2. How does the International Accounting Standard Board (IASB) achieve its objectives?
Discuss the qualitative characteristics identified by the IASB for preparation of financial statements.
In order to meet their objectives financial statements are prepared on an accruals basis. Transactions and events are simply recognised at the point when they occur and are matched to the period in the financial statements to which they relate.
Financial statements are usually prepared on the assumption that the reporting entity is a going concern and is likely to operate for the foreseeable future. The assumption here is that the reporting entity has no intention to liquidate or to adversely curtail its scale of activities. If this is the case then a different basis of reporting may be necessary and the basis disclosed.
Qualitativecharacteristics of financial statements.
The attributes that make information useful to users include:
A primary characteristic of financial information is that it should be readily understandable by the user. This assumes the user has knowledge of the business, its economic activity and accounting concepts. This should not deter the reporting entity from including complex matters in the financial reports.
Information possesses the attribute of relevance when it influences the economic decisions of users by aiding the evaluation of past, present and future events in both a predictive and confirmatory way.
For information to be useful it must be reliable. It must therefore be free from error or bias and present a faithful representation. Information could in certain circumstances be relevant but unreliable.
Preparers of financial statements need to address uncertainty, for example collection of receivables and the provision for bad and doubtful debts. In such instances there is a need to exercise prudence in preparation of the financial statements.
Prudence is the inclusion of a degree of caution in the judgement required to raise a provision to cover elements of uncertainty.
Comparability provides the facility for the comparison of performance of the reporting entity over time. Also the analysis of performance of different entities may be considered.
2. How does the International Accounting Standard Board (IASB) achieve its objectives? Discuss the qualitative characteristics...
How does the International Accounting Standard Board (IASB) influences financial reporting in Australia?
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Which of the following is true about the International Accounting Standards Board (IASB)? The IASB has been working with the FASB in recent years to achieve convergence of International Financial Reporting Standards (IFRS) and U.S. GAAP. The goal of the IASB is to develop a single set of high quality, understandable, enforceable, and globally accepted financial reporting standards based upon clearly articulated principles. The SEC has delegated full authority to the IASB to be the accounting standards setting body in...
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