Study Guides (238,613)
Canada (115,253)
York University (9,816)
Accounting (97)
ACTG 3110 (13)

Chapter 1 (5 pages of thorough notes for midterm).docx

5 Pages
Unlock Document

York University
ACTG 3110
Elizabeth Farrell

Chapter 1: The Framework for Financial Reporting International Financial Reporting Standards (IFRS) International Accounting Standards (IAS) – 41 standards developed by the International Accounting Standards Committee  Voluntary compliance – no significant power  IFRS includes these 41 standards As countries began investing in other countries, the need for a standardized system became more important International Accounting Standards Board (IASB) – professional international standard-setting body – accepted IFRS Convergence project – change from one accounting standard to another IASB Structure:  IFRS Foundation – 22 trustees responsible for overall strategy  International Accounting Standards Board – 16 members responsible for issuing IFRS  IFRS Advisory Council – 30 members who identify problems and are very knowledgeable (advises the Board on decisions, priorities, etc.)  IFTS Interpretations Committee – 14 members that provide technical updates for interpreting IAS Accounting Standards in Canada For public companies, they are required to use IFRS as of January 1, 2011. Private companies have the choice between:  IFRS as used by public companies  Accounting standards for private enterprises (ASPE) Public enterprise – company that has securities issued to the public (or are about to) Publically accountable enterprise (PAE) – a private enterprise that is publicly accountable Fiduciary enterprise – organization that acts in a trusteeship capacity for members of the public (investment funds, pension funds, savings institutions, etc.) Reporting in US GAAP If a Canadian company is traded heavily in the USA, the Ontario Securities Commission (OSC) accepts the use of US standards Is a corporation uses Canadian GAAP, and is traded in the US, then the SEC will accept IFRS-based reporting Legal and Regulatory Requirements Special industries (investment funds, chartered banks, regulated enterprises) may have IFRS requirements, plus additional legal requirements Reporting Currency Functional currency – currency in which most transactions are conducted Presentation currency – currency in which the statements are prepared Control blocks – voting shares are given to a small number of shareholders Restricted shares – shares that have limited voting power – raise capital without giving up too much control Accounting Standards for Private Enterprises Private organizations only need to provide information to a limited group of people: creditors, tax authorities, government, etc. Private companies in Canada have three reporting options: 1. IFRS (like public) 2. Canadian accounting standards for private enterprises (ASPE) 3. Tailored accounting policies (called disclosed basis of accounting) Using IFRS A private company would use IFRS if it were in competition with a public company Private placement – arranged by direct negotiation between company and those who hold capital Other reasons to use IFRS:  Is the subsidiary of a parent company that is publicly traded  May be thinking of going public in the future  May be thinking of selling the company in the future Using ASPE One of the advantages is being able to use historical costs as opposed to fair values. Additionally, there are fewer disclosure rules Using a Disclosed Basis of Accounting Normally, GAAP will not be used unless it is requested Often statements will be tailored so that they are useful for the user Disclosed basis of accounting (DBA) – non-GAAP accounting policies are used Private Company Standards Internationally There is a simplified version of IFRS for private companies (called IFRS-SME) This is based on ownership (public vs. private) rather than size Countries will normally take one of the following approaches: 1. Require compliance with nation-specific standards 2. Require compliance with full IFRS or IFRS-SME 3. Offer a choice between full IFRS or national standards Issue of Comparability Before, you would have to know the standards of a few countries in order to be able to compare their statements. Now, you just need to know IFRS. However, it is still very difficult. This is because the environments are different, and the focus of the statements is different. For instance, in North America, we put an emphasis on residual earnings for the shareholder. Other areas have different interests:  Income taxes are based on accounting income  Sweden – provide information on social responsibility  Germany – creditor protection  Emphasize employee protection – compensation and benefits High debt in Canada is a bad sign, while low debt in Japan indicates that the banks do not trust you Objectives for Financial Reporting Managers and accountants make many judgments: 1. Choosing appropriate measurement methods (accounting policies) 2. Making suitable estimates 3. Deciding what to disclose in the statements and notes Some of this is determined by the accounting standards you are following Decisions that are made are often done after consideri
More Less

Related notes for ACTG 3110

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.