Financial Acct Ch 1

Front 1

Canadian Accounting Standards Board (AcSB)

Back 1

Primary responsibility for setting GAAP in Canada and produces a variety of authoritative material, including the most important source of GAAP, the CICA Handbook. Two basic premises underlie the process of establishing financial accounting stadards: (1) the AcSB should respond to the needs and viewpoints of the entire economic community, not just the public accounting profession and (2) it should operate in full public view giving interested persons the ability to make their views known. IE any party interested or involved in the financial reporting process.

Front 2

Accounting Standards Oversight Council (AcSOC)

Back 2

Overseas AcSB activities, including providing input to the activities of the AcSB and reporting to the public. Members come from a wide range of groups that are interested or involved in the financial reporting process.

Front 3

Canadian Institute of Chartered Accountants (CICA)

Back 3

the first official recommendation on standards of financial statement disclosure were published in 1946 by the CICA.

Front 4

Capital Allocation

Back 4

refers to the ability of Investors and Financial institutions to properly allocate debt and equity effectively throughout the capital markets. Their decisions are often based on financial statements created by the accounting profession. The accuracy, timliness, and fairness of these financial statements is paramount in ensuring an efficient allocation of resources.

Front 5

CICA Handbook

Back 5

Originally published in 1968 and now consists of several voumes of accounting and assurance guidance.

Front 6

Due Process

Back 6

system that gives interested persons enough opportunity to make their views known.

Front 7

EIC Abstracts

Back 7

to circumvent `due process` which can be lengthy an Emerging Issues Committee was created to speed things up. The EIC abstracts is a publication or emerging issues that eventually gets incorporated into the CICA handbook.

Front 8

Emerging Issues Committee (EIC)

Back 8

created in 1988 to react more quickly to current financial reporting issues.

Front 9

Ethical Dilemmas

Back 9

in accounting like other professions ethical dilemmas are common. Management bias`are the common one either internally or externally prompted to reach bonus levels or to meet analysts earning expectations. Unfortunately there are no hard and fast rules to deal with these dilemmas making good judgement paramount in the accounting profession.

Front 10

Financial Accounting (Financial Reporting)

Back 10

the process that culminates in the preparation of financial reports that cover all of the enterprise`s business activities and that are used by both internal and external parties.

Front 11

Financial Accounting Standards Board (FASB)

Back 11

the major standard setting body in the United States that is more rules based than Canadian financial reporting.

Front 12

Financial Statements

Back 12

the principal way of communicating the financial information to those who are outside an enterprise. These statement`s give the firms history, quantified in terms of money. The most common are the balance sheet, income statement, statement of cash flows, and statement of owners`or shareholders`equity or statement of retained earnings. In addition note disclosures are an important part of each financial statement.

Front 13

GAAP hierarchy

Back 13

identifies the sources of GAAP and lets users know which ones should be consulted first in asking the question. GAAP is divided into primary and other sources based on Handbook Part II section 1100.

Front 14

GAAP

Back 14

Generally Accepted Accounting Principles are the common set of standards that are generally accepted and universally practised. The term `generally accepted`means either a rule-making body in accounting has created a reporting principle in a particular area, or that over time, a specific practice has been accepted as appropriate because of its use universally.

Front 15

IASC Foundation

Back 15

monitors, reviews the effectiveness of, appoints members to, and funds the IASB.

Front 16

International Accounting Standards Board (IASB)

Back 16

founded out of the IASC, the IASB was founded in 2001 and thier missions is to develop, in the public interest, a single set of high quality, understandable and international financial reporting standards (IFRS) for general purpose financial statements.

Front 17

International Financial Reporting Interpretation Committee (IFRIC)

Back 17

studies issues where guidance in IASB is isufficient or non-existent. If necessary, it produces additional guidance in the form of IFRIC interpretations, which are part of IFRS.

Front 18

International Financial Reporting Standards (IFRS)

Back 18

often referred to as international GAAP

Front 19

Management Bias

Back 19

obviously since the financial statements are prepared by management it is often in their best interest to present information in its best light. This is the theory behind managment bias

Front 20

Management Stewardship

Back 20

the fact that financial statements give information to users about the ability of managers to correctly run (steward) an entity make them more likely to present the information in its best light

Front 21

Managerial Accounting

Back 21

is the process of identifying, analyzing, measuring, and communicating financial information to internal decision makers. Varied forms such as cost benefit analaysis and forecasts that management uses to plan, evaluate, and control an organizations operations.

Front 22

Objective of Financial Reporting

Back 22

to provide financial information that is useful to users (primarily capital providers such as investors and lenders) and that is decision relevant (ie will help them make decisions about allocating capital) The statements should communicate information about 1) the entity`s economic resources and claims to those resources 2) changes in those resources and claims

Front 23

Ontario Securities Commission (OSC)

Back 23

the OSC reviews and monitors the financial statements of companies whose shares are publicly traded so that it can judge whether the statements present the financial position and results of operations of these companies fairly. It also issues its own disclosure requirements, which inform companies how the OSC interprets GAAP. If companies do not abide by rules, fines may be levied, or they may be de-listed from the Stock Exchange altogether, removing a company`s access to capital markets.

Front 24

professional judgement

Back 24

plays an especially important role in private entity GAAP and IFRS due to the philosophy of Canadian and international accountants on standard setting: there is not a rule for every situation. Reliance on general principles instead of hard and fast rules creates situations where judgement is paramount.

Front 25

Provincial Securities Commissions

Back 25

oversee and monitor the capital marketplaces. They ensure that participants in the capital markets (companies, auditors, brokers, dealers, investors) respect securities laws and legislation so that the marketplace is fair.

Front 26

Securities and Exchange Commision (SEC)

Back 26

in the United States it is the final authority over accounting standards. It oversees any changes made to accounting standards in the United States.

Front 27

stakeholders

Back 27

are parties who have something at risk in the financial reporting environment ie salary, job, investment, or reputation.

Front 28

Standards Advisory Council (SAC)

Back 28

is composed of various user groups such as preparers of financial statements, analysts, auditors, regulators, professional accounting bodies, and academics. It provides guidance and feedback to the IASB.

Front 29

Toronto Stock Exchange (TSX)

Back 29

the largest stock exchange in Canada