Summary: International Financial Reporting

Read the summary and the most important questions on International Financial Reporting

• Session 1

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• From events to financial reports

  Financial accounting translates events/transactions into financial statements.
  
  Events/transactions --> Rules & Management choses --> Financial statements

• What are rules and management choices?

  * Accounting standards
  * Management selects from alternative rules and allowable estimates under accountings standards

• How does the development of standards looks like?

  1. Agenda consultation: request for info
  2. Research Programme: discussion paper
  3. Standard Programme: Exposure draft, Final IFRS
  4. Implementation: IFRIC narrow scope

• What's the objective of general purpose financial reporting?

  The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing an potential investors, lenders and other creditor in making decisions about providing resources tot the entity. Those decisions involve buying, selling, or holding equity and debt instruments, and providing or settling loans and other forms of credit.

• What are the qualitative characteristics of CF?

  - Fundamental: Revelance and Faithful Representation
  - Enhancing: Comparability, Verifiability, Timeliness, Understandability

• When doe you recognize an asset/liability?

  1. Probable that benefits will flow to/or from the entity
  2. Hast costs or value that can be measured reliably

• Market participants assumptions: Fair Value

  Fair Value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date.

• What's the hierarchy of inputs for step 4?

  Level 1: Quoted prices
  Level 2: Observable prices
  Level 3: Unobservable prices

• Session 3

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• What's the definition of a financial instrument?

  A financial instrument is any contract that gives rise to a financial asset of one entity and a financials liability or equity instrument of another entity

• What are common financial liabilities?

  - Bank overdraft
  - Accounts payable
  - Notes payable
  - Loans payable
  - Derivatives with potentially unfavorable exchange conditions
  - Certain preference shares