Accounting Principles for Non Executive Directors 1st Edition by Peter Holgate, Elizabeth Buckley ISBN 0511512473 9780511512476

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ISBN 10: 0511512473 
ISBN 13: 9780511512476
Author: Peter Holgate, Elizabeth Buckley

Good quality non-executive directors are essential to good corporate governance. They bring a wealth of experience to the boardroom, and together with their fellow board members they are responsible for the company’s annual report and accounts. However, very few are trained accountants. This volume explains the key elements of a listed company’s annual report and accounts. Part I explains the difference between profit and cash flows, the accounting profession, the international harmonisation of accounting rules, the origins of the rules governing the preparation of accounts, the regulation of financial reporting and the overarching principles behind accounting rules. Part II discusses issues relevant to listed companies: mergers and acquisitions; earnings per share; realised and distributable profits; financial instruments; and other key topics. An appendix sets out 50 questions, linked to the chapters, which non-executive directors might like to ask at meetings of the board and audit committee.

Accounting Principles for Non Executive Directors 1st Table of contents:

PART I: The accounting environment
1 Introduction
Aim of this book
What is accounting?
The components of a company?s annual report
The difference between profit and cash flow
Performance statements
The use of accounting terms in agreements
What is GAAP?
2 Accounting in the UK and the effects of international harmonisation
The UK?s Accounting Standards Board
International harmonisation
The International Accounting Standards Board
The EU Regulation for harmonisation within Europe
Convergence with US GAAP
Implications for the UK
Growing convergence
BERR and entity accounts
Tax and distributable profits
In a nutshell where are we now?
3 The legal framework for accounting
Introduction: the Companies Act 1985 and the Companies Act 2006
The Companies Act 2006: accounts and reports
Application of the Companies Act to IFRS and UK GAAP companies
Accounting provisions of the Act applying to IFRS and UK GAAP companies
The requirement for individual accounts
The requirement for group accounts
Annual accounts and the true and fair view
Approval, distribution and filing of accounts
Exemptions and special provisions
Accounting provisions of SI 2008/410 applying to UK GAAP companies only
Introduction
Schedule 1
Schedule 6
4 The accountancy profession and the regulatory framework for accounting and auditing
The accountancy profession
The Financial Reporting Council
The Board
The Accounting Standards Board
The Urgent Issues Task Force
The Financial Reporting Review Panel
Professional Oversight Board
The Auditing Practices Board
Board for Actuarial Standards
Accountancy and Actuarial Discipline Board
The Financial Reporting Review Panel
Audit reporting
Limitation of liability for auditors
The role of accountants in capital markets transactions
5 Substance over form
Form v. substance
Early examples
Emergence of the off-balance-sheet industry in the UK
FRS 5 ?Reporting the substance of transactions?
Quasi-subsidiaries
Specific applications
Examples of FRS 5 in practice in the UK
Failed sale of an asset
Warehousing of stock
Trusts and SPVs
The future of FRS 5 in UK GAAP
Does substance over form have a place in IFRS?
6 Communicating accounting information
Background
Summary financial statements
The corporate reporting supply chain
The reality of the ?earnings game?
Alternative performance measures
Users and analysis of accounting information
7 Current trends in accounting
Why all the change?
Developments in business
Activities of standard-setters
Legislation and EU Regulation
Response to scandals
Current trends in thinking
Greater disclosure
Principles v. rules
Use of fair value
Smoothing v. volatility
Part II: Some specifics
8 Individual entity and consolidated financial statements
The distinction between individual entity financial statements and consolidated financial statements
General distinction
Distributable profits
Entity focus for tax purposes
When to consolidate
General approach
What to consolidate
The spectrum of interests in other companies
Definitions of parent and subsidiary undertaking
Exclusions from consolidation
Special purpose entities and quasi-subsidiaries
Exemption re holding company income statement
Techniques of consolidation
Changes in composition of a group
Full v. proportional consolidation
Minority interests or non-controlling interests
Elimination of intra-group transactions
Associates and joint ventures
Definitions of associate and joint venture
