ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce)
[

WARNING
1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING
THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD
OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.
2. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM
OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN
“AIOU PLAGIARISM POLICY”.
Course: Financial Reporting-I (8567) Semester: Spring, 2022
Level: M. Com/BS
Please read the following instructions for writing your assignments.
(AD, BS, BEd, MA/MSc, MEd) (ODL Mode)
1. All questions are c//////ompulsory and carry equal marks but within a question,
the marks are distrited according to its requirements.
2. Read the question carefully and then answer it according to the requirements of
the question.
3. Avoid irrelevant discussion/information and reproducing from books, study
guide or allied material.
4. Hand written scanned assignments are not acceptable. However, the students who
attempt their assignments in Urdu/Arabic may upload a scanned copy of their
hand written assignments (in PDF format) on University LMS. The size of the
file should not exceed 5 MB.
5. Upload your typed (in Word or PDF format) assignments on or before the due
date.
6. Your own analysis and synthesis will be appreciated.
7. Late assignments can’t be uploaded at LMS.

Total Marks: 100

Pass Marks: 50
ASSIGNMENT No. 1
Q. 1 Babar Limited has a financial asset that it has classified as a available-for-sale.
Available-for-sale financial assets are measured at fair value at the end of each
year, with changes in fair value taken to equity (again on available-for-sale assets
account). When the assets are sold, any gain or loss is then realized and recognized
as income. All the assets were: (20)

Purchased on 1 June 2011: for Rs. 100,000

Measured at 31 December 2011 (the year-end): at their fair value of Rs. 120,000
Sold on 31 December 2011: for Rs. 130,000.

The following was extracted before any journals related to these assets had been
processed:

Revenue Debit Credit

1
 Cost of Sales 450,000 1,000,000
Cost of distribution 120,000
Cost of administration 80,000
Interest Expense 100,000
Tax Expense 70,000
Required:
A) Show all the journal entries relating to the financial assets (ignore tax);
B) Present the statement of comprehensive income (as a single stamen), with
reclassification adjustments provided in this statement (not ibn the notes).
Ignore all taxes.

Q. 2 (a) Awais Limited is a petrochemical company that has a bad reputation for
environmental pollution. It has recently been presented with numerous legal
claims from residents in the surrounding neighborhood.
Required: Explain the issue that Awais limited must consider when
complying with IAS 1 requirement’s regarding ‘sources of estimation
uncertainty’. (10)

(b) Assume that Mr. X has one employees who earns a gross monthly salary of
Rs. 50,000. The employee’s tax on his salary has been calculated to be Rs.
1,000 per year. The income tax rate applied for tax year 2018-19. This
employee is employed as a secretary. (10)
Required:

(10)
Post al related journal entries in Mr. X’s business ledger.

Q.3 (a) Statement of cash flow prepared under IAS 7, it allows two different methods
to be used in presenting the statement of an entity. Explain both methods
with suitable example. (10)

(b) Akbar Corporation is supplier of various types of industrial mechanics, parts and
installation. It also provides services for the maintenance of these machines.
Following transactions were carried out by Akbar Corporation during the year
ended 30 June 2019;
i. Five machines were sold on a lay away basis to one of its frequent customers.
Three out of a total of five installments had been received till the year end.
ii. A service contract for maintenance of a machine for a period of one year was
signed and Akbar Corporation received a non-refundable annual fee
amounting to Rs. 65,750 as advance on 15 April 2019.
Required:
Discuss when it will be appropriate for Akbar Corporation to recognize
revenue in each of the above situations. (10)

2
Q. 4 (a) Ibrahim Ltd received Rs. 10,000 in rent income on 31 st December 2018 (the
year-end) from a tenant for rent of a building in January 2019. There are no
permanent differences or temporary differences other than those evident from
the information provided. No dividends were declared in either year. Profit
before tax (correctly calculated) was Rs. 100,000 in both 2018 and 2019.
Required: (10)

A. Show the journals entries in 2018 and 2019 relevant to the rent income.
B. Calculate the taxable profits and current tax per the tax legislation for
2018 and 2019.

