emilewoolfpublishing.com 2013 ACCA P2 (INT) Corporate Reporting Publishing Study Text ACCA Paper P2 Corporate Reporting (International) Publishing Publishing Welcome to Emile Woolf‘s study text for Paper P2 Corporate Reporting (INT) which is: Written by tutors Comprehensive but concise In simple English Used around the world by Emile Woolf Colleges including China, Russia and the UK ii © Emile Woolf Publishing Limited Sixth edition published by EmileWoolfPublishingLimited CrowthorneEnterpriseCentre,CrowthorneBusinessEstate,OldWokinghamRoad, Crowthorne,BerkshireRG456AW Email:info@ewiglobal.com www.emilewoolfpublishing.com ©EmileWoolfPublishingLimited,April2013 Allrightsreserved.Nopartofthispublicationmaybereproduced,storedinaretrieval system,ortransmitted,inanyformorbyanymeans,electronic,mechanical,photocopying, recording,scanningorotherwise,wi tbylaw,orunderthetermsagreedwiththe appropriate reprographicsrightsorganisation. Youmustnotcirculatethisbookinanyotherbindingorcoverandyoumustimpose thesameconditiononanyacquirer. Notice EmileWoolfPublishingLimitedhasmadeeveryefforttoensurethatatthetimeof writingthecontentsofth isstudytextareaccurate,butneitherEmileWoolfPublishing Limitednoritsdirectorsoremployeesshallbeunderanyliabilitywhatsoeverforany inaccurateormisleadinginformationthisworkcouldcontain. BritishLibraryCataloguinginPublicationsData Acataloguerecordforth isbookisavailablefromtheBritishLibrary. ISBN: 978‐1‐84843‐194‐2 PrintedandboundinGreatBritain Acknowledgements The Syllabus and study guide are reproduced by kind permission of the Association of Chartered Certified Accountants. All IASB material is adapted and reproduced with the kind permission of the International Accounting Standards Committee Foundation. © International Accounting Standards Committee Foundation (IASB). All rights reserved. © Emile Woolf Publishing Limited iii Paper P2 (INT) Corporate Reporting c Contents Page Syllabus and study guide v Chapter 1 The professional and ethical duty of the accountant 1 Chapter 2 Social reporting 9 Chapter 3 The financial reporting framework 19 Chapter 4 Reporting financial performance 59 Chapter 5 Non-current and current assets 87 Chapter 6 Financial instruments 121 Chapter 7 Leases and substance over form 161 Chapter 8 Reporting requirements for listed companies 181 Chapter 9 Employee benefits and share based payments 203 Chapter 10 Taxation 229 Chapter 11 Provisions and events after the reporting period 251 Chapter 12 Specialised entities 273 Chapter 13 Group financial statements 281 Chapter 14 Group financial statements: complex groups 341 Chapter 15 Group financial statements: step acquisitions and disposals 365 Chapter 16 Group reorganisations and restructuring 381 Chapter 17 Foreign currency 395 Chapter 18 Statements of cash flows 419 Chapter 19 Performance measurement 453 Chapter 20 Other issues 481 Practice questions 489 Paper P2: Corporate Reporting (International) iv © Emile Woolf Publishing Limited Answers 525 Index 587 Examinable documents © Emile Woolf Publishing Limited iii Examinable documents International Accounting Standards (IASs)/International Financial Reporting Standards (IFRSs) Chapter: IAS 1 Presentation of Financial Statements 4 IAS 2 Inventories 5 IAS 7 Statement of Cash Flows 18 IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 3 IAS 10 Events after the Reporting Period 11 IAS 12 Income Taxes 10 IAS 16 Property, Plant and Equipment 5 IAS 17 Leases 7 IAS 18 Revenue 4 IAS 19 Employee Benefits 9 IAS 20 Accounting for Government Grants and Disclosure of Government Assistance 5 IAS 21 The Effects of Changes in Foreign Exchange Rates 17 IAS 23 Borrowing Costs 5 IAS 24 Related Party Disclosures 4 IAS 27 Separate Financial Statements 13 IAS 28 Investments in Associates and joint ventures 13 IAS 32 Financial Instruments: Presentation 6 IAS 33 Earnings per Share 8 IAS 34 Interim Financial Reporting 8 IAS 36 Impairment of Assets 5,13 IAS 37 Provisions, Contingent Liabilities and Contingent Assets 11 IAS 38 Intangible Assets 5 IAS 39 Financial Instruments: Recognition and Measurement 6 IAS 40 Investment Property 5 IFRS 1 First-time Adoption of International Financial Reporting Standards 20 IFRS 2 Share-based Payment 9 IFRS 3 Business Combinations (revised) 13,15 IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations 4,5 IFRS 7 Financial Instruments: Disclosures 6 IFRS 8 Operating Segments 8 IFRS 9 Financial Instruments 6 IFRS 10 Consolidated Financial Statements 3,13 IFRS 11 Joint Arrangements 3,13 IFRS 12 Disclosure of Interests in Other Entities 3,13 IFRS 13 Fair Value Measurement 3,6 IFRS for SMEs IFRS for small and medium sized entities 12 Paper P2: Corporate Reporting (International) iv © Emile Woolf Publishing Limited Chapter: Other Statements The Conceptual Framework for Financial Reporting 3 Practice statement: Management Commentary 2 EDs, Discussion Papers and Other Documents ED2009/12 Financial Instruments: Amortised Cost and Impairment 6 ED 2010/06 Revenue from contracts with customers 4 ED 2010/09 Leases 7 ED 2011/04 Investment Entities 13 © Emile Woolf Publishing Limited v Paper P2 (INT) Corporate reporting S Syllabus and study guide Aim To apply knowledge, skills and exercise professional judgement in the application and evaluation of financial reporting principles and practices in a range of business contexts and situations. Main capabilities On successful completion of this examination candidates should be able to: A Discuss the professional and ethical duties of the accountant B Evaluate the financial reporting framework C Advise on and report the financial performance of entities D Prepare the financial statements of groups of entities in accordance with relevant accounting standards E Explain reporting issues relating to specialised entities F Discuss the implications of changes in accounting regulation on financial reporting G Appraise the financial performance and position of entities H Evaluate current developments Paper P2: Corporate Reporting (International) vi © Emile Woolf Publishing Limited Rationale The syllabus for Paper P2, Corporate Reporting, assumes knowledge acquired at the Fundamentals level including the core technical capabilities to prepare and analyse financial reports for single and