Assignment Sample on Accounting Policies of Companies Reporting
Introduction
The IFRS stands for “International Finance reporting standard”. IFRS helps to reduce the information gap between two concerning parties. These concerning parties are involved in an organization. The IFRS standards are a crucial aspect of global finance. The IFRS standards help the business to be accountable to their investors. Thus, the IFRS helps to mitigate the information gap between the business organization and the financial institution from which the businesses have taken the fund to run the business. Or it can be an individual investor. So, in other terms, the IFRS standards hold the business management to account in front of their investors. The IFRS helps the investors to make informed decisions about their investment. And the standards also help to provide the informed knowledge after the investment is made.
This paper will discuss the key aspect of some of the accounting policy which is set by the IFRS standards. This paper also discusses the different types of accounting policies that exist and which can help the business to report their financial statement, and the research on the paper is conducted on the various policies that are implemented by various companies across the globe.
Discussion
Accounting policies
The accounting policy helps the company to follow the structure for their cash flow. This section will discuss the different accounting policies that an organization will adopt according to the goal or the objectives of that financial year (Grosu,et al. 2019). This accounting policy will help to reduce the communication gap between the investor and the business organization. The following section will discuss the different account policies that the business is using to mitigate the information gap between the investor and the business management.
IAS 16
The ” IAS 16 accounting policy” is applicable to the three entities of the organization; the organization is known as the “Property, Plant. And Equipment”. “This is known as the PPE guideline”. the purpose of using the PPE act is that it provides a descriptive “accounting treatment of the property, plant, and equipment” (Derzayeva, 2020). This standard recognizes all the assets and liabilities that are involved in these three concerning domains of the business. Along with that, the standards also help the business to find out the depreciation rate of the asset and the losses of equipment.
IAS 38
IAS 38 has been involved in identifying the assets of an organization which is intangible in nature. The “international standard for accounting 38” helps to prescribe the intangible assets of the organization. The prescribing asset of the organization must not be under another IFRS standard. The standard has certain criteria (Duzert, 2018). Once certain criteria are met, then the asset will be declared under this standard.
IAS 40
The “international standard for accounting 40” has set the proper guideline to describe the property of an organization. The investment property can be recognized such as: “Land or the building”. The guideline initially measures the cost (Bohušová, 2017). Once the cost of the property is measured, then a fair value guideline will be set. Once the guideline is set, “this will give a clear indication of the difference between the model price and the actual price if the actual value is less than the model value”. Then it is profitable, and else it will be in a loss condition.
IAS 2
This “standard of international accounting 2” is responsible for describing the inventory department of an organization (Аlibekovaet al. 2017). This standard provides all detailed aspects of the inventory. These details include expense, cost. This guideline helps the business to decide the cost of the inventory.
IFRS 3
The “International Finance report standard” is the guideline set by the international regulatory body. The IFRS 3 helps to mitigate the information gap between the business management and the business investor (Panchenko, 2018). “These guidelines help to decide the fair market value at the time of business acquisition or at the time of any business merger”.
IAS 1
The purpose of “this standard of the international accounting board is to describe the general Financial statement of the business”. These guidelines help to decide the requirement needed to present the financial statement in an organization (Panchenko, et al.2018). This guideline helps to understand where the company is situated in terms of performance from their competitors.
Finding
“IFRS-10 consolidated financial statement”
“IFRS 10 The Consolidated Financial Statements “detail the conditions that the companies must combine regulated entities for preparing and reporting of “consolidated financial statements”. Control demands visibility or access to current shareholders and the potential to influence these results via an investor’s control.
“In May 2011, IFRS 10” extends to annual reporting periods starting or ending on or around “1 January 2013”.
Key finding:
“IFRS 10” aims to lay down rules for the preparation of combined accounts, where one person manages one or so other institutions (Plutytska, 2019). The regulations require a people are responsible (the company that controls one or so other institutions) to submit consolidated accounts to define the organ consisting, which sets control as a basis for consolidating how the organically modified should be used to determine whether the shareholder regulates an investor.
