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Knowledge guide to International AccountingStandardsIn this knowledge guide, we describe the development of international standards and offer

resources to help you find more on IAS, IFRS, interpretations and IPSAS.

Contents

What are International Accounting Standards?

History and development

Sources for standards and interpretations

International convergence

Further reading

Other international accounting standards

What are international accounting standards?

International Accounting Standards are accounting standards issued by the International Accounting

Standards Board (IASB) and its predecessor, the International Accounting Standards Committee (IASC).

Listed companies, and sometimes unlisted companies, are required to use the standards in their financial

statements in those countries which have adopted them.

TheEU regulation 1606/2002 on the application of international accounting standardsmade this a requirement

for listed companies in the European Union. For other jurisdictions, please see our page on theworldwide

adoption of IFRS.

History and development

Our timeline highlights some of the most significant dates in the history of international accounting

standards. It covers the period from the 1960s to 2005 when listed companies in the UK were required to

present their financial statements using international standards. Please note it is not intended to be a

comprehensive list of developments between these dates.

1966The history of International Accounting Standards really began in 1966, with the proposal to establish an

International Study Group comprising:

Institute of Chartered Accountants of England & Wales (ICAEW)

American Institute of Certified Public Accountants (AICPA)

Canadian Institute of Chartered Accountants (CICA).
http://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#whathttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#whathttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#historyhttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#historyhttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#sourceshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#sourceshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#convergencehttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#convergencehttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#readinghttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#readinghttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#otherhttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#otherhttp://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002R1606:EN:NOThttp://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002R1606:EN:NOThttp://www.icaew.com/en/library/subject-gateways/accounting-standards/worldwide-adoption-of-ifrshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/worldwide-adoption-of-ifrshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/worldwide-adoption-of-ifrshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/worldwide-adoption-of-ifrshttp://www.aicpa.org/http://www.aicpa.org/http://www.cica.ca/http://www.cica.ca/http://www.cica.ca/http://www.aicpa.org/http://www.icaew.com/en/library/subject-gateways/accounting-standards/worldwide-adoption-of-ifrshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/worldwide-adoption-of-ifrshttp://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002R1606:EN:NOThttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#otherhttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#readinghttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#convergencehttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#sourceshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#historyhttp://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards#what


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1967

In February 1967 this resulted in the foundation of the Accountants International Study Group (AISG),

which began to publish papers on important topics every few months and created an appetite for change.

Many of these papers led the way for the standards that followed, when in March 1973 it was finally

agreed to establish an international body writing accounting standards for international use.

1973

In June 1973 the IASC came into existence, with the stated intent that the new international standards it

released must be capable of rapid acceptance and implementation world-wide. The IASC survived for 27

years, until 2001, when the organisation was restructured and the IASC was replaced by the IASB.

One of the most comprehensive accounts of this early history of international accounting standards is

contained in Lord Benson's article The story of international accounting standards which was published

in Accountancy magazine in July 1976 (Volume 87, Number 995) on pages 34-39. A further source ofinformation is Lord Benson's biography Accounting for life which was published by Kogan Page, with

ICAEW, in 1989.

Between 1973 and 2000 the IASC released a series of standards called International Accounting

Standards (IAS) in a numerical sequence that began with IAS 1 and ended with IAS 41 Agriculture, which

was published in December 2000.

1997

The Standing Interpretations Committee (SIC) was established in 1997 to consider contentious

accounting issues that needed authorative guidance to stop widespread variation in practice.

2000

February

The US Securities and Exchange Commission (SEC) issued a concept release on 24 February 2000 on

the acceptability of International Accounting Standards. The ICAEW response was published in a

technical release (TECH 16/00). In the press release issued on 19 May 2000, Graham Ward, Deputy

President of the ICAEW, commented:

We have long looked forward to the time when financial statements prepared in accordance with

international accounting standards are recognised by stock exchanges throughout the world.

May

The International Organisation of Securities Commissions (IOSCO) endorses IAS for use in connection

with cross-border listings, as announced in apress releaseissued by the organisation on 17 May 2000.
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August

The ICAEW issued a policy statement (TECH 23/00)on the endorsement and enforcement of IAS within

the EU.

2001Apr i l

The IASC restructured its organisation at the end of the twentieth century, which resulted in the formation

of the IASB. These changes came into effect on 1 April 2001.

At the time, the IASB stated that it would adopt the body of standards issued by the Board of the

International Accounting Standards Committee (which would continue to be designated International

Accounting Standards [1]), but any new standards would be published in a series called International

Financial Reporting Standards (IFRS) [2].References:

[1] The IASB approved the IASB Resolution on IASC Standards at its meeting in April 2001 which

confirmed the status of all IASC Standards and SIC Interpretations in effect as of 1 April 2001.

[2] The IASB announced that the IASC Foundation Trustees had agreed that accounting standards

issued by IASB would be designated International Financial Reporting Standards in a statement dated

23 April 2001.

Ju ly

At the 23 July 2001 meeting of the Standards Advisory Council the IASB submitted a proposal to rename

the Standing Interpretations Committee (SIC) as the International Financial Reporting Issues Committee

(IFRIC) which was subsequently accepted.

Following this change, releases from IFRIC were categorized as abstracts rather than interpretations. In

December 2001 the Standing Interpretations Committee (SIC) was reconstituted as the International

Financial Reporting Interpretations Committee (IFRIC).

2002

May

The IASB issued published a press release on 23 May 2002 announcing the publication of thePreface to

International Financial Reporting Standardswhich Sir David Tweedie, IASB Chairman, said provided
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a brief description of the purpose and function of the main structures of the new arrangements for setting

global standards. As such, it is a short but essential introduction to the context within which the Board will

frame its standards.

June

On 6 June 2002 the European Council of Ministers approved the regulation that would require all EU

companies listed on a regulated market to prepare accounts in accordance with International Accounting

Standards for accounting periods beginning on or after 1 January 2005.

ICAEW welcomed the formal approval of the regulation as a landmark development in the creation of a

single European capital market. Ian D Wright, Chairman of the ICAEW Financial Reporting Committee,

said:

The Institute has supported the European Commission through a lengthy political process to see this

Regulation come into effect because we believe passionately in the benefits to business of truly

international accounting standards.

