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6. A conceptual and regulatory framework Flashcards

1
Q

What is the regulatory framework effected by other than the IFRS standards?

A
  • National company law
  • EU directives
  • Security exchange rules
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2
Q

Why is the regulatory framework necessary?

A

It ensures that relevant and reliable financial reporting is achieved to meet the needs of the shareholders and other users

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3
Q

Accounting standards on their own would not be a complete regulatory framework.

What is also needed to fully regulate the obligations of companies and directors?

A

Legal and market regulations

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4
Q

What is a principles based framework based on?

A

Based on a conceptual framework such as the IASB’s framework

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5
Q

What kind of approach does the rules based framework use?

A

Cookbook approach

Accounting standards are a set of rules

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6
Q

In the UK what is there a principles based framework on?

A
  • Statements of principles

- Accounting standards

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7
Q

In the UK what is there a rules based framework on?

A
  • Companies act
  • EU directives
  • Stock exchange rulings
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8
Q

Explain why the harmonisation of accounting standards is beneficial for…

Multinational entities

A
  • Financial information is more understandable
  • Greater efficiency in accounting departments
  • Consolidation is easier
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9
Q

Explain why the harmonisation of accounting standards is beneficial for…

Investors

A

Easier to make decisions based on worldwide availability of investments

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10
Q

Explain why the harmonisation of accounting standards is beneficial for…

Tax authorities

A

Tax liabilities of investors easier to calculate

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11
Q

Explain why the harmonisation of accounting standards is beneficial for…

Large international accounting firms

A

Accounting and auditing is easier if similar accounting practices exist on a global basis.

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12
Q

What are the disadvantage of harmonisation of accounting standards in relation to…

Introduction

A

Difficult to introduce, maintain and enforce in different countries

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13
Q

What are the disadvantage of harmonisation of accounting standards in relation to…

Legal systems

A

Different legal systems may prevent application

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14
Q

What are the disadvantage of harmonisation of accounting standards in relation to…

Countries

A

Some countries may be unwilling to accept other countries standards

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15
Q

What are the disadvantage of harmonisation of accounting standards in relation to…

Costs

A

Costly to develop a full detailed set of accounting standards

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16
Q

What do IFRS foundation do? 2

A
  • Supervise IASB

- Responsible for governance

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17
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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18
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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19
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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20
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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21
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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22
Q

What are interpretations made by the interpretations committee known as?

A

IFRIC Interpretations

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23
Q

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

A

IFRS Foundation

24
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
25
How does the IASB prepare the IFRS's?
In accordance with due process
26
What is the first step with standard setting?
Establish consultative group
27
What is the second step with standard setting?
Project is accepted and committee set up
28
What is the third step with standard setting?
On major projects the IASB develops and publishes a discussion document
29
What is the fourth step with standard setting?
Following receipt and review of comments an exposure draft is produced
30
What is the fifth and final step with standard setting?
Folowing receipt and review of comments the final IFRS is issued.
31
How many of the board members' votes are required to publish an exposure draft?
8/15
32
What are the two qualitative characteristics categories?
- Fundamental | - Enhancing
33
What are the two fundamental qualitative characteristics?
Relevance | Faithful representation
34
What are the four enhancing qualitative characteristics?
- Comparability - Verifiability - Timeliness - Understandability
35
What is the underlying assumption of the financial statements?
The going concern concept
36
When is information relevant?
- When it has the ability to influence the economic decisions of the users; and - It is provide in time to influence those decisions
37
What are the two qualities of relevance?
Predictive and confirmatory value
38
What do we mean by predictive?
Predictive value enables users to evaluate or assess past, present or future events.
39
What do we mean by confirmatory?
Confirmatory value helps users to confirm or correct past evaluations and assessments.
40
How do we present transactions so that they are faithfully represented?
In accordance with their economic substance rather than their legal form
41
What are the three characteristics of Faithful representation?
Completeness Neutrality Free from error
42
What characteristic of faithful representations is below? To be understandable information must contain all the necessary descriptions and explanations.
Completeness
43
What characteristic of faithful representations is below? Information must be free from bias
Neutrality
44
Information must be free from error within the bounds of materiality.
45
Comparability
Users must be able to compare period to period and company to company
46
Verifiability
Knowledgeable and Independent users could reach a consensus that the depiction is a faithful representation.
47
Timeliness
Having information available in time for decision makers to be capable of influencing their decisions.
48
Understandability
Assuming users have a reasonable business knowledge and willingness to study, the statements should be understandable.
49
What is an economic resource?
A right that has the potential to produce economic benefit.
50
What is an asset?
- A present economic resource controlled by the entity | - As a result of past events
51
What is a liability?
- A present obligation of the entity | - To transfer an economic resource as a result of past events
52
What is equity (think of the accounting equation)
Equity is the residual interest in the assets of the entity after deducting all its liabilities'
53
What is income?
Increases in assets or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims
54
What are expenses?
Decreases in assets or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims.'
55
What is Capital maintenance?
A theoretical concept which tries to ensure that excessive dividends are not paid in times of changing prices.
56
What are the two types of capital maintenance?
Physical | Financial

FR Textbook (23 decks)

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