Financial Accounting: GAAP Principles 3e

Tutorial 1.1
(Solution included in
SQB)

GAAP theory

Chapter 1

Basic level

Answer the following questions:

(a)When does a company not have public accountability?
(b)Explain how you would decide on the materiality of an amount.
(c)What is the difference between an executive and a non-executive director of a company?
(d)Explain the information needs of users of financial statements with reference to the
comparability of financial statements.
(e)Briefly explain the role of the auditor in the preparation of the financial statements of a
company.

Department of Accounting, UCT and Oxford University Press Southern Africa

Financial Accounting: GAAP Principles 3e

Tutorial 1.2

GAAP theory

Chapter 1

Basic level

1. What is IFRS (International Financial Reporting Standards)? Write a paragraph in which

you explain the development of IFRS, its adoption, and compliance requirements in South
Africa.
2. What is the standard of GAAP for SMEs? Write a paragraph in which you explain the need
for a separate standard for SMEs, its application, and the users of financial statements
which are prepared in accordance with this standard.
3. What is the IASB (International Accounting Standards Board)? Write a paragraph in which
you discuss its history, role and objectives.
4. Briefly explain the scope and authority of IFRS, with specific reference to the South
African scenario.
5. Briefly explain the development process that the IASB applies, and its working relationship
with the FASB (Financial Accounting Standards Board) and other organisations and
individuals, for projects and IFRS.

Department of Accounting, UCT and Oxford University Press Southern Africa

Financial Accounting: GAAP Principles 3e

Tutorial 1.3

Development of IFRS

Chapter 1

Intermediate level

Following your recent success in your accounting examination, you have been appointed to a
listed company. The Chairman of the Board of Directors of the listed company is an
independent non-executive director (which implies that he does not work full-time at the
company and that he has no connection with the company other than in his capacity as a
director.) He is a man who is known for his short temper and dislike of waffle. He has
specifically asked you to write him a succinct (brief) memorandum answering two questions
that have been troubling him.
His first question arises from his irritation with all the IFRS standards that have been published
in recent years. He wants to know why there have been so many and what the advantages are
of adopting IFRS.
His second question arises from his concern about the level of communication with the
employees of the company. The company is a manufacturing company that employs a large
number of staff, and he feels that it would be appropriate to prepare some form of publication
specifically for the staff to communicate to them how the company has performed over the last
year. He has asked you to outline some of the general principles that should be taken into
consideration in the preparation of that type of communication.
Required:
Prepare a memorandum to the Chairman answering the two questions that have been posed.

Department of Accounting, UCT and Oxford University Press Southern Africa