Chapter 7 Financial Reporting in the UK

Influence on Accounting Major influences on UK financial reporting Company law Professional accountants Less important influences Stock exchanges Taxation system

Types of Company Public company limited by shares Private company limited by shares Companies limited by guarantee and unlimited companies “Plc.” vs “Ltd.” Only public companies have the right to make an issue of shares or debentures to the public.

Accounting Requirements of Company Law Basic requirements All companies shall prepare a B.S and a P/L account and that each give a true and fair view. A parent or holding company must file group accounts, although it is then exempted from filing its own P/L account.

The accounting profession Britain was the first country in the world to develop a private-sector accountancy profession. 4 of the present institutions of the profession in the UK ICAEW / ICAS / ICAI ACCA 2 other groups CIMA & CIPFA

Accounting Standards Accounting Standards Committee Statements of Standard Accounting Practice (SSAPs) Accounting Standards Board Financial Reporting Standards (FRSs) The convergence of UK and IFRS.

Statutory requirements, accounting standards and a true and fair view Statutory requirements but no recommendations or standards. Statutory requirements and professional recommendations, but no standards. Statutory requirements and non-approved standards. Statutory requirements and legally backed accounting standards. Legal requirements imposing accounting standards.

Contents of annual reports of listed companies Annual reports typically include the following: A chairman’s statement An operating and financial review The report of the director A statement on corporate governance The report of the remuneration committee The financial statements (including notes thereto) The auditors’ report, preceded by a statement of the directors’ responsibilities Shareholding information

Accounting principles and policies Statement of Principles for Financial Reporting Similar to the conceptual frame work of the FASB, but more friendly to current values than is the US conceptual frame work.

Assets ASB’s Statement of Principle defines assets as: Rights or other access to future economic benefits controlled by an entity as a result of past transactions or events.

Liabilities ASB’s Statement of Principle defines liabilities as: Obligations to transfer benefits as a result of past transactions or events.

Creative Accounting The use of financial reports to mislead rather than inform.

Differences from IFRS Similarities The ASB and the IASB largely share the same conceptual frame work. Primary purpose of financial reporting: to provide useful information to investors for the prediction of future cash flows. Asset / Liability view Compliance with IFRS for, at a minimum, the consolidated financial statements of listed companies from 1 January Unlisted companies have the option to apply either IFRS or UK GAAP to all financial statements.

Differences from IFRS 英国国际会计准则 1 、后进现出法不允许允许 （ 2003 年撤销， 2005 年 生效） 2 、 投资性房地产 市场价值成本或市价 3 、买卖和供出 售的有价证券 成本或成本市价 孰低 公允价值

Differences from IFRS 英国国际会计准则 4 、递延所得税 的基础 时间性差异，可 以贴现 临时性差异，不贴现 5 、拟派股利作为负债不作为负债 6 、发行者的金 融工具呈报 建立在法律形式 基础上 建立在经济实质基础 上，并将工具划分为 权益和负债

Differences from IFRS 英国国际会计准则 7 、政策变更和 基本错误更正 以前年度调整可以计入收入 8 、合资企业权益法权益法或者比例合并 法 9 、现金流量表 的核心 现金现金和现金等价物