International Financial Reporting: Able Plc's 2017 Report

This report presents an analysis of Able Plc's financial performance for the year 2017, focusing on international financial reporting standards (IFRS). It begins with an income statement, detailing sales, cost of goods sold, and expenses to arrive at a net profit or loss. The report then delves into the relevant International Accounting Standards (IAS), specifically IAS 1, which governs the presentation of financial statements, and IAS 2, which addresses inventory valuation. The report provides a critical analysis of IAS 2, highlighting its importance in accurate financial reporting. Furthermore, the report discusses the concept of intangible assets, differentiating between non-current assets and intangible assets, and elaborating on goodwill as a key intangible asset. It also covers IAS 38, the standard for accounting for intangible assets, including recognition and measurement criteria. Overall, the report provides a comprehensive overview of Able Plc's financial position and the application of key accounting standards.

INTERNATIONAL FINANCIAL
REPORTING

Table of Contents
INTRODUCTION...........................................................................................................................1
Q.1 Income statement of Able Plc for the year 2017..................................................................1
Q.2 International accounting standards (IAS) related to financial reporting..............................3
Q.3 IAS 2 inventory valuation and critical analysis of statement...............................................7
CONCLUSION................................................................................................................................9
REFERENCES .............................................................................................................................10

INTRODUCTION
Financial reporting basically associated with disclosing financial information and data to
stakeholders and the financial performance of organisation. Financial reporting is a method to
define the policies and standards which remain related to financial reporting and analysis.
Organisations have to follow rules and regulations subject to presenting financial information
and data. There is a financial representation done in respect of presenting financial reporting and
information related to managers, stakeholders, public, government, banks and financial
institutions (Loughran and McDonald, 2016). International standards related to accounting for
intangible assets are defined in this report. International financial standards are defined with
critical analysis and reporting. IAS 2 which is related to inventory management and valuation.
Q.1 Income statement of Able Plc for the year 2017
IAS 1 contains the rules and policies related to presenting financial statements. There are
some guidelines are made in order to determine the structure and frame the financial information
of organisation in well organised manner. This standard required all the essential aspects in terms
of making financial accounts on annual basis. Complete primed subject to financial statements
are comprised as follows:
 Presenting the financial statement at the end of the period and year.
 Profit and loss account and other comprehensive income for the period. Comprehensive
income contains the elements which remain associated with income and expenses which
are not recognised in profit or loss as per IFRS rules and standards (Lamberton and
Lapeyre, 2011).
 IAS allows organisation to present a consolidated statement of profit and loss and other
comprehensive income in separate two statements.
 There are some essential aspects considered in respect of determining the change in
equity. A statement of change in equity for the period is formed which helps to
determine change in equity.
 This also assist managers and accountants to prepare cash flow statement which
contains the all the relevant details related to cash inflows and outflows for the particular
duration.
 Notes to accounts are also presented in respect of comprising of significant financial and
accounting policies and other explanatory information
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 A statement which contains the details related to predicting comprehensive information
and accounting reports to functions and management are presented in this context
(Kumar, 2012).
 A financial statement is presented by the organisation to present the financial position
and capital structure of the organisation. This is one of the essential aspect which is
considered important for defining the financial position in systematic format. This
statement contains the details related to all current, non current assets, current and non
current liabilities.
There is an income statement presented below of Able plc.
Income statement of Able Plc for the year ended 31st December 2017.
