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ACCOUNTING FOR COMPANY STATEMENT OF FINANCIAL POSITION (ASSETS)

Learn about assets, recognition, measurement, and classification in financial statements. Understand IFRS guidelines, recognition criteria, measurement bases, and classification practices for company assets. 8

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ACCOUNTING FOR COMPANY STATEMENT OF FINANCIAL POSITION (ASSETS)

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  1. ACCOUNTING FOR COMPANY STATEMENT OF FINANCIAL POSITION (ASSETS)

  2. Learning outcomes • Understand the accounting items – assets, liabilities and owners’ equity • Understand the recognition, classification and measurement of accounting items – assets, liabilities and owners’ equity

  3. Assets • Definition: An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

  4. Recognition • Recognition is the process of incorporating in the balance sheet or income statement an item that meets the definition of an element and satisfies the following criteria for recognition: • It is probable that any future economic benefit associated with the item will flow to or from the entity; and • The item's cost or value can be measured with reliability. • Based on these general criteria: An asset is recognised in the balance sheet when it is probable that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably.

  5. Measurement • Measurement involves assigning monetary amounts at which the elements of the financial statements are to be recognised and reported. • The IFRS Framework acknowledges that a variety of measurement bases are used today to different degrees and in varying combinations in financial statements, including: • Historical cost • Current cost • Net realisable value • Present value (discounted) • Historical cost is the measurement basis most commonly used today, but it is usually combined with other measurement bases.

  6. Classification • An entity must normally present a classified statement of financial position, separating current and noncurrent assets and liabilities, unless a presentation based on liquidity is more relevant. • Current assets are cash; cash equivalent; assets held for collection, sale, or consumption within the entity's normal operating cycle; or assets held for trading within the next 12 months. All other assets are noncurrent. [IAS 1.66]

  7. Minimum items on the face of the statement of financial position [IAS 1.54] • (a) property, plant and equipment • (b) investment property • (c) intangible assets • (d) financial assets (excluding amounts shown under (e), (h), and (i)) • (e) investments accounted for using the equity method • (f) biological assets • (g) inventories • (h) trade and other receivables • (i) cash and cash equivalents • (j) assets held for sale

  8. Cont. • (k) trade and other payables • (l) provisions • (m) financial liabilities (excluding amounts shown under (k) and (l)) • (n) liabilities and assets for current tax, as defined in IAS 12 • (o) deferred tax liabilities and deferred tax assets, as defined in IAS 12 • (p) liabilities included in disposal groups • (q) non-controlling interests , presented within equity and • (r) issued capital and reserves attributable to owners of the parent

  9. Presentation in SFP Property, plant and equipment • Disclosed on the face of SFP – The aggregate amount • Disclosed in the notes - The details are presented in the notes under separate headings concerning the amount of land and building, plant and machinery and other categories of non-current assets. To disclose accumulated depreciation to date for each assets and movements during the year. • By way of notes, the methods and rate/useful life of depreciation for each non-current assets are to be stated.

  10. Cont. • Revalued non-current assets – disclosure is to be made of the amount and the year of valuation and whether an external valuer did the valuation • Assets disposed of or held to be disposed during the period – disclosed together with assets acquired on installment purchased plan • To state any impairment loss and accumulated impairment loss Intangible assets • Disclosed on the face of SFP - Aggregate amount • Disclosed in the notes - the details (accumulated amortisation, impairment loss etc.)

  11. Cont. Investments/Financial Instruments • Disclosed on the face of SFP – the aggregate amount • Disclosed in the notes • Separately the amounts of investments in shares, debentures, government securities, in subsidiaries. • Distinguished between investments that are quoted, listed or shares purchased that are not quoted. • State the quoted market values of investments which are quoted, and the directors’ valuation of investments that do not have a market value. • For quoted investments, a distinction should be made between those quoted, listed or dealt in on ant stock exchange in and outside Malaysia.

  12. Cont. Inventories • To be valued at lower of cost and net realisable value Receivables • Should be disclosed under separate headings of: • Trade debts and bills receivables • Loan to a director • Deposits with licensed banks, finance companies, other corporations and other deposits • Amount owing by holding/subsidiaries/associated companies Cash and cash equivalent • Cash deposits are to be distinguished as to those with licensed banks, finance companies, other corps and others

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