ACCT-601 Week 2 Written Assignment: IFRS Updates (Already GRADED A)

Week 2 Written Assignment ACCT-601 Week 2 Written Assignment: IFRS Updates Introduction The International Financial Reporting Standards, or commonly known as IFRS to everyone in the accountin g world, was designed to make things easier for individuals to comprehend accounts while also being able to do an “apples to apples” comparison of companies across all industries. Think of it as an “apples to apples approach dictionary”. This accounting dictionary was developed due to growing trade business between all of the countries in the world. IFRS has been capable of supplanting all of the global accounting standards across the globe, with the exception of US GAAP. IFRS is comparable, understandable, reliable, and relevant as what is required by both external and internal users of a company’s information. IFRS had been improved to harmonize accounting standards across the European Union, but soon this concept will stabilize the accounting standards for the entire globe. It is debatable as to whether harmonization happened. IFRS has been openingly criticized by the United States as they continue to use their own accounting standards, U.S. GAPP. It is believed that the U.S. wouldn’t consider IFRS unless the U.S. helps in the convergence process. Also, countries such as France have opposed and criticized IFRS. Another company in Zimbabwe’s hyperinflationary economy has had little effect when IFRS was implemented there. Features of IFRS Listed below are some of the features that IFRS brings to the table: • Reporting frequency: In terms of the frequency needed by IFRS, these reporting standards require that companies submit their statements annually. Also required by IFRS are that listed companies would also need to issue provisional statements per IAS 34 Interim Financing Reporting. • Compliance and fair representation: According to IFRS, fair presentation means that the financial statement report is done in accordance to the standards and is a fair representation of both transactions and events mentioned in the IFRS framework. • Going concern: Statements are submitted on a going concern manner. The only exception to this is if the company decides to pursue not conducting business in the future, or if the company decides to liquidate the company. • Comparative information: Companies are required to submit current comparative information while providing a narrative to understand the current financial statements. • Presentation consistency: Both the presentation and classification of items are required to be used going forward, unless: (1) Another presentation or classification would be more fitting in accordance to what is stated in IAS 8, or (2) The accounting standard requires companies to change their presentation or classification of items. • Accrual accounting: The Company should distinguish between assets, liabilities, equity, income and expenses in accordance to the Framework of IFRS. • Materiality and aggregation: Every material class should be broken out separately. For example, all current liabilities should be grouped together unless immaterial. • Offsetting: Offsetting shouldn’t be used at all in IFRS, but if certain requirements and conditions are met, then offsetting can be used. IFRS standards are the main component to which public companies derive their own accounting standards from. The standards were developed by Financial Accounting Standards Board, FASB, which resides within the U.S. who is responsible for the setting of accounting principles and rules. The public companies within the U.S. are structured by policies, laws, and rules established by the Securities Exchange Commission, or SEC. The SEC is the ultimate authority when it comes to presentation form and the content associated with public companies’ financial statements. In terms of private companies, the SEC doesn’t have jurisdiction over them but the companies are governed in accordance with U.S. GAAP. The goal in which FASB had was implementing and improving accounting standards for investors. FASB supplanted American Institute of Certified Public Accountants, AICPA, which is currently a national organization geared towards COAs within the U.S. FASB is active in providing suggestions, recommendations, and views on the Standards Advisory Forum of IASB. In today’s economy, which consists of companies performing transactions all over the globe, it makes the implementation of IFRS that much more important. With IFRS helping individuals comprehend accounts to be able to make “like comparisons”, there needs to be an approach, or framework, that defines what accounts are and making the accounts more reliable as companies submit their financial statements. Financial statements provide more than just the performance of a company, it provides investors a larger view, or a bigger picture of the assets at the company’s disposal, the liabilities that the company needs to take care of, and also the amount of cash flow that flows into the business due to its operating, financial, and investing activities. To ensure that all companies are following the same game plan when it comes to financial statements, there are now the reporting standards in IFRS to help companies not only prepare their statements in a like matter, but to also make it easier for investors to compare companies. IFRS helps companies to meet all of the standards and requirements needed when constructing their financial statements while also providing a guideline to all companies across the world. IFRS accounting standards have been adopted by countries in Asia and Europe. In order to include countries like the U.S. and France, IFRS needs to have some tweaks worked out. In 2005, there was an amendment to IFRS, IFRS 6, in which it was aimed towards how to deal with financial statements and reporting of companies in the mineral extraction industry. In this report, we are to be focused on changes that have happened within the past 12 months. There have been numerous updates to IFRS. Included in the changes would be IFRS 10, IFRS 11, and IFRS 12. IFRS 10 provides clarification on investor exposure to variable returns may which may result in new consolidations, assets, or fund managers. IFRS 11 provides information on joint arrangements’ rights and obligations while also stating that proportional consolidation for joint ventures is no longer permitted. IFRS 12 requires companies to provide more disclosure on the financial effects on statements and explaining the risks associated with consolidating companies. There will be other changes to IFRS that are slated to begin later in 2015 and into 2016. For example, IFRS 15 concerns how companies account for revenue from customers in which there is a contract involved. IFRS 15 will need to be implemented for a company’s first annual IFRS statements for period beginning or on after 1 January 2017. As noted in the introduction paragraph, there are some countries that criticized IFRS. These countries are the U.S., France, and Zimbabwe. IFRS currently is not being implemented in the U.S. because U.S. companies are still using GAAP. Until the convergence project has been completed in which the U.S. has their say in adding additional sections, the U.S. will continue to use GAAP. In Zimbabwe, IFRS has failed to help out their standards in which their economy is facing hyperinflation. In France, they have their version of the American GAAP which is why France is opposed to adopting IFRS at the current moment. By adopting IFRS, countries should be seeing a benefit. These benefits include reducing conversion costs while also improving accounting and costing efficiency. Also, some of the qualitative characters that IFRS brings are comparability, verifiability, timeliness, and the ability to better comprehend a company’s financial statements. References IFRS. Retrieved March 6, 2016 from-