Financial Reporting Standards

Question 1

The two Standard-setting bodies:

Answer 1

Private sector organizations

• FASB: Financial Accounting Standards Board - for US standards, standards called GAAP
• IASB: International Accounting Standards Board - ROW,
• ——-standards called IFRS (International Financial Reporting Standards)
• they set standards, but do not have the authority to enforce
• funded by companies for which the standards are being developed

Question 2

Regulatory Authorities:

Answer 2

Self-regulated organizations

• SEC (US), FSA (UK)
• have the authority to enforce financial reporting standards and are responsible for the regulation of capital markets in their jurisdiction

Question 3

IFRS Framework

- Objective

Answer 3

• Provide financial information useful in making decisions about providing resources to an entity

Question 4

IFRS Framework

- Qualitative characteristics

Answer 4

The two fundamental:

• Relevance: (useful to make forecasts and evaluate past forecasts)
• Faithful representation

The four supplementary qualitative characteristics

• comparability
• verifiability
• timeliness
• understandability

Question 5

Elements related to the measurement of financial positions are

Answer 5

• assets
• liabilities
• equity

Question 6

Elements related to the measurement of financial performance are:

Answer 6

• revenue

- expenses

Question 7

IFRS Framework

- assumptions

Answer 7

• accrual basis - revenue is recognized when earned and expenses recognized when incurred
• going concerned

Question 8

Differences between IFRS and GAAP

• developed by
• based on
• inventory valuation
• extraordinary items
• development cost
• reversal of inventory

Answer 8

Compare US GAAP IFRS

• developed by FASB IASB
• based on Rules Principles
• Inventory valuation FIFO, LIFO, Weight Avg FIFO, Weight Avg
• Extraordinary items Shown below I.S. Not segregated in the I.S.
• Development cost Treated as an expense Capitalized if conditions met
• Reversal of Inventory Prohibited Allowed if conditions met

Question 9

The International Organization of Securities Commissions (IOSCO)

Answer 9

• technically not a regulatory auth
• objectives
  protect investos
  ensure fairness, efficiency, and transparency in markets
  reduce systemic risk
• principles
  financial results should be full, accurate, and timely
  financial statements should be of high quality