(10)
(b) Abdul Nafay Ltd sold inventory for Rs, 100,000 during 2017 o0n credit and
received payment of Rs. 100,000 in 2018. The tax authorities tax income
when earned or received, whichever happens first. There is no other income
in either 2017 or 2018. (10)
Required:
a. Show journal entries of Abdul Nafay Ltd in 2017 and 2018 relevant to
the income and receipt above.
b. Calculate the current normal tax expense of Abdul Nafay Ltd in each
year and briefly explain your answer.

Q. 5 Narrate and differentiate the followings;

(a) The IFRS versus GAAP and Compliance with IFRS. (10)

(10)
(b) The difference between IASC and IASB. (10)

GUIDELINES FOR ASSIGNMENT # 1

You should look upon the assignments as a test of knowledge, management skills, and
communication skills. When you write an assignment answer, you are indicating your
knowledge to the teacher:
 Your level of understanding of the subject;
 How clearly you think;
 How well you can reflect on your knowledge & experience;
 How well you can use your knowledge in solving problems, explaining situations,
and describing organizations and management;
 How professional you are, and how much care and attention you give to what you do.

To answer a question effectively, address the question directly, bring important related
issues into the discussion, refer to sources, and indicate how principles from the course
materials apply. The student must also be able to identify important problems and
implications arising from the answer.

3
 ASSIGNMENT No. 2
Total Marks: 100 Pass Marks: 50

This assignment is a research-oriented activity. You are required to obtain information

from a business/commercial organization and prepare a report of about 1000 words on
the issue allotted to you to be submitted to your teacher for evaluation.
You are required to select one of the following issues according to the last digit of your
roll number. For example, if your roll number is P-3427182 then you will select issue # 2
(the last digit):

ISSUES:
0- IAS 7 Statement of Cash Flows: A Comprehensive Study on International
Accounting Standard 7.
1- Constraints and trade-offs between different qualitative characteristics of Financial
Statements.
2- Subsequent measurement: depreciation: Method of deprecation and useful life with
reference to IAS 16.
3- Disclosure of cost of sales and deprecation.
4- Cost analyzed by nature in the statement of comprehensive income.
5- Events After the Reporting Period: A Comprehensive Study on International
Accounting Standards 10 (IAS 10).
6- IAS 23 Borrowing cost: A Comprehensive Study on International Accounting
Standards 23.
7- Subsequent costs: recording of capitalization of the new part with reference to IAS
16.
8- In some countries, income tax authorities require companies to prepare accounts
that conform to national laws for measuring taxable income. Are those financial
statements ‘general-purpose financial statements’? Why? How?
9- Exchange of assets; fair value of asset given up is known with reference of IAS 16

The report should follow the following format:

i. Title page
ii. Acknowledgements
iii. An abstract (one-page summary of the paper)
iv. Table of contents
v. Introduction to the issue (brief history & significance of topic assigned)
vi. Practical study of the organization (with respect to the topic)
vii. Data collection methods
viii. Conclusion (one-page brief covering important aspects of your report)
ix. Recommendations (specific recommendations relevant to issue assigned)
x. References (as per APA format)
xi. Annexes (if any)

GUIDELINES FOR ASSIGNMENT # 2:

 1.5-line spacing
 Use headers and subheads throughout all sections
 Organization of ideas
 Writing skills (spelling, grammar, punctuation)
4
 Professionalism (readability and general appearance)
 Do more than repeat the text
 Express a point of view and defend it.

WORKSHOPS
The workshop presentations provide students opportunity to express their communication
skills, knowledge & understanding of concepts learned during practical study assigned in
assignment # 2.
You should use transparencies and any other material for effective presentation. The
transparencies are not the presentation, but only a tool; the presentation is the
combination of the transparencies and your speech. Workshop presentation
transparencies should only be in typed format.

