
|
|
20X6
|
Profit attributable to:
|
|
|
|
Owners of the parent
|
97,000
|
|
52,400
|
Minority interest
|
24,250
|
|
13,100
|
|
121,250
|
|
65,500
|
|
|
|
|
Total comprehensive income attributable to:
|
|
|
|
Owners of the parent
|
85,800
|
|
74,800
|
Minority interest
|
21,450
|
|
18,700
|
|
107,250
|
|
93,500
|
|
|
|
|
Earnings per share (in currency units):
|
|
|
|
Basic and diluted
|
0.46
|
|
0.30
|
|
|
|
|
|
(a) This
means the share of associates’ profit attributable to owners of the associates,
ie it is after tax and minority interests in the associates.
(b) This
illustrates the aggregated presentation, with disclosure of the current year
gain or loss and reclassification adjustment presented in the notes. Alternatively, a gross presentation can be
used.
(c) This
means the share of associates’ other comprehensive income attributable to
owners of the associates, ie it is after tax and minority interests in the
associates.
(d) The
income tax relating to each component of other comprehensive income is
disclosed in the notes.
And then the following's a confusion state of mind over SCF -_-"
Cash Flow Statement for an Entity other than a Financial
Institution
(FRS 7 Statement of Cash Flows)
The appendix accompanies, but is not part
of, the Standard.
1. The
examples show only current period amounts.
Corresponding amounts for the preceding period are required to be
presented in accordance with FRS 1 Presentation of Financial Statements.
2. Information
from the income statement and balance sheet is provided to show how the
statements of cash flows under the direct method and indirect method have been
derived. Neither the income statement nor the balance sheet is presented in
conformity with the disclosure and presentation requirements of other
Standards.
3. The
following additional information is also relevant for the preparation of the
statements of cash flows:
·
all of the shares of a subsidiary were
acquired for 590. The fair values of
assets acquired and liabilities assumed were as follows:
Inventories
|
100
|
|
|
Accounts receivable
|
100
|
|
|
Cash
|
40
|
|
|
Property, plant and equipment
|
650
|
|
|
Trade payables
|
100
|
|
|
Long-term debt
|
200
|
·
250 was raised from the issue of share
capital and a further 250 was raised from long-term borrowings.
·
interest expense was 400 of which 170 was
paid during the period. 100 relating to interest expense of the prior period
was also paid during the period.
·
dividends paid were 1,200.
·
the liability for tax at the beginning and
end of the period was 1000 and 400 respectively. During the period, a further
200 tax was provided for. Withholding
tax on dividends received amounted to 100.
·
during the period, the group acquired
property, plant and equipment with an aggregate cost of 1,250 of which 900 was
acquired by means of finance leases.
Cash payments of 350 were made to purchase property, plant and
equipment.
·
plant with original cost of 80 and
accumulated depreciation of 60 was sold for 20.
·
accounts receivable as at end of 19-2
include 100 of interest receivable.
Consolidated Income Statement for the period
ended 20-2
|
|
|
Sales
|
30,650
|
Cost of sales
|
(26,000)
|
Gross profit
|
4,650
|
Depreciation
|
(450)
|
Administrative and selling expenses
|
(910)
|
Interest expense
|
(400)
|
Investment income
|
500
|
Foreign exchange loss
|
(40)
|
Profit before taxation
|
3,350
|
Taxes on income
|
(300)
|
Profit
|
3,050
|
|
|
Consolidated
Balance Sheet as at the end of 20-2
|
|
|
20-2
|
|
20-1
|
Assets
|
|
|
|
|
Cash and cash equivalents
|
|
230
|
|
160
|
Accounts receivable (Increase in AR)
|
|
1,900
|
|
1,200
|
Inventory
|
|
1,000
|
|
1,950
|
Portfolio investments
|
|
2,500
|
|
2,500
|
Property, plant and equipment at cost
|
3,730
|
|
1,910
|
|
Accumulated depreciation
|
(1,450)
|
|
(1,060)
|
|
Property, plant and equipment net
|
|
2,280
|
|
850
|
Total assets
|
|
7,910
|
|
6,660
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Trade payables
|
|
250
|
|
1,890
|
Interest payable
|
|
230
|
|
100
|
Income taxes payable
|
|
400
|
|
1,000
|
Long-term debt
|
|
2,300
|
|
1,040
|
Total liabilities
|
|
3,180
|
|
4,030
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
Share capital
|
|
1,500
|
|
1,250
|
Retained earnings
|
|
3,230
|
|
1,380
|
Total shareholders’ equity
|
|
4,730
|
|
2,630
|
Total liabilities and shareholders’ equity
|
|
7,910
|
|
6,660
|
Direct
Method Cash Flow Statement (paragraph 18a)
|
|
|
|
|
|
|
20-2
|
Cash
flows from operating activities
|
|
|
|
Cash
receipts from customers
|
30,150
|
|
|
Cash
paid to suppliers and employees
|
(27,600)
|
|
|
Cash
generated from operations
|
2,550
|
|
|
Interest
paid
|
(270)
|
|
|
Income
taxes paid
|
(900)
|
|
|
|
|
|
|
Net
cash from operating activities
|
|
|
1,380
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
Acquisition
of subsidiary X, net of cash acquired (Note A)
|
(550)
|
|
|
Purchase
of property, plant and equipment (Note B)
|
(350)
|
|
|
Proceeds
from sale of equipment
|
20
|
|
|
Interest
received
|
200
|
|
|
Dividends
received
|
200
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(480)
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
Proceeds
from issue of share capital
|
250
|
|
|
Proceeds
from long-term borrowings
|
250
|
|
|
Payment
of finance lease liabilities
|
(90)
|
|
|
Dividends
paid*
|
(1,200)
|
|
|
|
|
|
|
Net
cash used in financing activities
|
|
|
(790)
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
110
|
Cash
and cash equivalents at beginning of period (Note C)
|
|
|
120
|
Cash
and cash equivalents at end of period (Note C)
|
|
|
230
|
|
|
|
|
*This
could also be shown as an operating cash flow.
