IAS 1 FInancial Reporting - Handout

IAS 1 - Presentation of Financial Statements DSM CPA (T) REVIEW
IAS 1 - Presentation of Financial Statement

Objective of IAS 1
The objective of IAS 1 is to prescribe the basis for presentation of general purpose financial
statements, to ensure comparability both with the entity's financial statements of previous periods
and with the financial statements of other entities. IAS 1 sets out the overall requirements for the
presentation of financial statements, guidelines for their structure and minimum requirements for
their content. Standards for recognizing, measuring, and disclosing specific transactions are
addressed in other Standards and Interpretations.
Scope
IAS 1 applies to all general purpose financial statements that are prepared and presented in
accordance with International Financial Reporting Standards (IFRSs).
General purpose financial statements are those intended to serve users who are not in a position
to require financial reports tailored to their particular information needs.
Objective of financial statements
The objective of general purpose financial statements is to provide information about the
financial position, financial performance, and cash flows of an entity that is useful to a wide
range of users in making economic decisions. To meet that objective, financial statements
provide information about an entity's:
assets
liabilities
equity
income and expenses, including gains and losses
contributions by and distributions to owners (in their capacity as owners)
cash flows.
That information, along with other information in the notes, assists users of financial statements
in predicting the entity's future cash flows and, in particular, their timing and certainty.
Components of financial statements
A complete set of financial statements includes:
a statement of financial position (balance sheet) at the end of the period

a statement of profit or loss and other comprehensive income for the period (presented as a
single statement, or by presenting the profit or loss section in a separate statement of profit or
CPA T PAUL MDEE CONT: 0712619088, CPA T YONA B CONT: 0718474403 1

loss, immediately followed by a statement presenting comprehensive income beginning with

profit or loss)
a statement of changes in equity for the period
a statement of cash flows for the period
notes, comprising a summary of significant accounting policies and other explanatory notes
comparative information prescribed by the standard.
An entity may use titles for the statements other than those stated above. All financial statements
are required to be presented with equal prominence.
When an entity applies an accounting policy retrospectively or makes a retrospective restatement

of items in its financial statements, or when it reclassifies items in its financial statements, it
must also present a statement of financial position (balance sheet) as at the beginning of the
earliest comparative period.
Reports that are presented outside of the financial statements – including financial reviews by
management, environmental reports, and value added statements – are outside the scope of
IFRSs.
General features of Financial Statements
Fair presentation and compliance with IFRSs
The financial statements must "present fairly" the financial position, financial performance and
cash flows of an entity. Fair presentation requires the faithful representation of the effects of
transactions, other events, and conditions in accordance with the definitions and recognition
criteria for assets, liabilities, income and expenses set out in the Framework. The application of
IFRSs, with additional disclosure when necessary, is presumed to result in financial statements
that achieve a fair presentation.
Going concern
The Conceptual Framework notes that financial statements are normally prepared assuming the
entity is a going concern and will continue in operation for the foreseeable future.
Accrual basis of accounting
IAS 1 requires that an entity prepare its financial statements, except for cash flow information,
using the accrual basis of accounting.
Consistency of presentation
The presentation and classification of items in the financial statements shall be retained from one
period to the next unless a change is justified either by a change in circumstances or a
requirement of a new IFRS.
Materiality and aggregation
Information is material if omitting, misstating or obscuring it could reasonably be expected to

influence decisions that the primary users of general purpose financial statements make on the
basis of those financial statements, which provide financial information about a specific
reporting entity.
Offsetting
Assets and liabilities, and income and expenses, may not be offset unless required or permitted
by an IFRS.
Comparative information
IAS 1 requires that comparative information to be disclosed in respect of the previous period for
all amounts reported in the financial statements, both on the face of the financial statements and
in the notes, unless another Standard requires otherwise. Comparative information is provided
for narrative and descriptive where it is relevant to understanding the financial statements of the
current period.
An entity is required to present at least two of each of the following primary financial
statements:
 statement of financial position*

 statement of profit or loss and other comprehensive income
 separate statements of profit or loss (where presented)
 statement of cash flows
 statement of changes in equity
 related notes for each of the above items.
* A third statement of financial position is required to be presented if the entity retrospectively

applies an accounting policy, restates items, or reclassifies items, and those adjustments had a
material effect on the information in the statement of financial position at the beginning of the
comparative period.
Structure and content of financial statements in general
IAS 1 requires an entity to clearly identify:

