‫)‪Sheet (5‬‬

‫‪Third year‬‬

‫‪Edited by‬‬
‫‪Dr. Magdy kamel‬‬
‫‪Tel/ 01273949660‬‬

‫مكتبة الباشمحاسب‬ ‫العنوان‪ :‬مركز سيجما – شارع دمحم عىل‬

‫شارع المكتبات‬ ‫مكارم امام مطعم سلطانه‬

‫‪1 | Page Dr. Magdy Kamel‬‬ ‫‪tel / 01273949660‬‬

 ‫ى‬
Q1: What is happening to world markets ‫ماذا يحدث ف االسواق العالمية‬
 World markets are becoming increasingly intertwined. The tremendous variety
and volume of both exported and imported goods indicates the extensive
involvement in international trade.
‫االستتاد والتصدير بالشاركة‬
‫ر‬ ‫االسواق العالمية اصبحت متشابهة بشكل ى‬
‫ فهناك تنوع هائل من‬: ‫متايد‬
‫ى‬
‫الواسعة ف التجاره الدولية‬
Notes
Capital markets are increasingly integrated and companies have greater
flexibility in deciding where to raise capital
‫ى‬ ‫اصبحت االسواق الراس مالية متكامله بشكل ى‬
‫متايد و ر‬
‫كبتة ف تحديد مكان زياده راس مالها‬
‫الشكات عندها مرونة ر‬

Essential characteristics of accounting are: ‫خصائص الشركة‬

1. the identification, measurement, and communication of financial information about
2. economic entities to
3. interested parties.

Differentiate broadly between financial accounting and managerial accounting

Q2: what is the definition of financial accounting ?

 Financial accounting is the process of preparation of financial reports on the
enterprise for use by both internal and external parties
‫الشكة لالستخدام من قبل‬‫المحاسبة ىه نظام معلومات مالية الهدف منه اعداد تقارير مالية عن ر‬
‫الشكة‬‫المستخدمي داخل وخارج ر‬
‫ر ى‬
 Users of these financial reports include
Investors, Creditors, Managers, Unions, governmental agencies.
Q3: what is the definition of managerial accounting
 The process of identifying, measuring, analyzing, and communicating financial
information needed by management to plan, control, and evaluate an
organization’s operations.
‫هى عملية تحديد وقياس وتحليل وتوصيل المعلومات المالية التى تحتاجها االدارة علشان تقدر االداره‬
‫للتخطيط والمراقبة وتقييم عمليات الشركة‬
Differentiate between “financial statements” and “financial reporting
 Financial statements are the principal means through which a company
communicates its financial information to those outside an enterprise.

2 | Page Dr. Magdy Kamel tel / 01273949660

Q4: What are the major financial statements?
Financial statements generally refer to the four basic financial statements

1. the statement of financial position. Or (balance sheet)

2. the income statement (or statement of comprehensive income).
3. the statement of cash flows
4. the statement of changes in equity. ( statement of owner’s equity ).

 Note disclosures are an integral part of each financial statement.

‫مبدا االفصاح التام ىه جزء مكمل لكل القوائم المالية‬

Q5: What is the financial reports?

 Some financial information is better provided, or can be provided only, by
means of financial reports but not through financial statements. include
)‫غت القوائم المالية (وهذه الطريقة ىه تقارير مالية‬
‫بعض المعلومات يفضل انك تقولها وتعرضها بطريقة اخرى ر‬

 the president’s letter, supplementary schedules in the corporate annual reports,

Prospectuses, Reports filed with governmental agencies, Management’s
forecasts.

True or false
(T) 1. Financial statements are the principal means through which financial information is
communicated to those outside an enterprise.

(T) 2. Capital markets are increasingly integrated and companies have greater flexibility
in deciding where to raise capital.

(F) 3. The major financial statements used under International Financial Reporting
Standards (IFRS) include the statement of changes in financial position and the
statement of stockholders’ equity.

(F) 4. In order to provide information that is useful in decision making and capital
allocation, the International Financial Reporting Standards (IFRS) requires all
companies to use a common currency.

(T) 5. Users of the financial information provided by a company use that information to
make capital allocation decisions.

