Reading 23: Financial Reporting Standards (FRS) (ISAB Conceptual Framework…
Reading 23: Financial Reporting Standards (FRS)
Ensure that difference firms' statements are comparable.
Narrow the range of reasonable estimate on which financial statements are based
Private organization that establish financial reporting standards
International Accounting Standard Board (IASB)
Financial Accounting Standard Board (FASB) in USA
Government agencies that enforce FRS compliance
International Organization of Securities Commissions (IOSCO)
Security and Exchange Commission (SEC) in USA
Financial Service Authority (FSA) in UK
Global conversion of accounting standards
: Efforts to achieve convergence of local accounting standards with IFRS are underway in most countries that have not adopted IFRS
Difference in opinion among standard-setting bodies and regulatory authorities
Political pressure within countries from interest groups.
ISAB Conceptual Framework
Define fundamental and enhancing qualitative characteristics of financial statement.
Specify the required reporting elements
Note constraints and assumption involved in preparing financial statements
Financial Statement Characteristics
Constraints on Financial Preparation
Cost vs. benefit
Difficulty of capturing non-qualifiable information in Financial Statement.
Assumptions underlying FS preparation
General requirements for FS under IFRS
Required financial statements
Cash flow statement
Statement of changes in equity
Classified balance sheet
Specific minimum information that must be reported in note and on FS
General features of FS
IASB (IFRS) vs. FASB(GAAP) differences
FASB lists r
evenues, expenses, gains and losses in comprehensive incomes.
Minor differences in asset definition.
FASB does not allow upward revaluation of most assets
Coherent Financial Reporting Framework
Issues of valuation
Issues of Standard setting
Issues of Measurement
Must disclose accounting policies and estimate in footnotes and MD&A
Disclose likely impact of recently issued accounting standards on the FS