History
| Date | Development | Comments |
| “April 2002” | IFRS added the project to its agenda | Deadline March 2009 |
| “December 2008” | ED 10 published | |
| “Sept 2010” | Drafts of staffs of CFS published | Annual periods beginning in Jan 2013 |
| “May 2011” | IFRS 10 published | Effective periods begin after 2013 |
| “June 2012” | “Joint arrangement and disclosure of interest” have been published | Effective periods begin after 2014 |
Income reports of a company which includes the parent and its “subsidiaries’ properties, liabilities, equities, earnings, expenditures and cash flows
Investor control”When an investor is exposed or is entitled to unpredictable returns from his interaction with the investor, an investor monitors the investor and may influence those returns with his leverage over the investor. Person of investment an institution that: “receives funds from one or more investors to provide investment management services to the investor (s).”
Control
An investor will decide whether a parent owns one or more investors. When deciding whether it controls a shareholder, the investor evaluates all the necessary available evidence. A shareholder influences and will influence the returns whether an investor is subject to or entitled to variable returns from their participation in the investor. An investor is an investor only if and only if it has all the following components: authority over the investor. For example, the investment has existing powers to guide the activities concerned.
The privileges give rise to power. These can be easy or complicated such as by means of voting rights that are “embedded in contractual arrangements”. A shareholder with security rights alone cannot “control an investment person and thus cannot control an investor [IFRS 10:11, IFRS 10:14]”.
A shareholder should be subject to unpredictable returns from his participation with an investor in order to manage the investor (Khotamov, 2021). “Such returns may vary according to the investor’s success and maybe favorable, negative or both. [10:15 IFRS]”
A parent should also be entitled to use its own leverage over the investor, to influence the returns of an investor from its association with the investor, and to expose or to “varying returns. [10:17 IFRS]”.
An investor with decision-making powers decides, by deciding whether an investor owns an investor, whether he functions as an agent or as an agency of other entities. In making this evaluation, a variety of variables are weighed. For example, “the decision-remuneration maker is perceived to be an agent. IFRS 10: B58, IFRS 10: B60 IFRS 10: B58”.
Measurements
An object, plant, and machinery should be registered at cost initially. ” [IAS 16] [IAS 16 .15] Cost covers the expenses needed to make the asset perform with its planned purpose”. Not just their initial acquisition expense, but also their site planning, delivery and storage costs, implementation costs, associated fees for the scientists and designers, and projected cost of demolishing, removing, and rebuilding the site would also be included (” IAS 37 Provisions, Contingent Liabilities, and Contingent Assets). [IAS 16.16-17] (Sakun, 2020). Specifications”. If the compensation is postponed for an item, plant, and device, interest shall be recognized or imputed at a market rate. ” [IAS 16] [IAS 16 .23]
Where an asset is exchanged for another asset (whether equivalent or different in nature), costs are calculated at market value, unless” (a) there is no economic material in the swap contract or (b) there is no fair value for either the purchased or the abandoned asset. If the object is not valued at equal value, the expense is calculated at the price of the asset that has been transferred. “[IAS 16] [IAS 16 .24]”.
Procedures
Combine the carrying amount of the parent’s investment in any of the companies and the parent’s equity part in each subsidiary “(IFRS 3 Business Combinations explains how to account for the goodwill related to this)” in full intragroup assets and passivates, as well as items of asset, liabilities, equity, and revenue. “The parent’s expenditures and cash flows compensate (eliminate) (profits or losses resulting from intragroup transactions that are recognized in assets, such as inventory and fixed assets, are eliminated in full)”.
An accounting person shall contain in the “consolidated financial statements’ an affiliate’s revenue and expenditure from the date of management up to the date of cessation of branch management by the reporting entity. The subsidiary’s income and costs were dependent on the asset and liability figures recognized on the purchase date of the “consolidated financial statements”. ” [10: B88 IFRS] The parent and subsidiaries must have the same filing or consolidation dates” unless it is feasible for them to provide extra financial reports.
