F1

Regulatory environment: US GAAP, UK IFRS principles or rules based

Professional ethics: integrity, professional competence and due care, professional behavior, objectivity,
confidentiality

Corporate governance: UK- voluntary code based on integrity, US- rule based

IAS 1: presentation of financial reporting- guidelines. Balance sheet, p and l, changes in equity, cash
flows, notes, comparatives, cash flows IFRS

IAS – 16: property plant and equipment

Held for use for goods or services or rental or for administrative + expected for more than 1 period

Purchase price + irrecoverable taxes – trade discount (not cash) + costs to bring it to location+ to make it
operatable (site preparation, delivery, handling, installation, assembly, testing, professional fees)

Subsequent capitalized if it adds value to asset (makes it faster) depreciation straight line, reducing
balance

IAS-36: impairment of assets – external internal identity, perform impairment review, record it

External: market value, technological

Internal: obsolescence, idle, economic performance, operating losses, loss of key employee

Review: recoverable, fair value- costs to sell, value in use, reduction in carrying value.

IFRS 5: non-current assets held for sale and discontinued operations- tell which have been discontinued_
carrying amount recovered through sale- single sale transaction

Available for immediate sale+ highly probable sale-mngmnt committed- program to actively locate
buyer- market at place- within 12 months- no changes to plan

IAS 10- events after the reporting period- adjusting, non adjusting- adjusting- existing at reporting
period, non adjusting- existing after reporting date

IAS 2- inventories- cost or nrv or market price whichever is lowee

IAS 16- leases- right to use asset and lease liability+ initial direct costs+ payments less incentives before
commencement date lease liability

IAS 7- statement of cash flows

Short term finance and cash investment

Trade payables- delay to suppliers- source of finance- credit system- cash flow difficulty- supply
problems

Overdraft- interest is paid on it right to take away on demand

Short term loans- repayable in fixed period

Debt factoring- often more success

Short term cash investment- interest bearing deposists- receive high interest low risk

Short term treasury bills- weekly by govt- pays less fv than what received at end

Certificateof deposit- fixed 1 term commercial paper- firm investment less than 270 days

Working capital management- conservative- reduce risk by holding high levels of working capital,
aggressive- reduce finance cost and increase profitability

Inventory management: ordering costs- administrative, delivery holding- insurance, warehouse, theft

EOQ-square root of 2 into cost per order into demand by cost of holding one unit
Management accounting

Purpose of management accounting is to help management in running business in ways that will
improve the performance of business.

Costing, planning, decision making, control, performance evaluation

Cost classification- logical groups for profitability analysis

Cost unit- costs ascertained product or service, direct costs- total d.c= prime costs indirect= overhead

Total production cost= prime cost+ production overheads

Variable cost increase with volume, fixed costs remain same, semi variable- extra hours ex: security
hours

Cost centers- costs assigned to things- unit of output, service location etc. uses- price covers cost, track
of cost, decision, budget, efficient use of scarce, marketing, inclusion fs, inventory

Assigning costs- responsibility centers- direct indirect production

Traditional costing- absorption and marginal costing

 Absorption costing- acceptable IAS 2- full product costs full production cost of a unit of product.
Absorption costing includes an element of fixed overheads in inventory values (in accordance with SSAP
9).
 Analysing under/over absorption of overheads is a useful exercise in controlling costs of an organisation
 In small organisations, absorbing overheads into the costs of products is the best way of estimating job
costs and profits on jobs
 the main disadvantages of absorption costing are that it is more complex to operate than marginal
costing and it does not provide any useful information for decision making (like marginal costing does).

More disadvantages required.

Marginal costing- short term internal decision making- only variable costs included- overheads period costs- focus on
contribution earned- selling price- variable cost

 Contribution per unit is constant unlike profit per unit which varies with changes in sales volumes
 There is no under or over absorption of overheads (and hence no adjustment is required in the income
statement).
 Fixed costs are a period cost and are charged in full to the period under consideration
 Marginal costing is useful in the decision-making process
 It is simple to operate
 The main disadvantages of marginal costing are that closing inventory is not valued in accordance
with accounting standards and that fixed production overheads are not 'shared' out between units of
production, but written off in full instead.

Activity based costing- based on activities- invoices taken and divided based on activities, much easier to understand
and analyze, is more accurate, better to understand cost drivers. Disadvantages- complex to prepare, time
consuming, not useful for FR.
Throughput accounting- only material costs taken into consideration

Budgeting-