{"id":1465,"date":"2025-11-04T19:22:32","date_gmt":"2025-11-04T16:22:32","guid":{"rendered":"https:\/\/finskillbox.com\/?page_id=1465"},"modified":"2025-11-04T19:28:11","modified_gmt":"2025-11-04T16:28:11","slug":"financial-reporting","status":"publish","type":"page","link":"https:\/\/finskillbox.com\/en\/financial-reporting\/","title":{"rendered":"Conceptual principles of financial reporting"},"content":{"rendered":"<div class=\"row align-center\"  id=\"row-1617730694\">\n\n\t<div id=\"col-386545784\" class=\"col medium-8 small-12 large-8\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<h1 class=\"uppercase\" style=\"text-align: center;\">Conceptual principles of financial reporting<\/h1>\n\t<div id=\"text-2351086161\" class=\"text\">\n\t\t\n<p>Covaliov Georgeta,<\/p>\n<p>auditor, CIPA<br \/>\n\t\t\n<style>\n#text-2351086161 {\n  text-align: right;\n}\n<\/style>\n\t<\/div>\n\t\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n\t<div id=\"col-386116736\" class=\"col medium-10 small-12 large-10\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<p><strong>\n<p><strong><u>Conceptual Framework for Financial Reporting<\/u><\/strong><\/p>\n<p><strong>The objective of financial reporting<\/strong><strong>is to present information about <strong>financial position<\/strong>, <strong>performance<\/strong>, and <strong>changes in financial position<\/strong>.<\/strong><\/p>\n<p><strong>Users:<\/strong> investors, creditors, employees, suppliers, government authorities, and the public.<\/p>\n<p><strong>Underlying Assumptions<\/strong><\/p>\n<ol>\n<li><strong>Accrual Accounting<\/strong>\u2014transactions are recognized when they occur, not when paid.<\/li>\n<li><strong>Going Concern<\/strong>\u2014the entity continues to operate for the foreseeable future.<\/li>\n<\/ol>\n<p><strong>Qualitative Characteristics of Information<\/strong><\/p>\n<table>\n<tbody>\n<tr>\n<td><strong>Category<\/strong><\/td>\n<td><strong>Characteristic<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Principal<\/strong><\/td>\n<td>Relevance, Materiality, Fair Presentation, Substance over Form, Prudence<\/td>\n<\/tr>\n<tr>\n<td><strong>Enhancing<\/strong><\/td>\n<td>Comparability, Verifiability, Timeliness, Understandability<\/td>\n<\/tr>\n<tr>\n<td><strong>Limitation<\/strong><\/td>\n<td>Benefit-Cost Balance<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Elements of Financial Statements<\/strong><\/p>\n<table>\n<tbody>\n<tr>\n<td width=\"138\"><strong>Category<\/strong><\/td>\n<td width=\"485\"><strong>Definition<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"138\">Assets<\/td>\n<td width=\"485\">Controllable resources that generate future benefits<\/td>\n<\/tr>\n<tr>\n<td width=\"138\">Liabilities<\/td>\n<td width=\"485\">Current debt requiring outflow resources<\/td>\n<\/tr>\n<tr>\n<td width=\"138\">Equity<\/td>\n<td width=\"485\">Asset-Liability Difference<\/td>\n<\/tr>\n<tr>\n<td width=\"138\">Revenue<\/td>\n<td width=\"485\">Increase in Benefits (Asset Growth \/ Decrease in Liabilities)<\/td>\n<\/tr>\n<tr>\n<td width=\"138\">Expenses<\/td>\n<td width=\"485\">Decrease in Benefits (Asset Outflow \/ Increase in Liabilities)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Recognition of Elements<\/strong><\/p>\n<p>An element is recognized if:<\/p>\n<ul>\n<li>an inflow\/outflow of economic benefits is probable;<\/li>\n<li>the amount can be reliably measured.