F3 Revision

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PAPer F3 revision notes

June 2009 Examinations 1

ACCOUNTING CONCEPTS
Fundamental Assumptions Fair presentation Going concern Accruals Consistency

Materiality / Aggregation Relevance Reliability Faithful representation Substance over form Neutrality Prudence Completeness Comparability Understandability Separate entity

Money measurement

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PAPer F3 revision notes

June 2009 Examinations 2

BASES OF VALUATION

Historic cost

Replacement cost

Net realisable value

Economic value

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PAPer F3 revision notes

June 2009 Examinations 3

IAS 8: ACCOUNTING POLICIES, ChANGES IN ACCOUNTING ESTImATES ANd ErrOrS

1. Changes in accounting policy should only be made if required by a standard, or if the change will result in a more appropriate presentation

2. The change should be applied retrospectively (unless not practical). Adjustments in respect of previous periods should be made to the opening balance of retained earnings, and to comparative figures.

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PAPer F3 revision notes

June 2009 Examinations 4

IAS 2: INVENTOrIES

1. Value at lower of cost and net realisable value

2. Measurement of costs: • actual cost standard cost retail method FIFO Weighted average

3. If we produce our own goods, the inventory is valued at the full cost of production. ie including all factory overheads. But, do not include any non-production costs (selling and administrative costs)

4. (Not in IAS 2, but remember) If we reduce closing inventory, then the profit for the year will reduce. (However, Opening Inventory of next year will reduce, so next years profit will increase)

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