AC5&6 | CFAS

• Recording, summarizing, and reporting financial transactions of an organization. A process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties.

  Financial Accounting.
• What is Financial Reporting?

  Providing financial information about the reporting entity that is useful to various users.
• What is considered as the "Bible of Accountants?"

  Accounting Standards
• What is the relationship of AC1&2 and AC5&6?

  The conceptual framework and accounting standards that is tackled in AC5&6 is integrated in the accounting cycle from AC1&2
• What are accounting standards?

  • Guidelines and rules that govern how financial statements are prepared and presented.
  • The primary source of Generally Accepted Accounting Principles (GAAP).
• Accounting standards specify how transactions and other events are to be recognized, summarized, measured, presented, and disclosed in financial statements.
• What standard-setting body issued the International Financial Reporting Standards (IFRS)?

  International Accounting Standards Board (IASB)
• Give the 4 (5) organization that composes the international standard-setting structure.

  International Accounting Standards Board

  IFRS Advisory Council (The Advisory Council)

  IFRS Foundation

  IFRS Interpretation Committee

  Monitoring Board
• What is the function of the International Accounting Standards Board?


  Develops International Financial Reporting Standards (IFRS) for general-purpose Financial Statements.
• What is the function of the IFRS Advisory Council (The advisory council)?

  Provide advice and recommendations to the International Accounting Standards Board (IASB) on the development and implementation of International Financial Reporting Standards (IFRS).
• What is the function of the IFRS Interpretation Committee?

  To provide guidance and clarification on the application of International Financial Reporting Standards (IFRS).
• What is the function of the IFRS Foundation?

  Overseeing the IASB, The Advisory Council, and the IFRS Interpretation Committee.

  It appoints members, reviews effectiveness, and helps in fundraising efforts for these organizations.
• What is the Monitoring Board in the standard-setting body for?

  To establish a link between accounting standard setters and those public authorities that generally oversee them.
• What are the 3 major types of pronouncements from IASB?

  International Financial Reporting Standards

  Conceptual Framework for Financial Reporting

  International Financial Reporting Standards Interpretations
• The Conceptual Framework for Financial Reporting sets forth the fundamental objective and concepts that the Board uses in developing future standards of financial reporting.
• The objective of general-purpose financial reporting is to provide financial information about the reporting entity to potential investors or creditors to be able to make sound decisions.
• Characteristics of Liability according to the Conceptual Framework from IASB.

  1. Present Obligation
  2. Future Economic Sacrifice
  3. Resulted from Past events
• What are the ingredients of relevant (Relevance) financial information?

  Materiality, Predictive Value, and Confirmatory Value
• What are the ingredients of Faithful Representation?

  Completeness, Neutrality, and Free from error
• With Enhancing qualitative characteristics, we will know which financial information is more useful for the primary users. What are these?

  Verifiability, Comparability, Understandability, and Timeliness.
• Pervasive constraint that is inherent in preparing financial information. Preparing financial information always has what?

  Cost. Cost Constraint.
• Authoritative standard for Financial Accounting and Reporting.

  Accounting Standards
• Differentiate Stakeholders to Shareholders/Stockholders.

  All shareholders are stakeholders but not all stakeholders are shareholders. Shareholders emphasized the return on their investment made in the company, while stakeholders may have other reasons for their interest in the company.
• General Purpose Financial Statements can provide the Reporting entity's history.
• The underlying theory for the development of Accounting Standards.

  Conceptual Framework
• Primary users of General Purpose Financial Statements.

  Existing and potential Lenders, Investors, and Other Creditors