DFS Revision Game
Comments
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Just to make sure I just misread something, but isn't it a group of assets, rather than an asset?this comes under IAS 36 impairmnent of assets. it is a small asset that helps generate cash inflow from continued use
what are the limitations to ratio analysis?
In general it only shows past events and does not reflect changes that may have been made recently for future profitability etc.
Q what are the elements of the financial statements?0 -
short comings or ratio anal continued!
Doesn't show resources available, effects on environment/commutity.
Doesn't compare like with like, ie figures from SOFP at period end date and those from IS are used in some ratios ie. ROCE, asset turn, working capital.
'Window dressing' could be employed to improve end of year figureseg. inventories and receivables lower and cash higher by adusting deliveries colletion procedures.
Timing of period end could be chosen in favour of a seasonal business.
comparison of like businesses,
different acconting policies, ie non curent asset cost or revaluation.
different markets although same industry
size
differerent formula for ratios, ie. gearing0 -
opps i am surprsied my abbreviation for analysis didn't find my reply in the spam box!0
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Just to make sure I just misread something, but isn't it a group of assets, rather than an asset?
In general it only shows past events and does not reflect changes that may have been made recently for future profitability etc.
Q what are the elements of the financial statements?
Asset
Liability
Equity
Income
Expenses
Q What is the revised accounting equation? (previously assets-liabilities=equity)0 -
Assets = equity + liabilities
Q Which standards deal with the consolidated accounts?0 -
trade debtors divided by revenue x 365
What is IAS1's definition of total comprehensive income?0 -
trade debtors divided by revenue x 365
What is IAS1's definition of total comprehensive income?
Total of items on the Income Statement plus additional comprehensive income such as:
Foreign currency adjustments
gains or losses on a defined benefit pension plan
Revaluations of property, plant and equipment
Is this examinable? I'm sure there's more items but I haven't made a point of learning them.
Cheers
Q What is the ratio for creditor days?0 -
Trade creditors / Purchases or Cost of Sales x 365 days
What is the ratio for gearing0 -
(Average) creditors/ cost of sales (or credit purchases if available) times 365 gives the number of days on average when creditors are being paid.
Q Under IFRS 8 how do you define an operating segment?0 -
Long term liabilities/ equity or capital employed0
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(Average) creditors/ cost of sales (or credit purchases if available) times 365 gives the number of days on average when creditors are being paid.
Q Under IFRS 8 how do you define an operating segment?
Rinske is this definitely examinable? I've just tried to look but the AAT will not allow me on the DFS changes document that states the examinable IRS's. I haven't researched this IRS, maybe I should be doing?
CheersLong term liabilities/ equity or capital employed
I use this way too. I've heard another way something like LTL/LTL+(something else that i've forgot)0 -
It's letting me access this now and according to the AAT IFRS 8 isn't examinable. It's good to know them anyway for future reference in further studies, but with my brain being full already i'll give it a miss!!! :-)
Q Is an increase in gearing good or bad?0 -
Hi Rachey,
I took it as a need to know, because in the Guidance notes it said:IAS 14 - segment reporting (to be replaced by IFRS 8 for exam sittings from December 2009 onwards)
Where did you find it was not assessable?0 -
An increase in gearing in general means that there are more long term liabilities compared to the year before (or less capital employed compared to the liabilities), which can be good if it is used for an investment, but in most cases it would not be it good.
Q what does the return on capital employed ratio show?0 -
An increase in gearing in general means that there are more long term liabilities compared to the year before (or less capital employed compared to the liabilities), which can be good if it is used for an investment, but in most cases it would not be it good.
Q what does the return on capital employed ratio show?
A low return on capital employed is caused by either a low profit margin, a low asset turnover or a combination of both. And vice versa for a high turnover. Is there anything i've missed?
Thanks :-)
Q What are the components for calculating Goodwill in consolidating accounts?
1. Share Capital...... etc0 -
Hi Rachey,
I took it as a need to know, because in the Guidance notes it said:
Where did you find it was not assessable?
