ICAP CAF CAF-6: Corporate Reporting Syllabus

CAF-6: Corporate Reporting syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for CAF-6: Corporate Reporting in ICAP CAF, not a summary of it.

1. 1

   Consolidated Financial Statements

   3 topics

   • IFRS 10 consolidated statement of financial position
   • Consolidated statement of profit or loss and OCI
   • IAS 28 investment in associates
2. 2

   Earnings Per Share and Local Requirements

   2 topics

   • IAS 33 basic and diluted earnings per share
   • Local requirements for preparing financial statements
3. 3

   Income Taxes and Revenue

   2 topics

   • IAS 12 current and deferred tax
   • IFRS 15 revenue from contracts with customers
4. 4

   Intangible Assets

   1 topic

   • IAS 38 recognition and measurement
5. 5

   Ethics and Sustainability Reporting

   2 topics

   • Fundamental principles of professional ethics
   • Fundamentals of ESG and sustainability
6. 6

   Leases and Financial Instruments

   2 topics

   • IFRS 16 Leases
   • IFRS 9 financial instruments
7. 7

   Provisions, Events and Other Areas

   4 topics

   • IFRS 8 operating and reportable segments
   • IAS 37 provisions, contingent liabilities and assets
   • IAS 10 events after the reporting period
   • IAS 21 effects of changes in foreign exchange rates

CAF-6: Corporate Reporting flashcards for ICAP CAF

21 of 51 cards from the CAF-6: Corporate Reporting deck — real questions with worked answers.

1. Under IFRS 10, what is the definition of control of an investee?

   An investor controls an investee when it has: (1) power over the investee, (2) exposure or rights to variable returns from its involvement, and (3) the ability to use its power to affect the amount of those returns. All three must be present.

2. How is goodwill on consolidation calculated under IFRS 3 (full goodwill method)?

   Goodwill = (Fair value of consideration transferred + Fair value of non-controlling interest + Fair value of any previously held equity interest) - Fair value of identifiable net assets acquired at the acquisition date.

3. In a consolidated statement of financial position, how is non-controlling interest (NCI) measured at the reporting date?

   NCI at acquisition (FV or proportionate share of net assets) + NCI's share of post-acquisition changes in net assets (e.g. share of post-acquisition retained earnings and other reserves).

4. How are intra-group balances and unrealised profit on intra-group inventory treated in consolidation?

   Intra-group receivables/payables are eliminated in full. Unrealised profit on inventory still held within the group is eliminated by reducing closing inventory and group profit; if the seller is the subsidiary, the adjustment is shared between group and NCI.

5. In the consolidated statement of profit or loss, how much of a subsidiary's income and expenses is included, and how is profit then split?

   100% of the subsidiary's income and expenses are added line-by-line (time-apportioned from the acquisition date). Profit for the year is then split between owners of the parent and the non-controlling interest based on their respective shareholdings.

6. How is the non-controlling interest's share of profit for the year calculated in the consolidated P&L?

   NCI share = NCI% x subsidiary's profit after tax for the period, adjusted for fair value depreciation, impairment of goodwill (if full goodwill method) and any unrealised profit where the subsidiary is the seller.

7. Under IAS 28, what is an associate and what level of influence does it imply?

   An associate is an entity over which the investor has significant influence (the power to participate in financial and operating policy decisions but not control or joint control). Significant influence is presumed at 20% to 50% of voting power.

8. How is an investment in an associate accounted for under the equity method (IAS 28)?

   Initially recorded at cost. The carrying amount is then increased/decreased by the investor's share of the associate's post-acquisition profit or loss (in P&L) and OCI, and reduced by dividends received from the associate.

9. Under the equity method, where in the consolidated P&L does the share of an associate's profit appear?

   As a single line: 'Share of profit of associate' (investor's % x associate's profit after tax), presented after group operating profit, net of any impairment.

10. State the formula for basic earnings per share under IAS 33.

    Basic EPS = (Profit or loss attributable to ordinary equity holders of the parent - Preference dividends) / Weighted average number of ordinary shares outstanding during the period.

11. Under IAS 33, how is a bonus (scrip) issue treated when calculating the weighted average number of shares?

    Bonus issues are treated as if they had always existed: the number of shares before the bonus issue is multiplied by the bonus fraction, and the comparative (prior year) EPS is restated. No cash is received, so no time-apportionment applies.

12. Under IAS 33, how is a rights issue handled in the weighted average number of shares?

    A rights issue contains a bonus element, so a bonus fraction is applied: (Fair value per share before exercise / Theoretical ex-rights price). Shares are time-apportioned and the prior-year EPS is restated using the bonus fraction.

13. State the formula for diluted earnings per share under IAS 33.

    Diluted EPS = (Earnings attributable to ordinary shareholders + post-tax effect of dilutive items) / (Weighted average ordinary shares + weighted average dilutive potential ordinary shares).

14. How are convertible bonds treated when computing diluted EPS?

    Adjust earnings by adding back the post-tax interest saved on the convertible (interest x (1 - tax rate)), and add the maximum number of new ordinary shares that would arise on conversion to the denominator.

15. In Pakistan, which law governs the form and content of company financial statements, and which standards apply?

    The Companies Act 2017 prescribes the form/content (e.g. Fourth and Fifth Schedules), and companies must follow IFRS/IAS as notified/adopted by the SECP. The Fourth Schedule applies to listed companies and the Fifth Schedule to non-listed companies.

16. Under the Companies Act 2017, what financial statements must a company prepare and within what period must they be presented to the AGM for a listed company?

    A statement of financial position, statement of profit or loss (and OCI), statement of changes in equity, statement of cash flows, and notes. Listed companies must lay audited accounts before the AGM within 120 days of the financial year-end.

17. Under IAS 12, define a temporary difference and distinguish taxable from deductible temporary differences.

    A temporary difference is the difference between the carrying amount of an asset/liability and its tax base. Taxable temporary differences give rise to deferred tax liabilities; deductible temporary differences give rise to deferred tax assets.

18. How is the tax base of an asset determined under IAS 12?

    The tax base of an asset is the amount that will be deductible for tax purposes against future taxable economic benefits when the carrying amount is recovered. If the benefits are not taxable, the tax base equals the carrying amount.

19. What measurement (tax rates) does IAS 12 require for deferred tax, and may it be discounted?

    Deferred tax is measured using the tax rates expected to apply when the asset is realised or liability settled, based on rates/laws enacted or substantively enacted by the reporting date. Deferred tax must NOT be discounted.

20. When may a deferred tax asset be recognised under IAS 12?

    A deferred tax asset is recognised for deductible temporary differences, unused tax losses and unused tax credits only to the extent that it is probable that future taxable profit will be available against which they can be utilised.

21. State the five-step model for recognising revenue under IFRS 15.

    1) Identify the contract with a customer; 2) Identify the performance obligations; 3) Determine the transaction price; 4) Allocate the transaction price to the performance obligations; 5) Recognise revenue when (or as) a performance obligation is satisfied.

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