Summary financial reporting

INTERNAL AND EXTERNAL
FINANCIAL REPORTING
Semester 1 – Bridging year MBA




Sien Bosmans

,INTERNAL AND EXTERNAL FINANCIAL REPORTING 8

PART 1: FINANCIAL ACCOUNTING 8

CHAPTER 1 – CONCEPTUAL FRAMEWORK 8

1. Conceptual framework and financial statements 8
1.1. Language of business 8
1.1.1. Limited liability company: 9
1.1.2. Accounting standards 10

2. Conceptual framework 10
2.1. Why? Who? What? How? 10
2.2. Balance sheet 12
2.3. Income statement 13
2.4. Notes 13
2.5. The accounting equation 13
2.6. Ethics in business and accounting decisions 14

3. Accounting process 14
3.1. Accounting process – the flow of accounting data 14
3.2. Double-entry accounting 15
3.3. Preparing financial statements 17
3.4. Formats of financial statements 17

4. Accounting principles 18
4.1. Objectivity 18
4.1.1. Unit of measurements 18
4.1.2. Basis of valuation 18
4.1.3. No offsetting 19
4.2. Quality of information 19
4.2.1. Materiality and aggregation 19
4.2.2. Faithful presentation 19
4.2.3. Substance over form 20
4.3. Prudence 20
4.3.1. Conservatism 20
4.3.2. Accrual basis 20
4.3.3. Matching principle 20
4.4. Periodicity 21
4.4.1. Accounting period 21
4.4.2. Going concern 21
4.4.3. Consistency 21


CHAPTER 2 – COMMERCIAL & FINANCIAL TRANSACTIONS 22

1. Fundamental commercial transactions 22
1.1. Belgian chart of account 22
1.2. Value added tax (VAT) 25
25
1.3. Discounts 26
1.3.1. Commercial discounts 26
1.3.2. Financial discounts 26
1.4. Credit notes 27
1.5. End of period adjustments 28




2

,2. Fundamental financial transactions 30
2.1. Belgian chart of account 30
2.2. Recording financial transactions 31


CHAPTER 3 – ASSETS 32

1. Formation expenses 33
1.1. Belgian chart of accounts 33
1.2. Valuation 33
1.3. IAS/FRS 34

2. Non-current assets 34
2.1. Intangible fixed assets 35
2.1.1. Belgian chart of accounts 35
2.1.2. Valuation 35
2.1.3. Image-oriented vs tax-efficient 36
2.1.4. IAS/IFRS 36
2.2. Tangible fixed assets 37
2.2.1. Belgian chart of accounts 37
2.2.2. Valuation 37
2.2.3. Image-oriented vs tax-efficient 39
2.2.4. IAS/IFRS 40
2.3. Financial fixed assets 41
2.3.1. Belgian chart of accounts 41
2.3.2. Valuation 41
2.3.3. Image-oriented vs. tax-efficient 42
2.3.4. IAS/IFRS 42
2.4. Exercise 42

3. Current assets 43

3.1. Inventories 43
3.1.1 Belgian chart of accounts 43
3.1.2. Valuation RM, Consumables, GP,… 48
3.1.3. Valuation WIP, CIP 48
3.1.4. Valuation change 49
3.1.5. Image-oriented versus tax oriented 49
3.1.6. IAS/IFRS 49
3.2. Amounts receivables < 1 Year 50
3.2.1. Belgian chart of accounts 50
3.2.2. Valuation 50
3.2.3. Image-oriented versus tax oriented 52
3.2.4. IAS/IFRS 52
3.3. Current investments 52
3.3.1. Belgian chart of accounts 52
3.3.2. Valuation 53
3.3.3. Image-oriented versus tax oriented 53
3.2.4. IAS/IFRS 53
3.4.2. Valuation 54
3.4.3. IAS/IFRS 55
3.5. Deferred charges and accrued income 55
3.5.1. Belgian chart of accounts 55
3.5.2. Valuation 55




3

, CHAPTER 4 – EQUITY AND LIABILITIES 56

1. Equity 56
1.1. Equity - Belgian chart of accounts 56
1.2. Share capital and contributions outside capital 57
1.2.1. Belgian chart of accounts 57
1.2.2. Valuation 58
1.2.3. Image-oriented versus tax-efficient 58
1.2.4. IAS/IFRS 58
1.3. Revaluation surplus 59
1.3.1. Belgian chart of accounts 59
1.3.2. Valuation 59
1.3.3. Image-oriented versus tax-efficient 59
1.3.4. IAS/IFRS 60
1.4. Profit appropriation 60
1.4.1. Reserves 61
1.4.2. Accumulated profit/loss 61

2. Provisions 62
2.1. Belgian chart of accounts 62
2.2. Valuation 63
2.3. Image-oriented versus tax-efficient 63
2.4. IAS/IFRS 63

3. Liabilities 63
3.1. Non-current liabilities 64
3.1.1. Belgian chart of accounts 64
3.1.2. Valuation 64
3.1.3. IAS/IFRS 64
3.2. Current liabilities 65
3.2.1. Belgian chart of account 65
3.2.2. Valuation 66

4. Accrued charges and deferred income 66
4.1. Belgian chart of accounts 66
4.2. Valuation 66


PART 3 – FINANCIAL ANALYSIS 67

CHAPTER 1 – INTRO 67

1. Introduction 67
1.1. Tools for financial analysis 67
1.1.1. Disclosure financial statements 67
1.1.2. Annual report: 67
1.1.3. Content of Annual report: 68
1.2. Audit report 68
1.2.1. 4 types of audit reports 69
1.3. Timing filing financial statements 69
1.4. Consequences 69

2. Introduction FS analysis 69
2.1. The big picture 70
2.2. First screening 70
2.2.1. Balance sheet 70



4