Accounting treatment of associates in consolidated financial statements
Accounting treatment of JVs in consolidated accounts
9 Presentation of financial statements
Introduction
Statement of comprehensive income
Overview
Disclosure on the face of the income statement
Disclosure on the face of the income statement or in the notes
Exceptional items
Discontinued operations
Columns and boxes
Earnings per share and dividends per share
Statement of comprehensive income or statement of recognised income and expense
Balance sheet
Cash flow statement
Accounting policies
Notes
Individual entity and consolidated financial statements: combined or separate
10 Earnings per share
Introduction
Summary
Basic EPS
Diluted EPS
Adjusted EPS
11 Mergers and acquisitions
Introduction
Overview of acquisition and merger accounting
Introduction
Summary of acquisition accounting
Summary of merger accounting
Application of IFRS 3
Merger accounting banned
Acquisition accounting under IFRS 3
Fair value of the consideration given
Fair value of the net assets acquired
Future developments in IFRS
Goodwill and other intangibles
UK accounting in overview
Merger accounting
Legislative requirements ? acquisition and merger accounting
Group reconstructions
Future developments in UK GAAP
Share premium, merger relief and group reconstruction relief
12 Interaction of accounting with tax
Introduction
Accounting profit and its adjustment
Accounting for current and deferred tax
Current tax
Deferred tax
HM Revenue & Customs and the move to IFRS
13 Assets
Introduction
Definition of an asset
Recognition of assets
Measurement of assets
Impairment of assets
Classification and presentation of assets
Depreciation
Amortisation
Disclosure
14 Liabilities
Introduction
Definition of a liability
Recognition of liabilities
Measurement of liabilities
Presentation of liabilities on balance sheets
Disclosure, including contingent liabilities
15 Leases
Introduction
Leases under IFRS
Definitions
Treatment of operating leases
Treatment of finance leases
Classification of leases into finance or operating
Sale and leaseback transactions
Disclosures
Leases under UK GAAP
The way forward
16 Pensions
Introduction
Defined contribution and defined benefit schemes
Defined contribution schemes
Defined benefit schemes
Accounting for defined benefit schemes
IAS 19
Differences between IFRS and UK GAAP
The effect of pensions on realised and distributable profits
17 Financial instruments
Introduction
Background
Definitions
Debt and equity
The distinction
Types of shares and balance sheet classification
Equity shares in the Companies Act
Issue of shares
Categories of financial instrument
Introduction
Initial measurement
Subsequent measurement
Fair value through profit or loss
Amortised cost
Fair value
Derivatives and embedded derivatives
Hedge accounting
Recognition and de-recognition
Other matters
Treasury shares
Disclosures
Accounting under UK GAAP
18 Share-based payment
Introduction
Accounting under IFRS
Overview
What is a ?share-based payment transaction??
Basic principle of the standard
Accounting for equity-settled share-based payment transactions
Accounting for cash-settled share-based payment transactions
Other requirements: IFRIC 8
Other requirements: IFRIC 11
Disclosure requirements
Trusts
Accounting for share-based payment under UK GAAP
19 Realised and distributable profits
Introduction
?Realised? and ?distributable?
General rules on distributions
Relevant accounts
Relationship with reporting of performance
TECH 01/08
Introduction
Principles of realisation
Definitions
Effects of TECH 01/08
Changes in circumstances
General examples of realised profits
Pension deficits
Fair value accounting: gains and losses
Share-based payment
Preference shares presented as liabilities
Dividends out of pre-acquisition profits
Intra-group transactions
20 Disclosures in published annual reports
Introduction
Corporate governance disclosures
Listing Rules
Disclosure and Transparency Rules
Combined Code
Statement of directors? responsibilities
Directors? report
Operating and financial review
Recent government action
ASB Reporting Statement
Directors? remuneration
Directors? remuneration report
Notes to the accounts
Related-party relationships and transactions
Transactions with directors
Segment disclosure
Appendices
Appendix 1 50 questions for non-executive directors to ask
Appendix 2 List of international accounting standards (IFRSs and IASs) and IFRIC interpretations as
International Accounting Standards
IASB statements
Interpretations ? SICs and IFRICs
Appendix 3 List of UK accounting standards (FRSs and SSAPs), Statements and UITF Abstracts as at 30
Financial Reporting Standards
Statements of Standard Accounting Practice

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