<\/li>\n<\/ul>\n<p><strong>Valuation of Elements<\/strong><\/p>\n<table>\n<tbody>\n<tr>\n<td><strong>Valuation Basis<\/strong><\/td>\n<td width=\"295\"><strong>Brief Description<\/strong><\/td>\n<td width=\"161\"><strong>Example<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Historical Cost<\/strong><\/td>\n<td width=\"295\">At Cost<\/td>\n<td width=\"161\">FA under IAS 16<\/td>\n<\/tr>\n<tr>\n<td><strong>Fair Value<\/strong><\/td>\n<td width=\"295\">Arm-to-Arm Price<\/td>\n<td width=\"161\">IFRS Financial Assets 9<\/td>\n<\/tr>\n<tr>\n<td><strong>Value in Use <\/strong><\/td>\n<td width=\"295\">Present Value of Future Inflows<\/td>\n<td width=\"161\">IAS 36<\/td>\n<\/tr>\n<tr>\n<td><strong>Redemption Value <\/strong><\/td>\n<td width=\"295\">Present Value of Future Payments<\/td>\n<td width=\"161\">IAS 37<\/td>\n<\/tr>\n<tr>\n<td><strong>Current Value <\/strong><\/td>\n<td width=\"295\">Asset Replacement Cost at the Reporting Date<\/td>\n<td width=\"161\">\u2014<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n<\/div>\n<p><!--nextpage--><\/p>\n<div class=\"row align-center\"  id=\"row-1198624990\">\n\n\t<div id=\"col-1608230874\" class=\"col medium-8 small-12 large-8\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<h1 class=\"uppercase\" style=\"text-align: center;\">Conceptual principles of financial reporting<\/h1>\n\t<div id=\"text-841972072\" class=\"text\">\n\t\t\n<p>Covaliov Georgeta,<\/p>\n<p>auditor, CIPA<br \/>\n\t\t\n<style>\n#text-841972072 {\n  text-align: right;\n}\n<\/style>\n\t<\/div>\n\t\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n\t<div id=\"col-1104834125\" class=\"col medium-10 small-12 large-10\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<p><strong>\n<h2 style=\"text-align: center;\"><u>IAS 1 Presentation of Financial Statements<\/u><\/h2>\n<p><strong>Objective:<\/strong> To establish requirements for the presentation of a common set of financial statements and to ensure comparability between periods and entities.<\/p>\n<p><strong>Statement of the financial statements:<\/strong><\/p>\n<ol>\n<li>Statement of financial position (balance sheet)<\/li>\n<li>Statement of comprehensive income (SCI)<\/li>\n<li>Statement of changes in equity (SCE)<\/li>\n<li>Statement of cash flows (CFS)<\/li>\n<li>Notes (including accounting policies)<\/li>\n<\/ol>\n<p><strong>Basic principles:<\/strong><\/p>\n<ul>\n<li>Going concern<\/li>\n<li>Accrual basis<\/li>\n<li>Consistency of presentation<\/li>\n<li>Comparability of information<\/li>\n<li>Materiality and aggregation<\/li>\n<li>Prohibition of offsetting assets and liabilities, income and expenses<\/li>\n<li>Separate disclosure of material items<\/li>\n<\/ul>\n<p><strong>Changes in Equity:<\/strong><\/p>\n<ul>\n<li>Results for the period<\/li>\n<li>Other comprehensive income<\/li>\n<li>Contributions\/distributions to owners<\/li>\n<\/ul>\n<p><strong>Other comprehensive income (OCI):<\/strong><\/p>\n<ul>\n<li>Revaluation reserve (IAS 16, IAS 38)<\/li>\n<li>Actuarial gains\/losses (IAS 19)<\/li>\n<li>Financial instruments through OCI (IFRS 9)<\/li>\n<li>Cash flow hedges (IFRS 9)<\/li>\n<\/ul>\n<h2 style=\"text-align: center;\"><u>IAS 7 Statement of Cash Flows<\/u><\/h2>\n<p><strong>Objective:<\/strong> To disclose information about an entity&#8217;s cash flows to assess its ability to generate cash flows.