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Financial Reporting Standards Notes

Accounting Notes > Accounting (Special Edition) Notes

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Financial Reporting Standards

Definition International financial reporting standards (IFRS) is a set of accounting rules followed by companies to make financial statements, In other words These are just like accounting laws established by the International Accounting Standards Board (IASB) to prepare financial statements. Why is it important?
To understand the importance and need for financial reporting standards, we need to know the objective of financial reporting is to provide economic information about the business that is useful to shareholders, potential investors, finance providers and creditors in making future decisions about providing funds to the entity. That is why it is very important to make a set of rules for financial reporting which is acceptable universally so that the users from all over the world can take their decisions reliably. Lecture Notes Standard Setting Bodies There are two major standard setting bodies in the world

1. U.S Financial Accounting Standards Board (FASB)

2. International Accounting Standards Board (IASB) The standards set by FASB are known as U.S.GAAP and standards by IASB are called IFRS Note: We will focus on the IFRS in this lesson because of global acceptance and convergence of the international standards.


IASB qualitative characteristics Qualitative characteristics are the features that make information provided in financial statements useful to others. The Framework separates qualitative characteristics into following: Fundamental qualitative characteristics Relevance Faithful representation Ornamental qualitative characteristics Comparability Verifiability Timeliness Understandability IASB requirements for Financial Statements IAS 1 Presentation of Financial Statements sets out the overall requirements for financial statements.

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