International Financial Reporting: A Practical Guide, 8th Edition PDF by Alan Melville

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International Financial Reporting: A Practical Guide, Eighth edition

By Alan Melville

International Financial Reporting A Practical Guide, Eighth edition

Contents:

Preface ix

Acknowledgements x

List of international standards xi

Part 1 Introduction to Financial Reporting

1 The regulatory framework 3

The need for regulation 4

Sources of regulation 4

Generally accepted accounting practice 6

The International Accounting Standards Board 7

The IASB® standard-setting process 9

The purpose of accounting standards 10

Worldwide use of international standards 11

First-time adoption of international standards 12

The International Sustainability Standards Board 14

2 The IASB conceptual framework 17

Purpose and status of the IASB

Conceptual Framework 18

Objective of general purpose financial reporting 19

Qualitative characteristics of financial information 21

Financial statements and the reporting entity 24

Elements of financial statements 25

Recognition of the elements of financial statements 27

Measurement of the elements of financial statements 28

Presentation and disclosure 30

Concepts of capital and capital maintenance 30

Discounting and present value 34

3 Presentation of financial statements 37

Purpose of financial statements 38

Components of financial statements 38

General features 39

Structure and content of financial statements 41

The statement of financial position 42

The statement of comprehensive income 46

The statement of changes in equity 51

The notes to the financial statements 53

Interim financial reporting 54

Management commentary 55

Making materiality judgements 56

Exposure Draft ED/2019/7 58

4 Accounting policies, estimates and errors 68

Accounting policies 68

Accounting estimates 73

Prior period errors 73

Part 2 Financial Reporting in Practice

5 Property, plant and equipment 83

Definition of property, plant and equipment 84

Recognition of property, plant and equipment 85

Initial measurement of property, plant and equipment 87

Subsequent measurement of property, plant and equipment 88

Depreciation 90

Disclosure requirements 94

Borrowing costs 95

Government grants 97

Investment property 100

IFRS13 Fair Value Measurement 103

6 Intangible assets 108

Definition of an intangible asset 109

Initial recognition and measurement of intangible assets 110

Subsequent measurement of intangible assets 114

Amortisation of intangible assets 116

Derecognition 118

Disclosure requirements 118

Goodwill 119

IFRS3 Business Combinations 120

7 Impairment of assets 126

Indications of impairment 127

Recoverable amount 128

Recognition and measurement of an impairment loss 131

Cash-generating units 132

Reversal of impairment losses 136

Disclosure requirements 137

8 Non-current assets held for sale and discontinued operations 142

Classification of non-current assets as held for sale 143

Measurement of non-current assets held for sale 145

Presentation of non-current assets held for sale 149

Discontinued operations 150

9 Leases 156

Definition of a lease 157

Lease accounting by lessees 158

Lease accounting by lessors 162

Sale and leaseback transactions 165

10 Inventories 170

Inventories 171

Cost of inventories 171

Cost formulas 173

Net realisable value 176

Disclosures relating to inventories 177

11 Financial instruments 181

Definitions 182

Classification of financial instruments 183

Recognition and measurement 186

Initial measurement of financial assets and liabilities 186

Subsequent measurement of financial assets 187

The effective interest method 188

Subsequent measurement of financial liabilities 190

Disclosure requirements 191

12 Provisions and events after the

reporting period 196

Recognition of a provision 197

Measurement of a provision 199

Application of the recognition and measurement rules 200

Contingent liabilities and contingent assets 202

Disclosure requirements 203

Events after the reporting period 204

13 Revenue from contracts with customers 210

Purpose and scope of IFRS15 211

The five-step model 211

Identifying the contract 212

Identifying performance obligations 214

Determining the transaction price 215

Allocating the transaction price 217

Satisfaction of performance obligations 218

Contract costs 219

Presentation and disclosure 220

Guidance to the application of IFRS15 222

14 Employee benefits 226

Short-term employee benefits 227

Post-employment benefits 229

Accounting for defined contribution plans 229

Accounting for defined benefit plans 230

Other long-term employee benefits 235

Termination benefits 235

Share-based payments 236

15 Taxation in financial statements 242

Current tax 243

Deferred tax 245

The tax base concept 247

IAS12 requirements with regard to

deferred tax 252

Disclosure requirements 252

16 Statement of cash flows 259

Cash and cash equivalents 260

Classification of cash flows by activity 261

Interest, dividends and taxes 262

Reporting cash flows from operating activities 263

Disclosures 270

Exposure Draft ED/2019/7 271

17 Financial reporting in

hyperinflationary economies 285

Historical cost accounting and its weaknesses 286

Strengths of historical cost accounting 291

Alternatives to historical cost accounting 292

Hyperinflationary economies 293

The restatement of financial statements 293

Disclosures required by IAS29 298

Part 3 Consolidated Financial Statements

18 Groups of companies (1) 303

Requirement to prepare consolidated

financial statements 304

Group statement of financial position

at date of acquisition 305

Group statement of financial position

in subsequent years 309

Partly-owned subsidiaries 312

Preference shares 315

Elimination of intra-group balances 317

Unrealised profits 318

Reporting period and accounting

policies 319

Disclosure requirements 319

19 Groups of companies (2) 328

Group statement of comprehensive

income 329

Group statement of changes in equity 329

Subsidiary acquired part way through

an accounting period 335

20 Associates and joint arrangements 345

Associates and significant influence 346

The equity method 347

Application of the equity method 347

Joint arrangements 354

Disclosure requirements 355

21 Related parties and changes in

foreign exchange rates 361

Related parties 362

Definition of related party and related

party transaction 362

Disclosures required by IAS24 364

Foreign exchange accounting 365

Reporting foreign currency

transactions 366

Translation to a presentation currency 368

Part 4 Analysis of Financial Statements

22 Ratio analysis 375

Accounting ratios 376

Profitability ratios 377

Liquidity ratios 381

Efficiency ratios 383

Investment ratios 386

Limitations of ratio analysis 393

Multivariate ratio analysis 394

23 Earnings per share 404

Significance of EPS 404

Calculation of basic EPS 405

Shares issued during the accounting

period 407

Bonus issues 409

Rights issues 410

Calculation of diluted EPS 413

Presentation and disclosure

requirements 415

24 Segmental analysis 421

Operating segments 422

Reportable segments 422

Disclosures required by IFRS8 424

Part 5 Small and Medium-sized Entities

25 The IFRS for SMEs® Standard 433

Small and medium-sized entities 434

Concepts and pervasive principles 435

Financial statement presentation 436

Statement of financial position 437

25 The IFRS for SMEs Standard (cont.)

Statement of comprehensive income

and income statement 437

Statement of changes in equity and

Statement of income and retained earnings 438

Statement of cash flows 438

Notes to the financial statements 438

Consolidated and separate financial statements 439

Accounting policies, estimates and errors 439

Financial instruments 440

Inventories 440

Investments in associates and

joint ventures 440

Investment property 441

Property, plant and equipment 441

Intangible assets other than goodwill 442

Business combinations and goodwill 442

Leases 442

Provisions and contingencies 442

Liabilities and equity 443

Revenue 443

Government grants 444

Borrowing costs 444

Share-based payment 444

Impairment of assets 444

Employee benefits 445

Income tax 445

Foreign currency translation and Hyperinflation 445

Events after the end of the reporting period 445

Related party disclosures 446

Specialised activities 446

Transition to the IFRS for SMEs Standard 446

Part 6 Answers

Answers to exercises 449

Index 513

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