 The financial statements, which must be distinguished from other information in a published
document
 each financial statement and the notes to the financial statements.
In addition, the following information must be displayed prominently, and repeated as necessary:
 the name of the reporting entity and any change in the name
 whether the financial statements are a group of entities or an individual entity
 information about the reporting period
 the presentation currency (as defined by IAS 21 The Effects of Changes in Foreign Exchange
Ratess)
 the level of rounding used (e.g. thousands, millions).
Reporting period
There is a presumption that financial statements will be prepared at least annually. If the annual
reporting period changes and financial statements are prepared for a different period, the entity
must disclose the reason for the change and state that amounts are not entirely comparable.
Format of statement
IAS 1 does not prescribe the format of the statement of financial position. Assets can be
presented current then non-current, or vice versa, and liabilities and equity can be presented
current then non-current then equity, or vice versa. A net asset presentation (assets minus
liabilities) is allowed. The long-term financing approach used in UK and elsewhere – fixed assets
+ current assets - short term payables = long-term debt plus equity – is also acceptable.
Statement of financial position
A recommended format is as follows:

XYZ: Statement of financial position as at 31 December 20
Assets TZS TZS
Non-current assets:
Property, plant and equipment xx
Investments xx
Intangibles xx
xx
Current assets:
Inventories xx
Trade receivables xx
Cash and cash equivalents xx
Asset held for sale xx xx
Total assets xx
Equity and liabilities

Capital and reserves:
Share capital xx
Retained earnings xx
Other components of equity xx xx
Total Equity xx
Non-current liabilities:
Long-term borrowings xx
Deferred tax xx xx
Current liabilities:
Trade and other payables xx
Short-term borrowings xx
Current tax payable xx
Short-term provisions xx xx

Total Equity and Liabilities xx
Note that IAS 1 requires an asset or liability to be classified as current if:
 it will be settled within 12 months of the reporting date, or

 it is part of the entity's normal operating cycle.
Within the equity section of the statement of financial position, other components of equity
include:
 revaluation surplus
 share premium
 investment reserve (see financial instruments,
Statement of changes in equity (SOCIE)
The statement of changes in equity provides a summary of all changes in equity arising from
transactions with owners in their capacity as owners.
This includes the effect of share issues and dividends.
Other non-owner changes in equity, such as comprehensive income, are disclosed in aggregate
only.
XYZ Group
Statement of changes in equity for the year ended
31 December 20X8
Share Share Revaluation Retained Total

capita premium surplus earnings equity
TZS TZS TZS TZS TZS
Balance at 31 December 20X7 xx xx xx xx xx
Prior year adjustment (IAS 8) (xx) (xx)
Restated balance xx xx xx xx xx
Dividends (xx) (xx)
Issue of share capital xx xx xx
comprehensive income xx xx xx
Transfer to retained earnings (xx) xx -
Balance at 31 December 20X8 xx xx xx xx xx
Statement of profit or loss and other comprehensive income
Total comprehensive income is the realised profit or loss for the period, plus other
comprehensive income.
Other comprehensive income (OCI) is income and expenses that are not recognised in profit or
loss (i.e. they are recorded in reserves rather than as an element of the realised profit for the
period). For the purposes of FR, other comprehensive income includes any change in the
revaluation of non-current assets (IAS 16, covered in Chapter 2) and fair value through other
comprehensive income financial assets.
IAS 1 Presentation of Financial Statements requires that you prepare either:

1. A statement of profit or loss and other comprehensive income showing total
comprehensive income, or
2. A statement of profit or loss showing the realised profit or loss for the period PLUS a
statement showing other comprehensive income.
Statement of profit or loss and other comprehensive income
A recommended format is as follows:
XYZ: Statement of profit or loss and other comprehensive income for

the year ended 31 December 20X8
TZS
Revenue xx
Cost of sales xx
Gross profit xx
Distribution costs (xx)
Administrative expenses (xx)
Profit from operations xx
Finance costs (xx)
Investment income xx
Profit before tax xx
Income tax expense (xx)
Profit for the year xx
Other comprehensive income

Gain/loss on revaluation (IAS 16) xx
Gain/loss on fair value through other comprehensive income financial assets (IFRS 9) xx
Total comprehensive income for the year xx
Disclosures
IAS 1 says that entities must present their disclosure notes in a systematic order. This might mean:
 Giving prominence to the most relevant areas
 Grouping items measured in similar ways, such as assets held at fair value
 Following the order in which items are presented in the statement of profit or loss and the statement of
financial position.

