FAC1602
Summary Guide
,FAC1602 2023 Summary Guide
Elementary Financial Accounting and Reporting Semesters 1 & 2
Learning Unit 1
Introduction to the Preparation of Financial Statements
Learning Outcomes
After completing this learning unit, students should be able to:
explain the meanings of IFRS, IAS, APB, FRSC and SAICA and describe their
roles;
explain the purpose and nature of the Conceptual Framework for Financial
Reporting;
identify the purposes served by the Conceptual Framework in the preparation
and presentation of financial statements;
explain the objective of general-purpose financial reporting;
describe the fundamental assumption applied when financial statements are
prepared;
discuss the qualitative characteristics that make financial information useful;
explain the constraints that affect the preparation and presentation of financial
information;
identify and explain the elements of financial statements and distinguish those
relating to financial position from those relating to financial performance;
explain the recognition and disclosure of elements in financial statements;
explain how the elements of financial statements are measured using the
measurement bases contained in the Conceptual Framework;
identify the types of business entities that are required to apply IFRS;
explain the important IAS 1 concepts, including fair presentation, going concern,
accrual accounting, materiality, aggregation, offsetting, reporting frequency,
comparative information and consistency of presentation;
, identify the statements that constitute a complete set of financial statements;
explain how financial statements are identified and what is meant by a reporting
period;
distinguish between current and non-current assets and liabilities in accordance
with IAS 1;
identify the information that should appear on the face of the Statement of
Financial Position and the Statement of Profit or Loss and Other Comprehensive
Income;
explain which information may be presented either on the face of the financial
statements or in the accompanying notes;
explain the purpose and organisation of notes to financial statements;
define a financial instrument, financial asset, financial liability, fair value and
contract;
distinguish between financial instruments, financial assets and financial liabilities;
and
recognise, measure and present selected financial assets and liabilities in
financial statements.
Key Concepts
The main concepts covered in this learning unit include:
Conceptual Framework
Underlying assumption
Qualitative characteristics
Components of financial statements
Elements of financial statements
Recognition
Measurement
Capital
Capital maintenance
Reporting period
, Financial instruments
Financial assets
Financial liabilities
Fair value
1.1 Introduction
Accounting systems enable businesses to collect, process and organise information
arising from their financial transactions. The resulting information provides an
understanding of an entity's financial performance and financial position. It can then be
communicated through reports such as financial statements and budgets, which assist
users in making informed economic decisions.
The accounting system introduced in FAC1502 therefore provides an important
foundation for financial reporting. This learning unit introduces the regulatory
environment governing financial reporting in South Africa. It also considers why financial
statements need to follow prescribed requirements and identifies the institutions
involved in establishing and overseeing those requirements.
The need for financial information that can be understood and compared across
different entities and countries led to the development of accounting standards. These
standards establish principles and requirements that guide entities when preparing
financial statements.
In South Africa, the Accounting Practices Board (APB) was established in 1973. It
developed accounting standards that became known collectively as South African
Statements of Generally Accepted Accounting Practice (SA GAAP). At the time, both
listed and unlisted companies were required to use SA GAAP when preparing their
financial statements.
During the 1990s, South Africa began moving towards greater alignment with
international accounting standards. The APB worked towards harmonising SA GAAP
Summary Guide
,FAC1602 2023 Summary Guide
Elementary Financial Accounting and Reporting Semesters 1 & 2
Learning Unit 1
Introduction to the Preparation of Financial Statements
Learning Outcomes
After completing this learning unit, students should be able to:
explain the meanings of IFRS, IAS, APB, FRSC and SAICA and describe their
roles;
explain the purpose and nature of the Conceptual Framework for Financial
Reporting;
identify the purposes served by the Conceptual Framework in the preparation
and presentation of financial statements;
explain the objective of general-purpose financial reporting;
describe the fundamental assumption applied when financial statements are
prepared;
discuss the qualitative characteristics that make financial information useful;
explain the constraints that affect the preparation and presentation of financial
information;
identify and explain the elements of financial statements and distinguish those
relating to financial position from those relating to financial performance;
explain the recognition and disclosure of elements in financial statements;
explain how the elements of financial statements are measured using the
measurement bases contained in the Conceptual Framework;
identify the types of business entities that are required to apply IFRS;
explain the important IAS 1 concepts, including fair presentation, going concern,
accrual accounting, materiality, aggregation, offsetting, reporting frequency,
comparative information and consistency of presentation;
, identify the statements that constitute a complete set of financial statements;
explain how financial statements are identified and what is meant by a reporting
period;
distinguish between current and non-current assets and liabilities in accordance
with IAS 1;
identify the information that should appear on the face of the Statement of
Financial Position and the Statement of Profit or Loss and Other Comprehensive
Income;
explain which information may be presented either on the face of the financial
statements or in the accompanying notes;
explain the purpose and organisation of notes to financial statements;
define a financial instrument, financial asset, financial liability, fair value and
contract;
distinguish between financial instruments, financial assets and financial liabilities;
and
recognise, measure and present selected financial assets and liabilities in
financial statements.
Key Concepts
The main concepts covered in this learning unit include:
Conceptual Framework
Underlying assumption
Qualitative characteristics
Components of financial statements
Elements of financial statements
Recognition
Measurement
Capital
Capital maintenance
Reporting period
, Financial instruments
Financial assets
Financial liabilities
Fair value
1.1 Introduction
Accounting systems enable businesses to collect, process and organise information
arising from their financial transactions. The resulting information provides an
understanding of an entity's financial performance and financial position. It can then be
communicated through reports such as financial statements and budgets, which assist
users in making informed economic decisions.
The accounting system introduced in FAC1502 therefore provides an important
foundation for financial reporting. This learning unit introduces the regulatory
environment governing financial reporting in South Africa. It also considers why financial
statements need to follow prescribed requirements and identifies the institutions
involved in establishing and overseeing those requirements.
The need for financial information that can be understood and compared across
different entities and countries led to the development of accounting standards. These
standards establish principles and requirements that guide entities when preparing
financial statements.
In South Africa, the Accounting Practices Board (APB) was established in 1973. It
developed accounting standards that became known collectively as South African
Statements of Generally Accepted Accounting Practice (SA GAAP). At the time, both
listed and unlisted companies were required to use SA GAAP when preparing their
financial statements.
During the 1990s, South Africa began moving towards greater alignment with
international accounting standards. The APB worked towards harmonising SA GAAP
