Meaning of IFRS
IFRS's are a set of Accounting Standards developed by IASB (International Accounting Standard Board) formerly known as IASC (International Accounting Standard Committee) which provides guidelines to prepare accounting information at the global level.
The aim of IFRS is to enable international business firms to prepare their financial statements in a single set of language to make such financial statements understandable and comparable for the users at the international level.
Aims/Objectives of IASB
The major objectives of IASB are:
(i) To develop and implement a single set of high quality comparable and globally enforceable accounting standards.
(ii) To provide high quality, transparent and understandable information in financial statements.
(iii) To look into the concerns of small and medium enterprises having difficulties in implementation of IFRS.
(iv) To promote the use of these standards.
Benefits of IFRS
The adoption of IFRS is beneficial for those companies which operate at the global level. The benefits from various angles are.
(i) Benefits to investors If the companies adopt IFRS, the investors are in a better position to understand the contents of the financial statements and take wise decisions. If the different companies adopt accounting standards as the standards of a particular country, it would be quite difficult for the investors to take investment decisions.
(ii) Benefits to global enterprises If the companies working at the global level prepare financial statements as per IFRS, they can adopt uniform accounting practices to meet the requirements of various stakeholders at the global level.
(iii) Benefits to industry If the companies working under the same industry prepare financial statements as per IFRS, inter-firm comparison of the financial statements would be possible.
(iv) Benefits to raise loans globally If the financial statements of the companies are IFRS compliant, the companies can raise funds at the global level, easily as it will be convenient for the financial institutions to evaluate the financial position at the global level.
Assumptions in IFRS
The various assumptions in IFRS are:
(i) Accrual assumption The transactions in the system are recorded as they occur and not the basis of their settlement.
(ii) Going concern assumption It is assumed the business entity will last forever and the operations of the business will continue for an indefinite period of time.
(iii) Measuring unit assumption As per this assumption, the value of the assets is to be shown as the current market prices or fair value but not at the historical cost.
(iv) Constant purchasing power assumption As per this assumption, the value of the capital should be adjusted as the inflation in the economy at the end of financial year.
IFRS Based on Financial Statements
(i) Statement of financial position
This statement represents the items of the balance sheet. The components of the statement of financial position consist of:
(a) Assets The resources controlled by the enterprise as a result of past events and operations from the future economic benefits shall flow to the enterprise are assets.
(b) Liability The obligation of the enterprise from the past events and operations, which shall result in the outflow of resources in the form of assets.
(c) Equity It represents the sum of equity share capital, preference share capital and net value of reserves and surplus. It is also the difference between the book value of assets and liabilities.
(ii) Statement of comprehensive income It is simply the statement of profit and loss. This statement includes two statements:
(a) Income statement It shows income or loss for an accounting period.
(b) Statement of comprehensive income It reconciles the income or loss as per income statement with total comprehensive statement.
(iii) Statement of changes in equity This statement shows the change in the value of equity share capital, preference share capital and net of reserves and surplus over two or more years.
(iv) Statement of cash flow It shows the inflow and outflow of cash and cash equivalents of two years at the end of an accounting year.
(v) Notes and significant accounting policies Such notes explain the details and calculation of various items in the financial statements and accounting policies being used as well.
Facts File
The main facts file of IFRS are as follows:
(i) Accounting Standard Board (ASB) prepares accounting standards for India on the behalf of ICAI.
(ii) The Council of Institute of Chartered Accountants of India (ICAI) has so far issued 32 Accounting Standards.
(iii) IASC has issued 41 International Accounting Standards (IAS) so far.
(iv) IASB formerly known as IASC, has issued 13 IFRSs.
(v) International Accounting Standard Committee (IASC) was established in 1973 through an agreement of 10 countries and was assigned to prepare International Accounting Standards (IAS).
(vi) IASC was replaced by International Accounting Standard Board (IASB) in the year
Facts File
The main facts file of IFRS are as follows:
(i) Accounting Standard Board (ASB) prepares accounting standards for India on the behalf of ICAI.
(ii) The Council of Institute of Chartered Accountants of India (ICAI) has so far issued 32 Accounting Standards.
(iii) IASC has issued 41 International Accounting Standards (IAS) so far.
(iv) IASB formerly known as IASC, has issued 13 IFRSs.
(v) International Accounting Standard Committee (IASC) was established in 1973 through an agreement of 10 countries and was assigned to prepare International Accounting Standards (IAS).
(vi) IASC was replaced by International Accounting Standard Board (IASB) in the year 2001.
0 Comments