©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
ACCA Financial Reporting Exam Study
Guide
IAS 1 Presentation of Financial Statements - ANSWER✔✔States that a complete set of financial
statements comprises:
- A statement of financial position
- A statement of profit or loss
and other comprehensive income
- A statement of changes in equity
- A statement of cash flows
- Accounting policies and explanatory notes
Property, plant, and equipment (IAS 16) - ANSWER✔✔Tangible assets held by an entity for more than
one accounting period for use in the production or supply of goods or services, for rental to others, or for
administrative purposes
Page 1/56
, ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
Property, plant and equipment: Recognition - ANSWER✔✔Recognised as an asset when:
- it is probable that future economic benefits associated with the asset will flow to the entity; and
- the cost of the asset can be measured reliably (IAS 16, para 7).
Property, plant and equipment: Initial measurement - ANSWER✔✔- All costs involved in bringing the
asset into working condition
- Initial cost capital costs such as the cost of site preparation, delivery costs, installation costs, borrowing
costs
- Dismantling costs - the present
value of these costs should be
capitalised
- Expense items, such as fuel,
training and warranty costs, should be written off as incurred
Present Value: Discounting fraction - ANSWER✔✔1/(1 + r)^n
i.e. Present value = Cost x 1/(1+r)^n
Page 2/56
, ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
r = Rate or Interest rate
n = Number of years
Depreciation - ANSWER✔✔Depreciation is the systematic allocation of the depreciable amount of an
asset over its useful life (IAS 16, para 6).
Depreciable amount is the cost of
an asset, or other amount substituted for cost, less its residual value (IAS 16, para 6)
Methods:
- Straight line
- Reducing balance
- Machine hours
Revaluation of non-current assets - ANSWER✔✔IAS 16 treatments:
- The cost model: valued at cost less accumulated depreciation
Page 3/56
, ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
- The revaluation model: carried at a revalued amount less any
subsequent accumulated depreciation
Journal (assuming revalued amount is greater than original cost):
Dr Non-current assets cost/valuation (revalued amount - cost)
Dr Accumulated depreciation
(eliminate accumulated balance)
Cr Other Comprehensive Income (revaluation surplus)
Depreciation of revalued assets - ANSWER✔✔- Depreciation must be charged, based on valuation less
residual value, over the remaining useful life of the asset
- The whole charge must go to the statement of profit or
loss for the year
- An annual reserves transfer
may be made, from revaluation surplus to retained earnings, for the additional depreciation charged on
the revalued
Page 4/56
FIRST PUBLISH OCTOBER 2024
ACCA Financial Reporting Exam Study
Guide
IAS 1 Presentation of Financial Statements - ANSWER✔✔States that a complete set of financial
statements comprises:
- A statement of financial position
- A statement of profit or loss
and other comprehensive income
- A statement of changes in equity
- A statement of cash flows
- Accounting policies and explanatory notes
Property, plant, and equipment (IAS 16) - ANSWER✔✔Tangible assets held by an entity for more than
one accounting period for use in the production or supply of goods or services, for rental to others, or for
administrative purposes
Page 1/56
, ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
Property, plant and equipment: Recognition - ANSWER✔✔Recognised as an asset when:
- it is probable that future economic benefits associated with the asset will flow to the entity; and
- the cost of the asset can be measured reliably (IAS 16, para 7).
Property, plant and equipment: Initial measurement - ANSWER✔✔- All costs involved in bringing the
asset into working condition
- Initial cost capital costs such as the cost of site preparation, delivery costs, installation costs, borrowing
costs
- Dismantling costs - the present
value of these costs should be
capitalised
- Expense items, such as fuel,
training and warranty costs, should be written off as incurred
Present Value: Discounting fraction - ANSWER✔✔1/(1 + r)^n
i.e. Present value = Cost x 1/(1+r)^n
Page 2/56
, ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
r = Rate or Interest rate
n = Number of years
Depreciation - ANSWER✔✔Depreciation is the systematic allocation of the depreciable amount of an
asset over its useful life (IAS 16, para 6).
Depreciable amount is the cost of
an asset, or other amount substituted for cost, less its residual value (IAS 16, para 6)
Methods:
- Straight line
- Reducing balance
- Machine hours
Revaluation of non-current assets - ANSWER✔✔IAS 16 treatments:
- The cost model: valued at cost less accumulated depreciation
Page 3/56
, ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
FIRST PUBLISH OCTOBER 2024
- The revaluation model: carried at a revalued amount less any
subsequent accumulated depreciation
Journal (assuming revalued amount is greater than original cost):
Dr Non-current assets cost/valuation (revalued amount - cost)
Dr Accumulated depreciation
(eliminate accumulated balance)
Cr Other Comprehensive Income (revaluation surplus)
Depreciation of revalued assets - ANSWER✔✔- Depreciation must be charged, based on valuation less
residual value, over the remaining useful life of the asset
- The whole charge must go to the statement of profit or
loss for the year
- An annual reserves transfer
may be made, from revaluation surplus to retained earnings, for the additional depreciation charged on
the revalued
Page 4/56
