Question

2. According to IAS1, Notes to financial statements is an integral part of financial statements. a) Identify the seven main components of financial statements and discuss the main items included in Notes to financial statements. (8 marks) b) According to IAS1, an entity needs to identify each of its financial statements clearly. In doing so, an entity is expected to display some information prominently. What is this information? (4 marks) Total: 12 marks Word limit: 250 words

Answer 1

al Components of Financial Statements - A complete set of LF RS Compliant Filmancial statement consiglg of: • Statement of Finanancial Position. (Babincesheet] • statement of comprehensive nome. (Pic) • Statement of change in Equity (Appropriations) o statement of Cash Flows. o Notes consisting of significant Accounting Poties policies and other notes of Explanations. o Restitement and accounting. Policies Changes retrospectively necessitate a statement of Financial position at at the beginning of the earliest Comparative period. The following are the common items that nang may appear in the notes to the Financial statement : (1) Dosis of pregentations The first bection in Financial Statement notes explains the basis of preparing and presenting the key Financial statements (2) Accounting policiesThe Accounting policies Gection provides Information on the accounting policies adopted by the management in preparing the Financial Statements, Disclosing the accounting policies helps users Interpret and & understand the Financial statentent better. CS Scanned with CamScanner

3. Depreciation of Angelsa depreciation refer to the reduction in the value of an asset overtime due to normal wear and tear. The asset depreciation bection provides Information on the method adopted by the Company when depreciations the assets. 4. • Valuation of boventory. The valuation of Coventory notes informs vers how the company valued its Inventory, making it easy For them to compare inventory Pigures from of one period to anather or vis-a-vis other competing entities. The section popvieles Information on two main Enventory tessues, 5. Gubsequent eau events .- Information on any subsequent events can be found also in the financial Statement moties Gections Subsequent Event nefer to events that occur after the balance sheet date but before the release of the financial statement. CS Scanned with CamScanne

6. Intangible apo - The Notes to the financial Statement also Liaude Information on any intangible assets owrsed by the company. Intengible are assets that have no physical form, and they include trademarks and patients. The section details all the intangible assets that the company born and how it determined the value of Intengibles reported on the balance sheet, to cooplidation of Prmcial statements. The consolidation of Financial Statement Grection Confirms that the Statements under and it or being issued contain Finandal Statements of all of the subsidiaries of the company, it details He consolidating the Financial Statements, and any deviations from the subsidiaries should be expulained, Contingent liability. A contingent liability refer to liability Muat has mot occurred, but the conditions are pavorable for the liability to occur in future. An example of a contingent liability is a lawsuit against the company or and Income tax dispute. CS Scanned with CamScanner

bi Need to know about Financial Statemenig understanding how to read a company's Financial statement. is a key skill for any investor wanting to make smant Investment choices • There are four bections to company's Financial Statements; The Balance Glueet, the Income statement, the cash flow Statement ound the explanatory notes. prodent investore might also want to review a company tok, which is the detailed Financial report the company Files with the vis. Gearities and Exchange Commission An Tewestor Bharuld also revielo nmfinancial information that could impact a company return, auch as the state of the company economy, the quality of the company's management and the Company competitors. CS Scanned with CamScanner

Information of Financial statements The Four bois francial Statements are the income Statement, biancegueet, Statement of Casumon and Statement of retained eaming. Your Financial Statement are dynamie repente fui of insights Just waiting to be extracted and used to achieve your business objectives. CS Scanned wit CamScann