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Assignment on International Financial Report - Level 5


International Financial reporting standard can be also known as IFRS in which the standards are usually issued by IFRS foundation and IASB which is known as International accounting standards board. It gives an easy understanding to companies and organisation for comparing the financial performance and it also provides common language which can be understood globally for every business affairs. Its main objective is to compare financial performance across national and international boundaries. This report gives us a brief understanding about preparation of financial statements, data set and report which provides details which are informative database which will be needed for applying authentic framework for performing each and every activity. In the same series, there is preparation of income statement of Able Plc which consists of present revenue and expenses in proposed period. And in this report facts are been justified and applications of financial statement in context of regulatory framework of international accounting standards. The significance of such techniques and how accounting professionals are required to prepare financial statement. &n

Q1 Income Statement of Able Plc for the year 2017 and International Financial reporting standards

International Financial reporting standards can be defined as set of accounting principles which are formed by independent organizations and organizations who are not for profit. IFRS usually provides a basic framework of guiding organizations for the preparation of financial statements and there disclosure. Guidance and directions are provided by IFRS for stating financial statements but it does not set rules for any particular industry reporting. Organizations who have subsidiaries in different countries has a major role of International standards. The procedures of accounting will be simplified if single set of worldwide standards will be adopted by allowing an organisation for its application via one reporting language. Single standard will provide some characterized views of finance to auditors and investors. The financial performance of the company is been stated as comprehensive income statement. As this comprehensive income statement is divided into sub parts of profit and loss statement of comprehensive income. Revenues and expenses are elements which are included as per IFRS standards (Cairns and, 2011).

The economic benefit has been raised by inflows and enhancement of assets during the accounting period. If liabilities are decreased then there is raise of equity. Revenue does not include contributions which are performed by equity like owners, partners and shareholders. The assets are depleted during accounting period decreases the economic benefit and if equity is decreased then there is raise in liabilities. Equity participants does not include distributions. Circumstances which are related to comprehensive income that remeasurement of number of assets and liabilities. The fair value of financial asset may rise or fall and even it can be modified according to its availability for sale. There may be increase or decrease in revaluation of property, intangible assets and plant.

International financial reporting standards also gives a picture of generally accepted accounting principles which gives its application for financial statements which are published yearly and helps in the understanding of stakeholders like clients, shareholders, debtors, employees and government for tracking the financial position and stability of the company. These standards are adopted by more than 100 countries and because of increase in globalisation cost of process of preparing financial statements is minimised and conducted business by many group of companies in world. IFRS standards has forbidden offsetting but in some specific conditions offsetting is allowed. There is requirement of fair and faithful picture which effects all conditions who are according to framework of IFRS and even there should be recognition of criteria of assets, liabilities, expenses and income (Cotter, 2012). The comparative information which is related to financial statement of current year make the information narrative and descriptive and in alternative to know financial performance is balance sheet of International accounting standard 1 and classification of items in financial statements. Able Plc.'s income statement for the year ending 31 December 2017 is represented as:

Able Plc. Income statement of the year ending 31 December 2017



Amount (in £)

