Unit 1

Who sets the standards for the accounting in the Anglo-Saxon tradition

Accounting professionals

Who sets the standards for the accounting in the Continental European tradition

The governments

Information purpose in the Anglo-Saxon tradition

For the shareholders and capital markets that are interested in the actual market

Approach of the Anglo-Saxon accounting

Fair value

Fair value approach

Practice of measuring the assets and liabilities at their current market price

Taxation and financial statements in the Anglo-Saxon tradition

They are not linked and are done through different channels

Which companies have extra rules in the continental European tradition

Limited liabilitity companies and listed companies

Approach of the Continental European accounting

Prudence with Historical cost accouting

Historical cost accounting

We cannot include profit that wasn’t realized. This leads to the concept of overvalue, which is a hidden reserve\`

Tax and financial statements in the Continental European system

Taxes are mostly calculated as a percentage

IASB

International Accounting Standards Board

Annual reports

Managment commentary, Auditor’s Report, Financial Statement, CSR Reporting

Mandatory financial statements in the annual reports

Statement of Financial Position (Balance sheet), Notes on accounting policies and other explanatory notes, Statement of Comprehensive Income (Profit and Loss statement), Statement of Changes in Equity, Statement of Cash flow

Other name for the Statement of Financial position

Balance Sheet

Other name for the Statement of Comprehensive income

Profit and loss statement, income statement

Statement of Comprehensive income (P&L) summary

Losses/gains that do and don’t have cash transactions (such as depreciation), shows the flow during the year

IAS 1

Prescribes the formats of the financial statements, but not the businesses that must prepare them

Features of the Consolidated (Group financial statements)

Exclude all internal transactions, aggregation of individual financial statements, companies could be in different countries and different legal entitities\`

2 dimensions of the balance sheet

The economic resources that are controlled, where the finances come from

Liability definition

Present (at the balance sheet date) responsibility obligating the company to act or perform in a certain way towards a 3rd party

Liability 3 bullet point definition

* Arising from an obligating event in the past
* Leading to a transfer of economic resources
* No practical ability to avoid the transfer