Key Concepts from Financial Statements and Reporting Standards

These flashcards cover key terms and concepts from financial statements and reporting standards, helping to reinforce understanding of the material for an exam.

Statement of Financial Position

A formal statement showing the three elements of financial position: assets, liabilities, and equity.

Current Assets

Assets that are cash or cash equivalents unless restricted, held for trading, realized in the operating cycle, or within twelve months.

Operating Cycle

The time between acquisition of assets and their realization in cash or cash equivalents, typically assumed to be twelve months.

Noncurrent Assets

Assets that are classified as not current, according to IFRS.

Property, Plant and Equipment (PPE)

Tangible items used in operations, rental, or administration expected to be used for more than one period.

Investments

Assets held for wealth accretion through income, capital appreciation, or other benefits.

Intangible Assets

Identifiable nonmonetary assets without physical substance controlled by the entity.

Current Liabilities

Liabilities classified as current if due within twelve months and based on covenants complied with by period-end.

Covenants

Undertakings in borrowing agreements imposing restrictions on the borrower.

Noncurrent Liabilities

All liabilities classified as not current.

Equity

The residual interest after deducting liabilities, including share capital, retained earnings, reserves, and treasury stock.

Required Line Items

Items such as cash, receivables, PPE, intangibles, payables, provisions, financial liabilities, equity, and reserves that must be included.

Philippine Format

Presentation format that shows assets first, followed by liabilities and equity.

UK Format

Presentation format that commonly presents equity before liabilities.

Notes to Financial Statements

Narrative descriptions, disaggregation, and information on unrecognized items.

Purpose of Notes

To comply with PFRS, disclose omitted information, and provide additional relevant details.

Order of Notes

Compliance with PFRS, accounting policies, supporting line items, and other disclosures.

Compliance with PFRS

An explicit and unreserved statement of compliance is required.

Summary of Accounting Policies

Discloses measurement bases and applied accounting policies.

Judgments and Estimation Uncertainty

Disclosed when helpful in understanding financial statement effects.

Related Party

A party with control, significant influence, or joint control.

Related Party Transaction

Transfer of resources or obligations between related parties.

Control

Power to govern policies of an entity.

Significant Influence

Participation in decision-making without controlling power.

Joint Control

Contractual sharing of control over an arrangement.

Related Parties

Includes parents, subsidiaries, associates, joint ventures, key management, family members, and benefit plans.

Unrelated Parties

Common directors only, lenders, customers, suppliers, and fellow venturers.

Related Party Disclosures

Required disclosures when control exists, even without transactions.

Minimum Disclosures

Transaction amounts, balances, terms, allowances, and expenses related to related parties.

Key Management Compensation

Includes employee benefits, termination benefits, and share-based payments.

Pricing Policies

Arm’s length disclosure allowed only if substantiated.

Events After the Reporting Period

Events that occur between period-end and authorization of financial statements.

Types of Events

Adjusting events relate to existing conditions; nonadjusting events arise after period-end.

Examples of Adjusting Events

Court settlements and customer bankruptcy that affect financial statements.

Examples of Nonadjusting Events

Business combinations and asset destruction occurring after period-end.

Authorization for Issue

Approval by the board of directors for financial statements.