<\/p>\n<p><strong>Classification of Flows:<\/strong><\/p>\n<table>\n<tbody>\n<tr>\n<td><strong>Type of Activity<\/strong><\/td>\n<td><strong>Examples<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Operating<\/strong><strong> (O)<\/strong><\/td>\n<td>receiving and paying out cash from core activities (revenue, expenses, interest, taxes)<\/td>\n<\/tr>\n<tr>\n<td><strong>Investment<\/strong><strong> (I)<\/strong><\/td>\n<td>purchase\/sale of fixed assets, intangible assets, investments<\/td>\n<\/tr>\n<tr>\n<td><strong>Financial<\/strong><strong> (F)<\/strong><\/td>\n<td>issuance of shares, loans, payments Dividends<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Methods:<\/strong><\/p>\n<ol>\n<li><strong>Direct<\/strong> \u2014 cash flow by item (receipts, payments);<\/li>\n<li><strong>Indirect<\/strong> \u2014 net income \u00b1 adjustments (non-cash items, changes in working capital).<\/li>\n<\/ol>\n<p><strong>Interest and dividends:<\/strong><\/p>\n<p>Interest paid \u2014 O\/F<\/p>\n<p>Interest received \u2014 O\/F<\/p>\n<p>Dividends paid \u2014 F<\/p>\n<p>Dividends received \u2014 I<br \/>\n\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n<\/div>\n<p><!--nextpage--><\/p>\n<div class=\"row align-center\"  id=\"row-1460918556\">\n\n\t<div id=\"col-1222577842\" class=\"col medium-8 small-12 large-8\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<h1 class=\"uppercase\" style=\"text-align: center;\">Conceptual principles of financial reporting<\/h1>\n\t<div id=\"text-3300491332\" class=\"text\">\n\t\t\n<p>Covaliov Georgeta,<\/p>\n<p>auditor, CIPA<br \/>\n\t\t\n<style>\n#text-3300491332 {\n  text-align: right;\n}\n<\/style>\n\t<\/div>\n\t\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n\t<div id=\"col-1534004025\" class=\"col medium-10 small-12 large-10\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n\n<h2 style=\"text-align: center;\"><u>IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors<\/u><\/h2>\n<p><strong>Objective:<\/strong> To establish criteria for selecting and applying accounting policies, and to correct errors and report changes.<\/p>\n<p><strong>Accounting policies<\/strong> are the principles, methods, and rules used by an entity in preparing financial statements.<br \/>\nApplied consistently to similar transactions.<\/p>\n<p><strong>Change in accounting policies:<\/strong><\/p>\n<p>Only if:<\/p>\n<ul>\n<li>IFRS is required, or<\/li>\n<li>results in more reliable and relevant information.<br \/>\nApplication \u2014 <strong>Retrospective<\/strong>.<\/li>\n<\/ul>\n<p><strong>Changes in estimates:<\/strong><\/p>\n<ul>\n<li>Resulting from new information;<\/li>\n<li>Applied <strong>Prospectively<\/strong> (current and future periods only).<\/li>\n<\/ul>\n<p><strong>Prior Period Errors:<\/strong><\/p>\n<p>Omissions, misapplications of principles, arithmetic errors.<br \/>\nCorrection \u2014 <strong>Retrospective<\/strong> (restatement of comparatives and equity balances).<\/p>\n<p><strong>Comparison:<\/strong><\/p>\n<table>\n<tbody>\n<tr>\n<td><strong>Type of Change<\/strong><\/td>\n<td><strong>Reason<\/strong><\/td>\n<td><strong>Application<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Accounting Policy<\/strong><\/td>\n<td>New Standard \/ Presentation Improvement<\/td>\n<td>Retrospective<\/td>\n<\/tr>\n<tr>\n<td><strong>Valuation<\/strong><\/td>\n<td>New Information<\/td>\n<td>Prospective<\/td>\n<\/tr>\n<tr>\n<td><strong>Error<\/strong><\/td>\n<td>Incorrect Data<\/td>\n<td>Retrospective<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 style=\"text-align: center;\"><u>IAS 10 Events After the Reporting Date<\/u><\/h2>\n<p><strong>Objective:<\/strong> To determine which events occurring after the reporting date require adjustment to the financial statements.<\/p>\n<p><strong>Reporting Date:<\/strong> End of the reporting period<\/p>\n<p><strong>Authorization Date:<\/strong> The date management authorized the financial statements.