Accounting standards are issued by the International Accounting Standards Board (IASB), and are adopted by listed companies in the European Union when they produce accounts.
IFRS and IAS
When the IASB replaced the International Accounting Standards Committee (IASC) in 2001, it adopted the previous International Accounting Standards (IAS), but began issuing future standards as International Financial Reporting Standards (IFRS).
IFRS cover a number of different aspects of accounting from IAS, ranging from the presentation of financial accounting and the treatment of intangible assets, to the treatment of leases in accounts.
Why use IFRS and IAS?
IFRS and IAS apply to the way limited companies produce financial statements, standardising the way accounts are calculated and reported on to ensure consistency throughout.
They make accounts more transparent and ethical, preventing information from being hidden or missed, and avoiding deliberate deception.
Standards you need to know
As an accountant you need to be aware of current standards when producing sets of accounts for limited companies, as you must comply with the rules set out in them.
Some of the more common standards you will be expected to know include IAS 2 Inventories, IAS 16 Property, Plant and Equipment and IAS 7 Statement of Cash Flows.
Let’s take a closer look at these.
IAS 2 Inventories: This sets out the requirements for accounting for inventories. According to this standard, inventories must be measured at the lower of cost and net realisable value. It authorises stock valuation methods such as first-in first-out (FIFO) and weighted average cost.
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IAS 16 Property, Plant and Equipment: This standard addresses issues to do with property, plant and equipment, including recognition of assets, determination of carrying amounts, and depreciation charges and impairment losses.
IAS 7 Statement of Cash Flows: This standard establishes that companies must produce statements of cash flow as part of their primary financial statements. It classifies cash flows as operating, investing or financing activities.
For some IAS and IIFRS, you only need to have a basic awareness, as you will be able to look them up when required. However, you do need to keep up with changes in standards as part of your continuous professional development, as they can change or be completely removed, which will impact on your role if you work on the accounts of limited companies.
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