Scribd Logo
Upload

Welcome to Scribd!

  • 82 views

    Accounting Concepts/conventions and Policies: Always On The Exam!! MCQ?

    Uploaded by

    veemasw
    1. Accounting concepts and conventions have developed over hundreds of years to underpin accounting practices and determine how transactions are recorded and presented. Key concepts include business entity, money measurement, realization, matching, and going concern. 2. The Statement of Principles (SoP) published by the Accounting Standards Board in 1999 outlines principles for preparing financial statements, including the objectives, qualitative characteristics, elements, and accounting for interests in other entities. 3. Generally Accepted Accounting Principles (GAAP) in the UK are defined by statutory requirements, stock exchange regulations, accounting standards set by the ASB and UITF, and the companies act which requires compliance with applicable accounting standards.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd

    Accounting Concepts/conventions and Policies: Always On The Exam!! MCQ?

    Uploaded by

    veemasw
    82 views30 pages
    1. Accounting concepts and conventions have developed over hundreds of years to underpin accounting practices and determine how transactions are recorded and presented. Key concepts include business entity, money measurement, realization, matching, and going concern. 2. The Statement of Principles (SoP) published by the Accounting Standards Board in 1999 outlines principles for preparing financial statements, including the objectives, qualitative characteristics, elements, and accounting for interests in other entities. 3. Generally Accepted Accounting Principles (GAAP) in the UK are defined by statutory requirements, stock exchange regulations, accounting standards set by the ASB and UITF, and the companies act which requires compliance with applicable accounting standards.

    Original Description:

    ACCA

    Original Title

    F3 Concepts Conventions Policies

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPT, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1. Accounting concepts and conventions have developed over hundreds of years to underpin accounting practices and determine how transactions are recorded and presented. Key concepts include business entity, money measurement, realization, matching, and going concern. 2. The Statement of Principles (SoP) published by the Accounting Standards Board in 1999 outlines principles for preparing financial statements, including the objectives, qualitative characteristics, elements, and accounting for interests in other entities. 3. Generally Accepted Accounting Principles (GAAP) in the UK are defined by statutory requirements, stock exchange regulations, accounting standards set by the ASB and UITF, and the companies act which requires compliance with applicable accounting standards.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    82 views30 pages

    Accounting Concepts/conventions and Policies: Always On The Exam!! MCQ?

    Uploaded by

    veemasw
    1. Accounting concepts and conventions have developed over hundreds of years to underpin accounting practices and determine how transactions are recorded and presented. Key concepts include business entity, money measurement, realization, matching, and going concern. 2. The Statement of Principles (SoP) published by the Accounting Standards Board in 1999 outlines principles for preparing financial statements, including the objectives, qualitative characteristics, elements, and accounting for interests in other entities. 3. Generally Accepted Accounting Principles (GAAP) in the UK are defined by statutory requirements, stock exchange regulations, accounting standards set by the ASB and UITF, and the companies act which requires compliance with applicable accounting standards.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 30

    Accounting concepts/conventions and policies

    Always on the exam!! MCQ?

    Background / development
    Accounting practice has developed over hundreds of years Certain practices have developed over time.conceptsnow conventions The statement of principles operates alongside them

    The Financial Reporting framework consists of 2 elements 1. The conceptual framework 2. Generally accepted accounting practice (rules and regs!)ACCOUNTING STANDARDS

    Accounting concepts / conventions can be viewed as ideological practices that have developed over time that underpin accounting They help determine which transactions are recorded and how.

    Accounting Concepts / conventions


    Business Entity Duality Money Measurement Realization Substance over form Prudence Consistency Matching (Accruals) Going concern

    Important Concepts
    SSAP 2 described 4 concepts as Fundamental Going Concern Consistency Prudence Accruals

    1.

    2.
    3. 4.

    Important Concepts
    FRS 18 replaced SSAP 2 in Dec 2000 Emphasises 2 particular concepts Going Concern & Accruals Prudence & consistency merely desireable elements of statements

    Advantages of a Conceptual Framework


    Move away from fire fighting Avoid inconsistencies between standards Determine how profit should be measured Reduce number of standards, emphasis on principles Combat interference, justify procedures

    ASBs Statement of Principles (1999)


    Finally published in March 1999. Principles that should underlie the preparation and presentation of financial statements. True and fair view important.