<\/p>\n<p><strong>Event Types:<\/strong><\/p>\n<table>\n<tbody>\n<tr>\n<td><strong>Type<\/strong><\/td>\n<td><strong>Description<\/strong><\/td>\n<td><strong>Example<\/strong><\/td>\n<td><strong>Reflection<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Adjusting<\/strong><\/td>\n<td>confirm conditions that existed on the reporting date<\/td>\n<td>customer bankruptcy, court decision, inventory valuation update<\/td>\n<td>reporting adjustment<\/td>\n<\/tr>\n<tr>\n<td><strong>Non-adjusting<\/strong><\/td>\n<td>reflect new circumstances after the reporting date<\/td>\n<td>fire, share issue, dividend declaration<\/td>\n<td>expand in Notes, do not adjust.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Dividends declared after the reporting date<\/strong> \u2014 <strong>not adjusted<\/strong>, only disclosed.<\/p>\n<h2 style=\"text-align: center;\"><u>IAS 2 \u2014 Inventories<\/u><\/h2>\n<p><strong>Inventories<\/strong> \u2014 assets held for sale, in production, or as raw materials.<\/p>\n<p><strong>Valuation:<\/strong><\/p>\n<ul>\n<li>Initially \u2014 at cost;<\/li>\n<li>Subsequently \u2014 at the lower of cost and net realizable value (NRV).<\/li>\n<\/ul>\n<table>\n<tbody>\n<tr>\n<td><strong>Item<\/strong><\/td>\n<td><strong>Included in cost<\/strong><\/td>\n<td><strong>Not included<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Acquisition<\/strong><\/td>\n<td>Purchase price, duties, delivery<\/td>\n<td>Trade discounts<\/td>\n<\/tr>\n<tr>\n<td><strong>Processing<\/strong><\/td>\n<td>Direct labor costs, depreciation, OPR<\/td>\n<td>Losses Excessive<\/td>\n<\/tr>\n<tr>\n<td><strong>Other<\/strong><\/td>\n<td>Other direct costs<\/td>\n<td>Administrative, sales<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Disposal valuation methods:<\/strong><\/p>\n<ul>\n<li>FIFO<\/li>\n<li>Weighted average cost<\/li>\n<li>Specific identification (for unique assets)<\/li>\n<\/ul>\n<p>NRV = Selling price \u2013 Costs of completion and disposal<br \/>\n\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n<\/div>\n<p><!--nextpage--><\/p>\n<div class=\"row align-center\"  id=\"row-2117506617\">\n\n\t<div id=\"col-1051180865\" class=\"col medium-8 small-12 large-8\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<h1 class=\"uppercase\" style=\"text-align: center;\">Conceptual principles of financial reporting<\/h1>\n\t<div id=\"text-694946125\" class=\"text\">\n\t\t\n<p>Covaliov Georgeta,<\/p>\n<p>auditor, CIPA<br \/>\n\t\t\n<style>\n#text-694946125 {\n  text-align: right;\n}\n<\/style>\n\t<\/div>\n\t\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n\t<div id=\"col-633189989\" class=\"col medium-10 small-12 large-10\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n\n<h2 style=\"text-align: center;\"><u>IAS 36 \u2014 Impairment of Assets<\/u><\/h2>\n<p>Checking whether the carrying amount of an asset exceeds its recoverable amount.<\/p>\n<p><strong>Recoverable amount = the greater of:<\/strong><\/p>\n<ul>\n<li>Fair value less costs to sell,<\/li>\n<li>Value in use (PV of future flows).<\/li>\n<\/ul>\n<table>\n<tbody>\n<tr>\n<td><strong>Stage<\/strong><\/td>\n<td><strong>Action<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>1<\/strong><\/td>\n<td>Identify indicators of impairment<\/td>\n<\/tr>\n<tr>\n<td><strong>2<\/strong><\/td>\n<td>Calculate recoverable amount<\/td>\n<\/tr>\n<tr>\n<td><strong>3<\/strong><\/td>\n<td>Recognize loss if FV &gt; Recoverable amount<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Impairment testing is mandatory:<\/strong><\/p>\n<ul>\n<li>Goodwill,<\/li>\n<li>Intangible assets with an indefinite life,<\/li>\n<li>Intangible assets under development.