Trang 1
Module 5ModuleModuleModule 555 The Framework for Financial ReportingReporting Omar ElKheshen – kheshen@gmail.com 1
Trang 2
Learning Objectives By the end of this module you should understand: 1. The legal and quasi-legal framework within which companies draw up their financial statements 2. The principal features of the disclosure requirements contained in the International Financial Reporting Standards 3.3. The principles and basic mechanics of group accountingThe principles and basic mechanics of group accounting 4. How to read a published set of corporate financial statements 5. The role of the auditor and the report which he makes to the company Omar ElKheshen – kheshen@gmail.com 2
Trang 3
Agenda 5.1 Introduction 5.2 The Concept of Disclosure 5.3 Sources of Disclosure Requirements 5.4 Government Legislation – The UK Experience 5.5 Accounting Standards – A Brief History of the UK Experience 5.6 Stock Exchange Requirements – The UK Experience 5.7 Financial Reporting in Action 55..88 An Introductory Note on Groups of CompaniesAn Introductory Note on Groups of Companies 5.9 Abstract of Annual Reports: The MBA Company and The Award Company 5.10 The Accounting Policies 5.11 The Consolidated (or Group) Profit and Loss Account (or Income Statement) 5.12 The Consolidated (or Group) Balance Sheet 5.13 A Concluding Note on MBA’s Balance Sheet 5.14 Group Cash Flow Statement 5.15 Detailed Disclosure Requirements for Selected Items 5.16 The Lessons to Be Learned 5.17 Fundamental Accounting Principles 5.18 The External Auditor Omar ElKheshen – kheshen@gmail.com 3
Trang 4
We concluded from the first modules that we require considerable judgment and not a certain scientific formula for asset valuation and profit determination Typical issues confronting managers with respect to financial accounting and reporting: What inventory valuation method should we use: LIFO or FIFO or Inventories average? Overheads What portion of overheads should be allocated to inventory, and what Allocation portion should be written off against this year’s profit? Depreciation How should we depreciate our fixed assets? What is the useful life of the assets? Revenue When should we recognize revenue – on payment or at time of Recognition invoice? The company’s reported profit will be directly affected by how management decides to answer these questions Omar ElKheshen – kheshen@gmail.com 4
Trang 5
However, managers cannot be left alone with loose discretion in these matters Because this will jeopardize: Usefulness of Credibility Reliability financial statements There is always a temptation to draw up financial statements which exaggerate the efficiency of performance Omar ElKheshen – kheshen@gmail.com 5
Trang 6
The material in this module will be quite different and less numerical Describe the framework within which companies must operate in financial reporting Describe the additional information that a company must disclose to its statements However this module: Introduces the reader to the legal and quasi-legal framework NOT to be considered as a comprehensive checklist of disclosure requirements Through: "IFRS" International Financial Reporting Standards "IASB" International Accounting Standards Board Omar ElKheshen – kheshen@gmail.com 6
Trang 7
Agenda 5.1 Introduction 5.2 The Concept of Disclosure 5.3 Sources of Disclosure Requirements 5.4 Government Legislation – The UK Experience 5.5 Accounting Standards – A Brief History of the UK Experience 5.6 Stock Exchange Requirements – The UK Experience 5.7 Financial Reporting in Action 55..88 An Introductory Note on Groups of CompaniesAn Introductory Note on Groups of Companies 5.9 Abstract of Annual Reports: The MBA Company and The Award Company 5.10 The Accounting Policies 5.11 The Consolidated (or Group) Profit and Loss Account (or Income Statement) 5.12 The Consolidated (or Group) Balance Sheet 5.13 A Concluding Note on MBA’s Balance Sheet 5.14 Group Cash Flow Statement 5.15 Detailed Disclosure Requirements for Selected Items 5.16 The Lessons to Be Learned 5.17 Fundamental Accounting Principles 5.18 The External Auditor Omar ElKheshen – kheshen@gmail.com 7
Trang 8
The word ‘disclosure’ implies a degree of resistance on the part of a company to make public some internal information The Disclosure Concept Disclosure Implies a degree of resistanceresistance on the parton the part of the company to make public certain aspects of its affairs Many Questions arise: Why should the company be Why should a company be made to disclose information? reluctant to disclose to the public what is going on? What has the company got to hide? Omar ElKheshen – kheshen@gmail.com 8
Trang 9
