International Financial Reporting Standards

Finance - International Financial Reporting Standards are standards and interpretations adopted by the International Accounting Standards Board.

Many of the standards forming part of International Financial Reporting Standards are known by the older name of International Accounting Standards. International Accounting Standards was issued between 1973 and 2001 by the board of the International Accounting Standards Committee. In April 2001 the International Accounting Standards Board adopted all International Accounting Standards and continued their development, calling the new standards International Financial Reporting Standards.

Objective of financial statements

the framework states that the objective of financial statements is to provide information about the financial position, performance and changes in the financial position of an entity that is useful to a wide range of users in making economic decisions.

Underlying assumptions

The underlying assumptions used in International Financial Reporting Standards are:

• Accrual basis - the effect of transactions and other events are recognized when they occur, not as cash is received or paid.
• Going concern - the financial statements are prepared on the basis that an entity will continue in operation for the foreseeable future.

Qualitative characteristics of financial statements

The Framework describes the qualitative characteristics of financial statements as being:

• Understandability
• Relevance
• Reliability
• Comparability

Elements of financial statements

The Framework sets out the statement of financial position (balance sheet) as comprising:

• Assets - resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
• Liabilities - a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
• Equity - the residual interest in the assets of the entity after deducting all its liabilities
and the statement of comprehensive income (income statement) as comprising:
• Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or reductions in liabilities.
• Expenses are decreases in such economic benefits.

By Randika Lalith Abeysinghe