Summary Financial Accounting and Control - Intermediate Accounting IFRS edition by Kieso et al.
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Course
Financial Accounting and Reporting (MANBCU168)
Institution
Radboud Universiteit Nijmegen (RU)
Book
Intermediate Accounting IFRS
Summary of the book for Financial Accounting and Reporting at Radboud University. Business administration, specialisation Business Economics year 2. Subject code is MAN-BCU2016. Summary in English. Terms and researchers in italics. Formulas in italics. Summary of the book Kieso et al. - Intermediat...
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
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FAR book summary
Chapter 1
A single set of accounting rules: International Financial Reporting Standards (IFRS). Such a standard
set of rules is important because world markets are increasingly intertwined.
Essential characteristics of accounting:
- The identification, measurement, and communication of financial information about…
- Economic entities to…
- Interested parties.
Financial accounting: the process that culminates in the preparation of financial reports on the
enterprise for use by both internal and external parties
Managerial accounting: the process of identifying, measuring, analyzing, and communicating
financial information needed by management to plan, control , and evaluate a company’s operations.
Most-used financial statements:
- The statement of financial position
- The income statement
- The statement of cash flows
- The statement of changes in equity
To facilitate efficient capital allocation, investors need relevant information and a faithful
representation of that information to enable them to make comparisons across borders.
Objective financial reporting: provide financial information about the reporting entity that is useful to
present and potential equity investors, lenders, and other creditors in making decision about providing
resources to the entity
General purpose financial statements: provide at the least cost, the most useful information possible
Entity perspective: companies are viewed as separate and distinct form their owners.
Decision-usefulness approach: investors use financial reporting because it provides information that is
useful for making decisions.
Accrual-based accounting: ensures that a company records events that change its financial statements
in the periods in which the events occur, rather than only in the periods in which it receives or pays
cash
International Accounting Standards Board (IASB): the main international standard-setting
organization, based in London. Issued the International Financial Reporting Standards (IFRS).
Another organization that has a role in international standard-setting is the International Organization
of Securities Commissions (IOSCO): an association of organizations that regulate the world’s
securities and futures markets.
Four organizations in the international standard-setting structure:
- IFRS Foundation: provides oversight
- International Accounting Standards Board (IASB): develops standards
- IFRS Advisory Council: provides advice and council
- IFRS Interpretations Committee: assists issues
Monitoring Board: establishes a link between accounting standard-setters and the public
authorities that generally oversee them
Elements of due process:
- An independent standard-setting board overseen by a geographically and professionally
diverse body of trustees
- A thorough and systematic process for developing standards
- Engagement with investors, regulators, business leaders, and the global accountancy
profession at every stage of the process
- Collaborative efforts with the worldwide standard-setting community
Characteristics of the IASB:
- Membership
- Autonomy
- Independence
- Voting
Three major types of pronouncements that he IASB issues:
- International Financial Reporting Standards
1
, - Conceptual Framework for Financial Reporting: sets forth the fundamental objective and
concepts that the Board uses in developing future standards of financial reporting
- International Financial Reporting Standards Interpretations: cover (1) newly identified
financial reporting issues not specifically dealt with in IFRS and (2) issues where
unsatisfactory or conflicting interpretations have developed, or seem likely to develop, in the
absence of authoritative guidance
Hierarchy of IFRS to determine what recognition, valuation, and disclosure requirements should be
used:
1. International Financial Reporting Standards
2. The Conceptual Framework for Financial Reporting
3. Pronouncements of other standard-setting bodies that use a similar conceptual framework
Major challenges with financial reporting:
- There is a lot of politics around financial standards, and financial standards have economic
consequences
- There is an expectations gap: what the public things accountants should do and what
accountants think they can do differs
- Challenges within financial reporting:
o Non-financial measurements
o Forward-looking information
o Soft assets
o Timeliness
- You frequently encounter ethical dilemmas in accounting
- International convergence top a single set of accounting rules is desirable, but we are not there
yet
Chapter 2
Conceptual framework: establishes the concepts that underlie financial reporting. It is a coherent
system of concepts that flow form an objective. The objective identifies the purpose of financial
reporting. The other concepts provide guidance on (1) identifying the boundaries of financial
reporting; (2) selecting the transactions, other events, and circumstances to be represented; (3) how
they should be recognized and measures; and (4) how they should be summarized and reported.
Management stewardship: how well management uses a company’s resources to create and sustain
value.
Qualitative characteristics of accounting distinguish better (more useful) information from inferior
(less useful) information for decision-making purposes.
Fundamental qualities:
- Relevance:
o Predictive value
o Confirmatory value
o Materiality
- Faithful representation:
o Completeness
o Neutrality: is supported by prudence (the exercise of caution when making judgments
under conditions of uncertainty)
o Free from error
Enhancing qualitative characteristics:
- Comparability: information that is measured and reported in a similar manner for different
companies
- Verifiability: different knowledgeable and independent observers could reach consensus,
although not necessarily complete agreement
- Timeliness: having information available to decision-makers before it loses its capacity to
influence decisions
- Understandability: enhanced when information is classified, characterized, and presented
clearly and concisely
Elements of financial statements:
2
, - Asset
- Liability
- Equity
- Income
- Expenses
First three reflect a moment in time, second two reflects a period of time.
Basic assumptions:
- Economic entity: economic activity can be identified with a particular unit of accountability
- Going concern: the company will have a long life
- Monetary unit: money is the common denominator of economic activity and provides an
appropriate basis for accounting measurement and analysis
- Periodicity: a company can divide its economic activities into artificial time periods
- Accrual basis: transactions that change a company’s financial statements are recorded in the
periods in which the events occur
Basic principles of accounting:
- Measurement: two types:
o Historical cost principle: gives a faithful representation
o Current value principle: three bases:
Fair value: the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the
measurement date
Value in use for assets and fulfillment value for liabilities:
Value in use: present value of cash flows or other economic benefits
that a company expects to derive from the use of an asset
Fulfillment value: the present value of the cash, or other economic
resources that a company expects to be obliged to transfer as it fulfills
a liability
Current cost
- Recognition: two principles:
o Revenue recognition principle: requires that the companies recognize revenue in the
accounting period in which the performance obligation is satisfied
o Expense recognition principle: let the expenses follow the revenues. Two types of
costs: product costs and period costs
- Full disclosure principle: recognizes that the nature and amount of information included in
financial reports reflects a series of judgmental trade-offs. For full disclosure, you have to
include notes to financial statements and supplementary information
Cost constraint: companies must weigh the costs of providing the information against the benefits that
can be derived from using it
Conceptual framework for financial reporting:
3
, Chapter 3
The reasons for recent trend for integrating blockchain technologies in accounting:
- They create a database of information that is immutable
- The records are stored in a distributed system
- They can be built using public shared databases
Basic accounting terminology:
- Real accounts: appear on tha balance sheet
- Nominal accounts: temporary accounts, not on the balance sheet
- General ledger: a collection of all the assets, liability, equity, revenue, and expense accounts
- Subsidiary ledger: contains the details related to a given general ledger account
Debit: left, credit: right
Double-entry accounting system: when a company records the two-sided effect of each transaction in
appropriate accounts.
The basic accounting equation: assets + liabilities + equity
Expanded equation and debit/credit rules and effects:
4
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