Regulation in Financial Accounting
CHAPTER 2: REGULATION IN FINANCIAL ACCOUNTING
Chapter 2
regulation in Financial accounting LEARNING OUTCOMES
Upon completion of this chapter you should be able to understand:
•
The difference between management and financial accounting.
•
Why accounting regulations are important and required.
•
The need for and the structure of professional regulation, company law, stock exchange legislation and EU Directives.
•
How the different aspects of regulation work together and complement each other.
•
The process through which an accounting standard comes into being.
REVISION RESOURCES
EXAM QUESTIONS: Sample and Past papers are available from the website of Accounting
Technicians Ireland and are essential aids when studying Advanced Financial Accounting topics.
7
Chapter 2 : Regulation in Financial Accounting
2.1
Advanced Financial Accounting
the FunCtion oF FinanCial aCCounting and reporting
The International Accounting Standards Board (IASB) in their Conceptual Framework for Financial
Reporting state that ‘the objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling or holding equity and debt instruments, and providing or settling loans and other forms of credit’. This
Conceptual Framework is discussed in detail within chapter 3. Therefore, the motivation for all accounting is to provide information, financial or otherwise, that can assist the users of financial statements in their economic decision-making.
While there are many definitions of accounting worldwide, provided by various accounting bodies, all tend to have the following elements in common. That is that financial accounting is a process which is undertaken with the ultimate aim of:
•
Identifying
•
Chapter 2
regulation in Financial accounting LEARNING OUTCOMES
Upon completion of this chapter you should be able to understand:
•
The difference between management and financial accounting.
•
Why accounting regulations are important and required.
•
The need for and the structure of professional regulation, company law, stock exchange legislation and EU Directives.
•
How the different aspects of regulation work together and complement each other.
•
The process through which an accounting standard comes into being.
REVISION RESOURCES
EXAM QUESTIONS: Sample and Past papers are available from the website of Accounting
Technicians Ireland and are essential aids when studying Advanced Financial Accounting topics.
7
Chapter 2 : Regulation in Financial Accounting
2.1
Advanced Financial Accounting
the FunCtion oF FinanCial aCCounting and reporting
The International Accounting Standards Board (IASB) in their Conceptual Framework for Financial
Reporting state that ‘the objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling or holding equity and debt instruments, and providing or settling loans and other forms of credit’. This
Conceptual Framework is discussed in detail within chapter 3. Therefore, the motivation for all accounting is to provide information, financial or otherwise, that can assist the users of financial statements in their economic decision-making.
While there are many definitions of accounting worldwide, provided by various accounting bodies, all tend to have the following elements in common. That is that financial accounting is a process which is undertaken with the ultimate aim of:
•
Identifying
•