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FR Textbook > 6. A conceptual and regulatory framework > Flashcards

6. A conceptual and regulatory framework Flashcards

1
Q

What is the regulatory framework effected by other than the IFRS standards?

A
  • National company law
  • EU directives
  • Security exchange rules
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2
Q

Why is the regulatory framework necessary?

A

It ensures that relevant and reliable financial reporting is achieved to meet the needs of the shareholders and other users

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3
Q

Accounting standards on their own would not be a complete regulatory framework.

What is also needed to fully regulate the obligations of companies and directors?

A

Legal and market regulations

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4
Q

What is a principles based framework based on?

A

Based on a conceptual framework such as the IASB’s framework

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5
Q

What kind of approach does the rules based framework use?

A

Cookbook approach

Accounting standards are a set of rules

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6
Q

In the UK what is there a principles based framework on?

A
  • Statements of principles

- Accounting standards

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7
Q

In the UK what is there a rules based framework on?

A
  • Companies act
  • EU directives
  • Stock exchange rulings
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8
Q

Explain why the harmonisation of accounting standards is beneficial for…

Multinational entities

A
  • Financial information is more understandable
  • Greater efficiency in accounting departments
  • Consolidation is easier
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9
Q

Explain why the harmonisation of accounting standards is beneficial for…

Investors

A

Easier to make decisions based on worldwide availability of investments

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10
Q

Explain why the harmonisation of accounting standards is beneficial for…

Tax authorities

A

Tax liabilities of investors easier to calculate

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11
Q

Explain why the harmonisation of accounting standards is beneficial for…

Large international accounting firms

A

Accounting and auditing is easier if similar accounting practices exist on a global basis.

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12
Q

What are the disadvantage of harmonisation of accounting standards in relation to…

Introduction

A

Difficult to introduce, maintain and enforce in different countries

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13
Q

What are the disadvantage of harmonisation of accounting standards in relation to…

Legal systems

A

Different legal systems may prevent application

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14
Q

What are the disadvantage of harmonisation of accounting standards in relation to…

Countries

A

Some countries may be unwilling to accept other countries standards

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15
Q

What are the disadvantage of harmonisation of accounting standards in relation to…

Costs

A

Costly to develop a full detailed set of accounting standards

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16
Q

What do IFRS foundation do? 2

A
  • Supervise IASB

- Responsible for governance

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17
Q

What are the objectives of the IFRS foundation? 2

A
  • Develop high quality standards

- Promote the use and convergence of national accounting standards

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18
Q

What does the IASB board do? 2

A
  • Solely responsible for issuing IFRS’s

- Create a single set of understandable and enforceable accounting standards

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19
Q

What does the IFRS Advisory Council do? 2

A

Advise board agenda

-Informing IASB of the views/opinions of organisations and individuals

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20
Q

What do the IFRS Interpretations committee do? 2

A

-Issue guidance on how to apply the standards practically

For when people do not know how to apply the standard

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21
Q

What does the IFRS Advisory council do to allow individuals and organisations to participate in standard setting? 2 steps

A
  • Issue ED (exposure draft)

- Public come back with comments

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22
Q

What are interpretations made by the interpretations committee known as?

A

IFRIC Interpretations

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23
Q

Who provides a forum for the IASB to consult with the national accounting standard setters, academics and other interested parties?

A

IFRS Foundation

24
Q

What are the five ways the IFRS are used around the world?

A
  • National requirements
  • A basis for national requirements
  • International benchmark
  • Used by regulatory authorities for domestic and foreign companies
  • Used by companies themselves
25
Q

How does the IASB prepare the IFRS’s?

A

In accordance with due process

26
Q

What is the first step with standard setting?

A

Establish consultative group

27
Q

What is the second step with standard setting?

A

Project is accepted and committee set up

28
Q

What is the third step with standard setting?

A

On major projects the IASB develops and publishes a discussion document

29
Q

What is the fourth step with standard setting?

A

Following receipt and review of comments an exposure draft is produced

30
Q

What is the fifth and final step with standard setting?

A

Folowing receipt and review of comments the final IFRS is issued.

31
Q

How many of the board members’ votes are required to publish an exposure draft?

A

8/15

32
Q

What are the two qualitative characteristics categories?

A
  • Fundamental

- Enhancing

33
Q

What are the two fundamental qualitative characteristics?

A

Relevance

Faithful representation

34
Q

What are the four enhancing qualitative characteristics?

A
  • Comparability
  • Verifiability
  • Timeliness
  • Understandability
35
Q

What is the underlying assumption of the financial statements?

A

The going concern concept

36
Q

When is information relevant?

A
  • When it has the ability to influence the economic decisions of the users; and
  • It is provide in time to influence those decisions
37
Q

What are the two qualities of relevance?

A

Predictive and confirmatory value

38
Q

What do we mean by predictive?

A

Predictive value enables users to evaluate or assess past, present or future events.

39
Q

What do we mean by confirmatory?

A

Confirmatory value helps users to confirm or correct past evaluations and assessments.

40
Q

How do we present transactions so that they are faithfully represented?

A

In accordance with their economic substance rather than their legal form

41
Q

What are the three characteristics of Faithful representation?

A

Completeness
Neutrality
Free from error

42
Q

What characteristic of faithful representations is below?

To be understandable information must contain all the necessary descriptions and explanations.

A

Completeness

43
Q

What characteristic of faithful representations is below?

Information must be free from bias

A

Neutrality

44
Q

Information must be free from error within the bounds of materiality.

A
45
Q

Comparability

A

Users must be able to compare period to period and company to company

46
Q

Verifiability

A

Knowledgeable and Independent users could reach a consensus that the depiction is a faithful representation.

47
Q

Timeliness

A

Having information available in time for decision makers to be capable of influencing their decisions.

48
Q

Understandability

A

Assuming users have a reasonable business knowledge and willingness to study, the statements should be understandable.

49
Q

What is an economic resource?

A

A right that has the potential to produce economic benefit.

50
Q

What is an asset?

A
  • A present economic resource controlled by the entity

- As a result of past events

51
Q

What is a liability?

A
  • A present obligation of the entity

- To transfer an economic resource as a result of past events

52
Q

What is equity (think of the accounting equation)

A

Equity is the residual interest in the assets of the entity after deducting all its liabilities’

53
Q

What is income?

A

Increases in assets or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims

54
Q

What are expenses?

A

Decreases in assets or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims.’

55
Q

What is Capital maintenance?

A

A theoretical concept which tries to ensure that excessive dividends are not paid in times of changing prices.

56
Q

What are the two types of capital maintenance?

A

Physical

Financial

FR Textbook (23 decks)

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