(T) 6. An effective process of capital allocation promotes productivity and provides an

efficient market for buying and selling securities and obtaining and granting credit.
a. true b. false

3 | Page Dr. Magdy Kamel tel / 01273949660

 Economic Entity Financial Statements Additional Information

President’s letter
Financial Statement of Financial
Information Position
Prospectuses
Accounting? Income Statement or
Statement of Reports filed with
Comprehensive Income governmental agencies
Identify
Statement of Cash News releases
and
Flows Forecasts
Measure
Statement of Changes Environmental impact
and in Equity statements
Communicate
Note Disclosures Etc.

General purpose financial statements

1. provide financial reporting information to a wide variety of users.
2. provide the most useful information possible at the least cost.

These statements help shareholders, creditors, suppliers, employees and regulators to

better understand its financial position and related performance.

 primary users group for general purpose financial statements include investors
and creditors (capital provider)

What is “expectation gap” ‫فجوه التوقع‬

 The difference between what the public thinks the accountant should do and
what the accountant thinks they can do

Notes that
 GAAP → Generally Accepted Accounting Principle ‫المبادى المحاسبيه المتعارف عليها‬

 IFRS → international financial reporting standards ‫المعايي الدولية للتقارير المالية‬

‫ر‬

 IASB → International accounting standards boards ‫لمعايي المحاسبية‬

‫ر‬ ‫المجلس الدوىل‬

 FASB → Financial accounting standards boards ‫لمعايي المحاسبة المالية‬

‫ر‬ ‫مجلس الدوىل‬

 SOEs → State owned enterprises ‫الموسسات المملوكة للدولة‬

4 | Page Dr. Magdy Kamel tel / 01273949660

‫‪High Quality Standards‬‬
‫‪Globalization demands a single set of high-quality international accounting standards.‬‬
‫المعايت المحاسبية الدولية عالية الجوده‬
‫ر‬ ‫تتطلب العولمة مجموعة موحده من‬

‫‪Some elements:‬‬
‫‪1. Single set of high-quality accounting standards established by a single standard-‬‬
‫‪setting body.‬‬
‫المعايت المحاسبية ‪:‬‬
‫ر‬ ‫معايت المحاسبة الدولية تنشاء من قبل هيئة مسئولة عن وضع‬
‫ر‬ ‫مجموعة واحده من‬
‫ر ى‬
‫القوانيي المالية بشكل موحد)‬ ‫( مما يسهل عىل ر‬
‫الشكات التعامل مع‬

‫‪2. Consistency in application and interpretation.‬‬

‫بي ر‬
‫وتفسيها (مما يسهل المقارنه ر ى‬ ‫ى‬
‫الشكات والدول)‬ ‫ر‬ ‫المعايي‬
‫ر‬ ‫هناك تناسق ف تطبيق‬
‫االفصاح المشتك ‪3. Common disclosures.‬‬
‫متطلبات االفصاح الموحده (يساعد المستثمرين واصحاب المصلحة عىل فهم المعلومات الماليه بطريقة‬
‫افضل‬
‫‪4. Common high-quality auditing standards and practices.‬‬
‫ى‬ ‫هناك منهجية ر‬
‫لمعايي المراجعة و تطبيقها وتنظيمها بجوده عالية (هذا يعزز الثقة ف التقارير المالية)‬
‫ر‬ ‫مشيكة‬
‫‪5. Common approach to regulatory review and enforcement.‬‬
‫ر ى‬
‫القوانيي‬ ‫بمعن هناك راشاف تنظيىم يضمن تطبيق‬ ‫ى‬ ‫هناك نهج موحد للمراجعة التنظيمية والتنفيذ ‪( :‬‬
‫ى‬
‫بشكل متساوى مما يمنع التالعب وهذا يزيد من الثقة ف التقارير المالية)‬
‫ى ى‬
‫كي ف السوق ‪6. Education and training of market participants.‬‬ ‫توفي التعليم والتدريب للمشار ر‬
‫ر‬

‫)‪7. Common delivery systems (e.g., eXtensible Business Reporting Language -XBRL‬‬
‫ى‬
‫(بمعن تبادل المعلومات المالية وتحليلها‬ ‫انظمه توصيل موحدة مثل لغة التقارير المالية القابلة للتوسيع‬
‫بسهولة مما يحسن من كفاءه ودقة وسهولة الوصول اىل المعلومات المالية‬

