2015 ACCA p2 study text BPP

http://freeaccastudymaterial.blogspot.com/ / t.c om sp o og bl ter ial dy ma Paper P2 Corporate Reporting (International and United Kingdom) Study Text for exams up to June 2015 Free access to our Exam Success site Look inside htt p:/ June 2014 £32.00 For exams up to June 2015 BPP House 142-144 Uxbridge Road London W12 8AA United Kingdom T 0845 075 1100 (UK) T +44 (0)20 8740 2211 (Overseas) E Learningmedia@bpp.com bpp.com/learningmedia Study Text stu Study Text Contact us ACCA Approved ca • A user-friendly format for easy navigation • Exam focus points describing what the examining team will want you to • Regular Fast Forward summaries emphasising the key points in each chapter • Questions and quick quizzes to test your understanding • A practice question bank containing exam- standard questions with answers • A full index • All you need in one book ac In addition to ACCA examining team reviewed material you get: /fr ee Paper P2 Corporate Reporting (International and United Kingdom) This ACCA Study Text for Paper P2 Corporate Reporting (International and United Kingdom) has been comprehensively reviewed by the ACCA examining team This review guarantees appropriate depth and breadth of content and comprehensive syllabus coverage Corporate Reporting (International and United Kingdom) BPP Learning Media is dedicated to supporting aspiring business professionals with top-quality learning material as they study for demanding professional exams, often whilst working full time BPP Learning Media’s commitment to student success is shown by our record of quality, innovation and market leadership in paper-based and e-learning materials BPP Learning Media’s study materials are written by professionally qualified specialists who know from personal experience the importance of top-quality materials for exam success ACCA P2 ACCA approved content provider ACCA APPROVED CONTENT PROVIDER http://freeaccastudymaterial.blogspot.com/ ACP2ST14 (HO).indd 1-3 27/05/2014 18:14 co m/ http://freeaccastudymaterial.blogspot.com/ log sp o t S T U D Y ria ym ate CORPORATE REPORTING (INTERNATIONAL AND UNITED KINGDOM) l.b PAPER P2 tud BPP Learning Media is an ACCA Approved Learning Partner – content This means we work closely with ACCA to ensure this Study Text contains the information you need to pass your exam Highlight the most important elements in the syllabus and the key skills you need  Signpost how each chapter links to the syllabus and the study guide  Provide lots of exam focus points demonstrating what is expected of you in the exam  Emphasise key points in regular fast forward summaries  Test your knowledge in quick quizzes  Examine your understanding in our practice question bank  Reference all the important topics in our full index ea cc as  /fr e BPP's Practice & Revision Kit and i-Pass products also support this paper htt p:/ FOR EXAMS IN DECEMBER 2014 AND JUNE 2015 http://freeaccastudymaterial.blogspot.com/ T E X T log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ First edition 2007 All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd Seventh edition June 2014 ISBN 9781 4727 1086 (Previous ISBN 9781 4453 9654 5) We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions The suggested solutions in the exam answer bank have been prepared by BPP Learning Media Ltd, unless otherwise stated e-ISBN 9781 4453 6741 l.b British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library ria Published by ate BPP Learning Media Ltd BPP House, Aldine Place 142-144 Uxbridge Road London W12 8AA www.bpp.com/learningmedia as tud Polestar Wheatons Hennock Road Marsh Barton Exeter EX2 8RP ym Printed in the United Kingdom by © BPP Learning Media Ltd 2014 htt p:/ /fr e ea cc Your learning materials, published by BPP Learning Media Ltd, are printed on paper sourced from traceable, sustainable sources ii http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ co m/ Contents Page Helping you to pass – the ONLY P2 Study Text reviewed by the examiner! Studying P2 Important note for UK students The exam paper Part A Regulatory and ethical framework Financial reporting framework Professional and ethical duty of the accountant Environmental and social reporting 27 57 ate ria Non-current assets Employee benefits Income taxes Financial instruments Share-based payment Provisions, contingencies and events after the reporting period Related parties Leases l.b Part B Accounting standards 10 11 v vii vii xxxiii log sp o t Introduction 87 133 155 181 231 245 261 269 Part C Group financial statements Revision of basic groups Complex groups and joint arrangements Changes in group structures Continuing and discontinued interests Foreign currency transactions and entities Group statements of cash flows ym 12 13 14 15 16 17 291 337 363 393 401 423 Performance reporting Current developments Reporting for specialised entities Reporting for small and medium-sized entities as 18 19 20 21 tud Part D Performance reporting 561 647 651 htt p:/ /fr e ea cc Practice question and answer bank Mathematical tables Index Review form 449 507 523 549 Contents http://freeaccastudymaterial.blogspot.com/ iii http://freeaccastudymaterial.blogspot.com/ co m/ A note about copyright Dear Customer What does the little © mean and why does it matter? log sp o t Your market-leading BPP books, course materials and e-learning materials not write and update themselves People write them: on their own behalf or as employees of an organisation that invests in this activity Copyright