|
|
|
|
Indirect
Method Cash Flow Statement (paragraph 18b)
|
|
|
|
|
|
|
20-2
|
Cash
flows from operating activities
|
|
|
|
Profit before taxation
|
3,350
|
|
|
Adjustments for:
|
|
|
|
Depreciation (non cash item)
|
450
|
|
|
Foreign exchange loss (wrong category - Finance activities)
|
40
|
|
|
Investment income (wrong categroy - Finance activities)
|
(500)
|
|
|
Interest expense (wrong category - deduct actual paid only after "Cash generated from operations)
|
400
|
|
|
|
3,740
|
|
|
Increase in trade and other receivables (increase in AR, less cash for entity 700 -gain of 100 interest receivable which should be a gain in financial activties - gain of 100 AR from subsidiary?)
|
(500)
|
|
|
Decrease in inventories (less purchases, more cash)
|
1,050
|
|
|
Decrease in trade payables (earlier payment, less cash )
|
(1,740)
|
|
|
Cash generated from operations
|
2,550
|
|
|
Interest paid (deduct actual paid amt)
|
(270)
|
|
|
Income taxes paid (1000 - 400 + 200 + 100 (notes))
|
(900)
|
|
|
|
|
|
|
Net cash from operating activities
|
|
|
1,380
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
Acquisition of subsidiary X net of cash
acquired (Note A)
|
(550)
|
|
|
Purchase of property, plant and equipment
(Note B) (cash payment made)
|
(350)
|
|
|
Proceeds from sale of equipment
|
20
|
|
|
Interest received (where?)
|
200
|
|
|
Dividends received
|
200
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(480)
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
Proceeds from issue of share capital
|
250
|
|
|
Proceeds from long-term borrowings
|
250
|
|
|
Payment of finance lease liabilities
|
(90)
|
|
|
Dividends paid*
|
(1,200)
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(790)
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
110
|
Cash and cash equivalents at beginning of
period (Note C)
|
|
|
120
|
Cash and cash equivalents at end of period
(Note C)
|
|
|
230
|
|
|
|
|
*This could also be shown as an operating
cash flow.
|
|
|
|
Notes to the Cash Flow Statement
(direct method and indirect method)
A. Acquisition
of Subsidiary
During the period the group acquired subsidiary X. The fair value of assets acquired and
liabilities assumed were as follows:
Cash
|
40
|
Inventories
|
100
|
Accounts receivable
|
100
|
Property, plant and equipment
|
650
|
Trade payables
|
(100)
|
Long-term debt
|
(200)
|
Total purchase price
|
590
|
Less: Cash of X
|
(40)
|
Cash
flow on acquisition net of cash acquired
|
550
|
B. Property,
Plant and Equipment
During the period the Group acquired property, plant and equipment with
an aggregate cost of 1,250 of which 900 was acquired by means of finance
leases. Cash payments of 350 were made
to purchase property, plant and equipment.
C. Cash
and Cash Equivalents
Cash and cash equivalents consist of cash on hand and balances with
banks, and investments in money market instruments. Cash and cash equivalents included in the
cash flow statement comprise the following balance sheet amounts:
|
20-2
|
|
20-1
|
Cash
on hand and balances with banks
|
40
|
|
25
|
Short-term
investments
|
190
|
|
135
|
Cash
and cash equivalents as previously reported
|
230
|
|
160
|
Effect
of exchange rate changes
|
-
|
|
(40)
|
Cash
and cash equivalents as restated
|
230
|
|
120
|
Cash and cash equivalents at the end of the period include deposits with
banks of 100 held by a subsidiary which are not freely remissible to the
holding company because of currency exchange restrictions.
The Group has undrawn borrowing facilities of 2,000 of which 700 may be
used only for future expansion.
D. Segment
Information
|
Segment A
|
Segment B
|
Total
|
Cash flows from:
|
|
|
|
Operating activities
|
1,520
|
(140)
|
1,380
|
Investing activities
|
(640)
|
160
|
(480)
|
Financing activities
|
(570)
|
(220)
|
(790)
|
|
310
|
(200)
|
110
|
Alternative Presentation (indirect method)
As an alternative, in an indirect method cash flow statement, operating
profit before working capital changes is sometimes presented as follows:
Revenues
excluding investment income
|
30,650
|
|
Operating
expense excluding depreciation
|
(26,910)
|
|
|
|
|
Operating
profit before working capital
changes
|
|
|
