1.1 Objectives of Financial Reporting

The objective of financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Financial reports should help users assess the entity’s economic resources, claims against the entity, and changes in resources and claims, including the entity’s performance and cash flows.

1.2 IFRS Conceptual Framework

• Qualitative characteristics: relevance and faithful representation
  • Relevance includes predictive value and confirmatory value.
  • Faithful representation includes completeness, neutrality, and freedom from error.
• Elements of financial statements:
  • Assets, liabilities, equity, income, and expenses.
• Recognition criteria:
  • Definition, probability of future economic benefit, and reliable measurement.
• Measurement bases: historical cost, current cost, net realizable value, present value.

1.3 Presentation & Disclosure Requirements (IAS 1)

• Classification of assets and liabilities as current and non-current.
• Minimum line items for statements of financial position, performance, changes in equity, and cash flows.
• Notes to the financial statements: summary of significant accounting policies, other explanatory information.

1.4 Overview of Key Standards

• IAS 2 – Inventories: cost formulas, net realizable value, write-downs.
• IAS 16 – Property, Plant and Equipment: cost, depreciable amount, useful life, component accounting.
• IAS 36 – Impairment of Assets: recoverable amount, impairment indicators, reversal of impairments.
• IFRS 3 – Business Combinations: acquisition method, goodwill, non-controlling interest.
• IFRS 9 – Financial Instruments: classification, measurement, impairment (ECL).
• IFRS 10 – Consolidated Financial Statements: control definition, consolidation procedures.

1.5 Worked Example: Simple Acquisition

Scenario: Entity A acquires 80% of Entity B for $1,200,000. Entity B’s identifiable net assets at fair value are $1,000,000.
Step 1: Calculate goodwill:
  Consideration transferred ($1,200,000) – FV net assets ($1,000,000) = $200,000 goodwill.
Step 2: Eliminate investment against share capital and goodwill on consolidation entries.

1. Objectives and framework of financial reporting
2. Key IFRS standards overview (IAS 1, 2, 16, 36, 38, IFRS 3, 9, 10, 12)
3. Presentation formats: vertical vs horizontal statements
4. Common accounting principles: accrual, consistency, going concern