Financial accounting and auditing Lecture 7 Outline

Financial accounting and auditing Lecture 7

Outline • • Statement of position Formats of financial position Subtotals Examples of balance sheet

Statement of financial position (balance sheet) • There is no particular format required in presenting balance sheet • Format means ‘shape’ so it covers the items to be reported and the sequence in which they are reported.

Vertical format of statement of financial position (balance sheet) Assets minus Liabilities equals Owners’ equity

Horizontal form of statement of financial position (balance sheet) Owners’ equity Assets equal plus Liabilitiy

Subtotals • Help to group information within financial statements into useful sections • There are no rules about the placing of subtotals in either the IASB lists or the Companies acts formats

Examples of balance sheet • Consolidated statement of financial position (balance sheet). Companies listed on the Stock Exchange are generally using one name for a group of several companies linked together under one parent. • The parent company owns the other companies. They each own their separate assets. The parent company controls the use of those assets indirectly by controlling the companies it owns.

• A consolidated balance sheet would be produced if the parent owned less than 100%, provided it had the same element of control. The only additional item would be a minority interest in the ownership claim to indicate the proportion of the equity interest in subsidiaries held by shareholders outside the group. The minority interest is also called a non-controlling interest.

• Investments here means shares in other companies which are not subsidiary undertakings within the group. • The taxation recoverable is an amount of tax which has been paid already but may be reclaimed in 18 months’ time because of events that have occurred to reduce the tax due, after the tax was paid.