Financial reporting - Klára Flashcards
What is the main directive in regards to accounting?
AD ()
What is the object of the AD
To protect the interests of
How does the AD reach its objectives
With minimal harmonization of national laws
What is minimal harmonization?
Maximum - dimdip UK judgement
Minimum - MS can set stricter requirements
How has the AD been implomented in iceland?
Lög um ársreikninga
What is the scope of the AD
Limited liability companies
- companies can be subject to lesser or more requirements dependent on if they are small, large or public interest
What are public interest entities according to the AD
Listed companies
CI
Insurance undertaking
Other companies designated by MS
-in iceland pension funds e.g.
Are public interest companies subject to additional discloser requirement’s?
yes
What is the minimum standards for a annual financial statement?
BS
P&L
Notes to the statement
-MS can add additional documents
What is the requirement that an annual report must give a true and fair view?
an annual report should give a true and fair view of an undertakings assetes, liabilities, financial position and profit or loss.
That is to give the reader information that is true and fair - food for thought: Banks are very complicated
If a company follows the AD but ends up not giving a true and fair view - what should it do?
If a financial statement is not giving a true and fair view and still follows the AD the undertaking should depart from such provisions in order to give a true and fair view (regulatory override) Disclose in the notes
Where are the layouts of statements discussed in the AD
annexes III-IV
What kind of layouts can companies use for BS?
Horizontal or vertical
What kind of layouts can companies use for P/L?
bay nature or by function of expense
Can a company change its lay out?
No, they have to choose the layout and stick to it. They can change it in exceptional cases to fulfill the requerment of true and fair view but must disclose in the notes
What er the general financial reporting principles in the AD? - ATH setja líka öfugar spurningar og útskýra hvað þetta stuff þýðir
company shall be presumed to be carrying on its buisness as a going concern
accounting policies and measurement bases shall be applied consistently from one financial year to the next
Recognition and measurements shall be on a prudent basis
The opening BS for each financial year shall correspond to the closing BS for the preceding financial year
The components of asset and liability items shall be valued separately
Items recognized in financial statements shall be measured in accordance with the principle of purchase price or production cost
Items recognized in financial statements shall be measured in accordance with the principle of purchase price or production cost - this is a principle in art 6. Can you explain.
What are notes to a financial statements?
Notes should provide supplementary information to the financial statements
e.g.
Derogation from the general rules of the directive
Accounting policies
Additional requirements for medium and large undertakings and public-interest entities
What is the management report?
report by the management of the company that includes e.g.:
review of the development and performance of the business
The undertaking position
Description of the principal risks and uncertainties
KPI’s relevant to the particular business
and some other indication of, e.g., R&D, future developments, existence of branches.
Public interest entities have also additional information disclosure requirements such as:
corporate governance statement
If a bank is a parent undertaking what requirements must they fulfill in regards to financial reporting?
They must create a consolidated financial statement and management report for the conglomerate??
What is a parent undertaking?
Parent undertaking:
Has the majority of voting rights in another company or,
Has the right to appoint/remove the majority of the management or,
has the right to exorcise dominant influence on the basis of a contract
Once a bank has finished the financial report what is the next step?
It has to be audited by person/firm approved in a MS
What must the auditor do?
Express his opinion on whether the management report is consistent with the financial statement, is prepared in accordance with the relevant legal requirements and if it contains material misstatements
Is there also a special directive for companies providing financial services?
Yes, dir on the annual accounts and consolidated accounts of banks and financial institutions - refers to many provisions of the AD
What is the difference between lay out of P/L
one is by nature and other by function
Klára stuff um international accounting standards
