Module 7 Financial Reporting Regulation and the Conceptual Framework

Question 1

The financial reporting regulation in the UK consists of:

Answer 1

Legislation - the companies Act 2006

Financial reporting standards

Question 2

What is the Companies Act 2006?

Answer 2

All UK registered companies must comply with the provisions.

CA 2006 provides guidance on financial reporting administration and financial statement format, and has a number of disclosure requirements for financial statements.

Question 3

In the UK what standard must financial statements be prepared in accordance with?

Answer 3

IFRS or UK financial Reporting standards

Question 4

Which companies must apply IFRS Accounting Standards?

Answer 4

Listed Companies on London Stock Exchange

Question 5

Which companies can choose to follow IFRS or UK financial Reporting standards?

Answer 5

Non-Listed companies

Question 6

What is the difference between a Public company and a Private company?

Answer 6

Public can offer shares to the public whereas a private company cannot

Question 7

Under the CA 2006 companies MUST?

Answer 7

• Keep adequate accounting records
• Determine an appropriate accounting reference date
• Prepare financial statements
• Prepare directors and strategic reports
• File financial statements within a set time period

Question 8

CA 2006 requires directors to keep adequate accounting records that are sufficient to:

Answer 8

• Show and explain the company’s transactions
• Disclose the financial position of the company
• any accounts required to be prepared by the company comply with the requirements of the CA 2006

Question 9

Accounting records must, in particular contain:

Answer 9

• Details of all cash receipts and payments
• A record of the assets and liabilities of the company

Question 10

How long should a private company preserve records for?

Answer 10

3 years from the date which they are made

Question 11

How long should a public company preserve records for?

Answer 11

6 years from the date on which they are made

Question 12

For all newly formed companies what is the default position for when financial statements need to be prepared?

Answer 12

The last day of the month 1 year after incorporation

E.g. incorporating 10th October 2027, financial statements 31st October 2028

Question 13

If a company chooses a different Accounting reference data what are the rules under CA 2006?

Answer 13

The company’s first accounting reference period must be more than 6 months, BUT no longer than 18 months.

Question 14

What is the information gap?

Answer 14

The difference in knowledge of the company’s affairs between the directors and the shareholders

Question 15

Under CA 2006 what must the directors report state?

Answer 15

• The names of the persons who, at any time during the financial year, were directors of the company
• The amount (if any) that the directors recommend should be paid by way of dividend

Question 16

Some companies are required by CA 2006 to prepare a strategic report. The strategic report must contain:

Answer 16

• A fair review of the company’s business
• A description of the principal risks and uncertainties facing the company

Question 17

What is the period for filing for a private company?

Answer 17

9 months after the end of the accounting reference period

Question 18

What is the period for filing for a public company?

Answer 18

6 months after the end of that period

Question 19

What does ‘true and fair’ mean?

Answer 19

The requirement to prepare accounts which show a true and fair view is a legal requirement under the CA 2006

Question 20

What is the International Accounting Standards Board (IASB)?

Answer 20

Is an independent standard setting body that develops and issues international accounting standards (IFRS Accounting standards)

Question 21

What is the role of the IFRS interpretations committee?

Answer 21

Is to provide guidance on the application of accounting standards and specific transactions and events

Question 22

Which companies must use IFRS Accounting Standards?

Answer 22

Companies listed on the UK regulated markets (London stock exchange)

Question 23

What are the four enhancing qualitive charactersistics?

Answer 23

1) Comparability
2) Verifiability
3) Timeliness
4) Understandability

Question 24

What are the two fundamental qualitive characteristics?

Answer 24

• Relevance
• Faithful Representation

Question 25

What are the three criteria that help to ensure financial information is faithfully represented?

Answer 25

Complete

Neutral

Free from error