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L1 Regulation and Framework (Part 1) - Coggle Diagram
L1 Regulation and Framework (Part 1)
The need for regulation
Required by: Shareholders, creditor, other stakeholder
Directors preparing FS which give false/misleading information
that would cause users to make poor economic decisions
Source
Accounting Standard
Numbers in FS less subjective Uniformity & comparability between companies National – International
Securities regulation International Organization of Securities Commissions – accounting standards of high quality
Stock exchange regulations - e.g. prepare interim FS
Legislation
Individual countries enact their own legislation e.g. accounting records to be kept, format of FS, audit requirements
Generally accepted accounting principles “GAAP”
Companies need to comply with GAAP to achieve a “true and fair” view.
The International Accounting Standards Board “IASB”
that bring transparency, accountability and efficiency to financial markets around the world … serves the public interest by fostering trust, growth and long-term financial stability in the global economy” (IASB)
sets out the basic concepts that underlie the preparation and presentation of financial statements.
Conceptual Framework
purpose of the Conceptual Framework
entities to develop consistent accounting policies when no standard applies to a particular transaction or other event, or when a standard allows a choice of accounting policy; and
all stakeholders to understand and interpret the standards.
IASB to develop and revise its standards
scope of the conceptual Framework
The Conceptual Framework is not an IFRS / IAS. If there is a conflict, the Framework does not override any IFRS / IAS; accounting standards prevail. The Framework will be used to develop new standards so the number of cases of conflict should decrease over time.
the qualitative characteristics that determine the usefulness of information in financial statements
the definition, recognition and measurement of the elements from which FS are constructed
the objective of general purpose financial reporting