Ju ly

TheRegulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of

international accounting standardswas adopted on 19 July 2002 by the European Parliament and the

Council, requiring listed companies to use International Accounting Standards by 2005.

November

ICAEW issued a memorandum on November 7 2002 to the Accounting Standards Board (replaced by the

Accounting Council in July 2012) entitledThe Transition to IAS: The role of the ASB (TECH 20/02), in which

the institute highlighted its support for aligning UK accounting standards progressively with IAS, stressing

the importance of minimising differences between UK GAAP and IAS

in order to maintain comparability between the accounts of listed and larger unlisted companies, avoid

unnecessary complexity and prevent practical problems for companies seeking listed status.

2003

June

The first IFRS was published in June 2003IFRS 1: First-time Adoption of International Financial

Reporting Standards.
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Ju ly

The Department of Trade and Industry (DTI) issued the press release UK extends use of International

Accounting Standards on 17 July 2003 announcing that publicly traded companies in the UK wou ld be

permitted to use international accounting standards in their individual accounts from 2005 and that

other companies and limited liability partnerships in the UK will be permitted to use IAS in both their

individual and consolidated accounts from the same date.

ICAEW issued a press release in support entitled ICAEW welcomes announcement that unlisted

companies can opt to use IAS from 2005.

September

The European Commission adopted a Regulation endorsing International Accounting Standards (IASs)

on 29 September 2003, thereby confirming the requirement for their compulsory use from 2005.

At the time, Internal Market Commissioner Frits Bolkestein said that:

Adoption by the Commission of this Regulation, endorsing most of the existing International Accounting

Standards and publishing them in the EU's official languages, will help the 7000 or so listed EU

companies affected to get ready for 2005, when their consolidated accounts will have to be in line with

IAS. That will put an end to the current Tower of Babel in financial reporting, improve competition and

transparency and make the free movement of capital much easier.

The full text of the regulationAdopting certain international accounting standards in accordance with Regulation

(EC) No 1606/2002is available online.

December

In Chancellor Gordon Brown'sPre-Budget Report 2003speech on 10 December 2003, the Chancellor

announced that

firms applying international accounting standards will not have to submit a second and separate set of

accounts to the Inland Revenue.

2004

February

On 24 February 2004 the Inland Revenue publishedAccounting Standardsthe UK tax implicationson its

website. At the time the website stated that the Finance Bill 2004 would
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include measures to ensure that companies choosing to adopt International Accounting Standards (IAS)

to draw up their accounts will receive broadly equivalent tax treatment to companies that continue to use

UK GAAP.

March

The DTI published a consultation document on the implementation of the accounting modernisation

directive and arrangements for the use of IAS for companies and building societies,Modernisation of

Accounting Directives/IAS Infrastructure.

November

On 12 November 2004 the Accounts Modernisation and Fair Value Directives came into force withThe

Companies Act 1985 (International Accounting Standards and Other Accounting Amendments) Regulations

2004(SI 2947).

2005

Listed companies in the UK were required to present their financial statements using the international

accounting standards adopted by the EU for periods commencing on or after 1 January 2005.

Sources for standards and interpretations

Standards (IAS/IFRS)

From 1973 until 2000 the International Accounting Standards Committee (IASC) released a series of

International Accounting Standards (IAS). In 2001 the International Accounting Standards Committee

(IASC) was replaced by the International Accounting Standards Board (IASB) and all new standards

published since then have been issued as International Financial Reporting Standards (IFRS).

The text of unaccompanied standards (which are the current year's consolidated standards, excluding

additional content such as illustrative examples and basis for conclusions) are freely available from

theIASB website.Registration is required.

We have printed versions in the ICAEW Library of the individual standards (as published) and annual

volumes which provide consolidated versions of the standards. We also have access to an online

database with electronic versions of the standards.

Prior to 2010 one annual bound volume of consolidated standards was published by the IASB. In January

2010 the additional bound volume IFRS: Consolidated without early application, also known as the Blue

Book, was launched. This new publication only consolidates those standards with an effective date no

later than 1 January so excludes those not yet effective to non-early adopters. It includes IFRSs, IASs,

IFRICs and SICs plus accompanying documents
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The existing IFRS bound volume, now known as the Red Book, is still published and follows the practice

of previous years by consolidating all IFRSs issued at 1 January, including those with an effective date

later than 1 January. It excludes IFRSs that are being replaced or superseded but remain applicable to

non-early adopters. Part A contains IFRSs, IASs, IFRICs and SICs and Part B the accompanying

documents

See the links below for full details of the Library's holdings:

IASC/IASB Handbooks, 1981-

International Accounting Standards, 1973-2001

International Financial Reporting Standards, 2001-

Our webpages onIFRSinclude links to guides, news updates and other online resources for each of the

standards.

Interpretations (SIC/IFRIC)SIC Interpretations agreed by the Standing Interpretations Committee (SIC) and ratified by the IASB were

published between 1997 and 2001.

IFRIC Interpretations agreed by the International Financial Reporting Interpretations Committee (IFRIC)

and ratified by the IASB have been published since 2001. In 2010 the IFRIC was renamed the IFRS

Interpretations Committee. An explanation of the process can be found on the IASB website atHow we

develop interpretations.

The text of unaccompanied standards (which are the current year's consolidated standards, excluding

additional content such as illustrative examples and basis for conclusions) including SICs and IFRICs are

freely available from theIASB website.Registration is required.

The full official text of the interpretations are included in the current bound volumes of IASB standards

which are available from theInternational Accounting Standards Board (IASB).

We have printed copies in the ICAEW Library of the individual interpretations and the current volumes of

standards, in addition to access to an online database with electronic versions of the interpretations.

