Question

select whether in your opinion the statement is : True,False or of unclear veracify. Justify& explain the reasoning for your opinion.

Please outline the relevant international accounting regulations on those issues in your answer.

Under international accounting standards dividends on ordinary and preference shares are included in the"Finance Costs" category on the income statement.

Answer 1

Ans)Unclear Veracify that international accounting standards dividends on ordinary and preference shares are included in the"Finance Costs" category on the income statement.

IAS 7 does not specify how to classify cash flows from interest paid and interest and dividends received.

VALUE IFRS Plc has chosen to present interest paid and interest received on financial assets held for cash management purposes as operating cash flows, but dividends and interest received on other financial assets as investing cash flows because they are returns on the group’s investments.

Dividends paid are classified in this publication as financing cash flows because they are a cost of obtaining financial resources. However, they could also be classified as operating cash flows to assist users in determining the ability of an entity to pay dividends out of operating cash flows.

Finance costs

Finance costs will normally include: IAS23(5),(6) IFRS7(IG13) (a) costs that are borrowing costs for the purposes of IAS 23 Borrowing Costs:

(i) interest expense calculated using the effective interest rate method as described in IAS 39 Financial Instruments: Recognition and Measurement

(ii) finance charges in respect of finance leases (refer to note 25(h)),

(iii) exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

Other income and expense items IAS37(60)

(b) the unwinding of the effect of discounting provisions IAS32(35),(40) (c) dividends on preference shares that are classified as debt IAS39(47),(AG6)

(d) the amortisation of discounts and premiums on debt instruments that are liabilities (e) interest on tax payable where the interest element can be identified separately IFRS5(17) (f) the increase in the present value of the costs to sell in relation to assets that are held for sale, where the sale is expected to occur beyond one year.