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Discuss the requirements of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors in relation to Ladram plcs new accounting policy in relation to

  1. Discuss the requirements of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors in relation to Ladram plcs new accounting policy in relation to the measurement of inventories. Explain why these requirements are necessary.

(maximum word count 100 words)

Question 2

The statement of comprehensive income of Oak plc, a publicly listed company, is as follows:

Statement of comprehensive income for the year ended 31 March 2020

000

Revenue

33,600

Cost of sales

(22,500)

Gross profit

11,100

Distribution costs

(3,600)

Administrative expenses

(3,450)

Finance costs

(300)

Profit before tax

3,750

Income tax expense

(150)

Profit for the year

3,600

Gain on revaluation

250

Total comprehensive income

3,850

The following supporting information is available:

  1. Depreciation of 965,000 was charged (to cost of sales) for property, plant and equipment in the year ended 31 March 2020. An item of plant with a carrying value of 750,000 was sold at a profit of 65,000 during the year.
  2. The following extracts from the statements of financial position for the years ended 31 March 2020 and 31 March 2019 are relevant:

2020

2019

000

000

Inventory

4,350

4,050

Trade receivables

1,800

900

Trade payables

850

2,625

Current tax payable

825

1,800

YOU ARE REQUIRED TO:

  1. Calculate the cash generated from operations for Oak plc for the year to 31 March 2020 in accordance with IAS 7 Statement of cash flows using the indirect method. SECTION B(a)

Explain the characteristics of an item to be considered as a cash equivalent and give three examples of items that could be included as cash and cash equivalents in a statement of cash flows.

(maximum word count 100 words)

Profit is not a good indicator of performance as it can be changed to suit managements needs.

Discuss whether, in your opinion, the statement of profit or loss or the statement of cash flows is a better indicator of a companys performance.

(maximum word count 200 words)

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