Unit Title: Financial Accounting
Guided Learning Hours: 160
Level: Level 6
Number of Credits: 25
Learning Outcome 1
The learner will: Understand the framework of financial accounting.
Assessment Criteria
The learner can:
1.1 Describe the scope,
objectives and main users
of financial accounting
information in accordance
with the international
framework of the
International Accounting
Standards Board (IASB).
1.2 Identify the main and
sub-characteristics of
useful information to users.
1.3 Describe the role and
scope of external auditing
and internal auditing in
business.
Indicative Content
1.1.1 Describe the scope and objectives of financial
accounting.
1.1.2 Describe the main users of accounting information and
their needs in accordance with the international framework of
the IASB.
1.2.1 Identify and explain the four main characteristics of
useful information to users namely relevance, reliability,
understandability and comparability.
1.2.2 Identify and explain the sub-characteristics of the four
main characteristics.
1.2.3 Explain the twelve traditional accounting concepts.
1.2.4 Distinguish between capital income and expenditure,
and between revenue income and expenditure, within financial
accounting.
1.3.1 Describe the role and scope of external auditing in
business.
1.3.2 Describe the role and scope of internal auditing in
business.
1.3.3 Describe the relationship between external and internal
auditing in the context of business.
1.3.4 Identify and explain the differences between external
and internal auditing in the context of business.
Learning Outcome 2
The learner will: Know how to prepare and present the financial statements of companies in
accordance with internationally generally accepted accounting practice
(IGAAP) under International Financial Reporting Standards.
Assessment Criteria
The learner can:
2.1 Describe the external
publication and the
elements that make up the
external financial
statements of a company.
2.2 Explain the rules
contained in International
GAAP in relation to assets,
liabilities, income and
expenses.
Indicative Content
2.1.1 Describe the external publication of companies’ financial
statements including:
• IAS 1: Presentation of Financial Statements.
• IAS 8: Accounting Policies, Changes in Accounting
Estimates and Errors.
• IAS 10: Events after the Reporting Period.
• IAS 33: Earnings per Share.
• IAS 24: Related Party Disclosures.
2.1.2 Describe the elements that make up the external financial
statements, including: the principal financial statements, the
directors’ report, the corporate governance report and the
auditor’s report.
2.2.1 Explain the rules contained in International GAAP in
relation to assets including:
• IAS 2: Inventories.
• IAS 11: Construction Contracts.
• IAS 16: Property, Plant and Equipment.
• IAS 17: Leases.
• IAS 36: Impairment of Assets.
• IAS 38: Intangible Assets.
• IAS 40: Investment Property.
2.2.2 Explain the rules of the International GAAP in relation to
liabilities, including IAS 37: Provisions, Contingent Liabilities
and Contingent Assets.
2.2.3 Explain the rules of the International GAAP in relation to
income, including IAS 18: Revenue.
2.2.4 Explain the rules of the International GAAP in relation to
expenses, including:
• IAS 12: Income Taxes.
• IAS 20: Accounting for Government Grants and
Disclosure of Government Assistance.
• IAS 23: Borrowing Costs.
Learning Outcome 3
The learner will: Know how to prepare Statements of Comprehensive Income, Statements of
Financial Position, Statement of Changes in Equity, and Statements of Cash
Flows.

Assessment Criteria Indicative Content

The learner can:

3.1 Prepare Statements of 3.1.1 Prepare Statements of Comprehensive Income for a

Comprehensive Income for given company from given information in accordance with
a given company from International GAAP.
given information in
accordance with
International GAAP.

3.2 Prepare Statements of
Financial Position for a
given company from given
information in accordance
with International GAAP.
3.2.1 Prepare Statements of Financial Position for a given
company from given information in accordance with
International GAAP.

3.3 Prepare Statements of
Changes in Equity for a
given company from given
information in accordance
with International GAAP.
3.3.1 Prepare Statements of Changes in Equity for a given
company from given information in accordance with
International GAAP.

