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Unit Title: Financial Accounting

Guided Learning Hours: 160


Level: Level 6
Number of Credits: 25

Learning Outcome 1
The learner will: Understand the framework of financial accounting.

Assessment Criteria Indicative Content


The learner can:

1.1 Describe the scope, 1.1.1 Describe the scope and objectives of financial
objectives and main users accounting.
of financial accounting
information in accordance 1.1.2 Describe the main users of accounting information and
with the international their needs in accordance with the international framework of
framework of the the IASB.
International Accounting
Standards Board (IASB).

1.2 Identify the main and 1.2.1 Identify and explain the four main characteristics of
sub-characteristics of useful information to users namely relevance, reliability,
useful information to users. understandability and comparability.

1.2.2 Identify and explain the sub-characteristics of the four


main characteristics.

1.2.3 Explain the twelve traditional accounting concepts.

1.2.4 Distinguish between capital income and expenditure,


and between revenue income and expenditure, within financial
accounting.

1.3 Describe the role and 1.3.1 Describe the role and scope of external auditing in
scope of external auditing business.
and internal auditing in
business. 1.3.2 Describe the role and scope of internal auditing in
business.

1.3.3 Describe the relationship between external and internal


auditing in the context of business.

1.3.4 Identify and explain the differences between external


and internal auditing in the context of business.
Learning Outcome 2
The learner will: Know how to prepare and present the financial statements of companies in
accordance with internationally generally accepted accounting practice
(IGAAP) under International Financial Reporting Standards.

Assessment Criteria Indicative Content


The learner can:

2.1 Describe the external 2.1.1 Describe the external publication of companies’ financial
publication and the statements including:
elements that make up the • IAS 1: Presentation of Financial Statements.
external financial • IAS 8: Accounting Policies, Changes in Accounting
statements of a company. Estimates and Errors.
• IAS 10: Events after the Reporting Period.
• IAS 33: Earnings per Share.
• IAS 24: Related Party Disclosures.

2.1.2 Describe the elements that make up the external financial


statements, including: the principal financial statements, the
directors’ report, the corporate governance report and the
auditor’s report.

2.2 Explain the rules 2.2.1 Explain the rules contained in International GAAP in
contained in International relation to assets including:
GAAP in relation to assets, • IAS 2: Inventories.
liabilities, income and • IAS 11: Construction Contracts.
expenses. • IAS 16: Property, Plant and Equipment.
• IAS 17: Leases.
• IAS 36: Impairment of Assets.
• IAS 38: Intangible Assets.
• IAS 40: Investment Property.

2.2.2 Explain the rules of the International GAAP in relation to


liabilities, including IAS 37: Provisions, Contingent Liabilities
and Contingent Assets.

2.2.3 Explain the rules of the International GAAP in relation to


income, including IAS 18: Revenue.

2.2.4 Explain the rules of the International GAAP in relation to


expenses, including:
• IAS 12: Income Taxes.
• IAS 20: Accounting for Government Grants and
Disclosure of Government Assistance.
• IAS 23: Borrowing Costs.
Learning Outcome 3
The learner will: Know how to prepare Statements of Comprehensive Income, Statements of
Financial Position, Statement of Changes in Equity, and Statements of Cash
Flows.

Assessment Criteria Indicative Content


The learner can:

3.1 Prepare Statements of 3.1.1 Prepare Statements of Comprehensive Income for a


Comprehensive Income for given company from given information in accordance with
a given company from International GAAP.
given information in
accordance with
International GAAP.

3.2 Prepare Statements of 3.2.1 Prepare Statements of Financial Position for a given
Financial Position for a company from given information in accordance with
given company from given International GAAP.
information in accordance
with International GAAP.

3.3 Prepare Statements of 3.3.1 Prepare Statements of Changes in Equity for a given
Changes in Equity for a company from given information in accordance with
given company from given International GAAP.
information in accordance
with International GAAP.

