Course Name : INTERNATIONAL FINANCIAL REPORTING

STANDARDS (IFRS)
Course Code : ACC470
Week : 01
Topic : Introduction to IFRS/ IASB Framework/IFRS
Name : Dr. Atul Bansal
E.Mail : [email protected]
Learning Objectives
 Discuss the nature and scope of international
accounting
 Describe accounting issues confronted by companies
involved in international trade (import and export
transactions)
 Explain the reasons for, and the accounting issues
associated with foreign direct investment
 Describe the practice of cross-listing on foreign stock
exchanges
 Explain the notion of global accounting standards
 Examine the importance of international trade,
foreign direct investment, and multinational
corporations in the global economy
 The concept of international accounting:
Introduction to IFRS/ IASB Framework

Achieving consistency in financial reporting worldwide is

the need of the hour, especially if meaningful comparisons
are to be made of financial information emanating from
different countries using accounting standards that, until
recently, were vastly different from each other.

in other words, global convergence into a common

language of accounting for the financial world.
International Financial Reporting Standards (IFRS), the standards
circulated by the International Accounting Standards Board
(IASB), previously known as International Accounting Standards
(IAS) that were issued by the International Accounting Standard
Committee (IASC), the IASB’s predecessor body, appear to be
emerging as the global accounting standards.
Whether, an accountant, auditor, investor, banker, regulator, or
financial analyst, understanding and appreciating the
fundamental principles and requirements of IFRS has become
more important than ever before.
In this new financial world, knowledge of the fundamental
principles of IFRS is essential to meet the growing demands of a
changing regulatory and market environment.
 INTRODUCTION TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS

International Accounting Standards (IAS), now renamed

International Financial Reporting Standards (IFRS), are gaining
acceptance worldwide.
The legislation came into effect in 2005 and applies to more than
7,000 companies in 28 countries, including countries such as France,
Germany, Italy, Spain, and the United Kingdom.
Outside Europe, many other countries are also moving to IFRS. In
2005, IFRS had become mandatory in many countries in Southeast
Asia, Central Asia, Latin America, Southern Africa, the Middle East,
and the Caribbean. In addition, countries such as Australia, Hong
Kong, New Zealand, Philippines, and Singapore had adopted national
accounting standards that mirror IFRS.
THE INTERNATIONAL ACCOUNTING STANDARDS COMMITTEE

From 1973 until 2001, the body in charge of setting the international
standards was the International Accounting Standards Committee
(IASC). The principal significance of IASC was to encourage
national accounting standard setters around the world to improve
and harmonize national accounting standards. Its objectives, as
stated in its Constitution, were to
• Formulate and publish in the public interest accounting standards to be
observed in the presentation of financial statements and to promote
their worldwide acceptance and observance
• Work generally for the improvement and harmonization of
regulations, accounting standards, and procedures relating to the
presentation of financial statements
IASC and the Accounting Profession
IASC always had a special relationship with the international
accounting profession. IASC was created in 1973 by agreement between
the professional accountancy bodies in nine countries, and, from 1982, its
membership consisted of all those professional accountancy bodies that
were members of the International Federation of Accountants (IFAC),
that is, professional accountancy bodies in more than 100 countries.
International Accounting Standards and SIC Interpretations
During its existence, IASC issued 41 numbered Standards, known as
International Accounting Standards (IAS), as well as a Framework for
the Preparation and Presentation of Financial Statements. While some of
the Standards issued by the IASC have been withdrawn, many are still in
force. In addition, some of the Interpretations issued by the IASC’s
interpretive body, the so-called Standing Interpretations Committee (SIC),
are still in force.
CURRENT INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IAS/IFRS) AND INTERPRETATIONS (SIC/IFRIC)
 IFRS 1 First-Time Adoption of IFRS
 IFRS 2 Share-Based Payment
 IFRS 3 Business Combinations
 IFRS 4 Insurance Contracts
 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
 IFRS 6 Exploration for and Evaluation of Mineral Resources
 IFRS 7 Financial Instruments: Disclosures
 IFRS 8 Operating Segments
 IFRS 9 Financial Instruments (effective for accounting periods commencing
on or after 1 January 2018 and will supersede IAS 39) Chapter 1 /
Introduction to International Financial Reporting Standards 15
CURRENT INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IAS/IFRS) AND INTERPRETATIONS (SIC/IFRIC)
 IFRS 10 Consolidated Financial Statements
 IFRS 11 Joint Arrangements IFRS
 IFRS 12 Disclosure of Interest in Other Entities IFRS
 IFRS 13 Fair Value Measurement IFRS
 IFRS 14 Regulatory Deferral Accounts
 IFRS 15 Revenue from Contracts with Customers (effective for accounting
periods commencing on or after 1 January 2018 and will supersede IAS 11,
IAS 18, IFRIC 13, IFRIC 15, IFRIC 18 and SIC 31)
 IFRS 16 Leases (effective for accounting periods commencing on or after 1
January 2019 and will supersede IAS 17, IFRIC 4, SIC 15 and SIC 27)
 IFRS 17 Insurance Contracts (effective for accounting periods commencing
on or after 1 January 2021 and will supersede IFRS 4, IFRIC 4 and SIC 15)
List of CURRENT INTERNATIONAL FINANCIAL REPORTING STANDARDS (IAS/IFRS) AND INTERPRETATIONS(28)
1) IAS 1 Presentation of Financial Statements
2) IAS 2 Inventories
3) IAS 7 Statement of Cash Flows
4) IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
5) IAS 10 Events after the Reporting Period
6) IAS 11 Construction Contracts
7) IAS 12 Income Taxes
8) IAS 16 Property, Plant and Equipment
9) IAS 17 Leases
10) IAS 18 Revenue
11) IAS 19 Employee Benefits
12) IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
13) IAS 21 The Effects of Changes in Foreign Exchange Rates
14) IAS 23 Borrowing Costs
15) IAS 24 Related Party Disclosures
16) IAS 26 Accounting and Reporting by Retirement Benefit Plans
17) IAS 27 Separate Financial Statements
18) IAS 28 Investments in Associates and Joint Ventures
19) IAS 29 Financial Reporting in Hyperinflationary Economies
20) IAS 32 Financial Instruments: Presentation
21) IAS 33 Earnings per Share
22) IAS 34 Interim Financial Reporting
23) IAS 36 Impairment of Assets
24) IAS 37 Provisions, Contingent Liabilities and Contingent Assets
25) IAS 38 Intangible Assets
26) IAS 39 Financial Instruments: Recognition and Measurement
27) IAS 40 Investment Property
28) IAS 41 Agriculture
CURRENT INTERNATIONAL FINANCIAL REPORTING STANDARDS (IAS/IFRS/IFRIC/SIC) AND INTERPRETATIONS(15)

