This unit covers a critical awareness of accounting issues in an international context. It requires an understanding of the theoretical concepts within the regulatory and conceptual framework of corporate reporting. This includes recognition criteria, methods of valuation, and reporting and disclosure of the financial performance of companies.


1. Introduction to accounting
1.1 Define the need for accounting information for a wide variety of users
1.2 Identify the users of financial information and their information needs
1.3 Define and explain the purpose and scope of financial reporting
1.4 Explain the need for financial accounting systems that enables entities to record and report financial transactions
1.5 Describe the main types of systems used in an organisation to provide information to users
1.6 Identify and explain how financial accounting systems can assist in providing information to users

2. The regulatory framework
2.1 Define what is meant by the regulation of published financial statements
2.2 Identify the different sources of accounting regulation including company law, local GAAP and IFRS
2.3 Describe the advantages and disadvantages of regulating financial statements
2.4 Identify why regulatory regimes may vary between different countries
2.5 Describe the role of the International Accounting Standards Board (IASB) in the regulation of financial statements
2.6 Explain the need for International Financial Reporting Standards as a global means of regulating accounting
2.7 Describe the benefits of International Accounting Standards for national jurisdictions
2.8 Describe the process involved when the IASB introduces a new accounting standard

3. Conceptual framework of accounting
3.1 Define and explain the purpose of a conceptual framework of accounting
3.2 Explain whether conceptual frameworks are a necessary component of financial reporting
3.3 Explain the role of a conceptual framework in the development of financial reporting standards
3.4 Identify the advantages and disadvantages of conceptual frameworks
3.5 Explain why a conceptual framework cannot consist only of financial reporting standards
3.6 Explain the role and purpose of the IASB Conceptual Framework for the Financial Reporting
3.7 Explain the process of accounting in situations where accounting standards do not exist
3.8 Identify the benefits of a conceptual framework in situations where accounting standards do not exist

4. Accounting standards and concepts
4.1 Explain the purpose of an accounting standard
4.2 Explain the reason that accounting standards are used to regulate financial reporting
4.3 Explain the advantages and disadvantages of accounting standards
4.4 Explain the need for financial statements to provide a fair presentation of the financial performance and financial position of an entity
4.5 Define the principle of substance over form
4.6 Explain the importance of recording the economic substance of transactions rather than the legal form
4.7 Describe the difference between a principles-based and rules-based system of accounting
4.8 Identify major developments in the harmonisation of worldwide accounting standards
4.9 Describe the effect of harmonisation of accounting standards on companies
4.10 Explain the role of International Financial Reporting Standards in the harmonisation process

5. Elements of financial statements and their recognition criteria
5.1 Define the elements of financial statements
5.2 Identify and define the following elements of financial statements

5.2.1 Asset
5.2.2 Liability
5.2.3 Equity
5.2.4 Income
5.2 5 Expense

5.3 Identify the financial statements where these elements are recognised
5.4 Identify and define the criteria for recognition of the elements of the financial statements

5.4.1 Asset
5.4.2 Liability
5.4.3 Equity
5.4.4 Income
5.4 5 Expense

6. Alternative methods of valuation
6.1 Identify and explain the advantages and disadvantages of the historical cost system of accounting
6.2 Identify, explain and calculate amounts using the following measurement bases

6.2.1 Historical cost
6.2.2 Fair value
6.2.3 Deprival value
6.2.4 Replacement cost
6.2.5 Net realisable value

7. Alternative theories of accounting
7.1 Define positive accounting theory
7.2 Define normative accounting theory
7.3 Identify financial capital maintenance and operating capital maintenance and how this can affect calculated profits
7.4 Describe operating and financial capital maintenance as alternatives to historical cost and identify the impact on reported profits
7.5 Calculate profits or losses using the financial capital maintenance and operating capital maintenance models
7.6 Distinguish between the following concepts of capital market efficiency

7.6.1 Weak form efficiency
7.6.2 Semi-strong form efficiency
7.6.3 Strong form efficiency

8. Reporting and disclosure of performance
8.1 Explain agency theory in the context of company activity
8.2 Explain the separation of ownership and control in a large corporation
8.3 Define an agency cost
8.4 Identify the types of agency costs involved in monitoring the activities of the agent
8.5 Identify the components of a set of financial statements
8.6 Identify the difference between the mandatory and non-mandatory information that is produced in the annual report
8.7 Identify the different types of financial and non-financial information produced in the annual report
8.8 Identify the possible advantages and disadvantages of providing financial and non-financial information in the annual report
8.9 Explain the purpose and benefits of providing company information to shareholders
8.10 Identify the content of the following company reports

8.10.1 Annual financial report
8.10.2 Chairman’s statement
8.10.3 Directors’ report
8.10.4 Corporate governance statement
8.10.5 Corporate social responsibility report
8.10.6 Auditors’ report
8.10.7 Management commentary

Exam topic weightings
Introduction to accounting 5 %
The regulatory framework 15 %
Conceptual framework of accounting 20 %
Accounting standards and concepts 15 %
Elements of financial statements and their recognition criteria 10 %
Alternative methods of valuation 5 %
Alternatives theories of accounting 13 %
Reporting and disclosure of performance 17 %
Total 100 %