Net sales



Less: Return Inwards



Net Revenue



Cost of sales



Opening inventory






Less: Return outwards



Adjusted purchase



Goods available for sale



Closing inventory



Cost of sales



Gross Margin



Operating Expenses



Carriage inwards



Motor Expenses



Warehouse salaries



Less : outstanding salaries






Hire of vehicles



Director salary









Motor vans



Finance costs



Rent and rates






Sum of Operating Expenses






Sum of General Expenses



Tax paid



Bad debts






Total expenses






Net Income




Interpretation: The financial stability and performance of the organization can be observed by income statement. Able Plc.'s income statement is drawn above which has the net income of 294000. The business activities which are non primary stated in non operating section of this income statement gives revenue and benefits. While considering revenue and expenses, net income can be calculated. The difference between revenue and expenses gives the result. The series for coming to net income is, gross margin, then operating expenses, and general expenses. Gross margin can be represented by cost of goods sold and revenue during the year which gives consideration to sales, inventory and purchase (Christensen and, 2015). Operating expenses can be defined as all expenses which are related to factory, office and their operations. The above figure has major operating expenses such as hire of vehicles, motor expenses, carriage inward, finance cost, rent, salaries and wages, insurance and deprecation on assets whose aggregate is calculated as 79000. 24000 is calculated as general expenses which includes tax paid and interest. The aggregate of all expenses lie operating and general expenses is 10300. Now for reaching to net income step is to exclude all expenses from gross margin i.e. 294000. From the perspective of analysis of income statement it is suggested that organization should reduce the expenses so this will replicate positive side in net income.

The City College Level 4 assignment sample- Unit 3 International Financial Reporting Level 4 City College

Q2 Explaining accounting for intangible assets according to International Accounting Standards

For managing operational framework in the premises of organisation for preparing various financial reports which helps in accomplishing perfect framework of accounting in business. The regulations which are formed by accounting standards to give useful information which helps to funnel the managers for operational activities. Proper direction and guidance is provided on the basis of financial transaction which are recorded within period are beneficial and effective for preparing financial statements. The procedure of preparing financial should be based on universal framework and even universal operations should be easily understood and recognised by accounting professionals, government, financial authorities and even investors, it can be referred as main objective of developing accounting standards (Brochet, Jagolinzer and Riedl, 2013).

Standards which are accepted universally and accounting framework techniques which will be replicating and useful for perfect increase in reporting system's level. For attaining the information related to shareholders there are adequate resources which will be helpful also for financial statements. The revenue, expenses and profits can be easily identified or recognised in the list of income statements of the organizations and even assets and liabilities can be identified in balance sheet. This creates the ability to analysis of profitability and growth and even dividend payable by them also in coming year. This will be very effective for the company and presence of large number of investors in the organization who gives proper support to financial governance in business activities. The business professional can ascertain each and every business activity which incur the cost and changes in capital structure. Expenditure, revenue and incurred cost can be balanced by every business operations and well managed and even appropriate recording of every information.

It consists of accounting standards which are of very high quality with principles that are neutral and can be easily comparable, consistent, relevant and reliable. The information of financial statements should be properly justified with concrete evidence and on that basis it will be helpful for appropriate records and effective as well. The whole data which is collected as information should be properly analysed by all auditors and accounting professional for determining business's growth. It is also useful for decision making, planning and predicting the budget for operational development of the company (Müller, 2014). Proper guidance has been given to accounting professionals for allotting the capital funds in every business activities like promotion, purchasing, manufacturing etc. which balances revenues and level of spending which is collected by organization. And on the contrary side, various implications of different techniques on the perspective of bringing proper control in the economy of its financial operations.

Knowledge can be enhanced of investors for analysing the market along with this all stated risk and opportunities in the environment. All this will be prevailing market for having very satisfactory outcomes and for allocations of capital by creating perfection and efficiency. The main objective of implicating international standards is to develop the standards and global market is an important platform which will be creating help to investors, shareholders etc. which will be decreasing cost of international reporting and all territorial barriers will be removed. If organization will have investment from foreign investors then it will lead to increase in market value of company. There will be proper management of work and operation's workforce of internal management can be also managed along with capital allocation. There will be appropriate control over cost of capital and on periodical basis the financial performance of company can be reviewed. The financial account's preparation will be giving informative advantage and operational activities. Investors considers the information of financial report of any organization especially profit, turnover and even dividend paid by them. This will lead to gain knowledge related to profitability of the organisation and even the ability to meet all financial advantage (Adibah Wan Ismail and, 2013).

