International Accounting Standards
IAS 1 – Presentation of Financial Statements
Introduction to the IAS:
This is an international financial reporting standard which was adopted by the IASB(International Accounting Standards board).It refers to the skeleton and the way in which the financial statements are presented in order to reflect the proper view enabling analysis of information and decision making. The minimum requirements for the contents are well elaborated in this standard. This standards is therefore practically applicable to all financial statements based on the IFRSs (International Financial Reporting Standards).This standard was initially issued in the year 2007 by the International Accounting Standards Committee (Balthazar, 2011:20). It was therefore regarded as the first accounting standard to deal fully with the full presentation of financial statements including both full disclosure and the requirements of presentation. The last amendment to IAS1 was on June 2011 and it became effective on the year 2012.It was also comprehensive due to its full capacity to accommodate all aspects relating to the presentation of financial statements.
This standard clearly outlines the purpose and role of financial statements in providing the necessary information concerning, the cash flows of an organization as well as financial performance of that entity. It also provides the formats and schedules on how important aspects like assets, liabilities, expenses and incomes are presented and how they flow.
IAS1 gives a detailed ensures that the financial statements are presented fairly and in compliance with the IFRSs. It also ensures that the financial statements takes into consideration the going concern concept that there is continual existence of the entity. It also facilitates the use of the accrual basis principle of accounting such that the both the prepayments and accruals are treated in the right manner and accordingly to the accounts they relate to. The material classes are also taken into consideration in this standard where only material items are presented separately while many small materials o low values are aggregated in order to be reported under one heading. It also provides that the assets and liabilities should not be offset.IAS1 also ensures that the financial statements are prepared on an annual basis. It also provides the aspects relating to comparison of financial statements from one period to another. The aspects of consistency are also heavily covered under this standard so as to facilitate comparison of performance due to uniformity of principles and conventions used from one financial period to another.
Disclosures:
The main financial statements outlined in this standard includes the Statement of financial position, Statement of cash flows and the statement of comprehensive income.
Key Definitions:
Going concern concept: This refers to the function of business which states that there are no threats relating to liquidation therefore the business contuse to be in existence.
Accruals concept: this refers to the accounts on the balance sheet which are used to represent the items which are non-cash based as well as liabilities.
IAS 2 – Inventories:
Introduction to the IAS
IAS2 is an international financial reporting standard which that was initiated and supplied by the (IASB) International Accounting standards Board and the standard is meant to provide the guiding principles on classification and valuation of inventories. The standards clearly states that inventories are assets in the following forms:
i).Held for sale in the daily operations of the business
ii).Assets in the process of production for sale or
iii).Supplies or materials to be used in rendering of services or the production processes.
Main Objectives/Scope
The main purpose of IAS2 is streamlining the methods of accounting for inventories. It therefore aims at valuation of inventory in relation to costs in order to determine the exact value of the components of inventory. The standard therefore provides the guiding principles concerning the costs and the respective expenses which accompany the cost of inventory (Ruwaard, 2012:16).
The scope of IAS2 contains all aspects relating to all inventories with an exception of construction contracts. Biological wealth are also taken into consideration in the IAS2 which includes agricultural products at harvesting. This standard is however not applicable to the products related to agriculture, after harvest and mineral products. The scope of this standard also entails calculation of the values of products whose value has reached a specific stage for example in the case of agricultural products or manufacturing products. This standard also contains the aspects relating to narrowing the chances for brokers and mediators in the sale of inventory.
The main aspects covered in this standard are the issues of measurement and ascertainment of costs of the inventories. The costs relating to exchange, manufacture and other expenses incurred to bring the inventories to the current location and condition are taken into consideration by this standard because they are relevant in accounting for inventories. The aspects of process costing are also accounted for in this standard in order to determine the amount of products which are complete at the end of the financial period thereby enabling the actual value and inventories. In computation of the cost of inventories the cost of waste products and materials are taken into consideration in order to get an accurate and appropriate value of the product.
Disclosures:
The assets considered to be inventory are recorded at lower of net realizable value and cost. Cost entails various components like conversion costs as well as purchase costs. This standard also provides that fixed overheads and variables should be capitalized so long as the fixed costs are allocated in the appropriate and systematic manner and output levels criteria. The excesses or shortages of output with respect to fixed overhead costs are accounted for in accordance with guidelines provided in this standard. The evaluation methods of inventory First In First Out and First In Last Out which are used to treat costs depending on the objectives of the organization or business entity.
Key DefinitionsInventories: These are the consumer goods or assets produced during the production process
Net realizable value (NRV): This refers to the amount which is expected to be realized when inventory is sold. This value is specific to a specific entity.
Fair value: This refers to the market price for the inventories.
IAS 16 – Property, Plant & Equipment.
Introduction of IAS:
This international standard was adopted by IASB. This entails the aspect of accounting for property, plant and equipment (PPE).Recognition involves determining the current amounts of assets, impairment charges as well as depreciation charges relating to the fixed assets. This standard was initially issued by the International Accounting Standards Board in the year 1993.the last amendments to IAS16 were made in July 2012.This standard does not take into consideration the items which are categorized as held for sale. The fixed assets relating to minerals explorations and biological or assets agriculture are not covered under this under this standard. Investment properties are also not included in this standard (Quick, 2009:14).
The main objective of IAS 16 is the prescription of the treatment of property, plant and equipment in relation to their actual values after adjusting for depreciation charges and impairment losses.
In relation to the scope of IAS16,it does not cover aspects relating to the assets which are classifies as held for sale, biological assets in the case of agricultural activities as well as evaluation and exploration of assets. The mineral reserves and rights are also not covered in this standard.
The aspects relating to de-recognition of property, plant and equipment are also discussed in detail in order to determine the gains and losses on disposal of such assets. The aspects and extent of recoverability of such property, plant and equipment are also given emphasis in this standard.
Disclosures:
IAS16 states clear states the items for each class of property, plant and equipment to be recognized in the financial statements. The standard also provides for ways of measuring the carrying amounts, useful lives of assets, depreciation techniques to be used and the values of accumulated depreciation and impairment losses. The items relating to additions, disposals, changes in revaluation, impairment losses or reversal of the impairments should also be taken into consideration. The changes in foreign earnings and other movements should also be taken into consideration under IAS16.
Key Definitions:
Carrying value: This is the value of a specific asset as indicated by the balance sheet. It is usually computed by deducting amortization costs and depreciation from the Cost of the asset.
Depreciation:
This refers to the decline in the value of an asset. It may also be termed as the process where the costs of assets are allocated to the actual periods where such assets were used.
Impaired asset:
This refers to an asset whose market value is less than the carrying amount of that asset. The value of the asset is therefore lower than the book value of that asset.
References
Baltazar, E., & Ernst & Young (2011). International GAAP 2012: Generally Accepted Accounting Practice under International Financial Reporting Standards. Chichester, West Sussex: John Wiley & Sons.
Quick, R. (2009). Kommentierung zu IAS 16 Sachanlagen (Property, Plant and Equipment).
Ruwaard, J., Lange, A., Schrieken, B., Dolan, C. V., & Emmelkamp, P. (2012). The Effectiveness of Online Cognitive Behavioral Treatment in Routine Clinical Practice. PLOS One. doi:10.1371/journal.pone.0040089