law protects their livelihoods It does so by creating rights over the use of the content Breach of copyright is a form of theft – as well as being a criminal offence in some jurisdictions, it is potentially a serious breach of professional ethics With current technology, things might seem a bit hazy but, basically, without the express permission of BPP Learning Media:  Photocopying our materials is a breach of copyright  Scanning, ripcasting or conversion of our digital materials into different file formats, uploading them to facebook or emailing them to your friends is a breach of copyright l.b You can, of course, sell your books, in the form in which you have bought them – once you have finished with them (Is this fair to your fellow students? We update for a reason.) Please note the e-products are sold on a single user licence basis: we not supply ‘unlock’ codes to people who have bought them second-hand htt p:/ /fr e ea cc as tud ym ate ria And what about outside the UK? BPP Learning Media strives to make our materials available at prices students can afford by local printing arrangements, pricing policies and partnerships which are clearly listed on our website A tiny minority ignore this and indulge in criminal activity by illegally photocopying our material or supporting organisations that If they act illegally and unethically in one area, can you really trust them? iv http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ co m/ Helping you to pass – the BPP Learning Media Study Text reviewed by the ACCA examining-team! log sp o t BPP Learning Media – ACCA Approved Learning Partner - content As ACCA’s Approved Learning Partner – content, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examination team By incorporating the examination team’s comments and suggestions regarding the depth and breadth of syllabus coverage, the BPP Learning Media Study Text provides excellent, ACCA-approved support for your studies The PER alert ria l.b Before you can qualify as an ACCA member, you not only have to pass all your exams but also fulfil a three year practical experience requirement (PER) To help you to recognise areas of the syllabus that you might be able to apply in the workplace to achieve different performance objectives, we have introduced the ‘PER alert’ feature You will find this feature throughout the Study Text to remind you that what you are learning to pass your ACCA exams is equally useful to the fulfilment of the PER requirement Your achievement of the PER should now be recorded in your on-line My Experience record ate Tackling studying ym Studying can be a daunting prospect, particularly when you have lots of other commitments The different features of the text, the purposes of which are explained fully on the Chapter features page, will help you whilst studying and improve your chances of exam success tud Developing exam awareness Our Texts are completely focused on helping you pass your exam Our advice on Studying P2 outlines the content of the paper, the necessary skills you are expected to be able to demonstrate and any brought forward knowledge you are expected to have as Exam focus points are included within the chapters to highlight when and how specific topics were examined, or how they might be examined in the future cc Using the Syllabus and Study Guide ea You can find the syllabus and Study Guide on pages ix – xxxii of this Study Text /fr e Testing what you can Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can recall what you have learnt htt p:/ We include Questions – lots of them – both within chapters and in the Exam Question Bank, as well as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content Introduction http://freeaccastudymaterial.blogspot.com/ v Chapter features Each chapter contains a number of helpful features to guide you through each topic Topic list Syllabus reference What you will be studying in this chapter and the relevant section numbers, together with ACCA syllabus references log sp o t Topic list Introduction Puts the chapter content in the context of the syllabus as a whole Study Guide Links the chapter content with ACCA guidance Exam Guide Highlights how examinable the chapter content is likely to be and the ways in which it could be examined What you are assumed to know from previous studies/exams FAST FORWARD Summarises the content of main chapter headings, allowing you to preview and review each section easily l.b Knowledge brought forward from earlier studies Demonstrate how to apply key knowledge and techniques Key terms Definitions of important concepts that can often earn you easy marks in exams ate ria Examples When and how specific topics were examined, or how they may be examined in the future Exam focus points Formulae that are not given in the exam but which have to be learnt tud Question ym Formula to learn as Case Study ea cc Chapter Roundup /fr e Quick Quiz Gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER) Gives you essential practice of techniques covered in the chapter Real world examples of theories and techniques A full list of the Fast Forwards included in the chapter, providing an easy source of review A quick test of your knowledge of the main topics in the chapter Found at the back of the Study Text with more comprehensive chapter questions Cross referenced for easy navigation htt p:/ Exam Question Bank vi co m/ http://freeaccastudymaterial.blogspot.com/ Introduction http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ co m/ Studying P2 