1.9 International financial reporting standards

Question 1

Who developed the IFRS?

Answer 1

The International Accounting Standards Board

Question 2

What is the goal of the IFRS?

Answer 2

To achieve comparable cross-border accounting.

Question 3

How many countries have adopted IFRS as a framework for accounting statements?

Answer 3

Over 120

Question 4

What matters does the IFRS conceptual framework of reporting cover?

Answer 4

• objectives of financial reporting
• underlying assumptions
• qualitative characteristics
• elements of financial statements
• concepts of capital and capital maintenance.

Question 5

What are some advantages to adopting IFRS?

Answer 5

• global comparisons are easier
• facilitates cross-border listing
• multinationals can use a common, company-wide accounting language between countries
• foreign companies are more easily appraised for mergers/takeovers

Question 6

What are some disadvantages to adopting IFRS?

Answer 6

• cost of implementation
• lower level of detail compared to other standards
• IFRS is principles-based, leading to subjectivity, which is not desirable in ligation-heavy nations such as the USA.
• cultural differences between countries.

Question 7

What is meant by “standardisation”?

Answer 7

Process by which rules are developed to set standards for similar items on a global basis.

Question 8

What is meant by “harmonisation”?

Answer 8

Reconciling national differences and achieving a common set of accounting principles.

Question 9

What steps have the IASB and US Accounting Standards Board taken to converge their respective accounting standards?

Answer 9

• signed the Norwalk Agreement (2002) as a starting point for a project to converge standards
• published a MoU in 2005 to identify short and long term convergence projects based on several key principles.

Question 10

What role toes the European Commission play in the accounting profession?

Answer 10

Promotes quality, comparability and transparency of company reporting, particularly through adoption of IFRS.

Question 11

What role toes the UK GAAP play in the accounting profession?

Answer 11

This is the overall body of regulation establishing how accounts must be prepared in the UK. This includes requirements of CA2006 and other regulations such as EU law.