The purpose of this article is to summarise the key changes introduced by IFRS 16 from the perspective of the lessee. 1. Introduction and context setting International Financial Reporting Standard (IFRS®) 16 – Leases – was issued in January 2016 and, in comparison to its predecessor International Accounting Standard (IAS®) 17 makes significant changes to…
International Accounting Standard IAS 41, Agriculture, is the first standard that specifically covers the primary sector. IAS 41 introduces a fair value model to agriculture accounting. This is a major shift away from the traditional cost model widely applied in primary industry. IAS 41 impacts those agricultural activities where the income-producing biological assets are living…
IFRS 2, Share-based Payment, applies when a company acquires or receives goods and services for equity-based payment. These goods can include inventories, property, plant and equipment, intangible assets, and other non-financial assets. There are two notable exceptions: shares issued in a business combination, which are dealt with under IFRS 3, Business Combinations; and contracts for…
The impact of International Financial Reporting Standards (IFRS® Standards) has been felt extensively in the exploration industry – particularly the oil and gas industry where key dilemmas and judgements made are greatest at the exploration and production stage. At one end, IFRS 6®, Exploration for and evaluation of mineral resources has introduced certain issues for the industry,…
Following the revisions to IFRS 3, Business Combinations, in January 2008, there are now two ways of measuring the goodwill that arises on the acquisition of a subsidiary and each has a slightly different impairment process. This article discusses and shows both ways of measuring goodwill following the acquisition of a subsidiary, and how each…
A focus on the International Financial Reporting Standard for small to medium-sized entities. The principal aim when developing accounting standards for small to medium-sized enterprises (SMEs) is to provide a framework that generates relevant, reliable and useful information which should provide a high quality and understandable set of accounting standards suitable for SMEs. In July…
IFRS 3®, Business Combinations was issued in January 2008 as the second phase of a joint project with the Financial Accounting Standards Board (FASB), the US standards setter, and is designed to improve financial reporting and international convergence in this area. The standard has also led to minor changes in IAS 27®, Consolidated and Separate Financial…
The classification of debt and equity in an entity’s statement of financial position is not always easy for preparers of financial statements. Many financial instruments have both features with the result that this can lead to inconsistency of reporting. IAS® 32 clarifies the definition of financial assets, financial liabilities and equity. In doing so, it…
Share-based payments are a complex topic. However, an in-depth understanding of the material in this article should help you to feel more comfortable when answering exam questions from this syllabus area. IFRS 2®, Share-based Payment, applies when a company acquires or receives goods and services in exchange for an equity-based payment. These goods can include inventories,…
This two-part article considers the application of IFRS 15, Revenue from Contracts with Customers using the five-step model. On 28 May 2014, the International Accounting Standards Board (the Board), as a result of the joint project with the US Financial Accounting Standards Board (FASB), issued IFRS® 15, Revenue from Contracts with Customers. Application of the standard is…
This article explains the approach to examining Financial Management and clarifies any uncertainty regarding the content of the syllabus. For students planning to take this exam, a good place to start is the ACCA website, where the Financial Management Syllabus and Study Guide – together with the Specimen Exam and its suggested answers – can be found. The aim of Financial…
What you need to know about the objective test questions for session CBEs for PM, TX, FR, AA and FM. What you need to know about the objective test (OT) questions in Session CBE format exams for: Performance Management (PM) Taxation (TX) * Financial Reporting (FR) Audit and Assurance (AA) Financial Management (FM) * UK…
It has been noted in a number of examiner reports for Financial Management that calculation requirements are answered better than discursive requirements. Therefore, this article will look at how to answer a discursive requirement to a Financial Management question. First example First, let’s consider the following requirement from Question 32(c) of the September/December 2017 sample…
Is it possible to increase shareholder wealth by changing the capital structure? The first question to address is what is meant by capital structure. The capital structure of a company refers to the mixture of equity and debt finance used by the company to finance its assets. Some companies could be all-equity-financed and have no…
This article considers two methods a company could adopt in order to speed up the collection of cash from its customers. Adopting a rigorous receivables collection system is essential to the ability of a company to pay its suppliers and employees, and even survive. Even where such a system is adopted and effective steps are…
Project appraisal 1 – pure equity finance So now we have two ways of estimating the cost of equity (the return required by shareholders). Can this measurement of a company’s cost of equity be used as the discount rate with which to appraise capital investments? Yes it can, but only if certain conditions are met:…
A fundamental part of financial management is investment appraisal: into which long-term projects should a company put money? Discounted cash flow techniques (DCFs), and in particular net present value (NPV), are generally accepted as the best ways of appraising projects. In DCF, future cash flows are discounted so that allowance is made for the time…
This article has been updated to reflect the knowledge of basis risk that students are expected to have for Financial Management. Increasingly, many businesses have dealings in foreign currencies and, unless exchange rates are fixed with respect to one another, this introduces risk. There are three main types of currency risk as detailed below. Economic…
Investment appraisal is one of the core topics within Financial Management and it is a topic which has been well represented in the Financial Management exam. Investment appraisal is one of the eight core topics within Financial Management and it is a topic which has been well represented in the exam. The methods of investment appraisal are…
Section E of Financial Management syllabus deals with business finance: What types of finance? What sources? What mix? The article will first consider a business’s formation and initial growth, then a company that is well-established and mature, and will look at the financing choices and decisions that could face it at various stages. Formation and…
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