Hasaan Fazal
What is Detection risk?
According to International Auditing Standards detection risk is defined as follows: The risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material, either individually or when aggregated with other misstatements. In simple words detection risk is […]
What is Profit loading?
The purpose of every business activity is to earn profits and insurance business is no exception to this. Just like all other for-profit entities, insurance companies also need to earn sufficient amount of profit in order to cover up business expenses and cost of capital to keep the stakeholders especially investors happy. Profit loading is […]
What are the steps in the Financial Statement analysis Framework?
Financial analysts or simply analysts are required to analyse different types of financial information and provide recommendations to their clients or end users. In that sense analysts work as an adviser who advise or recommend appropriate actions that users should take to gain favourable results. In short, many people rely on analysts and their recommendation. […]
What is Control risk?
Control risk has been defined under International Standards of Auditing (ISAs) as following: The risk that a misstatement that could occur in an assertion about a class of transaction, account balance or disclosure and that could be material, either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on […]
What is LIFO liquidation?
Before we discuss LIFO liquidation, lets review how LIFO works in relation with economy which can either be inflationary (period of rising prices) or deflationary (period of declining prices). According to Last-in, First-out cost flow assumption the latest inventory in the store will be applied for production and if there is inflationary economy in place […]
What is Specific identification method of inventory valuation?
Specific identification method is just another method to value ending inventory of the business to be reported in the financial statements. IAS 2 permits the use of specific identification method. According to this method each identified items of inventory is assigned specific cost and hence the name specific identification. In simple words cost is attributed […]
What is accelerated depreciation method?
i-ask! | Have a question? Ask Tutor! What is meant by accelerated depreciation method? When such method is used and how many types are there for this method? And what is the position of accounting standards on such depreciation method? As the name suggests, the accelerated depreciation method accelerates the the recognition of depreciation […]
What is the difference between Inception of lease and Commencement of lease?
IAS 17 distinguishes between Inception and Commencement of lease and the two terms represent two different instances of time which may be occurring at different or the same date. Usually inception and commencement of the lease occur at the same date but if they are occurring at different dates then the two have significant effects […]
How to know that a lease is a Finance lease or Operating lease?
The core principle to distinguish or differentiate finance lease agreement from operating lease agreement is that if substantial risks and rewards incidental to the ownership of an asset are transferred under a lease agreement to the lessee (person acquiring the asset for use) from the lessor (the owner of the asset) then it is a […]
What is the difference between Finance lease and Operating lease?
According to IAS 17 two types of leases are identified namely Finance lease and Operating lease. The distinction between the two primarily resulted from the implications of one of the important accounting concept Substance over form. Finance lease is a lease agreement in which substantially all the risks and rewards incidental to ownership of an […]