Specifying the intangible assets for specific area of capitalising R and D costs

There will be various accounting entries and operational treatment for identifying and calculating the business of intangible assets and in return it will be giving effective and efficient control over the business and its operations. The asset valuation id very complicated and complex and efforts are required for contraction of managers and to perform such type of tasks. Perfect, appropriate and authentic information is needed to give proper justification over the operations of the company and it consists of copy rights, patents, brand image and goodwill. These factor's implication are very indicative and helpful for having appropriate management and asset valuation for professionals. On this same basis internal intangible assets consists of research and development which are produced or prepared in premises. As per IAS 38, intangible asset's valuation is mandatory for business and assumptions will be taxable especially over patents, copyrights etc. if the intangible assets will be improving then it will indirectly help in increasing the ability of the organization in balancing capital structure and even for effective planning and development which will be managing all operational activities so efficiently. The main features of these assets as they have capability of separation of other assets which will be licensed, transferred, rented and purchases and even exchanged from other entities. Many of the legal rights will be incorporated with relation of shifting rights from another organization (Kibiya, 2016).

These assets' valuation will be helpful for collecting the suitable knowledge and which is relevant on the perspective of capital structure of the organization. It consists of database, patent technology, trade secrets, trademarks, software, internet domains, details of stakeholder, investors or consumers etc. and its confidentiality with valuation have positive side of the growth of organizations for long term advantage. For measuring intangible assets reliable value, the accounting treatment will be measured by taking presumption of fair and faithful value. On the perspective of research and development, it will be predicted to have perfect assets of cost which  consists of favourable outcomes.  For retaining rights of longer period there is need of having appropriate innovative changes in operations of the business. The development related to goods and services will be different in market for attracting the consumer which will create brand value and goodwill of the organization (Gu and Lev, 2011). These techniques will be creating efficiency for growth related to operational activities and for securing rights of individuals will be very effective for identification of revenue gains which are fruitful.

According to IAS 38, intangible assets will be identified as if any possibility of future financial gains which will flow to organisations and even cost of assets which will be measuring reliability from professionals. Capital structure of organization can be strengthen by valuation f assets and it will create liquidity and ability in the organization which will be effective for accomplishing short term debts and even long term debts. On the perspective of treatment of accounting statements which includes with commercial production and amortisation and even proper management of operations.


Now it has been cleared that there will be presence of proper judgements which will be totally based on IAS's operational framework in financial reporting. The main objective of applying this rule is to give guidance and direction to accounting professionals for preparing the reports on the basis of requirements. The valuation and transactional organisations of intangible assets requires proper administration and even professionals control for appropriate operations. The main objective of preparation of this report is to give advantage to professionals for fixed gains and fact development (Sinaga and Sudjiman, 2012). All these accounting operations will be indicated, benficial for recognising loopholes.

Q3 Elaborating statement Inventories should be valued at “ Lower of cost and net realisable value”

As per International accounting standard 2, it has been stated that inventories should be valued as lower of cost and net realisable value. IAS 2 gives proper guidance for identifying cost of inventory and its recognition which is refereed as expense. To assign cost to inventory, cost formula has been applied. Cost formula can be defined as cost of inventories of items which cannot be easily interchangeable or exchangeable and even good and service can be produced and separated for some special projects which refers some special identification of cost of each and every individual. Specific cost can be signified by identification which is of inventory which as been identified for some attributed items. In the same series illustration can be given that some specific inventories are used by various operating segment of the organisation. The variations in location of inventories does not provide clear justification and its applicability of different cost formula. In case inventories are spoiled or there cost cannot be recoverable even they have become partial or fully obsolete or else there selling price is falling. If the determined cost of completion and cost which has incurred for generating and raising sales. For decreasing inventories from the cost to net realisable value which is perfect and appropriate from the perspective of excess number of assets must not be carried (Cohen, 2011).

Net realisable value is the medium of decreasing the inventories as in many of the cases they sound so perfect, similar related terms. The inventories which have same applicability, purpose, product line or even traded or marketed for same location or same geographical area which cannot be justified practically in various different ways. While classifying inventories cannot be write off like particular inventory segment consist of some inventories and even finished goods. Whenever the estimates are been prepared and price fluctuation or price which is directly linked to the events which happens at the end of period, then net realisable value gives most reliable and authentic indication. The inventory's cost generally includes the conversion cost such as direct labour and production overhead, purchase cost and all cost which has been occurred for collecting inventories in present condition and present location. Inventory's cost has been assigned by FIFO method, first in first out method or even weighted average cost of capital formula for each and every interchangeable or exchangeable item and there particular identification of items. Whenever, the inventories are sold as an expense and revenue which is also related is recognized then carrying amount is been considered.