The transparencies should follow the following format:

1) Title page
2) An abstract (one-page summary of the paper)
3) Introduction to the issue (brief history & significance of topic assigned)
4) Practical study of the organization (with respect to the issue)
5) Data collection methods
6) Conclusion (one-page brief covering important aspects of your report)
7) Recommendations (specific recommendations relevant to topic assigned)

GUIDELINES FOR WORKSHOP PRESENTATION:

 Make eye contact and react to the audience. Don't read from the transparencies or
from report, and don't look too much at the transparencies (occasional glances are
acceptable to help in recalling the topic to cover).
 A 15-minute presentation can be practiced several times in advance, so do that until
you are confident enough. Some people also use a mirror when rehearsing as a
substitute for an audience.

WEIGHTAGE OF THEORY & PRACTICAL ASPECTS IN ASSIGNMENT # 2 &

WORKSHOP PRESENTATIONS
Assignment # 2 & workshop presentations are evaluated on the basis of theory & its
applicability. The weightage of each aspect would be:
Theory: 60%
Applicability (practical study of the organization): 40%

Note: Assignments and presentation carry 300 Marks:

Assignment 01 100 Marks
Assignment 02 (Submission) 100 Marks
Assignment 02 (Presentation) 100 Marks

5
 COURSE OUTLINES
Financial Reporting-I 8567
UNIT 1 Regulatory Framework for Financial Reporting in Pakistan

1.1 The regulatory system

1.2 Standards setting process
1.3 Conceptual framework
1.4 Objectives of financial reporting
1.5 Users of financial statements
1.6 Qualitative characteristics
1.7 Elements of financial statements
1.8 True and fair view presentation

UNIT 2 Presentation of Financial Statements (IAS) 1

2.1 Financial statements and their components

2.2 General features of financial statements
2.3 Structure of financial statements
2.4 Contents of financial statements
2.5 Disclosure requirements of IAS 1

UNIT 3 Inventory (IAS) 2

3.1 Accounting for inventory under IAS 2

3.2 Measurement of inventories
3.3 Inventory valuation methods
3.4 Net Realizable Value
3.5 Recognition as an expense
3.6 Disclosures Requirements

UNIT 4 Accounting Policies, Changes in Accounting Estimates and Errors

(IAS) 8
4.1 IAS 8 and accounting policies
4.2 Accounting polices
4.3 Accounting estimates
4.4 Prior period errors
4.5 Underlying assumption
4.6 Disclosure Requirements

UNIT 5 Statement of Cash Flows (IAS) 7

5.1 IAS 7 and cash flow statement

5.2 Presentation of a statement of cash flow

6
 5.3 Calculation and reporting of net cash flow from operating
activities
5.4 Reporting of cash flow from investing & financing activities
5.5 Comparison of the statement of cash flows and income statement
5.6 Interpretation of statement of cash flows
5.7 Disclosures requirements

UNIT 6 Events after the Reporting Period (IAS) 10

6.1. Understanding events and their accounting

6.2. Adjusting events and their accounting
6.3. Non-adjusting events and their accounting
6.4. Calculation of impact on financial statements
6.5. Disclosures requirements

UNIT 7 Property, Plant and Equipment (IAS) 16

7.1. Property plant and equipment

7.2. Depreciation of non-current assets
7.3. Calculation of depreciation
7.4. Revaluation of non-current assets
7.5. Disclosures requirements

UNIT 8 Revenue Recognition (IAS) 18

8.1. IAS 18 and revenue recognition

8.2. Understanding revenues and their types
8.3. Rules for recognizing revenues
8.4. Financial statements and revenues recognition
8.5. Disclosure requirements

UNIT 9 Borrowing Costs (IAS) 23

9.1 Borrowing costs and their types

9.2 Recognition of borrowing costs
9.3 Commencement, Suspension and Cessation of Capitalization
9.4 Financial statements and borrowing costs
9.5 Disclosures requirements

Recommended Books (Latest Editions)

1. IRFS/IAS s issued by IASB, London.

2. Financial Accounting published by ICMAP, Karachi
3. Gripping IFRS by ICAP, Karachi.
4. Insight into IFRS by Hafiz Mohaiydin Tahir, PAC, Lahore.