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24.b
24.a
F.S provides information about financial performance & in financial position.
Reporting standards ensure the usefulness of information to a wide range of users.
FS =
A&L =
G/L =
BS =
IS =
Financial Statements
Assets & Liabilities
Gain & Loss
Balance Sheet
Income Statement
Standards-setting bodies professional organizations of accountants & auditors that establish financial reporting standards.
Regulatory authorities Govt agencies to enforce compliance with financial reporting standards.
Standard-Setting Bodies
Form S-1
Form 10-K
Form 10-Q
Registration
statement
prior to sale of
new securities
Annual filing
with
information
about
management,
Companys
business &
disclosures.
Not a
substitute for
annual report.
Quarterly
unaudited
filings & a
MD&A about
certain events.
Form DEF-14A
Related to
proxy
statement for
shareholders.
Form 8-K
To disclose
material
events
corporate
Form 144
Filing to notify
SEC notice of
the proposed
sale of
restricted
securities or
securities held
by an issuer
affiliate on
reliance of
Rule 144.
24.c
One barrier to convergence is different standard setting bodies & regulatory authorities.
Political pressure that regulatory bodies face from business groups is another barrier.
Form 3, 4, &5
Filing about
beneficial
ownership
24.d
Qualitative Characteristics
Understandability
Comparability
Verifiability
Timeliness
Measurement Bases
Historical cost
Current cost
Amount to be paid
today for same asset
Realizable value
Present value
Discounted value of
assets expected FCF
Fair value
Assumption
Accrual basis reflecting transactions at time of occurrence, not necessarily when
cash is paid.
Going concern assumption company will continue to exist for a foreseeable future.
24.e
IAS # 1
Fair presentation
Going concern; accrual basis;
materiality and aggregation
No offsetting
Frequency of reporting
Comparative information and
consistency of presentation.
24.f
Comparison of framework
FASB
IASB
24.g
Transparent
Comprehensive
Consistent
Similar transactions should
be accounted for in similar
ways.
Valuation
Standard Setting
Principle-based relies on
broad framework (IFRS).
Rule-based specific
guidance (U.S.GAAP).
Objective-oriented Blend
of two.
Measurement
Trade-off b/w properly
valuing B/S & I.S.
24.h
Analyst should be aware of new products & innovations in financial market.
Companies disclose policies & estimates in footnotes.
Management can discuss impact of adopting a new standard.