CHAPTER 8 Currently maturing long-term debt –

A liability which is due to be settled within 12 months

Provides that an entity shall classify an asset as current
after the reporting period is classified as current , even
when:
if:
 The entity holds the asset primarily for the
a. the original term must for a period longer than 12
purpose of trading.
months.
Simply states that an entity shall classify or other assets
b. An agreement to refinance or to reschedule payment
not classified as current as non-current.
on a long-term recessed is completed after the
 reporting period and before the financial statements
are authorized for issue.
An entity shall classify a liability as current when:
if the refinancing on a long term basis is completed on
 The entity expects to settle the liability within or before the end of the reporting period , the
the entity's normal operating cycle refinancing is an adjusting event and the obligation is
classified as noncurrent liability.
Forms of statement of financial position:
The objective of financial statements - is to provide
Account form- assets are shown on the left side and the
information about the financial position, financial
liabilities and equity on the right side.
performance and cash flows of an entity that is useful to
Report form - three major sections in a downward a wide range of users in making economic decisions.
sequence of assets , liabilities and equity.
Currently maturing long-term debt:
Notes to financial statements - are used to report
current - after reporting period
information that does not fit into the body of the
financial statements in order to enhance the noncurrent - on or before reporting period
understandability of the financial statements.
Covenants :
Covenants - Are often attached to borrowing
agreements which represent undertakings by the current - after reporting period
borrower. These are actually restrictions on the
noncurrent - on or before reporting period
borrower as to undertaking further borrowings, paying
dividends, maintaining specified level of working capital
and so forth. Under these, if certain conditions relating CHAPTER 9
to the borrower's financial situation are breached, the
Financial performance of an entity - is primarily
liability becomes payable on demand.
measured in terms of the level of income earned by the
Current - provides that liability is classified as entity through the effective and efficient utilization of
________________ even if the lender has agreed, after its resources
the reporting period and before the statements are
Financial performance - is also known as the results of
authorized for issue, not to demand payment as a
operation of the entity.
consequence of the breach.
Sources of income:
- Provides that the liability is classified as noncurrent if
the lender has agreed on or before the end of reporting Sales of merchandise to customers
period to provide a grace period ending at least 12
months after the end of reporting period. Rendering of services
Use of entity's resources Accounting policies - are the specific principles, bases,
conventions, rules and practices applied by an entity in
Disposal of resources other than products preparing and presenting financial statements.
Components of expense Entity - is required to outline all significant accounting
Cost of goods sold or cost of sales policies applied in preparing financial statements

Distribution costs or selling expenses The entity shall select and apply the same accounting
policies each period in order to achieve comparability of
Administrative expenses financial statements or to identify trends in the financial
position, performance and cash flows of the entity.
Other expenses
A change in accounting policy shall be made only
Income tax expense
when:
Classifications of expenses
a. Required by an accounting standard
Distribution costs - directly related to selling,
b. The change will result in more relevant and faithfully
advertising and delivery of goods to customers.
represented information about the financial position,
Administrative expenses - cost of administering the financial performance and cash flows of the entity.
business.
A change in accounting policy arises when an entity
Other expenses - those expenses which are not directly adopts a generally accepted accounting principle which
related to the selling and administrative function. is different from the one previously used by the entity.

Forms of income statement. Retrospective application - means that any resulting

adjustment from the change in accounting policy shall
Functional presentation - classifies expenses according be reported as an adjustment to the opening balance of
to their function. retained earnings.

Natural presentation - aggregated according to their The amount of the adjustment is determined as of the
nature. beginning of the year of change.

Comprehensive income - is the change in equity during A change in accounting estimate is a normal recurring
a period resulting from transactions and other events, correction or adjustment of an asset or liability which
other than changes resulting from transactions with is the natural resource of the use of an estimate.
owners in their capacity as owners.
Sometimes it is difficult to distinguish a change in
Comprehensive income includes: accounting estimate and a change in accounting policy.
In such a case, the changed is treated as a change in
a. Components of profit and loss/ income and expenses
accounting estimate with appropriate disclosure.
b. Components of other comprehensive income.
The effect of a change in accounting estimate shall be
recognized currently and prospectively by including it
CHAPTER 10 in income or loss of:

a. The period of change if the change effects that period

CHAPTER 11 only.

b. The period of change and future periods if the change

affects the both.
A change in accounting estimate shall not be accounted Bankruptcy of a customer which occurs after the
for by restating amounts reported in financial reporting period.
statements of prior period.
The determination after the reporting period of the cost
Prospective recognition of the effect of a change in of asset purchase before the end of reporting period.
accounting estimate - means that the change is applied
The determination after the reporting period of the
to transactions and other events from the date of
change in estimate. profit sharing or bonus payment if the entity has the
present obligation at the end of reporting period to
Prior period errors or omissions and misstatements in make such payment.
the financial statements for one or more period arising
The discovery of fraud or errors that show the financial
from a failure to use or misuse of reliable information.
statements to were incorrect.
Prior period errors shall be corrected retrospectively by
adjusting the opening balances of retained earnings and CHAPTER 13
affected assets and liabilities.
Parties are considered to be related if one party has:
CHAPTER 12 a. The ability to control the other party.
Event after the reporting period - is those events, b. The ability to exercise significant influence over the
whether favorable or unfavorable, that occur between other party.
the end of reporting period and the date on which the
financial statements are authorized for issue. c. Joint control over the reporting entity

Adjusting events after the reporting period - are those Control - is ownership directly or indirectly through
that provide evidence of conditions that exist at the end subsidiaries of more than half of the voting power of an
of reporting period entity.

