TITLE : FINANCIAL ACCOUNTING AND REPORTING.

 
Contents
 
Preface
 
PART 1	INCOME AND ASSET VALUE MEASUREMENT SYSTEMS  1
 
Chapter 1	Accounting and reporting on a cash-flow basis  3
 
1.1 Introduction
1.2 Shareholders
1.3 What skills does an accountant require in respect of external
    reports?
1.4 Managers
1.5 What skills does an accountant require in respect of internal
    reports?
1.6 Procedural steps when reporting to internal users
1.7 Illustration of periodic financial statements prepared under the
    cash-flow concept to disclose realised operating cash flows
1.8 Illustration continued to disclose the statement of financial
    position prepared under the cash-flow concept
1.9 Treatment of fixed assets in the cash-flow model
1.10 What are the characteristics of this data that make it reliable?
1.11 Reports to external users
1.12 Review
1.13 Discussion questions
1.14 Exercises
1.15 References
 
Chapter 2 Accounting and reporting on an accrual accounting basis  23
 
2.1 Introduction
2.2 The historic cost convention
2.3 The accrual accounting concept
2.4 The mechanics of accrual accounting-adjusting cash receipts and
    payments
2.5 The subjective judgements required in accrual accounting-adjusting
    cash receipts in accordance with IAS 18
2.6 The subjective judgements required in accrual accounting-adjusting
    cash receipts in accordance with UK accounting practice
2.7 The subjective judgements required in accrual accounting-adjusting
    cash payments in accordance with the matching principle
2.8 The mechanics of accrual accounting-the balance sheet
2.9 Reformatting the statement of financial position into a balance
    sheet
2.10 Accounting for the sacrifice of fixed assets
2.11 Reconciliation of cash-flow and accrual accounting data
2.12 Discussion questions
2.13 Exercises
2.14 References
 
Chapter 3 Income and asset value measurement: an economist's
          approach  45
 
3.1 Introduction
3.2 The role and objective of income measurement
3.3 The accountant's view of income, capital and value
3.4 The economist's view of income, capital and value
3.5 Critical comment on the economist's measure
3.6 Critical comment on the accountant's measure
3.7 Income, capital and changing price levels
3.8 Summary
3.9 Discussion questions
3.10 Exercises
3.11 References
 
Chapter 4 Changing price levels: the developing concepts  67
 
4.1 A review of the problems of historic cost accounting
4.2 Shifting price level accounting
4.3 The concepts in principle
4.4 The concepts illustrated for one year's transactions
4.5 A critique of each model
4.6 Summary
4.7 Discussion questions
4.8 Exercises
4.9 Further reading
 
Chapter 5 Changing price levels: accounting for two periods  83
 
5.1 Introduction
5.2 Historic cost accounting model (HCA)
5.3 Replacement cost accounting model (RCA)
5.4 The net realisable value accounting model (NRVA)
5.5 The current purchasing power accounting model (CPPA) or (GPPA)
5.6 Comparison of the information produced under the four models
5.7 Exercises
 
Chapter 6 Changing price levels: financial reporting practice  103
 
6.1 Introduction
6.2 Past practice: current purchasing power (CPP)
6.3 Past practice: current cost accounting (CCA)
6.4 Present practice: the ASC lSandbook
6.5 A worked example
6.6 Critique of CCA statements
6.7 Future developments
6.8 Summary
6.9 Discussion questions
6.10 Exercises
6.11 Further reading
 
PART 2	REGULATORY FRAMEWORK-AN ATTEMPT TO ACHIEVE UNIFORMITY  141
 
Chapter 7	Published accounts of listed public companies  143
 
7.1 A public company's financial calendar for providing
    shareholders with information
7.2 Information appearing in a directors' report
7.3 Criteria for information appearing in a published profit and loss
    account and balance sheet
7.4 What information is required to be disclosed in Format 1
    and Format 2?
7.5 Does it really matter under which heading a cost is classified in
    the profit and loss account provided it is not omitted?
7.6 The balanee sheet
7.7 Disclosure of accounting policies
7.8 Effect of FRS 3 on the presentation of financial statements
7.9 Appendices
7.10 Discussion questions
7.11 Exercises
7.12 References
 
Chapter 8 Preparation of published accounts  179
 
8.1 An illustration of the preparation of a profit and loss account
for
    publication using Format I
8.2 Stage 1: the preparation of the internal profit and loss account
    from a trial balance
8.3 Stage 2: the preparation of the profit and loss account of
    Illustrious plc in Format I style presentation
8.4 Stage 3: the preparation of the balance sheet of Illustrious plc
as
    at 31 December 19XI in Format I style presentation
8.5 Summary
8.6 Discussion questions
8.7 Exercises
 
Chapter 9 Financial reporting: statutes and standards  193
 
9.1 Introduction
9.2 Statutory legislation
9.3 Mandatory regulations
9.4 Statements of Standard Accounting Practice (SSAPs)
9.5 Statements of Recommended Practice (SORPs)
9.6 International Accounting Standards (IASs)
9.7 EC directives
9.8 The Stock Exchange
9.9 Non-mandatory recommendations
9.10 Discussion questions
9.11 References
 
