1.1 Regulatory framework - introduction

Question 1

What is the main objective of financial reporting?

Answer 1

To provide useful information about the reporting entity to shareholders and other users.

Question 2

What does IFRS stand for?

Answer 2

International Financial Reporting Standards

Question 3

What does UK GAAP stand for?

Answer 3

The UK Generally Accepted Accounting Principles

Question 4

Which body issues the International Financial Reporting Standards (IFRS)?

Answer 4

The International Accounting Standards Board (IASB)

Question 5

Why are accounting standards often more effective than laws?

Answer 5

Laws are slow to change, whereas accounting standards can respond effectively to major incidents (e.g. Carillion)

Question 6

What are some key aims of the regulatory framework? (6 things)

Answer 6

• ensure consistent and comparable reporting
• ensure objective reporting
• ensure a minimum level of information in financial statements
• improve transparency and credibility
• regulate the behavior of companies
• achieve desired social goals (CSR)