Particulars Amount
Sales 205000
Return inwards -10000 195000
Less: cost of goods sold 124000 -124000
Gross profit 71000
Expenses
Motor expenses 6000
Warehouse Salaries 26000
Hire of values 2000
Directors salary 10000
Finance costs 3000
Rent and rates 2000
Insurance paid 1000
Bed debts 2000
Depreciation
on fixtures 2000
on motor vans 1000
Loss of closing branch 20000 -75000
Net profit/Loss -4000
Working notes:
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1. Cost of goods sold is calculated as below;
COGS = (Purchase + Opening stock + direct expenses – return outwards – Closing stock)
= (130000-1000+1000+20000-26000)
= 124000
2. Adjustment of outstanding salary
Outstanding salary = Salary paid during the year + salary to be paid during the year or
outstanding salary
= 10000 + 1000 = 11000
3. Calculation of depreciation
Depreciation on Fixtures (20000*10%) 2000
Depreciation on Motor van (10000*10% ) 1000
Total depreciation 3000
IAS 1 fulfil the complete information and detail in respect of presenting financial
statements helps to set out overall requirements and needs for financial statements and the
requirements such as information related to profit and loss, revenues and expenditures generated
for the particular period (Kealy, 2014). Concept of going concern, accrual assumption, current
and non current distinction are considered essential in terms of making and comprising financial
statements of organisation. These standards remain essential in respect of comprehensive
income, contingent events and transactions, statements of change in equity, financial position
statement and cash flow statement. Assets and liabilities are classified in categorised form which
is bifurcated in various forms and helps to consolidate all the information in single format
additional and brief information are presented in the form of schedules.
Q.2 International accounting standards (IAS) related to financial reporting
There are standards and regulations are defined in respect of determining the information
and details which remain associated with analysing the performance and market position in
effective manner. There is an assets are defined in this context subject to building the structure of
organisation are adopted with in the organisation. There are two type of main assets are found in
organisational context. These assets are defined as follows;
Non Current assets: These are the assets which are considered essential in terms
of analysing the credibility and sustainability of organisation (Greenwood and Scharfstein,
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2013). There is a structure of proper cash flow and unrestricted cash within the operations are
considered in this context. Life cycle of this company basically remain for more than one year.
Non current assets basically helps to maintain an ethical manner.
These are mainly classified in major two board categorises such as
1. Limited life intangible assets: these are the type of intangible assets which contains
the type of assets such as copyrights, patents, goodwill, intellectual and contingent rights.
Duration of these type of assets remain associated for the limited duration. Life of these type of
assets also can increased or renewed for subsiding years and period. For example the rights of
patents and rights can be extended by fulfilling the legal and formal procedure for following
consideration.
2. Unlimited life of intangible assets: these are the assets which are considered essential
in terms of analysing the knowledge that how it can be treated and organised in well planed and
organised way. Trademarks, contrast to tangible assets, intangible assets, build back and
managing the skills and knowledge in more comprised way are some main aspects considered in
this context (Gotze, Northcott and Schuster, 2016).
Goodwill is one of the important and essential aspect considered in organisational
context. This is created by analysing and evaluating the base of structure. By providing quality
goods and services organisation try to attain customer interest and faith. Effective and quality
customer service plays vital role in respect of building brand value and goodwill in the market.
More over the information not only remain associated with analysing and maintain the scope of
good image but also helps to build the intellectual property. An approximation of the monetary
values are considered essential in respect of building the strong infrastructure, raising loans and
financial help and making the brand value at higher value.
Difference between Tangible assets and goodwill
Intangible assets Goodwill
These are the assets which are considered
essential in terms analysing the structure of
organisation. Non-physical and identifiable
assets and property are considered in this
context.
Goodwill is considered as a miscellaneous
category which helps to determine the value
and measurement of brand value of
organisation. This has also no any physical
appearance and existence but contains huge
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role in organisational value.
Computer software, advanced technology,
copyrights, licensing agreements, websites
domain name are some main examples of
intangible assets.
This is considered under miscellaneous
category which not only helps to maintain the
level of effective brand value but also
measured tiredly with in the organisation.
These can be sold independently and
successfully outside the market. Value of
intangible assets are considered in this context.
These are evaluated on the basis of goodwill
value in the market. This cannot exist
independently of the business.
This is one of the essential aspect which remain
associated with analysing the value of
intangible assets and properties. This helps to
estimate the value to organisation.
Goodwill can be sold and purchased or
transferred separately and combine. Life of
goodwill remain long term perspective.
Customer's loyalty, brand equity, recognition
and company worth are considered more than
the book value of organisation and quantifiable
assets are also counted as goodwill.
IAS 38
International Accounting standard Standard 38 contains the rules and standards related to
adjustment and accounting of intangible assets (Gabaix, 2012). Purpose of this objective is to
prescribe the accounting and goodwill in order to determine the tangibility and contingency of
intangible assets. There are some specified criteria are considered in this context which elaborate
the standards and polices related to measuring and evaluation of value of intangible assets.