REVIE QUESTIONS
QUESTION 1
Below is a Trial Balance of Decatex Limited for the year ended 30th September 2022
DETAILS DEBIT (TZS.) CREDIT (TZS.)
Ordinary share capital 440,000,000
6% Preference share capital 80,000,000
Retained earnings 96,412,000
Revaluation surplus 98,000,000
12% Bank loan 200,000,000
Sales 941,900,000
Depreciation until 30th September,2021 62,140,000
Trade receivable/payables 47,400,000 90,240,000
Landed Properties 656,840,000
Other tangible long-term assets 181,300,000
Investment in Pina 120,000,000
Cash/Bank 151,142,000
Cost of goods sold 421,000,000
Stock on 30th September, 2022 102,700,000
Cash operating expenses 328,310,000
TOTAL 2,008,692,000 2,008,692,000
Additional Details:
1) Fair value of landed properties on 30th September 2022 was TZS.528 million of which that value includes
TZS.210 million for the land itself. These properties had been revalued few years ago. Balance of
revaluation surplus and other values are in table below.
Details Land TZS. Properties TZS.
Revaluation surplus recorded before year end 40,000,000 58,000,000
Book Value on 30th September, 2021 218,000,000 396,500,000
Depreciation until 30th September, 2021 42,340,000
Depreciation charge is at 2.5% and 6% on carrying amount for landed properties and other tangible long-
term assets respectively.
2) Decatex Limited designed and produced a special khanga to TRA a non-recurring national event in March
2022. A batch of those khangas is still in stock at its original cost of ZS.28 million. The Demand of those
khangas deteriorated during the year, hence, leading to declining of fair value of that batch to TZS.24.5
million on September 2022. Decatex is anticipating a further falling of fair value of that lot in near future
but may not fall beyond TZS.22.6 million.
3) Decatex holds 20% of Pina ordinary shares. Pina pays TZS.450 million total ordinary dividend each year.
However, Pina neither declared interim dividend nor shareholders have met to approve a final dividend for
the current year, if any.
4) Shareholders of Decatex will approve a dividend of 30% of their rightful earnings in a forthcoming annual
general meeting. No any other dividend which was paid during the year.
5) Corporate tax rate is 40%
REQUIRED:
i. Prepare the Decatex Limited Statement of Profit and Loss and Other Comprehensive Income for year ended
30th September 2022.
ii. Prepare the Decatex Limited Statement of Financial Position as at 30th September, 2022
QUESTION 2
The following Trial Balance relates to INAK business which operates as a sole trader for the year ended 31st
December 2021.
DETAILS DEBIT (TZS.) CREDIT (TZS.)
Sales 3,298,500,000
Purchases 825,000,000
Trade Receivables 353,125,000
Trade Payables 401,750,000
Opening Inventory 172,500,000
Sales Returns 6,500,000
Purchase Returns 7,875,000
Discount Allowed 18,875,000
Discount Received 13,975,000
Salaries and Wages 515,000,000
Motor Vehicle 125,000,000
Electricity 25,000,000
Equipment 87,500,000
Premises 1,750,000,000
General Expenses 58,500,000
Bank 342,750,000
Suspense 7,650,000
Capital 625,000,000
Drawings 75,000,000
Total 4,354,750,000 4,354,750,000
INAK has provided the following additional information regarding the business operations for the financial year
ended 31st December 2021.

I. INAK closing stock at 31st December 2021 was valued at TZS.226,725,000.

II. INAK has a 6% fixed deposit account of TZS.200,000,000 with her Banker. The Bank has credited interest
for the year to INAK’s Bank account. This transaction is not reflected in INAK’s books.
III. During data analysis, it was found that electricity bills amounting to TZS.2,250,000, which was accrued at
31st December 2020 was forgotten in the electricity account balances.
IV. James is both a INAK’s customer and supplier. He has agreed to set off his amount owed of
TZS.15,750,000.
V. The bank balance includes a cheque amounting to TZS.10,000,000 received from one of the INAK’
customers. The cheque was dishonored by the Bank due to insufficient funds, however, the customer has
assured INAK that the debt will be settled soon.
VI. Discount allowed of TZS.1,375,000 were doubled but posted correctly to the ledger accounts.
VII. A purchase returns amounting to TZS.2,700,000 was posted to the debit of sales returns.
REQUIRED:
a) Prepare the suspense account showing the correction of the errors above.
b) Prepare INAK’s Statement of Profit or Loss for the year ended 31st December 2021.
c) Prepare INAK’s Statement of Financial Position as at 31st December 2021.
QUESTION 3
The following is the trial balance of Makusaro Limited (MALI) as at 31st December, 2020. The company
manufactures various kitchen utensils and sell them to retailers.
TZS TZS
Sales revenue - 300,000,000
Manufacturing costs 150,000,000 -
Selling and distribution costs 52,500,000 -
Administrative costs 45,000,000 -
Opening inventories 34,500,000 -
Interest on borrowings 7,500,000 -
Provision for income tax - 3,000,000
Advance income tax paid 9,000,000 -

