Mini case

Naura Pasya Karuza

29123034

1. The Challenges Facing Financial Reporting

Much is right about international financial reporting. One reason for this success is that
financial statements and related disclosures capture and organize financial information in a
useful and reliable fashion. However, much still needs to be done. Here are some of the major
challenges.
Lola Otero, a new staff accountant, is confused because of the complexities involving
accounting standard setting. Spesifically, she is confused by financial reporting challenges.
Lola decides that she must review the environment in which accounting standards are set
and implemented, if she is to increase her understanding of the financial reporting
challenges.
Lola recalls that during her accounting education there was a chapter or two regarding
the environment of financial accounting and the development of IFRS. However, she
remembers that her instructor placed little emphasis on these chapters.

Instructions
(a) Help Lola by identifying the challenges facing financial reporting.
(b) Lola asks for guidance regarding the challenges facing financial reporting. Please assist her by
describing why the challenges facing financial reporting are happened.

2. Accounting, Analysis, and Principles

The founders of Oslo Company, Finn Elo and Vender Hakala, are about to realize their dream
of taking their company public. They are trying to better understand the various legal and
accounting issues they will face as a public company.

Accounting
a. What are some of the reporting requirements that their company will have to comply with
when they offer securities to investors and creditors?
b. Identify the two entities that are primarily responsible for establishing IFRS, which will be
applied when preparing their financial statements. Explain the relationship of these two organizations
to one another.

Analysis
a. What is decision-usefulness?
b. Briefly describe how the financial statements that Oslo prepares for its investors and creditors
will contribute to decision-usefulness.

Principles
Oslo will prepare its statements in conformity with IFRS. Finn and Vender have heard about
an IFRS hierarchy. Briefly explain this hierarchy and advise them on how the hierarchy affects
the application of IFRS.
 Answer

1.
a) Lola’s challenges in financial reporting includes the expectation gap, non-financial
measurements, forward looking information, soft assets, and timeliness. Other than that
there are also challenges in the ethical issues of the company’s expectation for accountant to
make a good reporting despite the facts.

b) the challenges happened to lola because of:

-the expectation gap, meaning there will be different expectations in what the fashion
company think what accountants do vs what the accountants really do in real life. This gap
involves of the lack of information of the company’s side about accounting in general.
-the nonfinancial measurements which can differ in each company,
- challenges in the ethical issues of the company’s expectation for accountant to make a good
reporting despite the data not supporting it

2.
Accounting
a). They need to comply with the regulations of SAK EMKM for small businesses in
Indonesia based on IAI.
Other than that they also need to comply with OJK for the regulations in finances.
To offer security to the companies they need to provide information of their net cash
flow and make sure there is transparency of the reports to make sure there are safety
to the investors and third parties involved.
b). The two entities that are involved with the establishing of IFRS are IASB and
IOSCO. IASB stands for International Accounting Standards Board which involved in
the making of IFRS and it is used in most foreign exchanges. The IASB needs to inform
the IFRS foundations to create the IFRS. IOSCO contributed in the making of IFRS as
consulting and support but doesn’t set accounting standard.

Analysis
a) Decision usefulness is used for investors to asses the company of its use of
generating net cash inflows; investments that needs to be protected and
enhanced. The information included some statements financially and relevant
for economic decisions of investors
b) The financial statements that oslo prepare for will prepare for the investor and
creditor to contribute in the decision-usefulness by giving the need of insight
and transparency of the company about their net inflows and outflows. the
financial reports also provide primary informations to show integrity of his
company in which will contribute greatly in investors and creditors to make a
decision.
Principle
The effect of IFRS’s hierarchy towards IFRS applications in which to take a look at the
International Financial Reporting Standards, International Accounting Standards, and
International Accounting Standards Interpretations; conceptual framework for financial
reporting; and use other standard-setting bodies with similar concept framework (e.g
USGAAP)