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities IFRIC 2 Members’ Shares in Co-operative
Entities and Similar Instruments
IFRIC 4 Determining Whether an Arrangement Contains a Lease Chapter 1 / Introduction To International Financial
Reporting Standards 7
IFRIC 5 Rights to Interests Arising from Decommissioning, Restoration and Environtmental Rehabilitation Funds
IFRIC 6 Liabilities Arising from Participating in a Specific Market—Waste Electrical and Electronic Equipment
IFRIC 7 Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies
IFRIC 9 Reassessment of Embedded Derivatives (replaced by IFRS 9) IFRIC 10 Interim Financial Reporting and Impairment
IFRIC 12 Service Concession Arrangements IFRIC 13 Customer Loyalty Programmes (replaced by IFRS 15)
IFRIC 14 IAS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
IFRIC 15 Agreements for the Construction of Real Estate (replaced by IFRS 15)
IFRIC 16 Hedges of a Net Investment in a Foreign Operation IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 18 Transfer of Assets from Customers (replaced by IFRS 15)
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
IFRIC 21 Levies
IFRIC 22 Foreign Currency Transactions and Advance Consideration IFRIC 23 Uncertainty over Income Tax Treatment
CURRENT INTERNATIONAL FINANCIAL REPORTING STANDARDS (IAS/IFRS) AND INTERPRETATIONS(08)

SIC 7, Introduction of the Euro

SIC 10, Government Assistance—No Specific Relation to Operating
Activities
SIC 15, Operating Leases—Incentives
SIC 25, Income Taxes—Changes in the Tax Status of an Entity or its
Shareholders
SIC 27, Evaluating the Substance of Transactions Involving the Legal
Form of a Lease
SIC 29, Disclosure—Service Concession Arrangements
SIC 31, Revenue—Barter Transactions Involving Advertising Services
SIC 32, Intangible Assets—Web Site Costs
IASB FRAMEWORK

INTRODUCTION
The Framework for the Preparation and Presentation of Financial Statements (the
“Framework”) sets out the concepts that underlie the preparation and presentation
of financial statements. The Framework is often referred to as the “conceptual
framework.” The Framework deals with
(a) The objective of financial statements
(b) Underlying assumptions
(c) The qualitative characteristics that determine the usefulness of
information in financial statements
(d) The definition, recognition, and measurement of the elements from which
financial statements are constructed
(e) Concepts of capital and capital maintenance
OBJECTIVE OF FINANCIAL STATEMENTS

The objective of financial statements is to provide information about the financial

position, performance, and changes in financial position of an entity that is useful to a
wide range of users in making economic decisions (e.g., whether to sell or hold an
investment in the entity).

UNDERLYING ASSUMPTIONS
Normally, two assumptions underlying the preparation and presentation of financial
statements are the accrual basis and going concern.
Accrual Basis: When financial statements are prepared on the accrual basis of
accounting, the effects of transactions and other events are recognized when they
occur.
Going Concern: When financial statements are prepared on a going concern basis, it is
assumed that the entity has neither the intention nor the need to liquidate or curtail
materially the scale of its operations, but will continue in operation for the foreseeable
future.
QUALITATIVE CHARACTERISTICS OF FINANCIAL
STATEMENTS
Qualitative characteristics are the attributes that make the
information provided in financial statements useful to users.
According to the Framework, the four principal qualitative
characteristics are
(1) Understandability
(2) Relevance
(3) Reliability
(4) Comparability
ELEMENTS OF FINANCIAL STATEMENTS
The Framework describes the elements of financial statements as broad classes of
financial effects of transactions and other events. The elements of financial statements
are
• Assets. An asset is a resource 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 liability is 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. Equity is the residual interest in the assets of the entity after deducting all its
liabilities.
• Income. Income is increases in economic benefits during the accounting period in the
form of inflows or enhancements of assets or decreases of liabilities that result in
increases in equity, other than those relating to contributions from equity participants.
• Expenses. Expenses are decreases in economic benefits during the accounting period
in the form of outflows or depletions of assets or incurrences of liabilities that result in
decreases in equity, other than those relating to distributions to equity participants.
CONCEPTS OF CAPITAL AND CAPITAL
MAINTENANCE
The Framework distinguishes between a financial concept
of capital and a physical concept of capital.
Most entities use a financial concept of capital, under
which capital is defined in monetary terms as the net
assets or equity of the entity.
Under a physical concept of capital, capital is instead
defined in terms of physical productive capacity of the
entity.