Financial Accounting

Aim
In professional practice, the Chartered Secretary has to be competent in Financial Accounting to a high standard, and in a number of different contexts. Expertise is demanded in the boardroom setting to contribute to the analysis and interpretation of corporate financial performance and results. Corporate reporting in compliance with legal and stakeholder requirements, including financial statements, is a core responsibility of the Chartered Secretary. In public practice, and in many organisations, the Chartered Secretary is also sometimes called upon to fulfil the role of Corporate Accountant.

The aim of the module is to develop the knowledge and skills necessary for the Chartered Secretary to carry out these professional responsibilities.

Learning Outcomes
At the conclusion of this module, the candidate will be able to:

• Understand the language, concepts and use of financial accounts and reports.
• Identify and utilise the sources of accounting data and information.
• Understand and apply international standards of accounting practice.
• Prepare financial statements for different forms of organisation in compliance with legal and regulatory requirements.
• Apply financial information and statements in corporate reporting.
• Undertake the corporate accounting role for employers and clients.
• Contribute to boardroom analysis of corporate financial performance.

Learning Content

Introduction
What is financial accounting? Recognition of profit – increase in value and matching.
Timing of revenue recognition. Not for profit bodies

Methods of Financial Measurement

Theoretical roots of current purchasing power accounting and current cost accounting.
Defining company profit. Historical cost accounting, current purchasing power accounting and current cost accounting compared. Inflation, profit and capital employed.
Strengths and limitations of historical cost accounting, current purchasing power accounting and current cost accounting.

Accounting Theory and Regulation

Market imperfections and the need for regulation. The need for a theoretical framework.
Framework for the preparation and presentation of financial statements. Sources of regulation. Accounting standards – a boon or curse? Form and content of the Annual
Report. Value-added statement. Related party disclosures

Structure and Content of Financial Statements

Presentation of Financial Statements. Non-recurring profits and losses. New and discontinued operations. Segmental reporting. Limitations of published accounts.

Valuation of Assets and Liabilities

Remeasurement of assets and liabilities. Treatment of: property, plant and equipment; government grants; investment properties; goodwill and intangible assets; inventories and construction contracts; taxation; provisions and contingencies; events after the balance sheet date; and retirement benefits. Impairment of assets. Financial instruments. Reporting the substance of transactions: leasing; sale and repurchase agreements; quasi-subsidiaries; factoring of trade receivables; capital instruments.

Group Accounts

Combinations based on assets or shares. Consolidated balance sheet: goodwill; post-acquisition profits; minority interest; other consolidation adjustments. Interpreting consolidated balance sheets. Consolidated income statement. Investment in associates.
Interest in joint ventures. Limitations of group accounts

Foreign Currency Translation

Foreign currency transactions. Foreign operations. The current rate method. Combining home and overseas activities. The choice of home country

Capital Reduction, Reorganisation and Reconstruction

Distributable profits. Bonus issues. Reduction of capital. Redeemable shares and the purchase by a company of its own shares. Failure, losses and capital erosion.
Liquidation. Capital reconstruction

Interpretation of Accounts – Ratios

Principles of ratio analysis. Classification of accounting ratios. Ratios measuring solvency and financial strength. Asset turnover ratios. Profit ratios. Earnings per share.
Gearing. Limitations

Interpretation of Accounts – Cash Flow

Sources of cash. Applications of cash. The cash flow statement. Observations on the content of the cash flow statement. Unbalanced financial development. Cash-based accounting ratios