23 - The regulatory system Flashcards
what is company law around accounting
limited liability companies must produce accounts annually for distribution to shareholders
must be lodged with the registrar of companies and is available for inspection by public
what is an audit defined as
an independent examination of, and expression of opinion on, the financial statements of an enterprise
what are the 6 accountancy bodies
- chartered institute of management accountants (CIMA)
- institute of chartered accountants in england and wales (ICAEW)
- institute of chartered accountants of scotland (ICAS)
- chartered accountants ireland
- association of chartered certified accountants (ACCA)
- chartered institute of public finance and accountancy (CIPFA)
how is the regulatory framework structured in terms of power
IFRS foundation appoints IFRS advisory council, IFRS interpretations committee and International Accounting Standards Board (IASB)
IFRS advisory council advises International Accounting Standards Board (IASB) and IFRS foundation
IFRS interpretations committee reports to International Accounting Standards Board (IASB) who reports to IFRS foundation
what is the IFRS foundation
- not for profit organisation based in US heading regulatory system
- trustees appoint all boards under it
- oversee regulatory system and raise finance necessary to support it
- no involvement in accounting standard setting process
what is the International Accounting Standards Board (IASB)
- their principal is to develop a single set of high quality accounting standards: IFRS
- issues IFRSs and liases with national standard setters with the aim of achieving convergence in accounting standards globally
what is the IFRS interpretations committee
issues guidance on both:
- how to apply existing IFRSs in company financial statements and
- how to account for new financial reporting where no IFRS exists, reports to IASB
what is the IFRS advisory council
to advise the IASB on a range of issues:
- the IASB’s agenda and timetable for developing IFRSs
- advising IASB on areas that may need to be considered by IFRS interpretations committee
what are the role of International Financial Reporting Standards (IFRS)
they provide guidance as to how items should be known in financial statements
recognised = when should items be recorded
measured = what amount should be recorded
presented = where should items be categorised
disclosed = what info should be shown in notes to financial statements
what is an integrated report
a wide ranging report demonstrating how an organisation brings together strategy, governance, performance and future prospects to create value for stakeholders
considers external environment as well as non financial elements of performance
what factors are considered in the value creation process
- financial (funds available)
- manufactured (value of equipment, buildings)
- intellectual (eg patents, specialist knowledge)
- human (skills, motivation)
- social and relationship (internal culture of business and external brand value)
- natural (impact on environment, use of natural resources)
benefits of integrated reporting
- business can demonstrate short, medium, long term strategy to shareholders/investors
- makes connections between strategic aims, governance and financial reporting clearer
- allows for more effective capital allocation decisions to be made = long term investment returns and link between company departments to improve internal processes
what are the aspects of an integrated report
OVERVIEW = what organisation does, under which circumstances?
GOVERNANCE = how does organisations governance structure support ability to create short/medium/long term value?
OPPORTUNITIES/RISK = which ones affect ability to create value over time frame, how they are dealt with
STRATEGY AND RESOURCE ALLOCATION = where does organisation want to go and how?
BUSINESS MODEL = organisations business model and is it resilient?
PERFORMANCE = has organisation achieved strategic objectives? what are outcomes as effects on capital?
FUTURE OUTLOOK = challenges/uncertainties likely to encounter, implications for business model and performance?
