Week 1 IP1 Internat
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IFRS & IASB ACCT430 Week 1 IP 1
Tina Elder
February 11, 2024
The International convergence came about in the late fifties. In late 1950 during World War II, integration was concerning increases in cross-border capital flows. IFRS originated in the European Union. The intention of doing business affairs and accounts was to cross the continent. IFRS is used by public companies in 167 districts. The United States and China are not
involved in these districts. All the nations of Europe, India South Korea, Russia, South Africa, Chile, and I am sure Canada use IFRS. The International Accounting Standards Board (IASB) issues and develops the IFRS. The purpose of IFRS is that entities have common accounting rules that allow financial statements to be consistent, dependable, and comparable for every business in any country.
As you learn about IFRS and living in the United States, I wanted to know what the difference between IFRS and what the United States uses which is GAAP. The two accounting systems have so much in common, and two things that stood out to me are Clarity and Honesty when it comes to financial reporting. As I was researching, I came across methodological differences such as GAAP will allow its company to use either FIFO or LIFO. Now LIFO is banned under IFRS. This is due to potential distortions it would put on profitability and the financial statements. China companies do not use IFRS either. China uses accounting standards for business enterprises also known as ASBEs.
Standard IFRS Requirements cover a broad range of activities. It has its set of mandatory rules. This requires a statement of comprehensive income which includes a profit and loss statement and another statement of other income like their property and equipment. They need a statement of financial position, such as the balance sheet. They need a statement of Changes in their Equity (we say kept earnings). This shows the change in their earnings and profit for the financial period. Then of course we will need the statement of cash flow. These are what they considered basic reports. With these reports along with a summary of the accounting policies. They normally will show their earlier report next to the new report so they can see the changes in their profits and losses. If these standards did not exist, then the investors would be more reluctant to think about the financial statements and all the other information given. This helps investors to be able to analyze more easily and be able to compare their company and the rest of the companies. The bottom line is that IFRS has set rules for other companies with the setting of making a goal of making the company's financial statements more transparent, consistent, and easier to have comparable statements. That helps with tax purposes, investing, and auditing.
The process is based on the three principles, which are found in the
“Due Process Handbook.” It outlines all the requirements that the Board and the Interpretations Committee must undertake these principles.
Transparency
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