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Ifrs Project

The document discusses International Financial Reporting Standards (IFRS), including what IFRS are, their structure, objectives and underlying assumptions. It describes the framework, qualitative characteristics and elements of financial statements according to IFRS. It also discusses the content of IFRS financial statements and the necessity and widespread adoption of IFRS globally.

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Alexandra Cavca
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111 views5 pages

Ifrs Project

The document discusses International Financial Reporting Standards (IFRS), including what IFRS are, their structure, objectives and underlying assumptions. It describes the framework, qualitative characteristics and elements of financial statements according to IFRS. It also discusses the content of IFRS financial statements and the necessity and widespread adoption of IFRS globally.

Uploaded by

Alexandra Cavca
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Personal Details

Name: Purvesh Jobanputra


MFM : Sem 5, Div: B
Roll No : 220
Project :On IFRS
Submitted to : Professor Hemant Junarkar
WHAT IS IFRS?

International Financial Reporting Standards (IFRS), together with International


Accounting Standards (IAS), are a "principles-based" set of standards that establish
broad rules rather than dictating specific accounting treatments. From 1973 to 2001,
IAS were issued by the International Accounting Standards Committee (IASC). In
April 2001 the International Accounting Standards Board (IASB) adopted all IAS and
began developing new standards called IFRS.

Structure of IFRS
IFRS are considered a "principles based" set of standards in that they establish broad
rules as well as dictating specific treatments.

International Financial Reporting Standards comprise:

 International Financial Reporting Standards (IFRS) - standards issued after


2001
 International Accounting Standards (IAS) - standards issued before 2001
 Interpretations originated from the International Financial Reporting
Interpretations Committee (IFRIC) - issued after 2001
 Standing Interpretations Committee (SIC) - issued before 2001

There is also a Framework for the Preparation and Presentation of Financial


Statements which describes of the principles underlying IFRS.

Framework
The Framework for the Preparation and Presentation of Financial Statements states
basic principles for IFRS.

Objective of financial statements

The framework states that the objective of financial statements is to provide


information about the financial position, performance and changes in the financial
position of an entity that is useful to a wide range of users in making economic
decisions,and to provide the current financial status of the entity to its shareholders
and public in general.
Underlying assumptions

The underlying assumptions used in IFRS are:

 Accrual basis - the effect of transactions and other events are recognised
when they occur, not as cash is received or paid
 Going concern - the financial statements are prepared on the basis that an
entity will continue in operation for the foreseeable future

Qualitative characteristics of financial statements

The Framework describes the qualitative characteristics of financial statements as


being

 Understandability
 Relevance
 Reliability and
 Comparability.

Elements of Financial Statements

The Framework sets out the statement of financial position (balance sheet) as
comprising:-

 Assets - resources controlled by the entity as a result of past events and


from which future economic benefits are expected to flow to the entity
 Liabilities - a present obligation of the entity arising from past events, the
settlement of which is expected to result in an outflow from the entity of
resources embodying economic benefits
 Equity - the residual interest in the assets of the entity after deducting all its
liabilities

and the statement of comprehensive income (income statement) as comprising:

 Income is increases in economic benefits during the accounting period in the


form of inflows or enhancements of assets or reductions in liabilities.
 Expenses are decreases in such economic benefits.

Content of financial statements:-

IFRS financial statements consist of (IAS1.8)

 a balance sheet
 income statement
 either a statement of changes in equity(SOCE) or a statement of recognised
income or expense ("SORIE")
 a cash flow statement
 notes, including a summary of the significant accounting policies

Comparative information is provided for the previous reporting period (IAS 1.36). An
entity preparing IFRS accounts for the first time must apply IFRS in full for the
current and comparative period although there are transitional exemptions
(IFRS1.7).

On 6 September 2007, the IASB issued a revised IAS 1 Presentation of Financial


Statements. The main changes from the previous version are to require that an
entity must:

 present all non-owner changes in equity (that is, 'comprehensive income' )


either in one statement of comprehensive income or in two statements (a
separate income statement and a statement of comprehensive income).
Components of comprehensive income may not be presented in the
statement of changes in equity.
 present a statement of financial position (balance sheet) as at the beginning
of the earliest comparative period in a complete set of financial statements
when the entity applies an accounting policy retrospectively or makes a
retrospective restatement.
 disclose income tax relating to each component of other comprehensive
income.
 disclose reclassification adjustments relating to components of other
comprehensive income.

IAS 1 changes the titles of financial statements as they will be used in IFRSs:

 'balance sheet' will become 'statement of financial position'


 'income statement' will become 'statement of comprehensive income'
 'cash flow statement' will become 'statement of cash flows'.

The revised IAS 1 is effective for annual periods beginning on or after 1 January
2009. Early adoption is permitted.

Necessity of IFRS:-
By adopting IFRS, a business can present its financial statements on the same basis
as its foreign competitors,making comparisons easier.Furthermore,companies with
subsidiaries in countries that require or permit IFRS may be able to use one
accounting langauge company – wide.Companies also may need to convert to IFRS if
they are a subsidiary of a foreign company that must use IFRS,or if they have a
foreign investor that must use IFRS.Companies may also benefit by using IFRS if
they wish to raise capital abroad.

How widespread is the adoption of IFRS around the


world?

More than 12000 companies in approximately 113 nations have adopted


IFRS,including listed companies in the European Union. Other countries,
including Canada and India, are expected to transition to IFRS by 2011.
Mexico plans to adopt IFRS for all listed companies starting in 2012. Some
estimate that the number of countries requiring or accepting IFRS could grow
to 150 in the next few years. Japan has introduced a roadmap for adoption
that it will decide on in 2012 (with adoption planned for 2016). Still other
countries have plans to converge (eliminate significant differences) their
national standards with IFRS

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