1. CORPORATIONS AND THEIR STRUCTURE
Sole proprietorships Or partnerships:
ADVANTAGES OF INCORPORATION
• Limited shareholder liability
• Continuity of existence
• Transfer of ownership
• Ability to finance
• Professional management
DISADVANTAGES OF INCORPORATION
• Capital withdrawal
PRIVATE AND PUBLIC CORPORATIONS
• Private corporations have charters that restrict the right of shareholders to transfer shares, limit the number of shareholders to no more than 50, and prohibit members from inviting the public to subscribe for their securities.
• Public corporations are companies whose shares are listed on a stock exchange or traded over the counter.
VOTING BY PROXY
THE CORPORATE STRUCTURE
• Chairman of the board
2. FINANCIAL STATEMENTS OF A CORPORATION
International Financial Reporting Standards (IFRS)
STATEMENT OF FINANCIAL POSITION
• Assets consist of what the company owns and what is owed to it.
• Equity represents the shareholders’ interest in the company.
• Liabilities are what the company owes.
CLASSIFICATION OF ASSETS
ITEMS 1–3: NONCURRENT ASSETS
-Noncurrent assets include property, plant, and equipment (PP&E); goodwill and other intangible assets; and investments in associates.
-Two commonly used methods of calculating depreciation are the straight-line method and the declining-balance method.
ITEMS 5–8: CURRENT ASSETS
-Inventory, prepaid expenses, and trade receivables
• The weighted average method uses the average of the total cost of the goods purchased over the period on a per unit basis.
• The first-in-first-out (FIFO) method implies that items acquired earliest are assumed to be used or sold first.
CLASSIFICATION OF EQUITY
ITEM 11: SHARE CAPITAL
ITEM 12: RETAINED EARNINGS
ITEM 13: NON-CONTROLLING INTEREST
CLASSIFICATION OF LIABILITIES
ITEMS 15 AND 16: NON-CURRENT LIABILITIES
ITEMS 18–21: CURRENT LIABILITIES
• Current portion of long-term debt due in one year
• Taxes payable to the government in the near term
• Trade payables (unpaid bills for items such as raw materials and supplies)
• Short-term borrowings from financial institutions
STATEMENT OF COMPREHENSIVE INCOME
• Where earnings come from
• Where earnings go
• The adequacy of earnings, both to assure the successful operation of the company and to provide income for the holders of its securities
STRUCTURE OF THE STATEMENT OF COMPREHENSIVE INCOME
ITEMS 24–26: REVENUE, COST OF SALES, AND GROSS PROFIT
ITEM 27: OTHER INCOME
ITEMS 28 TO 31: GENERAL EXPENSES
• Distribution costs, including such expenses as advertising costs and salaries and commissions to sales personnel
• Administrative expenses, including office salaries, accounting staff salaries, and office supplies
• Other expenses not directly related to the company’s normal operating activities, including expenses associated with the sale of PP&E
• Finance costs in the form of interest payments on debtholders’ securities or loans to the company
ITEM 32: SHARE OF PROFIT OF ASSOCIATES
ITEM 33: INCOME TAX EXPENSE
ITEM 34: PROFIT
• Actuarial gains and losses on defined benefit plans
• Gains and losses from currency translations relating to the financial statements of a foreign operation
STATEMENT OF CHANGES IN EQUITY
TOTAL COMPREHENSIVE INCOME
STATEMENT OF CASH FLOWS
STRUCTURE OF THE STATEMENT OF CASH FLOWS
• Operating Activities • Financing Activities • Investing Activities
ITEMS 34 TO 37: OPERATING ACTIVITIES
• Trade receivables • Inventories • Trade payables • Interest payable • Taxes payable
ITEMS 38 TO 41: FINANCING ACTIVITIES
• If the company has issued new share capital (item 38) or debt (item 40), cash flows into the company. • If the company repays debt (item 39) or pays dividends to the shareholders (item 41), cash flows out of the company.
ITEMS 42 TO 44: INVESTING ACTIVITIES
ITEMS 45 AND 46: THE CHANGE IN CASH FLOW
3.THE ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
THE AUDITOR’S REPORT
5. PUBLIC COMPANY DISCLOSURES AND INVESTOR RIGHTS
STATUTORY RIGHTS OF INVESTORS
-RIGHT OF WITHDRAWAL
-RIGHT OF RESCISSION
-RIGHT OF ACTION FOR DAMAGES
5.TAKEOVER BIDS AND INSIDER TRADING
EARLY WARNING DISCLOSURE