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ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce)

FINANCIAL REPORTING-I (8567)

CHECKLIST

SEMESTER: AUTUMN, 2018

This packet comprises the following material:

1. Textbook (one)
2. Assignment No. 1, 2
3. Assignment Forms ( 2 sets )

In this packet, if you find anything missing out of the above mentioned material,
please contact at the address given below:

The Mailing Officer


Allama Iqbal Open University
Sector H-8, Islamabad
Ph: 051-9057611-12

Muhammad Munir Ahmad


(Course Coordinator)
ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(Department of Commerce)
[

WARNING
1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING
THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD
OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.
2. SUBMITTING ASSIGNMENT(S) BORROWED OR STOLEN FROM
OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN
“AIOU PLAGIARISM POLICY”.

ASSIGNMENT No. 1
Course: Financial Reporting-I (8567) Semester: Autumn, 2018
Level: M. Com Total Marks: 100
Pass Marks: 50
Q. 1 (a) Describe the recognition criteria of the elements of financial statements. (10)
(b) Enlist the complete set of financial statements and describe the objectives of
them. Also explain the general features which must be possessed by financial
statements. (10)

Q. 2 (a) Describe the Scope and objectives of IAS 2. (5)


(b) Given below is the information extracted from records of XYZ Company,
you are required to calculate the value of closing stock. (5)
Opening Stock, Rs. 10,000; Sales, Rs. 80,000;
Purchases, Rs. 70,000; Gross Profit rate, 25% on sales
(c) From the following information extracted from the books of ABC Company,
you are required to calculate the value of cost of goods sold. (5)
Purchases Rs.530,000; Purchases discounts Rs.10,000; Beginning inventory
Rs.160,000; Ending Inventory Rs.215,000; Freight out Rs.40,000

Q. 3 (a) What do you know about IAS 8? Explain. Also differentiate between
accounting estimates and accounting policies. (5)
(b) During 2018, Soban Co. discovered that some products that had been sold
during 2017 were incorrectly included in inventory at 31 st December, 2017 at
Rs. 6,500. (10)
Soban Co’s accounting records for 2018 show sales of Rs. 104,000, cost of goods
sold of Rs. 86,500 (including Rs. 6,500) for the error in opening inventory), and
income taxes of Rs. 5,250.
In 2017, Soban Co’s reported:
Sales Rs. 73,500
Cost of Goods Sold (53,500)
Profit before income tax 20,000
Income taxes (6,000)
Profit 14,000
In 2017 Opening retained earnings was Rs. 20,000 and closing retained earning
was Rs. 34,000.
Soban Co’s income tax rate was 30 percent for 2018 and 2017. It had no other
income or expenses.
Soban Co’s had Rs. 50,000 of share capital throughout and no other components of
equity except for retained earnings.
You are required to show the effects of above conditions on statement of
comprehensive income, statement of changes in equity and extracts from the
notes.

Q. 4 (a) Explain the Adjusted and Non-Adjusted events with reference to IAS 10,
with suitable examples. (8)
(b) Define the following key terms with reference to IAS 16: (8)
i. Property, Plant and Equipment
ii. Cost
iii. Fair Value
iv. Carrying Amount
v. Depreciation
vi. Impairment Loss
vii. Recoverable Amount
viii. Systematic Allocation
(c) Explain the disclosure requirements of IAS 16 (4)

Q. 5 A Limited bought a special bread-making plant on 1 January 2018, details of


which follow: (10)
Purchase price (Including VAT of 14%) Rs. 570,000
Import duties-non-refundable 100,000
Installation costs 30,000
Fuel (incurred when transporting the plant to the factory) 45,000
Administration Costs 10,000
Staff party to celebrate the acquisition of the new plant 14,000
Staff training 12,000
Testing to ensure plant fully operational before start of 10,980
production
Proceeds from sale of samples and by-products made 13,000
during testing
Advertising of the “special bread’ to be made by the new 50,000
plant
Initial operating loss 35,000
Estimated costs of dismantling/removal costs at the end 27,020
of its useful life (future amount payable of Rs. 70,031
present valued a discount rate of 10%)

The initial operating loss was incurred as a result of having to dump unsold ‘special
bread’ at sea since the advertising had not yet created sufficient demand.
The company is registered as a ‘VAT vendor’.

You are required to calculate the cost to be capitalized to the plant account.

