The International Accounting Standards Committee Foundation
REVISION QUESTION BANK – FINANCIAL REPORTING (F7)
Question 1 IASCF
Historically financial reporting throughout the world has differed widely. The International Accounting
Standards Committee Foundation (IASCF) is committed to developing, in the public interest, a single set of high quality, understandable and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements. The various pronouncements of the IASCF are sometimes collectively referred to as International Financial Reporting Standards (IFRS)
GAAP.
Required:
(a)
Describe the functions of the various internal bodies of the IASCF, and how the IASCF interrelates with other national standard setters.
(10 marks)
(b)
Describe the IASCF’s standard setting process including how standards are produced, enforced and occasionally supplemented.
(10 marks)
(c)
Comment on whether you feel the move to date towards global accounting standards has been successful.
(5 marks)
(25 marks)
Question 2 SUBSTANCE OVER FORM
The overriding requirement of a company’s financial statements is that they should represent faithfully the underlying transactions and other events that have occurred. To achieve this transactions have to be accounted for in terms of their “substance” or economic reality rather than their legal form. This principle is included in the IASBs “Framework for the Preparation and Presentation of Financial
Statements”, and is also used in many standards, in particular IAS 17 “Leases” and IAS 18 “Revenue”.
Required:
(a)
Describe why it is important that substance rather than legal form is used to account for transactions, and describe how financial statements can be adversely affected if the substance of transactions is not recorded.
(5 marks)
(b)
Describe, using an example, how the following features may indicate that the substance of a transaction is different from its legal form:
(i)
(ii)
Question 1 IASCF
Historically financial reporting throughout the world has differed widely. The International Accounting
Standards Committee Foundation (IASCF) is committed to developing, in the public interest, a single set of high quality, understandable and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements. The various pronouncements of the IASCF are sometimes collectively referred to as International Financial Reporting Standards (IFRS)
GAAP.
Required:
(a)
Describe the functions of the various internal bodies of the IASCF, and how the IASCF interrelates with other national standard setters.
(10 marks)
(b)
Describe the IASCF’s standard setting process including how standards are produced, enforced and occasionally supplemented.
(10 marks)
(c)
Comment on whether you feel the move to date towards global accounting standards has been successful.
(5 marks)
(25 marks)
Question 2 SUBSTANCE OVER FORM
The overriding requirement of a company’s financial statements is that they should represent faithfully the underlying transactions and other events that have occurred. To achieve this transactions have to be accounted for in terms of their “substance” or economic reality rather than their legal form. This principle is included in the IASBs “Framework for the Preparation and Presentation of Financial
Statements”, and is also used in many standards, in particular IAS 17 “Leases” and IAS 18 “Revenue”.
Required:
(a)
Describe why it is important that substance rather than legal form is used to account for transactions, and describe how financial statements can be adversely affected if the substance of transactions is not recorded.
(5 marks)
(b)
Describe, using an example, how the following features may indicate that the substance of a transaction is different from its legal form:
(i)
(ii)