Topic 2 Financial Statements of Limited Companies
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Transcript of Topic 2 Financial Statements of Limited Companies
Topic 2
Financial HighlightsReview of the year
Chairman’s Review Chief Executives review Operations Review Financial Review Other reviews
Directors InformationCorporate Governance Information
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Directors’ ReportStatement of Directors
ResponsibilitiesAuditors’ ReportFinancial Statements Accounting Policies Information re subsidiary companies
(where relevant) Investors InformationNotice of AGM
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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
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Enforcement in Ireland Companies Registration Office (CRO)
www.cro.ie Office of director of corporate
enforcement (ODCE) www.odce.ie
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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)
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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
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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
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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
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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.
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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
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Assets = Capital + Liabilities
Resources:
What they are Who supplied them
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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
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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
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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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