AFM 291 - Fall 2013

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University of Waterloo
Accounting & Financial Management
AFM 291
Robert Ducharme

- Accountants either apply specific standards that are based on the conceptual framework,or, if no specific standard exists, the accountant uses the conceptual framework& professional judgement to reason through to an answer. Challenges and Opportunities for the AccountingProfession - Legislation's key provisions: • Accounting oversight board • Independence rules made for auditors • Certify financial statements,company must forfeit bonuses & profits if there is a restatement of their companies' accounting disclosures • Management must report on the effectiveness of the financial reporting internal control systems • Audit committeesmust have independent members with financial expertise • Code of ethics Standard Setting in a Political Environment - Accounting standards result as much from political action as they do from careful logic or researching findings. Principles versus Rules - Rules-based approach • Like the Canadian tax system • There is a rule for most things (even though the rule may be based on a principle) • Body of knowledge significantly larger -> companies tend to interpret rules literally • Does not always emphasize importanceof communicating the best info for users - Principles-based approach • e.g. IFRS & ASPE • Body of knowledge is smaller • 1 or more principles form the basis for decision-makingin many scenarios • Professionaljudgement fundamental, less emphasis on right & wrong answers • Bright-linetests, numeric benchmarks for determining accounting, are minimized. Integrated Reporting - Financial performance is rooted in a company's business model (earnings process, how companies finance the process, & what resourcescompanies invest in).
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