R16: Financial Reporting Standards

Question 1

What does IASB stand for?

Answer 1

International Accounting Standards Board

Question 2

The International Accounting Standards Board’s (IASB’s) objective of general purpose financial reporting is to

Answer 2

• 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 entity.
• Those decisions involve buying, selling, or holding equity and debt instruments, and providing or settling loans and other forms of credit.”

Question 3

what does FASB stand for?

Answer 3

U.S. Financial Accounting Standards Board

Question 4

Financial statements are not designed only to facilitate asset valuation…

Answer 4

they provide information to a host of users (e.g., creditors, employees, and customers).

Question 5

Standard Setting Bodies

Answer 5

• IASB and FASB
• both are private sector organizations of accountants and auditors that develop financial reporting rules, regulations, and accounting standards

Question 6

Regulatory Authorities

Answer 6

• Securities and Exchange Commission (SEC) - United States)
• Financial Standards Authority (FSA) - United Kingdom

-both have legal authority to enforce financial reporting requirements, and can overrule private sector standard-setting bodies. Standard-setting bodies have no authority unless their standards are recognized by regulatory authorities.

Question 7

The IASB is

Answer 7

-the independent standard-setting body of the IFRS Foundation, which is an independent, not-for-profit private sector organization.

Question 8

The principal objectives of the IFRS Foundation are

Answer 8

• to develop and promote the use and adoption of a single set of high-quality financial standards;
• to ensure the standards result in transparent, comparable, and decision-useful information while taking into account the needs of a range of sizes and types of entities in diverse economic settings;
• and to promote the convergence of national accounting standards and IFRS.

Question 9

The IFRS Interpretations Committee is responsible for

Answer 9

reviewing accounting issues that arise in the application of IFRS and are not specifically addressed by IFRS.

Question 10

The IFRS Advisory Council provides…

Answer 10

advice to the IASB on agenda decisions and priorities among other items.

Question 11

The FASB

Answer 11

• issues new and revised standards with the aim of improving standards of financial reporting so that information provided to users is useful for decision-making.
• The FASB standards are contained in the FASB Accounting Standard Codification™ (Codification). The Codification is the source of all authoritative U.S. generally accepted accounting principles (U.S. GAAP) for nongovernmental entities. U.S. GAAP is officially recognized as authoritative by the Securities and Exchange Commission (SEC). However, the SEC retains the authority to establish standards.

Question 12

Desirable Attributes of an Accounting Standards Board

Answer 12

• The responsibilities of all parties involved in the standard-setting process should be clearly defined.
• All parties involved in the standard-setting process should observe high professional and ethical standards, including standards of confidentiality.
• The organization should have adequate authority, resources, and competencies.
• There should be clear and consistent processes to guide the organization and formation of standards.
• There should be a well-articulated framework with a clearly stated objective to guide the board.
• The board should seek and consider input from all stakeholders. However, it should operate independently and make decisions that are in line with the stated objective of the framework.
• The board should not succumb to pressure from external forces.
• Final decisions should be in public interest, and should lead to a set of high-quality standards that will be recognized and adopted by regulatory authorities

Question 13

Regulatory authorities are

Answer 13

governmental entities that have the legal authority to enforce the financial reporting requirements set forth by the standard-setting bodies, and to exert control over entities that participate in capital markets within their jurisdiction.

Question 14

IOSCO

Answer 14

• International Organization of Securities Commission

- not a regulatory authority, but its members regulate a large portion of the world’s financial capital markets.

Question 15

IOSCO sets out three core objectives of securities regulation:

Answer 15

1) Protection of investors.
2) Ensuring that markets are fair, efficient, and transparent.
3) Reducing systematic risk.