SRF LTD.

HOW SRF LTD. APPLY THESE ACCOUNTING

CONCEPT TO THEIR COMPANY?
Going concern

Disclosure

Materiality

Accrual

Consistency
GOING CONCERN
▪ Financial Statement Preparation: SRF Ltd. Would prepare their financial
statements, such as the balance sheet and income statement, assuming that the
company will continue its operations for the foreseeable future. This means that
assets and liabilities are recorded with the expectation that they will be realized
and settled in the normal course of business

▪ Long-Term Investments: They would consider their long-term investments and

commitments in light of the going concern assumption. For example, if they have
long-term loans or investments in subsidiaries, they would assess whether they
have the ability to meet these obligations as they come due
▪ Inventory Valuation: The valuation of inventory would be done considering
its expected sale or use in the ordinary course of business. Obsolete or
slow-moving inventory might be written down or adjusted accordingly

▪ Debt Covenants: If SRF Ltd. Has debt agreements with lenders, they would
assess their ability to meet debt covenants and interest payments in the
future. This is essential for ensuring compliance with loan agreements

▪ Cash Flow Projections: The company would prepare cash flow projections
to evaluate whether they have sufficient liquidity to meet their short-term
obligations and continue operations
DISCLOSURE
▪ Financial Statements: SRF Ltd. Publishes its financial statements annually and
quarterly. These include the balance sheet, income statement, and cash flow
statement, providing a snapshot of the company’s financial performance and
position

▪ Notes to Financial Statements: The company includes detailed notes

accompanying the financial statements. These notes explain accounting policies,
significant accounting estimates, and additional information about specific items in
the financial statements

▪ Management’s Discussion and Analysis (MD&A): SRF Ltd. Typically provides an

MD&A section in its annual report. This narrative explains the company’s financial
results, identifies significant trends, and discusses the outlook for the business
▪ Risk Factors: The company discloses a list of potential risks that could impact its
operations, including market risks, regulatory risks, and competitive risks. This
information helps investors understand the challenges the company faces

▪ Corporate Governance: SRF Ltd. Discloses its corporate governance practices,

including the composition and roles of its board of directors and any relevant
committees, as well as its adherence to corporate governance codes or guidelines
MATERIALITY
▪ Disclosure of Events: Material events or transactions occurring after the reporting
period but before the financial statements are issued are disclosed if they could
have a material impact on the company’s financial position or performance

▪ Segment Reporting: Materiality is considered when determining whether

individual business segments should be reported separately in financial
statements. Segments that meet materiality thresholds are disclosed separately to
provide more detailed insights into the company’s operations

▪ Related-Party Transactions: Transactions with related parties are disclosed,

particularly if they are material and have the potential to influence the decisions of
stakeholders
▪ Environmental and Social Responsibility: Material sustainability and
environmental impact information is disclosed, as it can be of importance to
stakeholders who are increasingly concerned about corporate responsibility

▪ Legal and Regulatory Compliance: Material legal and regulatory matters, such as
pending lawsuits or regulatory investigations, are disclosed to provide
transparency regarding potential financial and reputational impacts

▪ Performance Metrics: The company focuses on material performance metrics and

key performance indicators (KPIs) in its reporting to highlight what is most relevant
to investors and analysts
ACCRUAL
▪ Accrual Adjustments: At the end of each accounting period, SRF Ltd. Makes
accrual adjustments to their financial records to ensure that revenues and expenses
are recognized in the correct period. These adjustments are part of the closing
process

▪ Accrual Basis Financial Statements: The financial statements prepared by SRF

Ltd., such as the income statement and balance sheet, are presented on an accrual
basis to provide a more accurate picture of the company’s financial performance
and position

▪ Inventory Valuation: SRF Ltd. Uses accrual accounting to value its inventory at the
lower of cost or market value. This ensures that the balance sheet accurately
reflects the value of the inventory on hand
▪ Depreciation: The company recognizes depreciation expenses over the useful life
of their assets, even though the cash outlay for the asset may have occurred in a
previous period. This reflects the allocation of the asset’s cost over time

▪ Accrued Liabilities: SRF Ltd. Accounts for accrued liabilities, such as unpaid
salaries or accrued interest on loans, to ensure that expenses are matched with the
periods in which they are incurred
CONSISTENCY
▪ Audit Process: During the audit process, auditors review the company’s adherence
to consistent accounting policies and may provide recommendations or identify
any departures from these policies

▪ Internal Controls: The company establishes internal controls to ensure that

accounting policies are consistently applied across various departments and
subsidiaries, reducing the risk of errors and discrepancies

▪ Consistency with Industry Standards: SRF Ltd. Aligns its accounting practices with
industry standards and regulatory requirements to ensure consistency not only
within the company but also within the industry
▪ Changes in Accounting Policies: If SRF Ltd. Decides to change an accounting
policy, they are required to disclose the change and provide a justification for it.
Such changes are typically applied retrospectively, meaning that the impact on
prior periods is restated to maintain consistency

▪ Financial Reporting: SRF Ltd. Maintains consistency in the format and presentation
of its financial statements and reports. This includes consistent labeling of financial
statement line items and the use of standardized formats