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How to Use ARP Study Guide

• Part 1 of the Advanced Reporting and Performance Study Guide is for course participants
• Builds upon technical content from Reporting and Performance 2
• ARP study guides should be used with existing RP2 study guides
• They are a study aid and revision resource, not a substitute for the Advantage course
• The ARP study guide is in two parts
• Part 1 covers the material in the first three modules
• Part 2 covers the remaining modules and will be released later

Module 1 - Presentation and Disclosure

• The study guide for Module 1 of the Advanced Reporting and Performance course helps prepare for assessment.
• SLO1 involves advising on financial reporting and performance, in accordance with standards
• By completing this module, you will work towards the following module learning outcomes:
• Construct financial statements for companies
• Advise on the effect of transactions and adjustments on financial statements

Using Permitted Materials

• For ARP assessment you are allowed IFRS Accounting Standards and Extracts from the Companies Act 2006
• Highlighting, tabs, sidelines, and underlining are permitted, but writing on the materials is not
• Practice using these materials throughout the ARP course
• IFRS A book contains the accounting standards
• RP2 Course provides references to specific paragraphs in standards
• IFRS B Book includes Illustrative Examples (IE) and Illustrative Guidance (IG) relating to accounting standards
• Reliance on the permitted materials in the ARP assessment isn't expected and creates additional time pressure
• It is important to understand the materials to know when they may be useful

Conceptual Framework and Fair Value Measurement

• Conceptual Framework for Financial Reporting and IFRS 13 Fair Value Measurement was learnt for Reporting and Performance 2
• Refer to RP2 Study guides for this

Constructing Financial Statements per IAS 1

• In Reporting and Performance 2, the list of financial statements required by IAS 1 was learnt
• The layout for SPLCOI and SOFP as per IAS 1 is something you should already be familiar with
• At ARP the additional line item for Non-Current assets classified as Held for Sale should be noted

Presentation of Other Comprehensive Income (OCI)

• Items classified as OCI are transferred to components of equity like profit or loss is to retained earnings
• IAS 1 requires OCI items to be presented separately from profit or loss
• Items are classified based on whether they will be reclassified ('recycled') to profit or loss if certain conditions are met
• Some examples of the above include translation gains/losses
• Or gains/losses from certain financial assets
• Reclassification ensures financial performance items are recognized in profit or loss in the period they are realized
• Items that will not be reclassified ('recycled') subsequently to profit or loss include revaluation gains/losses

Materiality and Separate Disclosure

• When items of income or expense are material, their nature and amount should be disclosed separately
• This can be on the face of the statement or in the notes

Statement of Changes in Equity (SOCIE)

• SOCIE is a table showing movements during the year for each equity item
• It includes total comprehensive income for the period, attributed to parent and non-controlling interests
• For each equity component, the effects of retrospective application or restatement per IAS 8 are shown
• For each equity component, a reconciliation between the carrying amount at the beginning and end of the period is there. This should disclose changes from:
  • Profit or loss
  • OCI
  • Transactions with owners

Dividends Disclosure

• The amount of dividends recognized as distributions to owners during the period and the related amount of dividends per share must be shown
• This can be done in the statement of changes in equity or in the notes

Interim Reports

• The Listing Rules applicable to the London Stock Exchange mandate certain requirements for interim reporting

Entities Preparing Interim Reports

• Although IAS 34 doesn't mandate which entities should prepare interim reports, in practice only listed companies in the UK are required to prepare these statements
• Efficient markets need regular, relevant info
• Publicly traded entities are encouraged to provide interim reports at least by the end of the first half of the financial year
• Also, make interim reports available in no more than 60 days after the end of interim period
• The Listing Rules require publication within 3 months of the end of the reporting period

Basis for Interim Report Preparation

• The interim period should be treated as a separate accounting period, not just half the full year
• Financial figures, like revenue, are reported based on actual figures for the 6-month period, not annual projections
• The same principle applies to expenses
• Items calculated annually, like taxation or volume-based supplier discounts, should be included proportionally in the interim report
• Throughout this process, the company's standard accounting policies should be consistently applied

Content of Interim Financial Reporting

• Needs to include the following;
  • Condensed statement of financial position
  • Condensed statement of profit or loss and OCI
  • Condensed statement of changes in equity
  • Condensed statement of cash flows
  • Selected explanatory notes
• Comparative figures should also be given

Accounting Policies

• Consult the RP2 Module 1 Study Guide for guidance on selecting and changing accounting policies

Events After Reporting

• Refer to the RP2 Module 1 Study guide for events after the reporting period
• The Advanced Reporting and Performance assessment requires analyzing scenarios and determining events occurring after the reporting period
• It is vital to pay attention to dates to know how they should be accounted for and/or disclosed

Disclosure for Events

• Disclose the date the financial statements were authorized for issue
• Disclose who gave the authorization and whether any party can amend the financial statements after issue
• For each category of material non-adjusting events, disclose the event's nature
• Also, disclose an estimate of the financial effect or a statement that such an estimate cannot be made

Discontinued Operation (DCO)

