Accounting principles and procedures Flashcards
What is the purpose of the RICS Valuation - Global Standards UK National Supplement 2023?
Sets out specific requirements, together with supporting guidance, for members on the application of the RICS Valuation – Global Standards (Red Book Global Standards) to valuations undertaken subject to UK jurisdiction.
What is the structure of the RICS Valuation - Global Standards UK National Supplement 2023?
UK Professional Standards (UK PS) – mandatory
- UK PS 1 Compliance with valuation standards within the UK jurisdiction
UK Valuation Technical and Performance Standards (UK VPSs) – mandatory
1. UK VPS 1 Terms of engagement (scope of work) and reporting: Redbook compliance
2. UK VPS 2 Terms of engagement (scope of work): supplementary provisions in Scotland
3. UK VPS 3 Regulated purpose valuations: supplementary governance requirements
UK Valuation Practical Guidance Applications (UK VPGAs)
Why was the RICS Valuation - Global Standards UK National Supplement 2023 updated?
- Enact changes in valuation standards and in the legislative and regulatory valuation frameworks.
- Enables the implementation of several recommendations made in RICS’ Independent Review of Real Estate Investment Valuations published in January 2022.
What are the two financial reporting frameworks set out in the RICS Valuation - Global Standards UK National Supplement 2023?
Generally Accepted Accounting Principles (GAAP)
International Financial Reporting Standards (IFRS)
What is GAAP?
UK GAAP is the overall body of regulation establishing how company accounts must be prepared in the UK.
The chief standard-setter is the Accounting Standards Board (ASB), which issues standards called Financial Reporting Standards (FRS).
The ASB is part of the Financial Reporting Council (FRC), an independent regulator funded by a levy on listed companies.
What are the IFRS?
International Financial Reporting Standards (IFRS)
Published by the IASB (International Accounting Standards Board).
In the UK, public listed companies adopt IFRS as their financial reporting standard.
Under the Companies Act 2006, SMEs can use the simplified FRS 102. This became effective from 1 January 2015 and is known as ‘new UK GAAP’.
When do companies use GAAP or IFRS?
All UK-based publicly listed companies are required to apply IFRS in the preparation of their group accounts, but may choose between IFRS and UK GAAP for the preparation of their individual parent accounts.
What is a balance sheet?
A financial statement that reports a company’s assets, liabilities and shareholder equity at a given point in time. It shows how a business is being funded and what the funds are used for.
What is a balance sheet used for?
o For reporting purposes - part of annual accounts
o For assessing worth
o To analyse and improve the management of the business.
o Assists in raising finance –lenders/investors will want to see at least 3 yrs account
What do balance sheets include?
Fixed assets (tangible/intangible)
Current assets (short-term assets - value changes from day to day)
Current liabilities (amounts owing and due within one year)
Long-term liabilities (creditors due after one year, capital and reserves)
How are balance sheets and profit and loss statements linked?
Many of the BS figures relate to or are affected by the state of play with P&L transactions on a given date.
E.g., amounts shown as cash or as current assets will be determined in part by the income and expenses recorded in the P&L.
What is a profit and loss statement?
A financial statement that summarises the revenues, costs, and expenses (from business transactions) incurred during a specified period (usually 12 months)
Sales: business sales/turnover and other income (interest on business bank accounts, sale of equipment no longer needed, rental income, money put in from personal funds)
Costs: cost of sales (base cost of producing/obtaining product), business expenses, cost of equipment bought or leased
How are profit and loss statements useful?
Compare P&L statements from different accounting periods - changes over time become more meaningful than the numbers themselves.
How are profit and loss statements prepared?
Using the cash or accrual method of accounting
Cash accounting – only recognises transactions when there is an exchange of cash.
Accrual accounting uses the double-entry accounting method, where payments or receipts are recorded in two accounts at the time the transaction is initiated, not when they are made.
What is a cashflow statement?
A financial statement that shows how cash entered and exited a company during a period of time.
It can translate a project programme into the client’s anticipated financial commitment.
Can be straight line of S curve (slow initially then accelerates when a project gains momentum)
