IFRS - The Global Standard

of 3

Please download to get full document.

View again

All materials on our website are shared by users. If you have any questions about copyright issues, please report us to resolve them. We are always happy to assist you.
PDF
3 pages
0 downs
7 views
Share
Description
A note on IFRS
Tags
Transcript
  IFRS – The Global Standard CA. Veena Hingarh and CA. Arif AhmedNot many faculties had remained insulated from the impact of changes in theeconomy and body of knowledge for a longer time as the accounting profession did.However the call of pragmatism and need to evolve has eventually lead to introductionof International Financial eporting !ystem a common language for accountants allacross the world. #he insular world has long given way to e$pansion manifested byformation of economic and trading blocks while the accountants continued speakingdifferent language in terms of financial reporting observing the political boundaries of their national accounting bodies. It was only a matter of time that society would haveforced adoption of uniform accounting language across the political territories. In addition to the demand for change necessitated by the evolution of eco%political boundaries& the sub'ect of accounting and finance had also enriched itself withadvances that were unheard of earlier. #he distance of between economics andaccounting became shorter and interdisciplinary concepts and applications wereadopted with open mind. Need for accountancy to evaluate and record economicactivities became a necessity. #he divergent need of adhering to local laws andspeaking a common language re(uired accountants to en'oy greater fle$ibility in termsof application of specific provisions. #he fle$ibility& allows more accurate reflection of thefinancial status of the reporting entity& and re(uired greater disclosure to enable the user to understand what actually stood behind the reported value and description. How do we e$pect the accountants to use this newly found freedom) *e e$pectthe professional community to demonstrate e$emplary understanding in interpreting theaccounting standards to suit the re(uirement of the industry. It must be noted thatincreased fle$ibility brings with it increased responsibility to ensure that financialstatements allow readers to comprehensively understand the financial affairs of thereporting entity.#hough IF! has advocated many changes across various areas of application&three fundamentals shifts stand taller than the rest. #he first one is acceptance of fair value as the basis of reporting in financial statements& the second one is e$plicitrecognition of application of risk management tools in contemporary reporting entities&  and the last one is adoption of +,- technology for globally standardised financialreporting. #he paradigm shift marked by introduction of IF! is redefinition of the basis for reporting value. #he movement away from conventional system of reporting at HistoricalCost has been replaced by a concept of fair value/. #his is where we feel lies the addedresponsibility of accountants to ensure that valuations reflect the worth of the reportingentity to the economic society. #he broad basis of fair valuation is essentially how muchwould the asset fetch in the market today vis%0%vis how much would the asset earn for the entity over its useful life. #his marks a fundamental departure from reporting usinghow much did it cost the entity/. 1sage of historical cost based accounting was foundedon the premises of uniformity of value& while usage of fair value is based on thepremises of uniformity of approach. #he accountants will have a challenging task of selecting& and 'ustifying& their selection of a basis for valuation. It must be noted thatthough historical cost& has been included as one of permissible basis for valuation& thefamiliarity of the techni(ue must not end up being the primary selection criterion. #heprimary selection criterion must remain appro$imation to the fair value using any of thespecified valuation options.  As stated earlier& one of the salient features of International Financial eporting!tandards is its e$plicit recognition of risk management as one of the ma'or corporateresponsibility. Conse(uently we have& arguably for the first time& re(uirement of disclosing in the published accounts the risks that financial instruments are e$posed to.#hough the application has not been balance sheet wide& but a beginning has beenmade and it virtually covers all ma'or asset components e$cluding fi$ed assets andstock. isk management is an emerging application and the erstwhile system of accounting and disclosure had to evolve to catch up with the same. #hese new toolsre(uired special treatment so that the accounts reflect usage of the tool and the usersare aware of the same. #he new tools of financial risk management& essentiallyreplaces risk of a kind by risks of another kind it does not& and cannot& eliminate risksin its entirety. #hus the users of the balance sheet have a right and need to know aboutthese risks and circumstances under which the reported value of the assets can erode. #hird uni(ue aspect of adoption of IF! is accepting +,- as a technology for financial reporting. Cutting out the technical 'argon& +,- is essentially is processwhereas all elements of financial reports are pre%defined on a global basis and valuesare reported against the applicable head. #hus it becomes possible to consolidate or   compare financial reports of companies from different legal and political background.#his will not re(uire the accountants to be information technology professionals. #he+,- converters will sit on top of accounting applications and convert the report into+,- format at a press of a button. #hus within the uniform accounting languagetechnology will enable us to have uniform reporting format that would accommodate alllocal re(uirements without impairing the trans%legal structure comparability. India has already announced phase based deadline for implementing IF! andthe professional community is gearing up to take up the challenge. In the euphoriaassociated with implementation of IF!& we must note that IF! does not ensureprevention of corporate malpractice. IF! re(uires that disclosures must highlight(ualitative and (uantitative impact of the choice made by the accounting body fromamong available alternatives. It does not talk about what one should do/ but mandatesgiven what one has done& what should you tell others about it. It also does not makereading the balance sheet any simpler for the uninitiated. IF! will usher in an intelligent world inhabited by intelligent professionals.
Related Search
We Need Your Support
Thank you for visiting our website and your interest in our free products and services. We are nonprofit website to share and download documents. To the running of this website, we need your help to support us.

Thanks to everyone for your continued support.

No, Thanks