Chapter 7 - Accounting Standards

Question 1

The IFRS foundation should develop a single set of high quality, understandable, enforceable, and globally accepted international financial reporting standards through its standard setting body, the…

Answer 1

International accounting standards board

Question 2

The IASB stands for?

Answer 2

International accounting standards board

Question 3

Which two underlying assumptions are used in IFRS?

Answer 3

1. Accruals basis

2. Going concern

Question 4

What is the accruals basis?

Answer 4

The effect of transactions and other events recognised when they occur, not as cash is received or paid.

Question 5

What is going concern?

Answer 5

The financial statements are prepared on the basis that an entity will continue in operation for the foreseeable future. If management has significant concerns about the entities ability to continue as a going concern, the uncertainties must be disclosed.

Question 6

The IFRS framework describes the quantitive charactierstcs of financial statements as being…

Answer 6

• understandability
• relevance
• reliability and
• comparability

Question 7

The IFRS framework sets out the statement of financial position (balance sheet) as comprising …

Answer 7

Assets, Liabilities and equities

Question 8

Equity is…

Answer 8

Residual interest in the assets of the entity after deducting all its liabilities.

Question 9

The statement of comprehensive income (income statement) compromises…

Answer 9

• income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or reductions in liabilities
• expenses are decreases in such economic benefits

Question 10

For many years company law on the UK has required all companies to prepare financial statements each year which give a …

Answer 10

True and fair view

Question 11

In most other countries than the UK, accounts are taken to present a company’s results fairly if they comply with…

Answer 11

Accounting standards

Question 12

IFRS requires claims development tables to be shown for general insurers. Claims development tables show valuable information about…

Answer 12

How accurate managements prior estimates of outstanding claims were, and the extent to which insurance liabilities are subject to variation.

Question 13

IFRS financial statements consist of…

Answer 13

• a balance sheet
• income statement
• a cash flow statement
• notes, including a summary of the significant accounting policies
• either a SOCE or a SORIE

Question 14

What is the FRRP?

Answer 14

Financial reporting review panel

Question 15

What are SORPs?

Answer 15

Statements of recommended practice.

Question 16

What is the FRSSE?

Answer 16

Financial reporting standard for smaller entities.

Question 17

Reasons for the reluctance to convert from UK GAAP to IFRS were likely to include the following:

Answer 17

• potential adverse tax consequences
• potential adverse effect on distributable profits
• potential adverse impact on regulatory solvency
• potential adverse implications on debt covenants, particularly if the adoption of IFRS were to change the gearing ratios
• concern over the implications of conversion from the UK GAAP to IFRS in terms of management time, skills available, training requirements, changes required to systems and cost.

Question 18

Accounting standard that must be followed by international quoted insurance companies from 1st January 2023 replaces IFRS 4.

Answer 18

IFRS17

Question 19

Current UK independent regulator currently responsible for promoting confidence in corporate reporting.

Answer 19

Financial Reporting Council

Question 20

Group of international technical experts who develop and approve financial reporting standards.

Answer 20

International Accounting Standards Board (IASB)

Question 21

What is an accruals basis?

Answer 21

Transactions and other events are recognised as they occur not when cash is received or paid.

Question 22

Not-for-profit international organisation responsible for developing a single set of high-quality global accounting standards, known as IFRS Standards.

Answer 22

IFRS Foundation

Question 23

New UK regulator due to replace Financial Reporting council in 2023 to regulate auditors.

Answer 23

Audit Reporting & Governance Authority

Question 24

Group that considered financial reporting issues arising from the global financial crisis in 2007/08 and identified weaknesses

Answer 24

Financial Crisis

Advisory Group

Question 25

he UK financial reporting standard for insurance companies and allows entities to continue with their current practices for insurance contracts. It is expected
to be reviewed following publication of IFRS 17.

Answer 25

FRS103

Question 26

What is meant by “going concern”

Answer 26

The financial statements are prepared on the basis that an entity will continue in operation for the foreseeable future

Question 27

Tables required by IFRS which convey how accurate insurers previous estimates of outstanding claims were.

Answer 27

Claims development tables

Question 28

Accounting standard used by UK non listed entities

Answer 28

FRS102

Question 29

UK Microentities with
Turnover less than £632,000, Assets less than £316,000 Employees less than 10) can prepare their accounts to this standard?

Answer 29

FRS105