Lecture 2 - regulation Flashcards
Executive directors
Employees
Remuneration packages - perks
Day to day running of business
Owner/manager
Non-Executive directors
Not employees
Independent - check what executives are doing
Relatively small remuneration
Oversee running of the business on behalf of shareholders
Shareholders require information for
- Stewardship
- Management performance evaluation
- Prediction for investment decisions
- Managers require information to control the business
The need for regulation of financial reports:
- Relied upon by many users
- Comparability
- Directors are responsible to provide fair information that meets all regulatory requirements
Financial reporting standards - Purpose
- Define contractual terms
- Reduce subjectivity
- Help to avoid accounting scandals
IASB - Meaning
International accounting standards board
IASB - use
- Issue IFRS
- For listed companies in the EU
- Uk companies must use IFRS after 1 Jan 2021
- Does things like define assets - key terms and info
IAS 1 is
Presentation of financial statements
Statements involved in IAS 1
- Statement of financial position - BS
- Statement of profit and loss - IS
- Statement of changes in equity
- Statement of cash flows
The 2 formats of IAS 1 presentation
- Format 1 - cost analysed by function
- Format 2 - cost analysed according to nature
Cost of sales
Opening inventory + purchases - closing inventory
Salaries
Substantial inventory loss
Distribution and selling costs
Salaries of marketing staff
Sales commission
Deliveries
Assets used in distribution
Administrative expenses
Salaries of admin staff
Irrecoverable debt
Cash discounts
Amortisation of intangible assets
Statement of financial position - What do you include?
IAS 1 specifies:
- PPE
- Inventory
- Trade and other payables
- Trade and other receivables
Statement of changes in equity shows
- Shows the movement in each component of equity in the year
- Effects if changes in accounting policies
- Contributions by and distributions to equity shareholders
Fundamental qualitative characteristics of useful financial information
Relevance and faithful representation