Net realisable value is represented as net amount of organisation or product at what amount it is expected to sell in market. It is determined as selling price in business. For estimating net realisable value it is usually based on reliable entity which is required at time where these estimates are made of amount and expectation of inventory to be realized. If selling price decreases then it will reflect in item of inventory which has been carried at net realizable value and on contrary side in some subsequent period if selling price has increased then inventory is present yet in market. If the ultimate cost of assets which is expected and exceeds net realisable value so the cost which has been expected is less in the series of its standards requirement. If any inventory is damages or obsolete then it cannot be recovered (Zéghal and Maaloul, 2011).


From the above report, question 3, it has been stated that required level of inventories in organisation IAS 2 will bring each and every component in that manner that there will be an adequate and effective analysis of cost to every inventories. It will be on basis of holding cost which considers EOQ measurements and reorder level of inventory of the company. The main aim is to engage business and improving its efficiency. All this information will help accounting professionals on the perspective of analysing holding inventory's cost and even expenses related to manufacturing. The business policies will be changed after effective and accurate decision and this will lead to business efficiency and growth on the basis of long term. It also gives basic framework for analysing costs such as purchase cost, conversion cost and in same series fixed and variable costs. The main aim of applying any techniques into business operations it will be managing storage costs, selling costs, abnormal costs, overhead cost, selling and administration cost etc. The execution and control will be generating more revenue or improving the quantity of revenue of the organisation or even control over the businesses cost. 


The above study has clearly concluded that requirement of preparing financial statements will lead to be very helpful for each and every business and organization and to disclose the information which is fruitful to every investors. In the same context it creates attraction to the investors for making profitable investments in the trusted organization. The information which has been fetched by them consists of relevant information such as profits, yearly turnover and even the amount of dividend which has been payable by the organisations in recent years. It will directly leading or indicate them for analysing profitability of the organization. On the contrary side, this report gives us an understanding about income statement of Able Plc. according to IFRS standards and a brief understanding about different standards of international accounting standard. 


  • Adibah Wan Ismail and, 2013. Earnings quality and the adoption of IFRS-based accounting standards: Evidence from an emerging market. Asian Review of Accounting. 21(1). pp.53-73.
  • Brochet, F., Jagolinzer, A. D. and Riedl, E. J., 2013. Mandatory IFRS adoption and financial statement comparability. Contemporary Accounting Research. 30(4). pp.1373-1400.
  • Cairns, D. and, 2011. IFRS fair value measurement and accounting policy choice in the United Kingdom and Australia. The British Accounting Review. 43(1). pp.1-21.
  • Christensen, H. B. and, 2015. Incentives or standards: What determines accounting quality changes around IFRS adoption?. European Accounting Review. 24(1). pp.31-61.
  • Cohen, J. A., 2011. Intangible assets: valuation and economic benefit (Vol. 273). John Wiley & Sons.
  • Cotter, D., 2012. Advanced financial reporting: A complete guide to IFRS. Financial Times/Prentice Hall.
  • Gu, F. and Lev, B., 2011. Intangible assets: Measurement, drivers, and usefulness. In Managing knowledge assets and business value creation in organizations: Measures and dynamics (pp. 110-124). IGI Global.
  • Kibiya, M. U., 2016. Financial reporting quality, does regulatory changes matter? Evidence from Nigeria. ASIAN JOURNAL OF MULTIDISCIPLINARY STUDIES. 4(12).
  • Müller, V. O., 2014. The impact of IFRS adoption on the quality of consolidated financial reporting. Procedia-Social and Behavioral Sciences. 109. pp.976-982.
  • Sinaga, J. G. and Sudjiman, L., 2012. Familiarity of Accounting Students toward International Financial Reporting Standards (IFRS). EKONOMIS. 6(1). pp.65-74.
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