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Course Introduc-on

Introduc)on and Accoun)ng Informa)on

S1

Introduc)on

Introduc)on

Chong Kooi Wah kwchong@ntu.edu.sg

Course Descrip)on and Objec)ves

Prepara<on of Financial Statements

Measuring and disclosing informa<on that facilitates decision -making … quality of informa<on

Accoun<ng Standards Conceptual Framework The Standards Recogni<on Measurement Presenta<on & Disclosure

4

Course Assessment

Components

%

1 Seminar Par<cipa<on

10

2 Team Project

15

3 In-class Quiz

5

4 Term Test

20

5 Final Examina<on

50

100

5

Prescribed References and Ar)cles

Customised Text (CT)

Financial Repor<ng Standards (FRS)

Reading Ar<cles

Course Schedule

23 Seminars (including e-Learning)

Introduc<on Measurement System Opera<ng Ac<vi<es Inves<ng Ac<vi<es Financing Ac<vi<es Other Measurement and Disclosure Issues

Course Schedule

Introduc<on Measurement System Conceptual Framework, Standard-se[ng, etc. Opera<ng Ac<vi<es Revenue, Trade Receivables, Inventory Inves<ng Ac<vi<es PPE, Investment Property, Intangibles, etc. Financing Ac<vi<es Equity financing, Debt financing, Dividends, etc. Other Measurement and Disclosure Issues

GROUPING … Teams of 5

Course Descrip)on and Objec)ves

Prepara<on of Financial Statements

Measuring and disclosing informa<on that facilitates decision-making … quality of informa<on

Accoun)ng Standards Conceptual Framework The Standards Recogni<on Measurement Presenta<on & Disclosure

10

Course Descrip)on and Objec)ves

Prepara<on of Financial Statements and Accoun<ng Standards Accoun)ng Framework

Recogni)on ( when? ) Accrual basis of accoun<ng, probability, reliable measurement, …

Measurement ( at which amounts? ) Es<mates, judgment, models, Alloca<ons, provisions, etc. Historical cost, fair value, value in use, etc.

Presenta)on & Disclosure Presenta<on, classifica<on, offse[ng, disclosure, etc.

Accoun)ng Informa)on

Course Introduc<on: Accoun<ng Informa<on for Business Processes and Decision Making

Informa<on for Business Processes and Decision Making Firm’s business processes Impact AB1102: Recognition,

Firm’s

business

processes

and Decision Making Firm’s business processes Impact AB1102: Recognition, Measurement, Presentation
Impact AB1102: Recognition, Measurement, Presentation & of information Disclosure
Impact
AB1102: Recognition,
Measurement,
Presentation &
of information
Disclosure
External Decision Making External Users Users’ perspective Preparer’s perspective
External
Decision
Making
External
Users
Users’
perspective
Preparer’s perspective

Other

sources

perspective Preparer’s perspective Other sources Information Internal Accumulate A c c o u n t i
Information
Information
Preparer’s perspective Other sources Information Internal Accumulate A c c o u n t i n

Internal

Accumulate
Accumulate

Accounting

Other sources Information Internal Accumulate A c c o u n t i n g Users
Users Internal Decision Making
Users
Internal
Decision
Making

Impact

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Other sources Information Internal Accumulate A c c o u n t i n g Users

Demand for Financial Repor)ng

Shareholders and investors

Managers and employees

Lenders and suppliers

Customers

Government and regulatory agencies

Objec)ves of Financial Statements

provide financial informa<on about the repor<ng en<ty that is useful to exis<ng and poten<al investors, lenders and other creditors in making decisions about providing resources to the en<ty …

(Conceptual Framework (“CF”) Chp 1 para ) OB2)

Informa)on Needs of Investors and Creditors

Investors (e.g. equity investors, financial advisors, etc.)

Creditors (e.g. commercial banks, insurance companies, lenders, suppliers, etc.)

Informa)on Needs of Investors and Creditors

What are the factors that Investors and Creditors use in their assessment? Interest, dividends, repayments, … Liquidity, solvency, … Priori<es in payments, …

What informa<on do Investors and Creditors need for their assessment? Resources (assets) Claims Efficiency of management and opera<ons

Myths – Objec)ves of Financial Statements

Record of historical transac<ons?

Support tax returns?

Meet informa<on needs of all users?

Quiz …

General-purpose financial repor<ng?

Disclosure Incen)ves and Supply of Financial Informa)on

Mandatory repor<ng – (covered in Seminar 2)

Voluntary disclosure Disclosure benefits Disclosure costs

Informa)on Risks and Role of Assurance

Flexibility in accoun<ng policies/prac<ces Uncertainty

Cost constraint

Self-interest

Role of assurance To mi<gate informa<on risks (to be covered in AA205)

21

Q2

a) What role do accoun<ng numbers play in contracts ?

b) What incen<ves do contracts based on accoun<ng numbers create for par<es involved? c) How do these incen<ves help us understand why managers choose certain accoun)ng methods and avoid others? d) How do these incen<ves influence when transac<ons are recorded?

(Ref: RCJM chp 7)

22

Quiz …

Accoun<ng Standards?

Seminar 2

The Linkage and Preview …

Conceptual Framework

Conceptual Framework sets out agreed concepts that underlie financial repor<ng objec<ves qualita<ve characteris<cs element defini<ons

Rule-based vs Principle-based …

Conceptual Framework

Standard semers uses Conceptual Framework to set standards enhances consistency across standards – enhances consistency over <me as Board members change (provides benchmark for judgments)

Preparers use Conceptual Framework to develop accoun<ng policies in the absence of specific standard or interpreta<on

Auditors ?

>>> Comparability?

Seminar 1 - END

Introduc)on and Accoun)ng Informa)on