BUS275

• Who owns companies but does not manage them?


  Shareholders
• Why do shareholders rely on financial reports?

  To help them make important decisions
• Who else, besides shareholders, may rely on financial reports?

  Creditors and other user groups
• What is the purpose of regulations in financial reporting?

  To ensure that financial reports provide a faithful representation
• What are the sources of regulation for financial reporting?

  • Legislation (e.g., Companies Act 2006 in the UK)
  • Accounting standards (national and international)
  • Stock exchange regulations

  
• What does GAAP stand for?

  Generally Accepted Accounting Practice
• What does "international GAAP" refer to?

  The standards issued by the IASB and the principles on which those standards are based
• When was the IASB formed?

  In 2001
• What is the role of the IFRS Advisory Council?

  To advise the IASB on its agenda and priorities
• What is the purpose of the IFRS Interpretations Committee?

  To interpret international standards and provide guidance on matters not covered by standards
• What are the steps in the standard-setting process?

  1. Identification of the topic area
  2. Application of the Conceptual Framework
  3. Consultation with stakeholders
  4. Publication of discussion document
  5. Publication of exposure draft
  6. Publication of standard

  
• What are the components of an international standard?

  • Introduction
  • Objectives and scope
  • Definitions
  • Body of the standard
  • Effective date and transitional provisions
  • Formal approval and dissenting opinions
  • Basis for conclusions
  • Application/implementation guidance

  
• What is the purpose of accounting standards?

  To reduce variation in accounting practice and introduce uniformity in financial reporting
• What does the IASB Conceptual Framework emphasize?

  The importance of faithful representation and comparability
• When did mandatory adoption of IFRS standards begin in the EU?

  In periods beginning January 2015
• How many countries require listed companies to adopt IFRS standards?

  Over 120 countries
• What is the status of IFRS adoption in the USA?

  The USA has not yet adopted IFRS Standards
• What is the "first IFRS reporting period"?

  The period covered by the first IFRS financial statements
• What must be prepared as at the date of transition for first-time IFRS adoption?

  An opening IFRS statement of financial position
• What accounting policies must be used in the opening IFRS statement?

  The same accounting policies used in all periods presented
• What is the purpose and scope of the IASB Conceptual Framework?

  • Assist in the development of international standards
  • Provide a basis for reducing alternatives
  • Assist national standard-setters
  • Assist preparers of financial statements
  • Assist auditors in compliance opinions
  • Assist users in interpreting financial statements

  
• What is the objective of general purpose financial reporting?

  To provide useful financial information to investors, lenders, and creditors
• What information should general purpose financial reports provide about an entity?

  • Financial position
  • Financial performance (accruals basis)
  • Cash flows
  • Changes in financial position not caused by performance

  
• Who are the primary users of general purpose financial reports?

  • Existing/potential investors
  • Existing/potential lenders and creditors
• Who are other users of general purpose financial reports?

  • Employees
  • Customers
  • Governments and their agencies
  • The public
• What are the qualitative characteristics of financial information?

  • Fundamental characteristics: relevance, faithful representation
  • Enhancing characteristics: comparability, verifiability, timeliness, understandability

  
• What is the underlying assumption for preparing financial statements?

  That the entity will continue in operation for the foreseeable future
• What is an asset?


  A resource controlled by the entity expected to provide future economic benefits
• What is a liability?

  A present obligation of the entity arising from past events
• What is equity?

  The residual interest in the assets of the entity after deducting liabilities
• What is income?


  Increases in economic benefits during the accounting period
• What is an expense?

  Decreases in economic benefits during the accounting period
• What are the criteria for recognizing an element in financial statements?

  • Probable future economic benefit
  • Measurable cost or value
• What is the most commonly used measurement basis in financial statements?

  Historical cost
• Who is responsible for preparing financial statements?

  Directors
• What is the objective of general purpose financial statements according to IAS1?

  To provide information about financial position, performance, and cash flows useful for economic decisions

  
• What are the components of financial statements?

  • Statement of financial position (B/S)
  • Statement of profit or loss and other comprehensive income (I/S)
  • Statement of changes in equity
  • Statement of cash flows
  • Notes

  
• What are the general features of financial statements?

  • Fair presentation
  • Compliance with international standards
  • Going concern basis
  • Accruals basis
  • Materiality and aggregation
  • Offsetting
  • Frequency of reporting
  • Comparative information
  • Consistency of presentation

  
• What must financial statements present fairly?

  The financial position, financial performance, and cash flows of the entity
• What must an entity do if it complies with international standards?

  Make an explicit and unreserved statement of compliance in the notes