Thanks for this. It wasnt listed under the IRFS's. It went from IFRS 1 - IFRS 6. (However some did say not assessable at the sise of them)
Guess i'll start reading :-( unless you have a handy summary? Maybe I should start an FAO Rinske thread.... lol.0 -
Oooh I like your answer! I don't think you missed anything, but not really thinking clear at the moment, after 3 hours of sitting in the sun (and getting horribly burned again).A low return on capital employed is caused by either a low profit margin, a low asset turnover or a combination of both. And vice versa for a high turnover. Is there anything i've missed?
Thanks :-)
Q What are the components for calculating Goodwill in consolidating accounts?
1. Share Capital...... etc
Goodwill:
Actual investment
Less percentage of share capital acquired
Less same percentage of share premium acquired
Less same percentage of retained earnings till date acquired
Less same percentage of the difference caused by the revaluations at the time of acquiring
The difference is the goodwill.
Am I right or close?
Q How do you calculate the value of the revaluation?0 -
I used this summary from ACCA to add to my list.Thanks for this. It wasnt listed under the IRFS's. It went from IFRS 1 - IFRS 6. (However some did say not assessable at the sise of them)
Guess i'll start reading :-( unless you have a handy summary? Maybe I should start an FAO Rinske thread.... lol.
http://www.accaglobal.com/members/publications/accounting_business/CPD/30269590 -
Oooh I like your answer! I don't think you missed anything, but not really thinking clear at the moment, after 3 hours of sitting in the sun (and getting horribly burned again).
Goodwill:
Actual investment
Less percentage of share capital acquired
Less same percentage of share premium acquired
Less same percentage of retained earnings till date acquired
Less same percentage of the difference caused by the revaluations at the time of acquiring
The difference is the goodwill.
Am I right or close?
Q How do you calculate the value of the revaluation?
Are the pre-aquisition reserves included in the retained earnings?
Value of revaluation = The fair value price given to you as a bullet point, less the current value of the assets on the statement of financial position.
Q What is the purpose of ratio analysis?0 -
I would include the pre-acquisition reserves in the retained earnings, but didn't really specify it here, so I guess I was wrong.Are the pre-aquisition reserves included in the retained earnings?
Value of revaluation = The fair value price given to you as a bullet point, less the current value of the assets on the statement of financial position.
Q What is the purpose of ratio analysis?
To give accountants work!
Real reason is to give information that allows for (easier) comparison, more relevant information and give the users an overview of the performance of the company.
I'm quite sure there was more and I'm sure I got it written down somewhere, but I forgot for now, so any additions are welcome, cause I got the feeling my answer is more of a waffle than anything else!
Q What is the calculation of earning per share?0 -
I would include the pre-acquisition reserves in the retained earnings, but didn't really specify it here, so I guess I was wrong.
To give accountants work!
Real reason is to give information that allows for (easier) comparison, more relevant information and give the users an overview of the performance of the company.
I'm quite sure there was more and I'm sure I got it written down somewhere, but I forgot for now, so any additions are welcome, cause I got the feeling my answer is more of a waffle than anything else!
Q What is the calculation of earning per share?
You wasn't wrong, everyone works differently in their calculation of goodwill. I personally use a table that includes non-controlling interest too.
The purpose of ratio analysis is to help translate figures from the financial statements into understandable, comparable information that shows non-accountants such as share holders and potential investors how and why the figures have changed since the previous accounting period.
Your answer was perfect and i've only added mine for the readers of the thread, you never know it may come up in the exam!! 'Overview of the performance of the comany' I like that, i'm going to pinch that one for myself :-)
Earnings per share = Profits after Tax (i think)/ Shares in Issue
Q (this is for my own benefit as it's something I don't know)
Are there any ratio's for Inventories...??
