Institute of Business Management

FINAL PROJECT REPORT

Submitted by
Syed Affan Shah: 20232-33451

Submitted to
Abdul Ghaffar
IAS 1 - Presentation of financial statement
IAS 1 provides a framework for companies to present their financial statements in a way that is
transparent, fair, and easy to compare with other periods or other companies. The standard
emphasizes the following:

• Fair Presentation: Companies are required to present financial statements that reflect
the true financial position and performance of the business. This involves the
appropriate use of accounting policies and accurate representation of transactions.
• Comparability: Financial statements should be presented in a manner that allows for
meaningful comparisons over different periods. Consistency in presentation and
accounting policies is crucial for users to analyze trends and make informed decisions.
• Clarity and Understandability: The standard stresses the importance of clear and
concise financial statements. Information should be organized logically, and complex
transactions should be explained in a way that is understandable to users without a
deep financial background.
• Structure of Financial Statements: IAS 1 outlines the basic structure of financial
statements, including the balance sheet, income statement, statement of changes in
equity, and cash flow statement. It provides guidance on the order of these statements
and what information each should contain.
• Additional Disclosures: The standard requires companies to provide additional
information and explanations to ensure that users have a complete understanding of the
financial statements. This includes information about accounting policies, risk factors,
and other relevant details.
In essence, IAS 1 aims to ensure that financial statements not only adhere to accounting
standards but also effectively communicate the financial health and performance of a company
to its stakeholders.

IAS 2 – Inventories
IAS 2 provides comprehensive guidance on how companies should account for inventories,
which are the goods held for sale in the ordinary course of business or used in the production
process. Here are additional details:
 • Measurement of Inventory Costs: IAS 2 specifies that inventories should be measured at
the lower of cost and net realizable value. Cost includes all costs directly attributable to
bringing the inventory to its present condition and location.Costs include purchase price,
import duties, handling and storage costs, and other costs directly linked to the
acquisition or production of the inventories.
• Cost Formulas: Companies are allowed to use various cost formulas, such as FIFO (First-
In-First-Out), weighted average cost, or specific identification. The chosen formula
should reflect the flow of goods and the physical movement of inventory.
• Subsequent Measurement: IAS 2 outlines how companies should account for changes in
the net realizable value of inventories and when adjustments to lower of cost or market
should be recognized.
• Cost of Inventories Not Uniform: If inventories are not interchangeable, IAS 2 provides
guidance on how to determine the cost of specific items, particularly in industries where
each item of inventory is unique.
• Disclosure Requirements:The standard includes disclosure requirements, such as the
accounting policies adopted, the carrying amount of inventories, and the amount of any
write-downs.
• Exclusions:Certain items are excluded from the scope of IAS 2, such as work in progress
arising under construction contracts, financial instruments, and biological assets related
to agricultural activity.
In essence, IAS 2 ensures that companies account for inventories in a consistent and
comparable manner, providing transparency in financial reporting regarding the costs associated
with goods intended for sale or use in the production process.

IAS 7 - Statement of Cash Flows:

IAS 7 provides a structured framework for companies to present information about their cash
inflows and outflows. Here are additional details:
Three Main Categories:

• Operating Activities: This includes cash transactions that result from the principal
revenue-producing activities of the entity. It involves collecting cash from customers,
paying suppliers, and other operational cash movements.
• Investing Activities: Cash flows from the acquisition and disposal of long-term assets,
such as property, plant, equipment, and investments. It reflects changes in a company's
investment portfolio and capital expenditures.
• Financing Activities: Cash transactions with the entity's owners and creditors. This
involves obtaining resources from shareholders and repaying the capital to them, as well
as borrowing and repaying loans.
 • Direct vs. Indirect Method: IAS 7 allows companies to choose between the direct
method (reporting major classes of gross cash receipts and payments) and the indirect
method (adjusting net profit or loss for non-cash items).
• Operating Activities under Indirect Method: When the indirect method is used,
adjustments to reconcile net profit to net cash generated from operating activities are
required. These adjustments include depreciation, changes in working capital, and non-
cash items affecting profit.
• Foreign Exchange Transactions: Cash flows arising from transactions in a foreign
currency are recorded at the exchange rate at the date of the cash flow. Any resulting
exchange differences are dealt with in accordance with IAS 21.
• Interest and Dividends: Cash flows for interest and dividends are classified under
operating or financing activities based on the nature of the transaction. Dividends paid
to shareholders are typically classified as financing activities.
• Non-Cash Transactions: IAS 7 requires disclosure of significant non-cash transactions,
providing additional information on investing and financing activities that did not involve
the use of cash.
• Presentation and Disclosure: The statement of cash flows should be presented in a
manner that is understandable, and additional disclosures are required for changes in
liabilities arising from financing activities.
IAS 7 ensures that users of financial statements can assess the entity's ability to generate future
cash flows and its ability to pay dividends and obligations, providing valuable insights into its
liquidity and financial health.

