Chp 2 : Entities and financial reporting statements

Question 1

What are 9 advantages of having global financial reporting? ( 1-3 /9)

Answer 1

• Having global financial reporting standards improves comparability of financial statements across countries
• Global financial reporting standards provide a global business language which should lead to improvements in business communication
• Businesses can more easily raise funds in other countries as their financial statements will be recognised by stock markets in the respective countries

Question 2

What are 9 advantages of having global financial reporting? ( 3-5 /9)

Answer 2

• Preparation of group accounts is simpler and less costly
• global financial reporting standards should lead to improved global decision-making that may lead to improved global growth.
• global financial reporting standards should lead to increased levels of global investment as investors will be familiar with the financial statements

Question 3

What are 9 advantages of having global financial reporting? ( 5-9/9)

Answer 3

• Having global financial reporting standards reduces the cost of an entity starting a business in another country
• When a country does not have the resources to create their own national framework , global financial reporting standards provide a high quality ‘off-the-shelf’ alternative.
• The Use of global financial reporting standards provide legitimacy to business in countries that do not have their own financial reporting frameworks.

Question 4

What are disadvantages of global financial reporting standards? (1-3/5)

Answer 4

• Using global financial reporting standards is argued to be a threat to national identity.
• The treatments recommended within global financial reporting standards provide legitimacy may not reflect national culture.
• global financial reporting standards may not be flexible enough to deal with unique transactions that are country specific

Question 5

What are disadvantages of global financial reporting standards? (3-5/5)

Answer 5

• It is costly for entities to change from national financial reporting standards to global financial reporting standards
• global financial reporting standards are deemed to be inappropriate for small and medium-sized entities
• It is costly for entities to change from national financial reporting standards to global financial reporting standards
• Global financial reporting standards may not be flexible enough to deal with unique transactions that are country specific.

Question 6

Who are the IASB?

Answer 6

• International Accounting Standards Board (IASB)
• prepare global financial reporting standards
• it is a worldwide umbrella accounting standards body that aims to issue one set of accounting standards which are agreed upon and adopted in every country in the world.