‫‪8. Common approach to corporate governance and legal frameworks around the‬‬
‫ى‬ ‫نهج موحد لحوكمه ر‬
‫‪world.‬‬ ‫الشكات واالطار القانون‬
‫المعايت والممارسات واللوائح عىل مستوى العالم يسهل االستثمارات ويقلل من التعقيدات‬
‫ر‬ ‫بمعنن توحيد‬
‫ى‬ ‫بالنسبة ر‬
‫للشكات متعددة الجنسيات ويزيد من الثقة ف النظام الماىل العالىم‬
‫‪Notes‬‬
‫‪An effective process of capital allocation is critical to a healthy economy.‬‬
‫‪Include (1) promotes productivity‬‬
‫‪(2) encourages innovation‬‬
‫‪(3) provides an efficient and liquid market for buying and selling securities‬‬

‫‪5 | Page Dr. Magdy Kamel‬‬ ‫‪tel / 01273949660‬‬

 Financial reporting Users Capital Allocation

The financial Investors, creditors use The process of

information a company financial reports to make determining how
provides to help users their capital allocation and at what cost
with capital allocation decision money is allocated
decisions about the among competing
company interests.

Q1: What is a conceptual framework?

Why is a conceptual framework necessary in financial accounting?
 A conceptual framework is a coherent system of concepts that flow from an objective.
 The objective identifies the purpose of financial reporting.
: ‫الت توضح الهدف‬‫االطار المفاهيىم هو نظام متماسك من المفاهيم ر‬
.‫الهدف هو تحديد الغرض من عمل التقارير المالية‬

Q2: Describe the usefulness of a conceptual framework.

The accounting profession needs a conceptual framework to
1. Rule-making should build on and relate to an established body of concepts.
2. allow new and emerging practical problems to be more quickly solved.
3. IASB to issue more useful and consistent pronouncements over times.
4. increase financial statement users’ understanding of and confidence in financial
reporting.
5. enhance comparability among companies’ financial statements.
‫المعايت يجب ان تكون مبنية عىل اطار مفاهيىم و قواعد ثابتة‬ ‫ر‬ ‫ عملية وضع‬.1
‫ يساعد عىل حل المشكالت الطارئة والحديثة بشعة ر‬.2
‫اكت‬
.‫معايت مفيدة ومتناسقة بمرور الوقت‬ ‫ى‬
‫ر‬ ‫ تساعد المجلس الدوىل ف اصدار‬3
‫ى‬
‫ تزيد من فهم مستخدىم القوائم المالية والثقة ف التقارير المالية‬.4
‫بي البيانات المالية ر‬
‫للشكات‬ ‫ امكانية عمل مقارنة ر ى‬.5

True or false
(F) 1. The conceptual framework for accounting has been discovered through empirical
research

(T) 2. A conceptual framework is a coherent system of interrelated objectives and

fundamentals that can lead to consistent standards.

6 | Page Dr. Magdy Kamel tel / 01273949660

Notes:
The first level identifies the objective of financial reporting that is, the purpose of
financial reporting.

The second level provides the qualitative characteristics that make accounting
information useful and the elements of financial statements (assets, liabilities,& soon)

The third level identifies the recognition, measurement, and disclosure concepts used
in establishing and applying accounting standards and the specific concepts to
implement the objective

7 | Page Dr. Magdy Kamel tel / 01273949660

 First level : BASIC OBJECTIVES
Q2: What is the objectives of financial reporting ?
 The objective of general purpose financial reporting is to provide financial
information about the reporting entity that is useful to present and potential equity
investors, lenders, and other creditors in making decisions about providing resources
to the entity.
 Information that is decision useful to capital providers may also be useful to other
users of financial reporting who are not capital providers.
‫الشكة بحيث تكون هذه المعلومة مفيدة للمستثمرين‬‫الهدف من عمل التقارير المالية هو تقديم معلومة مالية عن ر‬
‫والدائني ىف اتخاز قرارات عن الموارد المقدمة اىل ر‬
‫الشكة‬ ‫رى‬ ‫رى‬
‫والمحتملي‬ ‫رى‬
‫الحاليي‬

