EMA1316 Accounting Theory and Practice 1

Accounting rules and regulations help ensure that financial statements provide an accurate picture of a company's financial situation, reducing the likelihood of accounting fraud.

The goal is to reduce, but not entirely eliminate, the differences between two accounting standards.

The aim is to completely remove all differences between two accounting standards, creating a single, unified set.

The G20's request for the IASB and FASB to create a single set of high-quality global accounting standards, eliminating differences between IFRSs and US GAAP.

Financial statements of companies operating in different industries, despite industry differences, can be compared due to the common accounting rules they follow.

When a company adheres to accounting rules and regulations, its financial statements are considered to be accurate and reliable.

Financial statements are useful for comparing companies. It is possible to compare companies across different industries because they use the same accounting rules and regulations.

IFRSs, issued by the IASB, and US GAAP, issued by the FASB are the two major sets of accounting standards, with the G20 aiming to standardize them into one set.

The process of merging two or more sets of accounting standards into a single, unified set, aimed at eliminating discrepancies and achieving consistency.

The main bodies responsible for setting accounting standards globally (IASB) and in the United States (FASB).

A set of fundamental accounting principles that provide the basis for developing specific accounting standards.

The process of combining the financial statements of a parent company and its subsidiaries into a single set of statements.

A standard that sets out the principles for recognizing and measuring revenue from contracts with customers.

A standard that establishes principles for the classification and presentation of financial instruments.

A standard focused on the reporting of interests in consolidated financial statements, particularly on the reporting of segments that are not fully consolidated.

A standard aimed at establishing a single, unified set of accounting standards for financial instruments, specifically regarding recognition, measurement, and impairment.

FIFO (First In, First Out) assumes that the oldest inventory items are sold first. This means the cost of goods sold reflects the cost of the earliest purchases.

LIFO (Last In, First Out) assumes that the newest inventory items are sold first. The cost of goods sold reflects the cost of the most recent purchases.

Different inventory valuation methods like FIFO and LIFO can lead to different values for closing stock and cost of goods sold, influencing profitability.

IFRS (International Financial Reporting Standards) and US GAAP (Generally Accepted Accounting Principles) are two major sets of accounting rules. They have different requirements for inventory valuation, impacting financial reporting.

Accounting terminology varies between IFRS and US GAAP. For example, a lease that covers the whole economic life of an asset is called a 'Finance lease' in IFRS, but a 'Capital lease' under US GAAP.

In IFRS, a 'Finance Lease' is a lease where the lessee gains ownership of the asset at the end of the lease term, while in US GAAP, it is called a 'Capital Lease'.

Accounting regulations help ensure that financial statements accurately represent a company's financial situation, reducing the risk of fraud.

Harmonization refers to reducing, but not eliminating, differences between accounting standards, while standardization aims to completely remove all differences to create a unified set.

An independent body established to ensure that accountants adhere to accounting laws and regulations.

A document issued by a qualified accountant asserting that a company's financial statements accurately reflect its financial situation.

A certified accountant qualified to perform audits.

The process of examining a company's financial records to ensure accuracy and compliance with accounting regulations.

The responsibility of accountants to act in the best interests of stakeholders, including investors and the public.

The trust that individuals and organizations place in accountants' reports and assessments.

Actions taken by the Accountancy Board to address cases where an accountant has jeopardized public trust by failing to meet professional standards.

The Accountancy Board's authority to initiate projects that benefit the accounting profession as a whole.

The statement that shows a company's profit or loss under IFRS.

The statement that shows a company's profit or loss under US GAAP.

The name for share capital in a company under IFRS.

The name for share capital in a company under US GAAP.

The advantage of having a standardized set of accounting standards across different countries.

A company listed on stock exchanges in two or more countries.

The challenge faced by companies listed on multiple exchanges due to differences in accounting standards.

The goal of having standardized accounting standards worldwide.

The amount of detail provided in a company's Director's Report should be proportionate to the company's size. Smaller companies can provide less detail, while larger companies require more comprehensive reports.

The 6th Schedule of accounting standards requires companies to disclose significant events that occurred between the year-end and the approval of their financial statements.

The 6th Schedule also emphasizes the need for disclosing significant future developments that the company expects to materialize. This includes plans like building a new factory or launching a new product.

Companies are required to disclose any research and development expenditures they are undertaking. This is important because it indicates a company's commitment to innovation and improvement.

The level of detail provided in a company's Director's Report should be commensurate with the size of the company. Smaller companies have less reporting requirements than larger companies.

Companies must disclose significant events that occur after the fiscal year-end, but before the approval of the financial statements.

The 6th Schedule requires companies to disclose important future developments that the company anticipates. This provides transparency for investors and stakeholders.

Research and Development expenditures are significant because they demonstrate a company's commitment to innovation and improvement. This information helps investors assess the company's potential for growth.