Please enable JavaScript.

Coggle requires JavaScript to display documents.

B293 - Unit 1 - Coggle Diagram

- - - - Supervisory body
        
        Regulates
        
        Accountants
        
        Auditors
        
        Actuaries
        
        Sets
        
        Corporate governance
        
        Stewardship codes
      - UK GAAP 2015
        
        FRS 102
        
        The Financial Reporting Standard Applicable in the UK and Republic of Ireland
        
        FRS 103
        
        Insurance contracts
        
        FRS 101
        
        Reduced disclosure framework
        
        FRS 104
        
        Interim financial reporting
        
        FRS 100
        
        Application of Financial Reporting Requirements
        
        FRS 105
        
        The Financial Reporting Standard Applicable to the Micro-entities Regime
      - Under threat
        
        Perceived failures
    - - Goal
        
        Accountability
        
        Efficiency
        
        Transparency
        
        Standardise format
      - Not-for-profit
      - Oversees
        
        IASB
        
        Sets standards
        
        14 members
        
        Financial technical experts
        
        Provide interpretation guidance
      - Council
        
        30 members
        
        Financial interest
        
        Advise IASB priorities
        
        Makes agenda decisions
      - ASAF
        
        4 nations standard setters
        
        Different geographic regions
        
        Engage and consult
        
        Technical
        
        Standard setting
        
        Implementation issues
      - Potential conflict
        
        National standard setters
        
        Who has authority?
  - - - Develop IFRS for consistency
      - Provide guidance where no standards exist
      - Help users in interpretation of IFRS
      - Does not overrule an IFRS standard
      - Four enhancing qualitative characteristics
        
        Verifiability
        
        Checking stock
        
        Checking calculations
        
        Timeliness
        
        Not delayed
        
        Comparability
        
        vs other companies
        
        vs previous years
        
        Understandability
        
        Clear
        
        Concise
        
        Appropriate content
      - Going concern and measurement
        
        Going cocnern
        
        Method used in previous years continues
        
        Assets valued at historical cost
        
        Paid at time of purchase
        
        Liquidation
        
        Assets measured at NRV
        
        Liabilities measured at settlement value
        
        Expenses for liquidating business to be included
        
        Must be specified in accounts
    - - Investors
        
        Potential
        
        Existing
      - Lendors
      - Other creditors
      - Faithful representation
        
        Complete information
        
        Neutral
        
        Free from error
      - Relevant
        
        Predictive value
        
        Confirmatory value
        
        Materiality
        
        Influence decision-making
        
        Material
  - - - IFRS
        
        Mandatory if on LSE or EAA
        
        Optional for other companies
        
        Titles of statements
        
        Statement of changes in equity
        
        Cash flow statement
        
        Statement of financial performance
        
        Notes about accounts
        
        Statement of financial position
      - New UK GAAP
        
        Titles of statements
        
        Statement of changes in equity
        
        Cash flow statement
        
        P&L account
        
        Notes about accounts
        
        Balance sheet
    - - Signed off by directors
        
        Sent to
        
        AGM attendees
        
        HMRC
        
        Shareholders
        
        Companies house
      - Includes
        
        P&L account (Income statement)
        
        Notes about accounts
        
        Balance sheet
        
        Signed by director
        
        Group accounts (If applicable)
        
        Signed directors report
        
        Qualitative info
        
        Auditors report
      - Filed according to end of tax year
        
        6 months after
        
        Public company
        
        9 months after
        
        Private company
    - - Medium
        
        May be abridged
      - Large
      - Small
        
        Can be abridged
      - Micro-entity
        
        Submit abridged accounts
        
        Shareholders must agree
        
        May not require external audit
      - File what you prepare
        
        Submit statements sent to shareholders
    - - External audit
        
        Mandatory if
        
        PLC
        
        Activities are
        
        Insurance
        
        E-money
        
        Banking
        
        Corporate body with traded shares on market
        
        May be optional
        
        Limited
        
        Audit defined by AoA
        
        Shareholder of 10% or more may demand
        
        Verifies accuracy
        
        Reports misrepresentations
        
        Assesses methodology to standards
  - - - Balance sheet
        
        Share premium
        
        Retained earnings
        
        Share capital
        
        No drawings
        
        Dividends paid out of profit
        
        Reduces
        
        Corporation tax
    - - Two types
        
        P&L
        
        Net profit (or loss)
        
        Recorded in retained earnings
        
        Comprehensive income
        
        Net profit + income from other changes
        
        Investments changing value
        
        Change in value of non-current assets
        
        Pension assets or liabilities
        
        Corporation tax
- - - - Make sales (legal fiction)
        
        Generate profit
        
        Schaefer and Cornforth (2015)
        
        Act in best interest of directors
      - Institution
        
        Entity theory
        
        Co-ordinate
        
        Holistic stakeholder management
        
        reconcile interests
        
        Survive
      - Institution adding value
        
        Social legitimacy
        
        More than a business
        
        Benefit larger communities
    - - Single-entity
        
        Limited companies
        
        Medium % of businesses (34)
        