See the links below for full details of the Library's holdings:

IASC/IASB Handbooks, 1981-

SIC Interpretations, 1997-2001

IFRIC Interpretations, 2001-

You can obtain information about recent IFRIC interpretations and draft IFRIC interpretations through the

IASB website from theIFRIC Projectssection. The IAS Plus website from Deloitte also provides

comprehensiveSummaries of interpretations,including those SIC and IFRIC interpretations which have

been superseded.
http://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=(%27international%20accounting%20standards%20board%27%7b110%7d%20AND%20%27handbook%27%7b745%7d)%20OR%20(%27International%20Accounting%20Standards%27%7b245%7d%20AND%20%271981-2002%27%7b245%7d)&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=(%27international%20accounting%20standards%20board%27%7b110%7d%20AND%20%27handbook%27%7b745%7d)%20OR%20(%27International%20Accounting%20Standards%27%7b245%7d%20AND%20%271981-2002%27%7b245%7d)&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27international%20accounting%20standard%27%7b440%7d%20AND%20%27international%20accounting%20standards%20committee%27%7b110%7d&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27international%20accounting%20standard%27%7b440%7d%20AND%20%27international%20accounting%20standards%20committee%27%7b110%7d&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=(%27international%20accounting%20standard%27%7b440%7d%20OR%20%27international%20financial%20reporting%20standard%27%7b440%7d)%20AND%20%27international%20accounting%20standards%20board%27%7b110%7d&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=(%27international%20accounting%20standard%27%7b440%7d%20OR%20%27international%20financial%20reporting%20standard%27%7b440%7d)%20AND%20%27international%20accounting%20standards%20board%27%7b110%7d&sort_by=-PBYR&user_id=WEBSERVERhttp://www.icaew.com/en/library/subject-gateways/accounting-standards/ifrshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/ifrshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/ifrshttp://www.ifrs.org/How-we-develop-Interpretations/Pages/IFRIC-meetings-and-voting.aspxhttp://www.ifrs.org/How-we-develop-Interpretations/Pages/IFRIC-meetings-and-voting.aspxhttp://www.ifrs.org/How-we-develop-Interpretations/Pages/IFRIC-meetings-and-voting.aspxhttp://www.ifrs.org/How-we-develop-Interpretations/Pages/IFRIC-meetings-and-voting.aspxhttp://www.ifrs.org/IFRSs/Pages/IFRS.aspxhttp://www.ifrs.org/IFRSs/Pages/IFRS.aspxhttp://www.ifrs.org/IFRSs/Pages/IFRS.aspxhttp://www.ifrs.org/http://www.ifrs.org/http://www.ifrs.org/http://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=(%27international%20accounting%20standards%20board%27%7b110%7d%20AND%20%27handbook%27%7b745%7d)%20OR%20(%27International%20Accounting%20Standards%27%7b245%7d%20AND%20%271981-2002%27%7b245%7d)&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=(%27international%20accounting%20standards%20board%27%7b110%7d%20AND%20%27handbook%27%7b745%7d)%20OR%20(%27International%20Accounting%20Standards%27%7b245%7d%20AND%20%271981-2002%27%7b245%7d)&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27SIC%27%7b440%7d&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27SIC%27%7b440%7d&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27IFRIC%27%7b440%7d&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27IFRIC%27%7b440%7d&sort_by=-PBYR&user_id=WEBSERVERhttp://www.ifrs.org/Current-Projects/IFRIC%20Projects/Pages/default.aspxhttp://www.ifrs.org/Current-Projects/IFRIC%20Projects/Pages/default.aspxhttp://www.ifrs.org/Current-Projects/IFRIC%20Projects/Pages/default.aspxhttp://www.iasplus.com/en/standards/standards/#sic-interpretationshttp://www.iasplus.com/en/standards/standards/#sic-interpretationshttp://www.iasplus.com/en/standards/standards/#sic-interpretationshttp://www.iasplus.com/en/standards/standards/#sic-interpretationshttp://www.ifrs.org/Current-Projects/IFRIC%20Projects/Pages/default.aspxhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27IFRIC%27%7b440%7d&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27SIC%27%7b440%7d&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=(%27international%20accounting%20standards%20board%27%7b110%7d%20AND%20%27handbook%27%7b745%7d)%20OR%20(%27International%20Accounting%20Standards%27%7b245%7d%20AND%20%271981-2002%27%7b245%7d)&sort_by=-PBYR&user_id=WEBSERVERhttp://www.ifrs.org/http://www.ifrs.org/IFRSs/Pages/IFRS.aspxhttp://www.ifrs.org/How-we-develop-Interpretations/Pages/IFRIC-meetings-and-voting.aspxhttp://www.ifrs.org/How-we-develop-Interpretations/Pages/IFRIC-meetings-and-voting.aspxhttp://www.icaew.com/en/library/subject-gateways/accounting-standards/ifrshttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=(%27international%20accounting%20standard%27%7b440%7d%20OR%20%27international%20financial%20reporting%20sta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Convergence with IAS/IFRS

We offer a number of resources focusing on convergence between national GAAP and IFRS across the

world, including:

Worldwide adoption of IFRS

Local GAAP and GAAP comparisons

Articles and books in the Library collection on IFRS convergence and harmonisation

Further resources

Our collection includes a growing volume of books and articles on international accounting standards.

View a list of the latest books on international accounting standards

View a list of the latest articles on international accounting standards

To find out how you can borrow books from the Library please see our guide tobook loans.

You can obtain copies of articles or extracts of books and reports by post, fax or email through

ourdocument supply service.

Financial Reporting Faculty

The faculty offers assistance and support in IFRS, UK GAAP and other aspects of business reporting. It

offers technical briefings and factsheets, IFRS and UK GAAP standards-trackers, plus practical advice

from industry experts and working accountants.

Other international accounting standards

International Public Sector Accounting Standards (IPSAS)

The International Public Sector Accounting Standards Board (IPSASB) focuses on the accounting and

financial reporting needs of national, regional and local governments, related governmental agencies.

The IPSASB issues International Public Sector Accounting Standards (IPSAS) for this audience which

are published in full text within the IFAC Handbook of International Public Sector Accounting

