Topic 2

Financial HighlightsReview of the year

Chairman’s Review Chief Executives review Operations Review Financial Review Other reviews

Directors InformationCorporate Governance Information

2

Directors’ ReportStatement of Directors

ResponsibilitiesAuditors’ ReportFinancial Statements Accounting Policies Information re subsidiary companies

(where relevant) Investors InformationNotice of AGM

3

Reading: Business Accounting 2 (11thEd)Chs:4,12,13,14Frank Wood & Alan Sangster

Companies Acts 1963 – 2005 Separate legal entity

Ownership and management separated Liability limited to value of shares Classes of shares

Ordinary Preference

Distributable Profits: Dividends

5

5

Enforcement in Ireland Companies Registration Office (CRO)

www.cro.ie Office of director of corporate

enforcement (ODCE) www.odce.ie

6

6

Companies Act 1963 Listed groups – must use International Financial

Reporting Standards (IFRS) to prepare accounts All other companies – choose between▪ Companies legislation and local Accounting Standards

(Irish GAAP) and ▪ IFRS

Rules and Guidelines – accounting standards International Financial Reporting Standards

(IFRS) Local Accounting standards (being phased out)

7

7

Income Statement / Profit & Loss Account Statement of Financial Position (Balance

Sheet) Cash Flow Statement Statement of Changes in Equity (SOCE) Accounting policies and other explanatory

notes

8

8

Sets of rules and guidelines established by the accounting profession

Use require by the law Also, some companies legislation requirements

in FS Role of Standards

When to recognise and de-recognise items in Financial Statements

How to present a particular transaction How to value and measure items What to disclose about the issue/ item

9

9

Assets Resources held by the organisation

a probable future benefit exists organisation has exclusive right to control the

benefit benefit must arise from some past transaction

or event must be capable of measurement in monetary

terms Current / Non-current

10

Liabilities Legal obligation to transfer assets or

provide services to another entity which has arisen from past transactions or events

Current / Long term (Non-current)

Capital (Owner's Equity) Amounts (money or goods) invested in

the organisation by owner(s).11

Revenue Amounts of money earned by the

organisation from its operations (i.e. the supply of goods or services) in a particular period.

Expenses Costs of goods and services incurred

in earning revenue.

12

Income Statement Shows the performance of the organisation

by matching the revenue earned with the expenses incurred in the period

Balance Sheet Shows the organisation's resources and the

source of those resources by listing the assets, liabilities and capital at a particular date

13

Assets = Capital + Liabilities

Resources:

What they are Who supplied them

14

Ordinary shares Preference

Participating Irredeemable Redeemable (like loans)

All shares are shown at ‘nominal value’ (book value) in the accounts This is not their ‘market value’ but an

arbitrary amount required by law

15

15

Part of owners ‘equity’ Different types of accumulated funds

Does not necessarily equate to cash Can be a gain that is not yet ‘realised’, i.e. turned into

cash Might be an allocation out of profits

Examples: Share Premium Revaluation Reserve Retained Earnings Capital Reserve Plant replacement reserve

Show all reserve movements in the year in SOCE

16

16

Purpose – part of return to shareholders Ordinary Preference Recording in Financial Statements

Paid Accrued (due but not yet paid)

Presentation in FS Shown in SOCE only Accruals (amounts as yet unpaid) in Balance

Sheet as a Current Liability

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17