international accounting standards 2007 new

8/14/2019 International Accounting Standards 2007 New

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What is Accounting?

The purpose of accounting is to:

identify, record, and

communicate the economicevents of an

organization to interested users.


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Accounting Standards

Definition: Accounting standards areauthoritative statements of how particular

types of transaction and other events should

be reflected in financial statements.(definition from International Accounting

Standards Board)

GAAP: Generally Accepted Accounting Principles


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The accountingprofession has

attempted to develop aset of standards thatare generally acceptedand universally

practiced.

GenerallyAcceptedAccounting

Principles (GAAP)

The Building Blocks of Accounting

Various usersneed financialinformation

Financial StatementsBalance SheetIncome StatementStatement of Owners Equity

Statement of Cash FlowsNote Disclosure


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Standardization

Standardization: the imposition of a rigid and narrow set of

rules that in the case of international accounting standards

would ensure full compatibility.

Standardization is more associated with the international

accounting standards committee, since it is more concerned

with setting new accounting standards for countries to follow,

in an attempt to unify the accounting practices around the

world.


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Internationalization There is considerable evidence that companies are increasingly

operating in a global marketplace.

Trade: from 1970 to 1998, world trade has grown from 600 billion to10,500 billion

Strategic alliances

Foreign direct investment

Portfolio investment

Today the worlds capital markets know no borders.

The participants in those markets need high quality, transparent,and comparable financial information to enable them to makesound economic decisions.

The diverse accounting and reporting practices across the worldhave been one of the major obstacles to economic globalization.


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Why Global Accounting Standards?

Enhanced worldwide comparability for

investors

Enhanced quality of reporting

Some national GAAPs are week

More company-friendly securities market

for foreign listings


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Reduced reporting costs

No need to develop and maintainnational standards

For audit firms and companies:

Easier movement of auditors and

accountants across borders


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GOING INTERNATIONAL

AND

INTERNATIONAL ACCOUNTING STANDARDSGlobalization of Business:

Ways to Export

Ways to Manufacture Overseas

Reasons for Manufacturing Overseas

International Accounting Standards:The Diversityof Worldwide GAAP

Efforts to Harmonize Worldwide GAAP


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http://www.fasb.org/intl/convergence_iasb.shtml


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IASC Restructured

The IASC was restructured in April 2001 resulting in an

organization called international accounting standards

board (IASB).

the IASB announced that future accounting standardswould be called International Financial Reporting

Standards (IFRSs). Standards issued by the IASC that are

still in circulation are referred to as International

Accounting Standards (IASs). 2003: IASB issues first new standard IFRS 1

2009 budget: 18.4 million
http://www.fasb.org/intl/convergence_iasb.shtml


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Organizations Involved in Standard Setting:

Securities and Exchange Commission (SEC)

Financial Accounting Standards Board (FASB)

International Accounting Standards Board

(IASB)

http://www.fasb.org/

http://www.sec.gov/

http://www.iasb.org/

Governmental Accounting Standards Board
http://www.fasb.org/http://www.sec.gov/http://www.iasb.org/http://www.iasb.org/http://www.sec.gov/http://www.fasb.org/


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SecuritiesAct of 1933

SecuritiesAct of 1934

Securities and Exchange Commission

Established by federal governmentAccounting and reporting for public companies

Encouraged private standard-setting body

SEC requires public companies to adhere to GAAP

SEC OversightEnforcement Authority


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Securities and Exchange Commission

Regulates all publicly held companies and all companies

with more than a specified number of shareholders or

owners.

Determines the form and content of accounting reports

filed by companies under its jurisdiction.

Has authority to define accounting terms and to prescribe

accounting principles. Lets the accounting profession develop principles and

standards, but has the final authority.


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Financial Accounting Standards Board

Seven member board each having distinguished

accounting backgrounds who are full-time employees.

Responsible for developing financial accounting

standards and principles.

Develops and issues Statements of Financial Accounting

Standards.

Has issued about 150 standards that the SEC recognizes

as authoritative.


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American Institute of CPAs

National professional organizationEstablished the following:

Committee on

AccountingProcedures

Accounting

Principles Board

1939 to 1959

Issued 51 AccountingResearch Bulletins

(ARBs)

Problem-by-problemapproach failed

1959 to 1973

Issued 31 AccountingPrinciple Board

Opinions (APBOs)

Wheat Committeerecommendationsadopted in 1973

http://www.aicpa.org/
http://www.aicpa.org/http://www.aicpa.org/


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Governmental Accounting Standards Board

Created in 1984 to address state and local governmental reporting

issues.FinancialAccountingFoundation

FinancialAccountingStandards Board

Financial AccountingStandards AdvisoryCouncil

GovernmentalAccountingStandards Board

GovernmentalAccounting StandardsAdvisory Council

http://www.gasb.org/
http://www.gasb.org/http://www.gasb.org/


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IASB Structure


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Who issues standards?

