ACCA F7 (INT) Financial Reporting - Study text - 2010 - Emile Woolf Publishing
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ACCA
F7 INT Study Text
Financial Reporting
PublishingPublishing
ACCA
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ACCA
Paper
F7
(INT)
Financial Reporting
(International)
Publishing
Publishing
Welcome to Emile Woolf‘s study text for
Paper F7 Financial Reporting (International) which is:
Written by tutors
Comprehensive but concise
In simple English
Used around the world by Emile Woolf Colleges including
China, Russia and the UK
ii
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Acknowledgements
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CharteredCertifiedAccountants.
© EWP Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides iii
Paper F7 (INT)
Financial Reporting
c
Contents
Page
Syllabus and study guide 1
Chapter 1: The conceptual framework 13
Chapter 2: Recognition and measurement 33
Chapter 3: Accounting for the substance of transactions 53
Chapter 4: The regulatory framework 63
Chapter 5: The financial statements of a single company 75
Chapter 6: Reporting financial performance 95
Chapter 7: Tangible non-current assets 113
Chapter 8: Intangible assets 143
Chapter 9: Impairment of assets 155
Chapter 10: Inventory 165
Chapter 11: Financial assets and financial liabilities 179
Chapter 12: Leases 201
Chapter 13: Provisions, contingent liabilities and contingent assets 219
Chapter 14: Taxation 241
Chapter 15: Reporting of non-group financial statements 263
Chapter 16: Earnings per share 285
Chapter 17: Statements of cash flows 311
Chapter 18: Consolidated accounts 353
Chapter 19: Consolidated accounts: intra-group adjustments 403
iv
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Chapter 20: Associates 431
Chapter 21: Analysis and interpretation of financial statements 445
Answers to exercises 473
Practice questions 475
Answers to practice questions 505
Index 557
© EWP Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides 1
Paper F7 (INT)
Financial Reporting
S
Syllabus and study guide
Aim
To develop knowledge and skills in understanding and applying accounting
standards and the theoretical framework in the preparation of financial statements
of entities, including groups and how to analyse and interpret those financial
statements.
Main capabilities
After passing this examination, candidates should be able to:
A Discuss and apply a conceptual framework for accounting
B Discuss a regulatory framework for financial reporting
C Prepare and present financial statements which conform to international
accounting standards
D Account for business combinations in accordance with international
accounting standards
E Analyse and interpret financial statements
Paper F7: Financial Reporting (International)
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Relational diagram of main syllabus capabilities
Rationale
The financial reporting syllabus assumes knowledge acquired in Paper F3 Financial
Accounting and develops and applies this further and in greater depth. The syllabus
begins with the conceptual framework of accounting with reference to the
qualitative characteristics of useful information and the fundamental bases of
accounting introduced in the Paper F3 Financial Accounting syllabus within the
Knowledge module. It then moves into a detailed examination of the regulatory
framework of accounting and how this informs the standard setting process.
The main areas of the syllabus cover the reporting of financial information for single
companies and for groups in accordance with generally accepted accounting
practice and relevant accounting standards.
Finally the syllabus covers the analysis and interpretation of information from
published financial reports.
A conceptual framework
for financial reporting
(A)
A regulatory
framework of financial
reporting (B)
Financial statements (C)
Business combinations (D)
Analysing
and
interpreting
financial
statements
(E)
Syllabus and study guide
© EWP Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides 3
Syllabus
A A conceptual framework for financial reporting
1 The need for a conceptual
2 Understandability, relevance, reliability and comparability
3 Recognition and measurement
4 The legal versus the commercial view of accounting
5 Alternative models and practices
6 The concept of ‘faithful representation’ (‘true and fair view’)
B A regulatory framework for financial reporting
1 Reasons for the existence of a regulatory framework
2 The standard setting process
3 Specialised, not-for-profit and public sector entities
C Financial statements
1 Statements of cash flows
2 Tangible non-current assets
3 Intangible assets
4 Inventory
5 Financial assets and financial liabilities
6 Leases
7 Provisions, contingent liabilities and contingent assets
8 Impairment of assets
9 Taxation
10 Regulatory requirements relating to the preparation of financial
statements
11 Reporting financial performance
D Business combinations
1 The concept and principles of a group
2 The concept of consolidated financial statements
3 Preparation of consolidated financial statements including an associate
E Analysing and interpreting financial statements
1 Limitations of financial statements
2 Calculation and interpretation of accounting ratios and trends to address
users’ and stakeholders’ needs
3 Limitations of interpretation techniques
4 Specialised, not-for-profit and public sector entities
Paper F7: Financial Reporting (International)
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Approach to examining the syllabus
The syllabus is assessed by a three-hour paper-based examination. All questions are
compulsory. It will contain both computational and discursive elements.
Some questions will adopt a scenario/case study approach.
Question 1 will be a 25-mark question on the preparation of group financial
statements and/or extracts thereof, and may include a small related discussion
element. Computations will be designed to test an understanding of principles.
Question 2, for 25 marks, will test the reporting of non-group financial statements.
This may be from information in a trial balance or by restating draft financial
statements.
Question 3, for 25 marks, is likely to be an appraisal of an entity’s performance and
may involve cash flow statements.
Questions 4 and 5 will cover the remainder of the syllabus and will be worth 15 and
10 marks respectively.
An individual question may often involve elements that relate to different subject
areas of the syllabus. For example the preparation of an entity’s financial statements
could include matters relating to several accounting standards.
Questions may ask candidates to comment on the appropriateness or acceptability
of management’s opinion or chosen accounting treatment.
Questions will test an understanding of accounting principles and concepts and
how these are applied to practical examples.
Questions on topic areas that are also included in Paper F3 Financial Accounting will
be examined at an appropriately greater depth in this paper.
Candidates will be expected to have an appreciation of the need for specified
accounting standards and why they have been issued. For detailed or complex
standards, candidates need to be aware of their principles and key elements.
Format of the paper
Number of
marks
Three questions (25 marks each) 75
Question 4
Question 5
15
10
100