Internation Accounting Standards Boards & U.S. SEC Flashcards
What are the organizations/structure that govern International Accounting Standards?
Top Level = IFRS Foundation 3 Supporting organizations: 1) IFRS Advisory Council 2) IASB (International Accounting Standards Board) 3) IFRS Interpretations Committee
What is the IFRS Foundation and what do they do?
Independent not-for-profit private sector org.
Parent of the IASB
Appoints members of the IASB, IFRS Advisory Council, IFRS interpretations committee
Governed by trustees with 3 year terms that can be renewed
What is the objective of the IFRS foundation?
Develop a single set of high quality, understandable, enforceable & globally accepted financial reporting standard
Promote use & application of IFRS
Consider needs of a range of size & type of entities
What is the role of the IASB?
Establishes international financial reporting standards
IFRS based on framework
Has NO ENFORCEMENT power (enforcement is responsibility of the securities regulators in individual national jurisdictions)
IASB est. 2001
What is the role of the IFRS Advisory Council?
Advises IASB on priorities & views of interested organizations
Represents > 40 organizations from around the world
Members of the the council are appointed by the IFRS Foundation
What is the role of the IFRS Interpretations Committee?
Similar to FASBs Emerging issues task force
Identifies issues in the context of IFRS & issues interpretations
Interpretations reviewed by IASB
What is the International GAAP Hierarchy?
1) IFRS implementation guidance = specific guidance to event
2) Framework
3) Pronouncements from other standard setting bodies
What are the noteable differences between US GAAP & IFRS standards
IFRS is more principled based Less detailed than US GAAP Fewer Rules Requires more professional judgement Less literature to address exceptions
What are the IASB standards for Small Medium sized Enterprises (SME) ?
Only one single standard for companies that are not publicly traded
- Simplifies financial reporting by
- eliminating topics not relevant to SMEs
- simplifies recognition & measurement
- disclosures are reduced
- revisions to SME standards only once every 3 years
- only
- Simplifies financial reporting by
What is the process for the development of an IFRS?
1) Project added to agenda
2) Conduct research & issue DP (discussion paper)
3) Public Input
4) Issue EP (exposure draft)
5) Modify EP (if necessary)
6) Finalize & Issue IFRS
What is the IASB Framework?
Framework is used to develop GAAP and is no GAAP itself
Objectives are similar to FASB’s
- provide useful information to financial statement user
What is the objective of the IASB Framework?
Objective = Decision Usefulness
Objective Qualitative Characteristics:
- Relevance:
a) Predictive Value
b) Confirmatory Value
- Faithful representation:
a) completeness
b) neutrality
c) free from material errorWhat are the Constraints to the IASB Framework?
Materiality: ignore immaterial amounts
Cost - Benefits: cost of providing information should not outweigh benefit
What are the 2 assumptions made in the IASB Framework?
1) Accrual Method
2) Entity is a going concern
FASB has 4, E.G.U.T
What is the S.E.C and its purpose?
Securities and Exchange Commission
Has legal authority to set accounting standards but designates to the private sector - currently the FASB
Purpose:
- Enforcement!
- enforces compliance to U.S. GAAP for U.S. publicly traded companies
- enforces compliance to IFRS for any Foreign registrants
Promotes:
- efficient allocation of capital through open, orderly and fair securities markets
What is a foreign Private Issuer?
Any non-governmental foreign issuer that:
- has majority of securities owned outside of U.S.
- Officers & directors not U.S. Citizens or residents
- Majority of assets outside U.S.
- Business administered outside U.S.
What is the organizational structure of the SEC?
5 commissioners appointed by President of U.S.
4 Divisions & office of chief accountant
1) Division of Corp Finance
- oversee compliance
- filings submitted to division
2) Enforcement
- investigate violations
- make recommendation for punishment
3) Trading & Markets
- oversee secondary markets & exchanges
4) Investment Management
- oversee investment advisors & investment companies
What are the 2 most currently relevant laws issued by SEC?
1) Securities Act of 1933 & 1934
2) Sarbanes Oxeley Act of 2002
What is the SEC’s role in the Standard Setting Process?
Participate by commenting on exposure drafts
Setting of items on FASB agenda
Additionally SEC pronouncements are included w/ FASB Codification to comprise authoritative U.S. GAAP for U.S. Public Companies
*private companies do not have to comply w/ SEC pronouncements
What are the Pronouncements Issued by the SEC?
FRR (Financial Reporting Releases): highest ranking in codification
SAB (Staff accounting bulletins): SEC’s current position on technical issues
AAER (Accounting & Auditing Enforcement Releases): reports enforcement actions
What are the reporting requirements laid out by the SEC under the Securities Act of 1933?
IPO Requirements:
- 2 years of Balance Sheets
- 3 years of Income Statements, statements of Cash Flow & statements of Shareholder’s Equity
- 5 years of selected other info
What is the IPO process?
1) Issuer
2) Underwriter
3) Dealer
4) Public
What does the 1934 Securities Act apply to?
Applies to securities that have already been issued
10-K annual filing:
must be audited by independent auditor, same as IPO: 2 years BS, 3 years other statements. Also MD&A, reports on controls, & management certification must be reviewed by auditor.
10-Q quarterly filing:
reviewed by auditors instead of audited
updated on significant matter sense last quarter
8-K filing: for any significant events
What are the significant Provisions of Sarbanes Oxley Act
Established the PCAOB (Public Company Accounting Oversight Board)
Limited Auditor services
Increased reporting on internal controls
Increased penalties for fraud & crime