<\/li>\n<\/ul>\n<p><strong>Impairment loss<\/strong> \u2014 to profit, except for revalued assets (reduces the revaluation reserve).<\/p>\n<h2 style=\"text-align: center;\"><u>IAS 38 \u2014 Intangible Assets<\/u><\/h2>\n<p>An identifiable non-monetary asset without physical form (patents, licenses, software).<\/p>\n<p><strong>Recognition:<\/strong><\/p>\n<ul>\n<li>Probability of future benefits;<\/li>\n<li>Reliable cost estimate.<\/li>\n<\/ul>\n<p><strong>Independently created intangible assets:<\/strong><\/p>\n<ul>\n<li>Research \u2192 period expenses<\/li>\n<li>Development \u2192 capitalization if project feasibility is proven.<\/li>\n<\/ul>\n<table>\n<tbody>\n<tr>\n<td><strong>Accounting model<\/strong><\/td>\n<td><strong>Example<\/strong><\/td>\n<td><strong>Reflection<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Costs<\/strong><\/td>\n<td>License purchase<\/td>\n<td>In Profit<\/td>\n<\/tr>\n<tr>\n<td><strong>Revaluations<\/strong><\/td>\n<td>Asset with a market (rare)<\/td>\n<td>Through equity (OCI)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Depreciation: over useful life (max. 10 years with uncertainty).<\/p>\n<h2 style=\"text-align: center;\"><u>IAS 16 \u2014 Property, Plant, and Equipment<\/u><\/h2>\n<p>Tangible assets used for more than one period in production, rental, or management.<\/p>\n<p><strong>Recognition:<\/strong><\/p>\n<ul>\n<li>Probability of economic benefits;<\/li>\n<li>Reliable estimate of cost.<\/li>\n<\/ul>\n<p><strong>Initial estimate<\/strong>: cost (purchase + delivery + completion + dismantling).<\/p>\n<table>\n<tbody>\n<tr>\n<td width=\"156\"><strong>Model<\/strong><\/td>\n<td width=\"306\"><strong>Essence<\/strong><\/td>\n<td width=\"161\"><strong>Reflection<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"156\"><strong>At cost<\/strong><\/td>\n<td width=\"306\">Cost \u2013 depreciation \u2013 impairment<\/td>\n<td width=\"161\">In profit<\/td>\n<\/tr>\n<tr>\n<td width=\"156\"><strong>At revaluation<\/strong><\/td>\n<td width=\"306\">Fair value \u2013 depreciation<\/td>\n<td width=\"161\">In other comprehensive Income<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Depreciation:<\/strong><\/p>\n<ul>\n<li>Start \u2014 from the moment of completion;<\/li>\n<li>Review the term and method annually;<\/li>\n<li>Methods: straight-line, declining balance, units of production.<\/li>\n<\/ul>\n<p><strong>Main Depreciation Methods<\/strong><\/p>\n<table width=\"624\">\n<tbody>\n<tr>\n<td width=\"157\"><strong>Method<\/strong><\/td>\n<td width=\"148\"><strong>Formula<\/strong><\/td>\n<td width=\"193\"><strong>Features \/ Application<\/strong><\/td>\n<td width=\"126\"><strong>Example<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"157\"><strong>Linear<\/strong><\/td>\n<td width=\"148\">(Cost &#8211; Liquidation Value) \/ Term<\/td>\n<td width=\"193\">Equal Distribution of Costs by Year<\/td>\n<td width=\"126\">Building, Office Equipment<\/td>\n<\/tr>\n<tr>\n<td width=\"157\"><strong>Declining Balance Method<\/strong><\/td>\n<td width=\"148\">Balance \u00d7 Standard (%)<\/td>\n<td width=\"193\">Highest Costs at the Beginning, Decrease Over Time<\/td>\n<td width=\"126\">Machinery, Equipment<\/td>\n<\/tr>\n<tr>\n<td width=\"157\"><strong>Sum of Years Method<\/strong><\/td>\n<td width=\"148\">(Remaining years \/ Sum of years) \u00d7 Depreciation value<\/td>\n<td width=\"193\">Accelerated depreciation; RB equivalent<\/td>\n<td width=\"126\">Specialized equipment<\/td>\n<\/tr>\n<tr>\n<td