IAS 16 - Property, Plant, and Equipment:

IAS 16 provides guidelines on the recognition, measurement, and subsequent accounting for
property, plant, and equipment (PPE). Here are additional details:

• Recognition of Assets:
• Entities are required to recognize PPE if it is probable that future economic
benefits will flow to the entity, and the cost of the asset can be reliably
measured.
• Recognition includes the cost of the asset and any directly attributable costs for
bringing the asset to its working condition.

• Initial Measurement:
• PPE is initially measured at cost, which includes all expenditures directly
attributable to bringing the asset to the location and condition necessary for it to
operate.
 • Subsequent Costs:
• After recognition, the cost model is generally used, where subsequent
expenditures are capitalized only if they increase the future economic benefits
embodied in the asset.
• Day-to-day servicing of PPE and ongoing repairs and maintenance costs are
expensed as incurred.

• Revaluation Model:
• Alternatively, entities can choose to use the revaluation model, where assets are
carried at fair value less any subsequent accumulated depreciation and
impairment losses.
• Revaluations should be performed regularly to ensure that the carrying amount
reflects the asset's fair value.

• Depreciation:
• Depreciation is applied systematically over the asset's useful life, and various
methods like the straight-line method or diminishing balance method can be
used.
• The useful life and depreciation method should be reviewed at least at each
financial year-end.

• Impairment:
• If there is an indication of impairment, IAS 16 requires the carrying amount of
the asset to be tested for recoverability. If impaired, the carrying amount is
adjusted.

• Derecognition:
• When an item of PPE is derecognized, any gain or loss arising from disposal
should be included in the profit or loss unless it is part of a revaluation surplus.

• Disclosures:
• Entities need to disclose information about the measurement model used, the
depreciation methods, useful lives, and any restrictions on title to assets.
IAS 16 ensures that entities account for their tangible assets consistently, providing users of
financial statements with relevant information about the cost, depreciation, and potential
impairment of property, plant, and equipment.
IFRS 9 - Financial Instruments:
IFRS 9 is a comprehensive standard that addresses the classification, measurement, and
recognition of financial assets and financial liabilities. Here are additional details:

• Classification of Financial Assets: IFRS 9 classifies financial assets into two main
categories: those measured at amortized cost and those measured at fair value through
profit or loss. The classification depends on the entity's business model for managing the
financial assets and the contractual cash flow characteristics of the financial asset.

• Measurement of Financial Assets: Financial assets measured at amortized cost are

initially recognized at fair value and subsequently measured at amortized cost, less any
impairment losses. Financial assets measured at fair value through profit or loss are
initially recognized at fair value, with subsequent changes in fair value recognized in
profit or loss.

• Impairment of Financial Assets: IFRS 9 introduces an expected credit loss model,

requiring entities to recognize expected credit losses at all times rather than waiting for
an incurred loss event. This model aims to reflect the entity's current expectations about
credit losses, considering various reasonable and supportable information.

• Hedge Accounting: IFRS 9 includes an improved hedge accounting model, aligning hedge
accounting more closely with risk management activities. It introduces the concept of
hedge effectiveness and allows entities to better reflect their risk management activities
in the financial statements.

• Financial Liabilities: The standard provides guidance on the classification and

measurement of financial liabilities, which are generally measured at amortized cost.
The treatment of changes in the fair value of financial liabilities designated at fair value
through profit or loss is also specified.

• Transition: IFRS 9 includes transitional provisions to facilitate the implementation of the

standard, allowing entities to choose practical expedients during the initial application.

• Disclosures: Comprehensive disclosures are required to enable users of financial

statements to understand the entity's exposure to risks, its risk management strategy,
and the impact of financial instruments on its financial position.
IFRS 9 enhances the accounting for financial instruments, providing more forward-looking
information, and addressing concerns highlighted during the financial crisis regarding the delay
in recognizing credit losses.
Statement of Financial Position of National Foods
For the year ended June 2023
Statement of Profit or Loss and other Comprehensive Income of
National Foods
For the year ended June 2023
Statement of Cash Flow of National Foods
For the year ended June 2023
Statement of Cash Flow of National Foods
For the year ended June 2023