Pronouncements, which is available from theIFAC websitefree of charge.
http://www.icaew.com/en/library/subject-gateways/accounting-standards/worldwide-adoption-of-ifrshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/worldwide-adoption-of-ifrshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/local-gaap-and-gaap-comparisonshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/local-gaap-and-gaap-comparisonshttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=(%27COMPARISON$%27%7b650%7d%20OR%20%27COMPARISON$%27%7b690%7d)%20AND%20(%27INTERNATIONAL%20ACCOUNTING%20STANDARD$%27%20OR%20%27IAS$%27%20OR%20%27IFRS$%27%20OR%20%27INTERNATIONAL%20FINANCIAL%20REPORTING%20STANDARD$%27)&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=(%27COMPARISON$%27%7b650%7d%20OR%20%27COMPARISON$%27%7b690%7d)%20AND%20(%27INTERNATIONAL%20ACCOUNTING%20STANDARD$%27%20OR%20%27IAS$%27%20OR%20%27IFRS$%27%20OR%20%27INTERNATIONAL%20FINANCIAL%20REPORTING%20STANDARD$%27)&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27accounting%20standards%20international%27%7b650%7d&pubyear=%3E2012&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27accounting%20standards%20international%27%7b650%7d&pubyear=%3E2012&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27%27accounting%20standards%20international%27%7b690%7d&pubyear=%3E2012&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27%27accounting%20standards%20international%27%7b690%7d&pubyear=%3E2012&sort_by=-PBYR&user_id=WEBSERVERhttp://www.icaew.com/en/library/guide-to-services/borrowing-bookshttp://www.icaew.com/en/library/guide-to-services/borrowing-bookshttp://www.icaew.com/en/library/guide-to-services/borrowing-bookshttp://www.icaew.com/en/library/guide-to-services/document-delivery-servicehttp://www.icaew.com/en/library/guide-to-services/document-delivery-servicehttp://www.icaew.com/en/library/guide-to-services/document-delivery-servicehttp://www.icaew.com/en/join-us/join-a-faculty/financial-reporting-facultyhttp://www.icaew.com/en/join-us/join-a-faculty/financial-reporting-facultyhttp://www.ifac.org/public-sectorhttp://www.ifac.org/public-sectorhttp://www.ifac.org/public-sectorhttp://www.icaew.com/en/join-us/join-a-faculty/financial-reporting-facultyhttp://www.icaew.com/en/library/guide-to-services/document-delivery-servicehttp://www.icaew.com/en/library/guide-to-services/borrowing-bookshttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27%27accounting%20standards%20international%27%7b690%7d&pubyear=%3E2012&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=%27accounting%20standards%20international%27%7b650%7d&pubyear=%3E2012&sort_by=-PBYR&user_id=WEBSERVERhttp://libcat.icaew.com/uhtbin/cgisirsi.exe/x/SIRSI/0/5?searchdata1=(%27COMPARISON$%27%7b650%7d%20OR%20%27COMPARISON$%27%7b690%7d)%20AND%20(%27INTERNATIONAL%20ACCOUNTING%20STANDARD$%27%20OR%20%27IAS$%27%20OR%20%27IFRS$%27%20OR%20%27INTERNATIONAL%20FINANCIAL%20REPORTING%20STANDARD$%27)&user_id=WEBSERVERhttp://www.icaew.com/en/library/subject-gateways/accounting-standards/local-gaap-and-gaap-comparisonshttp://www.icaew.com/en/library/subject-gateways/accounting-standards/worldwide-adoption-of-ifrs


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International Financial Reporting StandardsFrom Wikipedia, the free encyclopedia

Accountancy

Key concepts

Accountant

Accounting period

Accrual

Bookkeeping

Cash and accrual basis

Cash flow forecasting

Chart of accounts

Convergence

Journal

Special journals

Capital Maintenance in Units of Constant Purchasing Power

Cost of goods sold

Credit terms

Debits and credits

Double-entry system

Mark-to-market accounting

FIFO and LIFO
http://en.wikipedia.org/wiki/Accountancyhttp://en.wikipedia.org/wiki/Accountancyhttp://en.wikipedia.org/wiki/Accountanthttp://en.wikipedia.org/wiki/Accountanthttp://en.wikipedia.org/wiki/Accounting_periodhttp://en.wikipedia.org/wiki/Accounting_periodhttp://en.wikipedia.org/wiki/Accrualhttp://en.wikipedia.org/wiki/Accrualhttp://en.wikipedia.org/wiki/Bookkeepinghttp://en.wikipedia.org/wiki/Bookkeepinghttp://en.wikipedia.org/wiki/Comparison_of_cash_and_accrual_methods_of_accountinghttp://en.wikipedia.org/wiki/Comparison_of_cash_and_accrual_methods_of_accountinghttp://en.wikipedia.org/wiki/Cash_flow_forecastinghttp://en.wikipedia.org/wiki/Cash_flow_forecastinghttp://en.wikipedia.org/wiki/Chart_of_accountshttp://en.wikipedia.org/wiki/Chart_of_accountshttp://en.wikipedia.org/wiki/Convergence_of_accounting_standardshttp://en.wikipedia.org/wiki/Convergence_of_accounting_standardshttp://en.wikipedia.org/wiki/General_journalhttp://en.wikipedia.org/wiki/General_journalhttp://en.wikipedia.org/wiki/Special_journalhttp://en.wikipedia.org/wiki/Special_journalhttp://en.wikipedia.org/wiki/Constant_purchasing_power_accountinghttp://en.wikipedia.org/wiki/Constant_purchasing_power_accountinghttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Trade_credithttp://en.wikipedia.org/wiki/Trade_credithttp://en.wikipedia.org/wiki/Debits_and_creditshttp://en.wikipedia.org/wiki/Debits_and_creditshttp://en.wikipedia.org/wiki/Double-entry_bookkeeping_systemhttp://en.wikipedia.org/wiki/Double-entry_bookkeeping_systemhttp://en.wikipedia.org/wiki/Mark-to-market_accountinghttp://en.wikipedia.org/wiki/Mark-to-market_accountinghttp://en.wikipedia.org/wiki/FIFO_and_LIFO_accountinghttp://en.wikipedia.org/wiki/FIFO_and_LIFO_accountinghttp://en.wikipedia.org/wiki/FIFO_and_LIFO_accountinghttp://en.wikipedia.org/wiki/Mark-to-market_accountinghttp://en.wikipedia.org/wiki/Double-entry_bookkeeping_systemhttp://en.wikipedia.org/wiki/Debits_and_creditshttp://en.wikipedia.org/wiki/Trade_credithttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Constant_purchasing_power_accountinghttp://en.wikipedia.org/wiki/Special_journalhttp://en.wikipedia.org/wiki/General_journalhttp://en.wikipedia.org/wiki/Convergence_of_accounting_standardshttp://en.wikipedia.org/wiki/Chart_of_accountshttp://en.wikipedia.org/wiki/Cash_flow_forecastinghttp://en.wikipedia.org/wiki/Comparison_of_cash_and_accrual_methods_of_accountinghttp://en.wikipedia.org/wiki/Bookkeepinghttp://en.wikipedia.org/wiki/Accrualhttp://en.wikipedia.org/wiki/Accounting_periodhttp://en.wikipedia.org/wiki/Accountanthttp://en.wikipedia.org/wiki/Accountancy


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GAAP/ IFRS

Management Accounting Principles

General ledger

Goodwill

Historical cost

Matching principle

Revenue recognition

Trial balance

Fields of accounting

Cost

Financial

Forensic

Fund

Management

Tax (U.S.)

