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The preparation of financial statements, reports and data set which brings the informative details relevant with firm's growth, liquidity and ability to meet the debts. However, to prepare the suitable informative data base there will be requirement of implicating the authenticated framework to perform these activities. Similarly, in the present report there will be preparation of income statements which will present the revenue and expenses of Able Plc in the proposed period. Moreover, there will be determination of the facts and usefulness of the financial statements in relation with a regulatory framework of international accounting standards. The importance of such techniques in funneling the accounting professionals to prepare the financials as per the requirements.

Q1 International Financial Reporting standards and Income statement of Able Plc for the year 2017

Generally accepted accounting principles is been represented by International financial reporting standards and these are used by the organisations for the preparation of financial statements which has been published annually which is useful to stakeholders such as debtors, clients, shareholders, government and employees for the understanding of financial position and stability of the organizations. IFRS has been developed by International Accounting Standards Board, set of accounting rules adopted by more than 100 countries. The whole members of European Union should mandatory use IFRS. The increase of globalisation of financial markets and companies has increased the use of single set of financial reporting standards across all countries and it has made the comparison of financial statements easy across the borders. Due to this the cost of preparing financial statements has been reduced which has been prepared by group of companies which conducts business in the world. Generally these standards are developed by not for profit organisations and independent organizations (Cascino and Gassen, 2015).

The main objective of IFRS standard is to disclose the financial statement's preparation or in the same guidance has been provided for the procedure. The companies who have subsidiaries in many other countries have a vital and important role of IFRS standards. Statement of comprehensive income represents the financial performance of company. Sub parts of profit and loss statements such as revenue and expenses, enhancement of assets and inflows helps in raising economic benefit and if in case liabilities are decreased then there is increase in equity. Equity contributions like partners, owners and shareholders are not considered as revenue. And if there is outflow then there is decrease in economic benefit and because of increase in liabilities there is decrement in equity. Equity participants does not consist of distribution. There are major circumstances which are reflection of comprehensive income such as, remeasurement of assets and liabilities, fair value of financial asset might decrease or increase and can be modified as availability for sale and even revaluation of some assets such as plant, property and intangible asset may rise or fall.

Offsetting has been forbidden by IFRS standards. If some specific condition is mentioned then offsetting should be used. There is a basic need for fair representation for effect of all the conditions which are set according to IFRS framework and criteria should be recognised for income, assets, liabilities and expenses (Kieso, Weygandt and Warfield, 2010). Narrative and descriptive information is given by comparative information related to current year's financial statement and the alternative to know the financial position is the balance sheet statement of International accounting standard 1 and the items are been classified for financial statements. The income statement of Able plc. For the year ending 31 December 2017 is as follows:

Income statement of the year ending 31 December 2017



Amount (in £)

Net sales



Return Inwards



Net Revenue



Cost of sales



Opening inventory






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






Total Operating Expenses






Total General Expenses



Tax paid



Bad debts






Total expenses






Net Income




Interpretation: Income statement helps in measuring the financial performance and stability of the organisation. In the above income statement the net income of Able Plc is calculated as 294000. Revenues and benefits of business activities which are non primary comes in the non operating section of income statement. Net income has been calculated by considering  revenues and expenses, in which difference of expenses from revenue is net income. In the first step gross margin is calculated by revenue and cost of goods sold during the year which considers purchase, sales and inventory. The figure of gross margin is 397000 that is equivalent turnover with the perspective of return on investment. All the expenses related to office, factory or operations related to factory are considered as operating expenses, in the above scenario operating expenses are carriage inward, motor expenses, salaries, hire of vehicle, depreciation on assets, finance costs, rents and rate and insurance whose sum is 79000. The general expenses of 24000 like tax and interest so the combination of all expenses is 10300. The last step is to find net income by subtracting total expenses from gross margin which is net income as 294000. the suggestion for the company in the perspective of increasing net income, then it should try to reduce the expenses so this will directly reflect on the net income of the organization.

