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APC311INTERNATIONAL FINANCIAL REPORTING
Lecture 2
The regulatory & conceptual framework ofinternational financial reporting
Dr Donglin Pei
Room 203C
Ext.: 2343
E-mail: http://www.ukassignment.org/dxygessay/
指导英国essay Remember..Financial reporting is an important part of international system of corporate governance
There are arguments both for and against the regulation of financial reporting
Recent decades have witnessed concerns relating to the context and content of financial reporting
This lecture aims
To introduce the international regulatory systems for financial reporting
To outline the development of IASB
To state, explain and critically discuss the contents of the IASB Framework assignment
To think about various international influences on financial reporting standards and practices in your own country (self-learning target**)
How might we regulate financial reporting?
Market
Each company chooses its own rules pressured by the capital markets
Associationism
Rules are developed by organisations formed to represent the interests of its members
How might we regulate financial reporting?Corporatism
Rules are developed by organisations that are licensed by the state and incorporated into a state sponsored system of regulation
State
Statutory rules with an enforcement mechanism
Corporatism
Rules are developed by organisations that are licensed by the state and incorporated into a state sponsored system of regulation
State
Statutory rules with an enforcement mechanism
Within each of the above we need to consider how rules are
Created and approved, and
Enforced
The most important types of regulation are the law and accounting standards
IASB – a history1973 founded by accountancy bodies from nine countries as International Accounting Standards Committee (IASC)
Until late 1980s activity involved codifying best practice in International Accounting Standards – these included many options
1989 publication of a conceptual framework
IASB – a history1989 initial discussion with the International Organisation of Securities Commissions (IOSCO) regarding the acceptance of IASs as applicable for the financial statements of multinationals making cross-boarder security offerings
Development of a ‘comparability project’ to eliminate certain options in IASs and/or expressing a preference (benchmark treatment)
From 1993 IASs began to be adopted by a number of continental companies for their consolidated statements
1995 agreement by IOSCO and IASC to develop a ‘core set’ of IASs
1998 certain countries legally allowed the use of IASs for consolidated statements#p#分页标题#e#
2000 IOSCO endorses the use of IASs
2001 IASC reformed
The IASB todayThe reformed IASC consists of
IASC Foundation
IASB which initially adopted extant IASs but issues its own IFRSs
International Financial Reporting Interpretations Committee (IFRIC)
Standards Advisory Council (SAC)
What is a conceptual framework (CF)?‘.. a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function and limits of financial accounting and financial statements’ (FASB, 1967)
Why does accounting need a CF?Consistency, coherence in standard setting
Identify and rank issues and allow for a pro-active approach to standard setting
Encourage ‘rational’ debate
Aid interpretation of standards by preparers/auditors
Enhance the credibility of financial reporting
Legitimate the standard setting process
What does a CF usually cover?
The objective of financial statements
The qualitative characteristics of useful information
The definition, recognition and measurement of the elements from which financial statements are constructed
What does a CF usually cover?The objective of financial statements
The qualitative characteristics of useful information
The definition, recognition and measurement of the elements from which financial statements are constructed
The IASC FrameworkUnderlying assumptions:
Accruals (or matching)
Going concern
Qualitative characteristics of
Understandability
Relevance (including materiality)
Reliability (including faithful representation; substance over form; neutrality; prudence; completeness)
Comparability
Element definition:
Asset: a resource controlled by an enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise’ (deferred tax asset?)
Liability: a present obligation of the enterprise arising from past events the settlements of which is expected to result in an outflow from the enterprise of resources embodying economic benefits’ (deferred tax liability?)
Equity: the residual interest in the assets of the enterprise after deducting all its liabilities
Income: increases in equity (other than transactions with owners)
Expenses: decreases in equity (other than transactions with owners)
The recognition of elements when:
It is probable that any future economic benefit associated with the item will flow to or from the enterprise, and
The item has a cost or value that can be measured with reliability
The measurement of elements:
Choices include:
Historical cost
Current cost
Realisable value
Present value
Why a regulatory framework?Financial statements
Direction
Guidance
Quality
Users’ requirements
Quality
True and fair view/fair presentation#p#分页标题#e#
Global standards?The EU regulation imposes endorsed IFRSs on the consolidated statements of all companies listed in the UK on 1st January 2005.
Currently the US Financial Accounting Standards Board (FASB) and the IASB are working together on ‘convergence’
2009 aim to eliminate the SEC requirement for foreign private issuers to reconcile IFRS-based financial statements to US GAAP
HarmonisationThe goal is harmonisation of national financial reporting frameworks - a response to the globalisation of business
Will harmonisation be based on a particular view (the conceptual framework) that is appropriate for other countries?
IFRS and IAS Summaries
Framework - Technical Summary *
IFRSs:
IFRS 1 First-time Adoption of International Financial Reporting Standards
IFRS 2 Share-based Payment
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
IFRS 6 Exploration for and evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures *
IFRS 8 Operating Segments
IASs:
IAS 1 Presentation of Financial Statements *
IAS 2 Inventories
IAS 7 Cash Flow Statements *
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10 Events After the Balance Sheet Date
IAS 11 Construction Contracts
IAS 12 Income Taxes
IAS 16 Property, Plant and Equipment *
IAS 17 Leases *
IAS 18 Revenue
IAS 19 Employee Benefits *
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
IAS 21 The Effects of Changes in Foreign Exchange Rates assignment
IAS 23 Borrowing Costs *
IAS 24 Related Party Disclosures
IAS 26 Accounting and Reporting by Retirement Benefit Plans
IAS 27 Consolidated and Separate Financial Statements
IAS 28 Investments in Associates
IAS 29 Financial Reporting in Hyperinflationary Economies
IAS 31 Interests in Joint Ventures
IAS 32 Financial Instruments: Presentation *
IAS 33 Earnings per Share
IAS 34 Interim Financial Reporting
IAS 36 Impairment of Assets *
IAS 37 Provisions, Contingent Liabilities and Contingent Assets *
IAS 38 Intangible Assets *
IAS 39http://www.ukassignment.org/daixieEssay/daixieyingguoessay/ Financial Instruments: Recognition and Measurement *
IAS 40 Investment Property
IAS 41 Agriculture
True and fair/fair Essay
Workshop 2
Individual essay (400 - 500 words)
Recommended readings on WebCT
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