This document contains all lecture notes from lectures 1 to 8 from the 2021/2022 academic year. In addition, the document contains several examples that also serve as examples for the exam questions.
The examples helped me understand and apply the theory.
(The document may contain a few...
Intermediate Accounting IFRS 4th Edition Solution Manual by Donald E. Kieso, Jerry J. Weygandt, Complete Chapters 1 - 24, Verified Newest Version
Test Bank for Intermediate Accounting IFRS, 4th Edition by Kieso, Weygandt, Warfield All 1-24 Chapters Covered ,Latest Edition, ISBN:9781119607519
Test Bank for Intermediate Accounting IFRS, 4th Edition by Kieso, Weygandt, Warfield, All Chapters 1 to 24 complete Verified editon ISBN: 9781119607519
All for this textbook (38)
Written for
Tilburg University (UVT)
Accountancy
Intermediate Financial Accounting (324038B6)
All documents for this subject (3)
1
review
By: RRRRM • 1 year ago
Translated by Google
Summary consists mainly of the text of the lectures, without any real addition. The PowerPoint of the lectures will be available free of charge on canvas. So this document adds nothing.
Seller
Follow
kirstennoteboom
Reviews received
Content preview
Intermediate financial accounting – college 1
What is accounting?
Accounting is the way a business communicates its financial performance.
Communication of information for decision-making.
Not regulated at all Regulated (financial statements as a primary means of
a firm’s communication).
Role of financial reporting
Economic (theory) reasoning
- Firms need economic resources (capital providers)
- Absence of reporting = wild wild west!! adverse selection
- Information asymmetry always exists because capital providers don’t know everything about
a firm.
- For an efficient functioning capital providers write contracts to prevent agency conflicts
and moral hazard behavior.
Example of accounting information and agency conflict
- Split of shareholders (principals) and managers (agents) leads to problems due to each
aiming to achieve their own (diverse) goals.
- Solution: performance-related pay, to align their interests and thus achieve ‘goal
congruence’.
- Further problem: such pay is usually based on reported profit… and who produces the
reported profit figure? agents.
- A lender (principal) lends money for a specific purpose, e.g., new machinery, BUT the
company (agent) then uses it for something else, e.g., a risky new venture.
, different goals, need for an aligning contract (here the loan covenant includes ratios such as
gearing/leverage to limit the agent’s ability to “misuse” the funds).
- Ratios are based on accounting numbers, produced by ….?
The objective of financial reporting is to provide financial information about the reporting entity that
is useful to present and potential equity investors, lenders and other creditors in making decisions
about providing resources to the entity.
In addition to decision-usefulness, financial reporting has also a stewardship purpose.
- If owners assign stewardship of their company to management, they wish to have the ability
to oversee management behavior to ensure that:
o It is aligned to the owners’ objectives
o Management are devising strategies aimed at making the best use of company assets
o No misappropriation of the company assets takes place.
Our focus in this course
- Annual report (consolidated) financial statements
Annual report vs. financial statements
Annual report
- General non-standard summary of company activities
- It includes financial statements, but many other things (e.g., CEO letter, employee and
gender issues, operation improvements, new technological developments)
- Distributed through media, firm websites, etc.
Financial statements (F/S) regulated by Generally Accepted Accounting Principles (GAAP)
- Must be deposited into national registers. For example:
o Kamer van Koophandel (KvK)
- Must comply with accounting standards (e.g., German GAAP)
- Usually include all financial statements and notes
o Depending on firm characteristics
Financial statements
- Statement of financial position – SOFP (aka Balance Sheet – BS)
- (Comprehensive) income statement – IS (aka Profit & Loss – P&L)
- Statement of cash flows
- Statement of changes in shareholders’ equity
Accompanying notes to the above F/S are also mandatory.
,Financial reporting standards
To satisfy the need for financial reporting, governments establish a set of rules Generally Accepted
Accounting Principles (GAAP)
A lot of developed countries have their own accounting standards:
- US GAAP
- UK GAAP
- Plan Comptable Général (France)
- Plan Genaral Contrable (Spain)
- Dutch GAAP
BUT a need for an international set of accounting standards was obvious.
Single set of rules (established by a single standard-setting body) that is:
- High-quality
- Understandable
- Enforceable
- Globally accepted
- Comparable
To ensure that relevant and faithful information is disclosed International Financial Reporting
Standards (IFRS).
Development of IFRS
1. International Accounting Standard Committee (IASC) – founded 1973 2001
2. International Accounting Standard Board (IASB) – Since 2001
1. IAS 1 to 41 (International Accounting Standards)
2. IFRS 1 to 17 (International Financial Reporting Standards) (at Sep. 2020)
From 1997 to 2002: SIC (Standard Interpretations Committee)
Since 2002: IFRIC (International Financial Reporting Interpretations Committee)
IFRS standard-setting structure
, IASB due process – “approval of a standard”
Standard setting through an open due process
1. The IASB establishes an Advisory Council to give advice on issues arising from a project.
2. Continuous consultation between IASB and the IFRS Advisory. Council throughout the
process.
3. Discussion documents are prepared for public consultation.
4. Comments are received and reviewed. IASB prepares and publishes an ‘exposure draft’ for
public comment (approval by 9 IASB members required).
5. Comments are received and reviewed. IASB issues a ‘final draft’.
6. Standards are published with basis for conclusions to assist users in their application.
IASB pronouncements
The IASB issues three major types of pronouncements:
1. International Financial Reporting Standards (IFRS)
2. Conceptual Framework of Financial Reporting
3. International Financial Reporting Standards Interpretations (IFRSI).
Hierarchy of IFRS
- The IASB is a private organization and has no regulatory mandate nor enforcement
mechanism.
- The IASB relies on other regulators to enforce the use of its standards
o E.g., The European Union requires publicly traded member country companies to use
IFRS.
- In order to determine what recognition, valuation, and disclosure requirements should be
used, companies follow a hierarchy:
1. International Financial Reporting Standards (IFRS), IAS and IFRS interpretations
2. Conceptual Framework for Financial reporting
3. Pronouncements of other standard-setting bodies that use a similar conceptual framework
(e.g., US GAAP).
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller kirstennoteboom. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $4.84. You're not tied to anything after your purchase.