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ACCA Financial Reporting > 10: The regulatory and conceptual framework > Flashcards

10: The regulatory and conceptual framework Flashcards

1
Q

What kind of approach to the framework do we have in the UK?

A

Principles based approach

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2
Q

What are the two fundamental characteristics?

A
  • Relevance

- Faithful representation

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3
Q

What regulatory standards are we looking at in FR?

A

IFRS standards

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4
Q

What do IFRS standards comprise of?

A

IFRS and IAS standards

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5
Q

What do IFRS foundation do? 2

A
  • Supervise IASB

- Responsible for governance

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6
Q

What are the objectives of the IFRS foundation? 2

A
  • Develop high quality standards

- Promote the use and convergence of national accounting standards

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7
Q

What does the IASB board do? 2

A
  • Solely responsible for issuing IFRS’s

- Create a single set of understandable and enforceable accounting standards

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8
Q

What does the IFRS Advisory Council do? 2

A

Advise board agenda

-Informing IASB of the views/opinions of organisations and individuals

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9
Q

What do the IFRS Interpretations committee do? 2

A

-Issue guidance on how to apply the standards practically

For when people do not know how to apply the standard

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10
Q

What does the IFRS Advisory council do to allow individuals and organisations to participate in standard setting? 2 steps

A
  • Issue ED (exposure draft)

- Public come back with comments

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11
Q

What are interpretations made by the interpretations committee known as?

A

IFRIC Interpretations

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12
Q

Who provides a forum for the IASB to consult with the national accounting standard setters, academics and other interested parties?

A

IFRS Foundation

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13
Q

What are the five ways the IFRS are used around the world?

A
  • National requirements
  • A basis for national requirements
  • International benchmark
  • Used by regulatory authorities for domestic and foreign companies
  • Used by companies themselves
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14
Q

How does the IASB prepare the IFRS’s?

A

In accordance with due process

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15
Q

What is the first step with standard setting?

A

Establish consultative group

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16
Q

What is the second step with standard setting?

A

Project is accepted and committee set up

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17
Q

What is the third step with standard setting?

A

On major projects the IASB develops and publishes a discussion document

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18
Q

What is the fourth step with standard setting?

A

Following receipt and review of comments an exposure draft is produced

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19
Q

What is the fifth and final step with standard setting?

A

Folowing receipt and review of comments the final IFRS is issued.

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20
Q

ARe IFRS’s intended to apply to immaterial items?

A

No

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21
Q

Are IFRS’s retrospective?

A

No

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22
Q

What is the IASB’s Framework for the presentation and presentation of financial statements do?

A

Sets out the concepts underlying the preparation and presentation of financial statements for external users.

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23
Q

Who is the IASB’s Framework for the presentation and presentation of financial statements for?

A

External users

24
Q

Can the conceptual framework override accounting standards?

A

No

25
Q

What is the objective of the financial statements?

A

To provide information about the

  • financial position
  • performance and;
  • changes in financial position

of an entity that is useful to a wide range of users in making decisions.

26
Q

What are the two underlying assumptions?

A
  • Accruals basis

- Going concern

27
Q

What is the accruals basis?

A
  • The effects of transactions and other events are recognised when they occur and not when cash
    transfers.

-They are reported in the financial statements in the period to which they relate

28
Q

What is the going concern basis?

A

The financial statements are prepared on the basis that an entity will continue in operation for the foreseeable future.

29
Q

If you are expected to trade for more than 12m what basis do you use?

A

Going concern

30
Q

If you are expected to trade for less than 12m what to you do?

A

Make a lot of disclosures

31
Q

What are the two fundamental characteristics?

A
  • Relevance

- Faithful representation

32
Q

Describe relevance

A

To be useful -relevant to the decision making process of the user.

33
Q

Describe faithful representation

A

Accounting for transactions in line with the IFRS’

34
Q

What are the four aspects of reliability?

A

Completeness
Neutrality
Free from error
Substance over form

35
Q

Completeness

A

Information must be complete within restrictions of materiality and cost to be reliable.

Omissions may cause information to be misleading

36
Q

Neutrality

A

Information is not neutral if it has been selected or presented in such a way as to
-influence the making of a decision or judgement in order to achieve a predetermined result or outcome.

37
Q

Free from error

A

No material errors or omissions

38
Q

Substance over form

A

Economic substance should be recorded. Not just its legal form.

39
Q

What are the four enhancing qualitative characteristics?

A

Comparability
Verifiability
Timeliness
Understandability

40
Q

Comparability

A

Users must be able to compare period to period and company to company

41
Q

Verifiability

A

Knowledgeable and Independent users could reach a consensus that the depiction is a faithful representation.

42
Q

Timeliness

A

Having information available in time for decision makers to be capable of influencing their decisions.

43
Q

Understandability

A

Assuming users have a reasonable business knowledge and willingness to study, the statements should be understandable.

44
Q

What are the three other accounting concepts?

A

Fair presentation
Consistency
The business entity concept

45
Q

What are the three factors for Fair presentation to happen?

A
  • Compliance with accounting standards
  • Presented in a manner that provides relevant, reliable, comparable and understandable information
  • Additional disclosure when required
46
Q

What is consistency?

A

The presentation and classification should stay same from period to period.

47
Q

What is the business entity concept?

A

Treat the business as separate from the owner.

Transactions of business should never be mixed with transactions of owner.

48
Q

What are the four measurement bases that are mentioned in the conceptual framework?

A
  • Historical cost
  • Current cost (replacement cost)
  • Realisable value (fair value)
  • Present value
49
Q

What are the three capital maintenance concepts you need to understand?

A
  • Real financial capital maintenance
  • Money financial capital maintenance; and
  • Physical capital maintenance
50
Q

Real financial capital maintenance

A

General price rise

51
Q

Real financial capital maintenance

A

General price rise

52
Q

Money financial capital maintenance

A

Physical profit

53
Q

Physical capital maintenance

A

Specific prise rise

54
Q

What do IFRS foundation do? 2

A
  • Supervise IASB

- Responsible for governance

55
Q

What are the objectives of the IFRS foundation? 2

A
  • Develop high quality standards

- Promote the use and convergence of national accounting standards

ACCA Financial Reporting (17 decks)

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