UNIVERSITY OF TECHNOLOGY,

MAURITIUS

Financial Reporting
(Week 1: Saturday 23 April 2022)

Presentation by:
Poonanan JEEBUN, MBA, FCCA, FCIS, CFE, CAT, MIPA
April 2022
 OUTLINE
 What is Book-Keeping?
 What is Accounting?
 Difference between Book-
Keeping and Accounting
 Purpose and Methods of
Accounting
 Golden Rules of Accounting
 Branches of Accounting
 Introduction to Financial
Reporting
 Components of Financial
Reporting
 Objectives of Financial Reporting
 Importance of Financial
Reporting
 Regulatory Framework
 Purpose of Regulatory
Framework
 Issues dealt with in Regulatory
Framework
 Conceptual Framework
 Accounting Concepts &
Conventions
 Comparison between Concepts
& Conventions
 The Accounting Concepts
 The Accounting Conventions
 Faithful Representation
 IAS 1: Presentation of Financial
Statements
 WHAT IS BOOK-KEEPING?

 The process of recording a business’s

financial transactions into organised accounts
on a daily basis (Double-Entry System)
 Book-keeping is an essential part of the
Accounting process that has a broader picture
of financial performance of an enterprise
 It is about preparing the ledger accounts by
using documentary evidence such as an
invoice, debit/credit note or bank statements
(primary books of accounts)
 WHAT IS ACCOUNTING?

 The process of recording financial transactions

pertaining to a business
 It includes summarising, analysing and reporting
these transactions to oversight agencies (CBRD),
regulators and tax collection entities(MRA)
 Accounting Concepts and Conventions form the
basis for recording financial transactions
 Accountants are required to understand the
Accounting Concepts and Conventions to ensure
consistency and accuracy of accounts (to give a
true & fair view)
DIFFERENCE BETWEEN BOOKKEEPING & ACCOUNTING

 Book-keeping is a foundation or base of

Accounting
 Accounting uses the information provided by
Book-keeping to prepare financial reports and
statements
 Book-keeping is one segment of the whole
Accounting system
 Accounting starts where the Book-keeping
ends and has a broader scope than Book-
keeping
 PURPOSE & METHODS OF ACCOUNTING

 To accumulate and report on financial

information about the performance, financial
position and cash flows of a business
 Two methods:
 Cash Accounting
Income is recorded when it is received
 Accrual Accounting
Income is recorded when it is earned or accrued
 GOLDEN RULES OF ACCOUNTING?

TYPES OF ACCOUNT GOLDEN RULES

Real Account
Debit what comes into the business
Credit what goes out from the
(Relating to Assets & Liabilities
business
other than people)

Personal Account Debit the receiver

(Relating to people) Credit the giver

Debit the expense or loss of the

Nominal Account business
(Relating to expenses, revenue, losses or gains) Credit the income or gain of the
business
 BRANCHES OF ACCOUNTING

 Financial Accounting
 Cost Accounting
 Auditing
 Management Accounting
 Accounting for Information System
 Tax Accounting
 Forensic Accounting
 Fiduciary Accounting
 BRANCHES OF ACCOUNTING/2

 Financial Accounting
 To provide information to external users such as potential
investors for decision-making
 Cost Accounting
 To collect and record information on the total cost of producing
goods or services
 Auditing
 A systematic examination of financial records to ensure
adherence to GAAPS, management policies and stated
requirements
 Management Accounting
 To provide financial information to internal users for efficient &
effective management of the business
 BRANCHES OF ACCOUNTING/3

 Accounting for Information Systems

 Collection, storage, and processing of financial and accounting
data used by internal users to report information to investors,
creditors and tax authorities
 Tax Accounting
 System of examining financial statements and reformatting
them for tax purposes (allowable/disallowable expenses)
 Forensic Accounting
 Scrutinising/analysing financial information to be used as
evidence in a court of law
 Fiduciary Accounting
 Sometimes called Court Accounting, is a comprehensive report
of the activity within a trust, estate, guardianship or
conservatorship during a specific period
 INTRODUCTION TO FINANCIAL REPORTING (FR)

 FR involves the disclosure of financial information

to various stakeholders
 About financial performance and financial position
of the organisation over a specified period of time
 The stakeholders include: investors, creditors,
public, debt providers, governments &
government agencies
 For listed companies, the frequency of financial
reporting is quarterly & annual
 FR is usually considered an end product of
Accounting
 COMPONENTS OF FINANCIAL REPORTING

 The financial statements: Statement of

Financial Position, Statement of Profit and Loss
and other comprehensive Income, Statement
of Cash Flows and Statement of Changes in
Equity
 Notes to financial statements
 Quarterly and Annual Reports (for listed
companies)
 Prospectus
 Management Discussion & Analysis (for public
companies)
 OBJECTIVES OF FINANCIAL REPORTING

 To provide information to:

 management for planning, analysis, benchmarking and
decision-making
 investors, promoters, debt providers and creditors to enable
them make rational decisions regarding investment, credit, etc.
 Shareholders & public at large about various aspects of the
organisation
 Stakeholders about how the economic resources are being
managed
 About the financial performance of the organisation
 About how Directors are discharging their fiduciary duties and
responsibilities
 Statutory auditors to facilitate audit of the financial statements
 Enhance social welfare of employees, enable dialogue with
trade unions & government
 IMPORTANCE OF FINANCIAL REPORTING

