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FINANCIALO P E R A T I O N S
CIMA PAPER: F1
LECTURER : ABIODUN MAMORA ACCA-Affiliate |Bsc Applied Accounting
LAGOS
LESSON 1: THE REGULATORY FRAMEWORK
NEED FOR REGULATION
1. Reliability of financial information
2. Consistency
3. Uniformity for comparison
Need for harmonisation of accounting standard
2. Wider capital base spreading across national boundaries
3. Wider access to capital for finance
4. Wider business presence-Multinationals
Harmonisation Versus Standardisation
LESSON 1: THE REGULATORY FRAMEWORK
Harmonisation means the process of increasing the compatibility of accounting
practices by setting bounds to their degree of variation.
Standardisation on the other hand implies the imposition of a rigid and narrower
set of rules.
Due to the variation in accounting policies between counties full standardisation
of accounting practices is unlikely. Harmonisation is more likely, as the agreement of
a common conceptual framework of accounting may enable a closer harmonisation
of accounting practices
LESSON 1: THE REGULATORY FRAMEWORK
Element of Regulatory Framework•Local law•Local accounting standards•International accounting standard•Conceptual frameworks•Requirements of International bodies
IFRS Foundation
IASBTRUSTESS
LESSON 1: THE REGULATORY FRAMEWORK
THE TRUSTEES
The trustees are responsible for :
2.Appoint members of IASB, IFR interpretation committee and IFRS advisory
council
3.Review annual performance of IASB
4.Approve annually the budget of IASB
5.Promoting IASB and its works
International Accounting Standards Board (IASB)
IASB are responsible for developing international financial reporting standards
(IFRSs). They are completely responsible for IASB technical matters, including the
irepation and publication of IFRSs , exposure draft , withdrawal of IFRSs and final
interpretations by IFRSs interpretation committee.
LESSON 1: THE REGULATORY FRAMEWORK
IFRS ADVISORY COUNCIL
This provides a forum for organisations and individual to participate in standard
Setting process. The members are appointed by the trustees from various
background. Role of IFRS Advisory Council
• To give advise to IASB
•To inform the IASB of the view of organisations and individuals on
major standard setting project.
•To give other advise to the board or to the trustees.IFRS Interpretations committees
IFRIC has 2 main responsibilities2.Review on a timely basis new financial reporting issues not specifically addresses in IFRS3.Clarify issues where unsatisfactory or conflicting interpretations are developed
LESSON 1: THE REGULATORY FRAMEWORK
STANDARD SETTING PROCESS
1. Establish an advisory committee along side IFRS advisory committee
2. Develop and publish discussion papers for public comment
3. Produce an exposure draft for final review
4. Standard issued.
Test your understanding 1
LESSON 2: THE CONCEPTUAL FRAMEWORK
USERS OF FIANCIAL INFORMATION
The frame work identifies user groups as :
•Inventors
•Lenders
•Employees
•Business contacts i.e customers, suppliers , and competitors
•The general public
•The government i.e. Tax authoritiesObjectives of financial statement
The object of financial statement is to provide information about the
financial position (statement of financial position)
Financial performance (statement of comprehensive income)
Changes in the financial position (statement of cash flows)
LESSON 2: THE CONCEPTUAL FRAMEWORK
Underlining Assumptions
Accruals concept
This means that financial statement should be prepared on the
basis of when transactions occur and not when they are paid.
Class work : give examples
Going concerns
This means financial statements are prepared on the basis
that the enterprise will continue trading for the foreseeable
future. It is assumed that the enterprise neither have an
intention nor the need to liquidate or significantly reduce the
scale of its operations
LESSON 2: THE CONCEPTUAL FRAMEWORK
Qualitative Characteristics of Financial Statements
The framework discusses 4 make financial information useful to users
2.Understandability
3.Relevance
4.Reliability
5.comparability Elements of Financial Statement
Assets
Liabilities
Equity
Income
Expenses
LESSON 2: THE CONCEPTUAL FRAMEWORK
Measurement of Elements of Financial Statement
There are a number of different ways of measuring the element
•Historical cost
•Current cost
•Realisable (settlement) value
•Present (discounted ) value
Test your understanding 2
LESSON 3: CODE OF ETHICS
INTRODUCTION
Chartered management accountant ( and registered student ) have
duty to observe the highest standard of conduct and integrity and to
uphold the good standing and reputation of the profession. They must
also refrain from any conduct which might discredit the profession.
What is Ethics?
Ethics relate to fairness, honesty and responsibility. Ethics are a set
of moral principles to guide behaviour.
They are important because accountant are expected to perform
their work properly.
Ethics describe “how” an entity does its business not what it does.
LESSON 3: CODE OF ETHICS
CIMA’s CODE OF ETHICS
LESSON 3: CODE OF ETHICS
Principles
5 fundamental principles form the basis of the code. They are
3.Objectivity
4.Professional competence and due care
5.Professional behaviour
6.Integrity
7.confidentialityThreatAlthough it is impossible to define all the situation that could create a threat to the fundamental principles, the code does identify 5 categories of common threat3.Self interest threat4.Self reveal threat5.Familiarity threat6.Intimidation threat7.Advocacy threat
LESSON 3: CODE OF ETHICS
Safeguards
In a situation where their might be a threat to any of the code’s
fundamental principles, you should first asses whether the threat is
significant. If it is , you should take reasonable action to remove or mitigate
it. Safeguards measures include whistle blowing or grievance procedure, or
can be embedded within the profession in the form of standard or
legislation.
Safeguards are also the actions that a professional accountants take to
resolve an ethical conflict or dilemma.
Resolving an Ethical Dilemma2.Gather all the relevant information3.Raise your concern internally4.Report to an external regulatory authority or body5.Consider how you can remove yourself from the situation
Illustration 1