financial reporting
DESCRIPTION
Background, lecture notesTRANSCRIPT
-
ACC410 Financial ReportingLecturerDr. J. JosiahOffice: 245/[email protected]
Semester 1
ACC410 Week1 L*
ACC410 Week1 L
-
ACC410 - AssessmentACC410 Week1 L*Coursework2 Tests 40%Degree exam 60% ReadingJennings, A.R.: Financial Accounting, 2nd edition.Wood, F. and Sangster, A.: Business Accounting IIGee, P.: Spicer and Peglers Bookkeeping and Accounts. Lexis Law Publishing
ACC410 Week1 L
-
The Regulation of Financial Reporting; standard setting process.
ACC410 Week1 L*
ACC410 Week1 L
-
ContentsAnnual financial statementsUses of financial statementsAccounting choicesQualitative characteristicsAccounting regulationInternational Financial Reporting StandardsACC410 Week1 L*
ACC410 Week1 L
-
Annual financial statements
Old terminologyIncome statement Balance sheet Notes to the accountsCash flow statementStatement of changes in equityAudit report
New terminologyStatement of comprehensive incomeStatement of financial position Notes to the financial statementsStatement of cash flowsStatement of changes in equityAudit report
ACC410 Week1 L*
ACC410 Week1 L
-
Uses of Financial StatementsObjective of financial statementsUser groupsAccounting traditionsAnglo-Saxon accountingContinental EuropeLink with taxationBotswanaCompanies Act Accountants Act
ACC410 Week1 L*
ACC410 Week1 L
-
Objective of financial statements
The...general purpose 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 in their capacity as capital providers. Information that is decision useful to capital providers may also be useful to other users of financial reporting who are not capital providers.
Source: IASB, Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics and Constraints of Decision-Useful Financial Reporting Information, para OB2, exposure draft issued on May 29, 2008
ACC410 Week1 L*
ACC410 Week1 L
-
Users of financial statementsACC410 Week1 L*
ACC410 Week1 L
-
Fund ProvidersEquity investorsLendersOther creditorsTo the extent that suppliers, customers or other groups make decisions relating to providing capital to the entity in the form of credit, they are capital providersACC410 Week1 L*
ACC410 Week1 L
-
Accounting traditionsAnglo-Saxon traditionContinental European tradition
ACC410 Week1 L*
ACC410 Week1 L
-
Anglo-Saxon accountingMainly US, UK, Australia, Canada, New ZealandFinancial statements as a function of a companys financingMarket solution to accounting rulesPowerful accounting profession
ACC410 Week1 L*
ACC410 Week1 L
-
Continental European accountingFinancial statement as a product of government regulating of the economyAll businesses are subject to accounting rules, with extra rules for:Limited liability companiesListed companies
ACC410 Week1 L*
ACC410 Week1 L
-
Accounting choicesAccounting is not necessarily a set of precise measurement rules which permit the exact measurement of company profit and company valueMeasurement of profit can never be anything but an estimateAccounting measurement is full of choicesChoices made should be stated clearly in the annual financial statements
ACC410 Week1 L*
ACC410 Week1 L
-
Accounting choicesAttributes of financial information that underpin the decision-usefulness of financial reportingFundamental versus enhancing characteristicsMateriality and cost as pervasive constraints
ACC410 Week1 L*
ACC410 Week1 L
-
Fundamental qualitative characteristicsRelevanceFaithful representationCompleteNeutralFree from bias
ACC410 Week1 L*
ACC410 Week1 L
-
Enhancing qualitative characteristicsVerifiabilityComparabilityUnderstandabilityTimeliness
ACC410 Week1 L*
ACC410 Week1 L
-
Qualitative characteristics Fundamental QC
Relevance Faithful representationCompleteNeutral Free from material error
Enhancing QC
Verifiability Comparability Understandability Timeliness
ACC410 Week1 L*
ACC410 Week1 L
-
Accounting regulationAccounting regulation disciplines accounting choicesTypes of regulatory body:GovernmentStock exchangePrivate sector bodyProfessional accountantsSpecialist industry organizationsSeparate rules for banks and insurance companiesACC410 Week1 L*
ACC410 Week1 L
-
Government as accounting regulatorRegulation of accounting designed to ensure that the markets can operate free from fraud and misrepresentationAccounting lawsCommercial codesGovernment regulatory agenciesRegulation of accounting for tax collection purposes
