1. Financial Accounting II Lecture 09

2. Disclosure Requirements
The financial statements should disclose the following for each class of intangible assets, distinguishing between internally generated assets and other assets:
The useful lives or the amortization rates used.
The amortization method used.

3. Disclosure Requirements
The gross carrying amount and the accumulated amortization at the beginning and at the end of the period.
The reconciliation of carrying amount at the beginning and at the end of the period.

4. Disclosure Requirements
The financial statements should also disclose:
If an intangible asset is amortized over a period of more than 20 years the reason why the presumption of useful life was rebutted.
Description, carrying amount and remaining amortization period of any individual asset that is material to financial statements.

5. Disclosure Requirements
For intangible assets acquired by way of Government grants:
The fair value initially recognized
The carrying amount
Whether they are carried at bench mark or the allowed alternative treatment.

6. Disclosure Requirements
The existence of intangible assets whose title is restricted and the carrying amount intangible assets pledged as security for liabilities.
The amount of commitments for acquisition of intangible assets.

7. Disclosure Requirements
If intangible assets are carried at revalued amount the financial statements should disclose:
By class of intangible assets:
The effective date of revaluation
The carrying amount of revalued assets
The carrying amount of the intangible assets that would have been included in financial statement had the assets been carried under benchmark treatment.

8. Disclosure Requirements
If intangible assets are carried at revalued amount the financial statements should disclose:
The amount of revaluation surplus at the beginning and at the end of period indicating the changes during the period

9. Disclosure Requirements
The financial statements should also disclose the aggregate amount of research and development expenditure recognized as expense during the period.

10. Associated Companies – Companies Ordinance 1984
A single person:
Is Owner / Partner / Director in both the enterprises
Holds Twenty Percent Holding in both the enterprises.

11. Associated Companies – Companies Ordinance 1984
If both companies or enterprises are under common management or control or if one is a subsidiary of the other.
If the undertaking is a modarba managed by a company.

12. Associated Companies – Companies Ordinance 1984
Two persons / companies / enterprises would be associated if:
They are partners of a single enterprise.
They hold Ten Percent holding in a single company.

13. Associated Companies – IAS 28
IAS 28 defines An Associate through identification of influence,
An enterprise would be associate of an investor if that investor has a significant influence on the enterprise.

14. Associated Companies – IAS 28
Significant influence is the ability to participate but not to control the financial and management affairs of an enterprise.

15. Associated Companies – IAS 28
As per the IAS 28 an investor is presumed to have a significant influence over the investee if the investor controls Twenty Percent voting power in the investee.

16. Associated Companies – IAS 28
Significant influence is usually evidenced in following ways:
Representation on the board of directors.
Participation in policy making process
Material transactions
Interchange of managerial personnel
Provision of technical information

17. Recognition of Investment in Associated Companies
There are two methods for recognition of investment in associated companies:
Cost method
Equity method

18. Cost Method
Under the cost method the investment in investee company is recorded at cost of acquisition.
Any distribution of profits by the investee company is recorded as income.

19. Equity Method
Under the equity method the investment is initially recorded at cost.

20. Equity Method
The carrying amount of the investment is increased or decreased to recognize the investors share of profits or losses of the investee after the date of acquisition.

21. Selection of Method
Investments made for a long term are recorded using equity method and shown separately in the balance sheet as long-term assets
Investment made for a short period of time should be recognized at cost and classified in short term investments.

22. Disclosure
An appropriate listing and description of significant associates including proportion of ownership interest.
The method used to account for such investments.
Investment in associates accounted for using equity method are classified as long term assets and disclosed as a separate item in balance sheet.