Financial statements

Balance sheet

Cash flow statement

Income statement

Statement of retained earnings

Notes
http://en.wikipedia.org/wiki/Generally_Accepted_Accounting_Principles_(United_States)http://en.wikipedia.org/wiki/Generally_Accepted_Accounting_Principles_(United_States)http://en.wikipedia.org/wiki/Management_Accounting_Principleshttp://en.wikipedia.org/wiki/Management_Accounting_Principleshttp://en.wikipedia.org/wiki/General_ledgerhttp://en.wikipedia.org/wiki/General_ledgerhttp://en.wikipedia.org/wiki/Goodwill_(accounting)http://en.wikipedia.org/wiki/Goodwill_(accounting)http://en.wikipedia.org/wiki/Historical_costhttp://en.wikipedia.org/wiki/Historical_costhttp://en.wikipedia.org/wiki/Matching_principlehttp://en.wikipedia.org/wiki/Matching_principlehttp://en.wikipedia.org/wiki/Revenue_recognitionhttp://en.wikipedia.org/wiki/Revenue_recognitionhttp://en.wikipedia.org/wiki/Trial_balancehttp://en.wikipedia.org/wiki/Trial_balancehttp://en.wikipedia.org/wiki/Cost_accountinghttp://en.wikipedia.org/wiki/Cost_accountinghttp://en.wikipedia.org/wiki/Financial_accountancyhttp://en.wikipedia.org/wiki/Financial_accountancyhttp://en.wikipedia.org/wiki/Forensic_accountinghttp://en.wikipedia.org/wiki/Forensic_accountinghttp://en.wikipedia.org/wiki/Fund_accountinghttp://en.wikipedia.org/wiki/Fund_accountinghttp://en.wikipedia.org/wiki/Management_accountinghttp://en.wikipedia.org/wiki/Management_accountinghttp://en.wikipedia.org/wiki/Tax_accounting_in_the_United_Stateshttp://en.wikipedia.org/wiki/Tax_accounting_in_the_United_Stateshttp://en.wikipedia.org/wiki/Financial_statementhttp://en.wikipedia.org/wiki/Financial_statementhttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Cash_flow_statementhttp://en.wikipedia.org/wiki/Cash_flow_statementhttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Statement_of_retained_earningshttp://en.wikipedia.org/wiki/Statement_of_retained_earningshttp://en.wikipedia.org/wiki/Notes_to_financial_statementshttp://en.wikipedia.org/wiki/Notes_to_financial_statementshttp://en.wikipedia.org/wiki/Notes_to_financial_statementshttp://en.wikipedia.org/wiki/Statement_of_retained_earningshttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Cash_flow_statementhttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Financial_statementhttp://en.wikipedia.org/wiki/Tax_accounting_in_the_United_Stateshttp://en.wikipedia.org/wiki/Management_accountinghttp://en.wikipedia.org/wiki/Fund_accountinghttp://en.wikipedia.org/wiki/Forensic_accountinghttp://en.wikipedia.org/wiki/Financial_accountancyhttp://en.wikipedia.org/wiki/Cost_accountinghttp://en.wikipedia.org/wiki/Trial_balancehttp://en.wikipedia.org/wiki/Revenue_recognitionhttp://en.wikipedia.org/wiki/Matching_principlehttp://en.wikipedia.org/wiki/Historical_costhttp://en.wikipedia.org/wiki/Goodwill_(accounting)http://en.wikipedia.org/wiki/General_ledgerhttp://en.wikipedia.org/wiki/Management_Accounting_Principleshttp://en.wikipedia.org/wiki/Generally_Accepted_Accounting_Principles_(United_States)


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Management discussion and analysis

