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IFRS Reflection in the financial statements of changes in accounting

IFRS Reflection in the financial statements of changes in accounting

IFRS Reflection in the financial statements of changes in accounting: 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 Reflection in the financial statements of changes in accounting

IFRS Reflection in the financial statements of changes in accounting

IFRS Reflection in the financial statements of changes in accounting: IAS 1 “Presentation of Financial Statements”

  1. -Purpose and application of the standard.
  2. Components of financial statements, including Report on Equity.
  3. Confidence in reporting and compliance with IFRS.
  4. Presentation of Financial Statements.

IFRS Reflection in the financial statements of changes in accounting: IAS 1 also elaborates on the following features of the financial statements:

  • fairly presented and compliant with IFRS.
  • prepared on a going concern basis.
  • prepared using the accrual basis of accounting.
  • has material classes presented separately.
  • does not offset assets and liabilities.
  • prepared at least annually.
  • includes comparison with previous periods.
  • presented consistently across periods.

IFRS Reflection in the financial statements of changes in accounting

This Standard prescribes the basis for presentation of general purpose financial statements to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities. It sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. A complete set of financial statements comprises:

(a) a statement of financial position as at the end of the period.

(b) a statement of profit and loss and other comprehensive income for the period.

(c) a statement of changes in equity for the period.

(d) a statement of cash flows for the period.

(e) notes, comprising a summary of significant accounting policies and other explanatory information.

(f) a statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements.

IFRS Reflection in the financial statements of changes in accounting: An entity whose financial statements comply with IFRSs shall make an explicit and unreserved statement of such compliance in the notes. An entity shall not describe financial statements as complying with IFRSs unless they comply with all the requirements of IFRSs. The application of IFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern.

IFRS Reflection in the financial statements of changes in accounting:An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern, the entity shall disclose those uncertainties. An entity shall present separately each material class of similar items.

IFRS Reflection in the financial statements of changes in accounting: Method for reflecting changing prices

The enterprise must select one of two broad accounting methods for reflecting the effects of changing prices:

  • General purchasing power approach. Restate financial statements for changes in the general price level.
  • Current cost approach. Measure balance sheet items at replacement cost. IAS 15 allows a variety of methods of adjusting income under the current cost approach.

Some other details to understand the concept better.

IFRS Reflection in the financial statements of changes in accounting : IFRS Components Of Financial Statements  are Assets, Liabilities, Owner’s Equity, Revenues, Expenses, Gains, Losses

Assets are :

  1. probable future economic benefits
    –> obtained or controlled by an entity
    –> as a result of past transactions or events.
  2.   Essential characteristics of assets
    Probable future economics benefits
    Obtained or controlled by an entity
    Result of past transactions or events.Common characteristic of all assets
    –> is service potential or future economic benefits

Liabilities are 
–> probable future sacrifices of economic benefits
–> arising from present obligations of an entity
–> to transfer assets or provide services to other entities in the future
–> as a result of past transactions or events.

Essential characteristics of liabilities
Probable future sacrifices of economic benefits
Present obligations to transfer assets or provide services in the future
Result of past transactions or events.

Equity (or net assets) is 
–> residual interests in the assets of an entity
–> that remains after deducting its liabilities.

Essential characteristics of equity
Equity is residual interests in the assets after deducting liabilities
Equity = Assets – Liabilities

Revenues are 
–> inflows of assets of an entity or
–> settlements of its liabilities (or a combination of both)
–> from delivering or producing goods, rendering services.

Essential characteristics of revenues
Inflows of assets or settlements of liabilities
From delivering goods or rendering services

 Expenses are 
–> outflows or other using up of assets or
–> incurrences of liabilities (or a combination of both) |
–> from delivering or producing goods, rendering services.

Essential characteristics of expenses
Outflows of assets or incurrences of liabilities
from delivering goods or rendering services

Gains are 
–> increases in equity (net assets)
–> except those from revenues or investments by owners.

Essential characteristics of gains
Increases in equity from transactions or events
Except those that result from revenues or investments by owners.

Losses are 
–> decreases in equity (net assets)
–> except those from expenses or distributions to owners.
Essential characteristics of losses
Decreases in equity from transactions or events
Except those that result from expenses or distributions to owners.

IFRS Reflection in the financial statements of changes in accounting

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IFRS Reflection in the financial statements of changes in accounting

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