International Financial Reporting Standards Report

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International Financial Reporting
1

Table of Contents
Introduction......................................................................................................................................3
Part 1................................................................................................................................................4
A..................................................................................................................................................4
B...................................................................................................................................................5
C...................................................................................................................................................6
Part 2..............................................................................................................................................13
A................................................................................................................................................13
B.................................................................................................................................................14
Part 3..............................................................................................................................................17
A................................................................................................................................................17
B.................................................................................................................................................18
Conclusion.....................................................................................................................................21
References......................................................................................................................................22
2

Introduction
International Financial Reporting System is a standard that is used by the entire countries for the
preparation of their financial reporting. These standards are issued by the International
Accounting Standard Board (IASB). It also shows how the companies maintain their books of
account and also how they record the transaction. The total assessment is divided into 3 parts and
each part has its respective subparts. The 1st part contains the information related to the IFRS 16
and also talks about the lease. The 2nd part deals with revenue expenditure and capital
expenditure. It also shows their difference. The last and final part will deal with the IAS 2 which
refers to the valuation of inventory and also the calculation of closing stock.
3

Part 1
A
International Financial Reporting is a single accounting lessee. It recognizes all the assets and
liability within the lease period for more than 12 months. A lease provides the leaser as the right
to use the leased assets and lease liability to make the payment. IFRS 16 has been replaced the
IAS 17. Under IFRS 6 the finance lease is treated as a finance lease (Acharya and Ryan 2016).
Accounting treatment of International Financial Reporting System 16
1. It helps in recognizing the assets and liability which are on lease in the balance sheet
which were earlier measured at their respective present value so to avoid the payment of
lease in near future (Epstein and Jermakowicz 2010).
2. It also helps in identifying the depreciation of the leased assets and also able to find out
the interest on the lease liability shown in the income statement.
3. It also helps in segregating the amount paid in cash towards the different portion and also
the interest amount which is reflecting in the cash flow statement (Bushee, Goodman, and
Sunder 2018).
4

B
IFRS 16 tells about the lease. The lease cannot be classified when the lease gets inspected and
also unable to determine whether the lease is an operating lease or a financial lease. IFRS has a
single method for every lease which is provided to the lessees (Epstein and Jermakowicz 2010).
IFRS 16 provides every leaser its rights on assets such as the right to use assets under the lease
agreement and helps in finding the liability that occurs during the accounting period (Acharya
and Ryan 2016).
Exceptions in IFRS 16
1. The lease carries a very short period, it means the lease should less than one year. It
means that the lease should of short term.
2. Under this lease, the assets get leased which are very less the value.
Changes under the lessee
1. The calculation of present value is done under the lease and also the liability is to be
calculated. For recording this transaction the entry will be,
Right to use of assets A/c Dr.
To liability A/C
2. Depreciation should also be calculated at the time of payment during the accounting
period. First depreciation should be identified over the lease assets during the lease
period.
5

C
Calculation of Interest Rate:
Quarters Amount
0 (28,050)
1 1,950
2 1,950
3 1,950
4 1,950
5 1,950
6 1,950
7 1,950
8 1,950
9 1,950
10 1,950
11 1,950
12 1,950
13 1,950
14 1,950
15 1,950
16 1,950
17 1,950
18 1,950
19 1,950
Interest Rate 2.95%
6

Lease Schedule:
Quarte
r Amount Interest Installment Amount Repaid Balance
0
30,00
0 -
1,95
0 1,950
28,05
0
1
28,05
0
82
8
1,95
0 1,122
26,92
8
2
26,92
8
79
5
1,95
0 1,155
25,77
3
3
25,77
3
76
1
1,95
0 1,189
24,58
4
4
24,58
4
72
6
1,95
0 1,224
23,36
0
5
23,36
0
69
0
1,95
0 1,260
22,09
9
6
22,09
9
65
2
1,95
0 1,298
20,80
2
7
20,80
2
61
4
1,95
0 1,336
19,46
6
8
19,46
6
57
5
1,95
0 1,375
18,09
0
9
18,09
0
53
4
1,95
0 1,416
16,67
5
10
16,67
5
49
2
1,95
0 1,458
15,21
7
11
15,21
7
44
9
1,95
0 1,501
13,71
6
12
13,71
6
40
5
1,95
0 1,545
12,17
1
13
12,17
1
35
9
1,95
0 1,591
10,58
0
14
10,58
0
31
2
1,95
0 1,638
8,94
3
15
8,94
3
26
4
1,95
0 1,686
7,25
7
16
7,25
7
21
4
1,95
0 1,736
5,52
1
17
5,52
1
16
3
1,95
0 1,787
3,73
4
18
3,73
4
11
0
1,95
0 1,840
1,89
4
19
1,89
4
5
6
1,95
0 1,894
(0
)
7

Journal Entries in the book of Roy Joy Ltd.
Date particulars L.F
.
Amount(Dr.
)
Amount
(Cr.)
1/1/2019 Lease Receivable a/c Dr. £ 30,000
To Asset a/c £
30,000
(Being freehold property
purchased)
1/1/2019 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,950
(Being installment received)
31/3/2019 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,122
To Finance Income a/c £
828
(Being installment received)
30/6/2019 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,155
To Finance Income a/c £
795
(Being installment received)
30/9/2019 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,189
To Finance Income a/c £
761
(Being installment received)
31/12/201
9 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,224
To Finance Income a/c £
726
(Being installment received)
8

31/3/2020 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,260
To Finance Income a/c £
690
(Being installment received)
30/6/2020 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,298
To Finance Income a/c £
652
(Being installment received)
30/9/2020 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,336
To Finance Income a/c £
614
(Being installment received)
31/12/202
0 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,375
To Finance Income a/c £
575
(Being installment received)
31/3/2021 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,416
To Finance Income a/c £
534
(Being installment received)
30/6/2021 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,458
To Finance Income a/c £
492
(Being installment received)
9

30/9/2021 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,501
To Finance Income a/c £
449
(Being installment received)
31/12/202
1 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,545
To Finance Income a/c £
405
(Being installment received)
31/3/2022 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,591
To Finance Income a/c £
359
(Being installment received)
30/6/2022 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,638
To Finance Income a/c £
312
(Being installment received)
30/9/2022 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,686
To Finance Income a/c £
264
(Being installment received)
31/12/202
2 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,736
To Finance Income a/c £
214
(Being installment received)
10

31/3/2023 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,787
To Finance Income a/c £
163
(Being installment received)
30/6/2023 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,840
To Finance Income a/c £
110
(Being installment received)
30/9/2023 Bank a/c Dr. £ 1,950
To Lease Receivable a/c £
1,894
To Finance Income a/c £
56
(Being installment received)
31/12/202
3 Bank a/c Dr. £ 800
To Rental Income a/c £
800
(Being rental income received)
31/3/2024 Bank a/c Dr. £ 800
To Rental Income a/c £
800
(Being installment received)
30/6/2024 Bank a/c Dr. £ 800
To Rental Income a/c £
800
(Being installment received)
30/9/2024 Bank a/c Dr. £ 800
To Rental Income a/c £
800
(Being installment received)
31/12/202 Bank a/c Dr. £ 800
11

4
To Rental Income a/c £
800
(Being installment received)
31/3/2025 Bank a/c Dr. £ 800
To Rental Income a/c £
800
(Being installment received)
30/6/2025 Bank a/c Dr. £ 800
To Rental Income a/c £
800
(Being installment received)
30/9/2025 Bank a/c Dr. £ 800
To Rental Income a/c £
800
(Being installment received)
** For future 2 years of period rental income should be taken at £800/ quarter.
12