There is a specified disclosures about intangible assets need to given and presented in systematic
format.
Scope
This standard is applied in accounting for intangible assets expect, intangible assets
which are already associated with another standards, financial assets defined in IAS 32 financial
instruments and presentation, recognition and measurement of exploration and evaluation assets
and expenditure on the development and renovation of minerals, oil, natural gas and related non-
regenerative resources (Coles Lemmon and Meschke, 2012).
Intangible assets
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These are the assets which don not contains the specific meaning and relevance and
physical nature in organisational context, but they retain high organisational values which helps
enhance the capability and enhance the value of organisation (Brooks, 2014). There are some
essential aspects are considered in this context such are Reputation, goodwill, patents,
intellectual property and assets, skilled and knowledge, professional skills and aspects. This not
only enhance the value of organisation but also improve the capacity of managing asstes and
liabilities.
These are considered as long terms aspects which helps to maintain long term visibility
and viability of organisation in terms of stakeholders, owners, directors, external parties, banks
financial institutions and suppliers. These assets do not contains physical relevance and existence
in real life. These drive as per the added value and increased infrastructure for better
understanding and leading the organisation. Value of intellectual property and the legal existence
not only present the right reflection of organisation but also build a strong base to run business
operations effectively and smoothly. Patents, legal rights, value of subsidiary assets and property
are the main aspects which are considered in this context (Brealey, Myers and Mohanty, 2012).
Recognition and measurement
Intangible assets are considered essential in respect of determining the item meets:
a) The definition of an intangible assets
b) The recognition contains specific criteria such as cost incurred to acquire internally
generated. There are some intellectual properties and intangible assets are treated in various form
which are defined as follows:
The nature of intangible assets are considered essential and no any replacement part is
added with in the organisational. Some times it become to bifurcate and divide the cost of
intangible assets and value of organisation in separate parts. More over these information remain
associated with analysing performance and evaluating value of generated goodwill value of
organisation (Baxter and et. al., 2014). Assets are replaced and in addition the replacement part
directly impact upon subsequent expenditure and expenditure incurred in different operations
and management.
Acquisition
Price of entity and business paid to acquiree assets separately reflects expectations about
probability in near future. Recognition of cost is considered essential in terms of assets ceases
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and the assets in the conditions for necessary. This basically associated with analysing with the
help of management (Baños-Caballero, García-Teruel and Martínez-Solano, 2014). Some
operations creates connections with the development and enhancement of value of intangible
assets. It is necessary to consider the assets to situation for accepting and capable of operating in
the manner intended by management.
These incidental operations basically helps to determine the essential aspects which
remain associated with expenses, operations and classification of income and expenses. Payment
is made in terms of short term credit which remain associated with cost of operations and
management in economic aspects. Inflows are considered essential in terms of managing.
Recognising credibility and sustainability.
Q.3 IAS 2 inventory valuation and critical analysis of statement
Inventories and stocks are considered as commodities in which organisation deals and run
their business. Inventory valuation is one of the prime requirement for an organisation. Sales are
held for sales are considered ordinary course of business. This is considered as process of
production for sales (Anandarajan,Anandarajan and Srinivasan, 2012). Supplies and
commodities are used by users and customers in terms of getting benefits. Inventories and stocks
are found in various forms in an organisation such as raw material use for manufacturing
products, stock work in progress (the stock which remain in inventories for manufacturing
goods), finished goods (these are the goods which are considered as ready for sale). Products
brought for resale of products and services which remain associated with stationary, retail
business and internal use of business.
These are the assets which do not remain consistent for more than one year. Life of these
assets remain centralised around 1 year. There are type of currents are found in organisational
context such as cash, debtors, lose and tools, foreign currency, investment, except investments
which can not be easily liquidated and analysed in organisational context. Account receivable,
investments, liquid assets, prepaid expenses, inventories and short term investments, market
securities, shares of other companies and venture capital and structure are the main examples
which are considered as current assets (Harrison, 2013). This are commonly helps to analyse the
aspects in respect of listed above which also define various categorises.