The first of these questions is the easiest to answer and is related to the limited liability status of companies Sole Traders & Partnerships Incorporations Liability is beyond the extent of Limited Liability to the extent of Liability Status their capital accounts into their their shareholdings personal possessions Creditors Can Easily pursue them beyond Less able to recover money their share Are more attached to Are divorced from management Shareholders management Law recognizes that there is no Law protects both creditors & Disclosure Need need on such entities to disclose shareholders by forcing a statement companies to disclose certain information Managers disclose the minimum information required by the various regulations to avoid external interference Omar ElKheshen – kheshen@gmail.com 9
Trang 10
Agenda 5.1 Introduction 5.2 The Concept of Disclosure 5.3 Sources of Disclosure Requirements 5.4 Government Legislation – The UK Experience 5.5 Accounting Standards – A Brief History of the UK Experience 5.6 Stock Exchange Requirements – The UK Experience 5.7 Financial Reporting in Action 55..88 An Introductory Note on Groups of CompaniesAn Introductory Note on Groups of Companies 5.9 Abstract of Annual Reports: The MBA Company and The Award Company 5.10 The Accounting Policies 5.11 The Consolidated (or Group) Profit and Loss Account (or Income Statement) 5.12 The Consolidated (or Group) Balance Sheet 5.13 A Concluding Note on MBA’s Balance Sheet 5.14 Group Cash Flow Statement 5.15 Detailed Disclosure Requirements for Selected Items 5.16 The Lessons to Be Learned 5.17 Fundamental Accounting Principles 5.18 The External Auditor Omar ElKheshen – kheshen@gmail.com 10
Trang 11
There are three main sources of rules which govern the disclosure practices of all companies 1 Government Legislation Local Accounting Accounting Profession’s Standards 2 Rules of Procedure InternationalInternational Accounting Standards Requirements of the National 3 Stock Exchange on which a Company has its Shares Quoted Omar ElKheshen – kheshen@gmail.com 11
Trang 12
Agenda 5.1 Introduction 5.2 The Concept of Disclosure 5.3 Sources of Disclosure Requirements 5.4 Government Legislation – The UK Experience 5.5 Accounting Standards – A Brief History of the UK Experience 5.6 Stock Exchange Requirements – The UK Experience 5.7 Financial Reporting in Action 55..88 An Introductory Note on Groups of CompaniesAn Introductory Note on Groups of Companies 5.9 Abstract of Annual Reports: The MBA Company and The Award Company 5.10 The Accounting Policies 5.11 The Consolidated (or Group) Profit and Loss Account (or Income Statement) 5.12 The Consolidated (or Group) Balance Sheet 5.13 A Concluding Note on MBA’s Balance Sheet 5.14 Group Cash Flow Statement 5.15 Detailed Disclosure Requirements for Selected Items 5.16 The Lessons to Be Learned 5.17 Fundamental Accounting Principles 5.18 The External Auditor Omar ElKheshen – kheshen@gmail.com 12
Trang 13
A company’s auditor must certify every year that a true and fair view has been given of the company’s profits and state of affairs The Overall Requirement of the Law: “The company’s profit and loss account & balance sheet shall give a true and fair view of, respectively, the profit or loss for the financial year, and the state of affairs as at the end thereof.” According toAccording toAccording toAccording to Using accurate figuresUsing accurate figuresUsing accurate figuresUsing accurate figures Accepted AccountingAccepted Accounting Free from deliberateFree from deliberate PrinciplesPrinciples biasbias Free from manipulationFree from manipulation Using reasonable estimatesUsing reasonable estimates or concealmentor concealment Much of the information is given by way of notes which are keyed into summarized figures on the accounts Omar ElKheshen – kheshen@gmail.com 13
Trang 14
Agenda 5.1 Introduction 5.2 The Concept of Disclosure 5.3 Sources of Disclosure Requirements 5.4 Government Legislation – The UK Experience 5.5 Accounting Standards – A Brief History of the UK Experience 5.6 Stock Exchange Requirements – The UK Experience 5.7 Financial Reporting in Action 55..88 An Introductory Note on Groups of CompaniesAn Introductory Note on Groups of Companies 5.9 Abstract of Annual Reports: The MBA Company and The Award Company 5.10 The Accounting Policies 5.11 The Consolidated (or Group) Profit and Loss Account (or Income Statement) 5.12 The Consolidated (or Group) Balance Sheet 5.13 A Concluding Note on MBA’s Balance Sheet 5.14 Group Cash Flow Statement 5.15 Detailed Disclosure Requirements for Selected Items 5.16 The Lessons to Be Learned 5.17 Fundamental Accounting Principles 5.18 The External Auditor Omar ElKheshen – kheshen@gmail.com 14
