Exam focus - ACCA F8 June 2009 (3)

I received many complains, why the next post is so slow? Why answer is simple, I am too busy too tired and of course lazy.
Well no excuse as I have promised to do so. Let continue to the journey of June 2009 examination. However I may skip the internal control apart as promised earlier and go on to another important area namely financial statement assertion. We shall do it in a layman way, MY WAY!
What is financial statement assertion? This is an area where students always misunderstand. Financial Statement assertions are assertion where company must observed when recording a business transaction into the Financial Statement.
In your student text there are seven assertions namely:

Existence
An asset or liabilities exist at given date

Right and obligation
An asset or liabilities pertain to the entity at a given date

Occurrence
A transaction or events took place which pertain to the entity during the relevant period

Completeness
There are unrecorded assets, liabilities or events or disclosure items

Valuation
An asset or liabilities is recorded at an appropriate carrying value

Measurement
A transaction or events is recorded in the proper amount and revenue or expenses is allocated to the proper periods

Disclosure
An items is disclosed, classified and describe in accordance with the applicable reporting framework

However usually we will summarized it into 5 category namely

Completeness
ownership/obligation
valuation
existence
disclosure

So how to make it relevant in exam?

When a Company records a business transaction (BT) in the financial statement the need to ensure that:

1. The Company need to ensure that the BT is properly recorded in the Financial statement to ensure completeness or
2. To ensure completeness the company needs to ensure that BT is properly record in the financial statements.
3. To ensure ownership or obligation, the company need to ensure that they own or obliged toa business transaction.
4. To ensure valuation, the Company need to ensure that the BT has the right valuation when recorded into the financial statement
5. The ensure existence, company need to ensure that the BT actually exist
6. To ensure proper disclosure, company need to ensure that all BT are properly disclosed in the financial statements

Practice Can you provide example for the above?

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