Maynard - Financial Accounting, Reporting & Analysis

second edition

jennifer maynard

Great Clarendon Street, Oxford, OX2 6DP,
United Kingdom

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Oxford University Press 2017

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First Edition 2013
Impression: 1

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Library of Congress Control Number: 2017934845

ISBN 9780198745310

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To my late mother, Monica.

Who the textbook is for

This textbook on financial accounting, reporting and analysis is principally aimed at Level 2 and 3 undergraduate students on specialist accounting and finance degree programmes, although it may be relevant for postgraduate courses in financial statement analysis. It is assumed that all readers will have completed an introductory financial accounting course, and may go on to study more advanced financial reporting courses. There is, however, an introductory chapter, which revises the main topics covered in introductory financial accounting courses and textbooks, and this provides a foundation on which the remainder of the textbooks material is built. The textbooks basis is international financial reporting standards (IASs and IFRS) issued by the International Accounting Standards Board (IASB).

New to the second edition

This second edition has been substantially updated for all changes in IFRS and the regulatory environment. In addition two new chapters have been added.

Revenue from contracts with customers is now based entirely on IFRS 15 Revenue from contracts with customers, although implementation of this standard is not required by companies until accounting periods beginning on or after 1 January 2018.

Leases maintains details of IAS 17 Leases since companies will still be reporting under this standard for a few more years. It also covers the new replacement standard IFRS 16 Leases. This is not required to be implemented by companies until accounting periods beginning on or after 1 January 2019.

There are no real-life application examples of these two new standards yet; however, some of the financial reporting in practice illustrations are from companies that make reference to the future impact of the standards on their financial statements.

The financial reporting system includes discussion of the proposals contained in the IASBs 2015 Exposure Draft (ED) of the Conceptual Framework for Financial Reporting. This significant IASB project has been in progress for some years, and is hopefully nearing conclusion, with the final Conceptual Framework expected to be issued in early 2017. Amongst other changes, the ED places more explicit emphasis on stewardship as an objective of financial reporting, prudence is back as an underpinning concept in certain circumstances and measurement principles are fully updated. All these issues are discussed in detail in the chapter.

The two new chapters cover more advanced financial reporting topics and are included at the request of reviewers.

Financial instruments addresses the important topic of financial instruments and is based on the latest and final version of financial reporting standard IFRS 9 Financial Instruments and the related presentation and disclosure standards IAS 32 Financial Instruments: Presentation and IFRS 7 Financial Instruments: Disclosures. Financial instruments are held by many companies, not only financial institutions, and encompass some fundamental items such as cash, receivables and payables. The chapter does not cover the more complex instrumentsderivatives and hedging instruments. As for other recently issued financial reporting standards there are few full practical examples available of the application of IFRS 9, as companies have until accounting periods beginning on or after 1 January 2018 to implement the standard; however its expected impact is fully discussed.

Employee benefits and share-based payments concerns all forms of employee remuneration, and concentrates on how companies account for post-retirement benefit plans (pension schemes) and all forms of share-based payments. The applicable standards are IAS 19 Employee Benefits and IFRS 2 Share-based Payment.

The technical nature of financial reporting

One key issue with a second year undergraduate course in financial reporting is how to take students from Level 1 basic financial accounting, which focuses on the preparation of the main financial statements, to an understanding of the complexities and many subtleties of financial reporting. Financial reporting is about communicating financial information about a business entity to its users. This is mirrored by this textbooks main aimto enable readers to understand and interpret the financial statements of business entitiesmainly companies. Inevitably and unapologetically this requires understanding of detailed technical material and terminology, and the use of judgement in situations where there are often no right or wrong answers. However, the textbook explains the technicalities and complexities in a clear manner, so that students become familiar with and confident in the use of this material and language, and are able to develop use of their own judgement as necessary. However, in all this complexity, the overarching objective of financial reporting should not be lost.

The textbook also seeks a balance between the sometimes conflicting needs of financial reporting courses. On the one hand these may seek to attract professional accountancy body exemptions, but on the other they need to be theoretical enough and include sufficient critical perspective to meet the demands of academic benchmarking requirements. Thus the technical material is current and comprehensive, but not so much so that the main points are swamped in a mass of detail. The financial accounting and reporting methods are discussed in relation to underpinning frameworks and principles and always in the context of what they mean for the user.