ACCA

Financial Accounting (F3)

(Chapter 2: The regulatory framework)

Edway Academy
Đào Trường Đăng, ACCA, CPA

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For exams in September 2023, December 2023, March 2024 and June 2024

02.

The regulatory framework

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 Chapter Overview

The regulatory framework

IFRS IFRSF IASB IFRIC IFRS AC

 International  IFRS Foundation  International  IFRS  IFRS Advisory

Financial Reporting (IFRSF) Accounting Interpretations Council (IFRS AC)
Standards (IFRSs) Standards Board Committee (IFRIC)
(IASB)

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The factors which have shaped financial accounting

National / local
What factors to consider legislation
during the process of
preparing the financial
statements? Accounting Accounting concepts
standards and individual
judgement

Generally accepted
Other international accounting principles
influences (GAAP)

Fair
presentation

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 Accounting standards
 Financial statements are derived from the application of judgement in applying
fundamental accounting assumptions and conventions.
 Subjectivity
What if there
 Without the same judgement, different groups of people could produce very
are no
different financial statements from the same data.
accounting
standards?  No comparability between the accounts of different organizations.

 Deliberate manipulations may occurs in order to present accounts in the most

favorable light.
 No true and fair financial statements

National level
(For example: Vietnamese Accounting
Standards)
Accounting standards were developed.

 To deal with subjectivity International level

 To achieve comparability (For example: International Financial
Reporting Standards “IFRS”)
 To limit manipulations for a true and fair
financial statements

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International Financial Reporting Standards “IFRSs”

Key term

IFRS: A single set of high-quality, understandable, enforceable and globally accepted

accounting standards.

IASC IASB
International Accounting Standards International Accounting Standards Board
Committee (1973) (2001)

41 IASs 17 IFRSs
(International Accounting Standards) (International Financial Reporting Standards)

25 IASs 16 IFRSs
(Currently effective) (Currently effective)

IFRICs

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International Financial Reporting Standards “IFRSs”
# Name Issued Effective date

Conceptual Framework for Financial Reporting 2018*

IFRS 1 First-time Adoption of IFRSs 24/11/2008 01/07/2009
IFRS 2 Share-based Payment 19/02/2004 01/01/2005
IFRS 3 Business Combinations 10/01/2008 01/07/2009
IFRS 4 Insurance Contracts 31/03/2004 01/01/2005
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations 31/03/2004 01/01/2005
IFRS 6 Exploration for and Evaluation of Mineral Resources 09/12/2004 01/01/2006
IFRS 7 Financial Instruments: Disclosures 18/08/2005 01/01/2007
IFRS 8 Operating Segments 30/11/2006 01/01/2009
IFRS 9 Financial Instruments 24/07/2014 01/01/2018
IFRS 10 Consolidated Financial Statements 12/05/2011 01/01/2013
IFRS 11 Joint Arrangements 12/05/2011 01/01/2013
IFRS 12 Disclosure of Interests in Other Entities 12/05/2011 01/01/2013

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International Financial Reporting Standards “IFRSs”

# Name Issued Effective date

IFRS 13 Fair Value Measurement 12/05/2011 01/01/2013

IFRS 14 IFRS 14 — Regulatory Deferral Accounts 30/01/2014 01/01/2016
IFRS 15 Revenue from Contracts with Customers 28/05/2014 01/01/2018
IFRS 16 Leases 13/01/2016 01/01/2019
IAS 1 Presentation of Financial Statements 2007 01/01/1975
IAS 2 Inventories 2005 01/01/1976
IAS 7 Statement of Cash Flows 1992 01/01/1979
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 2003 01/01/1979
IAS 10 Events After the Reporting Period 2003 01/01/1980
IAS 12 Income Taxes 1996 01/01/1981
IAS 16 Property, Plant and Equipment 2003 01/01/1983
IAS 19 Employee Benefits (2011) 2011 01/01/1985