log sp o t Paper P2 Corporate Reporting is a tough paper, reflecting the demands that will be made upon the professional accountant in his or her working life At the Fundamentals level, you will have studied the essentials of financial statement preparation and analysis, including those of group accounts At the Professional level, these essentials will be assumed knowledge You will be required to apply them, assuming the role of a professional adviser and analyst to the management as well as the shareholders and other stakeholders What P2 is about The P2 syllabus comprises eight main areas: The professional and ethical duty of the accountant The financial reporting framework Reporting the financial performance of entities Financial statements of groups of entities Specialised entities Implications of changes in accounting regulation on financial reporting The appraisal of financial performance and position of entities Current developments l.b A B C D E F G H ate ria There is, of course, some overlap between these areas For example, if you are discussing current developments (H), you might be talking about the proposed changes to accounting for business combinations (D) and considering the implications of changes in accounting regulation (F) and perhaps even the ethical duty of the accountant to report those changes fairly and accurately (A) Skills you have to demonstrate ym At the Fundamentals level, the questions would be more easily categorised into syllabus areas However, at this level you may need to demonstrate knowledge, skills and thinking from outside the syllabus area that the question seems to be about on the surface The examiner has stated: tud Students should be capable of relating professional issues to relevant concepts and practical situations The evaluation of alternative accounting practices and the identification and prioritisation of issues will be a key element of the paper Professional and ethical judgement will need to be exercised, together with the integration of technical knowledge when addressing corporate reporting issues in a business context cc as So the paper is not predictable That said, clear guidance has been given The compulsory Section A question, worth 50 marks, will always be on group accounts It will also deal with issues in financial reporting and will be case study based In Section B, questions could be on any area of the syllabus, but we have been told that two questions will be scenario based and one question will be an essay You have a choice of two from three ea Increasingly, questions are discursive rather than numerical, so it is vital that you get practice at answering this type of question Important note for UK students htt p:/ /fr e If you are sitting the UK P2 paper you will be studying under International standards and up to 20 marks will be for comparisons between International and UK GAAP The ACCA UK Syllabus and Study Guide gives the following advice: International Financial Reporting Standards (IFRS) are the main accounting standards examined in the preparation of financial information The key differences between UK GAAP and International Financial Reporting Standards are looked at on a subject by subject basis The comparison between IFRS and UK GAAP will be based on the new UK GAAP as set out in FRSs 100-102, so the standard by standard Introduction http://freeaccastudymaterial.blogspot.com/ vii http://freeaccastudymaterial.blogspot.com/ co m/ comparisons that appeared in previous editions of this study guide are now combined in outcome C11 (d): Discuss the key differences between the IFRS for SMEs and UK GAAP This Study Text covers all the topics you need to know under International Financial Reporting Standards An online supplement will be available at www.bpp.com/learning-media, covering the additional UK issues log sp o t Exam technique for P2 Do not be needlessly intimidated There is no shortcut to passing this exam It looks very difficult indeed, and many students wonder if they will ever pass But many How they this? Easy marks ria l.b All the questions are demanding, but there are many easy marks to be gained Suppose, for example, you had a consolidated statement of cash flows with a disposal, some foreign exchange complications and an impairment calculation There will be easy marks available simply for the basic cash flow aspects, setting out the proforma, setting up your workings, presenting your work neatly If you recognise, as you should, that the disposal needs to be taken into account, of course you will get marks for that, even if you make a mistake in the arithmetic If you get the foreign exchange right, so much the better, but you could pass the question comfortably omitting this altogether If you’re short of time, this is what you should ate Be ruthless in ignoring the complications Look at the question Within reason, if there are complications – often only worth a few marks – that you know you will not have time or knowledge to do, cross them out It will make you feel better Than tackle the bits you can This is how people pass a seemingly impossible paper ym Answer all questions and all parts of questions tud The examiner frequently comments that students don't this, so they miss easy opportunities to gain marks Be ruthless in allocating your time as At BPP, we have seen how very intelligent students one almost perfect question, one averagely good and one sketchy For a fifty mark question, the first twenty marks are the easiest to get Then you have to push it up