XBRL

Auditing

Auditor's report

Control self-assessment

Financial audit

GAAS/ISA

Internal audit

SarbanesOxley Act

Accounting qualifications

CIA

CA

AIA

CPA

CCA

CGA

CMA

CAT

AAT

CFE
http://en.wikipedia.org/wiki/Management_discussion_and_analysishttp://en.wikipedia.org/wiki/Management_discussion_and_analysishttp://en.wikipedia.org/wiki/XBRLhttp://en.wikipedia.org/wiki/XBRLhttp://en.wikipedia.org/wiki/Audithttp://en.wikipedia.org/wiki/Audithttp://en.wikipedia.org/wiki/Auditor%27s_reporthttp://en.wikipedia.org/wiki/Auditor%27s_reporthttp://en.wikipedia.org/wiki/Control_self-assessmenthttp://en.wikipedia.org/wiki/Control_self-assessmenthttp://en.wikipedia.org/wiki/Financial_audithttp://en.wikipedia.org/wiki/Financial_audithttp://en.wikipedia.org/wiki/Generally_Accepted_Auditing_Standardshttp://en.wikipedia.org/wiki/Generally_Accepted_Auditing_Standardshttp://en.wikipedia.org/wiki/International_Standards_on_Auditinghttp://en.wikipedia.org/wiki/International_Standards_on_Auditinghttp://en.wikipedia.org/wiki/International_Standards_on_Auditinghttp://en.wikipedia.org/wiki/Internal_audithttp://en.wikipedia.org/wiki/Internal_audithttp://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Acthttp://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Acthttp://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Acthttp://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Acthttp://en.wikipedia.org/wiki/Certified_Internal_Auditorhttp://en.wikipedia.org/wiki/Certified_Internal_Auditorhttp://en.wikipedia.org/wiki/Chartered_Accountanthttp://en.wikipedia.org/wiki/Chartered_Accountanthttp://en.wikipedia.org/wiki/Association_of_International_Accountantshttp://en.wikipedia.org/wiki/Association_of_International_Accountantshttp://en.wikipedia.org/wiki/Certified_Public_Accountanthttp://en.wikipedia.org/wiki/Certified_Public_Accountanthttp://en.wikipedia.org/wiki/Chartered_Certified_Accountanthttp://en.wikipedia.org/wiki/Chartered_Certified_Accountanthttp://en.wikipedia.org/wiki/Certified_General_Accountanthttp://en.wikipedia.org/wiki/Certified_General_Accountanthttp://en.wikipedia.org/wiki/Certified_Management_Accountanthttp://en.wikipedia.org/wiki/Certified_Management_Accountanthttp://en.wikipedia.org/wiki/Certified_Accounting_Technicianhttp://en.wikipedia.org/wiki/Certified_Accounting_Technicianhttp://en.wikipedia.org/wiki/Association_of_Accounting_Technicianshttp://en.wikipedia.org/wiki/Association_of_Accounting_Technicianshttp://en.wikipedia.org/wiki/Certified_Fraud_Examinerhttp://en.wikipedia.org/wiki/Certified_Fraud_Examinerhttp://en.wikipedia.org/wiki/Certified_Fraud_Examinerhttp://en.wikipedia.org/wiki/Association_of_Accounting_Technicianshttp://en.wikipedia.org/wiki/Certified_Accounting_Technicianhttp://en.wikipedia.org/wiki/Certified_Management_Accountanthttp://en.wikipedia.org/wiki/Certified_General_Accountanthttp://en.wikipedia.org/wiki/Chartered_Certified_Accountanthttp://en.wikipedia.org/wiki/Certified_Public_Accountanthttp://en.wikipedia.org/wiki/Association_of_International_Accountantshttp://en.wikipedia.org/wiki/Chartered_Accountanthttp://en.wikipedia.org/wiki/Certified_Internal_Auditorhttp://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Acthttp://en.wikipedia.org/wiki/Internal_audithttp://en.wikipedia.org/wiki/International_Standards_on_Auditinghttp://en.wikipedia.org/wiki/Generally_Accepted_Auditing_Standardshttp://en.wikipedia.org/wiki/Financial_audithttp://en.wikipedia.org/wiki/Control_self-assessmenthttp://en.wikipedia.org/wiki/Auditor%27s_reporthttp://en.wikipedia.org/wiki/Audithttp://en.wikipedia.org/wiki/XBRLhttp://en.wikipedia.org/wiki/Management_discussion_and_analysis


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CICA

ACCA

CIMA

CGMA

V

T

E

International Financial Reporting Standards(IFRS) are designed as a common global language for

business affairs so that company accounts are understandable and comparable across international

boundaries. They are a consequence of growing international shareholding and trade and are particularly

important for companies that have dealings in several countries. They are progressively replacing the many

different national accounting standards. The rules to be followed by accountants to maintain books of accounts

which is comparable, understandable, reliable and relevant as per the users internal or external.

IFRS began as an attempt to harmonise accounting across the European Union but the value of harmonisation

quickly made the concept attractive around the world. They are sometimes still called by the original name

of International Accounting Standards(IAS). IAS were issued between 1973 and 2001 by the Board of

theInternational Accounting Standards Committee(IASC). On 1 April 2001, the newInternational Accounting

Standards Boardtook over from the IASC the responsibility for setting International Accounting Standards.

During its first meeting the new Board adopted existing IAS and Standing Interpretations Committee standards

(SICs). The IASB has continued to develop standards calling the new standards International Financial

Reporting Standards(IFRS).

In the absence of a Standard or an Interpretation that specifically applies to a transaction, management must

use its judgement in developing and applying an accounting policy that results in information that is relevant

and reliable. In making that judgement, IAS 8.11 requires management to consider the definitions, recognition

criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework.

Contents

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1 Objective of financial statements

2 Qualitative characteristics of financial statements

3 Elements of financial statements (IAS 1 article 10)

4 Recognition of elements of financial statements

5 Measurement of the elements of financial statements

6 Concepts of capital and capital maintenance

7 Concepts of capital

o 7.1 Concepts of capital maintenance and the determination of profit

8 Requirements of IFRS

9 Adoption of IFRS

o 9.1 Australia

o 9.2 Canada

o 9.3 European Union

o 9.4 India

o 9.5 Japan

o 9.6 Montenegro

o 9.7 Pakistan

o 9.8 Russia

o 9.9 Singapore

o 9.10 South Africa

o 9.11 Taiwan

o 9.12 Turkey

10 List of International Financial Reporting Standards

11 See also

12 References

13 Further reading

14 External links

Objective of financial statements[edit]

A financial statement should reflect a true and fair view of the business affairs of the organization. As

statements are used by various constituents of the society / regulators, they need to reflect a true view of the

financial position of the organization, and they are very helpful to check the financial position of the business for

a specific period.
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IFRS authorize three basic accounting models:

I. Current Cost Accounting, under Physical Capital Maintenance at all levels of inflation and deflation under

the Historical Cost paradigm as well as the Capital Maintenance in Units of Constant Purchasing Power

paradigm. (See the Conceptual Framework, Par. 4.59 (b).)

II. Financial Capital Maintenance in Nominal Monetary Units, i.e., globally implementedHistorical cost

accountingduring low inflation and deflation only under the traditional Historical Cost paradigm. (See the

original Framework (1989), Par 104 (a)) [now Conceptual Framework (2010), Par. 4.59 (a)]

III. Financial Capital Maintenance in Units of Constant Purchasing Power,[5]CMUCPPin terms of

aDaily Consumer Price Indexor daily rate at all levels of inflation and deflation (see the original Framework

(1989), Par 104 (a)) [now Conceptual Framework (2010), Par. 4.59 (a)] under the Capital Maintenance in Units

of Constant Purchasing Power paradigm.

The following are the three underlying assumptions in IFRS:

1.Going concern:an entity will continue for the foreseeable future under the Historical Cost paradigm as

well as under the Capital Maintenance in Units of Constant Purchasing Power paradigm. (See Conceptual

Framework, Par. 4.1)

2.Stable measuring unit assumption:financial capital maintenance innominal monetary unitsor

traditionalHistorical cost accountingonly under the traditional Historical Cost paradigm; i.e., accountants

consider changes in the purchasing power of the functional currency up to but excluding 26% per annum

for three years in a row (which would be 100% cumulative inflation over three years or hyperinflation as

defined in IAS 29) as immaterial or not sufficiently important for them to choose Capital Maintenance

inunits of constant purchasing powerin terms of a Daily Consumer Price Index or daily rate [Capital

Maintenance in Units of Constant Purchasing Power] at all levels of inflation and deflation as authorized in

IFRS in the original Framework(1989), Par 104 (a) [now Conceptual Framework (2010), Par. 4.59 (a)].

