Unit 1 - BTEC HND in International Financial Report - Regent College - Level 5


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The preparation of financial statements, reports, and data sets brings informative details relevant to the firm's growth, liquidity, and ability to meet the debts. However, to prepare a suitable informative database there will be a 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 the determination of the facts and usefulness of the financial statements in relation to 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 are represented by International financial reporting standards and these are used by organisations for the preparation of financial statements which are published annually and are useful to stakeholders such as debtors, clients, shareholders, government, and employees for the understanding of the financial position and stability of the organizations. IFRS has been developed by the International Accounting Standards Board, a set of accounting rules adopted by more than 100 countries. The whole members of the European Union should use IFRS. The increase of globalisation of financial markets and companies has increased the use of a single set of financial reporting standards across all countries and it has made the comparison of financial statements easy across borders. Due to this the cost of preparing financial statements has been reduced which has been prepared by a group of companies that conduct business in the world. Generally, these standards are developed by not-for-profit organisations and independent organizations (Cascino and Gassen, 2015).

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The main objective of the IFRS standard is to disclose the financial statement's preparation or the same guidance has been provided for the procedure. Companies that have subsidiaries in many other countries have a vital and important role in IFRS standards. Statement of comprehensive income represents the financial performance of company. Subparts of profit and loss statements such as revenue and expenses, enhancement of assets, and inflows help in raising economic benefit and if in case liabilities are decreased then there is an increase in equity. Equity contributions like partners, owners, and shareholders are not considered revenue. And if there is outflow then there is a decrease in economic benefit and because of the increase in liabilities, there is decrement in equity. Equity participants do not consist of distribution. There are major circumstances that are reflections of comprehensive income such as, remeasurement of assets and liabilities, fair value of financial assets 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 the effect of all the conditions which are set according to the 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 the 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 for 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: The income statement helps in measuring the financial performance and stability of the organization. In the above income statement, the net income of Able Plc is calculated as 294000. Revenues and benefits of business activities that are nonprimary come in the non-operating section of the income statement. Net income has been calculated by considering revenues and expenses, in which the 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 which is equivalent to turnover with the perspective of return on investment. All the expenses related to the office, factory, or operations related to the factory are considered 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.

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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 to funnel the managers to have appropriate operational activities. The guidance is based on recording all the financial transactions held during the period which in turn will be effective and beneficial 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 financials 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 standards and the framework of the accounting techniques will be indicative and helpful to have an appropriate rise in the level of reporting systems. Therefore, it will be a helpful and adequate source for the shareholders in relation to attaining all the infotainments which are listed in the financial statements. They can easily recognise that revenue, expense, and profits are listed in the income statement of the firm while liabilities and assets are in the 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 more effective for the organisation as they will have large numbers of investors in the firm as well as it supports 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 a proper recording of all the information.

It comprises high-quality accounting standards with neutral principles that will be comparable, reliable, consistent, and relevant. The information stated in the financial accounts is needed to have concrete evidence behind them which in turn will be effective and helpful for proper records. The collected data will be analysed by the accounting professionals or auditors to redetermine the growth of the business (Dos Reis and, 2017). Thereafter, it will be used in decision-making, planning, and forecasting the budgets for the favorable operational development of the organisation. It guides the accounting professionals in terms of allocating the capital funds in each business activity such as manufacturing, purchasing, promoting, etc. It brings the balance between the 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 to analyse the market by ascertaining the risks and opportunities stated in the environment. Therefore, this will prevail in the market so as to have satisfactory outcomes and capital allocations with proper efficiency and ascertainment. The motive of implementing the international standards is to develop the standards and global market for a proper platform that will be helpful to the shareholders, investors, etc. that will reduce international reporting costs as well as remove the territorial barriers (Carvalho and, 2017). Moreover, a firm will have investments from foreign investors which will be beneficial in raising the market value of organisation. Apart from managing the capital allocation in the international business, it will be suitable to have proper management of the work and workforce force for the operations. It brings proper control over the costs of capital as well as reviews the financial performance of the organisation in a periodical basis. Hence, the preparation of the financial accounts which in turn will have informative gains and operational activities. The information which is to be considered by investors in the financial reports of an entity is mainly the profits, turnover as well as the dividend paid by them. Thus, it will bring them knowledge regarding 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 to 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, the valuation of these assets is very complex and needs the efforts of the counteraction managers to perform such tasks. There will be a requirement for appropriate and authentic information that will bring the proper justification for the operations of the entity. It mainly includes patents, copyrights, goodwill, and brand image. Thus, the implication of various factors which in turn will be indicative and helpful to the professionals to have proper management as well as valuation of these assets. In relation to the internal intangible assets which are mainly comprised of research and development made on the premises (Saucier and, 2017). In accordance with IAS 38, the valuation of intangible assets will be necessary for a business and there will be taxable assumptions mainly over the patents, copyrights, etc. Thus, to improve the intangible assets will eventually raise the ability of the firm to balance the capital structure as well as make effective planning and development which in turn helps in managing the 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, purchased, transferred, licensed, rented as well as exchanged with other entities. It is also incorporated with the various legal rights in relation to transferring the rights to another corporation or person.