International Accounting Standards (IASs) wereissued by the IASC from 1973 to 2000. The IASBreplaced the IASC in 2001. Since then, the IASB hasamended some IASs and has proposed to amendothers, has replaced some IASs with new

International Financial Reporting Standards (IFRSs),and has adopted or proposed certain new IFRSs ontopics for which there was no previous IAS. Throughcommittees, both the IASC and the IASB also haveissued Interpretations of Standards. Financial

statements may not be described as complying withIFRSs unless they comply with all of the requirementsof each applicable standard and each applicableinterpretation.

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In 1973, International Accounting Standards

Committee (IASC) was established byprofessional accounting bodies from nine

countries: the U.S., Canada, Australia, France,Germany, Japan, Mexico, Netherlands, andU.K.

I A S Committee became IASB in early2001(Also IFRIC came into being)

The organization was renamed InternationalAccounting Standards Board (IASB) in 2001


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1n 1975, first International Accounting

Standard (IAS) was published.

IAS No. 1 Disclosure of Accounting Policies

Since there, 41 international accounting

standards have been issued.


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TYPES OF IAS

GAAP(GENERALLY ACCEPTED ACCOUNTING

PRINCIPLE)

IFRS(INTERNATIONAL FINANCIAL REPORTING

STANDARD

And 41 OTHER STANDARD


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Generally Accepted Accounting Principles

(GAAP)

Ensure that financial statements are meaningful and

useful.

Are used whether the business is large or small. Allow financial statements of different companies to

be compared.

Allow a company to compare its own financialstatements from period to period.


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Accounting The House of GAAP

The role that accounting standards play in establishing the rules fordisclosing both public and private financial reporting assumes levels

of authority of "more to less" which guide reliance on anddetermines the weight of the standards. Understanding thishierarchy is paramount to grasping the meaning of"generallyaccepted accounting principles" (GAAP), and the manysupporting documents.

The concept of the "house of GAAP" was introduced in a 1984 article

from the Journal of Accountancy. The author describes and definesthe vast universe of accounting standards as a hierarchy structuredalong the lines of the floor plan of a house. "Like any otherstructure, the house of GAAP rests on a foundation, in this case afoundation of the basic concepts and broad principles that underliefinancial reporting, without which, like a house of cards, the houseof GAAP would tumble."

In 199I the AICPA's Auditing Standards Board remodeled the houseof GAAP by changing some of the levels of authority of certainaccounting pronouncements and distinguishing between thestandards defining state and local government entities, establishedby the Government Accounting Standards Board (GASB) and thosefor all others, falling under the FASB's jurisdiction.


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Principle of continuity: When stating financial information, one shouldassume that the business will not be interrupted. This principle mitigates the

principle of prudence: assets do not have to be accounted at their disposable

value, but it is accepted that they are at their historical value

Principle of periodicity: Each accounting entry should be allocated to agiven period, and split accordingly if it covers several periods. If a client pre-

pays a subscription (or lease, etc.), the given revenue should be split to the

entire time-span and not counted for entirely on the date of the transaction.

Principle of Full Disclosure/Materiality: All information and valuespertaining to the financial position of a business must be disclosed in the

records.

Principle of Utmost Good Faith: All the information regarding to the firm

should be disclosed to the insurer before the insurance policy is taken.


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What is IFRSs

The term International Financial Reporting Standards(IFRSs) has both a narrow and a broad meaning. Narrowly,IFRSs refers to the new numbered series ofpronouncements that the IASB is issuing, as distinct fromthe International Accounting Standards (IASs) series issued

by its predecessor. More broadly, IFRSs refers to the entirebody of IASB pronouncements, including standards andinterpretations approved by the IASB and IASs and SICinterpretations approved by the predecessor International

Accounting Standards Committee. [On this website,consistent with IASB policy, we abbreviate InternationalFinancial Reporting Standards (plural) as IFRSs and

International Accounting Standards (plural) as IASs.]

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IFRS

International Financial Reporting Standards Preface toInternational Financial Reporting Standards

IFRS 1 First-time Adoption of International FinancialReporting Standards

IFRS 2 Share-based Payment IFRS 3 Business Combinations IFRS 4 Insurance Contracts IFRS 5 Non-current Assets Held for Sale and Discontinued

Operations IFRS 6 Exploration for and Evaluation of Mineral Assets

IFRS 7 Financial Instruments: Disclosures IFRS 8 Operating Segments Framework for the Preparationand Presentation of Financial Statements

Frameworkfor the Preparation and Presentation ofFinancial Statements

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Which are
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Which areinternational accountingstandards(IAS)?

IAS 1 Presentation of Financial Statements IAS 2 Inventories IAS 3 Consolidated Financial Statements

Originally issued 1976, effective 1 Jan 1977. Superseded in 1989by IAS 27 and IAS 28.

IAS 4 Depreciation AccountingWithdrawn in 1999, replaced by IAS 16, 22, and 38, all of which

were issued or revised in 1998. IAS 5 Information to Be Disclosedin Financial StatementsOriginally issued October 1976, effective 1 January 1997.Superseded by IAS 1 in 1997. IAS 6 Accounting Responses toChanging PricesSuperseded by IAS 15, which was withdrawn December 2003 IAS7 Cash Flow Statements IAS 8 Accounting Policies, Changes inAccounting Estimates and Errors IAS 9 Accounting for Researchand Development Activities Superseded by IAS 38 effective 1.7.99IAS 10 Events After the Balance Sheet Date IAS 11 ConstructionContracts IAS 12 Income Taxes IAS 13 Presentation of CurrentAssets and Current LiabilitiesSuperseded by IAS 1. IAS 14 Segment Reporting.