3.4 Prepare Statements of 3.4.1 Prepare Statements of Cash Flows for a given company
Cash Flows for a given from given information in accordance with International GAAP,
company from given including IAS 7: Statement of Cash Flows.
information in accordance
with International GAAP.

Learning Outcome 4
The learner will: Know how to analyse and interpret financial statements for a range of users.

Assessment Criteria Indicative Content


The learner can:

4.1 Explain the meaning of 4.1.1 Explain the meaning of performance, financial status and
performance, financial investor ratios.
status and investor ratios.

4.2 Calculate investment 4.2.1 Calculate financial ratios in respect of performance of a


ratios and financial ratios company.
in respect of performance
and financial status of an 4.2.2 Calculate financial ratios in respect of financial position of
enterprise.
a company.

4.2.3 Calculate ratios of interest to investors and potential


investors in a company.

4.3 Interpret the results of 4.3.1 Analyse and interpret, for users of financial information,
the analysis of financial the ratios calculated for performance and financial status and
ratios of performance and investor ratios.
financial status and
investor ratios for users of 4.3.2 Explain the limitations of ratio analysis to users of the
financial statements. ratios.

4.3.3 Explain the impact of changing prices on financial


statement ratios.

4.3.4 Identify possible methods of adjusting historical financial


statements to present more useful information to users.

Learning Outcome 5
The learner will: Know how to prepare and present consolidated financial statements in
accordance with IGAAP.

Assessment Criteria Indicative Content


The learner can:

5.1 Describe and explain 5.1.1 Describe the contents of IFRS 3: Business Combinations
the contents of IASs in and IAS 27: Consolidated and Separate Financial Statements.
relation to the preparation
of consolidated financial 5.1.2 Explain the concept of control in relation to a subsidiary
statements. and holding enterprise.

5.1.3 Explain the principles of consolidation for a single holding


structure.

5.1.4 Explain inter-enterprise items (dividends, inter-enterprise


sales, inter-enterprise loans) and their elimination from the
consolidation process.

5.1.5 Explain the treatment of goodwill in consolidation in


accordance with IGAAP.

5.2 Prepare consolidated 5.2.1 Prepare Consolidated Statements of Financial Position for
financial statements for a a holding enterprise with one subsidiary both at the acquisition
holding enterprise with one date and for subsequent periods.
subsidiary both at the
acquisition date and for 5.2.2 Prepare Consolidated Statements of Comprehensive
subsequent periods. Income for a holding enterprise with one subsidiary both at the
acquisition date and for subsequent periods.
Learning Outcome 6
The learner will: Understand the capital structure and gearing of a business.

Assessment Criteria Indicative Content


The learner can:

6.1 Explain and appraise 6.1.1 Describe the long-term sources of finance available in the
the various sources of market place to a business.
finance available to
businesses both long-term 6.1.2 Describe the short-term sources of finance available to a
and short-term. business.

6.1.3 Compare and contrast the effect on a business of


financing long-term and short-term.

6.1.4 Give advice on the financing needs of a given business to


interested parties.

6.1.5 Explain working capital management.

6.2 Explain the relationship 6.2.1 Calculate gearing ratios for a business.
between equity and debt
within a business (i.e. the 6.2.2 Interpret gearing ratios for users.
gearing).

6.3 Prepare financial 6.3.1 Describe the issue of various types of shares and loans.
statements of a business
after changes in their 6.3.2 Describe the redemption of shares and loans.
financing.
6.3.3 Prepare a Statement of Financial Position after the issue
and redemption of shares and loans.

Assessment:
• Assessment method: written examination (unless otherwise stated).
• Written examinations are of three hours’ duration.
• All learning outcomes will be assessed.

Recommended Reading:
• Financial Accounting – ABE Study Manual.
• Please refer to the Tuition Resources section of the Members Area of the ABE
website (www.abeuk.com) for further recommended reading.