Accountants implementing the stable measuring unit assumption (traditional Historical Cost Accounting) during

annual inflation of 25% for 3 years in a row would erode 100% of the real value of allconstant real value non-

monetary itemsnot maintained constant under the Historical Cost paradigm.

3.Units of constant purchasing power:Capital Maintenance in Units of Constant Purchasing Power at

all levels of inflation and deflation - including during hyperinflation as required in IAS 29 - in terms of a

Daily Consumer Price Index or daily rate[6]only under the Capital Maintenance in Units of Constant

Purchasing Power paradigm; i.e. the total rejection of the stable measuring unit assumption at all levels of

inflation and deflation. See The Framework (1989), Paragraph 104 (a) [now Conceptual Framework

(2010), Par. 4.59 (a)]. Capital Maintenance in Units of Constant Purchasing Power in terms of a Daily
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Consumer Price Index or daily rate of all constant real value non-monetary items in all entities that at least

break even in real value at all levels of inflation and deflation - ceteris paribus - remedies for an indefinite

period of time the erosion caused by Historical Cost Accounting of the real values of constant real value

non-monetary items never maintained constant as a result of the implementation of the stable measuring

unit assumption at all levels of inflation and deflation under HCA.

It is not inflation doing the eroding. Inflation and deflation have no effect on the real value of non-monetary

items.[1]It is the implementation of the stable measuring unit assumption, i.e., traditional HCA, which erodes the

real value of constant real value non-monetary items never maintained constant in a double entry basic

accounting model.

Constant real value non-monetary items are non-monetary items with constant real values over time whose

values within an entity are not generally determined in a market on a daily basis.

Examples include borrowing costs, comprehensive income, interest paid, interest received, bank charges,

royalties, fees, short term employee benefits, pensions, salaries, wages, rentals, all other income statement

items, issued share capital, share premium accounts, share discount accounts, retained earnings, retained

losses, capital reserves, revaluation surpluses, all accounted profits and losses, all other items in shareholders

equity, trade debtors, trade creditors, dividends payable, dividends receivable, deferred tax assets, deferred tax

liabilities, all taxes payable, all taxes receivable, all other non-monetary payables, all other non-monetary

receivables, provisions, etc.

All constant real value non-monetary items are always and everywhere measured in units of constant

purchasing power at all levels of inflation (including during hyperinflation) and deflation under CMUCPP in

terms of a Daily CPI or daily rate under the Capital Maintenance in Units of Constant Purchasing Power

paradigm. The constant purchasing power gain or loss is calculated when current period constant items are not

measured in units of constant purchasing power.

Monetary items constitute the money supply.

Examples of units of money held are bank notes and coins of the fiat currency created within an economy by

means of fractional reserve banking. Examples of items with an underlying monetary nature which are

substitutes for money held include the capital amount of: bank loans, bank savings, credit card loans, car loans,

home loans, student loans, consumer loans, commercial and government bonds, Treasury Bills, all capital and

money market investments, notes payable, notes receivable, etc. when these items are not in the form of

money held.

Historic and current period monetary items are required to be inflation-adjusted on a daily basis in terms of a

daily index or rate under the Capital Maintenance in Units of Constant Purchasing Power paradigm. The net

monetary loss or gain as defined in IAS 29 is required to be calculated and accounted when they are not
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inflation-adjusted on a daily basis during the current financial period. Inflation-adjusting the total money supply

(excluding bank notes and coins of the fiat functional currency created by means of fractional reserve banking

within an economy) in terms of a daily index or rate under complete co-ordination would result in zero cost of

inflation (not zero inflation) in only the entire money supply (as qualified) in an economy.

Variable real value non-monetary items are non-monetary items with variable real values over time. Examples

include quoted and unquoted shares, property, plant, equipment, inventory, intellectual property, goodwill,

foreign exchange, finished goods, raw material, etc.

Current period variable real value non-monetary items are required to be measured on a daily basis in terms of

IFRS excluding the stable measuring unit assumption under the Capital Maintenance in Units of Constant

Purchasing Power paradigm. When they are not valued on a daily basis, then they as well as historic variable

real value non-monetary items are required to be updated daily in terms of a daily rate as indicated above.

Current period impairment losses in variable real value non-monetary items are required to be treated in terms

of IFRS. They are constant real value non-monetary items once they are accounted. All accounted losses and

profits are constant real value non-monetary items.

Under the Capital Maintenance in Units of Constant Purchasing Power paradigm daily measurement is

required of all items in terms of

(a) a Daily Consumer Price Index or monetized daily indexed unit of account, e.g. the Unidad de Fomento in

Chile, during low inflation, high inflation and deflation and

(b) in terms of a relatively stable foreign currency parallel rate (normally the US Dollar daily parallel rate) or a

Brazilian-style Unidade Real de Valor daily index during hyperinflation. Hyperinflation is defined in IAS 29 as

cumulative inflation equal to or approaching 100 per cent over three years, i.e. 26 per cent annual inflation for

three years in a row.

Qualitative characteristics of financial statements[edit]

Qualitative characteristics of financial statements include:

Relevance (Materiality)

Faithful representation

Enhancing qualitative characteristics include:

Comparability

Verifiability

Timeliness

Understandability
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Elements of financial statements (IAS 1 article 10)[edit]

The financial position of an enterprise is primarily provided in theStatement of Financial Position.The

elements include:

Asset:An asset is a resource controlled by the enterprise as a result of past events from which future

economic benefits are expected to flow to the enterprise.

Liability:A liability is a present obligation of the enterprise arising from the past events, the settlement

of which is expected to result in an outflow from the enterprise' resources, i.e., assets.

Equity:Equity is the residual interest in the assets of the enterprise after deducting all the liabilities

under the Historical Cost Accounting model. Equity is also known as owner's equity. Under the units of

constant purchasing power model equity is the constant real value of shareholders equity.

The financial performance of an enterprise is primarily provided in theStatement of Comprehensive

Income(income statementor profit and loss account). The elements of an income statement or the

elements that measure the financial performance are as follows:

Revenues:increases in economic benefit during an accounting period in the form of inflows or

enhancements of assets, or decrease of liabilities that result in increases in equity. However, it does

not include the contributions made by the equity participants, i.e., proprietor, partners and

shareholders.

