This is a complete summary of the first half (up until Lecture 5: Tax Accounting) of the KU Leuven course “D0R50a: International Accounting” in . This is a summary of all the slides used in class added with course notes.
International Accounting
Academic Year 2023-2024 – Course 1 Introduction – 02.10.2023
Koen Neijens – Nico Houthaeve – Bianca Chang
This is a complete summary of the first half (up until Lecture 5: Tax Accounting) of the KU Leuven course
“D0R50a: International Accounting” in 2023-2024. This is a summary of all the slides used in class
added with course notes.
Course Introduction
(facilitators, objectives, materials, format, exam)
Chapter 1 – regulatory framework
Chapter 2 – conceptual framework for financial reporting
Chapter 3 – presentation of financial statements (IAS1)
Chapter 4 – accounting policies, accounting estimates and errors (IAS8)
Overall objectives of the course
• The objective of this course is to illustrate how IFRS accounting standards and the judgment used
within the IFRS accounting framework affect financial statements.
• As a user, ask the right questions when analysing the financial statements of a company
• Be critical when comparing financial statements of different companies
Key learning outcomes
• Improved understanding of IFRS accounting standards
• Be able to demonstrate how accounting standards (IFRS) influence the accounting fundamentals
and the financial statements
• Be able to show how the level of judgment used within an accounting framework influence the
main accounting fundamentals (earnings and equity).
• Prerequisite: basic knowledge of accounting concepts
Other materials
E-learnings of the IFRS/IAS standards:
https://www.deloitteifrslearning.com/
Useful website addresses:
• IASB: http://www.ifrs.org/Pages/default.aspx
• Deloitte: http://www.iasplus.com/en
• EY: http://www.ey.com/BE/en/Issues/IFRS
• KPMG: http://www.kpmg.com/global/en/topics/global-ifrs-
institute/Pages/default.aspx
, • PwC: https://www.pwc.com/gx/en/services/audit-assurance/ifrs-reporting.html
Teaching format
• Lectures
o Standard format / topic
o IFRS standard and the judgment needed
• Exercises/examples to get familiar with the topic
• E-learnings of the IFRS/IAS standards
• Assessment method
o Open book exam
o All materials can be brought to the exam (handbook, slides, other)
• Typical structure of the exam:
o Multiple choice
o Exercises/Open questions
INTRODUCTION
Usefulness of accounting
• A firm’s financial statements support the decision making of different stakeholders as the primary
objective of financial statements
o Acquisitions or mergers
o Buying/Selling shares
o Getting a loan
o …
• Stakeholders: owners, employees, suppliers, banks, …
Remember the objectives of the course
• Illustrate how IFRS accounting standards and the judgment used within the IFRS accounting
framework affect financial statements.
• Ask the right questions when analysing the financial statements of a company
• Be critical when comparing financial statements of different companies
Let’s look at an example…
Specific example – beer industry
• AB InBev
• Heineken
• Molson Coors
• Benchmarking useful and necessary:
o cross-sectional (comparing different companies)
o time series analysis (one company over a longer period)
• Ratio analysis is a common tool to provide useful information for decision making
Financial Ratios
, • Profitability ratios (reasonable profit level)
o Is a company successful at generating profits over a time period?
o A reasonable profit margin for long term survival
• Liquidity (short-term ability to pay debt)
o Does a company have the short-term ability to pay its maturing obligations?
o Essential for short-term survival
• Leverage (appropriate long-term debt level)
o A protection for long-term creditors and investors
o A firm should have an appropriate level of borrowing
Financial ratios: some examples
• Return On Equity = profit / equity
• Return On Assets = EBIT (=operating profit) / total assets
• Current ratio = current assets / current liabilities
• Debt / equity ratio
• Price / earnings ratio
• Earnings per share
Numerical data – but what are we looking at?
• In comparing the different financial ratios of those firms some crucial fundamentals are ignored
o What are the underlying fundamentals used in preparing the financial statements?
▪ First question: consolidated or individual company accounts?
▪ Second question: accounting standards used?
▪ Third question: level of judgment used given certain accounting standards?
• Notes to the financial statements important!
1) First question: consolidated or individual company accounts?
2) Second question: accounting standards used?
• What are the accounting standards used to prepare the financial statements?
o IFRS
o US GAAP
o Local GAAP
• IFRS (International Financial Reporting Standards) are set by the IASB (International Accounting
Standards Board)
• US GAAP are set by the FASB (Financial Accounting Standards Board)
, Differences between accounting standards (IFRS vs US GAAP)
3) Third question: level of judgment used given certain accounting standards?
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