Académique Documents
Professionnel Documents
Culture Documents
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Need
Need to
to Develop
Develop Standards
Standards
Various users
need financial
information
Financial Statements
Balance Sheet
Income Statement
Statement of Stockholders Equity
Statement of Cash Flows
Note Disclosure
Generally Accepted
Accounting Principles
(GAAP)
Parties
Parties Involved
Involved in
in Standard
Standard Setting
Setting
Three organizations:
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Financial
Financial Accounting
Accounting Standards
Standards Board
Board
Types of Pronouncements
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Generally
Generally Accepted
Accepted Accounting
Accounting Principles
Principles
Principles that have substantial authoritative support.
Major sources of GAAP:
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APB Opinions.
Issues
Issues in
in Financial
Financial Reporting
Reporting
International Accounting Standards
Two sets of standards accepted for international use:
RELEVANT FACTS
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RELEVANT FACTS
Bangladesh Financial Reporting Standards (BFRS)
The Financial Reporting Standards prescribed by the Institute of
Chartered Accountants in Bangladesh (ICAB) are known as Bangladesh
Financial Reporting Standards (BFRS, including Bangladesh Accounting
Standards, BAS).
As at January 2013, a version of all IFRS (and IAS) issued by the IASB
had been adopted as BFRS by the ICAB, with the following exceptions:
- IAS 29 Financial Reporting in Hyperinflationary Economies adopted
but will not enter into force until 2015
- IFRS 9 Financial Instruments.
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Conceptual Framework
The Framework is comprised of three levels:
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ASSUMPTIONS
PRINCIPLES
1. Economic entity
1. Measurement
1. Cost-benefit
2. Going concern
2. Revenue recognition
2. Materiality
3. Monetary unit
3. Expense recognition
3. Industry practice
4. Periodicity
4. Full disclosure
4. Conservatism
QUALITATIVE
CHARACTERISTICS
Relevance
Reliability
Comparability
Consistency
1.
2.
Conceptual Framework for
Financial Reporting
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CONSTRAINTS
3.
Third
level
ELEMENTS
Assets, Liabilities, and Equity
Investments by owners
Distribution to owners
Comprehensive income
Revenues and Expenses
Gains and Losses
OBJECTIVES
Useful in investment and credit
decisions
Useful in assessing future cash
flows
About enterprise resources,
claims to resources,
and changes in them
Second level
First level
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Reliability
Verifiable
Representational faithfulness
Neutral - free of error and bias
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Period of Time
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Investment by owners
Distribution to owners
Comprehensive income
Revenue
Expenses
Gains
Losses
CONSTRAINTS
1. Economic entity
1. Cost-benefit
2. Going concern
2. Materiality
3. Monetary unit
3. Industry practice
4. Periodicity
PRINCIPLES
1. Measurement
2. Revenue recognition
3. Expense recognition
4. Full disclosure
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4. Conservatism
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Issues:
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Financial Statements
Supplementary information
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Issues
Issues in
in Financial
Financial Reporting
Reporting
Sarbanes-Oxley Act (2002)
Accounting scandals at companies like Enron, Xerox, WorldCom, etc
has resulted in the enactment of a legislation Sarbanes-Oxley Act.
This law has increased the resources for SEC to combat fraud
and curb poor reporting practices.
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Issues
Issues in
in Financial
Financial Reporting
Reporting
Expectations Gap
However, despite this legislation it is difficult to close the
Expectations Gap - what the public thinks accountants
should do vs. what accountants think they can do.
Although accounting cannot be held responsible for every
financial catastrophe, the accounting professional bodies
should continue to develop a highly transparent, clear and
reliable system for financial reporting.
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