 FR is important because it
 Helps an organisation to comply with IAS, concepts &
conventions, statutes and regulatory requirements
 Facilitates auditing of books & records
 Is the backbone of planning, analysis, benchmarking and
decision-making such as investments appraisal
 Helps organisations to raise capital both domestic as well as
overseas
 Enables obtaining funds or loans
 Enables the public to analyse the performance of the entity
and its management
 Enables bidding, labour contract, government supplies,
government grants, etc.
 REGULATORY FRAMEWORK

 The Regulatory Framework provides a set of rules and

regulations for Accounting
 International Accounting Standards Board (IASB)
provides a broad regulatory framework of International
Accounting Standards (IAS)
 IAS applies to all European listed companies including
UK companies
 In UK, two sources of regulation are the Companies Acts
and Accounting Standards
 Financial statements must give a ‘true and fair view’ of
the financial position and performance of the reporting
entity
 PURPOSE OF REGULATORY FRAMEWORK

 To assist the IASB in development of future accounting

standards and review of existing ones
 To assist IASB by providing a basis for reducing the number
of alternate accounting treatments
 To assist national standard-setting bodies in developing a
national standard
 To assist accountants to apply relevant accounting
standards in preparing financial statements and in dealing
with topics that do not form the subject of IAS
 Ro assist accountants in forming an opinion as to whether
financial statements conform with relevant accounting
standards
 Ro assist users of financial statements in interpreting the
information contained in financial statements prepared in
conformity with IAS
 ISSUES DEALT WITH IN REGULATORY FRAMEWORK

 The objective of financial statements

 User groups
 Assumptions underlying financial statement
preparation
 Qualitative characteristics of financial
statements
 Elements of financial statements; their
recognition and their measurement
 Concepts of capital maintenance
 CONCEPTUAL FRAMEWORK

 The Conceptual Framework is an attempt to define the

nature and purpose of Accounting
 It considers the theoretical and conceptual issues
surrounding financial reporting
 It forms a coherent and consistent foundation that will
underpin the development of accounting standards
 It is a statement of Generally Accepted Accounting
Practices (GAAPs)
 It shows how transactions should be measured (historical
value or current value)
 It shows how financial information should be reported or
presented to users
 ACCOUNTING CONCEPTS & CONVENTIONS

 Accounting Concepts are the fundamental

accounting assumptions that act as a
foundation for recording business
transactions and preparation of final
accounts
 Accounting Conventions are the methods
and procedures which have universal
acceptance. These are followed by the firm
while recording transactions and preparation
of financial statements
 COMPARISON BETWEEN CONCEPTS & CONVENTIONS

BASIS FOR ACCOUNTING

ACCOUNTING CONCEPT
COMPARISON CONVENTION

Accounting conventions imply

Accounting concepts refer to
the customs or practices that are
the rules of Accounting which
widely accepted by the
are to be followed, while
Meaning Accounting Bodies and are
recording business
adopted by the firm to work as a
transactions and preparing
guide in the preparation of final
final accounts
accounts

What is it? A theoretical notion A method or procedure

Set by Accounting Bodies Common Accounting practices

Preparation of financial
Concerned with Maintenance of accounts
statements

Biasness Not possible Possible

 THE ACCOUNTING CONCEPTS

 Business Entity:
 The business enterprise is independent of its owners
 Money Measurement:
 Transactions that can be measured in monetary terms are
recorded
 Cost:
 All assets are recorded in the accounts at purchase price
(historical cost)
 Going Concern:
 The business will continue its operations for an indefinite
period
 THE ACCOUNTING CONCEPTS/2

 Dual Aspect:
 Primary rule: each transaction has 2 entries, in 2 accounts
 Realisation:
 Revenue be recorded only when realised
 Accrual:
 Revenue be recognised when become receivable while
expenses when they become due for payment
 Periodicity:
 Financial statements be prepared for every period, i.e. at
end of financial year
 Matching:
 Revenue be matched with expenses
 THE ACCOUNTING CONVENTIONS

 Consistency:
 Accounting policies are to be used consistently over the
period. Changes can be made in special circumstances.
 Disclosure:
 Financial statements must show all material information to
users to enable them take rational decisions
 Conservatism/Prudence:
 A firm should not anticipate incomes and gains but provide
for all expenses and losses
 Materiality:
 Only those items be disclosed which have a significant
economic effect (exception to Disclosure convention above)
 FAITHFUL REPRESENTATION

 The concept that financial statements reflect

accurately the transactions within the company
 Most users do not have the time or expertise to
evaluate the factual content of the information
 Thus, financial statements must be faithfully
representative
 Three characteristics of Faithful Representation:
 Completeness
 Neutrality
 Free-from-Error
IAS 1: PRESENTATION OF FINANCIAL STATEMENTS (FS)

 IAS 1 sets out overall requirements for the presentation of

FS
 It provides guidelines for their structure and content
 It requires presentation of a complete set of FS at least
annually with comparative amounts for preceding year
 An entity whose FS comply with IFRS must make an explicit
and unreserved statement of such compliance in the notes
 It must not describe FS as complying with IFRS unless it
complies with all the requirements of the standards
 The application of IFRS with additional disclosure is
presumed to result in FS that achieve a fair presentation
 IAS 1 also deals with going concern issues, offsetting and
changes in presentation or classification
 THANK YOU
FOR
YOUR ATTENTION