IAS AND IFRS
International Accounting Standards (IAS) refers to international accounting standards which
were a set of accounting standard issued by the International Accounting Standard Committee
(IASC) before the year 2000.These standards aimed to provide a common framework for
financial reporting to be used by companies globally.
International Financial Reporting Standard (IFRS) refers to a set of global accounting standards
developed by the International Accounting Standard Board (IASB) since 2001.IFRS has replaced
IAS and is designed to provide a consistent and comprehensive framework for financial
reporting by companies and organization worldwide.
The IAS and IFRS include the following:
1. Presentation of financial statement –IAS 1.
Objective
The primary objective is to ensure that financial statements are presented in a way that is easy to
understand for users who have a reasonable knowledge of business and economic activities. This
means financial information should be clear, concise, and not overly complex.
It also enables informed users to rely on a formal definable structure and facilitate financial
analysis.
Scope of the standard
Structure of financial statements-IAS outlines the sequence of the financial statement and
the format of each statement.
General requirements –IAS prescribes the overall requirements for the presentation
financial statement, including guidelines for their structures.
Minimum requirements for the content of financial statements.
The distinction between current and noncurrent elements.
2. Inventories – IAS 2:
Objective
IAS 2’s objective is to prescribe the accounting treatment for inventories, such as the
measurement, recognition, and disclosure.
The standard set out principles for the measurement of inventories and requires the use of cost
formulas such as FIFO (first-in, fist-out), weighted average cost, and specific identification
,methods. It also mandates that inventories should be valued at the lower of cost and net
realizable value to ensure conservatism in financial reporting.
Scope of the standard
This standard deals with all inventories of assets that are:
Held for sale in the ordinary course of the business
In the process of production for sale
In the form of materials or supplies to be consumed in the production process; and
Used in rendering of services.
3. Cash flow statements – IAS 7
Objective
In order to assess the viability of any entity, particularly the solvency and liquidity position, the
users of financial statements require information about the cash resources of an entity, the ability
of the entity to generate cash resources and the use by an entity of its cash resources.
The objective of IAS7 is to ensure that financial statement users have clear understanding of
entity cash flow activities, helping them to assess its liquidity, solvency, and the ability to
generate future cash flows. The statement of cash flows is also relevant for identifying the
following:
Movement in cash balances for the period;
Ability of the entity to generate cash resources
Prediction of future cash flows.
Timing and certainty of cash flows;
, Scope of the standard
All entities are required to present a statement of cash flows that reports cash flows during the
reporting period, classified by;
Operating activities: Cash flows from the core operating activities of the entity.
Investment activities: Cash flows from the acquisition and disposal of long term assets
and other investments
Financing activities: Cash flows from activities that result in changes in the size and
composition of the equity and borrowings of the entity.
4. Accounting policies, accounting estimates and errors – IAS 8
Objective
The objective of IAS 8 is to provide entities with guidance on how to account for and disclose
changes in accounting estimates, and corrections of errors. Its main purpose is to enhance the
relevance and reliability of financial information by ensuring that changes in accounting methods
and the correction of errors and appropriately and transparently reflected in financial reporting.
Scope of the standard
IAS 8 scope primarily covers:
Selection and applying accounting policies
Changes in accounting policies
Changes in accounting estimates
Correction for prior-period error in financial statements.
Disclosures-IAS 8 also set out disclosure requirements.
International Accounting Standards (IAS) refers to international accounting standards which
were a set of accounting standard issued by the International Accounting Standard Committee
(IASC) before the year 2000.These standards aimed to provide a common framework for
financial reporting to be used by companies globally.
International Financial Reporting Standard (IFRS) refers to a set of global accounting standards
developed by the International Accounting Standard Board (IASB) since 2001.IFRS has replaced
IAS and is designed to provide a consistent and comprehensive framework for financial
reporting by companies and organization worldwide.
The IAS and IFRS include the following:
1. Presentation of financial statement –IAS 1.
Objective
The primary objective is to ensure that financial statements are presented in a way that is easy to
understand for users who have a reasonable knowledge of business and economic activities. This
means financial information should be clear, concise, and not overly complex.
It also enables informed users to rely on a formal definable structure and facilitate financial
analysis.
Scope of the standard
Structure of financial statements-IAS outlines the sequence of the financial statement and
the format of each statement.
General requirements –IAS prescribes the overall requirements for the presentation
financial statement, including guidelines for their structures.
Minimum requirements for the content of financial statements.
The distinction between current and noncurrent elements.
2. Inventories – IAS 2:
Objective
IAS 2’s objective is to prescribe the accounting treatment for inventories, such as the
measurement, recognition, and disclosure.
The standard set out principles for the measurement of inventories and requires the use of cost
formulas such as FIFO (first-in, fist-out), weighted average cost, and specific identification
,methods. It also mandates that inventories should be valued at the lower of cost and net
realizable value to ensure conservatism in financial reporting.
Scope of the standard
This standard deals with all inventories of assets that are:
Held for sale in the ordinary course of the business
In the process of production for sale
In the form of materials or supplies to be consumed in the production process; and
Used in rendering of services.
3. Cash flow statements – IAS 7
Objective
In order to assess the viability of any entity, particularly the solvency and liquidity position, the
users of financial statements require information about the cash resources of an entity, the ability
of the entity to generate cash resources and the use by an entity of its cash resources.
The objective of IAS7 is to ensure that financial statement users have clear understanding of
entity cash flow activities, helping them to assess its liquidity, solvency, and the ability to
generate future cash flows. The statement of cash flows is also relevant for identifying the
following:
Movement in cash balances for the period;
Ability of the entity to generate cash resources
Prediction of future cash flows.
Timing and certainty of cash flows;
, Scope of the standard
All entities are required to present a statement of cash flows that reports cash flows during the
reporting period, classified by;
Operating activities: Cash flows from the core operating activities of the entity.
Investment activities: Cash flows from the acquisition and disposal of long term assets
and other investments
Financing activities: Cash flows from activities that result in changes in the size and
composition of the equity and borrowings of the entity.
4. Accounting policies, accounting estimates and errors – IAS 8
Objective
The objective of IAS 8 is to provide entities with guidance on how to account for and disclose
changes in accounting estimates, and corrections of errors. Its main purpose is to enhance the
relevance and reliability of financial information by ensuring that changes in accounting methods
and the correction of errors and appropriately and transparently reflected in financial reporting.
Scope of the standard
IAS 8 scope primarily covers:
Selection and applying accounting policies
Changes in accounting policies
Changes in accounting estimates
Correction for prior-period error in financial statements.
Disclosures-IAS 8 also set out disclosure requirements.