 The objective of financial reporting in (IASB’s) Is the foundation for the Framework

Second level: FUNDAMENTAL CONCEPTS

Identify the qualitative characteristics of accounting information.
 The second level of the International Accounting Standards Board’s (IASB’s)
Conceptual Framework serves as a bridge between the “why” of accounting
and the “how” of accounting
 Qualitative characteristics of accounting information” are those characteristics
which contribute to the quality or value of the information.
‫ى‬
‫الخصائص االساسية للمعلومات المحاسبة ىه تلك الخصائص الن تساهم ف جودة وتقييم المعلومات‬
 The IASB identified the qualitative characteristics of accounting information
that distinguish better (more useful) information from inferior (less useful)
‫ى‬ ‫ر‬ ‫ رى‬.
information )‫(األكت فائدة) عن المعلومات األدن (األقل فائدة‬ ‫تميت المعلومات األفضل‬

8 | Page Dr. Magdy Kamel tel / 01273949660

Notes : As indicated illustraction 2-2
 Qualitative characteristics are either fundamental or enhancing characteristics ,
depending on how they affect the decision – usefulness of information
‫ىه خصائص اساسية وتعزيزية تعتمد عىل تقديم معلومه مفيده بتائر عىل القرارات‬
 Providing useful financial information is limited by a pervasive constraint on
financial reporting ‫تقديم معلومه مالية بتكون محدوده بقيود عىل التقارير الماىلة‬
 Cost should not exceed the benefits of a reporting practice.
 Each qualitative characteristic contributes to the decision – usefulness of financial
reporting information.
‫ى‬ ‫ى‬
‫كل خاصيه نوعية تساهم ف اتخاذ قرار – بتقديم معلومة مالية مفيدة يتم وضعها ف تقرير ماىل‬

Fundamental quality
 Relevance and faithful representation are the two fundamental qualities that
make accounting information useful for decision-making.

1. Relevance: ‫معلومه موثره ىف قرارى‬

 Relevance is one of the two fundamental qualities that make accounting
information useful for decision-making.
 to be relevance, accounting information must be capacity of making a difference
in a decision.
‫ى‬
‫المعلومات المالية تكون موثره اذا كانت قادرة عىل صنع اختالف ف القرار بتاىع‬

Fundamental Relevance
quality

Ingredients of Predictive Confirmatory materiality

fundamental value value
quality

Ingredients of fundamental quality – relevance

a. predictive value ‫قيمة تنبؤية‬

 financial information has a predictive value if it has values as an input to
predictive processes used by inventors to form their own expectations about the
future.

9 | Page Dr. Magdy Kamel tel / 01273949660

b. confirmatory value. ‫قيمة تاكيدية‬
 Relevant information also helps users confirm or correct prior expectations;
It has confirmatory value. )‫(الىل توقعته طلع صح باكد علية ولو كان غلط بصحح الخطا‬

c. materiality ‫اهمية نسبية‬

 information is material if omitting it or misstating it could influence decisions
that users make on the basis of the reported financial information.
‫المعلومه تكون مهمه اذا كان التالعب فيها قد يوثر على قرارى‬
Notes
Companies consider qualitative and quantitative factors in determining whether an
item is material.

‫ى‬
2. Faithful representation: ‫مصداقية ف عرض المعلومات‬
 Faithful representation is the second fundamental qualities that make
accounting information useful for decision-making.
 Faithful representation means that the numbers and descriptions match what
really existed or happened.
 Faithful representation is a necessity because most users have neither the time
nor the expertise to evaluate the factual content of the information.
 To be a faithful representation, information must be complete, neutral and free
of material error.

Fundamental
Faithful representation
quality

Ingredients of
faithful completeness Neutrality Free from error
representation

10 | Page Dr. Magdy Kamel tel / 01273949660

Ingredients of faithful representation

a. completeness: ‫معلومة متكاملة‬

 completeness means that all the information that is necessary for faithful
representation is provided

‫رى‬
b. neutrality: (unbiased information) ‫التحت‬ ‫الحيادية او عدم‬
 neutrality means that a company cann’t select information to favor one set
of interested parties over another.
‫ر‬
‫الشكة ال يمكنها تفضيل معلومة لطرف عىل حساب طرف اخر‬

c. free from error: ‫خالية من االخطاء‬

 an information item that is free from error will be a more accurate (faithful)
representation of a financial item.