Property, plant and equipment 129,000,000 -
Accumulated depreciation on property, plant and equipment - 18,000,000
Intangible assets 9,000,000 -
Trade receivables 56,700,000 -
Cash and bank balances 7,087,500 -
Other receivable and prepayments 21,000,000 -
Trade payables - 18,000,000
Provisions for litigation - 7,500,000
Long term borrowings - 47,287,500

Deferred tax - 7,500,000

Share capital (TZS 1,000 each and fully paid) - 90,000,000
Retained earnings - 30,000,000
Total 521,287,500 521,287,500
The following information are relevant to the Makusaro Limited:

i. After closing the accounts and preparing the trial balance, the accountant discovered that furniture and
fittings worth TZS.10,000,000, bought on 30th September 2018 were not recorded in general ledger.
ii. On 31st March 2020, the Board of Directors made a decision to dispose of a machine that was beyond
repair. The machine was purchased and installed on 1st January 2016 at a price of TZS.20,000,000.
However, because of shortage of raw materials, production using the machine started on 1st July 2016.
iii. Management changed depreciation method from straight line to reducing balance method after reviewing
consumption pattern of property, plant and equipment. The change applies to all non-current assets existing
at year end. Depreciation rate remained at 10%.
iv. On 27th November 2020, Makusaro Limited received goods that were sold to customer on 14th June 2019
under a sale or return agreement, at cost plus 20%. The invoice value of the goods was TZS.15,000,000
and was included as sales for the year that ended 31st December 2019.
v. Intangible assets include:
 TZS.2,000,000 that was used during the year for research on accounting software that the
company was to develop.
 TZS.6,000,000 export license has been obtained for exporting a new product and is effective for
five years up to 30th June 2022. The export license has never been amortized.
 TZS.1,000,000 was paid for website development.
vi. TZS.9,000,000 of the long-term borrowings is of current maturity (i.e. will be repaid within 12 months).
vii. During the year TZS.7,500,000 was paid in full and final settlement of income tax liability against which a
provision of TZS.10,500,000 had been made in the previous year. Current year’s taxable income exceeds
accounting income by TZS.7,500,000 of which 1,200,000 are permanent differences. Applicable tax rate
for the company is 30%
viii. On 1st January 2021 the Board of Directors proposed a final dividend at 15% for the year ended 31st
December 2020
ix. Closing inventories are valued at TZS.45,000,000.
REQUIRED:
In accordance with the requirements of International Financial Reporting Standards (IFRS)
a) Prepare the Statement of Profit or Loss of Makusaro Limited for the year ended 31st December 2020.
b) Prepare the Statement of Financial Position of Makusaro Limited as at 31st December 2020

QUESTION 4
The following trial balance relates to Kingo as at 30th September 2019
DETAILS TZS.‘000’ TZS.‘000’
Leasehold property – at valuation 1st October 2018 (Note 1) 50,000.00 -
Plant and equipment – at cost (Note 1) 76,600.00 -
Plant and equipment – accumulated depreciation at 1st October 2018 - 24,600.00
Capitalized development expenditure – at 1st October 2018 (Note 2) 20,000.00 -
Development expenditure – accumm. Amortization at 1st October 2018 - 6,000.00
Closing inventory at 30th September 2019 20,000.00 -
Trade receivables 43,100.00 -
Bank - 1,300.00
Trade payables and provisions (Note 3) - 23,800.00
Revenue (Note 1) - 300,000.00
Cost of sales 204,000.00 -
Distribution costs 14,500.00 -
Administrative expenses (Note 3) 22,200.00 -
Preference dividend paid 800.00 -
Interest on bank borrowings 200.00 -
Equity dividend paid 6,000.00 -
Research and development costs (Note 2) 8,600.00 -
Equity shares of 25 cents each - 50,000.00
8% redeemable preference shares of TZS.1 each (Note 4) - 20,000.00
Retained earnings at 1st October 2018 - 24,500.00
Deferred tax (Note 5) - 5,800.00
Leasehold property revaluation reserve - 10,000.00
Total 466,000 466,000
Notes: The following notes are relevant.