width=\"157\"><strong>Production <\/strong><\/td>\n<td width=\"148\">(Actual output \/ Total output) \u00d7 Depreciation Cost<\/td>\n<td width=\"193\">Tied to the use of the asset<\/td>\n<td width=\"126\">Machine, quarry, intangible asset with a patent<\/td>\n<\/tr>\n<tr>\n<td width=\"157\"><strong>Component-Based<\/strong><\/td>\n<td width=\"148\">For each component<\/td>\n<td width=\"193\">For fixed asset parts with different service lives<\/td>\n<td width=\"126\">Aircraft (fuselage, engine)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Component-Based Accounting<\/strong>: fixed asset parts with different service lives are depreciated separately.<br \/>\n\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n<\/div>\n<p><!--nextpage--><\/p>\n<div class=\"row align-center\"  id=\"row-1805106918\">\n\n\t<div id=\"col-1106266876\" class=\"col medium-8 small-12 large-8\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<h1 class=\"uppercase\" style=\"text-align: center;\">Conceptual principles of financial reporting<\/h1>\n\t<div id=\"text-1934852966\" class=\"text\">\n\t\t\n<p>Covaliov Georgeta,<\/p>\n<p>auditor, CIPA<br \/>\n\t\t\n<style>\n#text-1934852966 {\n  text-align: right;\n}\n<\/style>\n\t<\/div>\n\t\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n\t<div id=\"col-797204972\" class=\"col medium-10 small-12 large-10\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n\n<h2 style=\"text-align: center;\"><u>IAS 40 \u2014 Investment Property<\/u><\/h2>\n<p>Property held to earn rentals or for capital gains rather than for use in an activity.<\/p>\n<table>\n<tbody>\n<tr>\n<td><strong>Model<\/strong><\/td>\n<td><strong>Valuation<\/strong><\/td>\n<td><strong>Impact<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Fair Value<\/strong><\/td>\n<td>Market<\/td>\n<td>Changes to Profit<\/p>\n<p>No Depreciation<\/td>\n<\/tr>\n<tr>\n<td><strong>Cost<\/strong><\/p>\n<p><strong>IAS 16<\/strong><\/td>\n<td>Cost \u2013 Depreciation<\/td>\n<td>Fair Value is disclosed in the notes<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Transfers from\/to investment property are permitted upon a change in use.<\/p>\n<h2 style=\"text-align: center;\"><u>IAS 23 \u2014 Borrowing Costs<\/u><\/h2>\n<p>Interest and other expenses associated with borrowings.<\/p>\n<p><strong>Capitalization:<\/strong><br \/>\nOnly for qualifying assets \u2014 those requiring significant time to prepare.<\/p>\n<p><strong>Conditions for commencing capitalization:<\/strong><\/p>\n<ul>\n<li>Borrowing costs have commenced;<\/li>\n<li>Work on the asset is underway;<\/li>\n<li>Costs of the asset have been incurred.<\/li>\n<\/ul>\n<p><strong>Cessates<\/strong> when the asset is ready for use.<\/p>\n<table>\n<tbody>\n<tr>\n<td><strong>Loan Type<\/strong><\/td>\n<td><strong>Formula<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Special<\/strong><\/td>\n<td>% minus investment income<\/td>\n<\/tr>\n<tr>\n<td><strong>General<\/strong><\/td>\n<td>Weighted Average Rate \u00d7 Asset Cost<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 style=\"text-align: center;\"><u>IAS 37 \u2014 Provisions, Contingent Liabilities, and Assets<\/u><\/h2>\n<table>\n<tbody>\n<tr>\n<td><strong>Term<\/strong><\/td>\n<td><strong>Definition<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Provision (estimated liability)<\/strong><\/td>\n<td>Liability of an indefinite amount or term<\/td>\n<\/tr>\n<tr>\n<td><strong>Contingent liability<\/strong><\/td>\n<td>Possible obligation dependent on a future event<\/td>\n<\/tr>\n<tr>\n<td><strong>Contingent asset<\/strong><\/td>\n<td>Possible asset confirmed by a future event<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Recognition criteria for a provision<\/strong>:<\/p>\n<ul>\n<li>Liability exists;<\/li>\n<li>An outflow of resources is probable;<\/li>\n<li>Can be estimated.