Accounting for pre-master (320110-B-6)
Tilburg University
Table of Contents
Lecture 1: Corporate role in governance ................................................................................. 3
Key IFRS principles .........................................................................................................................4
Lecture 2: Corporate Governance ........................................................................................... 5
Agency theory................................................................................................................................5
Lecture 3: Non-financial disclosures ....................................................................................... 9
Single vs double materiality ...........................................................................................................9
Stakeholder vs. Shareholder theory .............................................................................................. 10
Lecture 4: Non-financial disclosures II................................................................................... 13
Regulations on climate change - SEC, ISSB, CSRD ........................................................................... 16
Accounting for carbon emission ...................................................................................................17
E-liability system .......................................................................................................................... 18
Lecture 5: Financial Accounting Basics .................................................................................. 20
5.1. Double entry principle ........................................................................................................... 20
Financial statements .................................................................................................................... 23
Income statement (IS / P&L) .............................................................................................................................. 24
Statement of total comprehensive income (balance sheet) .............................................................................. 24
Statement of changes in shareholders’ equity................................................................................................... 24
Statement of financial position .......................................................................................................................... 25
Statement of cash flows ............................................................................................................... 26
Workshop 2 .................................................................................................................................28
Lecture 6: IFRS Conceptual Framework (CF) .......................................................................... 34
CH1. Objective of financial reporting ............................................................................................ 35
CH2. Qualitative characteristics of useful financial information ..................................................... 35
1. Fundamental qualitative characteristics ........................................................................................................ 36
2. Enhancing qualitative characteristics ............................................................................................................. 36
CH3. Financial statements & the reporting entity .......................................................................... 36
CH4. The elements of financial statements ................................................................................... 37
CH.5 Recognition and derecognition .................................................................................................................. 38
Lecture 7: Accounting discretion & fair value ........................................................................ 40
Earnings management.................................................................................................................. 40
Fair value accounting (FVA) (IFRS 13) ............................................................................................ 42
, Fair value measurement: steps .....................................................................................................43
Lecture 8: Revenue recognition – IFRS 15.............................................................................. 44
IFRS 15 Five-Step Model ............................................................................................................... 45
Lecture 9: IAS 16, IAS 38 IAS 36 (PPE, Intangibles, Impairment) ............................................. 48
IAS 16 – Property, plant & equipment (PPE) .................................................................................. 48
IAS 16 §50-62 – Depreciation ........................................................................................................ 49
IAS 38 – Intangible Assets ............................................................................................................. 50
IAS 36 – Impairment..................................................................................................................... 52
IAS 16 – Depreciation methods.....................................................................................................53
Lecture 10: Lease Accounting (IFRS 16) ................................................................................. 55
Lessee Accounting........................................................................................................................ 56
Accounting by a Lessor ................................................................................................................. 61
Accounting by a lessor: Finance lease ................................................................................................................ 62
Accounting by a lessor: Operating lease ............................................................................................................ 65
Lecture 11: Provisions & Contingent liabilities – IAS 37 ......................................................... 66
Provisions ....................................................................................................................................66
Contingent liabilities .................................................................................................................... 72
Contingent assets......................................................................................................................... 73
Lecture 12: Accounting for income taxes – IAS12 .................................................................. 74
Temporary differences (IAS12) .....................................................................................................75
Example: Temporary differences – accounts receivable ................................................................................... 76
Example: Temporary differences – warranty costs ............................................................................................ 78
Permanent differences ................................................................................................................. 82
,Lecture 1: Corporate role in governance
Accounting: communication of a firm’s performance for decision-making.
Types of information:
- Financial information: processed economic data used by internal and external decision-makers.
o Main channel: financial reports.
- Non-financial information: disclosures on environmental, social, and governance (ESG) factors that
affect long-term value.
Bottum-up logic: economic activity → accounting judgement → useful information → better decisions
Economic theory background:
- Firms need economic resources; capital providers need protection
- Without reporting → adverse selection (capital providers can’t evaluate firms).
- → Information asymmetry between firms and stakeholders
To function efficiently, capital providers design contracts to limit agency conflicts and moral hazard.
Agency example:
- Shareholders (principals) vs managers (agents) – each aiming to achieve their own (diverse) goals.
- Tools: performance-based pay, but it relies on reported profit, which managers influence through
accounting choices.
Corporate reporting = financial + non-financial information enabling capital allocation decisions by investors
and creditors.
