Financial Reporting

Study guide: sixth edition

Financial Reporting is designed to provide you with financial reporting and business skills that are applicable in a professional environment. The subject is based on International Financial Reporting Standards (IFRSs), which are issued by the International Accounting Standards Board (IASB). Many international jurisdictions have adopted or are progressively adopting IFRSs.

In a competitive international environment, financial reporting provides users with information to formulate corporate strategies, business plans and leadership initiatives. There is also a common acceptance of IFRSs for communicating financial information because they are internationally understood. This reduces the cost of capital for the international reporting entities.

Financial reporting provides information for corporate leadership. Members of the accounting profession with financial reporting skills and knowledge provide business advice to board directors, analysts, shareholders, creditors, colleagues and other stakeholders. Members of the accounting profession who provide assurance services for financial reports also require a good understanding of the IFRSs. Directors are also required to declare that the financial statements are fairly stated. These examples reinforce the importance of financial reporting.

This subject's technical content includes linkages with the other segments in the CPA Program. Financial reporting is a significant part of an entity's governance and accountability process, issues which are covered in the subject Ethics and Governance. Compliance with IFRS is important because it results in the presentation of fairly stated financial statements.  This presentation outcome is also the aim of audit and assurance services. The assurance knowledge and audit skills are taught in the subject, Advanced Audit and Assurance. While taxation is covered in the subject Australia Taxation - Advanced, and while it is distinct from financial reporting, the accounting for tax is recognised as material information and therefore included in this subject. Financial reporting provides information about the business operations and the financial results. As a result, there is a relevant topical link with the subject, Contemporary Business Issues.

Exam structure

The Financial Reporting exam is comprised of a combination of multiple-choice and extended-response questions.

General objectives

On completion of this subject, you should be able to:

• explain the application and basis of selected IFRSs issued by the IASB
• apply IFRSs in the preparation of general-purpose financial statements
• explain details relating to general purpose financial statements
• prepare general purpose financial statements for designated entities, including the exercise of professional judgement.

Subject content

The subject is divided into seven modules. A brief outline of each module is provided below.

The weighting column in the following table provides an indication of the emphasis placed on each module in the exam. The proportion of study time is a guide for you to allocate your study time for each module.