to what you think is thirty to get yourself a clear pass For a twenty-five mark question, the first eight to ten marks are the easiest to get, and then you must try to push it up to fifteen htt p:/ /fr e ea cc Do your best question either first or second, and the compulsory question either first or second The compulsory question, being on groups, will always have some easy marks available for consolidation techniques viii Introduction http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ co m/ Syllabus and Study Guide The P2 syllabus and study guide can be found below htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t International Introduction http://freeaccastudymaterial.blogspot.com/ ix http://freeaccastudymaterial.blogspot.com/ JAY GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 MAY 20X5 co m/ (a) $m Assets Property, plant and equipment (W9) 300 + 40 + 14 + (5 – 0.1) – 5.7 (W9) Goodwill (W2) Investment in associate (W3) Investment (10 – 0.5) (W6) Current assets (120 – 6) (W7) log sp o t Equity and liabilities Share capital Share premium Revaluation surplus (W8) Retained earnings (W4) Non-controlling interest (W5) 100.0 50.0 15.0 136.7 301.7 14.0 315.7 64.0 120.0 499.7 l.b Non-current liabilities Current liabilities ria Workings 353.2 10.0 13.0 9.5 114.0 499.7 Group structure 80% ym Gee ate Jay 25% Hem Goodwill: Gee (on acquiring control) $m 30 12 tud Consideration transferred Non-controlling interests Fair value of previously held equity interest ($30m consideration transferred × 30%/50%) 18 Investment in associate $m 12 13 cc (50) 10 as Fair value of identifiable net assets at acq'n htt p:/ /fr e ea Cost of investment Share of profit for year ended 31 May 20X5 (W5) Practice answer bank http://freeaccastudymaterial.blogspot.com/ 641 http://freeaccastudymaterial.blogspot.com/ Per question PUP on machinery (W6) PUP on investment (associate) (W6) Impairment loss on receivable Pre-acquisition (NA excl FV adjustments, SC and SP): 50 – 14 – 10 – 20 32 – – – 14 Jay $m 139.00 (5.70) (0.5) (1.10) Gee $m 16 (6) 10 Group share Gee: 80% × 10 Hem: 25% × Less fair value gain recognised in Jay's separate FS since Gee has been a sub *: Hem $m 10 co m/ Retained earnings log sp o t (6) 8.0 (4.0) 136.7 ria l.b * Fair value gain in Jay’s separate FS since Gee has been a sub (from June 20X4) Fair value of 80% at 31 May 20X5 Less: Fair value of 50% at June 20X4 Less: Fair value of 30% at June 20X4 (30 x 30%/50%) Fair value gain since June 20X4 $m 52 (30) (18) Non-controlling interests ate Tutorial note There is no gain or loss on derecognition of the 30% financial asset at June 20X4 because the financial asset is already stated at fair value ym NCI at acquisition (date of control ie1 June 20X4) NCI share of post-acquisition retained earnings ((W4) 10 × 20%) $m 12 14 Provision for unrealised profit tud Sales from Jay to Gee as Profit (19 – 13) Less depreciation on machine constructed with goods: (6  10%  6/12) Sale of investments from Hem to Jay Impairment of receivable Cost of machinery Less deposit received Bad debt written off Less net book value of machine (included in tangible assets) (W9) Impairment loss deducted from retained earnings /fr e ea cc Group share of profit (25%  2) htt p:/ 642 Revaluation surplus Jay Gee: at date control acquired (80%  14 – 14) Practice answer bank http://freeaccastudymaterial.blogspot.com/ $m 6.0 (0.3) 5.7 $m 0.5 $m 8.0 (2.0) 6.0 (4.9) 1.1 $m 15.00 0.00 15.00 http://freeaccastudymaterial.blogspot.com/ Property, plant and equipment $m Jay Gee Fair value adjustment (land) Machine Cost Less depreciation (3/12  10%  5) 5.0 (0.1) $m 300.0 40.0 14.0 co m/ log sp o t 4.9 (5.7) 353.2 Provision for unrealised profit (W6) Note that Jay has retained title to the machinery because the first instalment has not been paid The initial transaction of the purchase of goods from the foreign supplier would be recorded in the ledger accounts at $5 million (€8/1.6) Therefore both the purchase and the payables balance would be recorded at this amount At the year end the payables balance is restated to the closing rate but the inventories remain at $5 million Therefore the payable is restated to $6.2 million (€8m/1.3) and an exchange loss is taken to profit or loss of $1.2 million ($6.2 – 5m) l.b (b) ria On the sale, the original transaction is recorded at $2.5 million (€4m/1.6) as both a sale and a receivable When payment is made the amount actually received is $3.1 million (€4m/1.3) and an exchange gain is recognised in profit or loss of $0.6 million ($3.1 – 2.5m) ate When the investment property was first purchased it should have been recognised in the statement of financial position at $20 million (€28m/1.4) At the year end the investment property has fallen in value to €24 million and the exchange rate has changed to 1.3 Therefore at 31 May 20X6 the property would be valued at $18.5 million (€24m/1.3) (c) ym The fall in value of $1.5 million ($20 – 18.5m) is recognised in profit or loss The loss is a mixture of a fall in value of the property and a gain due to the exchange rate movement However, as the investment property is a non-monetary asset the foreign currency element is not recognised separately Nature of corporate citizenship tud Increasingly businesses are expected to be socially responsible as well as profitable Strategic decisions by businesses, particularly global businesses nearly always have wider social consequences It could be argued, as Henry Mintzburg does, that a company produces two outputs: goods