• The Conceptual Framework prioritizes relevance in financial statements
• Users should distinguish ongoing and discontinued operations
• Companies must meet strict criteria to classify operations as discontinued, preventing manipulation for better profit presentation
• Several criteria must be met before an operation can be classified as discontinued

Presentation and Disclosure for DCO

• They include A component of an entity with operations and cash flows that can be clearly operationally distinguished for FR purposes, and is either
  • A separate major line of business or geographical area of operations, or
  • Part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations
• DCOs can include assets to be abandoned, only if they still fit all the criteria
• DCO results and cash flows are treated as discontinued in the year the operations cease, even if closure was announced well in advance
• Held-for-sale assets are also covered by IFRS 5 and were covered in RP2 Module 2 and is covered further in Module 2 of ARP
• When an ARP assessment is done, it is not expected to be directly told that a component meets the DCO requirements for an assessment

Presentation Requirements for DCOs

• Post-tax profit or loss of DCOs should be shown as a single figure on the face of the statement of profit or loss and OCI
• Post-tax gain or loss recognized on the measurement of held for sale disposal group or on the disposal of the discontinued operation should also be included
• An analysis of the single amount is needed which includes revenue, expenses, and pre-tax profit or loss of the discontinued operations, related taxation, etc
• Net cash flows relating to discontinued operations are disclosed
• Comparative figures should be restated so that operations classified as discontinued in the current year are also classified as discontinued in comparative figures

Earnings per Share (EPS)

• Represents the annual profit divided by the total number of issued shares
• It is prominently disclosed in the SPLOCI and shows profit attributable to equity shareholders, expressed as pence per share
• The formula for basic EPS is: Profit or loss attributable to ordinary shareholders ('earnings')/ Weighted average number of ordinary shares ('shares')

EPS Details

• 'Earnings' are after deducting tax, non-controlling interests, and preference share dividends (where shares are classified as equity)
• 'Shares' are calculated considering issues/buybacks at market value, issue of bonus shares, and rights issues
• Calculate using the following formulas:
  • Share issue at market value: Increase resource available to generate profits → Include new shares from the date share consideration is receivable
  • Share buyback: Decrease resource available to generate profits → Exclude shares from the date they are repurchased

Bonus Share

• Shareholders receive bonus shares at no cost
• Not an inflow of new resources for generating 'earnings'
• Time weighting isn't applicable
• Are counted since the beginning of the earliest period

Rights Issue

• Shares are offered at a price lower than the prevailing market value + issuer does receive consideration, just not the full FMV
• Hybrid between FMV issue and a bonus share issue
• Formulas are:
  • Current period: Time weight the 'shares' calculation
  • Multiply shares outstanding before the issue by 'bonus' adjustment factor Adjustments must be made to account for this

Dealing with Rights Issue

• Step 1 - Calculate the theoretical ex-rights value
• Step 2 - Calculate the adjustment factor
• Step 3 - Calculate EPS

Diluted EPS

• Financial instruments that may lead to the issuance of ordinary shares at a future date is called potential shares
• They include convertible debt or preference shares and share options or warrants
• Formula is Earnings Effect + of the issue of dilutive potential ordinary shares or Shares Used in basic EPS + dilutive potential ordinary shares to be issued
  • It is important to know since they must account for both numbers
  • Diluted Earnings per share needs to factor for potential options/warrants in stock

Process Flow

• Step 1 - Calculate the weighted average number of ordinary shares for basic EPS.
• Step 2 - Calculate basic EPS.
• Step 3 - Calculate the increase, if any, in earnings on conversion of the dilutive instruments.
• Step 4 - Calculate + number potential ordinary shares
• Step 5 - diluted EPS

Share Options

• Shares issued for a non-cash consideration
• Options in the money vs options not in the money
• Those that are in the money will need to be factored

Disclosure Requirements

• For companies under IAS 33
• Continuing and discounted operations
• How do we find a related party

Identifying Related Parties

• A related party is a person or entity related to the entity preparing its financial statements
• A person with control or joint control, significant influence, or is key management personnel of the reporting entity is a related party
• A close family member of such a person may be expected to influence, or be influenced by, the person for that period

Key Management Personnel

• Those with authority and responsibility for planning, directing, and controlling the entity's activities, directly or indirectly
• Can be individuals or entities
• Red lines represents direct lines, the other lines are dotted

Disclosure Requirements per IAS24

• Three kinds of disclosure
• Must have group relationship disclosure, regardless
  • Name parent entity
  • Nature related party
  • Management compensations payments
  • Short term payments

Companies Act of 2006

• Determines if has to meet 2 of the following conditions
  • Small, Large or Medium sized
  • Disclosure for non quoted companies

Diagram Summarizing Directors' Remuneration

• Aggregate remuneration + incentives
  • Does not include small or micro entities.
  • Doesn't include entities by joint ventures

Module 2 – Assets

• This study guide will help to prepare for the assessment
• Should be able to Construct, with appropriate workings, the financial statements for an individual company
• SLO1 involves advising on financial reporting and performance, in accordance with standards
• The effect of transactions and adjustments on the financial statements of an individual company and of a group should be analyzed
• Disclosure notes should be constructed in accordance with IFRS Standards
• It is important to know Advise on disclosure notes in accordance with IFRS Accounting Standards for inventories