        Largest turnover (93%)
        
        Largest employment (79%)
        
        By shares
        
        Advantages
        
        Separate legal personality
        
        Business responsible for debts, torts and crimes
        
        Limited liability for shareholders
        
        Protected assets
        
        Disadvantages
        
        Time consuming financial statements
        
        Shareholders vs stakeholders
        
        Diverging strategies
        
        Modern Organisation (Armour et al 2009)
        
        Centralised delegated management
        
        Separate control and ownership
        
        Greater impartiality
        
        Managements acts in shareholder interest
        
        Legal obligations for directors
        
        Transferable shares
        
        Raise money through new public shares
        
        Long-term tie in for private
        
        Classes govern sale rules
        
        Public discloses greater information
        
        Liquidity
        
        High
        
        2 more items...
        
        Low
        
        1 more item...
        
        Shareholder limited liability
        
        Reduces personal risk
        
        Investment
        
        1 more item...
        
        Assets
        
        Reduces incentive to manage board
        
        Absentee investor ownership
        
        Modern portfolio investment
        
        Risk vs competitors vs ROI
        
        1 more item...
        
        Speculators
        
        2 more items...
        
        Separate legal personality
        
        Continue until wound up
        
        Enter into contracts by itself
        
        Creditor's cannot claim assets
        
        Creditors paid before shareholders
        
        Confidence
        
        Public limited company
        
        Market economies
        
        Forces
        
        Supply and demand
        
        Private enterprise and profit pursuit
        
        Motivates innovation and determines profit (and tax!)
        
        Competition and profitability
        
        Keeps market power in check
        
        Public information facilitates competition
        
        Information in prices and financial statements
        
        Imperfect vs perfect markets
        
        Government can step in
        
        Secure property rights and accounting
        
        Establishes who owns / owes what
        
        Choose who buys and sells
        
        Market imperfections
        
        Can lead to failures
        
        2 more items...
        
        Externalities
        
        1 more item...
        
        Imperfect information
        
        2 more items...
        
        Type of good
        
        1 more item...
        
        Imperfect competition
        
        2 more items...
        
        Sole trader
        
        Greatest % of businesses (59)
        
        Medium turnover (4%)
        
        Medium employment (15%)
        
        Owned by one person
        
        Advantages
        
        Autonomous decision-making
        
        Easy to set up
        
        Owns assets of business
        
        Owns profits of the business
        
        Disadvantages
        
        Above £85,000 turnover
        
        Must register for VAT
        
        Wound up if dead
        
        No holiday or illness income
        
        Unlimited liability for debts, torts and crimes
        
        Basic financial statements
        
        Taxation
        
        Own requirements
        
        Unspecfied format
        
        Partnerships
        
        Lowest employment (6%)
        
        Lowest % number (7)
        
        Lowest turnover (3%)
        
        Two or more owners
        
        Advantages
        
        Greater capital
        
        Split risk
        
        Task coverage
        
        Shared knowledge
        
        Disadvantages
        
        Complex Decision-making
        
        Owners may disagree
        
        Joint liability
        
        Can be held for all debts
        
        Three types
        
        General
        
        Limited
        
        Limited liability
- - - - Company secretary
        
        Qualifications
        
        Member of accounting institute
        
        Member of ICSA
        
        Barrister or solicitor
        
        Three of five years being secretary
        
        Another position or qualification
        
        Duties
        
        Formal meetings
        
        Keeping meeting minutes
        
        Submitting statements
        
        Maintaining statutory boooks
      - Shareholders (members)
        
        Powers
        
        Contribute capital
        
        Change AoA
        
        Remove directors
        
        Wind up company
        
        Mechanisms
        
        Meetings
        
        Ltd
        
        Make at general meetings
        
        In writing
        
        More agile
        
        plc
        
        Made at the meetings
        
        Gives opportunity to attend and vote
        
        Resolutions
        
        Ordinary
        
        Simple majority (50% + 1 vote)
        
        Special
        
        Greater than 75% votes
        
        Show of hands
        
        Poll
        
        Class meeting
        
        Particular shareholder class
        
        e.g. preference shareholders
        
        EGM
        
        When needed
        
        AGM
        
        Few minority rights
        
        Unanimous consent
        
        Decision is implemented
      - Directors
        
        Executive
        
        Active in company
        
        Likely to be employee
        
        Non-executive
        
        Third-party
        
        Brings specific expertise
        
        Act as check on executive
        
        Managing
        
        Lead role in management
        
        Typically non-executive
        
        Can be called CEO
        
        Chairperson
        
        Meetings
        
        Company spokesperson
        
        Usually different to CEO
        
        Limitations on who can be one
        
        Disqualified
        
        Auditors
        
        Duties
        
        Reasonable care, skill and diligence
        
        Avoid conflicts of interest
        
        Exercise independent judgement
        
        Not accept benefits from 3rd parties
        
        Promote success for shareholders (members)
        