International standard IAS2 defines inventories as "assets:
(a) held for sale in the ordinary course of business;
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(b) in the process of production for such sale; or
(c) in the form of materials or supplies to be consumed in the production process or in the
rendering of services".
Companies often have inventories in various forms:
 raw materials, for use in a manufacturing business
 work-in-progress (partly manufactured goods) and finished goods (ready for
sale) of a manufacturing business
 products bought for resale by a retailer
 service items, such as stationery, bought for use within a business
Cost formula
IAS2 requires that the cost of inventory items should be ascertained "by using specific
identification of their individual costs".
In other words, each item of inventory should be considered separately and its cost should be
individually established.
There are two cost formula’s
Valuation of inventory
IFRS rules and standards are made in respect of evaluate the value and price of products
and services. It is required to measure the value of stock to analyse the cost of closing stock with
in the process and inventories. IAS 2 provides guidelines and rules related to cost evaluation of
inventories and stock with in process. This standard provides standards and aspects related to
determining value of subsequent recognition of the cost of an expenses and including accurate
cost and value of inventories and value which need to analyse the cost to inventories. Inventories
are measured in respect of determining aspects related to cost evaluating.
Cost is one of the crucial element which remain associated with acquiring goods and raw
material for better production and functional operations (Agarwal, Taffler and Brown, 2011).
Cost of inventory contains the cost of acquiring the goods to the presenting information in
transmit. with the help of analysing the aspetc .There is a cost concept used in organisation
subject to determining the cost of inventories cost of inventories is measured as follow;
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Cost of purchase = purchase cost + Import duties and other non recoverable taxes +
transport and handling cost + other cost directly attributed to acquisition – trade discounts and
rebates.
Cost of inventories basically remain associated with cost of labour, direct expenses and
production overheads and other costs there are some inventories are presented at various
locations such as warehouse and production department. There are some essential elements such
as cost of purchase, cost of conversion, cost incurred in beaning and the inventories are aligned
in different stores position. There are types of inventory valuation methods are used in
organisation which helps to determine the cost of inventories and valuation of closing stock.
Value of stock is evaluated on the basis of net realisable value and cost of inventory in market at
present time.
The first-in, first-out or weighted average cost formula for items that are ordinarily
interchangeable (generally large quantities of individually insignificant items). Specific
identification of cost for items of inventory that are not ordinarily interchangeable.
There are types of formulas used in organisational context to evaluate the cost of
inventories such as
FIFO: This is the method which is used to analyse the cost of value and stock with help
of assumption and the inventory items. Purchase of produced goods and sold and used as first in
terms of analysing the accounting period (Abdel-Kader, 2011). Valuation of stock remain related
to first in first out. This method is basically considered essential in terms of analysing cost and
determination of purchasing inventory. This method helps to align the requirement of inventories
in well organised manner.
Weighted Average: this is one of the essential method which is used by organisation to
determine the effective value of stock within the organisation. This method basically helps to
determine the average cost of inventory which remain in inventories. The cost of the items
remaining at the end of an accounting period is then calculated by using the most recently-
computed weighted average cost per item. This generally remain involved in computing a new
weighted average cost of capital and acquiring assets. It take place to acquire assets in respect of
determining the cost by consolidating value of stock in synchronised way. This method also
plays vital role in respect of decision making process.
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Last in first out (LIFO): this is the method which helps to analyse the cost of inventory
on the basis of evaluation profitability and cost of inventory by considering inventories in end.
This method is rarely used by managers and accountants because value of stock is based upon
the last price which is introduced with effective used.
Disclosure requirement
Accounting policy basically helps to determine inventories cost and evaluation of cost by
analysing the profitability. It is required by the mangers and accountants to disclose the policies,
procedures and standards which are adopted by organisation. Classification of goods also
depends upon appropriate strategies and plans which are carried out for smooth functioning and
planing.
CONCLUSION
This report explain the the importance of IAS standards and rules related to financial
reporting and analysis of financial representation. IAS 1 presentation of financial statements, IAS
2 inventory valuation and capital structure of organisation in terms of building the effective
structure of organisation is defined in this context. Regulatory discussion and international
standards are also discussed in this context. Regulatory discussion and relevant international
accounting standards are defined in this context and critical evaluation process is provided in
various forms.
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REFERENCES
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