ACCA P2

THIS SECTION provide you with all materials falling under corporate reporting subject (ACCA P2) AND THEIR RELATED PRACTICE QUESTIONS.

3 requirements of IFRS 8 on identification of reportable segments.

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IFRS 8 reporting segments seeks to assist the user of financial statements gain a clearer understanding of the performance of the business by requiring disaggregation of the reported financial information into segments.

Definition of reportable segment.

IFRS 8 requires an entity to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregation of reporting … Read the rest

Five (5) components of set of financial statements.

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Financial statement are report prepared by management of the entity to provide information to owners of the entity and other users about the financial position and financial performance of the entity.



The following are components of set of financial statements:

  • statement of financial position;
  • statement of comprehensive income;
  • statement of changes in equity;
  • statements
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6 Limitation of financial accounting.

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Financial accounting is the process of recording, summarizing and reporting the myriad of transactions resulting from business operations over a period of time.

The following are limitation associated with financial accounting:



  • Financial accounting is historical in nature. Financial accounting present financial statement at the end of the period which normally covers the year in length
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Financial Leverage Ratio – meaning and formula.

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Financial leverage results from the presence of fixed financial charges in the firm’s income stream. These fixed charges do not vary with the earnings before interest and tax (EBIT) or operating profits. They have to be paid regardless of the amount of earnings before interest and taxes available to pay them. After paying them, the operating profits (EBIT) belong to … Read the rest

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What is meant by associate in consolidated financial statements?

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An associate is an entity over which the investor has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, without having control or joint control over these policies.



 Significant influence is normally assumed to exist if the investor own between … Read the rest

5 disadvantages of consolidated financial statements

5 disadvantages of consolidated financial statements.

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Consolidated financial statements are the “Financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent (company) and its subsidiaries are presented as those of a single economic entity”.



The following are shortcomings of consolidated financial statements:

Unprofitable companies are set off against

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