Chapter 10 Conceptual framework  209
 
10.1 The Corporate Report
10.2 Definition of a conceptual framework
10.3 The Solomons Report 1989
10.4 IASC Framework for the Presentation and Preparation of Financial
     Statements
10.5 ASB Statement of Principles
10.6 Making Corporo-te Reports Valuable (MCRV)
10.7 Summary
10.8 Discussion questions
10.9 References
 
PART 3 PROFIT AND LOSS ACCOUNT-REGULATING THE EARNINGS FIGURE THAT IS
       PRODUCED FOR INVESTORS  225
 
Chapter 11 Taxation in company accounts  227
 
11.1 Introduction
11.2 Corporation tax
11.3 Advance corporation tax
11.4 Investment income
11.5 Investment income other than dividends from shares
11.6 Deferred tax
11.7 A critique on the development of deferred tax accounting
11.8 Disclosure of the accounting policy for deferred tax
11.9 Interpretation
11.10 Value added tax
11.11 Discussions questions
11.12 Exercises
11.13 References
 
Chapter 12 Earnings per share  249
 
12.1 Why is the earnings per share figure important?
12.2 What were the earnings that were used in the EPS calculation?
12.3 How does a shareholder arrive at an estimate of future growth in
     the earnings per share?
12.4 Illustration of the EPS calculation and treatment of ACT
12.5 Calculating the EPS figure
12.6 Adjusting the number of shares used in the EPS calculation
12.7 The disclosure requirements of the Standard (SSAP 3)
12.8 Treatment of exceptional and extraordinary items in the profit
and
     loss account
12.9 Critique
12.10 The ASB response to criticisms of SSAP 6
12.11 Discussion questions
12.12 Exercises
12.13 References
 
PART 4 CONSOLIDATED ACCOUNTS  269
 
Chapter 13 Accounting for groups of companies at the time of
           acquisition  271
 
13.1 Business combinations: why they occur
13.2 Business combinations: financial reporting requirements
13.3 Business combinations: when a parent or holding
     company may or must omit the results of a subsidiary from the
     consolidated accounts
13.4 Company-only accounts: treatment of investment in a subsidiary
     acquired for cash and no goodwill
13.5 Consolidated accounts: acquisition accounting
13.6 Company-only accounts: treatment of positive and negative
goodwill
13.7 Consolidated accounts: treatment of positive goodwill
13.8 Consolidated accounts: effects of fair values
13.9 Consolidated accounts: minority interests
13.10 Consolidated accounts: treatment of negative goodwill
13.11 Company-only accounts: share-for-share exchange without merger
      relief
13.12 Consolidated accounts: acquisition accounting method after share
      exchange
13.13 Explanation of the merger accounting method
13.14 Company-only accounts: share-for-share exchange with merger
      relief
13.15 Consolidated accounts: merger accounting method
13.16 Discussion questions
13.17 Exercises
13.18 References
 
Chapter 14 Accounting for fixed asset investments  307
 
14.1 Accounting treatment of the investment in the books of the
     investing company at the date of acquisition
14.2 Categories of fixed asset investments
14.3 Carrying value of investments at the end of the financial year in
     the books of the investing company under the historic cost
     convention
14.4 Carrying value of investments at the end of the financial year in
     the books of the investing company under the alternative
     accounting rules
14.5 Preparation of a consolidated balance sheet at the end of the
     financial year to account for an investment in a subsidtary
14.6 Preparation of a consolidated balance sheet at the end of the
     financial year to account for an investment in an associate
14.7 How are shareholders' funds measured?
14.8 How does a dividend distribution by a subsidiary affect the
     balance sheet of the investing company, the investee company and
     the group?
14.9 In what circumstances will the consolidated reserves be adjusted
     in respect of intragroup transactions?
14.10 Why have the consolidated reserves increased during the year
      since acquisition?
14.11 Discussion questions
14.12 Exercises
14.13 References
 
Chapter 15 Consolidated profit and loss account  331
 
15.1 Introduction
15.2 Format of the consolidated profit and loss account
15.3 A step approach to preparing a consolidated profit and loss
     account for wholly and partly owned subsidiaries
15.4 Subconsolidation stages where there is more than one subsidiary
15.5 Summary
15.6 Discussion questions
15.7 Exercises
15.8 References
 
PART 5	BALANCE SHEET-ASSET MEASUREMENT AND DISCLOSURE  345
 
Chapter 16 Tangible fixed assets and depreciation  347
 
16.1 Introduction
16.2 What is a fixed asset?
16.3 What is depreciation?
16.4 What are the constituents in the depreciation formula?
16.5 The determination of the cost of fixed assets
16.6 Determination of the valuation on the revaluation of fixed assets
16.7 How is the economic life of an asset determined?
16.8 Residual value
16.9 The calculation of depreciation
16.10 Disclosure requirements
16.11 Government grants towards the cost of fixed assets
16.12 Investment properties
16.13 The effect of depreciation on the interpretation of the accounts
16.14 Summary
16.15 Discussion questions
16.16 Exercises
16.17 References
 
