Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

PART A- Advanced Accounting- BBAM 3207
Topic 1
Conceptual Framework and Regulatory Framework for Accounting
They are 2 main approaches to Accounting
...

It is a framework which prescribes the nature, function and limits of financial
accounting and financial statements
...


Reasons for having a conceptual framework
They are variety of reasons for having a conceptual framework these include:
1
...


2
...


Fire fighting can lead to

inconsistencies between different accounting standards and legislation
...


Lack of conceptual framework may mean that certain critical issues are not
addressed
...


A conceptual framework helps prepares and auditors of accounts to deal with
transactions which are not the subject of an accounting standard
...


A conceptual framework strengthens the credibility of financial reporting and
accounting profession
...


It makes it less likely that the standard setting process can be influenced by vested
interests e
...
large companies/business sectors
...


Accounting standards based on principles are thought to be harder to circumvent
...


Rules based system

This is an alternative to a conceptual framework
...

Structure of International Regulatory System
The IASC
Foundation

IASB

SAC

IFRIC
The International Accounting Standards Committee Foundation (IASC)
This is a supervisory body that has 19 trustees and is responsible for governance
issues and ensuring each body is properly funded
...

 Promote the using and applying of the standards
...


International Accounting Standards Board (IASB)
This is solely responsible for issuing International Accounting Standards and is
made up of 14 members
...

International financial Reporting Interpretations Committee (IFRIC)
This issues rapid guidance on accounting matters where divergent Interpretations
of IFRSs have arisen
...


Advanced Accounting lecture notes 1

Page 2

The development of an IFRS
The procedure for development of an IFRS is as follows:
1
...


2
...


3
...


4
...


5
...


The IASB and National Standard Setters
The intentions of IASB are:-

To develop a single set of accounting Standards that are understandable
enforceable and of high quality
...

In order to achieve this IASB works in partnership with the major national standard
setting bodies:

All the most important national standard setters are represented on the IASB and
their views are taken into account so that a consensus can be reached
...




Each major national standard setter leads certain international standard – setting
project
...




They need to be useful to these users
...




They need to provide some basic information
...




They increase users understanding of and confidence in financial statements
...
In
order to fully regulate the preparation of financial statements and obligations of
companies and directors legal and market regulations are also required
...
It includes
guidance with regard to:


The qualitative characteristics of financial information
...




Recognition of the elements of financial statements
...

(2) Help the IASB by providing a basis for reducing the number of alternative
accounting treatments permitted by IFRS
...

(4) Help those preparing financial statements to apply IFRS and also to deal with areas
where there is no relevant standard
...

(6) Help users of financial statements to interpret the information in financial statements
which have been prepared in accordance with IFRS
...

Qualitative characteristics of financial information
Qualitative characteristics are attributes that make information provided in the financial
statements useful to others
...
Understandability
2
...
Reliability
4
...


Understandability: Accounting Information should be presented in such a way
that it will be understandable to users
...
Information that is relevant
and reliable should not be excluded from the financial statements simply because
it is difficult for some users to understand
...


Relevance: Information is relevant if it has the ability to influence the economic
decisions of users and is provided in time to influence those decisions
...


3
...
Information is reliable when:
-

It can be depended upon by users to represent faithfully what either purports to
represent
...


-

In conditions of uncertainty, a degree of caution (i
...
prudence) has been applied
in exercising judgment and making the necessary estimates
...


Comparability: Users must be able to compare the financial statements of an
entity over time to identify trends in its financial position and performance and
compare the financial statements of different entities to evaluate their relative
financial performance and financial position
...


Elements of financial statements
1
...


Conditions that must be met before an asset is recognized
(a) There must be control – i
...
ability to obtain economic benefits and to restrict
access of others
...

(c) There is sufficient evidence of its existence
...


Liabilities: an entity’s obligation to transfer economic benefits as a result of past
transactions or events
...

(b) It can be measured with sufficient reliability
...


3
...

Recognition of income is made when an increase in future economic benefit arises
from an increase in an asset (or a reduction in a liability) and the increase can be
measured reliably
...


-

Expenses: These are decreases in economic benefits during the accounting
period in the form of outflows or depletions of assets or incurrence’s of liabilities
...

And can be measured reliably
...


Equity Interest: is the residual amount found by deducting all liabilities of the
entity from all of the entity’s assets

---