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The IFRS and Accounting Concepts - Rocha Plc

   

Added on  2020-07-22

9 Pages1651 Words107 Views
FINANCE

Table of Contents1. ADJUSTMENTS IN LINE WITH THE IFRS AND ACCOUNTING CONCEPTS.................1Item 1...........................................................................................................................................1Item 5...........................................................................................................................................1Item 7...........................................................................................................................................2Item 8...........................................................................................................................................2Item 9...........................................................................................................................................3Item 11.........................................................................................................................................32. PREPARATION OF FINANCIAL STATEMENTS FOR THE ROCHA PLC.........................31. Statement of income statement................................................................................................32. Statement of changes in equity................................................................................................43. Statement of financial position................................................................................................5REFERENCES................................................................................................................................7

1. ADJUSTMENTS IN LINE WITH THE IFRS AND ACCOUNTINGCONCEPTS Item 1 According to the provisions of IAS 40, investment property is recognized at fair value atthe end of every accounting period. It means that every year, property is revaluated at its fairvalue and any changes in the fair value are recognized as profit or loss in the statement ofcomprehensive income (IAS 40 Investment Property, 2016). IFRS 13 indicates that fair value isthe price, at which, the assets can be exchanged between two knowledgeable and willing partiesin arm’s length transaction without deducting any transaction cost. Thus, applying the rule, on 1stApril, 2016, investment property is valued at £830,000 which at the end of financial year, 2017valued at £850,000. Thus, increase in value of the investment property by (£850,000-£830,000),£20,000 will be recognized as profit in P&L account. Journal entry Profit on revaluation of investment property A/c Dr. £20,000 To profit and loss a/c £20,000Item 5Trade receivables are recognized differently in line with the provisions of IAS 39 andIFRS 9. It is because, IAS 39 only recognize bad debts as a credit loss if there is sufficientevidences available to believe in impairment loss. However, in contrast, IFRS 9 allows entity torecognize expected reasonable impairment loss according to the historical experiences even noloss event happened yet (Silvia, 2015). Thus, applying the principle of IFRS 9, it becomes clear adebtors owing £20,000 will be considered as fully credit loss in the financial statement.However, for the remaining debtors, allowance will be created @ 5% of (£101,800- £4800 -£20,000 = £77,000) worth £3,850 for the expected future credit loss due to bad & doubtful debts.Journal entries:Bad debts a/c Dr. £20,000To Trade receivables a/c £20,000Allowances for receivables a/c Dr. £3,850GTo Trade receivables a/c £3,8501

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