Inventories

• How are they Measured and what is included in the cost
  • Should be measured at the lower of cost and NRV
  • Purchase cost including duties + other costs
  • Should be recognized based on SALE
  • Should know the below costs are not part of inventory costs

Costs NOT Included in Inventory

• Waste/Spoilage
• Admin overhead/selling costs

Inventory Write Down/Reversal

• NRV have fallen below cost so that you can provide relevant accounting advice
• Indicator is Market price will drop
• Physical
• Obsolete
• An increase in costs to
  • Should recognize the journal entry for this

Inventory Approximations

• Refer back to module 2 study guide

How IAS2 Interacts With Other Standards

• Required standards and whether questions touch this:
  • Allocation deprecation/cost included
  • Investment property
  • Property classified
  • Borrowing property/expenses

IFRS 15 - Customer Contracts

• IFRS 15 considers accounting for cost for this
• Must be dealth with to IFRS compliance with a customer

PPE

• When should it be recognized at initial recognition
• Module 2 study guide

Measurements of PPE

• Review RP1/2 for depricatable assets at ARP

Recognition of Deprecation as an Asset

• If a machine is to use cost then it needs to allocated to inventory(IAS2)

PPE Disclosure

• Disclose as a line item single/minimum

Investments

• Refer to PP2 module for guideline of property - Is required for certain PPE - Disclosure for the revaluated assets - Date and valuation and historical costs - Definition or revalue investment

Property Owned by a Group Company

• Property owned by a group company ,is it rented to another company in the same group
  • IAS 40 Applies
  • Same rules apply between subsidiaries

Reliably Measure Value

• Ias 40 includes a reasonable statement that fair value and cost can be reliable

Acceptable Investments

• When is chain accounting acceptable
  • Only by one measurement model

Transfer From Investments

• Owner occupied-Evidence by date,commencement
  • Inventory by when do you sell it?

How Is Investment Property Reported/Presented and disclosed?

• Line item is not current asset

Intangible Assets

• What is defition, and criteria to be used for each asset(module 2 study guide)

Costs as A Qualifying asset

• How long till cost/ how is it calculated

To What Assets Does IAS 36 Apply

• Likely to determine impairment and be within IAS 36 scope
  • Important to know which apply where, since this may be impaired

Testing For Impairment

• Review if indicator exists
• Or assets are not yet available for use

How Is an Impairment Loss Calculated

• Property plan, and plant equipment, and impairment of loos

Assets Subsequently measured

• Over the remaining assets
• Use chart
• Recognixze for a cost value

CGU

• Is the smallest group to generate cash flows - CGU test for impairment - must exceed and cannot be exceeded

Other Things for IMPairment

• Goodwill appendic1 C4 Tests and includes assets

Reversal of Loss of Allocation

• 105 - If allocated, can only be reduced

Disclose Info

• Must have and be present on all
  • Must be all class assets

IFRS 5 APPLY

• What does this apply to

Module 3 - Liabilities

• Study guide for module 3 advanced

Syllabu - Advices on what standard,

• construct and group
  • Disclaim the impact

Wha is lease contract?

• Is its 16

To do steps/diagram

• lease assessment on standard
• Right of economical use

Diagram To Control The use

• And direction
• Identification of assets

Leases to which exemption be applied?

• Recognition of application

Accounting treatment Recognize total lease payments, on expense on straight basis

Measured at Right Of Use

Refer back to guideline - How Liability - And what to do

Factors affect meausrement?

• what changes to affect?

Accounting Correct treatments- corrections

Sale and leaseback recognized?

• Is not a sale Refer to RP2, sale is fair value
• It is value? What to do?

Great than Fair value and more

• Great/legalform > Fair value
• Record the excess
• Refer Back to Note
• To do the future

Is is 16 affecting Financial Statements?

• Back to 3 module study guides

Amount Discovered and REcognized? - amount relating from SOFP in the SOSP?

• Maturity analysis ,

  how to figure out when is that analysis due

Wha Is A Provision(Recognizing

• What are the test, and the step to take
• refer back to RP2 MOD 3 study -Contingen - Not probable or probabile will affect?

Is a Prov measured at Inital Recognition?

• Referr to RP2 AND 42-52

2) Is recognized the year each end

• Wither to discount after year.

Provisions as part of the cost of asets in the first yr cost

• Restructering provisions and others for that section Ifs and Emploeys

Warrantires

• What does this affect - Standard - will cost more

Should A visions make cost

• What to do with this one
• disclose it and if its needed

What are Provisions

• 3 moduel guide/refer

Current/REcognizED>

• 3 mod guide

What Is Th ePurpose Of Def taxable?

• What about limits What is IAS12 to deferred taxi
• What steps sho
• 4 to calulate what the tax is.
• Tax of ability of the asse,t?
• Temp and more.
• 53 If this is too long, prompt me again to regenerate the response and I'll provide a shorter summary.