Q2 Critical revelation over the regulator discussion and relevant international accounting standards

            To manage an operational framework within organisational premises as well as preparing various reports which will be helpful to establish the appropriate accounting framework in the business. Moreover, the regulation incorporated by these accounting standards is to provide the relevant information funnel the managers to have appropriate operational activities. The guidance is based on recording of all the financial transactions held in during the period which in turn will be effective and beneficial as to have preparation of the statement on the basis of such financials (Volberding, 2017). The main purpose of developing the accounting standard is that the preparation of financial will be based on a universal framework as well as universal operations which in turn will easily be understandable and recognizable to all the accounting professionals, investors, financial authorities as well as government.

            Universally accepted standard and the framework of the accounting techniques which will be indicative and helpful as to have appropriate rise in the level of reporting systems. Therefore, it will be helpful and adequate sources for the shareholders in relation with attaining all the infotainments which are listed in the financial statements. They can easily recognise that revenue, expense and the profits tare listed in the income statement of the firm while liabilities and assets are in balance sheet. This makes them able to analyse the growth and profitability of the industry in the coming time as well as also analyse the dividend payable by them (IAS 38 — Intangible Assets, 2018). It will be much effective to the organisation as they will have large numbers of investors in the firm as well as it supports the good financial governance in business activities. Thus, the capital structure and costs incurred in each business activities which will be recognised and ascertained by business professionals. It helps in balancing the expenditure, revenue and costs incurred in each business operations which will be managed and have proper recording of all the informations.

            It comprises with the high quality of accounting standards with the neutral principles that will be comparable, reliable, consistent and relevant. The information stated in the financial accounts are needed to have concrete evidence behind them which in turn will be effective and helpful for proper records. The collected data than will be analysed by the accounting professionals or auditors to redetermine the growth of business (Dos Reis and, 2017). Thereafter, it will be used in decision making, planing and forecasting the budgets for the favourable operational development of the organisation. It guides th accounting professionals in terms of allocating the capital funds in each business activities such as manufacturing, purchasing, promoting etc. it brings the balance between level of spending and the revenue gathered by the firm. On the other side, the implication of various techniques which in context with bringing the appropriate control over financial operations in the economy.

            It also enhances the knowledge of investors as to analyse the market with ascertain the risks and opportunities stated in the environment. Therefore, this will prevail in the market as to have satisfactory outcomes and capital allocations with proper efficiency and ascertainment. The motive of implicating the international standards is for developing the standards and global market for a proper platform which will be helpful to the shareholders, investors etc. that will reduce international reporting costs as well as removes the territorial barriers (Carvalho and, 2017). Moreover, a firm will have investments from the foreign investors which will be beneficial in rising the market value of organisation. Apart from managing the capital allocation in the international business it will be suitable as to have proper management of the work and workforce force for the operations. It brings the proper control over the costs of capital as well as review the financial performance of the organisation in the periodical basis. Hence, the preparation of the financial accounts which in turn will have informative gains and operational activities. The informations which are to be considered by investors in the financial reports of an entity which are mainly the profits, turnover as well as the dividend  paid by them. Thus, it will bring them knowledge regrading the profitability of the firm as well as the ability to meet the financial gains.

Read BTEC HNCD Business Research Project Level 5 Sample

Identifying the intangible assets looking at the specific area of capitalising R&D costs

            In relation with measuring the intangible assets of the business there will be various operational treatment and accounting entries which in turn will have effective control over the operations of the business. However, valuation of these assets is very complex and needs efforts of the counteraction managers in performing such tasks. There will be requirement of appropriate and authenticate information that will bring the proper justification over the operations of entity. It mainly includes patents, copy rights, goodwill and brand image. Thus, implication of various factors which in turn will be indicative and helpful to the professionals as to have proper management as well as valuation of these assets. In relation with the internal intangible assets which are mainly comprises with research and development made in the premises (Saucier and, 2017). In accordance with IAS 38, the valuation of intangible assets will be necessary to a business and there will be taxable assumptions mainly over the patents, copyrights etc. Thus, to improve the intangible assets will eventually rise the ability of firm in balancing the capital structure as well as making the effective planning and development which in turn helps in managing operational activities of the entity. The main characteristics of these assets are they are capable of being separate from other assets which will be sold, purchases, transferred, licensed, rented as well as exchanged with other entities. It also incorporated with the various legal rights in relation with transferring the rights to another corporation of person.

