Consider to what extent International Financial Reporting Standards allow for comparability between Financial Statements.
Overview
Accounting gives companies, investors, regulators and others with a standardized way to explain the financial performance of an entity. Accounting standards present preparers of financial statements with a set of rules that they have to follow when preparing an entity’s accounts, making sure this standardization is across the market (Robert 2008). Many Companies are required to publish their financial statements in accordance with the relevant accounting standards. To simply International Financial Reporting Standards (IFRS) is one set of accounting standards, which have been established and maintained by the IASB with the purpose of those standards being efficient of being useful consistently. Financial statements are a structured representation of the financial positions and financial performance of an entity. The role of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions.
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There are pros and cons about the prudence in accounting standards, one thing is certain that financial information should be authentic and trustworthy. One thing, which is certain that there are many examples of prudence in existing IFRS and that these examples are widely accepted treatments.
We can look at the following examples
You should always discuss when the new framework draft is being given a shape. The discussion and definition should be reconsidered as arguably the principal role for prudence in standard setting lies in robust recognition criteria for assets and liabilities, where its application is transparent (Martin). Also another factor to consider is the retention of historical cost for many items will tell a proper degree of prudence to recognition of profit and asset
Conclusion: It is evident that if these financial practices were to be followed, David Johnston, the CRA, the business, and its stakeholders will be satisfied. A business must obey IFRS standards, as it provides a corporation with accurate measures of finance and
GAAP and IFRS have their similarities as well as differences. “GAAP is the accounting standard used in the US, while IFRS is the accounting standard used in over 110 countries around the world. GAAP is considered a more rules based system of accounting, while IFRS is more principles based” (Diffen). The Diffen site compared GAAP and IFRS elements using a chart. The chart is broken down into sections such as performance elements, required documents, inventory estimates and reversal, purpose of framework, etc. GAAP and IFRS both use revenue, expenses, assets, and liabilities as performance elements; but with GAAP gains, losses, and comprehensive income are added. GAAP and IFRS also use some of the same financial statements such as the balance
GAAP (Generally Accepted Accounting Principles) are the policies and procedures accountants or companies need to use for all financial statements or records. These policies and procedures are not necessarily set in stone although need to be taken into consideration. “The GAAP is not a fixed set of rules. They are guidelines or, more precisely, a group of objectives and conventions that have evolved over time to govern how financial statements are prepared and presented” (All Business Editors, 2013). This helps keep consistency with financial statements or reports that are written by companies or accountants.
What is IFRS, and what is its significance in the world market? In 2001 the International Accounting Standards Board, or IASB, was created to develop a set of standards by which global financial statuses could be reported. According to financialstabilityboard.org, this set of standards, known as the International Financial Reporting Standards, or IFRS, falls under the jurisdiction of the IFRS Foundation, which is a non-profit, private and independently run entity that exists for the public interest, is based on four principle objectives. The first is to develop a single set of international financial reporting standards (IFRS). This set would be high in quality, readily understandable, easily enforceable, and acceptable world-wide. The second objective is to encourage the use of this set of standards in the international business world. Thirdly, the ISAB would like to monitor the needs of different sizes and types of businesses in different settings. The fourth objective is to promote the adoption of the IFRS by converging national accounting standards wit...
In conclusion, appropriate principles could lead to clearer interaction and more comparable financial reporting standards without the need of the current rules. The NZ Framework has provided parts of clear and appropriate underlying principles to lead the application of NZ GAAP and other financial reporting standards. However the standards setting movement from ‘rule-driven’ approach to ‘principle-based’ approach is still half-way in New Zealand. How could principles be sufficiently clearly portrayed and put into practice require the profession to think and support. Just as Tweedie (2007, p.7) states, a principle based system will only work if preparers, auditors, users and regulators wish to make it work.
Private and public accounting has long been discussed and disputed in regards to financial reporting. Since the Financial Accounting Standards Board (FASB) was created in 1973, accountants have called for different accounting regulations for private and public accounting sectors, as private companies do not have the resources to meet the complex requirements of public companies. Private companies currently are not required by law to issue annual or quarterly financial statements (James, 2012). Private companies do, however, have the option to apply the U.S. Generally Accepted Accounting Principles (GAAP), cash basis, or accrual accounting to their financial statements (James, 2012).