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Q. 6 From the following information extracted from the books of Qaiser Brothers, you
are required to prepare statement of cash flows using direct and indirect method.
STATEMENT OF FINANCIAL POSITION
As on 31 March 2017
Capital & liabilities Rs. Assets Rs.
Share capital 65,000 Non-current assets
Bank loan 30,000 Building 40,000
Current liabilities Furniture 10,000
Creditors for goods 10,000 Van 15,000
Current Assets
Stock in trade 15,000
Debtors 20,000
Cash & banks 5,000
105,000 105,000

Creditors represent on month’s purchases and debtors represent one and a half months’
sales for the year ended 31st March, 2018. (20)
1. Purchases will increase by 20% in volume.
2. Prices of purchases will increase by 9%
3. Expenses will total Rs. 36,000 for 2017 – 2018 including depreciation
o 5% on building
o 10% furniture
o 20% on van
4. The van will be sold in March 2018 for Rs. 20,000 and replaced by a new one
costing Rs. 25,000
5. Dividend paid Rs. 18,000.
6. The mark up rate was 33.33 in 2017
7. There will be no change in the rate of mark-up (based on cost).
8. The bank loan is repayable in three installments.
9. Stock in trade is equal to one and half month of purchase.

GUIDELINES FOR ASSIGNMENT # 1


The student should look upon the assignments as a test of knowledge, management skills,
and communication skills. When you write an assignment answer, you are indicating your
knowledge to the teacher:
 Your level of understanding of the subject;
 How clearly you think;
 How well you can reflect on your knowledge & experience;
 How well you can use your knowledge in solving problems, explaining situations,
and describing organizations and management;
 How professional you are, and how much care and attention you give to what you do.

To answer a question effectively, address the question directly, bring important related
issues into the discussion, refer to sources, and indicate how principles from the course
materials apply. The student must also be able to identify important problems and
implications arising from the answer.
ASSIGNMENT No. 2
Total Marks: 100 Pass Marks: 50

This assignment is a research-oriented activity. You are required to obtain information


from a business/commercial organization and prepare a report of about 1000 words on
the issue allotted to you to be submitted to your teacher for evaluation.
You are required to select one of the following issues according to the last digit of your
roll number. For example, if your roll number is P-3427182 then you will select issue # 2
(the last digit): -
ISSUES:
0- Costs and Benefits of implementing the Financial Reporting Standards: A Study of
Pakistani Firms.
1- The need for a common set of accounting and financial reporting standards.
2- Impact of International Accounting Standard 1 (IAS 1) on Corporate Financial
Reporting: The extent of disclosures, and their relationship to Corporate
Characteristics.
3- Constraints and trade-offs between different qualitative characteristics of Financial
Statements
4- A Comprehensive Study on International Accounting Standard 7 (IAS 7)
5- Contemporary Challenges in adopting the International Accounting Standards.
6- A Comprehensive Study on International Accounting Standard 23 (IAS 23)
7- Is the IASB Framework a standard? Is it relevant to preparing IFRS financial
statements? If so, how?
8- In some countries, income tax authorities require companies to prepare accounts
that conform to national laws for measuring taxable income. Are those financial
statements ‘general-purpose financial statements’? Why? How?
9- A Comprehensive Study on International Accounting Standard 10 (IAS 10)

The report should follow the following format:


i. Title page
ii. Acknowledgements
iii. An abstract (one-page summary of the paper)
iv. Table of contents
v. Introduction to the issue (brief history & significance of topic assigned)
vi. Practical study of the organization (with respect to the topic)
vii. Data collection methods
viii. Conclusion (one-page brief covering important aspects of your report)
ix. Recommendations (specific recommendations relevant to issue assigned)
x. References (as per APA format)
xi. Annexes (if any)

GUIDELINES FOR ASSIGNMENT # 2:


 1.5-line spacing
 Use headers and subheads throughout all sections
 Organization of ideas
 Writing skills (spelling, grammar, punctuation)
 Professionalism (readability and general appearance)
 Do more than repeat the text
 Express a point of view and defend it.

