Dvmnt of Fin Rep Framework and standard-setting bodies

• Accounting - this is important for markets, free enterprise, and competition because it assists in providing information that leads to capital allocation.
• Capital allocation - is the process of determining the most efficient investment strategy for an organization's financial resources, with the goal of maximizing shareholder equity.
• Financial accounting - is the process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties.
• Financial accounting - is the broadest branch of accounting
• The main purpose of the accounting standards is to ensure the relevance and reliability to the external users.
• Financial statements - are the principal means through which a company communicates its financial information to those outside it
• Notes disclosure - is an integral part of each financial statement.
• other means of financial reporting include the president's letter or supplementary schedules in the corporate annual report, prospectuses, and reports filed with government agencies.
• The objective of general-purpose of financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions about providing resources to the entity.
• General-purpose financial statements - provide at the least cost the most useful information possible to a wide variety of users.
• OBJECTIVE OF FINANCIAL REPORTING 1. General-purpose financial statement 2. Equity investors and creditors 3. entity perspective 4. decision-usefulness
• Equity investors and creditors - are the primary user group and have the most critical and immediate needs for information in the financial statements.
• Entity perspective - means that the company is viewed as being separate and distinct from its investors.
• Therefore the assets of the company belong to the company, not a specific creditor or shareholder
• Decision-usefulness - means that information contained in the financial statements should help investors assess the amount, timing, and uncertainty of prospective cash inflows
• Branches of accounting: Financial accounting Managerial accounting Cost accounting Auditing Government Accounting Tax accounting Accounting Education
• Financial accounting - is focused on the recording of business transaction and periodic preparation of reports on financial position and results of operation.
• Management accounting - is defined by Institute of Management Accountants is a profession that involves partnering in management decision making.
• Management accounting - for internal use; hindi ginagamitan ng GAAP
• Financial accounting - for external use; using GAAP
• Cost accounting - deals with the collection, allocation, and control of the cost of producing specific goods and services.
• Auditing - is an independent examination that ensures the fairness and reliability of the reports that management submits to users outside the business entity.
• Tax accounting - includes preparation of tax returns and the consideration of tax consequences of proposed business transactions.
• Accounting education - employs accountants either as researchers, professors, or reviewers.
• International Accounting Standards Board (IASB) - The main international standard setting organization , based in London, United Kingdom.
• The IASB issues IFRS
• IFRS - used by most foreign exchange
• The two organizations that have a role in international standard-setting - International Organization of Securities Commission and IASB
• IOSCO - does not set accounting standards; it is dedicated to ensuring that the global markets can operate in an efficient and effective basis.
• IOSCO - Recommends that its members allow multinational issuers to use IFRS in cross-folder offerings and listings, as supplemented by reconciliation, disclosure and interpretation where necessary, to address outstanding substantive issues at a national or regional level.
• International standard-setting structure composed of: 1. IFRS Foundation 2. IASB 3. IFRS Advisory Council 4. IFRS Interpretations Committee
• IFRS Foundation - provides oversight to the IASB, IFRS ADVISORY COUNCIL, AND IFRS INTERPRETATION COMMITTEE
• HOW MANY TRUSTEES NEEDS IN IFRS FOUNDATION - 22
• IASB - DEVELOPS IN THE PUBLIC INTEREST, A SINGLE SET OF HIGH-QUALITY FINANCIAL REPORTING STANDARDS FOR GENERAL-PURPOSE FINANCIAL STATEMENTS.
• HOW MANY MEMBERS ANG NEED NG IASB? 16
• IFRS Advisory council - provides advice and council to the IASB on major policies and technical issues
• How many members and need sa IFRS Advisory Council? 30 or more
• IFRS Interpretations Committee - assists the IASB through the timely identification, discussion, and resolution of financial reporting issues within the framework of IFRS.
• IASB specific steps to develop a typical IFRS

  • Topics are identified and placed on the board's agenda
  • research and analysis are conducted, and preliminary views of pros and cons are issued
  • public hearings are held on the proposed standard
  • the board evaluates research and public responses and issues an exposure draft
  • the board evaluates the responses and changes the exposure draft, if necessary.
  • then the final standard is issued
• Characteristics of IASB

  • MEMBERSHIP
  • AUTONOMY
  • INDEPENDENCE
  • VOTING