<\/li>\n<\/ul>\n<p>Provisions are recognized,<\/p>\n<p>contingent liabilities are only disclosed.<\/p>\n<p><strong>Examples:<\/strong> lawsuits, restructurings, onerous contracts.<\/p>\n<h2 style=\"text-align: center;\"><u>IAS 21 \u2014 Foreign Exchange Rates<\/u><\/h2>\n<p><strong>Functional currency<\/strong> \u2014 the currency of the primary economic environment.<\/p>\n<table>\n<tbody>\n<tr>\n<td><strong>Item Type<\/strong><\/td>\n<td><strong>Restatement<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Monetary<\/strong><\/td>\n<td>At Closing Rate<\/td>\n<\/tr>\n<tr>\n<td><strong>Non-monetary<\/strong><\/td>\n<td>At Historical Rate (if not at Fair Value)<\/td>\n<\/tr>\n<tr>\n<td><strong>Income and Expense<\/strong><\/td>\n<td>At Transaction Date Rate<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Exchange rate differences<\/strong>:<\/p>\n<ul>\n<li>For transactions \u2014 in profit;<\/li>\n<li>For foreign transactions \u2014 in other comprehensive income (upon consolidation).<\/li>\n<\/ul>\n<h2 style=\"text-align: center;\"><u>IFRS 9 \u2014 Financial Instruments<\/u><\/h2>\n<p><strong>Financial asset<\/strong> \u2014 cash, or the right to receive or exchange benefits.<br \/>\n<strong>Financial liability<\/strong> \u2014 an obligation to deliver cash.<\/p>\n<p>Asset Classification:<\/p>\n<table>\n<tbody>\n<tr>\n<td><strong>Category<\/strong><\/td>\n<td><strong>Model<\/strong><\/td>\n<td><strong>Example<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Amortized Cost<\/strong><\/td>\n<td>Hold for Cash<\/td>\n<td>Loans, Receivables<\/td>\n<\/tr>\n<tr>\n<td><strong>Fair Through Earnings<\/strong><\/td>\n<td>Trading Assets, Derivatives<\/td>\n<td>Equity<\/td>\n<\/tr>\n<tr>\n<td><strong>Fair Through OCI<\/strong><\/td>\n<td>For Liquidity Management<\/td>\n<td>Debt ts\/b<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Impairment<\/strong>:<br \/>\n<strong>Expected Credit Loss (ECL) Model.<\/strong><\/p>\n<p>Stage 1 \u2013 12 months;<\/p>\n<p>Stage 2 \u2013 Lifetime;<\/p>\n<p>Stage 3 \u2013 Default.<br \/>\n\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n<\/div>\n<p><!--nextpage--><\/p>\n<div class=\"row align-center\"  id=\"row-747623781\">\n\n\t<div id=\"col-838452503\" class=\"col medium-8 small-12 large-8\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<h1 class=\"uppercase\" style=\"text-align: center;\">Conceptual principles of financial reporting<\/h1>\n\t<div id=\"text-360366080\" class=\"text\">\n\t\t\n<p>Covaliov Georgeta,<\/p>\n<p>auditor, CIPA<br \/>\n\t\t\n<style>\n#text-360366080 {\n  text-align: right;\n}\n<\/style>\n\t<\/div>\n\t\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n\t<div id=\"col-1279723009\" class=\"col medium-10 small-12 large-10\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n\n<h2 style=\"text-align: center;\"><u>IFRS 15 \u2014 Revenue from Contracts with Customers<\/u><\/h2>\n<p><strong>Five Steps<\/strong>:<\/p>\n<ol>\n<li>Contract Identification<\/li>\n<li>Determining the Performance Obligations<\/li>\n<li>Determining the Transaction Price<\/li>\n<li>Price Allocation<\/li>\n<li>Revenue Recognition (as or when Performance occurs)<\/li>\n<\/ol>\n<table>\n<tbody>\n<tr>\n<td><strong>Type of Performance<\/strong><\/td>\n<td><strong>Example<\/strong><\/td>\n<td><strong>Recognition<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>At the Time<\/strong><\/td>\n<td>Sale of Goods<\/td>\n<td>Upon Transfer Control<\/td>\n<\/tr>\n<tr>\n<td><strong>Over time<\/strong><\/td>\n<td>Services, construction<\/td>\n<td>Proportional to the degree of completion<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Variable consideration: included unless renegotiated.