问题详情

IAS1PresentationofFinancialStatementsdefinesprofitorlossandothercomprehensiveincome.Thepurposeofthestatementofprofitorlossandothercomprehensiveincomeistoshowanentity’sfinancialperformanceinawaywhichisusefultoawiderangeofuserssothattheymayattempttoassessthefuturenetcashinflowsofanentity.Thestatementshouldbeclassifiedandaggregatedinamannerwhichmakesitunderstandableandcomparable.However,theInternationalIntegratedReportingCouncil(IIRC)iscallingforashiftinthinkingmoretothelongterm,tothinkbeyondwhatcanbemeasuredinquantitativetermsandtothinkabouthowtheentitycreatesvalueforitsowners.Historicalfinancialstatementsareessentialincorporatereporting,particularlyforcompliancepurposes,butitcanbearguedthattheydonotprovidemeaningfulinformation.Preparersoffinancialstatementsseemtobeunclearabouttheinteractionbetweenprofitorlossandothercomprehensiveincome(OCI)especiallyregardingthenotionofreclassification,butareequallyuncertainaboutwhethertheIIRC’sFrameworkconstitutessuitablecriteriaforreportpreparation.ADiscussionPaperontheConceptualFrameworkpublishedbytheInternationalAccountingStandardsBoard(IASB)hastriedtoclarifywhatdistinguishesrecogniseditemsofincomeandexpensewhicharepresentedinprofitorlossfromitemsofincomeandexpensepresentedinOCI.
Required:
(a)(i)Describethecurrentpresentationrequirementsrelatingtothestatementofprofitorlossandothercomprehensiveincome.(4marks)
(ii)Discuss,withexamples,thenatureofareclassificationadjustmentandtheargumentsforandagainstallowingreclassificationofitemstoprofitorloss.Note:AbriefreferenceshouldbemadeinyouranswertotheIASB’sDiscussionPaperontheConceptualFramework.(5marks)
(iii)DiscusstheprinciplesandkeycomponentsoftheIIRC’sFramework,andanyconcernswhichcouldquestiontheFramework’ssuitabilityforassessingtheprospectsofanentity.(8marks)
(b)Cloud,apubliclimitedcompany,regularlypurchasessteelfromaforeignsupplieranddesignatesafuturepurchaseofsteelasahedgediteminacashflowhedge.Thesteelwaspurchasedon1May2014andatthatdate,acumulativegainonthehedginginstrumentof$3millionhadbeencreditedtoothercomprehensiveincome.Attheyearendof30April2015,thecarryingamountofthesteelwas$8millionanditsnetrealisablevaluewas$6million.Thesteelwasfinallysoldon3June2015for$6·2million.
Onaseparateissue,Cloudpurchasedanitemofproperty,plantandequipmentfor$10millionon1May2013.Theassetisdepreciatedoverfiveyearsonthestraightlinebasiswithnoresidualvalue.At30April2014,theassetwasrevaluedto$12million.At30April2015,theasset’svaluehasfallento$4million.Theentitymakesatransferfromrevaluationsurplustoretainedearningsforexcessdepreciation,astheassetisused.
Required:
ShowhowtheabovetransactionswouldbedealtwithinthefinancialstatementsofCloudfromthedateofthepurchaseoftheassets.
Note:Candidatesshouldignoreanydeferredtaxationeffects.(6marks)
Professionalmarkswillbeawardedinquestion4forclarityandqualityofpresentation.(2marks)


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