Summary
Financial Accounting and Reporting Summary of All Lectures (2022/2023)
- Course
- Institution
Summary of the course Financial Accounting and Reporting. Contains all lectures.
[Show more]
Seller
Follow
yoel0507
Reviews received
Content preview
Financial Accounting and ReportingSummary of all Lectures
Radboud University Nijmegen
Yoël Guijt
,Chapter 1 — Financial Reporting and Accounting Standards
Accounting = The process of identifying, measuring and communicating economic information to
permit informed judgments and decisions by users of the information
Financial Accounting = Process that culminates in the preparation of nancial reports on the
enterprise for use by both internal and external parties
Financial Accounting = The process of identifying, measuring and communicating nancial
about the reporting entity that is useful to capital providers in making decisions about providing
resources to the entity
Sole Proprietorship => 100% owner = 100% nancier = ‘Manager’
> Not the case?
Then, Owner ≠ Financier ≠ Manager —> Loans, Employees, Management, etc.
Local markets —> Global Markets: More complex business
> International capital provider on di erent nancial market, corporate nance become more
complex, multinational companies
> More information asymmetry, misleading information, information overload
More international, complex businesses:
> Agency problems, More info needed for economic decision making, which is relevant/
comparable/understandable —> Risk management, internal and external audits
Agency Theory:
> Separation of Ownership and control —> Agency problems
> Opportunistic and self-interested behavior, Risk preferences, Goal con icts, Information
asymmetry
>> Adverse Selection and Moral Hazard
How to reduce information asymmetry with di erent owner and management?
> High quality nancial reports which provide relevant and reliable nancial information
> Dependent on Accounting standards and External Auditors
Accounting Standards:
> Global Accounting Standards = IFRS (between rules- and principle-based)
> Local Accounting Standard = Dutch GAAP, US GAAP, etc.
IASB & IFRS:
> International Accounting Standards Board makes International Financial Reporting Standards
> IAS = International Accounting Standards
> IASC = International Accounting Standards Committee (they control these standards)
> When a new standard is issued by the IASB, the EU has to endorse it before take into
force; then, all European companies must prepare statements according to IFRS
Objective of Financial Reporting:
> “The objective of General Purpose Financial Reporting is to provide nancial information about
the reporting entity that is useful to existing and potential investors, lenders and other creditors in
making decision about providing resources to the entity”
> Communication of nancial information for…
1. Resource Allocation decisions:
> Buy, sell, hold shares? Provide or settle loans? Provide any guarantees?
2. Accountability and Assessment of management stewardship
> Managers must be accountable for choices and actions // Monitor those actions // Evaluate
managers performances
fi fi ff fi ff fi fi fifi fl fi
, 3. Protection of Capital Providers
> When information is relevant and reliable, positive performances attract capital providers or
make sure the current providers keep investing
External Auditor:
> Assurance on nancial information
Independent Auditor’s Report:
> Mandatory Audit: Public Companies, Financial Institutions
> IFRS: Public companies and nancial institutions have to prepare statements
under the IFRS
Chapter 2 — Conceptual Framework for Financial Reporting
General Objective:
> To provide nancial information about the reporting entity that is useful to present and potential
investors in making decision about providing resources to the entity
> Provided by issuing general-purpose nancial statements
> Assumption: Users need reasonable knowledge of business and nancial accounting
Basic Elements:
> Asset = Present economic resource controlled by the entity as a result of past events. A
right with the potential to produce economic bene ts
> Liability = Present obligation as a result from past events to transfer an economic resource
> Equity = Residual interest in the assets of the entity after deducting all its liabilities
> Income = Increases in assets, decreases in liabilities, that result in increases in equity, other
than those related to contributions from holders of equity
> Expenses = Decreases in assets, increase in liabilities, that result in decreases in equity, other
than those relating to distributions to holders of equity
fi fi fi fi fi fi
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 yoel0507. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.42. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
77254 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now