ACC410 Week1 L*
ACC410 Week1 L
-
Stock exchange as accounting regulatorStock exchange regulates the financial information to be provided by listed companiesIn some countries this is done by a government regulator
ACC410 Week1 L*
ACC410 Week1 L
-
Private sector as accounting regulatorDelegation of responsibility of writing detailed accounting rules to private sector bodies, financed by contributions from companies, audit industry, etc..Global: International Accounting Standards Board (IASB)Flexible and rapid rule-making, as opposed to governmental rule-makingTechnical committees from professional accounting bodies may function as catalyst
ACC410 Week1 L*
ACC410 Week1 L
-
International bodiesInternational Accounting Standards Board (IASB)The worlds leading accounting standards-setterIssues the International Financial Reporting Standards (IFRS)IFRS either compulsory or allowed in more than 100 countriesIntergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR)Under the auspices of the UN Conference on Trade and Development (UNCTAD)Commissions research reports into current accounting problemsInternational Federation of Accountants (IFAC)International representative of the accounting profession
ACC410 Week1 L*
ACC410 Week1 L
-
International Financial Reporting StandardsSingle set of global accounting and reporting standards, issued by the IASBIncreasingly used by many large and multinational companiesAccepted by most security market authoritiesUsed as a basis for national accounting requirements (partially or in full) or as a benchmark for the development of national accounting rulesACC410 Week1 L*
ACC410 Week1 L
-
International Accounting Standards BoardA private sector bodyOperates under the International Accounting Standards Committee Foundation (IASCF)Has no responsibility to any governmental organizationHas no enforcement authorityDevelops and issues both main standards (IAS / IFRS) and interpretations (SIC / IFRIC)
ACC410 Week1 L*
ACC410 Week1 L
-
Fig. 1.2 - The structure of the IASB (W&A, p. 25)ACC410 Week1 L*
ACC410 Week1 L
-
Fig. 1.3 - Standard-setting due process of the IASB (W&A p, 27 )ACC410 Week1 L*
ACC410 Week1 L
-
Economic and social impacts of accounting regulation new standards have social and economic impacts through their impact on the accounts e.g.IFRS 2 has no impact on cash flows directly, but arguably affects managerial motivations (UK) accounting standard on pension liabilities*ACC410 Week1 L
ACC410 Week1 L
-
Economic interest group theoryassumes groups will form to protect particular economic interestsgroups are often in conflict with each other and will lobby government to put in place legislation which will benefit them at the expense of othersno notion of public interest inherent in the theoryregulators (and all other individuals) deemed to be motivated by self interestthe regulator is not a neutral arbiter but is seen as an interest group itself*ACC410 Week1 L
ACC410 Week1 L
-
Economic interest group theory - continuedregulator motivated to ensure re-election or maintenance of its position of powerregulation serves the private interests of politically effective groupsthose groups with insufficient power will not be able to effectively lobby for regulation to protect its own interestsThe regulator will utilise their power to regulate to transfer wealth from those people with low levels of political power to those parties with greater levels of political power *ACC410 Week1 L
ACC410 Week1 L
-
Accounting regulation as an output of a political processthe view that financial accounting should be objective, neutral and apolitical can be challengedwill inevitably be political as it affects wealth distribution within societystandard-setters encourage affected parties to make submissions on drafts of proposed standards if standard-setters give consideration to views in submissions, accounting standards and therefore financial reports are the result of various social and environmental considerationstied to the values, norms and expectations of the society in which standards are developedquestionable whether financial accounting can claim to be neutral and objective *ACC410 Week1 L
