QUESTION 2 (SECTION B)
Rationale having two set of IFRS
IFRS are developed and published to promote the use of those IFRS in universal purpose financial statements and other financial reporting. General purpose financial statements are directed towards the common data needs of wide range of users. As it turns out, have different national accounting system is expensive for companies and investors. Companies need to keep a copy of the accounting system, and investors will be cautious about buying shares in the Corporation accounts they do not understand. This problem arises because accounting guidelines have developed over the centuries in which there are different needs from one another, the economy and the means of regulating.
Apart from that, the rationale about this two set of IFRS is IFRS will make all the countries use the correct accounting, transparent, true and fair and easy to understand the account all the countries because use a same guidelines and rules. Full IFRS is for a big company to monitor their business with the guidelines but for small company needs to use IFRS for SMEs because SMEs easy to understand and the report must submit three year one time. Differences in accounting systems do not efficiently transfer information that will adversely impact on the allocation of resources, the efficiency of capital markets, and tax adjustments. Standards of international financial reporting issued by the International Accounting Standards Board, committed to developing a standard set of high quality, global need transparent and comparable information in general purpose financial statements.
Although the principles of accounting and as an accrual basis and going concern assumption is widely accepted, the use of these princ...
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... to the topic or accounting policy options in full IFRS that were dropped from the IFRS for SMEs, or it relates to the principles of recognition and measurement in full IFRS that have stayed changed by simplifications in the IFRS for SMEs and they are not considered to be suitable based on the needs of consumers or cost-benefit concerns. For example, some disclosure in full IFRS are more relevant to investment decisions in the public capital markets from transactions and other events and conditions faced by the typical SMEs.
Assets are resources controlled by an entity consequence of past events and from which future economic benefits will flow to the entity. Future economic are benefits that can rise from the continued use of the asset. The asset that requirement in IFRS for SMEs are same with full IFRS. The factor is the right of ownership and physical substances.
The changes in IFRS will affect some slight modifications to significant amendments of principles. It can affect different areas of financial statements and information. For example, extensive disclosure requirements, financial statements and how specific elements will be recognize and measured. Those elements are financial instrument and employee benefit (IFRS, 2012).
Conclusion: It is evident that if these financial practices were to be followed, David Johnston, the CRA, the business, and its stakeholders will be satisfied. A business must obey IFRS standards, as it provides a corporation with accurate measures of finance and
We would love for these impacts to always have a positive impact; however the impact can affect a company in a negative manner. “ Researchers Holger Daske, Leuz Hail, Christian Leuz and Rodrigo Verdi examined 3,100 firms in 26 countries mandated to adopt IFRS in “Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences”. The study examines the economic effects of IFRS, both early and mandated adoption” (Bolt-Lee). They were able to conclude that a company’s adoption of IFRS creates strong economic benefits in countries with rigid regulation over financial reporting. The article also explains that these benefits include an increase in the stock’s market value, an increase in market liquidity, and a lower cost of capital. Companies with major differences between GAAP and IFRS standards show the greatest benefit when supported by a strong regulatory
To require the disclosure of meaningful information about a security and its issuer to allow investors to make intelligent investment decisions.
In accounting, private companies are treated differently than governmental and non-profit companies. However governmental and non-profit companies use different reporting requirements from the private sector. The requirements for governmental companies use the Government Accounting Standards Board (GASB), whereas profit and non-profit companies use the Financial Accounting Standards Board. This paper will explain the purpose, discus the similarities, and differences between the GASB and FASB.
The conceptual framework identifies the primary users of accounting information as investors, creditors, and those who advise them. It also assumes a “prudent” investor; that is, an investor who takes the time to become reasonably well informed with respect to accounting theory and practice. Discuss this concept with respect to the current economic environment. Are different groups of investors “prudent”? According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006).
In the world of international finance there are two major accounting systems; GAAP, which stands for Generally Accepted Accounting Principles, and IFRS, which stands for International Financial Reporting Standards. The United States prefers GAAP while the European market, as well as many other countries, prefers IFRS. By 2015 the Securities Exchange Commission is anticipating a total transfer to IFRS in the United States. Though the differences between GAAP and IFRS are few, they could affect accuracy of financial reporting throughout the world. It is important to understand the differences and similarities between both GAAP and IFRS if one is to globalize ones market (Logue).
... standard and help to reduce the preparer cost. And it has also enhanced the financial statements decision usefulness and make the organization prepare for expanded disclosure requirements.
It outlines the interconnection of a company’s financial and non-financial elements and aims to combine them and show value creation and maintenance. It identifies resources and their effective and responsible usage. It intends to create a dialogue between the shareholders and other stakeholders and provides them with detailed information.
The New Zealand (NZ) Framework for Financial Reporting is in the process of changing since 2009, as a result of the review of the statutory reporting requirements in New Zealand by Ministry of Economic Development (MED) and the Accounting Standard Review Board (ASRB). The mainly recommendation was to remove small and medium sized companies from the statutory reporting framework (Ernst & Young, 2013, p.11). This New Zealand Framework for Financial Reporting 2010 (NZ Framework) was issued by the New Zealand Accounting Standards Board of the External Reporting Board (XRB) in 2011. The changes of framework pull open the NZ financial reporting standards that comprise NZ Generally Accepted Accounting Practice (GAAP) setting movement from ‘rule-based’ approach to ‘principle-based’ approach. Then comes to the question: Whether the application of NZ GAAP is supported positively by the NZ Framework with the appropriate underlying principles, or it preserved a largely ‘rule-driven’ approach? From my perspective, NZ Framework provides parts of applicable underlying principles in guidance of NZ GAAP but there are rooms for improvement.
(i) Judgement and materiality play a significant role in helping to ensure that the selection of accounting policies in presenting the financial statements for a true and fair picture of the company’s financials. This means that entities should provide the financial statements with comparability, consistency and clarity to users of these statements. Entities must follow accounting policies required by IFRS and AASB should be relevant to particular circumstance.
Lange, Fornaro, and Buttermilch (2015) focused their research on the FASB Accounting Standards Update (ASU) 2011-08, in regards to Intangibles – Goodwill and Other: Testing Goodwill for Impairment. The authors elaborated on how reporting has been done in the past and how the changes made for private companies has helped ease the financial reporting of goodwill. In addition, the authors discussed the definition of a public business entity. This helps to allow private companies to determine the proper way to report their financial
Asset are the resources for running the business work. As a business, if get more assets it means that the business is powerful. Asset also be divided into two categories which is non-current assets and current assets. Non-current assets are long-term use for
IFRS for SMEs was created for any company that does not have public accountability. IFRS for SMEs avoids a quantified size test but assumes a public accountability principle, so no dispute ab...
The globalization of business has resulted in the need for compatible accounting standards that can be used internationally for financial reporting. As a result, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) to unify the various financial reporting methods and create a single accounting standard which can be applied to any financial statement worldwide (Byatt). The global standardization of financial reporting will increase the readability and enhance comparability of globally traded companies’ financial statements, without the need of conversion or translation. There are a few main differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (U.S GAAP). The increasing recognition and acceptance of the International Financial Reporting Standards by accounting professionals in the United States, will affect the way in which the U.S will record financial statements in the future.