Expenses:decreases in economic benefits during an accounting period in the form of outflows, or

depletions of assets or incurrences of liabilities that result in decreases in equity.

Revenues and expenses are measured innominal monetary unitsunder theHistorical Cost

Accountingmodel and inunits of constant purchasing power(inflation-adjusted)under theUnits of

Constant Purchasing Powermodel.

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

Recognition of elements of financial statements[edit]

An item is recognized in the financial statements when:

it is probable future economic benefit will flow to or from an entity.

the resource can be reliably measuredotherwise the stable measuring unit assumption is applied

under the Historical Cost Accounting model: i.e. it is assumed that the monetary unit of account (the

functional currency) is perfectly stable (zero inflation or deflation); it is simply assumed that there is no

inflation or deflation ever, and items are stated at their original nominal Historical Cost from any prior
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date: 1 month, 1 year, 10 or 100 or 200 or more years before; i.e. the stable measuring unit

assumption is applied to items such as issued share capital, retained earnings, capital reserves, all

other items in shareholders equity, all items in the Statement of Comprehensive Income (except

salaries, wages, rentals, etc., which are inflation-adjusted annually), etc.

Under the Capital Maintenance in Units of Constant Purchasing Power (CMUCPP) model, all constant real

value non-monetary items are measured in units of constant purchasing power in terms of a daily index at

all levels of inflation and deflation; i.e. all items in the Statement of Comprehensive Income, all items in

shareholders equity, Accounts Receivables, Accounts Payables, all non-monetary payables, all non-

monetary receivables, provisions, etc.

Measurement of the elements of financial statements[edit]

Par. 99. Measurement is the process of determining the monetary amounts at which the elements of the

financial statements are to be recognized and carried in the balance sheet and income statement. Thisinvolves the selection of the particular basis of measurement.

Par. 100. A number of different measurement bases are employed to different degrees and in varying

combinations in financial statements. They include the following:

(a) Historical cost. Assets are recorded at the amount of cash or cash equivalents paid or the fair value of

the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the

amount of proceeds received in exchange for the obligation, or in some circumstances (for example,

income taxes), at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the

normal course of business.

(b) Current cost. Assets are carried at the amount of cash or cash equivalents that would have to be paid if

the same or an equivalent asset was acquired currently. Liabilities are carried at the undiscounted amount

of cash or cash equivalents that would be required to settle the obligation currently.

(c) Realisable (settlement) value. Assets are carried at the amount of cash or cash equivalents that could

currently be obtained by selling the asset in an orderly disposal. Assets are carried at the present

discounted value of the future net cash inflows that the item is expected to generate in the normal course

of business. Liabilities are carried at the present discounted value of the future net cash outflows that are

expected to be required to settle the liabilities in the normal course of business.

Par. 101. The measurement basis most commonly adopted by entities in preparing their financial

statements is historical cost. This is usually combined with other measurement bases. For example,

inventories are usually carried at the lower of cost and net realisable value, marketable securities may be

carried at market value and pension liabilities are carried at their present value. Furthermore, some entities
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use the current cost basis as a response to the inability of the historical cost accounting model to deal with

the effects of changing prices of non-monetary assets.

Concepts of capital and capital maintenance[edit]

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Concepts of capital[edit]

Par. 102. A financial concept of capital is adopted by most entities in preparing their financial statements.

Under a financial concept of capital, such as invested money or invested purchasing power, capital is

synonymous with the net assets or equity of the entity. Under a physical concept of capital, such as

operating capability, capital is regarded as the productive capacity of the entity based on, for example,

units of output per day.

Par. 103. The selection of the appropriate concept of capital by an entity should be based on the needs of

the users of its financial statements. Thus, a financial concept of capital should be adopted if the users of

financial statements are primarily concerned with the maintenance of nominal invested capital or the

purchasing power of invested capital. If, however, the main concern of users is with the operating

capability of the entity, a physical concept of capital should be used. The concept chosen indicates the

goal to be attained in determining profit, even though there may be some measurement difficulties in

making the concept operational.

Concepts of capital maintenance and the determination of profit[edit]

Par. 104. The concepts of capital in paragraph 102 give rise to the following two concepts of capital

maintenance:

(a) Financial capital maintenance. Under this concept a profit is earned only if the financial (or money)

amount of the net assets at the end of the period exceeds the financial (or money) amount of net assets at

the beginning of the period, after excluding any distributions to, and contributions from, owners during the

period. Financial capital maintenance can be measured in eithernominal monetary unitsorunits of

constant purchasing power.

(b) Physical capital maintenance. Under this concept a profit is earned only if the physical productive

capacity (or operating capability) of the entity (or the resources or funds needed to achieve that capacity)

at the end of the period exceeds the physical productive capacity at the beginning of the period, after

excluding any distributions to, and contributions from, owners during the period.

The concepts of capital in paragraph 102 give rise to the following three concepts of capital during low

inflation and deflation:
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(A) Physical capital.[2]See paragraph 102&103

(B) Nominal financial capital.[2]See paragraph 104.[3]

(C) Constant item purchasing power financial capital.[2]See paragraph 104.[4]

The concepts of capital in paragraph 102 give rise to the following three concepts of capital maintenance

during low inflation and deflation:

(1) Physical capital maintenance:[2]optional during low inflation and deflation. Current Cost

Accounting model prescribed by IFRS. See Par 106.

(2) Financial capital maintenance innominal monetary units(Historical cost

accounting):[2]authorized by IFRS but not prescribedoptional during low inflation and deflation. See

Par 104 (a)Historical cost accounting.Financial capital maintenance innominal monetary unitsper se

during inflation and deflation is afallacy:it is impossible to maintain the real value of financial capital

constant with measurement in nominal monetary units per se during inflation and deflation.

(3) Financial capital maintenance inunits of constant purchasing power[2](Capital Maintenance

in Units of Constant Purchasing Power):[5]authorized by IFRS but not prescribedoptional during low

inflation and deflation. See Par 104(a). Capital Maintenance in Units of Constant Purchasing Power is

prescribed during hyperinflation in IAS 29:[6]i.e. the restatement of Historical Cost or Current Cost

period-end financial statements in terms of the period-end monthly published Consumer Price

Index.[7]Only financial capit

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