Annual report vs financial statements
Annual report (unregulated):
- Narrative overview + financial statements + CEO letter, strategy, developments.
- Distributed via media and websites.
Financial statements (F/S) (regulated by GAAP):
- Must be files with national authorities.
- Rules differ by country. Many developed countries prepare according to their national CAAP (e.g.
Dutch GAAP; UK GAAP; US GAAP).
Why GAAP differs across countries:
- Ownership structure
o Dispersed ownership → greater need for investor protection → stronger need for F/S
- Financing mix
o Bank financing → banks demand conservative accounting → less emphasis on public
general-purpose F/S.
o Investors also value upside potential, leading to different preferences.
*Conservative: more worried about the downside potential than the upside potential
Globalization raises the costs of GAAP diversity
- Poor accounting quality → low transparency and comparability → harder F/S analysis → limits
international capital flows
- Poor accounting quality → capital providers demand risk premium → higher cost of capital.
, o Cross-listed firms must prepare multiple sets of F/S → higher reporting costs.
Example: Numbers are not comparable due to different GAAP systems despite currency adjustments.
Ericsson (Sweden) Motorola (US) Nokia (Finland
US $ equivalent $(000,000) $(000,000) $(000,000)
Revenue 25,977 30,931 20,932
Net income 1,535 817 2,727
Assets 23,830 37,327 14,377
Accounting method Swedish GAAP US GAAP International
GAAP (IAS)
Need for international accounting standards
Single global system should be:
High quality, Understandable, Enforceable, Globally accepted, Comparable
to ensure that relevant and faithful information is disclosed
→ International Financial Reporting Standards (IFRS)
Development
- Pre-2001: IASC issued IAS 1-41
- Post-2001: IASB issues IFRS standards (IFRS 1-19 as of 2024)
Key IFRS principles
Double-entry principle: assets = liabilities + equity
- Every transaction must balance (total debits = total credits)
Example: purchase truck for $10,000, pay 90% cash:
December 24
Dr. Property, Plant and Equipment (+NCA) 10,000
Cr. Cash (-CA) 9,000
Cr. Accounts payable (+CL) 1,000
Accrual-based accounting: record transactions when economic events occur, not when cash is exchanged.
Tilburg University
Table of Contents
Lecture 1: Corporate role in governance ................................................................................. 3
Key IFRS principles .........................................................................................................................4
Lecture 2: Corporate Governance ........................................................................................... 5
Agency theory................................................................................................................................5
Lecture 3: Non-financial disclosures ....................................................................................... 9
Single vs double materiality ...........................................................................................................9
Stakeholder vs. Shareholder theory .............................................................................................. 10
Lecture 4: Non-financial disclosures II................................................................................... 13
Regulations on climate change - SEC, ISSB, CSRD ........................................................................... 16
Accounting for carbon emission ...................................................................................................17
E-liability system .......................................................................................................................... 18
Lecture 5: Financial Accounting Basics .................................................................................. 20
5.1. Double entry principle ........................................................................................................... 20
Financial statements .................................................................................................................... 23
Income statement (IS / P&L) .............................................................................................................................. 24
Statement of total comprehensive income (balance sheet) .............................................................................. 24
Statement of changes in shareholders’ equity................................................................................................... 24
Statement of financial position .......................................................................................................................... 25
Statement of cash flows ............................................................................................................... 26
Workshop 2 .................................................................................................................................28
Lecture 6: IFRS Conceptual Framework (CF) .......................................................................... 34
CH1. Objective of financial reporting ............................................................................................ 35
CH2. Qualitative characteristics of useful financial information ..................................................... 35
1. Fundamental qualitative characteristics ........................................................................................................ 36
2. Enhancing qualitative characteristics ............................................................................................................. 36
CH3. Financial statements & the reporting entity .......................................................................... 36
CH4. The elements of financial statements ................................................................................... 37
CH.5 Recognition and derecognition .................................................................................................................. 38
Lecture 7: Accounting discretion & fair value ........................................................................ 40
Earnings management.................................................................................................................. 40
Fair value accounting (FVA) (IFRS 13) ............................................................................................ 42