and services, and the social consequences of its activities, such as pollution as One major development in the area of corporate citizenship is the environmental report While this is not a legal requirement, a large number of major companies produce them Worldwide there are around 20 award schemes for environmental reporting, notably the ACCA's cc Jay might be advised to adopt the guidelines on sustainability given in the Global Reporting Initiative These guidelines cover a number of areas (economic, environmental and social) The GRI specifies key performance indicators for each area For environmental reporting, the indicators are: Energy Water Biodiversity Emissions Energy and waste Products and services Compliance Transport htt p:/ /fr e ea (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Another environmental issue which the company could consider is emission levels from factories Many companies now include details of this in their environmental report Practice answer bank http://freeaccastudymaterial.blogspot.com/ 643 http://freeaccastudymaterial.blogspot.com/ co m/ The other main aspect of corporate citizenship where Jay scores highly is in its treatment of its workforce The company sees the workforce as the key factor in the growth of its business The car industry had a reputation in the past for restrictive practices, and the annual report could usefully discuss the extent to which these have been eliminated log sp o t Employees of a businesses are stakeholders in that business, along with shareholders and customers A company wishing to demonstrate good corporate citizenship will therefore be concerned with employee welfare Accordingly, the annual report might usefully contain information on details of working hours, industrial accidents and sickness of employees htt p:/ /fr e ea cc as tud ym ate ria l.b In conclusion, it can be seen that the annual report can, and should go far beyond the financial statements and traditional ratio analysis 644 Practice answer bank http://freeaccastudymaterial.blogspot.com/ ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud Mathematical tables 645 http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ 646 http://freeaccastudymaterial.blogspot.com/ Present value table co m/ http://freeaccastudymaterial.blogspot.com/ Present value of £1 = (1+r)-n where r = interest rate, n = number of periods until payment or receipt Periods Discount rates (r) (n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 0.990 0.980 0.971 0.961 0.951 0.980 0.961 0.942 0.924 0.906 0.971 0.943 0.915 0.888 0.863 0.962 0.925 0.889 0.855 0.822 0.952 0.907 0.864 0.823 0.784 0.943 0.890 0.840 0.792 0.747 0.935 0.873 0.816 0.763 0.713 0.926 0.857 0.794 0.735 0.681 0.917 0.842 0.772 0.708 0.650 10 0.942 0.933 0.923 0.914 0.905 0.888 0.871 0.853 0.837 0.820 0.837 0.813 0.789 0.766 0.744 0.790 0.760 0.731 0.703 0.676 0.746 0.711 0.677 0.645 0.614 0.705 0.665 0.627 0.592 0.558 0.666 0.623 0.582 0.544 0.508 0.630 0.583 0.540 0.500 0.463 0.596 0.547 0.502 0.460 0.422 0.564 0.513 0.467 0.424 0.386 11 12 13 14 15 0.896 0.887 0.879 0.870 0.861 0.804 0.788 0.773 0.758 0.743 0.722 0.701 0.681 0.661 0.642 0.650 0.625 0.601 0.577 0.555 0.585 0.557 0.530 0.505 0.481 0.527 0.497 0.469 0.442 0.417 0.475 0.444 0.415 0.388 0.362 0.429 0.397 0.368 0.340 0.315 0.388 0.356 0.326 0.299 0.275 0.350 0.319 0.290 0.263 0.239 16 17 18 19 20 0.853 0.844 0.836 0.828 0.820 0.728 0.714 0.700 0.686 0.673 0.623 0.605 0.587 0.570 0.554 0.534 0.513 0.494 0.475 0.456 0.458 0.436 0.416 0.396 0.377 0.394 0.371 0.350 0.331 0.312 0.339 0.317 0.296 0.277 0.258 0.292 0.270 0.250 0.232 0.215 0.252 0.231 0.212 0.194 0.178 0.218 0.198 0.180 0.164 0.149 12% 13% 0.901 0.812 0.731 0.659 0.593 0.893 0.797 0.712 0.636 0.567 0.885 0.783 0.693 0.613 0.543 10 0.535 0.482 0.434 0.391 0.352 0.507 0.452 0.404 0.361 0.322 11 12 13 14 15 0.317 0.286 0.258 0.232 0.209 /fr e htt p:/ log sp o t l.b ria ate 11% 15% 16% 17% 18% 19% 20% 0.877 0.769 0.675 0.592 0.519 0.870 0.756 0.658 0.572 0.497 0.862 0.743 0.641 0.552 0.476 0.855 0.731 0.624 0.534 0.456 0.847 0.718 0.609 0.516 0.437 0.840 0.706 0.593 0.499 0.419 0.833 0.694 0.579 0.482 0.402 0.480 0.425 0.376 0.333 0.295 0.456 0.400 0.351 0.308 0.270 0.432 0.376 0.327 0.284 0.247 0.410 0.354 0.305 0.263 0.227 0.390 0.333 0.285 0.243 0.208 0.370 0.314 0.266 0.225 0.191 0.352 0.296 0.249 0.209 0.176 0.335 0.279 0.233 0.194 0.162 0.287 0.257 0.229 0.205 0.183 0.261 0.231 0.204 0.181 0.160 0.237 0.208 0.182 0.160 0.140 0.215 0.187 0.163 0.141 0.123 0.195 0.168 0.145 0.125 0.108 0.178 0.152 0.130 0.111 0.095 0.162 0.137 0.116 0.099 0.084 0.148 0.124 0.104 0.088 0.074 0.135 0.112 0.093 0.078 0.065 0.163 0.146 0.130 0.116 0.104 0.141 0.125 0.111 0.098 0.087 0.123 0.108 0.095 0.083 0.073 0.107 0.093 0.081 0.070 0.061 0.093 0.080 0.069 0.060 0.051 0.081 0.069 0.059 0.051 0.043 0.071 0.060 0.051 0.043 0.037 0.062 0.052 0.044 0.037 0.031 0.054 0.045 0.038 0.031 0.026 tud as cc 0.188 0.170 0.153 0.138 0.124 14% ym (n) 16 17 18 19 20 0.909 0.826 0.751 0.683 0.621 Discount rates (r) ea Periods 10% Mathematical tables http://freeaccastudymaterial.blogspot.com/ 647 Cumulative present value table co m/ http://freeaccastudymaterial.blogspot.com/ This table shows the present value of £1 per annum, receivable or payable at the end of each year for n years Periods Discount rates (r) (n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 0.990 1.970 2.941 3.902 4.853 0.980 1.942 2.884 3.808 4.713 0.971 1.913 2.829 3.717 4.580 0.962 1.886 2.775 3.630 