Financial Reporting I: IAS 2, IAS 1, and IFRS 18

Vocabulary flashcards covering accounting standards IAS 2, IAS 1, and IFRS 18 for Financial Reporting I.

IAS 2

An International Accounting Standard that prescribes the accounting treatment for inventories, providing guidance on cost determination, write-down to Net Realisable Value (NRV), cost formulas, and expense recognition.

Inventories

Assets held for sale in the ordinary course of business, in the process of production for such sale (work-in-progress), or in the form of materials or supplies to be consumed in production or rendering of services.

Net Realisable Value (NRV)

The estimated selling price in the ordinary course of business less trade discounts or rebates, estimated costs of completion, and estimated costs necessary to make the sale.

Cost of Conversion

Costs directly related to units of production, including direct labour and a systematic allocation of fixed and variable production overheads based on normal capacity.

Costs Excluded from Inventory

Costs not recognized as inventory costs, including abnormal amounts of wasted materials, labour, or production costs; storage costs (unless necessary in the production process); administrative overheads; and selling costs.

IAS 2 Permitted Cost Formulas

Cost allocation methods permitted by IAS 2, specifically First In First Out (FIFO) and Weighted Average. Last In First Out (LIFO) is strictly prohibited.

IAS 1

An International Accounting Standard that provides guidelines on the presentation of general purpose financial statements to ensure comparability with prior periods and other entities.

IFRS 18

An IFRS Standard issued in April 2024 replacing IAS 1 to set requirements for the presentation and disclosure of information in general purpose financial statements.

General Purpose Financial Statements

A particular form of general purpose financial reports that provide information about a reporting entity's assets, liabilities, equity, income, and expenses for primary users who cannot demand tailored reports.

Current Asset

An asset likely to be realized within the normal operating cycle or $12\,\text{months}$ after the statement of financial position date, held for trading purposes, or existing as cash or a cash equivalent.

Current Liability

A liability likely to be settled within the normal operating cycle or $12\,\text{months}$ after the statement of financial position date, held for trading, or lacking an unconditional right to defer settlement for at least $12\,\text{months}$.

Aggregation

The adding together of assets, liabilities, equity, income, expenses, or cash flows that share characteristics and are included in the same classification.

Classification

The sorting of assets, liabilities, equity, income, expenses, and cash flows based on shared characteristics.

Disaggregation

The separation of an item into component parts that have characteristics that are not shared.

Material Information

Information whose omission, misstatement, or obscuration could reasonably be expected to influence decisions made by primary users on the basis of general purpose financial statements.

General Purpose Financial Reports

Reports providing financial information about a reporting entity useful to primary users in making decisions relating to providing resources to the entity.

Operating Profit or Loss

The total of all income and expenses classified in the operating category of the statement of profit or loss under IFRS 18.

Management-Defined Performance Measure

A subtotal of income and expenses used in public communications outside financial statements to convey management's view of performance, not specifically listed in paragraph 118 of IFRS 18 or required by IFRS Accounting Standards.

Notes to Financial Statements

Information in financial statements provided in addition to primary financial statements, comprising a statement of compliance with IFRSs, accounting policies, and explanatory disclosures.

Components of Financial Statements

The set of core statements including Statement of Financial Position, Statement of Profit or Loss, Statement of Changes in Equity, Statement of Cash Flows, and Notes.