, Fair value measurement: steps .....................................................................................................43
Lecture 8: Revenue recognition – IFRS 15.............................................................................. 44
IFRS 15 Five-Step Model ............................................................................................................... 45
Lecture 9: IAS 16, IAS 38 IAS 36 (PPE, Intangibles, Impairment) ............................................. 48
IAS 16 – Property, plant & equipment (PPE) .................................................................................. 48
IAS 16 §50-62 – Depreciation ........................................................................................................ 49
IAS 38 – Intangible Assets ............................................................................................................. 50
IAS 36 – Impairment..................................................................................................................... 52
IAS 16 – Depreciation methods.....................................................................................................53
Lecture 10: Lease Accounting (IFRS 16) ................................................................................. 55
Lessee Accounting........................................................................................................................ 56
Accounting by a Lessor ................................................................................................................. 61
Accounting by a lessor: Finance lease ................................................................................................................ 62
Accounting by a lessor: Operating lease ............................................................................................................ 65
Lecture 11: Provisions & Contingent liabilities – IAS 37 ......................................................... 66
Provisions ....................................................................................................................................66
Contingent liabilities .................................................................................................................... 72
Contingent assets......................................................................................................................... 73
Lecture 12: Accounting for income taxes – IAS12 .................................................................. 74
Temporary differences (IAS12) .....................................................................................................75
Example: Temporary differences – accounts receivable ................................................................................... 76
Example: Temporary differences – warranty costs ............................................................................................ 78
Permanent differences ................................................................................................................. 82
,Lecture 1: Corporate role in governance
Accounting: communication of a firm’s performance for decision-making.
Types of information:
- Financial information: processed economic data used by internal and external decision-makers.
o Main channel: financial reports.
- Non-financial information: disclosures on environmental, social, and governance (ESG) factors that
affect long-term value.
Bottum-up logic: economic activity → accounting judgement → useful information → better decisions
Economic theory background:
- Firms need economic resources; capital providers need protection
- Without reporting → adverse selection (capital providers can’t evaluate firms).
- → Information asymmetry between firms and stakeholders
To function efficiently, capital providers design contracts to limit agency conflicts and moral hazard.
Agency example:
- Shareholders (principals) vs managers (agents) – each aiming to achieve their own (diverse) goals.
- Tools: performance-based pay, but it relies on reported profit, which managers influence through
accounting choices.
Corporate reporting = financial + non-financial information enabling capital allocation decisions by investors
and creditors.
Annual report vs financial statements
Annual report (unregulated):
- Narrative overview + financial statements + CEO letter, strategy, developments.
- Distributed via media and websites.
Financial statements (F/S) (regulated by GAAP):
- Must be files with national authorities.
- Rules differ by country. Many developed countries prepare according to their national CAAP (e.g.
Dutch GAAP; UK GAAP; US GAAP).
Why GAAP differs across countries:
- Ownership structure
o Dispersed ownership → greater need for investor protection → stronger need for F/S
- Financing mix
o Bank financing → banks demand conservative accounting → less emphasis on public
general-purpose F/S.
o Investors also value upside potential, leading to different preferences.
*Conservative: more worried about the downside potential than the upside potential
Globalization raises the costs of GAAP diversity
- Poor accounting quality → low transparency and comparability → harder F/S analysis → limits
international capital flows
- Poor accounting quality → capital providers demand risk premium → higher cost of capital.
, o Cross-listed firms must prepare multiple sets of F/S → higher reporting costs.
Example: Numbers are not comparable due to different GAAP systems despite currency adjustments.
Ericsson (Sweden) Motorola (US) Nokia (Finland
US $ equivalent $(000,000) $(000,000) $(000,000)
Revenue 25,977 30,931 20,932
Net income 1,535 817 2,727
Assets 23,830 37,327 14,377
Accounting method Swedish GAAP US GAAP International
GAAP (IAS)
Need for international accounting standards
Single global system should be:
High quality, Understandable, Enforceable, Globally accepted, Comparable
to ensure that relevant and faithful information is disclosed
→ International Financial Reporting Standards (IFRS)
Development
- Pre-2001: IASC issued IAS 1-41
- Post-2001: IASB issues IFRS standards (IFRS 1-19 as of 2024)
Key IFRS principles
Double-entry principle: assets = liabilities + equity
- Every transaction must balance (total debits = total credits)
Example: purchase truck for $10,000, pay 90% cash:
December 24
Dr. Property, Plant and Equipment (+NCA) 10,000
Cr. Cash (-CA) 9,000
Cr. Accounts payable (+CL) 1,000
Accrual-based accounting: record transactions when economic events occur, not when cash is exchanged.