4.452 0.952 1.859 2.723 3.546 4.329 0.943 1.833 2.673 3.465 4.212 0.935 1.808 2.624 3.387 4.100 0.926 1.783 2.577 3.312 3.993 0.917 1.759 2.531 3.240 3.890 10 5.795 6.728 7.652 8.566 9.471 5.601 6.472 7.325 8.162 8.983 5.417 6.230 7.020 7.786 8.530 5.242 6.002 6.733 7.435 8.111 5.076 5.786 6.463 7.108 7.722 4.917 5.582 6.210 6.802 7.360 4.767 5.389 5.971 6.515 7.024 4.623 5.206 5.747 6.247 6.710 4.486 5.033 5.535 5.995 6.418 4.355 4.868 5.335 5.759 6.145 11 12 13 14 15 10.37 11.26 12.13 13.00 13.87 9.787 10.58 11.35 12.11 12.85 9.253 9.954 10.63 11.30 11.94 8.760 9.385 9.986 10.56 11.12 8.306 8.863 9.394 9.899 10.38 7.887 8.384 8.853 9.295 9.712 7.499 7.943 8.358 8.745 9.108 7.139 7.536 7.904 8.244 8.559 6.805 7.161 7.487 7.786 8.061 6.495 6.814 7.103 7.367 7.606 16 17 18 19 20 14.718 15.562 16.398 17.226 18.046 13.578 14.292 14.992 15.678 16.351 12.561 13.166 13.754 14.324 14.877 11.652 12.166 12.659 13.134 13.590 10.838 11.274 11.690 12.085 12.462 9.447 9.763 10.059 10.336 10.594 8.851 9.122 9.372 9.604 9.818 8.313 8.544 8.756 8.950 9.129 7.824 8.022 8.201 8.365 8.514 Periods Discount rates (r) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 0.901 1.713 2.444 3.102 3.696 0.893 1.690 2.402 3.037 3.605 0.885 1.668 2.361 2.974 3.517 0.877 1.647 2.322 2.914 3.433 0.870 1.626 2.283 2.855 3.352 0.862 1.605 2.246 2.798 3.274 0.855 1.585 2.210 2.743 3.199 0.847 1.566 2.174 2.690 3.127 0.840 1.547 2.140 2.639 3.058 0.833 1.528 2.106 2.589 2.991 10 4.231 4.712 5.146 5.537 5.889 4.111 4.564 4.968 5.328 5.650 3.998 4.423 4.799 5.132 5.426 3.889 4.288 4.639 4.946 5.216 3.784 4.160 4.487 4.772 5.019 3.685 4.039 4.344 4.607 4.833 3.589 3.922 4.207 4.451 4.659 3.498 3.812 4.078 4.303 4.494 3.410 3.706 3.954 4.163 4.339 3.326 3.605 3.837 4.031 4.192 11 12 13 14 15 6.207 6.492 6.750 6.982 7.191 5.938 6.194 6.424 6.628 6.811 5.687 5.918 6.122 6.302 6.462 5.453 5.660 5.842 6.002 6.142 5.234 5.421 5.583 5.724 5.847 5.029 5.197 5.342 5.468 5.575 4.836 4.988 5.118 5.229 5.324 4.656 4.793 4.910 5.008 5.092 4.486 4.611 4.715 4.802 4.876 4.327 4.439 4.533 4.611 4.675 7.379 7.549 7.702 7.839 7.963 6.974 7.120 7.250 7.366 7.469 6.604 6.729 6.840 6.938 7.025 6.265 6.373 6.467 6.550 6.623 5.954 6.047 6.128 6.198 6.259 5.668 5.749 5.818 5.877 5.929 5.405 5.475 5.534 5.584 5.628 5.162 5.222 5.273 5.316 5.353 4.938 4.990 5.033 5.070 5.101 4.730 4.775 4.812 4.843 4.870 tud as cc ea htt p:/ /fr e ym (n) 16 17 18 19 20 648 0.909 1.736 2.487 3.170 3.791 log sp o t l.b ria ate 10.106 10.477 10.828 11.158 11.470 10% Mathematical tables http://freeaccastudymaterial.blogspot.com/ ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud Index 649 http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ 650 http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ ym Barriers to harmonisation, 515 ea cc as tud Basic EPS, 469 Basis of provision of deferred tax, 168 Behaviours, 38 Beliefs, 38 Benefits of cash flow information, 425 Big GAAP/little GAAP, 551 Biological assets, 535, 537 Biological transformation, 535 Borrowing costs, 96 Bribery, 29, 40 BS 7750 Environmental Management System, 61 Bureaucracy, 37 Business combination, 126, 292, 293 Carrying amount, 90, 98, 110, 535 /fr e Cash, 426 Cash and cash equivalents, 426 Cash equivalents, 426 Cash flow hedge, 211 Cash flows, 424, 426 Cash generating unit, 101 CERES Principles, 59 Change in accounting estimate, 457 htt p:/ log sp o t l.b ate Accounting policies, 457, 495 Accounting profit, 156 Acquiree, 293 Acquirer, 293 Actuarial assumptions, 141, 143 Actuarial method, 276 Actuarial method (before tax), 276 Advantages of global harmonisation, 515 Age and gender, 35 Agricultural activity, 535 Agricultural produce, 535, 539 Amortised cost, 198 Amortised cost of a financial asset or financial liability, 198 Analysis of exchange differences, 413 Antidilution, 469 Asset ceiling, 140 Asset turnover, 484 Assets, 88, 89 Assets held for sale, 395 Associate, 174, 293, 294, 300, 321 Associates and joint ventures, 435 Authority, 37 Change in functional currency, 419 Changes in accounting policy, 496, 497 Changes in direct ownership, 386 Chemical Industries Association Responsible care programme, 60 Close members of the family of an individual, 263 Closing rate, 404 Code of Ethics and Conduct, 46 Cognitivism, 31 Collectivism, 35 Comparability, 10 Comparative accounting systems, 514 Competence, 46 Component of an entity, 396 Compound financial instruments, 188 Conceptual Framework, Conceptual nature of employee benefit costs, 134 Confederation of British Industry Agenda for voluntary action, 60 Confidentiality, 46 Conflict of interest, 49 Consequentialist ethics, 33 Consolidated financial statements, 301 Consolidated income statement, 323 Consolidated statement of financial position, 323 Consolidating sub-subsidiaries, 340 Constraints on useful information, 11 Constructive obligation, 142, 248 Constructive obligations, 256 Context-related factors, 37 Contingent asset, 252, 255 Contingent consideration, 294 Contingent liability, 252, 255 Contingent rent, 274 Contingent rights and obligations, 185 Contingent share agreement, 468 Contingently issuable ordinary shares, 468 Control, 263, 293 299 Conversion, 402 Corporate culture, 44 Corporate governance, Cost, 90, 110 Costs to sell, 396 Cross-sectional analysis, 480 Cultural context, 39 Cultural context of ethics, 35 Cultural leadership, 42 Culture, 43 Current tax, 156 ria Absolutism, 31 co m/ Note: Key Terms and their page references are given in bold Index http://freeaccastudymaterial.blogspot.com/ 