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International Financial Reporting Summary + Example Exercises
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International Financial Reporting Summary + Example Exercises Chapters discussed in lectures week 1-6
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Applying IFRS Standards 4th Edition Ruth Picker - Test BankQUESTIONS & ANSWERS WITH RATIONALES COMPLETE AND WELL EXPLAINED BY EXPERTS ALREADY PASSED 100% CORRECT GRADED A+ LATEST UPDATE 2024 100% GUAR...
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Samenvatting "Applying IFRS Standards
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Volledige Lecture Notes Advanced Financial Accounting (2021/2022)
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https://tbpush.com/downloads/solution-manual-for-applying-ifrs-standards-4th-edition-by-ruth-picker/
Chapter 1: Conceptual Framework
- IFRS standards are principle based rather than rule based so they need professional
judgement
- The IASB develops the IFRS standards (IASB = independent standard-setting board)
- The conceptual framework establishes the qualitive characteristics financial info
needs to have to be useful
1.1 IASB international accounting standards boards
1.1.1. Formation IASB
It began as IASC but had a few shortcomings:
- Weak relationship with national standards
- Lack in convergence IASC standards and those adopted in mayor countries
- Board was part-time
- Board lacked resources and technical support
Then came the IASB and SAC (standard advisory council) IASB adapted IAS (international
accounting standards) but they were revised and they soon became the
→ International financial reporting standards (include IFRS and IAS standards)
1.1.2. The standard-setting structure of IASB
- IASB sets the IFRS standards
- IFRS interpretations Committee issues interpretations and guidance on requirements
of IFRS standards.
- IASB and IFRS Interpretations Committee are overseen by: IFRS Foundation Trustees
who by their turn are being overseen by a Monitoring Board full of public authorities
,To issue IFRs follows 6 stages:
1. Setting the agenda
- IASB considers relevance and reliability, existing guidance, potential for convergence,
quality of the standard and anu resource constraints
2. Planning the project
- IASB decides if they want to maybe do the project jointly or alone
3. Developing and publishing the discussion paper
- IASB issues discussion paper
4. Developing and publishing the exposure draft (ED)
5. Developing and publishing the standard
- If the ED is re-exposed
6. Procedure involving consultation and evaluation after an IFRS has been issued
1.1.3. IFRS interpretation committee
→ identifies newly identified financial reporting issues that are not specifically dealt with in
IFRSs, and it endeavors to reach a consensus
1.1.4. Advisory Bodies
Advisory bodies to give extra expertise to IASB when needed
→ the IASB has formal advisory bodies
1. IFRS advisory council
2. Capital markets advisory committee
3. Emerging economics group
4. Global preparers forum
5. SME interpretation group
, 1.2 Purpose of conceptual framework
→ to assist in developing a set of accounting standards for preparation of financial
statements
→ to assist preparers of financial statements in application of accounting standards and
dealing with topics that are not subject of an existing applicable accounting standard
→ to assist auditors in forming an opinion about compliance with accounting standards
→ to assist users in interpreting the information in financial statements
1.2.1 The Objective of Financial Reporting
- 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
- financial statements should reflect the perspective of the entity rather than the
perspective of the entity’s equity investors
- the key users of financial statements are capital providers (existing and potential investors
and lenders)
1.3 Qualitative characteristics of useful financial information
1.3.1 Fundamental qualitative 1.3.2. Enhancing qualitative characteristics
characteristics
1. Relevance 1. Comparability
QC6 QC10 - The quality of info that enables
- When it is capable of making a users to identify similarities in and
difference in the decision made by differences between 2 sets of
capital providers as users of economic phenomena
financial information 2. Verifiability
- It has predictive value, confirmatory - If different independent observers
value or both reach same conclusions
- If it is capable of making a 3. Timeliness
difference whether the users use it - Having info available to decisions
or not makers before it loses capacity to
influence decisions
Materiality is an entity-specific of the 4. Understandability
relevance of information - The quality of info that enables
- Information is material if its users to comprehend its meaning
omission or misstatement could
influence the decisions that users These enhancing characteristics are
make about a specific reporting complementary to the fundamental
entity characteristics. These characteristics
2. Faithful representation distinguish more useful info from less
Faithful representation is attained when useful info
the depiction of an economic phenomenon
is
- Complete
- Neutral
- free from material error
, 1.4 Going Concern assumption
→ is the assumption that the entity will continue to operate in the foreseeable future.
We assume that continuation of operation in future is highly probable for most entities.
We assume that the entity will continue to operate at least long enough to carry out
existing commitments.
1.5 Definition of elements in financial statements
1.5.1. assets
Asset = a resource controlled by the entity as a result of past events and from which future
economic benefits are expected to flow to the entity
3. major characteristics
1. resource must contain future economic benefits (must contribute directly or
indirectly to the flow of cash or cash equivalents)
2. entity must have control over the future economic benefits in sush a way that the
entity has the capacity to benefit from the asset in the pursuit of the entity’s
objectives
for the conceptual framework assets don’t necessarily have to:
- tangible because they can be intangible
- have a cost incurred to determine the existence of an asset
- have exchangeability
- be legally owned by the entity
1.5.2. liabilities
Liability = a present obligation of the entity arising from past events, the settlement of
which is expected to result in an outflow from the entity of resources embodying economic
benefits
Clarifications:
- legal debt constitutes a liability, but a liability is not restructured to be a legal debt
- a liability must result in the giving up on resources embodying economic benefits
that require settlement in the future (by paying cash, transferring other assets,
providing services, replacing obligations with other obligations, converting obligation
into equity)
- it must have resulted from a past transaction (wages to be paid for work in the
future is not a liability)
1.5.3. equity
Equity = the residual interest in the assets of the entity after deducting all its liabilities
Clarifications:
- you can only define equity if you know the assets and liabilities
- equity = assets – liabilities
- equity increases as result of profitable operations and diminished by unprofitable
operations
- Equity is influenced by the measurement system adopted for assets and liabilities
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