Lecture 1 - The Regulatory & Conceptual Framework - Presentation of FSs Flashcards
companies are owned by …
companies are managed by…
owned by shareholders
managed by directors
do shareholders have day-to-day involvement in the company?
no
what do shareholders rely on to help them make important decisions?
financial reports
who uses financial reports as a source of information on a company?
shareholders, creditors and other user groups
what is the purpose of regulations surrounding financial reports?
to ensure that financial reports provide a faithful representation
no fraud / dishonesty
what are the 3 main sources of regulation?
legislation
accounting standards
stock exchange regulations
legislation characteristics?
legislation is a source of regulation for financial reports
- broad rules
- e.g., companies act 2006 in UK
accounting standards’ characteristics?
accounting standards are a source of regulation for financial reports
- detailed rules
- e.g., national standards (FRC in UK, FASB in US)
- international standards (IASB)
stock exchange regulations?
source of regulation for financial reports of listed companies
e.g., requires listed companies to publish quarterly figures
GAAP?
generally accepted accounting practice
a complete set of accounting regulations and conventions that apply in a certain jurisdiction
e.g., US GAAP, UK GAAP etc
‘international GAAP’?
refers to the standards issued by the IASB
IASB = international accounting standards board
IASB?
- international accounting standards board
- formed in 2001 to replace IASC (international accounting standards committee)
what is the link between the IASB and the IFRS?
- IASB is responsible to the IFRS foundation
- IFRS advisory council advises the IASB on its agenda
- IFRS interpretations committee interprets international standards and provides guidance on matters not covered by the standards
IFRS Foundation?
umbrellas the IFRS advisory council, the IASB and the IFRS interpretations committee
what is the objective of general purpose financial reporting?
to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the company
4 pieces of information that financial reports must cover?
- financial position
- financial performance
- cash flows
- changes in equity
primary users of financial reports?
- existing/potential investors
- existing/potential lenders
- other creditors
other users of financial reports?
- employees
- customers
- governments and their agencies
- the public
fundamental characteristics of financial information?
- relevance
- faithful representation (complete, error-free)
enhancing characteristics of financial information?
- comparability
- verifiability
- timeliness
- understandability