        Declare interest in transactions or exchanges
        
        Act within company powers
        
        May have to 'make good' if in breach
    - - Registrar of companies
        
        Accountability
        
        Statutory returns
        
        Stakeholder information
        
        Control
        
        Must follow rules
        
        Potential to strike
        
        Protects public and companies
        
        Names and rights
        
        Traceability of owners
        
        Documents
        
        Cert of incorporation
        
        Proof of conformity with Companies Act 2006
        
        Memo of association
        
        Model articles
        
        Signed by starter(s) of company
        
        Initial shareholders
        
        Application form IN01
        
        Public or private company
        
        limited liability (shares or guarantee)
        
        Address of registered office
        
        Statement of share capital and holdings
        
        Proposed company name
        
        Details of first director(s)
        
        First company secretary
        
        Persons (natural and legal) with significant control in company
        
        Statement of compliance
        
        Private
        
        Cannot
        
        Offer shares to public
        
        No stock exchange listing
        
        Can
        
        Start with as little as £1
        
        Start with no trading cert.
        
        One director
        
        May appointment company secretary
        
        Public
        
        Can
        
        List on stock exchange
        
        Offer shares to public
        
        Cannot
        
        Start with <£50k capital
        
        £12.5k from cash
        
        Start without a trading cert
        
        Two or more directors
        
        Must have company secretary
        
        Legally recognised qualifications
        
        Statutory records
        
        Directors, shareholders and secretaries
        
        Voting results and resolutions
        
        Promises to repay loans with specific dates
        
        Indemnities
        
        Share transactions
        
        Secured loans or mortgages
        
        Register of PSC
        
        More than 25% shares or voting rights
        
        Appoint or remove directors
        
        Influence or control companies
        
        Accounting information
        
        Monies received and spent
        
        Record of assets and liabilities
        
        Extra for goods
        
        Current inventory
        
        Stock takings
        
        Goods sold and purchased other than buy ordinary detail
        
        1 more item...
        
        Copies go to
        
        All shareholders
        
        AGM participants
        
        Companies house
        
        HMRC
        
        Debenture holders
        
        Confirmation statement
        
        Statement of capital and shareholder information
        
        SIC code
        
        Registered office, directors, secretary and address
        
        PSC
        
        Due one year after
        
        Incorporation
        
        Last annual return
        
        Failure to submit
        
        Struck off register
        
        Fine
        
        Name
        
        Cannot be the same as another
        
        Cannot use certain words
        
        Permission to use certain words
        
        Avoid tort of passing off
        
        Mislead public
        
        Articles of association
        
        Set out rules
        
        Shares and distributions
        
        Director's powers and responsibilities
        
        Shareholder rights and voting
        
        Admin arrangements
        
        Limitation of liability
        
        May be amended later
    - - Equity (Share capital)
        
        Shares
        
        Ordinary
        
        Normally one vote per share
        
        Collect dividends
        
        Right to residual capital if wound up
        
        Once creditors, lendors and preference shareholders paid
        
        Preference
        
        Right to dividend before ordinary
        
        Redeemable
        
        Company may buy back at a specific date
        
        Fixed-term
        
        Treated as an interest expense
        
        Irredeemable
        
        Not brought back
        
        May carry voting rights
        
        Residual of interest from assets - liabilities
        
        Nominal, premium, RE, other reserves
        
        Dividends and capital maintenance
        
        Distribute in authorised way
        
        Protects creditors and lenders
        
        Must be declared
        
        As per AoA
        
        Only out of profit / RE
        
        Companies Act 2006
        
        Relevant accounts used
        
        2 more items...
        
        Recommended by directors
        
        Vote at AGM
        
        Increase by
        
        Secondary offering
        
        PLC only
        
        Issue new shares to public
        
        Rights issue
        
        New shares for existing shareholders
        
        Considered cheaper than secondary offering
        
        Bonus issue
        
        Alternative to paying dividend
        
        Rewards shareholders with more stake in business
        
        At no cost to business
      - Loan / Capital
        
        Debenture
        
        Unsecured fixed rate loan
        
        Public offer
        
        Not available to private
        
        Private placement
        
        Fixed charges
        
        Secured against specific asset
        
        Floating charges
        
        Secured against class of assets
        
        When crystallisation occurs
        
        Event occurs which attaches charge
        
        2 more items...
        
        Lower priority than fixed
        
        Bonds
        
        Secured against assets
        
        Contractual obligation
        
        Fixed or variable rate
        
        Bank loan
      - Strategic decision
        
        Risk vs reward
      - Markets
        
        Primary
        
        New
        
        Shares
        
        Debentures
        
        IPO for PLC
        
        Secondary
        
        Pre-owned
        
        Exchange of existing shares
        
        May reduce price volatility
        
        Based upon performance
        
        Can be OTC
        
        Unregulated
        
        Open
        
        London Stock Exchange
        
        Liquid
        
        Transparent
        
        Regulated
        
        AIM for SMEs