Financial Accounting and Reporting All answers are correctly provided, promising a high distinction.
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FAC1601 Financial Accounting & Reporting
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FAC1601 Financial Accounting & Reporting
Financial accounting - Answer Collecting and processing financial information to meet the needs
of external decision makers. It is highly regulated, and regulations change often
General purpose financial statements - Answer - Must comply with AASB framework and
accounting standards
- Meets info...
principles of corporate governance. Requires companies to provide a statement in their annual report
disclosing the ways they have not followed the best practice of corporate governance during that reporting
period
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,IFRSs - Answer Stands for International Financial Reporting Standards, which are developed by
the International Accounting Standards Board (IASB)
History of Australia adopting the IFRSs - Answer In 2002, the FRC decided to commit Australia to
adopting these international standards. They did this because the EU made all of their listed companies to
comply with these standards to support the 'single market objective'. In 2005 we adopted them properly.
The IFRSs are converted into Australian with an AASB prefix (IFRS 1 is AASB 1 in Australia), and they
apply to ALL reporting entities (listed or unlisted, private and public). AASB standards also have a
general application to not-for-profits and local government sectors.
Convergence Project - Answer Being jointly undertaken by the IASB and FASB (US standards
board) to converge US and international standards
Cultural barriers to international standardisation of accounting standards - Answer Different
cultural values in different countries can mean differences in expectations of accounting standards, so it
can be hard to make standards that can be agreed on for everyone. Standards cannot be considered 'culture
free'
eg. some countries are more secretive, level of compliance may be lower in some countries, etc
IASC - Answer International Accounting Standards Committee- established in 1973 to harmonise
accounting standards. Developed countries didn't adopt these standards until later
Structure of the IASB - Answer - IFRS Foundation
- IFRS Advisory Council
- Interpretations Committee
- Monitoring Board
What enforcement powers does the IASB have? - Answer None- it is a standard-setting board. The
ASIC enforces the ISFRs; therefore, even though many countries claim to use ISFRs, the truth of this
depends on the quality of the enforcing body in that country.
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, IFRS Interpretations Committee (part of IASB) - Answer - The 'official' interpretative arm of the
IASB
- Provides guidance on issues not covered in IFRSs
- Provides interpretations of existing requirements within IFRSs
- Interpretations have the force of law
- The Board has no power to enforce its standards
- Standards must be enforced in order for them actually ot be applied
Levels of compliance with AASB standards - Answer Small proprietary companies are exempt
Tier 2 reporting entities have reduced compliance
Tier 1 reporting entities have full compliance
Free-market perspective on accounting regulations - Answer - Disagree with regulations
- Demand and supply forces should be allowed to operate an optimal supply of information
- Without regulations, there are still economics-based incentives to provide good and bad information (eg.
to reduce conflict in the interest of the organisation)
- Managers argue that they are in the best place to determine which info should be produced
- Financial audits would still take place in the absence of regulation
- Market for lemons perspective?
Pro-regulation perspective on accounting regulations - Answer - Regulation is required to alleviate
effects of market failure
- Everyone should have equal access to the same info
- Regulation will make stakeholders more confident
- Uniform accounting methods means better comparability
What is a conceptual framework (CF)? - Answer A normative theory that prescribes the nature,
function and limits of financial accounting and reporting.
Goal of a conceptual framework - Answer To generate consensus on things like:
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