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IFRS Purpose And Application Of The Standard

IFRS Purpose And Application Of The Standard

IFRS Purpose And Application Of The Standard :  International Financial Reporting Standards (IFRS) is a set of accounting standards developed by an independent, not-for-profit organisation called the International Accounting Standards Board (IASB).

IFSR Provides global framework for should companies prepare and disclose their financial statements. All the general guidelines for preparation of financial statements are provided in IFRS.

IFRS provides international standards, having an international standard is very much important for the company. A single set of world wide standard will simply accounting procedure for a company to use one reporting language. Investors and auditors will also be provided with cohesive view of finance.

IFRS Purpose And Application Of The Standard:

The Conceptual Framework describes the objective of, and the concepts for, general purpose financial reporting. It is a practical tool that:

  1. assists the Board to develop IFRS Standards that are based on consistent concepts;
  2. assists preparers to develop consistent accounting policies when no IFRS Standard applies to a particular transaction or event, or when a Standard allows a choice of accounting policy; and
  3. assists others to understand and interpret the Standards.

The objective of the Conceptual Framework project is to improve financial reporting by providing a more complete, clear and updated set of concepts. To achieve this, the Board is building on the existing Conceptual Framework—updating it, improving it and filling in the gaps instead of fundamentally reconsidering all aspects of the Conceptual Framework.

The IASB’s existing Conceptual Framework was developed by its predecessor body, the International Accounting Standards Committee, in 1989. The material on the objective of financial reporting and on the qualitative characteristics of financial information was revised by the Board in 2010 as the result of a joint project with the US national standard-setter, the Financial Accounting Standards Board (FASB).

IFRS Purpose and application of the standard.Concepts: Although the existing Conceptual Framework has helped the IASB when developing and revising International Financial Reporting Standards:

  1. some important areas are not covered;
  2. the guidance in some areas is unclear; and
  3. some aspects of the existing Conceptual Framework are out of date.

In 2011 the IASB carried out a public consultation on its agenda. Most respondents to that consultation identified the Conceptual Framework as a priority project for the IASB. Consequently, the IASB restarted its Conceptual Framework project in 2012.

IFRS Purpose And Application Of The Standard :

On 28 May 2015 the IASB published an Exposure Draft that sets out the proposals for a revised Conceptual Framework. The deadline for comments on this Exposure Draft ended on 25 November 2015.

The Exposure Draft has been developed in the light of the responses received on the Discussion Paper A Review of the Conceptual Framework for Financial Reporting, which was published in July 2013.

The reasons for the proposals in the Exposure Draft are summarised in the Basis for Conclusions that accompanies the Exposure Draft.

Exposure Draft

The Conceptual Framework for Financial Reporting (the ‘Conceptual Framework’) describes the objective of, and the concepts for, general purpose financial reporting. It is a practical tool that:

(a) assists the International Accounting Standards Board (IASB) to develop Standards that are based on consistent concepts;

(b) assists preparers to develop consistent accounting policies when no Standard applies to a particular transaction or event, or when a Standard allows a choice of accounting policy; and

(c) assists others to understand and interpret the Standards. The IASB’s existing Conceptual Framework was developed by its predecessor body, the International Accounting Standards Committee, in 1989. The material on the objective of financial reporting and on the qualitative characteristics of financial information was revised by the IASB in 2010 as the result of a joint project with the US national standard-setter, the Financial Accounting Standards Board (FASB).

This Exposure Draft sets out the proposals for a revised Conceptual Framework. It has been developed in the light of responses received on the Discussion Paper A Review of the Conceptual Framework for Financial Reporting (the ‘Discussion Paper’), which was published in July 2013. The reasons for the proposals in this Exposure Draft are summarised in the Basis for Conclusions that accompanies this Exposure Draft. Why is the IASB revising the Conceptual.

Discussion Paper

Discussion Paper? The Conceptual Framework for Financial Reporting (the ‘Conceptual Framework’) sets out the concepts that underlie the preparation and presentation of financial statements. The IASB’s preliminary view is that the primary purpose of the Conceptual Framework is to assist the IASB by identifying concepts that it will use consistently when developing and revising IFRSs. Although the existing Conceptual Framework has helped the IASB when developing and revising IFRSs, the IASB has identified a number of problems with the existing Conceptual Framework:

(a) important areas are not covered. For example, the existing Conceptual Framework provides very little guidance on measurement, presentation, disclosure or how to identify a reporting entity.

(b) the guidance in some areas is unclear. For example, the existing definitions of assets and liabilities could be improved.

(c) some aspects of the existing Conceptual Framework are out of date and fail to reflect the current thinking of the IASB. For example, the existing Conceptual Framework states that an asset or a liability should be recognised only if it is probable that there will be a flow of economic resources. However, the IASB has concluded in some situations that recognising an asset or a liability would provide useful information even when a flow of economic resources is not probable.

In 2011, the IASB carried out a public consultation on its agenda. Most respondents to that consultation identified the Conceptual Framework as a priority project for the IASB. Consequently, the IASB decided to restart its Conceptual Framework project, which had been suspended in 2010. This Discussion Paper is the first step towards issuing a revised Conceptual Framework.

It is designed to obtain initial views and comments on a number of matters, and focuses on areas that have caused the IASB problems in practice. Consequently, this Discussion Paper does not cover all the issues that the IASB would expect to cover in an Exposure Draft of the Conceptual Framework. The Discussion Paper sets out the IASB’s preliminary views on some of the topics discussed. However, the IASB has not reached preliminary views on all of the issues discussed in this Discussion Paper

Basis for Conclusions

This Basis for Conclusions summarises the considerations of the International Accounting Standards Board (IASB) in reaching the conclusions described in the Exposure Draft Conceptual Framework for Financial Reporting (the ‘Exposure Draft’). Individual IASB members gave greater weight to some factors than to others.

IFRS Purpose And Application Of The Standard :

The Conceptual Framework is not a Standard and does not override specific Standards. Hence, the proposed changes to the Conceptual Framework will not have an immediate effect on the financial statements of most reporting entities. However, some entities could be affected by the changes directly if they need to use the Conceptual Framework to develop or select accounting policies when no IFRS Standard specifically applies to a transaction.

In future, the Conceptual Framework will guide the Board when it develops its Standards, so it will affect financial statements indirectly when entities implement new or revised Standards based on the revised Conceptual Framework.

IFRS Purpose And Application Of The Standard

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