Trang 15
In this part we’ll cover how the accounting standards were developed in the UK throughout the last century Before 1969 1990 UK Companies Acts SSAPs FRSs Dealt only with what ‘Statements of Statements ‘Financial Reporting should be disclosed of Standard Accounting Standards’ Practice’ By:By: By:By: Did NOT require The Accounting Standards The Accounting Standards companies to apply Committee Board specific accounting A body independent of the conventions in a specific professional accounting bodies manner The weakness of the UK accounting standards program up to 1990 lays in the fact that companies chose not to abide by specific standards Omar ElKheshen – kheshen@gmail.com 15
Trang 16
The main difference between the companies acts and the accounting standards is the disclosure requirements UK Companies Acts Companies must disclose certain information (of a financial nature) during the accounting year under review Accounting Standards (more influential) Set controls on how the numbers in the financial statements are to be compiled Change inChange in DisclosedDisclosedDisclosedDisclosed Any: Accounting Policies Should be Quantified in terms of itsQuantified in terms of its effect on profitseffect on profits Accounting Standards cover: A switch from FIFO stock valuationA switch from FIFO stock valuation Leases and hireLeases and hire--purchase contractspurchase contracts to LIFOto LIFO Pension costsPension costs WorkWork--inin--ProgressProgress StocksStocks Group accountsGroup accounts Related party transactionsRelated party transactions DepreciationDepreciation Omar ElKheshen – kheshen@gmail.com 16
Trang 17
Agenda 5.1 Introduction 5.2 The Concept of Disclosure 5.3 Sources of Disclosure Requirements 5.4 Government Legislation – The UK Experience 5.5 Accounting Standards – A Brief History of the UK Experience 5.6 Stock Exchange Requirements – The UK Experience 5.7 Financial Reporting in Action 55..88 An Introductory Note on Groups of CompaniesAn Introductory Note on Groups of Companies 5.9 Abstract of Annual Reports: The MBA Company and The Award Company 5.10 The Accounting Policies 5.11 The Consolidated (or Group) Profit and Loss Account (or Income Statement) 5.12 The Consolidated (or Group) Balance Sheet 5.13 A Concluding Note on MBA’s Balance Sheet 5.14 Group Cash Flow Statement 5.15 Detailed Disclosure Requirements for Selected Items 5.16 The Lessons to Be Learned 5.17 Fundamental Accounting Principles 5.18 The External Auditor Omar ElKheshen – kheshen@gmail.com 17
Trang 18
Listing requirements of the Stock Exchange extend the requirements of the Companies Acts rather than the accounting standards If a company seeks a quotation on a recognized stock exchange: 1 Supply the exchange with detailed information about the management and financial structure of the company 2 Annually provide certain information in its report and accounts Reasons for any departures from accounting standards Geographical analysis of sales turnover Details of shareholdings of more than 20% in other companies Details of directors’ shareholdings in the company Details of dividends waived by directors or shareholders 3 Prepare half-yearly profit reports, to be disclosed in the press Listing requirements make no attempt to prescribe accounting conventions for companies to adopt Omar ElKheshen – kheshen@gmail.com
Trang 19
Agenda 5.1 Introduction 5.2 The Concept of Disclosure 5.3 Sources of Disclosure Requirements 5.4 Government Legislation – The UK Experience 5.5 Accounting Standards – A Brief History of the UK Experience 5.6 Stock Exchange Requirements – The UK Experience 5.7 Financial Reporting in Action 55..88 An Introductory Note on Groups of CompaniesAn Introductory Note on Groups of Companies 5.9 Abstract of Annual Reports: The MBA Company and The Award Company 5.10 The Accounting Policies 5.11 The Consolidated (or Group) Profit and Loss Account (or Income Statement) 5.12 The Consolidated (or Group) Balance Sheet 5.13 A Concluding Note on MBA’s Balance Sheet 5.14 Group Cash Flow Statement 5.15 Detailed Disclosure Requirements for Selected Items 5.16 The Lessons to Be Learned 5.17 Fundamental Accounting Principles 5.18 The External Auditor Omar ElKheshen – kheshen@gmail.com 19
Trang 20
Financial Reporting in Action In this module we will have an extract from MBA’s published accounts forfor 2020xx22, with some of the relevant notes and disclosure requirements, with some of the relevant notes and disclosure requirements Omar ElKheshen – kheshen@gmail.com
Hiển thị 20 trang đầu. Tải tài liệu để xem đầy đủ.
Bình luận (0)
Chưa có bình luận nào. Hãy là người đầu tiên!