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Slide 1-1
FINANCIAL REPORTING AND FINANCIAL REPORTING AND ACCOUNTING STANDARDSACCOUNTING STANDARDS
Slide 1-2
General-purpose General-purpose
financial financial
statements statements
Capital providersCapital providers
Entity perspectiveEntity perspective
Decision-Decision-
usefulnessusefulness
Global MarketsObjective of Objective of
Financial Financial ReportingReporting
Standard-Setting Standard-Setting OrganizationsOrganizations
Financial Financial Reporting Reporting
ChallengesChallenges
Financial Financial
statements and statements and
financial reportingfinancial reporting
Accounting and Accounting and
capital allocationcapital allocation
High-quality High-quality
standardsstandards
IOSCOIOSCO
IASBIASB
Hierarchy of IFRSHierarchy of IFRS
Political Political
environmentenvironment
Expectations gapExpectations gap
Significant financial Significant financial
reporting issuesreporting issues
EthicsEthics
International International
convergenceconvergence
Financial Reporting and Accounting StandardsFinancial Reporting and Accounting StandardsFinancial Reporting and Accounting StandardsFinancial Reporting and Accounting Standards
Slide 1-3
Global MarketsGlobal MarketsGlobal MarketsGlobal Markets
World markets are becoming increasingly intertwined.
Top 20 Global Companies In Terms Of Sales
Slide 1-4
Global MarketsGlobal MarketsGlobal MarketsGlobal Markets
Significant number of foreign companies are found on
national exchanges.Illustration 1-2International ExchangeStatistics
Slide 1-5 LO 1 Identify the major financial statements and other means of financial reporting.LO 1 Identify the major financial statements and other means of financial reporting.
Global MarketsGlobal MarketsGlobal MarketsGlobal Markets
Financial Statements and Financial Reporting
Characteristics of accounting are:
(1) the identification, measurement, and communication of financial information about
(2) economic entities to
(3) interested parties.
Slide 1-6
Financial Information
Accounting?
Identify
and
Measure
and
Communicate
Financial Information
Accounting?
Identify
and
Measure
and
Communicate
Statement of Financial Position
Income Statement or Statement of Comprehensive
Income
Statement of Cash Flows
Statement of Changes in Equity
Note Disclosures
Statement of Financial Position
Income Statement or Statement of Comprehensive
Income
Statement of Cash Flows
Statement of Changes in Equity
Note Disclosures
President’s letter
Prospectuses
Reports filed with governmental
agencies
News releases
Forecasts
Environmental impact statements
Etc.
President’s letter
Prospectuses
Reports filed with governmental
agencies
News releases
Forecasts
Environmental impact statements
Etc.
Financial StatementsFinancial Statements Additional InformationAdditional InformationEconomic EntityEconomic Entity
Global MarketsGlobal MarketsGlobal MarketsGlobal Markets
LO 1 Identify the major financial statements and other means of financial reporting.LO 1 Identify the major financial statements and other means of financial reporting.
Slide 1-7
Resources are limited. Efficient use of resources often determines whether a business thrives.Resources are limited. Efficient use of resources often determines whether a business thrives.
LO 2 Explain how accounting assists in the efficient use of scare resources.LO 2 Explain how accounting assists in the efficient use of scare resources.
Illustration 1-3 Capital Allocation Process
Accounting and Capital Allocation
Global MarketsGlobal MarketsGlobal MarketsGlobal Markets
Slide 1-8 LO 3 Explain the need for high-quality standards.LO 3 Explain the need for high-quality standards.
High Quality Standards
Global MarketsGlobal MarketsGlobal MarketsGlobal Markets
Globalization demands a single set of high-quality
international accounting standards. Some elements:
1. Single set of high-quality accounting standards established by
a single standard-setting body.
2. Consistency in application and interpretation.
3. Common disclosures.
4. Common high-quality auditing standards and practices.
5. Common approach to regulatory review and enforcement.
6. Education and training of market participants.(Continued)
Slide 1-9 LO 3 Explain the need for high-quality standards.LO 3 Explain the need for high-quality standards.
High Quality Standards
Global MarketsGlobal MarketsGlobal MarketsGlobal Markets
Globalization demands a single set of high-quality
international accounting standards. Some elements:
7. Common delivery systems (e.g., eXtensible Business
Reporting Language—XBRL).
8. Common approach to corporate governance and legal
frameworks around the world
Slide 1-10 LO 3 Explain the need for high-quality standards.LO 3 Explain the need for high-quality standards.