<br \/>\nContract assets\/liabilities &#8211; reflected in advances and revenue.<\/p>\n<h2 style=\"text-align: center;\"><u>IFRS 16 \u2014 Leases<\/u><\/h2>\n<p><strong>A lease<\/strong> is the transfer of the right to use an asset for compensation.<\/p>\n<p><strong>Accounting by the lessee:<\/strong><\/p>\n<ul>\n<li>Right-of-use asset<\/li>\n<li>Lease liability<\/li>\n<\/ul>\n<p>At the commencement date: PV of lease payments = cost of the asset.<\/p>\n<table>\n<tbody>\n<tr>\n<td><strong>Model<\/strong><\/td>\n<td><strong>Essence<\/strong><\/td>\n<td><strong>Exceptions<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Full accounting (R<\/strong><strong>o<\/strong><strong>U + liability)<\/strong><\/td>\n<td>For all contracts &gt;12 months<\/td>\n<td>Short-term and low cost<\/td>\n<\/tr>\n<tr>\n<td><strong>Lessor accounting<\/strong><\/td>\n<td>Finance and operating leases<\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 style=\"text-align: center;\"><u>IFRS 10 \/ IAS 28 \/ IFRS 3 \u2014 Consolidation and Investments<\/u><\/h2>\n<table>\n<tbody>\n<tr>\n<td><strong>Concept<\/strong><\/td>\n<td><strong>Definition<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Control<\/strong><\/td>\n<td>Power + Variable Benefits + Ability to Influence<\/td>\n<\/tr>\n<tr>\n<td><strong>Associate<\/strong><\/td>\n<td>Influence (20\u201350%) \u2014 Equity Method<\/td>\n<\/tr>\n<tr>\n<td><strong>Joint Venture<\/strong><\/td>\n<td>Joint Control \u2014 Equity Accounting<\/td>\n<\/tr>\n<tr>\n<td><strong>Subsidiary <strong>Company<\/strong><\/strong><\/td>\n<td>Complete control \u2014 consolidation<\/td>\n<\/tr>\n<tr>\n<td><strong>Goodwill<\/strong><\/td>\n<td>Reimbursement + accrued interest \u2014 net assets of the subsidiary<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Goodwill impairment<\/strong> \u2014 annual test under IAS 36.<\/p>\n<p><strong>Unrealized gain between the group and the subsidiary<\/strong> \u2014 eliminated proportionately.<br \/>\n\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n<\/div>","protected":false},"excerpt":{"rendered":"","protected":false},"author":1,"featured_media":1478,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"class_list":["post-1465","page","type-page","status-publish","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/finskillbox.com\/en\/wp-json\/wp\/v2\/pages\/1465","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finskillbox.com\/en\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/finskillbox.com\/en\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/finskillbox.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finskillbox.com\/en\/wp-json\/wp\/v2\/comments?post=1465"}],"version-history":[{"count":12,"href":"https:\/\/finskillbox.com\/en\/wp-json\/wp\/v2\/pages\/1465\/revisions"}],"predecessor-version":[{"id":1477,"href":"https:\/\/finskillbox.com\/en\/wp-json\/wp\/v2\/pages\/1465\/revisions\/1477"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finskillbox.com\/en\/wp-json\/wp\/v2\/media\/1478"}],"wp:attachment":[{"href":"https:\/\/finskillbox.com\/en\/wp-json\/wp\/v2\/media?parent=1465"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}