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Basic accounting unit6
- 1. THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES UIBFS ISO 9001:2008 CERTIFIED Accounting Framework Posting and Processing Transactions Year- End Adjustments and Provisions Preparing Final Accounts Introduction to Financial Reporting Standards Published Accounts MODULE COVERAGE 1 Financial Ratios and Projections Elements of Taxation
- 2. THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES UIBFS ISO 9001:2008 CERTIFIED Introduction to Financial Reporting Standards • The accounting profession is governed nationally and internationally by standards which guide the treatment of items in the financial statement and the prudence as well as informativeness of reported financial information. • Internationally, it is guided (in a sense regulated) by the International Accounting Standards Board (IASB) which issues accounting standards known as the International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS). Overview of International Financial Reporting Standards International Financial Reporting Standards (IFRS) are principles-based guidelines adopted by the International Accounting Standards Board (IASB). In a broad sense, the International Financial Reporting Standards comprise; a. International Financial Reporting Standards (IFRS)—standards issued after 2001 b. International Accounting Standards (IAS)—standards issued before 2001 c. Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC)—issued after 2001 d. Standing Interpretations Committee (SIC)—issued before 2001 e. Conceptual Framework for the Preparation and Presentation of Financial Statements (2010) 2
- 3. THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES UIBFS ISO 9001:2008 CERTIFIED • Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS), which were issued between 1973 and 2001 by the International Accounting Standards Committee (IASC). • On 1st April 2001, the new IASB took over from the IASC the responsibility for setting International Accounting Standards. During its first meeting the new Board adopted existing IAS and SICs. • The IASB has continued to develop standards calling the new standards IFRS. There were 41 IASs and 9 IFRS as at the end of 2009. • The international standards (IASs and IFRSs) have been adopted by many countries to guide the preparation of financial statements by companies and other organizations. • The accounting profession in Uganda is regulated by the Institute of Certified Public Accountants of Uganda (ICPAU) which is a member of the IASB. ICPAU has also adopted the IASs and IFRS to be used in Uganda. We shall therefore be using the IAS and IFRS in this module 3
- 4. THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES UIBFS ISO 9001:2008 CERTIFIED List of International Financial Reporting Standards The following is the list of IFRS and IAS issued by IASB (as at end of 2009) • IFRS 1: First time Adoption of International Financial Reporting Standards • IFRS 2: Share-based Payment • IFRS 3: Business Combinations • IFRS 4: Insurance Contracts •IFRS 5: Non-current Assets Held for Sale and Discontinued Operations • IFRS 6: Explorations for and Evaluation of Mineral Resources • IFRS 7: Financial Instruments: Disclosures • IFRS 8: Operating Segments • IAS 1: Presentation of Financial Statements. • IAS 2: Inventories • IAS 7: Cash Flow Statements • IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors • IAS 10: Events after the Balance Sheet Date • IAS 11: Construction Contracts • IAS 12: Income Taxes • IAS 14: Segment Reporting • IAS 16: Property, Plant and Equipment • IAS 17: Leases • IAS 18: Revenue • IAS 19: Employee Benefits • IAS 20: Accounting for Government Grants and Disclosure of Government 4
- 5. THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES UIBFS ISO 9001:2008 CERTIFIED • IAS 21: The Effects of Changes in Foreign Exchange Rates • IAS 23: Borrowing Costs • IAS 24: Related Party Disclosures • IAS 26: Accounting and Reporting by Retirement Benefit Plans • IAS 27: Consolidated Financial Statements • IAS 28: Investments in Associates • IAS 29: Financial Reporting in Hyperinflationary Economies • IAS 31: Interests in Joint Ventures • IAS 32: Financial Instruments: Presentation • IAS 33: Earnings per Share • IAS 34: Interim Financial Reporting • IAS 36: Impairment of Assets • IAS 37: Provisions, Contingent Liabilities and Contingent Assets • IAS 38: Intangible Assets • IAS 39: Financial Instruments: Recognition and Measurement • IAS 40: Investment Property • IAS 41: Agriculture 5
Editor's Notes
- ByIf all adjusting entries have been made, and a trial balance done, preparing financial statements is really just a matter of putting the trial balance amounts onto properly formatted statements. As already discussed, financial statements prepared by most banks are; The Balance Sheet Income Statement (Statement of comprehensive Income) Cash Flow Statement Portfolio Report (optional but important) the end of this unit, the students should be able: Explain the end of period adjustments that are made to the various accounts. Pass the end of period adjustments Close off the ledger accounts To extract the account balances after closing of the accounts Prepare the trial balance
- A moratorium on new commercial bank licenses was declared in 2004, with the passage of the Financial Institutions Act 2004 by Parliament, which established new banking institution classification guidelines, shifting the focus and modality of supervision from forensic to risk-based, and introduced robust, tight rules for management and governance of banks in Uganda. The moratorium on new banks was lifted in July 2007. During the eighteen (18) months that followed the lifting of the moratorium, several new commercial banks were licensed. These included Kenya Commercial Bank, Equity Bank and Fina Bank, all from Kenya. Global Trust Bank and United Bank for Africa which trace their roots from Nigeria were also licensed during this period. The others were Ecobank; headquartered in Togo and Housing Finance Bank an indigenous bank. Between 2008 and 2009, several of the existing banks went on an accelerated branch expansion either through mergers and acquisitions or through new branch openings. As of October 2010[update], there were twenty-two (22) licensed commercial banks in Uganda, with nearly four hundred (400) bank branches and a total of almost six hundred (600) ATMs. In November 2010, Bank of Uganda directed that all commercial banks in Uganda, must raise their minimum capital to UGX 10 billion (approximately US$4.34 million) by March 2011 and to UGX 25 billion (approximately US$11 million) by March 2013. Any new commercial bank entering the Ugandan market effective November 2010 had to have a minimum capitalization of UGX 25 billion. Today (June 2012), most of the banking activity is concentrated around Kampala and other urban centers, leaving most Ugandans out of the formal financial sector.
- A moratorium on new commercial bank licenses was declared in 2004, with the passage of the Financial Institutions Act 2004 by Parliament, which established new banking institution classification guidelines, shifting the focus and modality of supervision from forensic to risk-based, and introduced robust, tight rules for management and governance of banks in Uganda. The moratorium on new banks was lifted in July 2007. During the eighteen (18) months that followed the lifting of the moratorium, several new commercial banks were licensed. These included Kenya Commercial Bank, Equity Bank and Fina Bank, all from Kenya. Global Trust Bank and United Bank for Africa which trace their roots from Nigeria were also licensed during this period. The others were Ecobank; headquartered in Togo and Housing Finance Bank an indigenous bank. Between 2008 and 2009, several of the existing banks went on an accelerated branch expansion either through mergers and acquisitions or through new branch openings. As of October 2010[update], there were twenty-two (22) licensed commercial banks in Uganda, with nearly four hundred (400) bank branches and a total of almost six hundred (600) ATMs. In November 2010, Bank of Uganda directed that all commercial banks in Uganda, must raise their minimum capital to UGX 10 billion (approximately US$4.34 million) by March 2011 and to UGX 25 billion (approximately US$11 million) by March 2013. Any new commercial bank entering the Ugandan market effective November 2010 had to have a minimum capitalization of UGX 25 billion. Today (June 2012), most of the banking activity is concentrated around Kampala and other urban centers, leaving most Ugandans out of the formal financial sector.