651 http://freeaccastudymaterial.blogspot.com/ as Eco-audit, 60 tud ym co m/ log sp o t l.b ate Davies, Hunter, 39 Debt ratios, 486 Deductible temporary differences, 159, 165, 173 Deferral method, 168 Deferred tax assets, 159 Deferred tax liabilities, 159 Deferred taxation and business combinations, 171 Deficit or surplus, 140 Defined benefit liability, 143 Defined benefit plans, 138, 140 Defined contribution plans, 138, 139 Definition of an asset, 88 Demographic assumptions, 143 Deontology, 32 Depreciation, 478 Derivative, 184 Derivative instruments, 182 Determining functional currency, 407 Diluted EPS, 470 Dilution, 469 Direct holdings in sub-subsidiaries, 351 Direct method, 428 Disclosure of financial instruments, 217 Discontinued operation, 396 Discount rate, 145 Discussion Paper: Review of the Conceptual Framework, 13, 455 Disposal group, 394 Disposal of foreign entity, 419 Disposals, 374 Dividend in specie, 387 Dividends, 17 Divisionalisation, 389 Due care, 46 Effective interest method, 198 Effective interest rate, 198 Efficient market hypothesis, 481 Egoism, 34 Embedded derivative, 208 Employee benefits, 136 Environmental audit, 60 Environmental Impact Assessments (EIAs), 60 Environmental Quality Management (EQM), 60 Environmental report, 63 Environmental SWOT analysis, 60 Equity instrument, 184, 234 Equity instrument granted, 234 Equity interests, 294 Equity method, 300, 321, 322 Ethical absolutism, 31 Ethical framework, 46 Ethical relativism, 30 Ethical theory, 30 Ethics, 39 European Commission (EC), 516 Exchange difference, 404, 405 Exchange rate, 404 Exemption from preparing group accounts, 302 Expected credit losses, 205, 206 Extortion, 29, 40 ria Date of effective control, 340 htt p:/ /fr e ea cc Eco-labelling, 61 Economic life, 273 ED Acquisition of an interest in a joint operation, 360 ED Equity method: share of other net asset changes, 331 ED Expected credit losses, 206 ED Improvements to IFRS, 509 ED Leases, 281 ED Sale or contribution of assets between an investor and its associate or joint venture, 330 Education and employment, 36 Effect of GAAP on gearing, 488 Effective date of disposal, 375 652 Fair value, 17, 90, 110, 184, 234, 294, 312, 396, 535 Fair value adjustments, 312 Fair value hedge, 211 Fair value model, 112 Femininity, 35 Finance lease, 271 Finance lease transactions, 436 Financial Accounting Standards Board (FASB), 7, 89 Financial analysis, 480 Financial asset, 183 Financial assumptions, 143 Financial instrument, 183 Financial liability, 183 Financial Reporting Standards, Financing activities, 426, 427 Foreign associated undertakings, 419 Foreign currency, 404, 478 Foreign operation, 406 Forgivable loans, 94 Framework, 16 FRED 39, 256 Friends of the Earth Environmental charter for local government, 60 Functional currency, 404 Fundamental principles, 45 Index http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ log sp o t (GAAP), Gifts, 30, 40 Going concern, 541 Goodwill, 125, 126, 311 Goodwill and fair value adjustments, 414 Government grants, 94 Grant date, 234 Grants related to assets, 94 Grants related to income, 94 Grease money, 29, 40 Gross investment in the lease, 273 Group, 293 Group of biological assets, 535 Guaranteed residual value, 273 ate ria l.b Harvest, 535 Hedge accounting: IFRS Chapter Review Draft, 214 Hedge effectiveness, 210 Hedge of a net investment in a foreign operation, 211 Hedged item, 210 Hedging, 210 Hedging instrument, 210 Held for sale, 395 IAS Presentation of financial statements, 189, /fr e ea cc as tud ym 450 IAS Statements of cash flows, 425 IAS Accounting policies, changes in accounting estimates and errors, 158, 320, 457 IAS 12 Income taxes, 156, 189 IAS 16 Property, plant and equipment, 90 IAS 17 Leases, 271 IAS 19 Employee benefits, 135 IAS 21 The effects of changes in foreign exchange rates, 404 IAS 23 Borrowing costs, 96 IAS 24 Related party disclosures, 262 IAS 25 Accounting for investments, 301 IAS 28 Investments in associates and joint ventures, 320 IAS 32 Financial instruments: presentation, 186 IAS 34 Interim financial reporting, 474 IAS 36 Impairment of assets, 98 IAS 37 Provisions, contingent liabilities and contingent assets, 247 IAS 39 Financial instruments: recognition and measurement, 191 htt p:/ IAS 40 Investment property, 110 IAS 41 Agriculture, 234 IASB Conceptual Framework, IFAC's Code of Ethics, 45 IFRS Share based payment, 232 IFRS Business combinations, 115, 126, 311 IFRS Non-current assets held for sale and discontinued operations, 98, 394 IFRS Financial Instruments disclosures, 186 IFRS Operating segments, 460 IFRS Financial Instruments, 183, 190 IFRS 10 Consolidated financial statements, 263 IFRS 11 Joint arrangements, 354 IFRS 12 Disclosure of interests in other entities, 331 IFRS 13 Fair value measurement, 219 Impaired asset, 98 Impairment, 98 Implications of high or low gearing, 487 Implicit interest rate, 285 Impracticable, 455, 457 Inception of the lease, 273 Independent, 46 Indirect method, 428 Indirect versus direct, 428 Individual influences, 35 Individualism, 35 Influences on ethics, 35 Initial direct costs, 273 Insider dealing, 482 Intangible asset, 115 Intangible fixed asset, 125 Integrated reporting, 78 Interest, 17 Interest, dividends, losses and gains, 189 Interest, royalties and dividends, 19 Interest rate implicit in the lease, 272 Interim financial report, 474 Interim period, 474 Internal reconstructions, 541 Internally generated goodwill, 117 International Accounting Standards Board, International Chamber of