ACC410 Week1 L
-
Table 1.1 - List of IASB rules as of September 2008 (W & A, pp. 22-24 )ACC410 Week1 L*
ACC410 Week1 L
Conceptual Framework
CF
Framework for the Preparation and Presentation of Financial Statements
Main standards
IAS 1
Presentation of Financial Statements
IAS 2
Inventories
IAS 7
Statement of Cash Flows
IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10
Events after the Reporting Period
IAS 11
Constructions Contracts
IAS 12
Income Taxes
IAS 14
Segment Reporting
IAS 16
Property, Plant and Equipment
IAS 17
Leases
IAS 18
Revenue
IAS 19
Employee Benefits
IAS 20
Accounting for Government Grants and Disclosure of Government Assistance
IAS 21
The Effects of Changes in Foreign Exchange Rates
IAS 23
Borrowing Costs
IAS 24
Related Party Disclosures
-
Table 1.1 - List of IASB rules as of September 2008 (cont.)ACC410 Week1 L*
ACC410 Week1 L
Main standards (continued)
IAS 26
Accounting and Reporting by Retirement Benefit Plans
IAS 27
Consolidated and Separate Financial Statements
IAS 28
Investments in Associates
IAS 29
Financial Reporting in Hyperinflationary Economies
IAS 30
Disclosure in the Financial Statements of Banks and Similar Financial Institutions
IAS 32
Financial Instruments: Disclosure and Presentation
IAS 33
Earnings per Share
IAS 34
Interim Financial Reporting
IAS 36
Impairment of Assets
IAS 37
Provisions, Contingent Liabilities and Contingent Assets
IAS 38
Intangible Assets
IAS 39
Financial Instruments: Recognition and Measurement
IAS 40
Investment Property
IAS 41
Agriculture
IFRS 1
First-time Adoption of International Financial Reporting Standards
IFRS 2
Share-based Payment
IFRS 3
Business Combinations
IFRS 4
Insurance Contracts
IFRS 5
Non-current Assets Held for Sale and Discontinued Operations
IFRS 6
Exploration for and Evaluation of Mineral Resources
IFRS 7
Financial Instruments: Disclosures
IFRS 8
Operating segments
-
Table 1.1 - List of IASB rules as of September 2008 - InterpretationsACC410 Week1 L*
ACC410 Week1 L
Interpretations
SIC 7
Introduction of the Euro (IAS 21)
SIC 10
Government Assistance No Specific Relation to Operating Activities (IAS 20)
SIC 12
Consolidation Special Purpose Entities (IAS 27)
SIC 13
Jointly Controlled Entities Non-Monetary Contributions By Venturers (IAS 31)
SIC 15
Operating Leases Incentives (IAS 17)
SIC 21
Income Taxes Recovery of Revalued Non-Depreciable Assets (IAS 12)
SIC 25
Income Taxes Changes in the Tax Status of an Enterprise or its Shareholders IAS (12)
SIC 27
Evaluating the Substance of Transactions involving the Legal Form of a Lease
SIC 29
Disclosure Service Concession Arrangements
SIC 31
Revenue Barter Transactions Involving Services
SIC 32
Intangible Assets Web Site Costs
IFRIC 1
Changes in Existing Decommissioning, Restoration and Similar Liabilities
IFRIC 2
Members Shares in Co-operative Entities and Similar Instruments
IFRIC 3
Emission Rights (withdrawn by the Board in June 2005)
IFRIC 4
Determining Whether an Arrangement contains a Lease
IFRIC 5
Rights to Interests arising from Decommissioning, Restoration and Environmental
Rehabilitation Funds
-
Table 1.1 - List of IASB rules as of September 2008 Interpretations (cont.)ACC410 Week1 L*
ACC410 Week1 L
Interpretations
IFRIC 6
Liabilities arising from Participating in a Specific Market Waste Electrical and Electronic Equipment
IFRIC 7
Applying the Restatement Approach under IAS 29
IFRIC 8
Scope of IFRS 2
IFRIC 9
Reassessment of Embedded Derivatives
IFRIC 10
Interim Financial Reporting and Impairment
IFRIC 11
Group and Treasury Share Transactions (IFRS 2)
IFRIC 12
Service Concession Arrangements
IFRIC 13
Customer Loyalty Programmes
IFRIC 14
The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (IAS 19)
IFRIC 15
Agreements for the Construction of Real Estate
IFRIC 16
Hedges for a Net Investment in a Foreign Operation
1FA (wk1)- Introduction to 1FA*1FA (wk1)- Introduction to 1FA*1FA (wk1)- Introduction to 1FA*1FA (wk1)- Introduction to 1FA*1FA (wk1)- Introduction to 1FA*1FA (wk1)- Introduction to 1FA*1FA (wk1)- Introduction to 1FA*1FA (wk1)- Introduction to 1FA*1FA (wk1)- Introduction to 1FA*1FA (wk1)- Introduction to 1FA*1FA (wk1)- Introduction to 1FA*1FA (wk1)- Introduction to 1FA