Assignment on International Financial Report - Level 5


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International Financial reporting standards, also known as IFRS in which the standards are usually issued by the IFRS Foundation and IASB which is known as the International Accounting Standards Board. It gives an easy understanding to companies and organisation for comparing the financial performance and it also provides a common language that 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 of the preparation of financial statements, data sets, and reports which provides details that are informative databases that will be needed for applying an authentic framework for performing each and every activity. In the same series, there is preparation of the income statement of Able Plc which consists of present revenue and expenses in the proposed period. In this report facts are justified and applications of financial statements in the context of the regulatory framework of international accounting standards. The significance of such techniques and how accounting professionals are required to prepare financial statements.   

Q1 Income Statement of Able Plc for the Year 2017 and International Financial Reporting Standards

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

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

International financial reporting standards also give a picture of generally accepted accounting principles which gives its application to financial statements that 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 the increase in globalization cost of the process of preparing financial statements is minimised and conducted business by many groups of companies in the world. IFRS standards have forbidden offsetting but in some specific conditions offsetting is allowed. There is a requirement of a fair and faithful picture that affects all conditions according to the framework of IFRS and even there should be recognition of criteria of assets, liabilities, expenses, and income (Cotter, 2012). The comparative information that is related to the financial statement of the current year makes the information narrative and descriptive and in alternative to knowing financial performance is the 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






The 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 the income statement. Able Plc.'s income statement is drawn above which has a net income of 294000. The business activities that are nonprimary stated in the non-operating section of this income statement give 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 the 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 that are related to the 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 lies in 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 the income statement, it is suggested that organization should reduce the expenses so this will replicate the 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

Managing operational framework in the premises of organisation for preparing various financial reports which help in accomplishing perfect framework of accounting in business. The regulations are formed by accounting standards to give useful information which helps to funnel the managers for operational activities. Proper direction and guidance are provided on the basis of financial transactions which are recorded within a period that are beneficial and effective for preparing financial statements. The procedure of preparing finances should be based on a 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 to as the main objective of developing accounting standards (Brochet, Jagolinzer and Riedl, 2013).

Standards that are accepted universally and accounting framework techniques that will be replicating and useful for a perfect increase in the 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 the balance sheet. This creates the ability to analyze profitability and growth and even dividends payable by them also in the coming year. This will be very effective for the company and the presence of a large number of investors in the organization who give proper support to financial governance in business activities. The business professional can ascertain each and every business activity that incurs the cost and changes in capital structure. Expenditure, revenue, and incurred costs can be balanced by every business operation and well managed and even appropriate recording of every information.

It consists of accounting standards that 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 professionals to determine the 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 activity like promotion, purchasing, manufacturing, etc. which balances revenues and level of spending which is collected by organization. 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 by investors for analysing the market along with this all-stated risk and opportunities in the environment. All this will be the 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 the global market is an important platform that will help investors, shareholders, etc. which will decrease the cost of international reporting, and all territorial barriers will be removed. If organization has investment from foreign investors then it will lead to an increase in the market value of the company. There will be proper management of work and the operation's workforce of internal management can be also managed along with capital allocation. There will be appropriate control over the cost of capital and on a periodical basis, the financial performance of the company can be reviewed. The financial account's preparation will be giving informative advantage and operational activities. Investors consider the information in the financial report of any organization especially profit, turnover, and even dividends paid by them. This will lead to gaining knowledge related to the profitability of the organisation and even the ability to meet all financial advantages (Adibah Wan Ismail and, 2013).

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Specifying the Intangible Assets for Specific Areas of Capitalising R and D Costs

There will be various accounting entries and operational treatments for identifying and calculating the business's intangible assets and in return, it will be giving effective and efficient control over the business and its operations. Asset valuation is very complicated and complex and efforts are required for the contraction of managers to perform such types of tasks. Perfect, appropriate, and authentic information is needed to give proper justification for the operations of the company and it consists of copyrights, patents, brand image, and goodwill. These factor's implications are very indicative and helpful for having appropriate management and asset valuation for professionals. On this same basis, internal intangible assets consist of research and development which are produced or prepared in premises. As per IAS 38, intangible asset valuation is mandatory for business and assumptions will be taxable, especially over patents, copyrights, etc. If the intangible assets improve then it will indirectly help in increasing the ability of the organization to balance 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 the capability of separating other assets that will be licensed, transferred, rented purchased, and even exchanged from other entities. Many of the legal rights will be incorporated in relation to shifting rights from another organization (Kibiya, 2016).

These assets' valuations will be helpful for collecting suitable knowledge that is relevant to the perspective of the capital structure of the organization. It consists of a database, patent technology, trade secrets, trademarks, software, internet domains, details of stakeholders, investors or consumers, etc. and its confidentiality with valuation has a 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 the presumption of fair and faithful value. From the perspective of research and development, it will be predicted to have perfect assets of cost which consists of favorable outcomes.  For retaining rights for a longer period there is a need to make appropriate innovative changes in the operations of the business. The development related to goods and services will be different in the market for attracting the consumer which will create brand value and goodwill for the organization (Gu and Lev, 2011). These techniques will create efficiency for growth related to operational activities and for securing the rights of individuals will be very effective for the identification of revenue gains which are fruitful.

According to IAS 38, intangible assets will be identified as any possibility of future financial gains that will flow to organisations and even the cost of assets which will measure reliability from professionals. The capital structure of organization can be strengthened by the valuation of 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. From the perspective of the treatment of accounting statements which includes commercial production and amortization and even proper management of operations.


Now it has been cleared that there will be the 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 reports on the basis of requirements. The valuation and transactional organizations of intangible assets require proper administration and even professional control for appropriate operations. The main objective of the preparation of this report is to give an advantage to professionals for fixed gains and fact development (Sinaga and Sudjiman, 2012). All these accounting operations will be indicated, beneficial 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 realizable value. IAS 2 gives proper guidance for identifying the cost of inventory and its recognition which is referred to as expense. To assign a cost to inventory, a cost formula has been applied. The cost formula can be defined as the cost of inventories of items that cannot be easily interchangeable or exchangeable and even goods and services can be produced and separated for some special projects which refers to some special identification of the cost of each and every individual. Specific cost can be signified by identification which is of inventory which has been identified for some attributed items. In the same series, an illustration can be given that some specific inventories are used by various operating segments of the organisation. The variations in the location of inventories do not provide clear justification and the applicability of different cost formulas. In case inventories are spoiled or their cost cannot be recoverable even if they have become partially or fully obsolete or else their selling price is falling. If the determined cost of completion and cost which has incurred for generating and raising sales. Decreasing inventories from the cost to a net realizable value which is perfect and appropriate from the perspective of an excess number of assets must not be carried out (Cohen, 2011).

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

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

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

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The above study has clearly concluded that the requirement of preparing financial statements will be very helpful for each and every business and organization and to disclose information that is fruitful to every investor. In the same context, it creates attraction to the investors to make 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 lead or indicate them for analysing the profitability of the organization. On the contrary side, this report gives us an understanding of the income statement of Able Plc. according to IFRS standards and a brief understanding of different standards of international accounting standards. 


  • 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, do 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 with Accounting Students toward International Financial Reporting Standards (IFRS). EKONOMIS. 6(1). pp.65-74.
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