So it appears that there would be some advantages for many aspects, such as accounting quality, when applying IFRS into various countries. Because IFRS would be able to exclude different options of accounting from national accounting standards which could reduce the divergence of management.[ Ahmed, A. S., Neel, M., & Wang, D. (2013). Does mandatory adoption of IFRS improve accounting quality? Preliminary evidence. Contemporary Accounting Research, 30(4), 1344-1372.](Ahmed, Neel & Wang, 2013) This change is likely to be more advantageous for more users, preparers and auditors to make their economic decisions. (Ramanna & Sletten, 2009)[ Ramanna, K., & Sletten, E. (2009). Why do countries adopt international financial reporting standards?. Harvard Business School Accounting & Management Unit Working Paper, (09-102).] Therefore, these expectations of changes would be beneficial for their local economic
According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006). The primary users are investors, creditors, and those who advise them. It goes on to define the criteria that make up each potential user, as well as, the limitations of financial reporting. The FASB explicitly states that financial reporting is “but one source of information needed by those who make investment, credit, and similar resource allocation decisions. Users also need to consider pertinent information from other sources, and be aware of the characteristics and limitations of the information in them” (Financial Accounting Standards Board, 2006). With this in mind, it is still particularly difficult to determine whom the financials should be catered towards and what level of prudence is necessary for quality judgment.
The aim of this paper is to provide the framework of the current professional accounting code of ethics. What are the ethics and how we define them? In this report we try to determine the main ethical principles that will establish the right and
The globalization of business has resulted in the need for compatible accounting standards that can be used internationally for financial reporting. As a result, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) to unify the various financial reporting methods and create a single accounting standard which can be applied to any financial statement worldwide (Byatt). The global standardization of financial reporting will increase the readability and enhance comparability of globally traded companies’ financial statements, without the need of conversion or translation. There are a few main differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (U.S GAAP). The increasing recognition and acceptance of the International Financial Reporting Standards by accounting professionals in the United States, will affect the way in which the U.S will record financial statements in the future.
The International Accounting Standards Board, (IASB), began life as the International Accounting Standards Committee (IASC) in the 1973. The IASC was created in June 1973 as a result of an agreement by the accountancy bodies of Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland and the United States. These countries constituted the Board of IASC at that time.
I have applied the IFRS to audit half-year income statement and statement of finical position from domestic sub-company or oversea branches. This allows me to understand the difficultly of dealing with accounting report form different nations. For example, we have to negotiate each report from the U.S. with their reporter by phone. It would take incredibly long time to explain the difference in order to adjust the figures in the reports. During the stuff training, we have been taught that to be professional at everywhere and anytime. Moreover, I realise that the most important feature to be a professional accountancy is responsibility. This is because that a unit of misallocation will cost other team number a huge amount of work to correct it. The experience of taking notes of weekly conferences between senior managers and PWC partner has indicates that how does change in financial policy influence the accounting treatment. For instant, since vice-perminster Mr Le Ke Qiang who visited China Construction Bank at earlier May. He point out that the Rate of Non-Performing Loans could not exceed 7% in the “BIG Four” Chinese bank. This has led Chinese bank to relax its accounting standard of credit rating. It allows me to understand the relationship between government and financial
Judgement is a notion of relevance and reliability in developing and applying accounting policies. It is a requirement of management that they exercise a high degree of professional judgement when selecting appropriate accounting policies in the preparation of financial statements that is relevant to decision-making and assessment needs of users. Management should also consider the applicability of IFRS and AASB in dealing with similar and related issues and then the definitions, recognition criteria in the Conceptual Framework when there is no IFRS standard or interpretation in certain circumstances that are specifically applicable. Management may also consider the most current pronouncements of other standard-setting bodies to the extent that do not conflict with IFRS and AASB in developing accounting standards and accepted industry practices by using a similar conceptual framework.
Initially, it appears that physical capital maintenance provides information that is more complete with better predictive and confirmatory value by its use of fair value. In actuality, it provides management with a greater ability to manipulate financial information and the wherewithal to do so resulting in decreased decision usefulness, as described by SFAC No. 8, compared to financial capital maintenance. Therefore, financial capital maintenance is the better choice for standards setters.
The success of a company is very dependent upon its financial accounting. In accounting there are numerous Regulatory bodies that govern the accounting world. These companies are extremely important to a company because they set the standards when it comes to the language and decision making of a company. These regulatory bodies can be structured as agencies, associations, commissions, and boards. Without companies like the Security and Exchange Commission (SEC), The Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), Internal Accounting Standards Board (IASB), Internal Revenue Service (IRS), and other regulatory bodies a company could not make well informed decisions. In this paper the author will look at only four of them.