1. Non-current assets – tangible:
The leasehold property had a remaining life of 20 years on 1st October 2018. The company’s policy is to
revalue its property at each year end and at 30th September 2019 it was valued at TZS.43 million. Ignore
deferred tax on the revaluation.
On 1st October 2018, an item of plant was disposed for TZS.2.5 million cash. The proceeds have been
treated as sales revenue by Kingo. The plant is still included in the above trial balance figures at its cost of
TZS.8 million and accumulated depreciation of TZS.4 million (to the date of disposal).
Plants are depreciated at 20% per annum using the reducing balance method. Depreciation and
amortization of all non-current assets is charged to cost of sales.

2. Non-current assets – intangible: In addition to the capitalized development expenditure of TZS.20 million,
further research and development costs were incurred on a new project which commenced on 1 st October
2018. The research stage of the new project lasted until 31st December 2018 and incurred TZS.1.4 million.
From that date the project incurred development costs of TZS.800,000 per month. On 1st April 2019 the
directors became confident that the project would be successful and yield a profit well in excess of its
costs. The project is still in development at 30th September 2019
Capitalized development expenditure is amortized at 20% per annum using the straight-line method. All
expensed research and development are charged to cost of sales.
3. Kingo is being sued by a customer for TZS.2 million for breach of contract over a cancelled order. Kingo
has obtained legal opinion that there is a 20% chance that Kingo will lose the case. Accordingly, Kingo has
provided TZS.400,000 (TZS.2 million x 20%) included in administrative expenses in respect of the claim.
The unrecoverable legal costs of defending the action are estimated at TZS.100,000. These have not been
provided for as the legal action will not go to court until next year.
4. The preference shares were issued on 1st April 2019 at par. They are redeemable at a large premium which
gives them an effective finance cost of 12% per annum.
5. The directors have estimated the provision for income tax for the year ended 30th September 2019 at
TZS.11.4 million. The required deferred tax provision at 30th September 2019 is TZS.6 million.
REQUIRED:
(a) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the year ended 30th
September 2019
(b) Prepare the Statement of Changes in Equity for the year ended 30th September 2019.
(c) Prepare the Statement of Financial Position as at 30th September 2019.
Note: Notes to the financial statements are not required.

QUESTION 5
DCRC Ltd has been in operation for the past five years. As a Public Listed Entity, the company uses full IFRSs in
preparing its financial statements. Management of the company is preparing financial statements for the year ended
31 December 2021, and has produced the following trial balance for the period.
TZS TZS
DR CR
Revenue 1,171,000
Inventories (31/12/2020) 80,000
Purchases 543,000
Administrative expenses 180,000
Marketing & distribution expenses 55,000
Non-current assets (cost)-31/12/2020: Note (ii)
Furniture & fittings 88,000
Motor vehicles 180,000
Office equipment 30,000
Intangible assets 50,000
Accumulated depreciation -31/12/2020: Note (ii)
Furniture & fittings 18,000
Motor vehicles 62,400
Office equipment 13,000
Intangible assets 6,000
Taxation account Note (iii) 28,000
Trade & other receivables 151,000
Trade payables 125,000
Deferred tax- 31/12/2020 Note (iii) 21,000
13% GOG Bond Note (iv) 19,000
Interest income Note (iv) 2,600
Bank account Note (v) 283,000
Share Capital 200,000
Retained earnings 68,000
1,687,000.00 1,687,000.00
The following additional information is relevant in preparing the financial statements of the company for the year
ended 31 December 2021:
i. Inventories at 31 December 2021 were valued at TZS. 65,000.

ii. On 1 November 2021, one of the company’s vehicles used in selling and distributing its finished goods was
involved in an accident; the vehicle was badly damaged beyond repairs as a result of the accident. This
vehicle was acquired by the company on 1 January 2019 for TZS. 95,000. The company, however, has
insured the vehicle and thus on 4 November 2021 wrote to the insurance company for the claim, to
purchase a new vehicle. In response, the Insurance company picked and assessed the damaged car, and on 8
January 2022 paid the company a claim of TZS. 80,000.
There were no other changes in non-current assets for the year ended 31 December 2021. Non-current
assets are depreciated or amortized as follows:
Furniture & fittings 20% of cost
Office equipment, Motor vehicles and intangible assets 10% of cost
No depreciation is charged on non-current assets in the year of de-recognition. Depreciation or amortization
expense is charged to cost of sales.
No depreciation is charged on non-current assets in the year of de-recognition. Depreciation or amortization
expense is charged to cost of sales.
iii. Taxation account represents the aggregate amount paid by the company as self-assessment tax on its
estimated profit for the four-quarters of the 2021 year of assessment. DCRC Ltd in the year 2021, had
officers of Tanzania Revenue Authority (TRA) auditing its tax records for the 2019 and 2020 years of
assessment. All the prior years before the 2019 year of assessment have already been audited by TRA. The
audit report of TRA received and agreed by DCRC Ltd in November 2021 revealed the following:
Year of Tax liability for the year from