combined entities. The Paper P2 syllabus takes the subject into greater depth and contextualises the role of the accountant as a professional steward and adviser/analyst by initially exploring the wider professional duties and responsibilities of the accountant to the stakeholders of an organisation. The syllabus examines the financial reporting framework within which the accountant operates and examines detailed financial reporting requirements for entities leading to the preparation of group financial reports in accordance with generally accepted accounting practice and relevant standards. The syllabus then deals with the nature of reporting for specialised entities including not-for-profit and small and medium-sized enterprises. The final sections of the syllabus explore – in more depth – the role of the accountant as financial analyst and adviser through the assessment of financial performance and position of entities, and the accountant’s role in assessing and advising on the implications of accounting regulation on corporate reporting. Finally, the syllabus covers the evaluation of current developments and their implications for financial reporting. Syllabus A The professional and ethical duty of the accountant 1. Professional behaviour and compliance with accounting standards 2. Ethical requirements of corporate reporting and the consequences of unethical behaviour 3. Social responsibility B The financial reporting framework 1. The applications, strengths and weaknesses of an accounting framework 2. Critical evaluation of principles and practices C Reporting the financial performance of entities 1. Performance reporting 2. Non-current assets 3. Financial instruments 4. Leases 5. Segment reporting 6. Employee benefits 7. Income taxes 8. Provisions, contingencies and events after the reporting date 9. Related parties 10. Share-based payment [...]... society between national and international reporting Evaluate the implications of worldwide convergence with International Financial Reporting Standards Discuss the influence of national regulators on international financial reporting Current reporting issues a) © Emile Woolf Publishing Limited Discuss current issues in corporate reporting xiii Paper P2: Corporate Reporting (International) xiv © Emile... Publishing Limited CHAPTER Paper P2 (INT) Corporate Reporting 1 The professional and ethical duty of the accountant Contents 1 2 © Emile Woolf Publishing Limited Professional behaviour and compliance with accounting standards Consequences of unethical behaviour 1 Paper P2: Corporate Reporting (International) Professional behaviour and compliance with accounting standards Introduction Professional behaviour... questions in Section B, which will normally comprise two questions which will be scenario or case -study based and one essay question which may have some computational element Section B could deal with any aspects of the syllabus viii © Emile Woolf Publishing Limited Syllabus and study guide Study guide This study guide provides more detailed guidance on the syllabus You should use this as the basis of... including step acquisitions Apply and discuss the criteria used to identify a subsidiary and an associate xi Paper P2: Corporate Reporting (International) e) f) g) h) i) 2 Continuing and discontinued interests a) b) 3 b) Outline and apply the translation of foreign currency amounts and transactions into the functional currency and the presentational currency Account for the consolidation of foreign operations... transfer should not be hidden and River should be consolidated 8 © Emile Woolf Publishing Limited CHAPTER Paper P2 (INT) Corporate Reporting 2 Social reporting Contents 1 2 © Emile Woolf Publishing Limited Corporate social responsibility Management commentary 9 Paper P2: Corporate Reporting (International) Corporate social responsibility Corporate social responsibility: the issues Reporting requirements... emissions into the air, emissions into the water, emissions into the earth and the use of non-renewable resources Since the business review is a part of the annual directors’ report, the external auditors are required to give an opinion on whether the information in the report is consistent with the financial statements However, this requirement for a business review applies only in the EU, not internationally... reflects badly not only on the accountant preparing the information but on the profession as a whole © Emile Woolf Publishing Limited 3 Paper P2: Corporate Reporting (International) There are two elements to professional competence: (1) achieving competence and then (2) maintaining that competence This is why there is a requirement for continuing professional development (CPD) after qualification Confidentiality... under the IFRS for SME’s including the revaluation model for certain assets Discuss and apply the simplifications introduced by the IFRS for SME’s including accounting for goodwill and intangible assets, financial instruments ,defined benefit schemes, exchange differences and associates and joint ventures Financial statements of groups of entities 1 Group accounting including statements of cash flows a)... equity method of accounting for associates Outline and apply the key definitions and accounting methods which relate to interests in joint arrangements Prepare and discuss group statements of cash flows Identify when an entity may no longer be viewed as a going concern or uncertainty exists surrounding the going concern status Identify and outline the circumstances in which a reconstruction would be... risks and opportunities and the associated sustainability performance indicators © Emile Woolf Publishing Limited 13 Paper P2: Corporate Reporting (International) The Institute of Social and Ethical Accountability (ISEA) has developed a series of principles-based standards that are intended to provide the basis for improving the sustainability performance of organisations These standards (which are called . emilewoolfpublishing.com 2013 ACCA P2 (INT) Corporate Reporting Publishing Study Text ACCA Paper P2 Corporate Reporting (International) . Publishing Publishing Welcome to Emile Woolf‘s study text for Paper P2 Corporate Reporting (INT) which is: Written by tutors Comprehensive