Chapter1

Friday,January27,2012

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Introduction - Regulatory framework deals with financial reporting It is the rules and regulations that apply to the preparation of financial statements - Financial reporting General purpose financial statement and other financial reports issued for public consumption - Users of financial statements Shareholders Equity - your own money you Creditors put into the business Employees Liability - the money you have Tax authorities borrowed Sources of Regulation - Legislation EU Directives; SEC - Accounting standards Generally Accepted Accounting Practice (GAAP) IASB (IFRS), FASB (FAB) - Stock exchange regulations NYSE; LSE Generally Accepted Accounting Practice / Principles (GAAP) - GAAP is the complete set of accounting regulations (from all sources) and accounting conventions that apply in a certain jurisdiction (e.g. UK GAAP, US GAAP etc.) - The IASB is developing a set of standards that may form the basis of 'international GAAP' The International Accounting Standards Board (IASB) - IASB Issues IFRS International Accounting standards (IAS's) (IASC) Consists of 14 members (12 full-time, 2 part-time) - IASC Foundation Standards Advisory Council (SAC) International Accounting Standards Board IFR Interpretations Committee

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The Standard-setting process - Due process Identification and review of issues pertaining to topic IASB conceptual framework Study of national accounting requirements Consultation of SAC Publication of discussion document for public Consideration for comments received Publication of exposure draft Consideration for comments received Publication for the standard The structure of an international standard - Introduction - Objectives of the standard - Scope of the standard - Definitions of terms used in standard - Body of the standard - Effective date and transitional provisions - Application guidance - Approval and dissenting opinions by IASB members

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The purpose of accounting standards - Standards reduce variation in accounting practice and introduce a degree of uniformity into financial reporting - Standards make it more likely that financial statements will provide a faithful representation for an entity's financial performance and financial position - Meaningful comparisons may be drawn over time and between entities Worldwide use of international standards - over 100 counties use IFRS in one form of the other - European Union - Canada (2011) Mexico (2012) South Korea - China; Japan - United States? Memorandum of understanding between FASB and IASB Convergence of standards Reconciliation of IFRS to US GAAP eliminated SEC Roadmap to adoption (see AICPA Backgrounder)

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Fist time adoption of international standards - 'reporting date' is the date which falls at the end of the period covered by the first IFRS statements - 'date of transition' is the date at the start of the period for which comparatives are provided in the first IFRS statements - Need to prepare an opening IFRS balance sheet as at the date of transitions - Must use the same accounting policies in the opening IFRS balance sheet and in all periods presented in the first IFRS statements; these policies must comply with all international standards in force at the reporting date - Certain reconciliation are required Reconciliation - the explanation of differences between two items

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