Acct 315 - Chapter 1

Front 1

Accounting Standards Board (AcSB)

Back 1

the group primarily responsible for setting GAAP in Canada, which publishes the CPA Canada handbook and other authoritative documents

Front 2

Accounting Standards for Private Enterprises (ASPE)

Back 2

The financial reporting standards applicable to private entries in Canada. Private entries may also use IFRS

Front 3

Accounting Standards Oversight Council (AcSOC)

Back 3

The group the provides oversight to AcSB activities such as setting the agenda, reporting to the public, and raising funds for standard setting

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Accrual-Basis Accounting (Accrual-Basis)

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The most commonly used basis of accounting whereby revenue is recognized when it is earned and expenses are recognized in the period incurred, without regard to the time of receipt or payment of cash

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Adverse Selection

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a result of information astmmetry whereby the capital marketplace may attract the wrong type of companies (those that may gain from having info others do not).

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Aggressive Accounting

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A bias that exists in financial reporting that focuses more on the positive information about a company may overstate net income or net assets

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Bright-Line Tests

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Quantitative thresholds in financial reporting standards that act as a benchmark to dictate home something is to be accounted for.

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Canadian Institute of Chartered accountants (CICA)

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The predecessor organization of Chartered Professional Accountants Canada (CPA Canada)

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Canadian Public Accountability Board (CPAB)

Back 9

The regulatory oversight body that ensures that certain standards are met regarding quality controls and independence

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Capital Allocation

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The process by which accounting enables investors and creditors to assess the relative returns and risks associated with investment opportunities and thereby channel resources more effectively

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Chartered Professional Accountants Canada (CPA Canada)

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The main professional accounting body for chartered accountants that also has primary responsibility for setting GAAP in Canda through the Accounting Standards Board

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Conservative Accounting

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A bias that exists in financial reporting that ensures that, where uncertainty exists and judgment is needed, net income and/or net assets are understated rather than being overstated

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CPA Canada Handbook

Back 13

A set of principles and guidelines for accounting and assurance

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Decision-Usefulness Approach

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Approach to financial reporting whereby the amount and types of information to be disclosed and the format in which information should be presented involves determining which alternative provides the most useful information for decision-making purpose

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Due Process

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A method used in standard setting in order to ensure that standard-setting bodies operate in full view of the public by giving those who are interested ample opportunity to make their views known

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Efficient Markets Hypothesis

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a theory that states that, in information is available, it will be incorporated into decisions made by market participants.

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Entity Perspective

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The viewpoint that companies are viewed as separate and distinct from their owners and therefore financial reporting should focus on the needs of the main users and not just the owners

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Ethical Dilemmas

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Problems where there are no set guidelines to follow in order to resolve a situation. these are the gray areas where one has to ask "is it right or wrong?"

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Financial Accounting

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The process that culminates in the preparation of financial reports for the company as a whole for use by both internal and external parties. also known as financial reporting.

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Financial Account Standards Board (FASB)

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The major standard-setting body in the US.

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Financial Reporting

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The process that culminates in the preparation of financial reports for the company as a whole for use by both internal and external parties. Also known as financial accounting.

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Financial Statements

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The principal means through which financial information in communicated to those outside a company. they provide a company's history, quantified in money terms.

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GAAP Hierarchy

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Guidance that notes that primary sources of GAAP should be used first, followed by other relevant and reliable sources, including the conceptual framework and professional judgment

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Generally Accepted Accounting Principles (GAAP)

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The common set of standards and procedures used to prepare financial statements with the expectation that the majority of users' needs will be met.

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General-Purpose Financial Statement

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Basic GAAP financial statements that provide information that meets the needs of external users (normally investors and creditors)

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IFRS Advisory Council

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A group that provides strategic advice to the IASB

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IFRS Foundation

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A group that raises finances and provides strategic direction and oversight to the IASB

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Information asymmetry

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The state that exists when one party (such as management) has access to more information than the other party (ex: investors)

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Information symmetry

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The states that exists when both parties have access to the same information

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Institutional investors

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Large corporations or corporate investors such as pension funds or mutual funds.

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International Accounting Standards Board (IASB)

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The group responsible for setting IFRS with the goal if increasing the transparency of financial reporting by achieving a single, global method of accounting

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International Fonancial Reporting Interpretation Comittee (IFRIC)

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A committee that studies and provides recommendations on issues not covered by the IASB

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International Financial Reporting Standards (IFRS)

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The internationally recognized common set of financial reporting standards and procedures.

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International Integrated Reporting Committee (IIRC)

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A group that looks at a broader view of financial reporting that includes management information, governance and compensation, and sustainabiliyu reporting.

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Management Bias

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The presentation by management of information about their company in its best light in order to make their company look as successful as possible

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Managerial Accounting

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The process of identifying, measuring, analyzing, and communicating financial information to internal decision-makers.

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Moral Hazard

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The risk that certain parties who have additional information not accessible to others will act in their own self-interest.

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Objective of Financial Reporting

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The goal "to communicate information that is useful to investors, members, contributors, creditors, and other users in making their resource allocating decisions and/or assessing management stewardship," as laid out in the CPA Canada Handbook.

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Ontario Securities Commission (OSC)

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A group that regulates companies listed on the Toronto stock exchange (TSX) by reviewing and monitoring their financial statements with a view to assessing whether the statements present fairly the financial position and results of operations.

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Professional judgement

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The process by which professional accountants with significant education and experience apply the CPA Canda Handbook's "general principles" appropriately as they see fit, which is important in Canada because IFRS and ASPE are based primarily on general principles rather than specific rules.

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Proprietary Perspective

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The viewpoint that financial reporting should focus on the needs of the owners of the company

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Provincial Securities Commissions

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The groups that oversee and monitor the provincial capital marketplaces. they ensure that participants in the capital markets adhere to securities legislation, and thus that the marketplace is fair.

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Public Company Accounting Oversight Coard (PCAOB)

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The regulatory oversight body in the United States that ensure that certain standards are met regarding quality controls and independence

Front 44

Securities and Exchange Commission (SEC)

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The U.S. counterpart of the Ontario Securities Commission, which regulates the U.S. capital markets and supports the FASB by indicating that financial statements conforming with FASB standards will be presumed to have substantial authoritative support.

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Stakeholders

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Parties who rely on and use financial statements and other financial documents to make decisions

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Stewardship

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Management's responsibility to manage assets with care and trust, which is described as its fiduciary relationship

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Toronto Stock Exchange (TSX)

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The largest stock exchange in Canada