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International Financial Reporting Standards “IFRSs”
# Name Issued Effective date
Accounting for Government Grants and Disclosure of Government
IAS 20 1983 01/01/1984
Assistance
IAS 21 The Effects of Changes in Foreign Exchange Rates 2003 01/01/1985
IAS 23 Borrowing Costs 2007 01/01/1986
IAS 24 Related Party Disclosures 2009 01/01/1986
IAS 26 Accounting and Reporting by Retirement Benefit Plans 1987 01/01/1988
IAS 27 Separate Financial Statements (2011) 2011 01/01/1990
IAS 28 Investments in Associates and Joint Ventures (2011) 2011 01/01/1990
IAS 29 Financial Reporting in Hyperinflationary Economies 1989 01/01/1990
IAS 32 Financial Instruments: Presentation 2003 01/01/1996
IAS 33 Earnings Per Share 2003 01/01/1999
IAS 34 Interim Financial Reporting 1998 01/01/1999
IAS 36 Impairment of Assets 2004 01/07/1999

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International Financial Reporting Standards “IFRSs”

# Name Issued Effective date

IAS 37 Provisions, Contingent Liabilities and Contingent Assets 1998 01/07/1999

IAS 38 Intangible Assets 2004 01/07/1999
IAS 39 Financial Instruments: Recognition and Measurement 2003 01/01/2001
IAS 40 Investment Property 2003 01/01/2001
IAS 41 Agriculture 2001 01/01/2003

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International Financial Reporting Standards “IFRSs”
Scope of IFRS:  Each individual standard lays out its scope at the beginning of the standard.
 Any limitation of the applicability of a specific IFRS is made clear within
that standard.
 IFRSs are not intended to be applied to immaterial items, nor are they
retrospective.

Role  IFRSs provide guidance on how transactions and events should be (in a set of
of IFRS: financial statements:
 Recognized – when and where recorded?
 Measured – what amount?
 Presented – what heading?
 Disclosed – what information should be shown in the notes to the accounts?

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International Financial Reporting Standards “IFRSs”

• As the basis for all or

• As national
some national
requirements
How is an IFRS requirements
applied?

IFRSs
Application
• As an international
• By companies benchmark for those
themselves countries which develop
their own requirements

• By regulatory
authorities for domestic
and foreign companies

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 International Financial Reporting Standards “IFRSs”
Monitoring Board

How is an IFRS IFRS Foundation

prepared? (IFRSF)
(22 Trustees)

IFRS Advisory International Accounting IFRS Interpretations

Council Standards Board Committee
(IFRS AC) (IASB) (IFRIC)

Appoints
Reports to
Advises

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International Financial Reporting Standards “IFRSs”

What is the Consultative Group

Standard-setting
process?

Board

On acceptance

Steering Committee (chaired

Discussion Paper Public comment
by board members)

Approved by 8 or 9 Board members

Exposure draft Public comment

Approved by 8 or 9 Board members

IFRS

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 International Financial Reporting Standards Foundation (IFRSF)

IFRS  A not-for-profit, public interest organization established to develop IFRSs and to

Foundation: promote and facilitate adoption of the standards.
 Its Trustees appoint members to the IASB, IFRIC and IFRS AC. It comprises of 22
trustees from diverse geographical and professional backgrounds.
 It has no involvement in the standard setting process.

 To develop in the public interest IFRS based upon clearly articulated principles. These
Why is standards should require high quality, transparent and comparable information in financial
IFRSF statements and other financial reporting to help investors, other participants in the world’s
established? capital markets and other users of financial information make economic decisions.

 To promote the use and rigorous application of those standards.

 In fulfilling the objectives associated with (a) and (b), to take account of, as appropriate,
the needs of a range of sizes and types of entities in diverse economic settings.

 To promote and facilitate adoption of the IFRSs, being the standards and IFRIC
interpretation issued by the board, through the convergence of national accounting
standards and IFRSs. (E.g. U.S GAAP)

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International Accounting Standards Board (IASB)

IASB:  An independent, privately funded body whose principal aim is to develop IFRSs.
 It also liaises with national accounting standard setters (for example, the UK’s ASB)
to achieve convergence in accounting standards around the world.
 Prior to 2003, standards were issued as IASs. In 2003, IFRS 1 was issued and all new
standards are now designated as IFRSs. The term IFRSs encompass both IFRSs and
IASs still in force.
 The members of the IASB come from several countries and have a variety of
backgrounds: Auditors; Preparers of financial statements; Users of financial
statements and academics.
 IASB operates under the oversight of the IFRS Foundation.

