CPA Profession: Painting a Financial Canvas Study Notes PDF

**[CPA Profession:]** **[Painting a Financial Canvas]** ***[Academic]*** Why are we using those colors? Why aren\'t the colors wider? a. **Sustainability Reporting** i. Materiality 1. The AP has significant experience with the concept of materiality (i.e., in determ...

**[CPA Profession:]** **[Painting a Financial Canvas]** ***[Academic]*** Why are we using those colors? Why aren\'t the colors wider? a. **Sustainability Reporting** i. Materiality 1. The AP has significant experience with the concept of materiality (i.e., in determining what is and isn't material to a user's decision). ii. Multiple Frameworks 1. It wasn't until the AP became formally involved in the sustainability reporting project that the consolidation of various existing frameworks began to take place. This helped to reduce some of the confusion in the sustainability reporting space. iii. Assurance 1. The accounting profession, through its historic monopoly on financial statement assurance, has significant experience in doing assurance which could be productively employed in assuring SR information. Trusting the SR canvas should be just as important as trusting the financial accounting canvas iv. Standard Setting 1. The AP has a well developed standard setting process (due process) that can be used in setting SR standards v. Regulation 1. It wasn't until the AP had developed IFRS S1 and S2 that IOSCO felt confident in recommending to its member securities commissions to incorporate regulation requiring this 'global baseline' reporting. Regulation is the key to getting SR to be used; hoping companies do it voluntarily is just that, hope. vi. Public Interest 1. Given that the AP's ultimate obligation is to the public interest how could the AP not get engaged in the area of sustainability. Aren't sustainable businesses and economies in the public interest, not to mention a sustainable planet? b. **BV vs. MV (Intangibles)** i. Constantly adjust book values to market values ii. Concerns have been raised about the growing disparity between book values and market values iii. Should we bring more intangibles onto the balance sheet iv. What about estimation error in market values, especially of the whole firm, and of such things as brands or R&D. v. What would the journal entries be if we did adjust to market values? vi. What about disclosure as an option to recognition: either inside or outside financial statements vii. Auditor concerns in auditing market values viii. F/S don't have to report all informative information -- conceptual framework -- but what is reported should be informative (and ideally trustworthy) a. **Non-GAAP** i. Should we allow multiple versions of income in the financial statements? ii. There is no income truth. All versions are compromises between various parties in the standard setting process. Accounting is a social science. We don't 'discover' income, rather we make it up, and hence, we can remake it. iii. What is the purpose of non gaap earnings? Value relevance (as per the JAAF article) versus managing perceptions (as per the JBE article). iv. No limit to number of adjustments v. Regulation by regulators (e.g., SOX) versus profession? vi. IFRS 18 vii. New rules for operating income (which is what non-gaap earnings typically purports to measure) viii. Now some discipline of non gaap by profession ix. Subject to audit -- additional trust x. Auditor concerns about auditing such things as 'one time' items xi. Disclosure of 'alternative performance measures' will be in the notes.     ***[Practice]*** What colors do I use? How wide is the canvas? a. **Assurance** b. **Standard Setting (Due process)** -Competing processes result in competing standard-setting -Ex. Consultation paper was an example of due process (went through similar process of collecting input from users, academics) - not necessarily about standards, also about establishing boards (sustainability reporting) a. **Contingencies** i. What word continually appears throughout the Nutrien Contingencies note and is the basis for the way in which the contingencies standards is operationalized (i.e., formally written)? 1. This formal writing of the standard then essentially allows management not to have to record contingent losses or disclose specific details of any litigation? a. Uncertainty. 1 mark. ii. What is the specific wording in the standard which is based on this uncertainly concept? 1. Not determinable iii. If there is uncertainty what is the contingent 1. Not determinable iv. How often can you make these claims: 1. likelihood of winning or losing is uncertain (Not determinable)? 2. Likelihood of correctly estimating \$ amoun in any law suit is uncertain (ND)? 3. Answer: management can always make all of those claims v. Competition between ASB (Accounting standards board) wanting companies to say the probability (how much) of lawsuits, one company came in and got this standard killed, who was it? 1. Canadian Bar association (Lawyers)