Topic 3 of 6 · Form 5
Limited companies and published financial statements
Ordinary and preference shares; issued and called-up capital; share premium; revaluation reserve; retained earnings; general reserve; bonus and rights issues; redemption of shares and debentures.
Notes for this topic 1 file, in order
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Share capital and reserves
Ordinary and preference shares; issued and called-up capital; share premium; revaluation reserve; retained earnings; general reserve; bonus and rights issues; redemption of shares and debentures.
Published financial statements
Statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, notes; IAS 1 requirements; directors' and auditors' reports; the role of the auditor.
Worked example: A company makes a rights issue of 1 for 4 at US$1.50 on 800 000 ordinary shares of US$1. Show the effect.
New shares = 200 000 → cash +300 000; share capital +200 000; share premium +100 000
Statement of cash flows (IAS 7)
Operating activities (indirect method), investing and financing activities; interpreting cash flows.
Events after the reporting period and provisions
Adjusting and non-adjusting events; provisions, contingent liabilities and contingent assets.
Check yourself
- Give one difference between an adjusting and a non-adjusting event.
- Where is the share premium shown?
- Why is depreciation added back in a cash flow statement?
Show answers
- An adjusting event provides evidence of conditions at the reporting date and changes the figures; a non-adjusting event arises after the date and is only disclosed.
- In equity, as a capital reserve.
- It is a non-cash expense that reduced profit.
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