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IFRS Interpretations Committee (IFRIC)

IFRIC:  IFRIC issues guidance on both how to apply existing IFRSs in company financial
statements and how to account for new financial reporting issues where no IFRS
exists. The members provide the best available technical expertise and diversity of
international business and market experience relating to the application of IFRSs and it
reports to the IASB.
 IFRIC comprises 14 voting members, appointed by the trustees of the IFRS Foundation.
 IFRIC has two main responsibilities:
 To review, on a timely basis, newly identified financial reporting issues not
specifically addressed in International Financial Reporting Standards; and

 To clarify issues where unsatisfactory or conflicting interpretations have developed, or

seem likely to develop in the absence of authoritative guidance, with a view to reaching
a consensus on the appropriate treatment.

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International Financial Reporting Standards Advisory Council (IFRS AC)

IFRS AC:  A forum used by the IASB to consult with the outside world (National standard
setters; Academics; User groups; A host of other interested parties).

 To advise the IASB on a range of issues, from the IASB’s work programs for developing
new IFRSs to giving practical advice on the implementation of particular standards.

 IFRS AC meets the IASB at least three times per year and puts forward the views of
its members on current standard-setting projects and advises the IASB on its agenda
and timetable for developing IFRSs.

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 Chapter Round-up

The regulatory framework

IFRS IFRSF IASB IFRIC IFRS AC

 International  Appoints  Issues IFRSs and  Issues guidance  Advises the IASB
Financial Reporting members to the revised IASs. on how to apply on its agenda and
Standards (IFRSs) IASB, IFRIC and  Is an independent existing IFRSs and timetable for
provide guidance IFRS AC, standard setter how to account for developing IFRSs
as to how  Oversees the made up of new financial  Advises the IASB
transactions and regulatory system; representative from reporting issues of areas that may
events should be  Raises the finance different global where no IFRS need to be
recognized, to support it. economies. exists; considered by the
measured,  Reports to the IFRIC.
presented and IASB.
disclosed in FSs.

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Practice
Question 1: What is the role of the International Financial Reporting Standards Foundation?
o To appoint the members of the IASB
o To advise the IASB on new accounting standards they should consider issuing
o To give guidance to businesses regarding how to apply accounting standards in
their financial statements
o To issue International Financial Reporting Standards
Let’s practice!

Question 2: Which of the following bodies is involved in trying to achieve convergence of global
accounting standards?
o The IASB
o The IFRIC
o The IFRSF
o The IFRS AC

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Practice
Question 3: Accounting standards are issued by:
o The IASB
o The IFRS Foundation
o The IAASB
o The IFRIC

Which of the following best describes the role of the International Financial Reporting

Let’s practice!
Question 4:
Standards Interpretations Committee?
o Issues International Financial Reporting Standards
o Provide advices on the development of standards
o Interprets International Financial Reporting Standards
o Investigates listed companies to ensure they comply with International Financial
Reporting Standards.

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Practice
Question 5: Who issues International Financial Reporting Standards?
o The IFRS Advisory Committee
o The stock exchange
o The International Accounting Standards Board
o The government

Question 6: Which of the following is NOT an objective of the IFRS Foundation?

o Through the International Accounting Standards Board (IASB), develop a single set
Let’s practice!

of globally accepted International Financial Reporting Standards (IFRSs)

o Promote the use and rigorous application of International Financial Reporting
Standards (IFRSs)
o Ensure IFRS focus primarily on the needs of global, multi-national organizations
o Bring about the convergence of national accounting standards and IFRSs.

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Practice
Question 7: Which of the following statements is/are true?
1. The IFRS Interpretations Committee is a forum for the International Accounting
Standards Board (IASB) to consult with the outside world.
2. The IFRS Foundation produces IFRSs. The IFRS Foundation is overseen by the
IASB.
3. One of the objectives of the IFRS Foundation is to bring about convergence of
national accounting standards and IFRSs.
o 1 and 3 only
o 2 only

Let’s practice!
o 2 and 3 only
o 3 only

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Practice
Question 8: What is the role of the International Accounting Standards Board (IASB)?
o Oversee the standard setting and regulatory process
o Formulate international financial reporting standards
o Review defective accounts
o Control the accountancy profession

Question 9: Which of the following statements correctly describes how International Financial
Reporting Standards (IFRSs) should be used?
Let’s practice!

o To provide examples of best financial reporting practice for national bodies who
develop their own requirements
o To ensure high ethical standards are maintained by financial reporting professionals
internationally.
o To facilitate the enforcement of a single set of global financial reporting standards
o To prevent national bodies from developing their own financial reporting standards

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Thank You

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