23 Financial Reporting Standards

standard-setting bodies: FASB, IASB

• FASB: financial accounting standards board
• IASB: international accounting standards board

standards

• GAAP: generally accepted accounting principles (FASB)
• IFRS: international financial reporting standards (IASB)
• IAS: international accounting standards (older IASB)

regulatory authorities

SEC: securities and exchange commission (US)
financial conduct authority (UK)
international organization of securities commissions (IOSCO)
1.protect investors
2.ensure the fairness, efficiency, and transparency of markets
3.reduce systemic risk

barrier to convergence

disagree on the best treatment of a particular item or issue
political pressures that regulatory bodies face from business groups
others who will be affected by changes in reporting standards

qualitative characteristics

relevance 中肯
faithful representation 如实反映
enhance relevance and faithful representation:
1.comparability 可比较性
2.verifiability 可验证性
3.timeliness 及时性
4.understandability 易懂性

required reporting elements

assets
liabilities
equity
income
expense

An item should be recognized if a future economic benefit from the item is probable and the item's value or cost can be measured reliably.

measurement base

historical cost 历史成本
amortized cost 摊余成本
current cost 现行成本
net realizable value 可变现净值
present value 现值
fair value 公允价值

constraints

1.the benefit that users gain from the information should be greater than the cost of presenting it
2.non-quantifiable information about a company cannot be captured directly in financial statements

assumptions

accrual accounting 权责发生制
going concern 持续经营

IFRS (by IASB)

required financial statements:
balance sheet
statement of comprehensive income
cash flow statement
statement of changes in owners' equity
explanatory notes(a summary of accounting policies)

features for preparing financial statements:
fair presentation
going concern basis (unless liquidate 除非清算)
accrual basis
consisitency (between periods)
materiality (be free from misstatements or omissions)
aggregation of similar items and separation of dissimilar items
no offsetting 资产与负债，收入与支出不抵消
reporting frequency (at least annually)
comparative information (prior periods should be included)

structure and content of financial statements:
classified balance sheet (showing current and noncurrent assets and liabilities)
minimum information eg: cash and cash equivalents, inventories
comparative information (prior periods)

U.S. GAAP (by FASB)

differ in several respects
1.IASB framework lists income and expenses
FASB framework includes revenues, expenses, gains, losses, comprehensive income
2 define an asset
IASB: a resource from which a future economic benefit is expected to flow
FASB: a future economic benefit (use the word probable)
3.FASB does not allow the upward valuation of most assets

coherent financial reporting framework

should be: transparency, comprehensiveness, consistency
barriers: valuation, standard setting, measurement
standard setting
principles-based: IFRS
rules-based: traditional U.S. GAAP
objective-oriented: common conceptual framework
measurement
valuing the elements at one point in time: balance sheet
valuing the changes between points in time: income statement