2. The Regulatory Framework Flashcards
Why is a regulatory framework for preparing financial statements needed? (4)
- Ensure basic user needs are met
- Ensure data is comparable and consistent
- Increase user confidence
- Regulate company behaviour
Give an example of…
a) National reporting standards
b) National law
c) market regulators
d) security exchange rules
a) IFRS standards
b) Companies Act 2006
c) Financial Conduct Authority
d) London Stock Exchange
What is the IFRS Foundation?
What are its main principles? (4)
Supervisory body for the IASB.
- High quality standards
- Promote the use of these standards
- Emphasise needs of SMEs and emerging economies
- Convergence in national and international reporting standards
What is the IASB?
International Accounting Standards Board: responsible for developing and publishing standards.
What is the IFRS AC?
What are it’s main objectives? (3)
Advisory Council: advisory body.
- Give advice
- Inform board of all opinions
- Choose agenda and work priorities
What is corporate governance?
Corporate governance is the system by which a business is directed and controlled.
What are the main components of the UK Corporate Governance Code? (5)
- Leadership of the company
- Effectiveness of the board
- Accountability of the board
- Remuneration of the board
- Relationship with stakeholders
What is the act in the US responsible for corporate governance?
What are its main enforcements? (4)
Sarnabes Oxley Act
- Auditor evidence
- Management evidence
- Clear documentation
- Sound systems of internal controls
What is prudence?
Taking precaution when making judgements under conditions of uncertainty.
What does the interpretations committee do?
Review widespread issues and reports back to the Board.
How do they develop an IFRS Standard?
- appoints a committee to a subject
- release exposure draft for public comment
- after feedback, final draft is published
- the Board may request a discussion paper to encourage comment
- Publication requires a +50% vote (8/15)