            The valuation of these assets will be helpful in bringing the suitable and satisfactory knowledge relevant with the capital structure of the firm. It includes patent technology, database and trade secrets, software, trademarks, internet domains, details of stakeholder, consumers or investors etc. therefore, the confidentiality of such details as well as valuation will have positive impacts over the growth of firm for the long term gains. To measure the reliable value of the intangible assets the accounting treatment will be measured in the presumption of their fair value. On context with the research and development which will be projected as to have appropriate assets at costs that comprises with the favourable results (Khan and, 2018). Moreover, it can be said that to retain the rights for the longer period there will be requirements of having the proper innovative changes in the operations. Moreover, the large discovered and development of products and services which will be unique in the market as well as attractive to consumer that will create the brand value, goodwill of the business. Thus, such techniques will be efficiency for making the growth in the operational activities. To secure the individual rights which in turn will be effective for determining the fruitful revenue gains.

            In accordance to IAS 38 which states that intangible assets will be recognised as if the probable future financial gains will flow to the entity as well as costs of assets which will reliability measured by the professionals. The valuation of assets will bring the strength to capital structure of firm (Volberding, 2017). It enhances liquidity and current ability in the firm which in turn will be effective as to meet the short term as well as long term debts. On the basis of their treatment in the accounting statements which comprises with the amortisation, commercial production as well as proper managements of the operations.


            On the basis of above discussion there will be proper judgements which were based on the operational framework of IAS in the financial reporting. Therefore, the main motive of implicating such rule is to provide the appropriate guidance and funnelling to accounting professionals as to have prepared the reports as per the requirements. Moreover, the valuation and transactional entities of intangible assets in reliable manner neds the proper administration as well as control of the professionals for better operations. Thus, the main motive is to prepare the financial reports which in turn will be helpful and indicative to the professionals as to have appropriate gains and development of facts. Therefore, such accounting operations will be held at the end of each period as well as management of the operations which in turn will be indicative as well as beneficial to have appropriate recognition of any loopholes.

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

            According to the international accounting standard 2 inventories should be valued at lower of cost and net realisable value. The direction has been provided by IAS 2 for determining the inventory's cost and recognition of cost which signifies as expense. For assigning cost to inventories cost formula is implied (Ahmed, Neel and Wang, 2013). Cost formula indicates the inventory's cost which cannot be interchangeable and the particular goods and services are differentiated and produced for projects  which are more specific and specific identification is been referred to individual costs. Attributed items of inventory is been identified at cost whose significance is of particular cost. Example in the same series can be, different operating segment uses some specific inventories of the different segment of the entity, so the location of that inventories is not sufficient for justifying the specific application of the cost formula. In case the inventories become obsolete or damaged then that cost is not recoverable whether they are partial of fully damaged even there is fall in prices of selling price. Net realisable value is accurate measure for reducing cost of inventories with the perspective of assets whose excess amount must not be carried.

            Though, net realisable value helps in reducing inventories such as in many cases they can be perfect for related or similar terms. The inventories which are used for same purpose, application, product line even traded or marketed for same location or geographical area that cannot be evaluated practically in different ways. On the perspective of classification, inventories cannot be write off such as inventories of specific operating segment and specific finished goods. The most essential and reliable indication is of net realisable value whose availability during the preparation of estimates and price fluctuations that is directly linked to the situation which occurs at end of the period and there is also consideration of application of inventories. It can be justified by the example that, the organisation's service or the sales contract has satisfied the net realisable value which is directly linked to the contract's price. If the quantity of inventory is more than sales contract then the excess net realisable value is purely based on selling price.  The inventory's cost consists of conversion cost like production overhead and direct labour. To bring all the inventories in present condition and location is been occurred by purchase cost and other cost. So the inventories cost is been assigned by FIFO method i.e. First in first out or WACC that is weighted average cost of capital for exchangeable objects and identifying the specific items in inventory which can not be exchangeable (Cascino and Gassen, 2015). When the inventories are sold and the expense where revenue is recognised then the carrying amount is considered in the inventories.

