IAS 8 Best summary policies estimates and errors

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IAS 8 Best summary policies estimates and errors comprises a high level summary of the three items in this standard:

  1. Accounting policies,
  2. Accounting Estimates
  3. Errors

1. Accounting policies

Definition:

Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.

Selection and application of accounting policies:

  • If a standard or interpretation deals with a transaction, use that standard or interpretation
  • If no standard or interpretation deals with a transaction, judgment should be applied. The following sources should be referred to, to make the judgement:
    • Requirements and guidance in other standards/interpretations dealing with similar issues
    • Definitions, recognition criteria in the framework
    • May use other GAAP
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Events after the Reporting period

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When should a reporting entity recognise events after the reporting period in the financial statements that are being finalised?

What are the disclosures that should be given about the date when the financial statements were authorised for issue and about the events after the reporting date?

The answers look a bit colorful but are spot on and short……

The events

The three important terms were it is all about are:

1. Events after the reporting period:

are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. (IAS 10 3 Definitions)

2. Adjusting events:

are events occurring after the reporting Read more

Valuation of unquoted equity instruments

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Valuation of unquoted equity instruments – The three valuation approaches and techniques described in IFRS 13 are: Valuation of unquoted equity instruments

IFRS 13  does not prescribe a specific valuation technique, but encourages the use of professional judgment together with consideration of all facts and circumstances surrounding the measurement. These three different valuation approaches could be applied in determining the fair value of an unquoted equity instrument. However, regardless of the valuation technique used, the fair value measurement of those equity instruments must reflect market conditions at the investor’s reporting date.

Market approach

The market approach uses prices and other relevant information generated by market transactions involving … Read more

The Role of Financial Reporting

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The Role of Financial Reporting – How does financial reporting information fit into business? Financial reporting ultimately serves a number of different desired outcomes. One of these is economic growth. It does not promote growth directly; instead, growth is promoted through a number of subordinate outcomes. One of these could be described as good business performance. This in turn is promoted through subordinate outcomes that could be described as good business decisions and good management. Financial reporting information is one type of information that helps people understand whether desired outcomes are being achieved. Have good decisions been made? Have they been well implemented? Have they led to good performance?

Good business decisions covers all business-related decisions … Read more

Assessing information quality for measurement

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Assessing information quality for measurement – The Conceptual Framework provides the foundation for Standards and Accounting Guidelines that:

  1. contribute to transparency by enhancing the comparability and quality of financial information, enabling investors and other market participants to make informed economic decisions.
  2. strengthen accountability by reducing the information gap between the providers of capital and the people to whom they have entrusted their money. Standards and Accounting Guidelines based on the Conceptual Framework provide information needed to hold management to account. As a source of comparable information, those Standards and Accounting Guidelines are also of vital importance to regulators.
  3. contribute to economic efficiency by helping investors to identify opportunities and risks, thus improving capital allocation. For businesses, the
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Drawbacks and Benefits of Intangible assets

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Drawbacks and Benefits of Intangible assets – Intangibles have become a more prominent reporting line in IFRS financial reporting. Here are some remarks on their current use.

Benefits of Intangible assets Drawbacks and Benefits of Intangible assets

Intangible assets form a major proportion of the modern businesses and are a primary area of discussion during the modern company analysis. Brand name, employee and management skills, Research and Development activities, IT systems, stakeholder relations are significant factors to determine any country’s success.

The major factors such as customer satisfaction, continuous innovation, Product and service quality as well as the financial profitability and ability to leverage the opportunities present in the market depend upon these intangible assets. To summarize, … Read more

Timeliness

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Timeliness – An enhancing qualitative characteristic possessed by information that is available to decision-makers in time to be capable of influencing their decisions.

The Conceptual Framework provides the following guidance [Conceptual Framework 2.33]:

Timeliness means having information available to decision-makers in time to be capable of influencing their decisions. Generally, the older the information is the less useful it is. However, some information may continue to be timely long after the end of a reporting period because, for example, some users may need to identify and assess trends.

There may also be trade-offs with accuracy to the extent that information can be improved with the benefit of hindsight, and with reliability if independent checks would … Read more