International Financial Reporting Standards

The interpretations, principles-based standards and the framework which is adopt by the international accounting standards board (IASB). International Accounting Standards is the older name given to the standard forming part of IFRS. The International Accounting Standards was issued from 1973 to 2001. It was mainly issued by the board IASC which is the International Accounting Standards Committee.

IFRS is mainly referred to be principles based standards which have established a broad set of rules while giving specific treatments.

The components of IFRS:

IFRS “International Financial Reporting Standards” mainly consists of the

• International Accounting Standards (IAS)—standards issued before 2001
• International Financial Reporting Standards (IFRS)—standards issued after 2001
• Standing Interpretations Committee (SIC)—issued before 2001
• Framework for the Preparation and Presentation of Financial Statements (1989)
• Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC)—issued after 2001

The structure of IFRS:

"In making the judgement described in paragraph 10, management shall refer to, and consider the applicability of, the following sources in descending order:

• The requirements and guidance in Standards and Interpretations dealing with similar and related issues; and
• The definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework."

The FASB and the IASB frameworks are being converged and being updated. The existing concepts and in the frameworks are being refined and updated by The Joint Conceptual Framework project in order to reflect the changes that takes place in the economic environment and the business practices that occurs in more than a decade from the concepts was first developed. The overall objective of the IFRS is to generate a proper base for the accounting standards of the future time which will definitely be principle based with internationally converged and internally consistent.

According to Deloitte

“In the absence of a Standard or an Interpretation that specifically applies to a transaction, management must use its judgment in developing and applying an accounting policy that results in information that is relevant and reliable. In making that judgment, IAS 8.11 requires management to consider the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework.”

The financial statement should necessarily expose the fair and the true view of the business affairs that the organizations has. This statement should give a true view of the financial position of the organization since it is viewed by the various constituents of the entire society.

Questions:

• What is IFRS?
• What is the nature of financial statement?