Revision sheet: Introduction to Accounting Standards and Norms

1. 📌 Essentials

• Normative evolution: mercantile → tax → EU adaptation → standards.
• Main norms: Ley 16/2007, Código de Comercio, RD 1514/2007, Ley 22/2015.
• Books of accounts: Diario + Inventories & Annual Accounts; legalize in Mercantile Registry.
• Formulation deadline: within 3 months after fiscal year-end.
• Financial statements: balance sheet, profit & loss, statement of changes in equity, cash flow, notes.
• Recognition criteria: probable future benefits and reliable measurement.
• Valuation methods: historical cost, fair value, net realizable value, present value.
• Core principles: accrual, consistency, prudence, materiality, no offsetting.
• Financial info must be prepared according to a codified chart of accounts.
• Financial statements are approved by the General Shareholders' Meeting and published in Mercantile Registry.
• Recognition of assets/liabilities occurs when benefits are probable and measurable.
• Income/expenses are recognized when realized or incurred.
• Inventory regularization at year-end ensures balance with physical stock.
• Inventory impairment must be recognized if net realizable value drops below cost.

2. 🧩 Key Structures & Components

• Normative Framework — sets legal and technical standards for accounting.
• Books of Accounts — Diario, Inventories, and Annual Accounts.
• Financial Statements — Balance Sheet, P&L, Statement of Changes, Cash Flow, Notes.
• Recognition Criteria — conditions for recording assets, liabilities, income, expenses.
• Valuation Methods — techniques for measuring asset/liability value.
• Principles — fundamental rules guiding accounting: accrual, prudence, materiality, consistency.
• Legal Bodies — Mercantile Registry, General Shareholders' Meeting, auditors.

3. 🔬 Functions, Mechanisms & Relationships

• Normative evolution guides the development of accounting standards over time.
• Books are the primary record-keeping tools, legalized in the Mercantile Registry.
• Financial statements are prepared based on recognized and measured items.
• Recognition depends on the probability of future benefits and measurement reliability.
• Valuation applies specific methods depending on asset/liability type.
• Principles ensure comparability, reliability, and prudence in financial reporting.
• Approval and publication ensure transparency and legal compliance.
• Recognition hierarchy: assets/liabilities → income/expenses, based on economic events.
• Inventory management involves regularization and impairment recognition.

4. 📊 Comparative Table

Item	Key Features	Notes / Differences
Normative Evolution	Mercantile → Tax → EU → International standards	Reflects increasing harmonization
Norm Types	Mercantile (general & specific), Fiscal, Civil	Different scopes and legal bases
Main Norms	Ley 16/2007, Código de Comercio, RD 1514/2007, Ley 22/2015	Current legal frameworks
Books of Accounts	Diario + Inventories & Annual Accounts	Mandatory, legalized in Mercantile Registry
Formulation Deadline	3 months post-year-end	For preparing financial statements
Publication Deadline	1 month after approval	In Mercantile Registry
Financial Statements	Balance sheet, P&L, changes in equity, cash flow, notes	Must reflect true economic situation
Recognition Criteria	Probable benefits, measurable reliably	When to record assets, liabilities, income, expenses
Valuation Methods	Cost, fair value, net realizable value, present value	For assets and liabilities
Principles	Accrual, prudence, materiality, consistency, no offsetting	Fundamental for reliable reporting

5. 🗂️ Hierarchical Diagram (ASCII)

Normative Framework
 ├─ Normative Evolution
 │    ├─ Mercantile Norms
 │    ├─ Tax Norms
 │    └─ EU & International Standards
 ├─ Norm Types
 │    ├─ Mercantile (General & Specific)
 │    ├─ Fiscal
 │    └─ Civil
 ├─ Current Norms
 │    ├─ Ley 16/2007
 │    ├─ Código de Comercio
 │    ├─ RD 1514/2007
 │    └─ Ley 22/2015
 ├─ Books & Formulation
 │    ├─ Diario + Inventories & Accounts
 │    ├─ 3 months to formulate
 │    ├─ 1 month to publish
 │    └─ Legalized in Mercantile Registry
 └─ Financial Statements
      ├─ Balance Sheet
      ├─ Profit & Loss
      ├─ Changes in Equity
      ├─ Cash Flow
      └─ Notes

6. ⚠️ High-Yield Pitfalls & Confusions

• Confusing recognition with measurement; recognition depends on probability and measurability.
• Mistaking valuation methods; e.g., using fair value when historical cost is required.
• Overlooking timing: assets/liabilities are recognized when benefits are probable and measurable, not necessarily cash flow.
• Ignoring inventory impairment rules; net realizable value must be checked at year-end.
• Misunderstanding principles: e.g., applying offsetting contrary to prudence or materiality.
• Assuming books are optional; they are legally mandatory and must be legalized.
• Confusing formulation deadline with publication deadline.
• Overlooking auditing and approval processes.
• Ignoring the importance of legalization in the Mercantile Registry.

7. ✅ Final Exam Checklist

• Understand the normative evolution of accounting standards.
• Identify main norms: Ley 16/2007, Código de Comercio, RD 1514/2007, Ley 22/2015.
• Know books of accounts: Diario + Inventories & Accounts, legalization process.
• Recall deadlines: 3 months for formulation, 1 month for publication.
• Be familiar with financial statements: balance sheet, P&L, cash flow, notes.
• Recognize recognition criteria: probable benefits, reliable measurement.
• Master valuation methods: historical cost, fair value, net realizable value, present value.
• Apply fundamental principles: accrual, prudence, materiality, consistency.
• Understand inventory management: regularization, impairment recognition.
• Know approval and publication procedures**.
• Comprehend hierarchical relationships between components.
• Be aware of common pitfalls: recognition timing, valuation errors, inventory issues.
• Ensure compliance with legal and normative requirements.

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