‫بعض مسائل االمتحانات واسئلة الكتاب‬

True-False Statement:
)T) 1. Relevance and faithful representation are the two primary qualities that
make accounting information useful for decision making.

(F) 2. Relevance and faithful representation are the two enhancing qualities
that make accounting information useful for decision making.

(T) 2. A conceptual framework is a coherent system of concepts that flow from an

objective

(T) 3. Qualitative characteristics of accounting information distinguish better

information from inferior information for decision-making purposes.

(T) 4. information that is decision-useful to capital providers may also be helpful to

other users of financial reporting who are not capital providers.

(F) 5. Information is immaterial if omitting it or misstating it could influence

decisions that users make on the basis of the reported financial information.

11 | Page Dr. Magdy Kamel tel / 01273949660

1. IFRS stands for :
(a) International Federation of Reporting Services.
(b) Independent Financial Reporting Standards.
(c) International Financial Reporting Standards.
(d) Integrated Financial Reporting Services.

2. The authoritative status of the Conceptual Framework for Financial Reporting is

as follows:
a. It is used when there is no standard or interpretation related to the
reporting issues under consideration.
b. It is not as authoritative as a standard but takes precedence over any
interpretation related to the reporting issue.
c. It takes precedence over all other authoritative literature.
d. It has no authoritative status.

3. The objective of financial reporting places most emphasis on:

a. reporting to capital providers.
b. reporting on stewardship.
c. providing specific guidance related to specific needs.
d. providing information to individuals who are experts in the field.
4. general purpose financial statements are prepared primarily for:
(a) internal users (b) external users
(b) auditors (c) government regulators

5. Economic consequences of accounting standard-setting means:

a. standard-setters must give first priority to ensuring that companies do not suffer
any adverse effect as a result of a new standard.
b. standard-setters must ensure that no new costs are incurred when a new
standard is issued.
c. the objective of financial reporting should be politically motivated to ensure
acceptance by the general public.
d. accounting standards can have detrimental impacts on the wealth levels of the
providers of financial information.

6. The expectations gap is the difference between:

a. what financial information management provides and what users want.
b. what the public thinks accountants should do and what accountants think they
can do.
c. what the governmental agencies want from standardsetting and what the
standard-setters provide.
d. what the users of financial statements want from the government and what is
provided.

12 | Page Dr. Magdy Kamel tel / 01273949660

7. A soundly developed conceptual framework of concepts and objectives should
a. increase financial statement users' understanding of and confidence in
financial reporting.
b. enhance comparability among companies' financial statements.
c. allow new and emerging practical problems to be more quickly solved.
d. all of these.

8. What is a purpose of having a conceptual framework?

a. To enable the profession to more quickly solve emerging practical problems.
b. To provide a foundation from which to build more useful standards.
c. Neither a nor b.
d. Both a and b.

9. Which of the following is a fundamental characteristic of useful accounting

information?
a. Comparability. b. Relevance.
c. Neutrality. d. Materiality.

10. Which of the following is a primary characteristic of useful accounting

information?
a. Conservatism. b. Comparability.
c. Faithful representation. d. Consistency.

11. Which of the following is an objective of financial reporting?

a) To provide information about economic resources, the claims to those resources,
and the changes in them.
b) To provide information that is helpful to investors and creditors and other users
in assessing the amounts, timing, and uncertainty of future cash flows.
c) To provide information that is useful to those making investment and credit
decisions.
d) All of these are objectives of financial reporting.

12. Which of the following is an ingredient of faithful representation?

a. Predictive value. b. Timeliness.
c. Neutrality. d. Feedback value.

13. Accounting information is considered to be relevant when it

a. can be depended on to represent the economic conditions and events that it is
intended to represent.
b. is capable of making a difference in a decision.
c. is understandable by reasonably informed users of accounting information.
d. is verifiable and neutral.
13 | Page Dr. Magdy Kamel tel / 01273949660