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Unformatted text preview: Module: Financial Reporting Lecturer: Mr. Avinash Odit Assignment: What are the main sections in a Financial Statement and what are the elements found in each section. Student: Riad Jhummun Cohort: BAS09/PT Student ID: BAS/09/PT/092391 Financial Statement A financial statement is a written report which describes the financial health of a company. It comprises of the following mains statements: Statement of financial position, which show what the company owns and owes at some specific period Income statement, which show how much money the company made and spent over that period of time Statement of Shareholders’ equity, showing changes in the interests of the company’s shareholders over that period Cash flow statement, showing the exchange of money between the company and the outer world notes to financial statements Statement of Financial Position(SFP) It provides detailed information about the company’s assets, liabilities and shareholders’ equity. The following formula summarizes the State of Financial Position: ASSETS = LIABILITIES + SHAREHOLDERS’ EQUITY The layout of the SFP is usually in the following order: ASSET o Non‐Current Assets Property and Equipments Intangible assets Investments in companies, etc… o Current Assets Investments in financial assets Loans and receivables etc… o Total Assets EQUITY o Capital and reserves Share Capital Reserves, etc… Owners’ Interest etc… o Total Equity LIABILITIES o Non‐Current Liabilities Retirement Benefits Obligations o Current Liabilities Trade and other payables Current Tax liabilities TOTAL EQUITY AND LIABILITIES Income Statement An income statement is a report that shows how much revenue a company earned over a specific time period (usually for a year or some portion of a year). An income statement also shows the costs and expenses associated with earning that revenue. Income statements also report earnings per share (or “EPS”). This calculation tells you how much money shareholders would receive if the company decided to distribute all of the net earnings for the period. The setup of the Income Statement is as follows: Gross Premiums o Premiums ceded to reinsurers o Change in gross unearned premiums o Recoverable from reinsurers Net Earned Premiums Net claims incurred Net commissions Underwriting surplus Operating Profit Profit before taxation Profit for the year Earnings per share Statement of Comprehensive Income The statement of comprehensive income shows the comprehensive income for the period. Comprehensive income for the period includes profit or loss for that period plus other comprehensive income recognized in that period. Comprehensive income is the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non‐
owner sources. Elements of the Statement of Comprehensive Income are as follow: Profit for the Year Other Comprehensive income o Net movement in fair value changes of available for sale financial assets o Release on disposal of available for sale financial assets o Net movements in other reserves Other Comprehensive income of theyear Total Comprehensive income of the year Statements of changes in equity A statement of changes in equity shows all changes in owner’s equity for a period of time. The statement must show: (a) profit or loss for the period; (b) each item of income and expense for the period that is recognised directly in equity, and the total of those items; (c) total income and expense for the period (calculated as the sum of (a) and (b)), showing separately the total amounts attributable to equity holders of the parent and to minority interest; and (d) for each component of equity, the effects of changes in accounting policies and corrections of errors recognised in accordance with IAS 8 . Statements of cash flows The statement of cash flows analyses changes in cash and cash equivalents during a period. Cash and cash equivalents comprise cash on hand and demand deposits, together with short‐term, highly liquid investments that are readily convertible to a known amount of cash, and that are subject to an insignificant risk of changes in value. The statement of cash flows contains the following: operating activities are the main revenue‐producing activities of the company that are not investing or financing activities, so operating cash flows include cash received from customers and cash paid to suppliers and employees investing activities are the acquisition and disposal of long‐term assets and other investments that are not considered to be cash equivalents financing activities are activities that alter the equity capital and borrowing structure of the entity interest and dividends received and paid may be classified as operating, investing, or financing cash flows, provided that they are classified consistently from period to period cash flows arising from taxes on income are normally classified as operating, unless they can be specifically identified with financing or investing activities for operating cash flows, the direct method of presentation is encouraged, but the indirect method is acceptable Notes to Financial statements Notes to financial statements (notes) are additional information added to the end of financial statements. Notes to financial statements help explain specific items in the financial statements as well as provide a more comprehensive assessment of a company's financial condition. Notes to financial statements can include information on debt, going concern criteria, accounts, contingent liabilities or contextual information explaining the financial numbers (e.g. to indicate a lawsuit). Auditor’s Report The auditor's report is a formal opinion, or disclaimer thereof, issued by either an internal auditor or an independent external auditor as a result of an internal or external audit or evaluation performed on a legal entity or subdivision thereof (called an “auditee”). The report is subsequently provided to a “user” (such as an individual, a group of persons, a company, a government, or even the general public, among others) as an assurance service in order for the user to make decisions based on the results of the audit. An auditor’s report is considered an essential tool when reporting financial information to users,
particularly in business. Since many third‐party users prefer, or even require financial information to be certified by an independent external auditor, many auditees rely on auditor reports to certify their information in order to attract investors, obtain loans, and improve public appearance. ...
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- Spring '12