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Segment Reporting

IAS 15 Information Reflecting the Effects ofChanging PricesWithdrawn December 2003

IAS 16 Property, Plant and Equipment IAS 17 Leases

IAS 18 Revenue IAS 19 Employee Benefits IAS 20 Accounting for Government Grants and

Disclosure of Government Assistance IAS 21 The Effects of Changes in Foreign

Exchange Rates IAS 22 Business Combinations

Superseded by IFRS 3 effective 31 March 2004. IAS 23 Borrowing Costs IAS 24 Related Party Disclosures

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IAS 25 Accounting for Investments
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S 5 ccou t g o est e tsSuperseded by IAS 39 and IAS 40 effective 2001.

IAS 26 Accounting and Reporting by Retirement Benefit Plans IAS 27 Consolidated and Separate Financial Statements IAS 28

Investments in Associates

IAS 29 Financial Reporting in Hyperinflationary Economies IAS 30 Disclosures in the Financial Statements of Banks andSimilar Financial InstitutionsSuperseded by IFRS 7 effective 2007.

IAS 31 Interests In Joint Ventures IAS 32 Financial Instruments: Presentation

Disclosure provisions superseded by IFRS 7 effective 2007. IAS 33 Earnings Per Share IAS 34 Interim Financial Reporting IAS 35 Discontinuing Operations

Superseded by IFRS 5 effective 2005. IAS 36 Impairment of Assets

IAS 37 Provisions, Contingent Liabilities and Contingent Assets IAS 38 Intangible Assets IAS 39 Financial Instruments: Recognition and Measurement IAS 40 Investment Property IAS 41 Agriculture

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IASBFormed in January 2001, the ISAB replaced its

predecessor, the International AccountingStandards Committee (IASC), as the internationalstandards setting body. Looking towards greaterformalization of international accountingstandards, IASB is structured similarly to the

FASB. It is currently the focus of the IASB, incollaboration with the FASB and other accountingfocused organizations, to "converge" standardsand develop a single, universally accepted set ofbiding international accounting standards. TheIASC, and now IASB, issue a series of standardsknown as International Financial ReportingStandards (IFRS), formerly called InternationalAccounting Standards (IAS).

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IASB, IASCF, and IASC DefinedThe International Accounting Standards Board is an independent,private-sector body that develops and approves International

Financial Reporting Standards. The IASB operates under theoversight of the International Accounting Standards CommitteeFoundation. The IASB was formed in 2001 to replace theInternational Accounting Standards Committee.

IASCF: International Accounting Standards Committee FoundationThe International Accounting Standards Committee Foundation isthe independent, non-profit foundation, created in 2000 tooversee the IASB. Click for more information about the IASCFStructure.

IASC: International Accounting Standards CommitteeFrom 1973 until a comprehensive reorganization in 2000, thestructure for setting International Accounting Standards wasknown as the International Accounting Standards Committee.There was no actual "committee" of that name. The standard-setting board was known as the IASC Board.

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Key to Understanding International
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Key to Understanding International

Accounting

Political, Economic, Cultural and

Infrastructure Influences on:

External Reporting

Taxes/Capital Markets/Gov.

Regulation/Standard Setting/Reporting

Requirements/Users

Internal Reporting Planning and Decision Making

Control

Performance Evaluation


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External Accounting

Standard Setters, Preparers and Users

Underlying Institutional Structures

Required reports

Internal Accounting

Decision Rights Assignment

Planning and Control

Performance Measurement and Evaluation


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Uses of International


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Uses of International

Accounting Standards As national standards

As basis for national standards

As benchmark to develop national

standards

By regulatory authorities

By companies themselves


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The world is getting smaller


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Conclusion


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Internationalize Accounting Standards:

The Grand Dream

World GAAP--so many hurdles.All are for it--BUTfew countries are willing to

change their own GAAP.


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International Accounting

Standards: World GAAPs

Advantages

Having a Uniform World GAAP:

Would greatly streamline the quarterly and year-endconsolidation process for the accountants of publicly-

owned companies.


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Efforts To Internationalize Accounting

Standards:

Progress Has Been Slow


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The Capital Markets--

A much-needed injection:

Relatively recent trend of raising capital

in world markets has given greatly added

emphasis to the desirability of having a

world GAAP. The BIG advantage:

Would greatly streamline the processby eliminating the need to comply

with multiple GAAPs in offering

securities.

Efforts To Internationalize Accounting

Standards: Capital Market Forces


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Advantages

Same basis with foreign competitors, easy tomake comparison

Easy to consolidate the parents company and theforeign subsidiaries

Disadvantages

Effectiveness of GAAP will be lost

Discourage the domestic public companies whichhave no significant market outside the US


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Time to Clear Things Up--

Any Questions?

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