Cheers0 -
Inventories have at least one ratio, which is inventory turnover: inventories divided by the cost of sales times 365, which shows how many days on average it takes before the inventory is sold. The quicker the better, but it's largely dependant on the goods the company sells.You wasn't wrong, everyone works differently in their calculation of goodwill. I personally use a table that includes non-controlling interest too.
The purpose of ratio analysis is to help translate figures from the financial statements into understandable, comparable information that shows non-accountants such as share holders and potential investors how and why the figures have changed since the previous accounting period.
Your answer was perfect and i've only added mine for the readers of the thread, you never know it may come up in the exam!! 'Overview of the performance of the comany' I like that, i'm going to pinch that one for myself :-)
Earnings per share = Profits after Tax (i think)/ Shares in Issue
Q (this is for my own benefit as it's something I don't know)
Are there any ratio's for Inventories...??
Cheers
It can also be expressed as number of times per year: cost of sales divided by inventories.
Maybe the liquid capital ratio can also be counted for inventories, but it's more dealing with the short term liquidity than with the inventories if you ask me.
Q what is the difference between depreciation and amortisation?0 -
amortisation is usually used in place of depreciation for intangible assets (from the french mort - to die)!!0
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amortisation is usually used in place of depreciation for intangible assets (from the french mort - to die)!!
I've already typed out my answer so your having that one too :-)
Amortization refers to spreading an intangible asset's cost over it's useful life.
Depreciation refers to spreading a tangible asset's cost over it's useful life.
You need to ask a question too reddwarf!!! (please....)
Cheers0 -
what is the definition of 'depreciable amount'?0
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The cost of an asset minus any residual value, to be spread out over the useful life of the asset.
Q Explain when deferred tax comes into existence?0 -
The cost of an asset minus any residual value, to be spread out over the useful life of the asset.
Q Explain when deferred tax comes into existence?
PGM answered this on another thread that I remember. Rather than use my own wording, i've copied his as it makes more sense. Also, I re-read this thread and would like it to be there for my own reference. So here goes:
Its the difference between accounting tax and capital allowances.
Simple example is if you bought an asset for 10k which will last 5 years. In your accounts you would depreciate at 2k per year. But, with capital allowances you could be entitled to large first year allowances.
So in that year you'll pay a lot less tax due to the big capital allowance. What deferred tax does is smooth out the difference between actual tax paid and what you would have expected to pay with your accounting treatment.
The result of this is that your profit for the period (after tax) is not distorted by capital allowances.
Q In accordance with IAS 8, would a change in depreciation method from straight line to reducing balance be classed as a change in accounting policy or change in accounting estimate?
(Thanks to Steve for teaching this on Saturday!!)0 -
Not sure on this one, but I would guess accounting policy.PGM answered this on another thread that I remember. Rather than use my own wording, i've copied his as it makes more sense. Also, I re-read this thread and would like it to be there for my own reference. So here goes:
Its the difference between accounting tax and capital allowances.
Simple example is if you bought an asset for 10k which will last 5 years. In your accounts you would depreciate at 2k per year. But, with capital allowances you could be entitled to large first year allowances.
So in that year you'll pay a lot less tax due to the big capital allowance. What deferred tax does is smooth out the difference between actual tax paid and what you would have expected to pay with your accounting treatment.
The result of this is that your profit for the period (after tax) is not distorted by capital allowances.
Q In accordance with IAS 8, would a change in depreciation method from straight line to reducing balance be classed as a change in accounting policy or change in accounting estimate?
(Thanks to Steve for teaching this on Saturday!!)
Can you please let me know if I am wrong or not?
Q What is the liquid capital ratio?0 -
Not sure on this one, but I would guess accounting policy.
Can you please let me know if I am wrong or not?
Q What is the liquid capital ratio?
The example Steve gave us was:
A change in depreciation method from straight line to reducing balance would be a change in accounting estimate.
However, including depreciation within cost of sales one accounting period and then changing it so it's included within admin expenses the next will be a change in accounting policy.
I haven't revised the liquid capital ratio and i'd be cheating if i researched it now, so i'll let someone else answer this one...........0
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