The valuation of these assets will be helpful in bringing suitable and satisfactory knowledge relevant to the capital structure of the firm. It includes patent technology, database and trade secrets, software, trademarks, internet domains, details of stakeholders, consumers or investors, etc. Therefore, the confidentiality of such details as well as valuation will have positive impacts on 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. In context with the research and development which will be projected to have appropriate assets at costs that comprise the favorable results (Khan and, 2018). Moreover, it can be said that to retain the rights for a longer period there will be requirements of having the proper innovative changes in the operations. Moreover, the large discovery and development of products and services that will be unique in the market as well as attractive to consumers will create the brand value and goodwill of the business. Thus, such techniques will be efficient for making the growth in the operational activities. To secure individual rights which in turn will be effective for determining the fruitful revenue gains.

In accordance with IAS 38 which states that intangible assets will be recognized as if the probable future financial gains will flow to the entity as well as costs of assets which will be reliability measured by the professionals. The valuation of assets will bring the strength to capital structure of the 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 the amortization, commercial production as well as proper management of the operations.

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            On the basis of the above discussion, there will be proper judgments that were based on the operational framework of IAS in the financial reporting. Therefore, the main motive for implementing such a rule is to provide the appropriate guidance and funneling to accounting professionals to prepare the reports as per the requirements. Moreover, the valuation and transactional entities of intangible assets in a reliable manner need 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 an expense. For assigning a cost to inventories cost formula is implied (Ahmed, Neel, and Wang, 2013). The cost formula indicates the inventory's cost which cannot be interchangeable and the particular goods and services are differentiated and produced for projects that are more specific and specific identification is been referred to as individual costs. Attributed items of inventory have been identified at cost whose significance is of particular cost. An example in the same series can be, that a different operating segment uses some specific inventories of the different segments of the entity, so the location of those 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 partially of fully damaged even if there is a fall in prices of selling prices. Net realisable value is an accurate measure for reducing the 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 that are used for the same purpose, application, and product line even traded or marketed for the same location or geographical area cannot be evaluated practically in different ways. From the perspective of classification, inventories cannot be written off such as inventories of specific operating segments 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 the end of the period and there is also consideration of the 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 the sales contract then the excess net realisable value is purely based on the selling price.  The inventory's cost consists of conversion costs like production overhead and direct labor. To bring all the inventories in present condition and location is been occurred by purchase cost and other cost. So the inventory cost is been assigned by the FIFO method i.e. First in first out or WACC is the weighted average cost of capital for exchangeable objects and identifying the specific items in inventory that 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 to by international accounting standards which also determines the inventory's cost and all the expenses which are related to inventory. A cost formula is been assigned to give the cost to the inventory. According to IAS 2 cost of purchase, net of trade discounts received, conversion cost, and all related costs that are used for bringing the inventory to the present geographical location have been used for measuring the inventories. The basic fundamental principle of IAS 2 says that inventories are required for stating lower costs and net realisable value. Abnormal waste, storage costs, selling costs, and interest costs which are linked to the acquisition of inventory that is invoiced in foreign currency are never included in inventory cost.


From the above question it has been clear that the 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 is by considering the EOQ measurements and organisation's reorder level of inventory. The main motive of IAS 2 is to engage the business's ongoing purpose which will be to increase 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 decisions. Even the guidance will impact effective business efficiency and growth from a long term perspective. It also gives the basic guidance and framework for analyzing various costs like purchase cost, conversion cost even fixed and variable costs. The main objective of implementing such techniques in the operations of the business will be managing all abnormal waste, selling costs, administration costs, etc. So this will lead to generating more revenue and control over the organisation's costs.


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

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  • 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. The inclusion complex between β-cyclodextrin and echogenic acetate produces a 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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