Evaluation of the finding
For all the stakeholders
A system-based allocation over the productive life of the commodity “(IAS 16.50) should be the depreciable quantity (cost less residual value)”. At least at any fiscal week, the residual value and the useful life of the asset should be examined, and any changes are taken into consideration in the future as an estimation adjustment in accordance with “IAS 8”, “where forecasts vary from previous projections. [IAS 16] [IAS 16 .51]” The accounting policies used should represent the trend of the economic benefits of the asset consumed by “the company [IAS 16.60]”; it is not sufficient to depreciate the depreciation method dependent on the revenues of the business which involves the usage of an “asset. [IAS 16] [IAS 16 .62A]”.
At least every year, the method of depreciation should be checked and, if the trend of profit use has shifted, the method of depreciation should be modified in the future as an adjustment to the “IAS 8 estimation. [IAS 16] [IAS 16.61]” An anticipated future sale price drop may indicate a higher consumption rate of “future asset-incorporated economic benefits. [IAS 16] [IAS 16.56]” Unless otherwise provided in the carry-force of another “, “asset [IAS 16.48],” a depreciation should be paid for benefit or damage. Devaluation starts when the asset is ready for use and lasts until, even when it is idle, the asset is detected. “[IAS 16] [IAS 16 .55]”
Conclusion
The IFRS standards are designed in such a way that they can allow the accounting to be more consistent, and at the same, the IFRS standards help the investor to be more educated. This will allow the investor to make better-informed decisions in their investment. The IFRS standards are created by the internal regulatory body. The international regulatory body is known as the ” International Accounting Standards Board,” shortly known as the IASB. The IFRS standards increase the transparency between the investor and the organization, and it also increases the consistency in the financial reporting section of an organization.
So, to conclude, the “IFRS and the IAS” have different sets of account policies. This diversity will help the company to pick any kind of accounting policy according to their business domain. This accounting policy will engage their shareholder to be more interested in the business. And also encourage them to actively participate in a business discussion. This will provide the business with a diverse perspective, which can prove to be a beneficial addition in the future.
Reference List
Journals
Cosmulese, C.G. and Grosu, V., 2019. INFLUENCES OF NEW IFRS ON CONSOLIDATED FINANCIAL REPORTING. The USV Annals of Economics and Public Administration, 19(2 (30)), pp.185-191.
Dias, M., Teles, A. and Duzert, Y., 2018. DID EMBRAER SUCCEED IN ADOPTING THE INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) IN BRAZIL?. European Journal of Accounting, Auditing and Finance Research, 6(2), pp.51-62.
Habanec, P. and Bohušová, H., 2017. Comparison of Deferred Tax Materiality Reporting in Accordance with Continental and Anglo‑Saxon Reporting System. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 65(6), pp.1917-1924.
Issakova, S.A., Moldabekova, A.S., Kenzhebayeva, M.T., Аlibekova, V.N. and Tuleyeva, G.T., 2017. Preparing consolidated financial statements in accordance with IFRS.
Panchenko, O., 2018. Improvement of the accounting policy of the small business enterprises in its transition to IFRS: investment and innovation aspects. Technology audit and production reserves, (5 (4)), pp.33-39.
Pavithran, A., Selvam, M., Gopinath, R. and Kathiravan, C., 2018. Effects of Adopting International Financial Reporting Standards: An Empirical Evidence from selected Indian companies. Management, 5(4), pp.137-147.
Proskurina, N.M. and Plutytska, K.M., 2019. Formation of the accounting policies based on ias and their impact on financial performance. Bulletin of Zaporizhzhia National University. Economic Sciences, (4 (44)), pp.67-72.
Rizaev, N. and Khotamov, K., 2021. THE NEED TO USE FOREIGN EXPERIENCE IN THE FORMATION OF ACCOUNTING POLICIES. International Finance and Accounting, 2021(1), p.15.
Sakun, A., 2020. ACCOUNTING POLICY AS AN OBJECTIVE FACTOR OF DEVELOPMENT OF THE ACCOUNTING SYSTEM OF UKRAINE.
Shbeilat, M.K. and Al Harasees, M.N., 2018. Do Listed Companies Need an IFRS Committee Beside Audit Committee?. International Journal of Academic Research in Accounting, Finance and Management Sciences, 8(2), pp.8-18.
Surkova, E.V., Skachko, G.A., Nikandrova, L.K., Starkova, M.M. and Sakharova, N.F., 2021. Approaches to the Organization of International Accounting in Russian Enterprises.
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