Assessment Current tax provided for the year Tax audit
TZS TZS
2019 45,000 43,000
2020 57,800 67,600
The company paid in full the current tax provided for the years 2019 and 2020 in the first half of the years
2020 and 2021 respectively. However, the differences arising from the tax audit have not been provided for
in the above balances and are yet to be settled by the company. Current tax expense and increase in deferred
tax liability for the year ended 31 December 2021 have been estimated at TZS. 35,300 and TZS. 3,750
respectively.
iv. As part of cash flow management, the company at the beginning of the current year, purchased a 13%,
TZS. 20,000 5-year bond at a price of TZS. 19,000, incurring brokerage fee of 2% of the par value. The
bond will be redeemed at a premium of 5% over its par value. The brokerage fee paid is included in the
administrative expenses. The business model of DCRC Ltd in relation to this bond is to hold it till maturity

while availing itself to sell when there is a good opportunity to do so. The effective interest rate of the bond
is 15% and its fair value at 31 December 2021 is TZS. 21,000.
v. Bank account represents the cash book balance as at 31 December 2021. The Bank statement, however,
reveals a balance of TZS. 353,000 as at this date. There are only two reconciling differences between the
two figures: Cheques recorded at the credit side of the cash book but yet to be presented to Bank for
payment and bank charges yet to be recorded in cash book. The value of cheques yet to be presented to
Bank for payment is TZS. 72,000. All bank charges are classified as administrative expenses.
Required:
Prepare the Statement of Profit or Loss and Other Comprehensive Income of DCRC Ltd for the year ended
31 December 2021 and the Statement of Financial Position as at that date. Show clearly all relevant
workings.
QUESTION 6
The following trial balance has been extracted from the books of Arran as at 31 March 20X7:
Tzs Tzs
"000,000" "000,000"
Administration expenses 250
Distribution costs 295
Share capital $1 270
Share premium 80
Revaluation surplus 20
Dividend paid 27
Cash at bank and in hand 3
Receivables 233
Interest paid 25
Dividends received 15
Interest received 1
Land and buildings at cost (land 380, buildings 100) 480
Land and buildings: accumulated depreciation 30
Plant and machinery at cost 400
Plant and machinery: accumulated depreciation 170
Retained earnings account (at 1 April 20X6) 235
Purchases 1,260
Sales 2,165
Inventory at 1 April 20X6 140
Trade payables 27
Bank loan 100
3113 3113

Additional information
1. Inventory at 31 March 20X7 was valued at a cost of TZS.95,000,000. Included in this balance were goods
that had cost TZS.15,000,000. These goods had become damaged during the year and it is considered that
the goods could be sold for TZS. 5,000,000 after paying commission of TZS.500,000.
2. Depreciation for the year to 31 March 20X7 is to be charged against cost of sales as follows:
Buildings 5% on cost (straight line)

Plant and machinery 30% on carrying amount (reducing balance)
3. Land is to be revalued upwards by TZS.100,000,000

4. Income tax of TZS.165,000,000 is to be provided for the year to 31 March 20X7.
5. The bank loan is repayable in five years' time.
Required:
Prepare the statement of profit or loss and other comprehensive income, statement of changes in equity and
statement of financial position for year ended 31 March 20X7.
Note: Show all workings, notes are not required.
QUESTION 7
Vibua Limited (Vibua) has hired you to a position of a chief accountant after becoming a Certified Public
Accountant. Your first assignment is on preparing financial statements for the year ended 30th April 2023. A senior
accountant presents the following trial balance to you:
DEBIT CREDIT
DETAILS TZS.‘000’ TZS.‘000’
Property, plant and equipment – cost 487,000
Land and building at – revaluation 563,000
Other non-current assets – revaluation 85,420
Accumulated depreciation – on 30th April 2023
Property, plant and equipment 96,250
Building 136,800
Other non-current assets 18,500
Merchandize – on 30th April 2023 263,200
Cash and bank balance 341,280
Trade receivables 215,700
Cost of goods sold 724,400
Operating expenses 270,000
Sales 1,488,900
Ordinary shares 800,000
Retained earnings 105,150
Revaluation surplus 115,100
5% preference shares 100,000
TOTAL 2,950,000 2,950,000