    8 chapters in S.O.P: 1 2 3 4 5 6 7 The objectives of financial statements The reporting entity The qualitative characteristics of financial information The elements of financial statements Recognition in financial statements Measurement in financial statements Presentation of financial information

    Accounting for interests in other entities

    The first 4 are the most important for 1.1 studies

    2.1.1 Purpose of the SoP


    ASB Develop future, and review existing, a/c standards. Reduce the number of alternative a/c treatments. PREPARERS AUDITORS

    Apply a/c standards.


    Deal with topics not covered by a/c standards.

    TO ASSIST

    Assist in forming an opinion on whether fin state conform with a/c standards.

    USERS
    In interpreting the information in financial statements.

    Elements of Financial Statements


    Assets
    Probable future economic benefits obtained or controlled by an entity as the result of past transactions or events

    Liabilities
    Probable future sacrifice of economic benefits arising from present obligations to transfer assets or provide services in the future as a result of past transactions or events

    Owners interest
    The residual interest in the assets of an entity that remains after deducting its liabilities

    Chapter 3 Qualitative Characteristics of Financial Information (S.O.P)


    RELEVANCE RELIABILITY COMPARABILITY UNDERSTANDABILITY

    Characteristics of Useful Information


    Relevant
    Complete and faithful representation Influences economic decisions

    Reliable

    Comparable

    Similarities and differences can be discerned &evaluated

    Significance of information can be perceived

    Understandable

    Part 2
    Generally Accepted Accounting Principles (GAAP)

    Statutory Requirements: Company Law; EC Law; Directives Stock Exchange Regulations: Listing Rules (Yellow Book)

    Accounting Standards:
    SSAPs; FRSs; UITF Abstracts

    The companies act and accounting standards


    The two are essentially separate But. CA requires companies to include a note to the accounts saying that they have been prepared in accordance with applicable accounting standards Or giving details of any departures

    The Standard Setting Process


    Financial Reporting Council (FRC)
    Accounting Standards Board (ASB) Review Panel

    Issues: Discussion Drafts FRED FRS

    Urgent Issues Task Force (UITF)

    Issues: Abstracts

    FRS 18 Revisited
    FRS 18 replaced SSAP 2 in Dec 2000 Emphasises 2 particular concepts Going Concern & Accruals FRS 18 provides detailed practical implementations of the concepts outlined in the S.O.P

    FRS 18 and Accounting Policies


    FRS 18 requires that the specific accounting policies adopted by an organisation are properly disclosed. The Accounting Policy chosen should be the one that gives a true and fair view

    FRS 18 and Accounting Policies


    Accounting policies are the principles, bases and practices applied by an organisation. They are how an organisation chooses to recognise, measure and present components of financial information e.g a policy to depreciate office equipment rather than not depreciate it

    FRS 18 and Accounting Policies


    Estimation Techniques are the specific methods adopted to estimate (measure) the monetary amounts for the components of financial statements. E.g straight line or reducing balance E.g increasing bad debt provision from 5 to 7%

    Accounting policies and Estimation techniques


    The distinction is an important one in practice: Changes in accounting policies are dealt with as prior-year adjustments. Changes in estimation techniques are only reflected in the profit and loss account for the year of change.

    Choosing an accounting policy involves making a selection of three factors:


    Whether or not to recognise elements as a result of the transaction recognition criteria.

    How to attribute a monetary amount to the elements that are recognised measurement bases.
    Where to present the elements in the financial statements.

    Estimation techniques are the methods adopted by an entity to arrive at the estimated monetary amounts (corresponding to the measurement bases selected) for elements of the financial statements.

    Change in Accounting policy?


    FRS 18 says that a change of accounting policy has occurred where there has been a change to any one of the components of the definition: Recognition criteria Measurement basis Method of presentation

    eg 1: change in depreciation method


    This decision does not involve a change in any of the three key criteria: The fixed assets are still carried at cost less accumulated depreciation. The depreciation is still allocated to individual accounting periods so as to reflect the consumption of economic benefits. Fixed assets and depreciation are presented in the same way in the balance sheet and the profit and loss account respectively.

    eg2: change in stock valuation from wac to fifo


    This involves a change in the basis used to measure stocks from average cost to historical cost and as such represents a change in accounting policy.

    eg 3: a company decides to capitalise finance costs incurred building a factory instead of writing them off
    Recognition the costs are now included as part of an asset. Presentation the costs are now presented in the balance sheet rather than the profit and loss account. This decision represents a change in accounting policy

    Essential Reading for next week


    Read over consolidated accounts in your study pack!!!

    You might also like