WORKSHOPS

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The workshop presentations provide students opportunity to express their communication
skills, knowledge & understanding of concepts learned during practical study assigned in
assignment # 2.
You should use transparencies and any other material for effective presentation. The
transparencies are not the presentation, but only a tool; the presentation is the
combination of the transparencies and your speech. Workshop presentation transparencies
should only be in typed format.
The transparencies should follow the following format:
1) Title page
2) An abstract (one-page summary of the paper)
3) Introduction to the issue (brief history & significance of topic assigned)
4) Practical study of the organization (with respect to the issue)
5) Data collection methods
6) Conclusion (one-page brief covering important aspects of your report)
7) Recommendations (specific recommendations relevant to topic assigned)

GUIDELINES FOR WORKSHOP PRESENTATION:


 Make eye contact and react to the audience. Don't read from the transparencies or
from report, and don't look too much at the transparencies (occasional glances are
acceptable to help in recalling the topic to cover).
 A 15-minute presentation can be practiced several times in advance, so do that until
you are confident enough. Some people also use a mirror when rehearsing as a
substitute for an audience.

WEIGHTAGE OF THEORY & PRACTICAL ASPECTS IN ASSIGNMENT # 2 &


WORKSHOP PRESENTATIONS
Assignment # 2 & workshop presentations are evaluated on the basis of theory & its
applicability. The weightage of each aspect would be:
Theory: 60%
Applicability (practical study of the organization): 40%

Note: Assignments and presentation carry 300 Marks:


Assignment 01 100 Marks
Assignment 02 (Submission) 100 Marks
Assignment 02 (Presentation) 100 Marks
COURSE OUTLINES
Financial Reporting I- 8567
UNIT 1 Regulatory Framework for Financial Reporting in Pakistan
1.1 The regulatory system
1.2 Standards setting process
1.3 Conceptual framework
1.4 Objectives of financial reporting
1.5 Users of financial statements
1.6 Qualitative characteristics
1.7 Elements of financial statements
1.8 True and fair view presentation

UNIT 2 Presentation of Financial Statements (IAS) 1


2.1 Financial statements and their components
2.2 General features of financial statements
2.3 Structure of financial statements
2.4 Contents of financial statements
2.5 Disclosure requirements of IAS 1

UNIT 3 Inventory (IAS) 2


3.1 Accounting for inventory under IAS 2
3.2 Measurement of inventories
3.3 Inventory valuation methods
3.4 Net Realizable Value
3.5 Recognition as an expense
3.6 Disclosures Requirements

UNIT 4 Accounting Policies, Changes in Accounting Estimates and


Errors (IAS) 8
4.1 IAS 8 and accounting policies
4.2 Accounting polices
4.3 Accounting estimates
4.4 Prior period errors
4.5 Underlying assumption
4.6 Disclosure Requirements

UNIT 5 Statement of Cash Flows (IAS) 7


5.1 IAS 7 and cash flow statement
5.2 Presentation of a statement of cash flow
5.3 Calculation and reporting of net cash flow from operating
activities
5.4 Reporting of cash flow from investing & financing activities
5.5 Comparison of the statement of cash flows and income statement

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5.6 Interpretation of statement of cash flows
5.7 Disclosures requirements

UNIT 6 Events after the Reporting Period (IAS) 10


6.1. Understanding events and their accounting
6.2. Adjusting events and their accounting
6.3. Non-adjusting events and their accounting
6.4. Calculation of impact on financial statements
6.5. Disclosures requirements

UNIT 7 Property, Plant and Equipment (IAS) 16


7.1. Property plant and equipment
7.2. Depreciation of non-current assets
7.3. Calculation of depreciation
7.4. Revaluation of non-current assets
7.5. Disclosures requirements

UNIT 8 Revenue Recognition (IAS) 18


8.1. IAS 18 and revenue recognition
8.2. Understanding revenues and their types
8.3. Rules for recognizing revenues
8.4. Financial statements and revenues recognition
8.5. Disclosure requirements

UNIT 9 Borrowing Costs (IAS) 23


9.1 Borrowing costs and their types
9.2 Recognition of borrowing costs
9.3 Commencement, Suspension and Cessation of Capitalization
9.4 Financial statements and borrowing costs
9.5 Disclosures requirements

Recommended Books (Latest Editions)

1. IRFS/IAS s issued by IASB, London.


2. Financial Accounting published by ICMAP, Karachi
3. Gripping IFRS by ICAP, Karachi.
4. Insight into IFRS by Hafiz Mohaiydin Tahir, PAC, Lahore.
AIOU-AS-281(18)PPU-13-9-2018-200