Financial Statements Certificate

The Financial Statements Certificate will provide explanations on various categories of assets and liabilities, along with the associated judgments and estimates involved in their creation.

Additionally, the course will delve into the primary financial statements, namely the Statement of Financial Position (Balance Sheet) and the Statement of Profit and Loss (Income Statement), which capture these assets, liabilities, and their movements. It will address questions such as the guiding principles for accountants in preparing these statements, covering topics like Generally Accepted Accounting Principles (GAAP) and accruals accounting.

Furthermore, the course will explore the components of an annual report beyond the financial statements, which provide insights into understanding the business they represent.

Financial Statements Concepts

• Understand why accounting concepts are required for high-quality financial statements.
• Outline the four principles of accounting concepts and their implication for the preparation and interpretationof financial statements.
• Identify other accounting concepts and how they help frame financial data.

Annual Reports

• Identify the main constituents of a corporate annual report.
• Understand how the annual report can aid our understanding of the business.
• Understand the constraints of an annual report.
• Describe the role of the audit report.

Financial Statements Standards

• Describe the concept of GAAP.
• Understand progress towards a single accounting language.
• Describe examples of high-level differences between IFRS and US GAAP.
• Understand how applicable GAAP may change as companies grow.

Financial Account Structures

• Understand the function and purpose of the statement of financial position.
• Describe what constitutes the elements of the statement of financial position.
• Understand the statement format and basis of allocation of elements within this framework.
• Explain why the statement of financial position is not a true indicator of company value.
• Understand the function and purpose of the statement of profit and loss.
• Compare and contrast differences in statement format.
• Describe what constitutes the elements of the statement of profit and loss.
• Interpret jargon associated with financial performance.
• Describe typical disclosures within other comprehensive income and the statement of changes in equity.
• Understand reconciling opening and closing net assets.
• Describe what constitutes cash and cash equivalents.
• Describe the format of the statement of cash flows and the allocation of movements between CFO, CFI, andCFF.
• Understand how movements in working capital impact the cash position.
• Understand the link between operating cash and EBITDA.

Assets and Liabilities

• Understand the concept of net book value and the impact of different depreciation methods.
• Differentiate depreciation from impairment.
• Understand the challenges of revaluation and how it is recorded in the financial statements.
• Understand the impact of asset disposal on the primary financial statements.
• Describe the three major categories of intangible assets.
• Apply best accounting practices to record intangible assets in the primary financial statements.
• Describe the three major asset and liability classes that comprise working capital.
• Understand the different approaches to determining the carrying value of inventory.
• Understand positive and negative influences on working capital.
• Describe the cash conversion cycle.
• Understand the main categories of debt instruments.
• Apply the principles of amortized cost.
• Differentiate provisions and contingencies.
• Obtain a high-level understanding of the drivers behind the reported tax liability.

Equity

• Understand the purpose and function of the principal constituents of equity.
• Describe the consequences of a share buyback.
• Understand the concept of distributable profits.

Revenues

• Understand the five-step process that determines the recognition of revenue.
• Understand the impact of this process on the timing of revenue recognition in different sectors.
• Understand when progressive revenue recognition is allowed for long-term contracts.

Expenses

• Understand the distinction between direct and indirect overheads and the leveraging effect these can have on reported profitability.
• Understand why reported profits may need to be adjusted before they are used for corporate projections.
• Analyze the finance and tax expense lines in the statement of profit and loss.

Group Financial Statements

• Understand the difference between legal rules and the concept of accounting substance that underpins group financial statements.
• Describe the spectrum of control.
• Apply the basic mechanics of group accounting.
• Understand the difference between acquisition and equity accounting.