Commerce Business Charter for sustainable developments, 60 International Financial Reporting Standards (IFRSs), International Monetary Fund, 34 Inter-temporal analysis, 480 Intrinsic value, 234 Investing activities, 426, 427 Investment, 294 Investment property, 110 Issue-related factors, 37 co m/ Generally Accepted Accounting Practice Index http://freeaccastudymaterial.blogspot.com/ 653 http://freeaccastudymaterial.blogspot.com/ Onerous contract, 250 Joint control, 263, 293, 321, 354 Joint operation, 354 Joint venture, 174, 293, 294, 354 Jones, Thomas, 37 Onerous contracts, 257 Operating activities, 426 Operating lease, 271, 277 Operating segment, 461 Options, warrants and their equivalents, 468 Ordinary shares, 468 Organisational culture, 38 Organisational field, 38 Originating timing differences, 161 Other long term benefits, 151 Other long-term employee benefits, 136 Owner-occupied property, 110 Lease, 270, 271 Lease term, 273 Leasing, 270 Lessee's incremental borrowing rate of interest, 273 Lessor accounting, 278 Leverage, 487 Liability, 247, 255 Liability method, 168 Liquidity, 485 Locus of control, 36 P l.b ria ym tud as cc N htt p:/ /fr e ea arrow and broad approach t, 14 National and cultural beliefs, 35 National context, 39 Nature of profit, 497 Net defined benefit liability, 140 Net investment in a foreign operation, 406 Net investment in the lease, 273 New top holding company, 386 Non-cancellable lease, 273 Non-cognitivism, 30 Non-controlling interest, 294, 325, 435 Non-current asset, 89 Non-market based vesting conditions, 235 654 arent, 293 PBIT, profit before interest and tax, 483 Pension schemes, 138 Permanent differences, 161 Personal integrity, 36 Plan assets, 141, 143 Pluralism, 34 Post-employment benefits, 136, 138 Potential ordinary share, 468 Power distance, 35 Present value of a defined benefit, 140 Presentation currency, 404 Presentation of financial instruments, 186 Prior period errors, 457 Professional behaviour, 46 Profit margin, 484 Profit smoothing, 247 Profitability, 483 Progress with harmonisation, 516 Property, plant and equipment, 90 Prospective application, 457 Provision, 247 Psychological factors, 36 Purchased goodwill, 125, 126 ate Management commentary, 501 Manufacturer/dealer lessors, 279 Market based vesting conditions, 235 Masculinity, 35 Material, 455 Materiality, 477 Measurement date, 234 Measurement of revenue, 17 Minimum lease payments, 272 Minimum premium value, 388 Minority interests, 342 Mintzberg, 69 Monetary items, 404 Moral framing, 37 Moral imagination, 36 Moral intensity, 37 Multi-employer plans, 138, 139 Multinational companies, 481 log sp o t K ant, 32 Key management personnel, 263 co m/ Joint arrangement, 293, 354 Qualifying asset, 96 Reconstruction scheme, 541 Recoverable amount, 99, 396 Recoverable amount of an asset, 99 Related party, 263 Related party transaction, 262, 263 Relativism, 30 Rendering of services, 18 Research and development costs, 117 Residual value, 90 Restructuring, 251 Restructuring provisions, 257 Retrospective application, 457 Index http://freeaccastudymaterial.blogspot.com/ Retrospective restatement, 457 Revaluations, 92 Revalued assets, 163 Revenue, 17 Reversal of an impairment loss, 106 Reverse acquisitions, 320 Right-of-use asset, 282 Royalties, 17 Taken for granted assumptions, 39 log sp o t Tax, 478 Tax base, 159, 171 Tax expense (tax income), 156 Tax planning opportunities, 167 Taxable profit (tax loss), 156 Taxable temporary differences, 159, 173 Teleological ethics, 33 Teleological or consequentialist ethics: utilitarianism, 33 Temporary differences, 159 Termination benefits, 136 Transactions between a venturer and a joint venture, 359 Translation, 403 Treasury shares, 189 Trend analysis, 480 Sale and leaseback transactions, 280 l.b Uncertainty avoidance, 35 ate ria Unearned finance income, 273 Unguaranteed residual value, 273, 284 Unprofessional behaviour, 49 Useful life, 273 Utilitarianism, 33 Value in use, 99, 396 Value of purchased goodwill, 126 Values, 38 Vest, 234 Vesting conditions, 235 Vesting period, 235 Voluntary liquidation, 544 Whistle-blowing, 45 Window dressing, 482, 498, 499, 500 Work roles, 38 htt p:/ /fr e ea cc as tud ym Sale of goods, 18 Seasonal fluctuations, 497 Segment reporting, 460 Settlement, 147 Share option, 234 Share-based payment arrangement, 234 Share-based payment transaction, 234 Shareholders' investment ratios, 488 Short-term employee benefits, 136 Significant influence, 263, 293, 300, 321 Situational influences, 36 Social and political considerations, 481 Social attitudes, 39 Spot exchange rate, 404 Stock exchanges, 481 Structural adjustment programmes, 34 Structured entity, 331 Subsidiaries, 299 Subsidiary, 293, 294 Subsidiary moved along, 387 Subsidiary moved down, 388 Substance over form, 10 Sub-subsidiaries, 339 Sum of the digits method, 276 Supplier audits, 61 Systems of reward, 37 co m/ http://freeaccastudymaterial.blogspot.com/ Index http://freeaccastudymaterial.blogspot.com/ 655 ... http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ co m/ Helping you to pass – the BPP Learning Media Study Text reviewed by the ACCA examining-team! log sp o t BPP. .. http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ co m/ Contents Page Helping you to pass – the ONLY P2 Study Text reviewed by the examiner! Studying P2 Important... http://freeaccastudymaterial.blogspot.com/ Introduction http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ co m/ Studying P2 log sp o t Paper P2 Corporate Reporting is a tough paper,