ch01-eng accounting intermediate

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  • 1. Slide 1-1

2. CHAPTER1FINANCIAL REPORTING AND ACCOUNTING STANDARDSIntermediate Accounting IFRS Edition Kieso, Weygandt, and Warfield Slide 1-2 3. Learning Objectives Learning Objectives 1.2.Explain how accounting assists in the efficient use of scarce resources.3.Explain the need for high-quality standards.4.Identify the objective of financial reporting.5.Identify the major policy-setting bodies and their role in the standard-setting process.6.Explain the meaning of IFRS.7. Slide 1-3Identify the major financial statements and other means of financial reporting.Describe the challenges facing financial reporting. 4. Financial Reporting and Accounting Standards Financial Reporting and Accounting StandardsGlobal MarketsObjective of Financial ReportingFinancial statements and financial reportingGeneral-purpose financial statementsAccounting and capital allocation High-quality standardsSlide 1-4Capital providers Entity perspective DecisionusefulnessStandard-Setting OrganizationsIOSCO IASB Hierarchy of IFRSFinancial Reporting Challenges Political environment Expectations gap Significant financial reporting issues Ethics International convergence 5. Global Markets Global Markets World markets are becoming increasingly intertwined. Top 20 Global Companies In Terms Of SalesSlide 1-5 6. Global Markets Global Markets Significant number of foreign companies are found on national exchanges. Illustration 1-2 International Exchange StatisticsSlide 1-6 7. Global Markets Global Markets Financial Statements and Financial Reporting Characteristics of accounting are: (1) (2)economic entities to(3)Slide 1-7the identification, measurement, and communication of financial information aboutinterested parties.LO 1 Identify the major financial statements and other means of financial reporting. 8. Global Markets Global Markets Economic EntityFinancial StatementsAdditional InformationFinancial InformationStatement of Financial PositionPresidents letterAccounting?Income Statement or Statement of Comprehensive IncomeIdentify and Measure and CommunicateStatement of Cash Flows Statement of Changes in EquityProspectuses Reports filed with governmental agencies News releases Forecasts Environmental impact statementsNote Disclosures Slide 1-8Etc. LO 1 Identify the major financial statements and other means of financial reporting. 9. Global Markets Global Markets Accounting and Capital Allocation Resources are limited. Efficient use of resources often determines whether a business thrives. Illustration 1-3 Capital Allocation ProcessSlide 1-9LO 2 Explain how accounting assists in the efficient use of scare resources. 10. Global Markets Global Markets High Quality Standards 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 1-10LO 3 Explain the need for high-quality standards. 11. Global Markets Global Markets High Quality Standards Globalization demands a single set of high-quality international accounting standards. Some elements: 7. Common delivery systems (e.g., eXtensible Business Reporting LanguageXBRL). 8. Common approach to corporate governance and legal frameworks around the worldSlide 1-11LO 3 Explain the need for high-quality standards. 12. Slide 1-12LO 3 Explain the need for high-quality standards. 13. Objective of Financial Accounting Objective of Financial Accounting 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 1-13LO 4 Identify the objectives of financial reporting. 14. Objective of Financial Accounting Objective of Financial Accounting General-Purpose Financial Statements Provide financial reporting information to a wide variety of users. Provide the most useful information possible at the least cost.Capital Providers (Investors) Investors are the primary user group.Slide 1-14LO 4 Identify the objectives of financial reporting. 15. Objective of Financial Accounting Objective of Financial Accounting Entity Perspective Companies viewed as separate and distinct from their owners.Decision-Usefulness Investors are interested in assessing the companys 1. ability to generate net cash inflows and 2. managements ability to protect and enhance the capital providers investments.Slide 1-15LO 4 Identify the objectives of financial reporting. 16. Objective of Financial Accounting Objective of Financial Accounting Review Question The objective of financial reporting places most emphasis on: a. reporting to capital providers. b. reporting on stewardship. c. providing specific guidance related to specific needs. d. providing information to individuals who are experts in the field. Slide 1-16LO 4 Identify the objectives of financial reporting. 17. Objective of Financial Accounting Objective of Financial Accounting Review Question General-purpose financial statements are prepared primarily for: a. internal users. b. external users. c. auditors. d. government regulators.Slide 1-17LO 4 Identify the objectives of financial reporting. 18. Standard-Setting Organizations Standard-Setting Organizations 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.Slide 1-18LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 19. Standard-Setting Organizations Standard-Setting Organizations Two Major Organizations: Financial Accounting Standards Board (FASB) Issues Statements of Financial Accounting Standards (SFAS). Required for all U.S.-based companies.Slide 1-19LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 20. Standard-Setting Organizations Standard-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 1-20LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 21. Standard-Setting Organizations Standard-Setting Organizations International Accounting Standards Board (IASB) Composed of four organizations International Accounting Standards Committee Foundation (IASCF) International Accounting Standards Board (IASB)http://www.iasb.org Standards Advisory Council International Financial Reporting Interpretations Committee (IFRIC) Slide 1-21LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 22. Standard-Setting Organizations Standard-Setting Organizations Illustration 1-4 International Standard-Setting StructureSlide 1-22LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 23. Standard-Setting Organizations Standard-Setting Organizations Review Question IFRS stands for: a. International Federation of Reporting Services. b. Independent Financial Reporting Standards. c. International Financial Reporting Standards. d. Integrated Financial Reporting Services.Slide 1-23LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 24. Standard-Setting Organizations Standard-Setting Organizations Review Question The major key players on the international side are the: a. IASB and FASB. b. SEC and FASB. c. IOSCO and the SEC. d. IASB and IOSCO.Slide 1-24LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 25. Standard-Setting Organizations Standard-Setting Organizations Review Question Which body from the U.S. side is similar to the IASB? a. SEC. b. FASB. c. FASC. d. FAF.Slide 1-25LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 26. Due Process Due 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. Slide 1-26LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 27. Due Process Due Process Illustration 1-4 International Standard-Setting StructureSlide 1-27LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 28. Due Process Due Process Review Question Accounting standard-setters use the following process in establishing international standards: a. Research, exposure draft, discussion paper, standard. b. Discussion paper, research, exposure draft, standard. c. Research, preliminary views, discussion paper, standard. d. Research, discussion paper, exposure draft, standard.Slide 1-28LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 29. Types of Pronouncements Types of Pronouncements Issued by the IASB: International Financial Reporting Standards. Framework for financial reporting. International financial reporting interpretations.Slide 1-29LO 5 Identify the major policy-setting bodies and their role in the standard-setting process. 30. Types of Pronouncements Types of Pronouncements Hierarchy of IFRS Companies first look to: 1. International Financial Reporting Standards; 2