The Regulatory Environment

Question 1

GAAP =

Answer 1

Generally accepted Accounting Principle

Question 2

Who actually writes/ sets standards?

Answer 2

International Accounting Standards Board

Question 3

IFRS Advisory Council

Answer 3

Provides a forum for organisations and individuals to participate in standard setting process. Advises Board and Trustees

Question 4

IFRS Interpretations Committee

Answer 4

Explain how to apply standards post publication

Question 5

How many IASs in issue?

Answer 5

41

Question 6

How many IFRSs in issue?

Answer 6

16

Question 7

IFRSs =

Answer 7

IFRSs and IASs

Question 8

IASB

Answer 8

Prepares IFRSs

Question 9

Objective of financial reporting (for user)

Answer 9

To provide financial information about reporting entity that can be used to assess entity’s prospects for the future

Question 10

Fundamental Qualitative characteristics (2)

Answer 10

• Relevance

- Faithful representation

Question 11

Enhancing Qualitative characteristics (4)

Answer 11

• Comparability
• Verifiability
• Timeliness
• Understandability

Question 12

Faithful representation (4)

Answer 12

• Substance over form
• Neutrality
• Free from error
• Completeness

Question 13

To be recognised in the financial statements must (3)

Answer 13

• Meet definition of element
• Be measured reliably
• Probable future economic benefit will flow to or from entity

Question 14

Measurement of elements of financial statements (4)

Answer 14

• Historical cost
• Present value
• Realisable value
• Current cost
  Framework does not say which

Question 15

Concepts of capital and capital maintenance

Answer 15

How entity defines capital it seeks to maintain. Difference between return of capital, and return on capital.

Question 16

Objectives IFRS Advisory Council (3)

Answer 16

• Give advice on IASB agenda decisions and priorities
• Inform IASB views organisations/ individuals
• Advise board/ trustees

Question 17

ResponsibilitIes IFRS IC (2)

Answer 17

• Review on a timely basis newly identified financial reporting issues
• Clarify issues where unsatisfactory/ conflicting interpretations arise

Question 18

IFRSs used for (5)

Answer 18

• National requirements
• Basis for national requirements
• International benchmark
• By regulatory authorities
• By companies themselves

Question 19

Due process

Answer 19

Timely, thorough and open study financial accounting

Question 20

Standard setting process (5)

Answer 20

1) Establish consultative group give advice issues arising
2) Steering committee set up
3) IASB publishes Discussion doc for public comment
4) Exposure draft produced following receipt and review comments
5) Final IFRS issued

Question 21

IFRSs NOT

Answer 21

Applied to immaterial items/ not retrospective

Question 22

Purpose conceptual framework (6)

Answer 22

• Assist IASB in future development standards
• Reduces number alternative accounting treatments permitted
• Assist preparers financial statements applying standards
• Helps users interpret information in financial statements
• Provides information for approach IASB

Question 23

Is conceptual framework accounting standard

Answer 23

No and cannot override accounting standard

Question 24

Objective financial reporting

Answer 24

Provide financial information about reporting entity that is useful to existing and potential investors, lenders and other creditors

Question 25

To assess entity's prospects for future, need info about

Answer 25

- Resources of entity - Claims against entity - How efficiently and effectively entity's management have discharges repsonsibilites

Question 26

Underlying assumption

Answer 26

Going concern

Question 27

Relevance

Answer 27

Relevant to decision making needs user

Question 28

Faithful representation

Answer 28

Way transaction represented corresponds closely with actual effect

Question 29

Neutrality

Answer 29

Not selected or presented in way that influences decision making or judgment users

Question 30

Free from error

Answer 30

Within bounds materiality.

Question 31

Completeness

Answer 31

Complete, omissions are misleading

Question 32

Comparability

Answer 32

Must be able compare over period time

Question 33

Verifiability

Answer 33

Direct or indirect > checking to cash/ checking inputs to model

Question 34

Timeliness

Answer 34

Information available to decision makers in time to be able influence decisions

Question 35

Understandability

Answer 35

Understandable by users

Question 36

Asset

Answer 36

Resource controlled by enterprise as result past events, from which future economic benefits expected flow to enterprise

Question 37

Liability

Answer 37

Entity's obligation transfer future economic benefits as result past transactions or events

Question 38

Equity

Answer 38

Residual amount found by deducting liabilities of entity from entity's assets

Question 39

Income

Answer 39

Increases economic benefits during accounting period in form inflows/ enhancements assets/ decreases liabilities

Question 40

Expenses

Answer 40

Decreases in economic benefits during accounting period in form outflows/ depletion assets, incurrence of liabilities

Question 41

Recognition elements in financial statements (3)

Answer 41

- Meet definition asset - Benefit must flow to / from entitity - Measured reliably