CH1 - Reporting Framework, Sustainability and Ethics Flashcards by Miss Alice Gamper

What are the three ways that financial statements can be prepared? In accordance with …?

CA 2006
IFRS (international financial reporting standards) - this course
Charities Act

How well did you know this?

Not at all

Perfectly

What are four limitations of financial statements?

Backward looking
Exclude non financial data
Highly standardised
Aggregate information

How well did you know this?

Not at all

Perfectly

What has been recently developed to help users gain more detail and context from the financial statements?

IFRS sustainability disclosure standards

How well did you know this?

Not at all

Perfectly

What did the IFRS form in 2021?

The ISSB - International Sustainability Standards Board - independent standard setting body

How well did you know this?

Not at all

Perfectly

What will the ISSB develop and issue?

IFRS sustainability disclosure standards

How well did you know this?

Not at all

Perfectly

What does the conceptual framework do?

Provides the foundation for the standards to built upon. Consistent concepts

How well did you know this?

Not at all

Perfectly

What is the IASB?

International Accounting Standards Board - independent group of experts

How well did you know this?

Not at all

Perfectly

Can the conceptual framework be used in exceptional circumstances to develop consistent accounting policies where no IFRS Standard applies or where there is a choice?

Yes

How well did you know this?

Not at all

Perfectly

Is the Conceptual Framework an IFRS Standard?

How well did you know this?

Not at all

Perfectly

Does the Conceptual Framework overrule any individual IFRS Standard?

How well did you know this?

Not at all

Perfectly

What are the two fundamental characteristics set out by the framework?

Relevance (nature, materiality)
Faithful representation (complete, neutral, free from error, substance over form)

How well did you know this?

Not at all

Perfectly

What are the five enhancing characteristics set out by the framework? CCVUT

Comparability
Cost vs benefit
Verifiability
Understandability
Timeliness

How well did you know this?

Not at all

Perfectly

What are the bases of accounting that the accounts are prepared on?

Accruals basis
Going concern basis (continue to trade for the foreseeable future)

How well did you know this?

Not at all

Perfectly

What are the ELEMENTS of the statements?

Assets
Liabilities
Equity
Income
Expenses

How well did you know this?

Not at all

Perfectly

Asset

Present economic resource
Controlled by entity
As a result of past event

How well did you know this?

Not at all

Perfectly

Economic resource

A right that has potential to produce economic benefits

How well did you know this?

Not at all

Perfectly

Liability

Present obligation
to transfer economic resource
as a result of past events

How well did you know this?

Not at all

Perfectly

Equity

Residual interest in the assets of an entity
after deducting liabilities

How well did you know this?

Not at all

Perfectly

Income

Increases in assets
or decreases in liabilities
resulting in increases in equity (profits)
other than those relating to contributions from s/hs

How well did you know this?

Not at all

Perfectly

Expenses

Decreases in assets
or increases in liabilities
resulting from decreases in equity
other than those relating to distributions to s/hs (dividends)

To be RECOGNISED on the F/S, what must be the case?

Item meets definition of element
Recognition provides useful information that is:
- Relevant
- Faithful representation

When would something be DERECOGNISED (removed) from the F/S??

Entity loses control of asset
No longer has present obligation for a liability

What are the two measurement bases?

Historical cost
Current value
- Fair value (could be sold for on open market)
- Value in use (PV of future cash flows from use)
- Current cost (replacement cost)

Integrity

Straightforward and honest

Objectivity

Neutral and unbiased

Professional competence and due care

Maintain knowledge and skills; act diligently in accordance with standards

Professional behaviour

Comply with laws and regs. Don't discredit the profession

Confidentiality

Not disclose info without proper authority

What safeguards are created by the profession, legislation or regulation?

1. Education and training 2. Corporate governance regs 3. Prof standards, monitoring, disciplinary procedures 4. External review; well publicised & effective complaints proceeded

What safeguards exist in the work environment?

1. Recruitment procedures; strong internal controls 2. Organisational system of ethics, conduct programmes 3. Cultural emphasis on ethics

In an ethics scenario, will you always be the auditor?

No! You might be the reporting accountant.

Ethical dilemma: what steps to take?

1. Check relevant facts 2. Talk to your line manager 3. Discuss with next level (recipients of accounts or next managers) 4. Escalate to senior management, internal audit, audit committee, directors, internal whistle-blowing 5. DOCUMENT YOUR INVOLVEMENT AND THE SUBSTANCE OF ANY DISCUSSIONS 6. Contact ICAEW ethical helpline

Sustainability impacts

How the business impacts on the planet

Sustainability dependencies

How the business depends on the world

UK LISTED companies are required to follow the sustainability disclosure recommendations of which body?

TCFD - Taskforce on climate related financial disclosures

What are the four disclosure areas required by IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) in terms of sustainability?

1. Governance: how do they monitor/manage sustainability related risks/opportunities? 2. Strategy: approach taken to manage risks and opportunities 3. Risk management: identify, asses, prioritise, monitor 4. Metric and targets: measurement of efforts

What does IFRS S2 Climate Related Disclosures require?

Disclose information about climate related risks and opportunities that could reasonably impact future prospects.

What does the IFRS Foundation do? Where does it sit?

IFRS Foundation: raises cash and appoints members for/of the other bodies Sits at the top

Which bodies sit underneath the IFRS Foundation?

International Accounting Standard Board International Sustainability Standards Board Advisory Council

What does the IASB (International accounting standards board) do?

Produce, review and reissue the accounting standards Promoting the use of the standards Approve any interpretations produced by the interpretations committee

Where does the IFRS interpretations committee sit?

Underneath IASB (International accounting standards board)

What does the ISSB (International Sustainability Standards Board) do?

Disclosures relating to sustainability business matters Work alongside the IASB

What does the advisory council do?

Work closely with the IASB and the ISSB to decide on the most urgent topic - new standard required/old one updated - prioritise which to do Help with consultation and feedback related to creating standards

Main steps of the standard setting process

1. Consultation 2. Formation of advisory group 3. Publication of discussion paper for public comment 4. Publication of exposure draft for public comment (no limit to number of these) 5. Consideration of comments 6. Approval of standard 7. Publication of final IFRS

Must LISTED companies use IFRS or UK GAAP?

IFRS

What does FRS 100 tell you?

Which set of rules to follow (most appropriate framework)

What does FRS 101 cover?

Reduced Disclosure Framework. Allows qualifying entities, such as subsidiaries, to produce reduced disclosures.

What does FRS 102 replace? What is it based on? Who uses it? What has been done in FRS 102 to modify it?

Replaces the majority of our accounting standards. Based on the IFRS for SMEs. All UK companies (smaller ones) other than those applying FRS 101 or who are required to adopt the full IFRS Standards (i.e. listed UK groups) Reduced in size/complexity for smaller entities

What type of entity does FRS 105 apply to?

Micro entities