IFRS Section 1: Introduction to IFRS Standards

IFRS SECTION 1 SESSION 1
PREPARED AND PRESENTED BY ARMAGHAN AHMED
SIR.ARMAGHAN@GMAIL.COM
https://www.linkedin.com/in/armaghan-khan-9273bb35/

Agenda
• What is IFRS
• Purpose of Financial reporting Standards
• How are IFRS developed
• IFRS framework
• Objectives of Financial reporting
• Characteristics of Financial Reporting
• Why IFRS
• Principle based standards

• IFRS is a globally recognised set of Standards for the preparation of
financial statements by business entities.
What is IFRS ?
• how to present them in a set of financial statements; and
• related disclosures about those items.
• Those Standards prescribe:
• the items that should be recognised as
expense
assets, liabilities, income and
• how to measure those items;

What is IFRS?
• IFRS stands for International Financial Reporting Standards.
• As indicated within the title, these standards are aimed at a global
practice.
• Ultimately, the goal is to achieve a single set of high-quality,
common accounting standards used around the world.
• These standards are the result of a convergence of international
viewpoints.
• These standards are for publicly accountable entities.
– Small and medium-sized entities (SMEs) that do not have public accountability
may use a simplified version of IFRS known as IFRS for SMEs.
– IFRS for SMEs has recently been accepted for non-SEC registrants by the AICPA as
an acceptable alternative reporting standard to US GAAP; however, it is not yet
common practice.

Why is it important to learn about IFRS today?
– Under IFRS 1, First-time Adoption of
International Financial Reporting
Standards, there is a variety of exemptions
and options that the preparer may elect to
utilize in the adoption process that need to
be assessed to best position the company.
– The IFRS adoption and convergence efforts
impact much more than just the
accounting function. Additional functions
that are impacted include the following:
• Information systems
• Tax
• Treasury
• Investor relations
• Sales
• Human resources
• Mergers and acquisitions

IFRS Implementation Around the
World(2005)
IFRS or fixed date for implementation
Convergence plans
U.S. GAAP and/or convergence intended
No/unknown convergence plans

IFRS Implementation Around the
World (2009)
IFRS permitted or required
Convergence plans
U.S. GAAP and/or convergence intended
No/unknown convergence plans

IFRS AT PRESENT

IFRS Implementation Around the World

FINANCIALREPORTING
STANDARDS - PURPOSE

• Transparency:
– Enhances international comparability and quality of information
– Enables market participants to make informed decision
• Accountability:
– Reducing the information gap between the providers of capital and the
people to whom they have entrusted their money.
– vital importance to regulators around the world.
• Efficiency:
– Helps investors to identify opportunities and risks across the world,
– For businesses, the use of a single, trusted accounting language lowers
the cost of capital and reduces international reporting costs.
Purpose

Is IFRS different than US GAAP?
• There are differences between IFRS and US GAAP but they
are more alike than different for most commonly
encountered transactions.
• IFRS is largely grounded in the same principles as US GAAP.
• The US and international standard setters are currently
working on convergence projects to better align the
standards and reduce these differences.
=
?
/

Is IFRS better than US GAAP?
• It cannot be stated that IFRS is better (or of higher quality) than US
GAAP nor that US GAAP is better (or of higher quality) than IFRS.
Neither set of standards is perfect.
• This is evidenced by the convergence efforts where changes are
being made to both sets of standards and are not one-sided.
• Some could say that the international standard setters have had the
following advantages in their standard setting:
– Being able to obtain a greater amount of global perspective.
– Being able to draw upon the latest standards.
– Being able to remedy perceived problems identified in practice.
– Having an annual improvement process to enhance the clarity and
consistency of IFRS, which continues to consider more current thinking
and practice.
– Being able to focus more intently on a principles orientation.

Principles Based vs. Rules Based
• As mentioned previously, both US GAAP and IFRS are
largely grounded in the same principles.
• As a general rule, however, IFRS standards are broader
with less rules and limited interpretive guidance.
– The international standard setters prefer to leave
implementation of the principles embodied in the
standards to preparers and auditors and its interpretive
body.
• US GAAP contains underlying principles as well but is
more specific and rules oriented with far more “bright
lines,” comprehensive implementation guidance and
industry interpretations.

The following example is a simple illustration of
a principles-oriented approach compared to a
rules-oriented approach.
Rules oriented:
► Your parents tell you
to get a 3.2 GPA or
above.
► They provide you
with 15 contingencies
that might justify
acceptance of
anything lower than a
3.2 GPA.
Principles oriented:
► Your parents tell
you to do your best
to get good grades.
► If you do not get
good grades, they
will consider the
substance of your
reasons.

IFRS Section 1: Introduction to IFRS Standards

Recommended

Recommended

More Related Content

Similar to IFRS Section 1: Introduction to IFRS Standards

Similar to IFRS Section 1: Introduction to IFRS Standards (20)

Recently uploaded

Recently uploaded (20)

IFRS Section 1: Introduction to IFRS Standards