            The accounting treatment of inventories is referred by international accounting standard which also determines the inventory's cost and all the expenses which are related to inventory. As cost formula is been assigned to give cost to the inventory. According to IAS 2 cost of purchase, net of trade discounts received, conversion cost and all related cost which is sued for bringing the inventory in present geographical location is been used for measuring the inventories. The basic fundamental principle of IAS 2 says that inventories are required for stating lower of cost and net realisable value. Abnormal waste, storage cost, selling cost and interest cost which is linked from the acquisition of inventory that is invoiced in foreign currency is never included in inventory cost.


            From the above question it has been clear that required level of inventories in the company then IAS 2 will be a mode which will be adequate and effective for the analysis of inventory's cost. The basis of analysing the holding cost by considering the EOQ measurments and organisation's reorder level of inventory. The main motive of IAS 2 is to engaging the business ongoing purpose which will be increasing the level of efficiency of the business. All the information will help accounting professionals in the context of analysing the holding cost of inventory along with this all manufacturing expenses. The business policies will be reframed by effective and accurate decision. Even the guidance will impact in effective business efficiency and growth on the long term perspective. It also gives the basic guidance and framework for analysing various cost like purchase cost, conversion cost even fixed and variable cost. The main objective of implementing such techniques in operations of the business which will be managing all abnormal waste, selling cost, administration cost etc. So this will lead for generating more revenue and control over the organisation's cost.


By considering the above study it will be concluded that the need of preparing the financial accounts which in turn will be helpful to the business as to disclose the fruitful information to the investors. Moreover, it will be attractive to the investors as to make their profitable investments in the firm. They fetch informations which are mainly relevant with the profits, annual turnover as well as dividend payable by the firm in the recent years. That will be indicative to them as to analyse the profitability of the firm. On the other side, the report is also comprises with income statement of Able plc and discussion based on various standard of international accounting standard.


  • Ahmed, A. S., Neel, M. and Wang, D., 2013. Does mandatory adoption of IFRS improve accounting quality? Preliminary evidence. Contemporary Accounting Research. 30(4). pp.1344-1372.
  • Carvalho, Y.M. and, 2017. Inclusion complex between β-cyclodextrin and hecogenin acetate produces superior analgesic effect in animal models for orofacial pain. Biomedicine & Pharmacotherapy. 93. pp.754-762.
  • Cascino, S. and Gassen, J., 2015. What drives the comparability effect of mandatory IFRS adoption?. Review of Accounting Studies. 20(1). pp.242-282.
  • Dos Reis, G. S. and, 2017. Removal of phenolic compounds from aqueous solutions using sludge-based activated carbons prepared by conventional heating and microwave-assisted pyrolysis. Water, Air, & Soil Pollution. 228(1). p.33.
  • Khan, G. and, 2018. Weak population structure and no genetic erosion in Pilosocereus aureispinus: A microendemic and threatened cactus species from eastern Brazil. PloS one. 13(4). p.e0195475.
  • Kieso, D. E., Weygandt, J. J. and Warfield, T. D., 2010. Intermediate accounting: IFRS edition (Vol. 2). John Wiley & Sons.
  • Saucier, C. and, 2017. Efficient removal of amoxicillin and paracetamol from aqueous solutions using magnetic activated carbon. Environmental Science and Pollution Research. 24(6). pp.5918-5932.
  • Volberding, P. A., 2017. HIV Treatment and Prevention: An Overview of Recommendations From the 2016 IAS–USA Antiretroviral Guidelines Panel. Topics in antiviral medicine. 25(1). p.17.

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