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Accounting Notes Accounting (Special Edition) Notes

Financial Reporting Standards Notes

Updated Financial Reporting Standards Notes

Accounting (Special Edition) Notes

Accounting (Special Edition)

Approximately 126 pages

These notes are specially designed to meet the requirements of the accounting and financial reporting students internationally. These notes are equally relevant for all the regions of the world.

There are many easy and unique features included in the notes to understand and grasp the topic.

Further There are free video links to better understand the topic by the expert tutor.

There are many practice questions to understand how the concept is applied into practical scenarios.

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Financial Reporting Standards

http://www.youtube.com/watch?feature=player_embedded&v=0ufX-y33h5Y

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.

The Standards Setting Process

International Financial Reporting Standards (IFRSs) are established through an international consultation procedure, the "due process",Under this process interested persons and organisations over the globe are involved.

The due process consist of six stages:

  1. Setting the agenda

  2. Planning the project

  3. Developing and publishing the discussion paper

  4. Developing and publishing the exposure draft

  5. Developing and publishing the standard

  6. After the standard is issued

Some differences between IFRS and US GAAP

following are some differences between the two major standards setting bodies.

Topic IFRS/IAS GAAP US GAAP

Inventory valuation LIFO not allowed LIFO allowed

Development costs Capitalise when conditions met Expensed

Long Lived assets Historical cost or valuation Historical cost

Extraordinary items Not...

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