Additional Details:
i. Vibua received an item of property, plant and equipment with a fair value of TZS.110 million from
Kambale on 25th April 2023. Kambale agreed on settling that transaction via TZS.30 million cash
together with a plot of land. Vibua is ready to offer a plot whose book value is TZS.65 million although
its market value on the date of transacting was TZS.75 million. Neither cash nor plot has been
transferred to-date.
ii. A building with a revaluation surplus of TZS.60 million had a recoverable amount of TZS.40 million
below its carrying value on 30th April 2023 was TZS.195 million and its total depreciation until then
was TZS.45 million.
iii. One lot of merchandise (composed of different kinds of inventory) worth TZS.120 million at Vibua
selling price was delivered to Sungura in early April 2023. On 25th April 2023, Sungura requested
returning goods of one kind of inventory invoiced at TZS.34.3 million, for that consignment was
ordered by mistake. Vibua accepted that request on the same day and approved a credit which was
entered in respective accounts correctly and communicated to Sungura a day after. Vibua’s standard
price is including a margin of 40%, but Vibua allowed Sungura a discount of 2% of selling price.
Vibua’s store keeper received those goods intact in May 2023
iv. To-date, Vibua over 15 years has been implementing its publicly known policy of supplying clean
water to one needy public health Centre. In April 2023, Vibua received a proposal of requesting an
assistance of drilling a bore hole for supplying clean water to new government dispensary. A feasibility
study report showed that the whole project can be completed in 18 months at a cost of TZS.67 million,
whose equivalent value on 30th April 2023 is TZS.58.3 million.
v. Corporate tax rate applicable to Vibua is 30% of annual profit.
vi. Ordinary dividend shall be 35% of profit after tax.
REQUIRED:
a. Prepare the Statement of Profit or Loss and other Comprehensive Income of Vibua for the year ended 30th
April 2023.
b. Prepare the Statement of Financial Position of Vibua as at 30th April, 2023.

QUESTION 8
The following trial balance relates to Koli Ltd for the year ended 31 December, 2020.
TZS’000 TZS’000
Sales 128,000
Purchases 75,000
Distribution expenses 8,000
Administrative expenses (Note ii) 22,000
License (Note iii) 5,000
Inventories at 31 December 2019 26,200
Finance costs on a long-term loan 3,000
Income tax (Note iv) 200
Deferred tax (Note iv) 6,000
Dividend paid on equity shares 2,000
Property, Plant and Equipment (1/1/2011) - at cost (Note v) 57,000
Provision for depreciation on PPE (31/12/2019) 10,790
Trade receivables 52,000
Bank balances 33,790
Provision for legal costs (Note ii) 10,000
Long-term loan 40,000
Stated capital 50,000
Retained earnings as at 31 December 2019 27,000
283,990 283,990
Additional information:
i. The carrying value of inventories on 31 December 2020 was 23 million
ii. Administrative expenses include a provision of TZS 10 million for the possible costs of a
legal claim lodged against Koli Ltd by one of its customers before 31 December 2020. The
directors of Koli Ltd consider that it is probable that Koli Ltd can successfully defend the
case, but they are providing for the worst possible outcome on the grounds of prudence. The
provision of TZS 10 million is for the amount sought by the customer (TZS 9.6 million) plus
the directors' best estimate of the legal costs incurred in defending the case. If Koli Ltd
successfully defends the case, then based on the outcomes of similar cases in the past, it is
likely (but not sure) that the customer will be required to reimburse Koli Ltd for its legal
costs.
iii. On 1 January, 2020, Koli Ltd paid TZS 5 million for a ten-year export license.
iv. The estimated income tax on the profits for the year to 31 December 2020 is TZS 2.5 million.
During the year, TZS 2.2 million was paid in full and in the final settlement of income tax on
the profits for the year ended 31 December 2019. The statement of financial position on 31
December 2019 had included TZS 2.4 million in respect of this tax liability.