3.4 Prepare Statements of
Cash Flows for a given
company from given
information in accordance
with International GAAP.
3.4.1 Prepare Statements of Cash Flows for a given company
from given information in accordance with International GAAP,
including IAS 7: Statement of Cash Flows.

Learning Outcome 4
The learner will: Know how to analyse and interpret financial statements for a range of users.

Assessment Criteria Indicative Content

The learner can:

4.1 Explain the meaning of 4.1.1 Explain the meaning of performance, financial status and
performance, financial investor ratios.
status and investor ratios.

4.2 Calculate investment 4.2.1 Calculate financial ratios in respect of performance of a

ratios and financial ratios company.
in respect of performance
and financial status of an 4.2.2 Calculate financial ratios in respect of financial position of
enterprise.

4.3 Interpret the results of
the analysis of financial
ratios of performance and
financial status and
investor ratios for users of
financial statements.
Learning Outcome 5
The learner will: Know how to prepare and present consolidated financial statements in
accordance with IGAAP.
Assessment Criteria
The learner can:
5.1 Describe and explain
the contents of IASs in
relation to the preparation
of consolidated financial
statements.
5.2 Prepare consolidated
financial statements for a
holding enterprise with one
subsidiary both at the
acquisition date and for
subsequent periods.
a company.
4.2.3 Calculate ratios of interest to investors and potential
investors in a company.
4.3.1 Analyse and interpret, for users of financial information,
the ratios calculated for performance and financial status and
investor ratios.
4.3.2 Explain the limitations of ratio analysis to users of the
ratios.
4.3.3 Explain the impact of changing prices on financial
statement ratios.
4.3.4 Identify possible methods of adjusting historical financial
statements to present more useful information to users.
Indicative Content
5.1.1 Describe the contents of IFRS 3: Business Combinations
and IAS 27: Consolidated and Separate Financial Statements.
5.1.2 Explain the concept of control in relation to a subsidiary
and holding enterprise.
5.1.3 Explain the principles of consolidation for a single holding
structure.
5.1.4 Explain inter-enterprise items (dividends, inter-enterprise
sales, inter-enterprise loans) and their elimination from the
consolidation process.
5.1.5 Explain the treatment of goodwill in consolidation in
accordance with IGAAP.
5.2.1 Prepare Consolidated Statements of Financial Position for
a holding enterprise with one subsidiary both at the acquisition
date and for subsequent periods.
5.2.2 Prepare Consolidated Statements of Comprehensive
Income for a holding enterprise with one subsidiary both at the
acquisition date and for subsequent periods.
Learning Outcome 6
The learner will: Understand the capital structure and gearing of a business.

Assessment Criteria Indicative Content

The learner can:

6.1 Explain and appraise
the various sources of
finance available to
businesses both long-term
and short-term.
6.1.1 Describe the long-term sources of finance available in the
market place to a business.
6.1.2 Describe the short-term sources of finance available to a
business.

6.1.3 Compare and contrast the effect on a business of

financing long-term and short-term.

6.1.4 Give advice on the financing needs of a given business to

interested parties.

6.1.5 Explain working capital management.

6.2 Explain the relationship 6.2.1 Calculate gearing ratios for a business.
between equity and debt
within a business (i.e. the 6.2.2 Interpret gearing ratios for users.
gearing).

6.3 Prepare financial
statements of a business
after changes in their
financing.
6.3.1 Describe the issue of various types of shares and loans.
6.3.2 Describe the redemption of shares and loans.
6.3.3 Prepare a Statement of Financial Position after the issue
and redemption of shares and loans.

Assessment:
• Assessment method: written examination (unless otherwise stated).
• Written examinations are of three hours’ duration.
• All learning outcomes will be assessed.

Recommended Reading:
• Financial Accounting – ABE Study Manual.
• Please refer to the Tuition Resources section of the Members Area of the ABE
website (www.abeuk.com) for further recommended reading.