Non adjusting events after reporting period - are those Significant influence may be gained by share ownership
that are indicative of conditions that arose after the end of 20% or more.
of reporting period.
Joint control -is the contractually agreed sharing of
Financial statements - are authorized for issue when control over an economic activity.
the board of directors reviews the financial statements
Example of related parties
and authorizes them issue.
Affiliates - meaning the parent the subsidiary and
In some cases, an entity is required to submit the
subsidiaries.
financial statements to the shareholders for approval
after the financial statements have been issued. Associate - meaning the entity over which one party
exercises significant influence
In such cases, the financial statements are authorized
for issue on the date of issued by the board of directors Ventures - are related to the joint venture because they
and not on the date when shareholders approved the have joint control of the activities of the joint venture
financial statements.
Other related parties
Example of adjusting events.→SBT³
Key management personnel
Settlement after the reporting period of a court case
because it confirms that the entity already had a Close family members of key management personnel
present obligation at the end of reporting period
Individuals or shareholders owning at least 20% of the
reporting entity
CHAPTER 14
Post-employment benefit plan for the benefit of Inventories are assets held for sale in the ordinary
employees course of business, in the process of production for such
sale or in the form of materials or supplies to be
Related party transaction is a transfer of resources or consumed in the production process or in the rendering
obligations between related parties, regardless of of services
whether a price is charged.
A trading concern is one that buys and sells goods and
PAS 24, paragraph 12, requires disclosure of related the same form purchased.
party relationships where control exists irrespective of
whether there have been transactions between the A manufacturing concern is one that buys goods which
related parties. In the other words, relationships are altered or converted into another form before they
between parent and subsidiaries or investor and are made available-for-sale.
associates shall be disclosed regardless of whether
The cost of purchase of inventories compromises the
there have been transactions between those related
purchase price, import duties and irrecoverable taxes,
parties.
freight, handling and other costs directly attributed to
An entity shall disclose the name of the entity's parent the acquisition of finished goods and materials.
and if different, the ultimate controlling party.
The cost of conversion of inventories includes cause
If neither the entity's parent nor the ultimate directly related to the units of production such as direct
controlling party produces financial statements labor.
available for public use, the name of the next most
Other cost is included in the cost of inventory is only to
senior parent that does so shall also be disclosed
the extent but it is incurred in bringing the inventories
PAS 24, paragraph 17, provides that if there have been to their present location and condition.
transactions between related parties, an entity shall
The FIFO method assumes that the goods first
disclose the nature of the related party relationship as
purchased are first sold and consequently the goods
well as information about the transactions and
remaining in the inventory at the end of the period are
outstanding balances necessary for an understanding of
those most recently purchased or produced.
the financial statements.
The inventory is thus expressed in terms of recent or
Key management personnel compensation:
new prices while the cost of goods sold is
PAS 24, paragraph 16, provides that an entity shall representative of earlier or old prices.
disclose key management personnel compensation in
The average unit cost is computed by dividing the total
total and for each of the following categories:
cost of goods available for sale by the total number of
a. Short term employee benefits. units available for sale.

b. Post employment benefits. Specific identification means that specific costs are
attributed to identified items of inventory.
c. Other long-term benefits.
The cost of the inventory is determined by simply
d. Termination benefits multiplying the units on hand by the actual unit cost

e. Share-based payment transactions Net realizable value estimated selling price in the
ordinary course of business less the estimated cost of
completion and the estimated cost of disposal.
CHAPTER 15
Property, plant and equipment are tangible assets that
are held for use in production or supply of goods or
services, for rental to others, or for administrative
purposes, and are expected to be used during more
than one period.

Three major characteristics of ppe→tangible assets,

used in business, expected to be used for more than
one year.

Cost is the amount of cash or cash equivalent paid and

the fair value of the other consideration given to
acquire an asset at the time of acquisition or
construction.

The cost model means that property, plant and

equipment are carried at cost less any accumulated
depreciation and any accumulated super meant loss

6 scenarios in acquisition of PPE and how they are

recognized

1. Acquisition on cash basis - cash price equivalent +

cost directly attributable

2. Acquisition on account - invoice price - cash discount

3. Acquisition on installment basis - cash basis not

installment

4. Issuance of share capital - fair value of consideration

received

5. Issuance of bonds payable - FFF

6. Exchange - fair value + cash payment made

Elements of cost of PPE→PCI

Directly attributable cost→CIIPC