Financial Reporting Regulatory Framework Quiz

The Sri Lanka Accounting and Auditing Standards Act No 15 of 1995 empowers the CA Sri Lanka to issue accounting and auditing standards.

The mandatory sources of GAAP in Sri Lanka are: Companies Legislation, SEC regulations and Rulings, and Accounting Standards as issued by the CA Sri Lanka.

The Companies Act No 07 of 2007 makes the application of Sri Lanka Accounting standards mandatory for all companies enacted under the Act. Therefore, the financial statements of limited liability companies in Sri Lanka must be prepared based on the provisions of the Sri Lanka Accounting standards.

The key components of the regulatory framework of financial reporting in Sri Lanka include Accounting standards, Auditing standards, company law, company act, SEC regulations, and stock exchange rules.

The International Accounting Standards Board (IASB) is responsible for developing and issuing International Financial Reporting Standards (IFRS), which are a set of globally recognized accounting standards.

The IASB Conceptual Framework for Financial Reporting provides a set of concepts and principles that guide the IASB in developing accounting standards and help preparers of financial statements in applying those standards.

The SEC Rules govern the listing of securities on the Exchange and continuing listing requirements to ensure an orderly and fair market, as well as efficiency and confidence of stakeholders.

To develop a single set of high-quality, understandable, enforceable, and globally accepted financial reporting standards based on clearly articulated principles.

The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) is the body responsible for issuing accounting standards in Sri Lanka.

The IASB is part of the IFRS Foundation and is responsible for developing and issuing International Financial Reporting Standards (IFRS).

SBEs include companies listed on the Stock Exchange, banks, insurance companies, finance companies, leasing companies, and unit trusts.

The Companies Legislation in Sri Lanka governs the formation, operation, and dissolution of companies, including regulations related to corporate governance and financial reporting.

The main purpose of the SLAASMB is to monitor and enforce compliance with Sri Lanka Accounting standards in the preparation, presentation and audit of financial statements of specified business enterprises to enhance the reliability of financial reporting in the country.

The SLAASMB is empowered to call for documents, information and explanations from Directors, Managers and Auditors for the purpose of carrying out its functions.

If financial statements have not been prepared in accordance with Sri Lanka Accounting Standards, the SLAASMB could require the entity to make corrections.

The two separate committees established under the SLAASMB are the Accounting Standards Committee and the Auditing Standards Committee, with the authority to oversee accounting and auditing standards respectively.

The SLAASMB has gradually increased its capacity in line with the increase in the Specified Business Enterprises (SBE) audit market.