Category: General accounting rules

The main strategic report must contain the following sections as per the Companies Act 2006 s414C: (a) a fair review of the company’s business; (b) a description of the principal risks and uncertainties facing the company; (c) the review required is a balanced and comprehensive analysis, consistent with the size and complexity of the business,… Continue reading The main requirements of a strategic report

IAS 37 and FRS 102 s21 apply to provisions, contingent liabilities, and contingent assets. They establishe the principles and rules for the recognition, measurement, and disclosure of provisions, contingent liabilities, and contingent assets in the financial statements. Provisions Provisions are liabilities that are recognized in the financial statements when it is probable that an outflow… Continue reading Provisions & contingent liabilities and assets

Related parties are entities or persons that are related to the entity preparing the financial statements. Related parties may include the entity’s parent, subsidiaries, associates, joint ventures, and directors, key management personnel, and their immediate families. Related parties may also include entities or persons that have the ability to exercise significant influence over the entity,… Continue reading Related parties

To account for an associate, the entity should follow the principles and rules of accounting for associates, which are the principles and rules that govern the recognition, measurement, and disclosure of associates in the financial statements. The key steps in accounting for an associate are as follows: Identify the associate: The first step in accounting… Continue reading How to account for an associate

Consolidated accounts are financial statements that present the financial position, performance, and cash flows of a group of entities as if they were a single entity. Consolidated accounts are prepared in accordance with the principles and rules of consolidation, which are the principles and rules that govern the combination of the financial statements of the… Continue reading How to prepare group accounts

Share issue transaction costs are costs incurred by a company in connection with issuing new shares. Share issue transaction costs can include costs such as legal fees, accounting fees, printing costs, and broker fees. Share issue transaction costs are usually required to be recognized as a deduction from equity (FRS 102 s22.9 and IAS 32… Continue reading Share issue transaction costs

Goodwill is an intangible asset that arises when one entity acquires another entity and pays more than the fair value of the acquired entity’s net assets. Goodwill is typically assigned to a cash-generating unit (CGU), which is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows… Continue reading Goodwill

A retrospective correction of prior period errors is a correction of errors that occurred in a previous period, but were not discovered until a subsequent period. Retrospective correction of prior period errors is required by IAS 8 and also FRS 102 s10.21 which state that errors should be corrected retrospectively by adjusting the opening balance… Continue reading Restrospective correction of prior period errors

The fair value of unlisted shares is the price at which the shares would be bought or sold between knowledgeable, willing parties in an arm’s length transaction. Estimating the fair value of unlisted shares can be challenging, as there is no readily available market price for the shares and the fair value must be determined… Continue reading Estimating fair value of unlisted shares

The accruals concept is a fundamental principle of accounting that states that income and expenses should be recognized in the period in which they are earned or incurred, rather than in the period in which they are paid or received. The accruals concept is based on the idea that the financial statements should reflect the… Continue reading Accruals concept