Slide 1-11
Objective of Financial AccountingObjective of Financial AccountingObjective of Financial AccountingObjective of Financial Accounting
LO 4 Identify the objectives of financial reporting.LO 4 Identify the objectives of financial reporting.
Objective: Provide financial information about the reporting
entity that is useful to
present and potential equity investors,
lenders, and
other creditors
in making decisions in their capacity as capital providers.
Slide 1-12
Capital Providers (Investors)
Investors are the primary user group.
Objective of Financial AccountingObjective of Financial AccountingObjective of Financial AccountingObjective of Financial Accounting
LO 4 Identify the objectives of financial reporting.LO 4 Identify the objectives of financial reporting.
General-Purpose Financial Statements
Provide financial reporting information to a wide variety
of users.
Provide the most useful information possible at the
least cost.
Slide 1-13
Decision-Usefulness
Objective of Financial AccountingObjective of Financial AccountingObjective of Financial AccountingObjective of Financial Accounting
LO 4 Identify the objectives of financial reporting.LO 4 Identify the objectives of financial reporting.
Investors are interested in assessing the company’s
1. ability to generate net cash inflows and
2. management’s ability to protect and enhance the
capital providers’ investments.
Entity Perspective
Companies viewed as separate and distinct from their owners.
Slide 1-14
Two Major Organizations:
International Accounting Standards Board (IASB)
Issues International Financial Reporting Standards
(IFRS).
Standards used on most foreign exchanges.
Standards used by foreign companies listing on U.S.
securities exchanges.
IFRS used in over 115 countries.
LO 5 Identify the major policy-setting bodies and LO 5 Identify the major policy-setting bodies and their role in the standard-setting process.their role in the standard-setting process.
Standard-Setting OrganizationsStandard-Setting OrganizationsStandard-Setting OrganizationsStandard-Setting Organizations
Slide 1-15
Two Major Organizations:
Financial Accounting Standards Board (FASB)
Issues Statements of Financial Accounting
Standards (SFAS).
Required for all U.S.-based companies.
LO 5 Identify the major policy-setting bodies and LO 5 Identify the major policy-setting bodies and their role in the standard-setting process.their role in the standard-setting process.
Standard-Setting OrganizationsStandard-Setting OrganizationsStandard-Setting OrganizationsStandard-Setting Organizations
Slide 1-16
LO 5 Identify the major policy-setting bodies and LO 5 Identify the major policy-setting bodies and their role in the standard-setting process.their role in the standard-setting process.
Standard-Setting OrganizationsStandard-Setting OrganizationsStandard-Setting OrganizationsStandard-Setting Organizations
International Organization of Securities Commissions (IOSCO)
Does not set accounting standards.
Dedicated to ensuring that global
markets can operate in an efficient
and effective basis.
http://www.iosco.org/
Slide 1-17
LO 5 Identify the major policy-setting bodies and LO 5 Identify the major policy-setting bodies and their role in the standard-setting process.their role in the standard-setting process.
Standard-Setting OrganizationsStandard-Setting OrganizationsStandard-Setting OrganizationsStandard-Setting Organizations
International Accounting Standards Board (IASB)
Composed of four organizations—
International Accounting Standards
Committee Foundation (IASCF)
International Accounting Standards
Board (IASB)
Standards Advisory Council
International Financial Reporting
Interpretations Committee (IFRIC)
http://www.iasb.org
Slide 1-18
LO 5 Identify the major policy-setting bodies and LO 5 Identify the major policy-setting bodies and their role in the standard-setting process.their role in the standard-setting process.
Standard-Setting OrganizationsStandard-Setting OrganizationsStandard-Setting OrganizationsStandard-Setting Organizations
Illustration 1-4International Standard-Setting Structure
Slide 1-19
Due ProcessDue ProcessDue ProcessDue Process
The IASB due process has the following elements:
1. Independent standard-setting board;
2. Thorough and systematic process for developing
standards;
3. Engagement with investors, regulators, business leaders,
and the global accountancy profession at every stage of
the process; and
4. Collaborative efforts with the worldwide standard-setting
community.
LO 5 Identify the major policy-setting bodies and LO 5 Identify the major policy-setting bodies and their role in the standard-setting process.their role in the standard-setting process.
Slide 1-20
Due ProcessDue ProcessDue ProcessDue Process
Illustration 1-4International Standard-Setting Structure
LO 5 Identify the major policy-setting bodies and LO 5 Identify the major policy-setting bodies and their role in the standard-setting process.their role in the standard-setting process.