PIPFA Financial Reporting Syllabus

Financial Reporting syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Financial Reporting in PIPFA, not a summary of it.

1. 1

   Regulatory and Conceptual Framework

   2 topics

   • IFRS and the IASB
   • Presentation of Financial Statements (IAS 1)
2. 2

   Consolidated Financial Statements

   3 topics

   • Consolidated Statement of Financial Position
   • Goodwill and Non-controlling Interest
   • Associates and Joint Ventures
3. 3

   Revenue Recognition

   2 topics

   • Revenue from Contracts with Customers (IFRS 15)
   • Performance Obligations
4. 4

   Leases

   2 topics

   • Lessee Accounting (IFRS 16)
   • Right-of-use Asset and Lease Liability
5. 5

   Provisions and Events after Reporting Date

   2 topics

   • Provisions and Contingent Liabilities (IAS 37)
   • Events after the Reporting Period (IAS 10)
6. 6

   Income Taxes and Deferred Tax

   2 topics

   • Temporary Differences
   • Deferred Tax Assets and Liabilities (IAS 12)
7. 7

   Intangibles and Impairment

   2 topics

   • Intangible Assets (IAS 38)
   • Impairment of Assets (IAS 36)
8. 8

   Analysis and Interpretation

   2 topics

   • Ratio Analysis
   • Profitability and Liquidity Assessment

Financial Reporting flashcards for PIPFA

23 of 62 cards from the Financial Reporting deck — real questions with worked answers.

1. What is the IASB and what is its primary role in financial reporting?

   The International Accounting Standards Board (IASB) is the independent standard-setting body of the IFRS Foundation. It develops and issues International Financial Reporting Standards (IFRS) and approves Interpretations issued by the IFRS Interpretations Committee.

2. What is the objective of general purpose financial statements under the IASB Conceptual Framework?

   To provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.

3. Name the two fundamental qualitative characteristics of useful financial information per the Conceptual Framework.

   Relevance and faithful representation.

4. List the four enhancing qualitative characteristics of useful financial information.

   Comparability, verifiability, timeliness and understandability.

5. What is the purpose of IAS 1 Presentation of Financial Statements?

   It prescribes the basis for presentation of general purpose financial statements to ensure comparability with the entity's own prior periods and with other entities, setting out overall requirements, structure and minimum content.

6. List the complete set of financial statements required by IAS 1.

   (1) Statement of financial position, (2) statement of profit or loss and other comprehensive income, (3) statement of changes in equity, (4) statement of cash flows, (5) notes, and a statement of financial position at the beginning of the earliest comparative period when there is a retrospective restatement.

7. Under IAS 1, what is the underlying assumption on which financial statements are normally prepared?

   The going concern assumption — that the entity will continue in operation for the foreseeable future and has no intention or need to liquidate or curtail materially the scale of its operations.

8. How does IAS 1 classify an asset as current?

   An asset is current if it is expected to be realised, sold or consumed in the normal operating cycle; held primarily for trading; expected to be realised within 12 months after the reporting period; or is cash/cash equivalent (unless restricted). All others are non-current.

9. What basis of accounting (other than cash flow information) must be used under IAS 1?

   The accrual basis of accounting.

10. What is a parent and a subsidiary in consolidation, and what is control?

    A parent is an entity that controls one or more entities (subsidiaries). Control exists when the investor has power over the investee, exposure to variable returns, and the ability to use its power to affect those returns (IFRS 10).

11. In a consolidated statement of financial position, how are the parent's and subsidiary's assets and liabilities combined?

    They are added together line-by-line on a 100% basis (full consolidation), regardless of the ownership percentage, after eliminating intra-group balances and the cost of investment against the subsidiary's equity.

12. How is goodwill arising on consolidation calculated?

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

13. How is positive goodwill subsequently measured under IFRS 3?

    Goodwill is not amortised; it is carried at cost less accumulated impairment losses and tested for impairment at least annually (IAS 36).

14. What is non-controlling interest (NCI)?

    The equity in a subsidiary not attributable, directly or indirectly, to the parent. It represents the other shareholders' share of the subsidiary's net assets and results, shown within equity in the consolidated statement.

15. What are the two methods allowed under IFRS 3 for measuring NCI at the acquisition date?

    (1) At fair value (full goodwill method), or (2) at the NCI's proportionate share of the acquiree's identifiable net assets (partial goodwill method).

16. How is NCI in the consolidated statement of financial position calculated at the reporting date (proportionate method)?

    NCI = NCI% × (Subsidiary's net assets at the reporting date, including fair value adjustments). Under the fair value method, add the NCI's share of post-acquisition movements to the NCI's fair value at acquisition, less NCI share of goodwill impairment.

17. How is an unrealised profit on intra-group inventory sales adjusted in the consolidated statement of financial position?

    The unrealised profit in closing inventory is eliminated by reducing inventory and reducing retained earnings (charged to the seller). If the subsidiary is the seller, the NCI's share of the adjustment is also reduced.

18. What is an associate and what method is used to account for it?

    An associate is an entity over which the investor has significant influence (but not control). It is accounted for using the equity method (IAS 28).

19. What is presumed to indicate significant influence under IAS 28?

    Holding, directly or indirectly, 20% or more (but not more than 50%) of the voting power of the investee, unless it can be clearly demonstrated otherwise.

20. How is the carrying amount of an associate measured under the equity method?

    Cost of investment + investor's share of post-acquisition profits/reserves − investor's share of losses − dividends received from the associate − any impairment.

21. What is a joint venture and how is it accounted for under IFRS 11?

    A joint venture is a joint arrangement whereby the parties that have joint control have rights to the net assets of the arrangement. It is accounted for using the equity method (like an associate).

22. What is joint control under IFRS 11?

    The contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

23. What is the core principle of IFRS 15 Revenue from Contracts with Customers?

    An entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

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