Chapter 17 Fixed tangible assets (not owned)-lessee  375
 
17.1 Leasing-an introduction
17.2 SSAP 21 (and its international equivalents)-the controversy
17.3 SSAP 21-classification of a lease
17.4 SSAP 21 -accounting for leases by lessees
17.5 Leasing-a form of off-balance-sheet financing
17.6 Materiality in relation to SSAP 21
17.7 Summary
17.8 Discussion questions
17.9 Exercises
17.10 References
 
Chapter 18 Fixed tangible assets (not owned)-lessor  395
 
18.1 Operating leases-lessor viewpoint
18.2 Finance leases-lessor viewpoint
18.3 Example-disclosure requirements in the lessor's accounts
18.4 Leasing-worked example in books of the lessor and lessee
18.5 Summary
18.6 Discussion questions
18.7 Exercises
18.8 References
 
Chapter 19 Intangible assets  415
 
19.1 An introduction to intangible assets
19.2 The importance of classifying an asset as intangible
19.3 The accounting treatment for research and development
19.4 Discussion questions
19.5 Exercises
19.6 References
 
Chapter 20 Goodwill
 
20.1 Introduction
20.2 What is goodwill?
20.3 What are the characteristics of goodwill?
20.4 The evolution of exposure drafts and standards for goodwill
20.5 The economic consequences of each method
20.6 Arguments relating to amortisation versus immediate write off
20.7 Goodwill-what will happen now?
20.8 Summary
20.9 Discussion questions
20.10 Exercises
20.11 References
 
Chapter 21 Brands  459
 
21.1 Introduction
21.2 What are brands?
21.3 What are the causes of the emergence of brand names?
21.4 Examples in the development of brand accounting
21.5 Justifications for brand accounting
21.6 Question marks surrounding brand accounting
21.7 The accounting bodies' reactions to brand accounting
21.8 Summary
21.9 Discussion questions
21.10 Exercises
21.11 References
 
Chapter 22 Stocks and work in progress  481
 
22.1 Stock defined
22.2 The controversy
22.3 SSAP 9 and legal requirements
22.4 Stock valuation
22.5 Work in progress (WIP)
22.6 Stock control
22.7 Creative accounting
22.8 The audit of the year-end physical stocktake
22.9 Published accounts
22.10 Discussion questions
22.11 Exercises
22.12 References
 
Chapter 23 Long-term contracts  505
 
23.1 Introduction
23.2 Recognition of profit
23.3 Integrated approach
23.4 Discussion questions
23.5 Exercises
23.6 References
 
PART 6	INTERPRETATION
 
Chapter 24 Funds-flow and cash-flow statements  519
 
24.1 From funds flow to cash flow
24.2 The SSAP 10 funds-flow statement
24.3 Problems associated with the SSAP 10 funds-flow statement
24.4 Worked example of the SSAP 10 funds-flow statement
24.5 Alternative approaches and formats to illustrate the flow of
funds
     in an organisation
24.6 The transition from funds-flow to cash-flow statements
24.7 ED 54-cash-flow statements: the benefits
24.8 ED 54-cash-flow statements: the format
24.9 FRS I-cash-flow statements
24.10 Worked examples of the ED 54 cash-flow statements and FRS I
      format
24.11 Critique of cash-flow accounting
24.12 Summary
24.13 Discussion questions
24.14 Exercises
24.15 References
 
Chapter 25 Analysis: profit and loss account and balance sheet. A
           review of financial ratio analysis  547
 
25.1 Introduction
25.2 Accounting ratios and ratio analysis
25.3 Six key ratios
25.4 Pyramid of ratios
25.5 Description of the six key ratios
25.6 Description of subsidiary ratios
25.7 Application of pyramid of ratios to Louis Newmark plc
25.8 Interpretation of Louis Newmark plc's accounts
25.9 Interfirm comparisons and industry averages
25.10 Interfirm comparisons: Louis Newmark plc and the electronics
      industry
25.11 Interpretation problems when using consolidated financial
      statements
25.12 Summary
25.13 Discussion questions
25.14 Exercises
25.15 References
 
Chapter 26 Analysis: profit and loss account and balance sheet. Trend
        analysis and multivariate analysis  573
 
26.1 Introduction
26.2 Horizontal analysisZbetween two periods
26.3 Trend analysis over a series of periods
26.4 Historical summaries
26.5 Vertical analysis-common size statements
26.6 Multivariate analysis-Z-scores  573
26.7 A-scores
26.8 Summary
26.9 Discussion questions
26.10 Exercises
26.11 Appendix-Thorn EMI accounts
26.12 References
 
PART 7 ACCOUNTABILITY  605
 
Chapter 27 Accountability of directors and auditors  607
 
27.1 Introduction
27.2 Commonality of interest
27.3 Exercising due care
27.4 Trustworthiness
27.5 Quality of performance
27.6 The way forward
27.7 Discussion questions
27.8 Exercises
27.9 Appendix-Grand Metropolitan annual report and accounts
27.10 References
 
Index