A transfer of TZS 1.4 million is required to increase the deferred tax liability in the statement
of financial position; TZS 900,000 of this amount was necessary due to the taxable temporary
difference caused by the property revaluation (see note v below).
v. The details of property, plant and equipment are as follows:
Accumulated
depreciation at Carrying Amount
Cost 1 January 2020 at 1 January 2020
Component of PPE TZS'000 TZS'000 TZS'000
Land 12,000 0 12,000
Buildings 18,000 3,240 14,760
Plant and Equipment 27,000 7,550 19,450
57,000 10,790 46,210
Estimate of useful economic life (at the date of purchase) of PPE components:
Land - nil (infinite life)

Building - 50 years
Plant and Equipment 4 years
Depreciation of property, plant and Equipment is allocated as follows:
80% to cost of sales

10% to distribution expenses
10% to administrative expenses
The above allocation relates to only owned tangible assets. All other depreciation or
amortization charges should be fully charged to the cost of sales.
vi. On 1 January 2020 the directors of Koli Ltd decided to revalue its property (Land and
Building) to its market value of TZS 40 million, including TZS 19.5 million for the Land. The
original estimate of the useful economic life of the property was still considered valid. The
directors wish to make an annual transfer of excess depreciation from the revaluation reserve
to realized profits following the revaluation.
Required:
a. The Statement of Profit or Loss and Other Comprehensive Income for the year ended 31
December 2020.
b. The Statement of Changes in Equity for the year ended 31 December 2020
c. The Statement of Financial Position as at 31 December 2020.

IAS 1 FInancial Reporting - Handout

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IAS 1 - Presentation of Financial Statements DSM CPA (T) REVIEW

IAS 1 - Presentation of Financial Statement

Objective of financial statements

Components of financial statements

A complete set of financial statements includes:

a statement of financial position (balance sheet) at the end of the period

CPA T PAUL MDEE CONT: 0712619088, CPA T YONA B CONT: 0718474403 1

loss, immediately followed by a statement presenting comprehensive income beginning with

When an entity applies an accounting policy retrospectively or makes a retrospective restatement

General features of Financial Statements

Fair presentation and compliance with IFRSs

Accrual basis of accounting

Materiality and aggregation

Information is material if omitting, misstating or obscuring it could reasonably be expected to

 statement of financial position*

* A third statement of financial position is required to be presented if the entity retrospectively

Structure and content of financial statements in general

IAS 1 requires an entity to clearly identify:

Statement of financial position

A recommended format is as follows:

Equity and liabilities

CPA T PAUL MDEE CONT: 0712619088, CPA T YONA B CONT: 0718474403 4

Total Equity and Liabilities xx

Note that IAS 1 requires an asset or liability to be classified as current if:

 it will be settled within 12 months of the reporting date, or

Statement of changes in equity (SOCIE)

Share Share Revaluation Retained Total

Statement of profit or loss and other comprehensive income

IAS 1 Presentation of Financial Statements requires that you prepare either:

A recommended format is as follows:

XYZ: Statement of profit or loss and other comprehensive income for

Other comprehensive income

CPA T PAUL MDEE CONT: 0712619088, CPA T YONA B CONT: 0718474403 6

DETAILS DEBIT (TZS.) CREDIT (TZS.)

Ordinary share capital 440,000,000

6% Preference share capital 80,000,000

Retained earnings 96,412,000

Revaluation surplus 98,000,000

12% Bank loan 200,000,000

Depreciation until 30th September,2021 62,140,000

Trade receivable/payables 47,400,000 90,240,000

Landed Properties 656,840,000

Other tangible long-term assets 181,300,000

Investment in Pina 120,000,000

Cost of goods sold 421,000,000

Stock on 30th September, 2022 102,700,000

Cash operating expenses 328,310,000

TOTAL 2,008,692,000 2,008,692,000

Revaluation surplus recorded before year end 40,000,000 58,000,000

Book Value on 30th September, 2021 218,000,000 396,500,000

Depreciation until 30th September, 2021 42,340,000

CPA T PAUL MDEE CONT: 0712619088, CPA T YONA B CONT: 0718474403 8

I. INAK closing stock at 31st December 2021 was valued at TZS.226,725,000.

Provision for income tax - 3,000,000

Advance income tax paid 9,000,000 -

CPA T PAUL MDEE CONT: 0712619088, CPA T YONA B CONT: 0718474403 9

Deferred tax - 7,500,000

The following information are relevant to the Makusaro Limited:

CPA T PAUL MDEE CONT: 0712619088, CPA T YONA B CONT: 0718474403 10

Notes: The following notes are relevant.

CPA T PAUL MDEE CONT: 0712619088, CPA T YONA B CONT: 0718474403 11

Note: Notes to the financial statements are not required.

CPA T PAUL MDEE CONT: 0712619088, CPA T YONA B CONT: 0718474403 12