An IFRS Overview with Peter Thatcher BSc FCA
What’s on the agenda? • What does ‘complying with IFRS’ mean? • Who uses IFRS? • Who is involved in the standard setting process? • What IFRS and IAS are currently in issue? • What are the IASB’s plans for future standards? • Where can you find out more?
What does ‘complying with IFRS’ mean?
Complying with IFRS • IAS 1 requires entities whose financial statements comply with IFRS to make an explicit and unreserved statement of such compliance in the notes • Financial statements should not be described as complying with IFRS unless they comply with all applicable requirements
IFRS defined • IAS 1 defines IFRS as standards and interpretations issued by the International Accounting Standards Board which comprise: – International Financial Reporting Standards – International Accounting Standards – IFRIC Interpretations – SIC Interpretations
Who uses IFRS?
The aim of the IASB • To develop a single set of high quality, global accounting standards that require transparent and comparable information in general purpose financial statements
The benefits of IFRS • Transparency • Accountability • Efficiency
Who uses IFRS? • 126 jurisdictions require IFRS to be used by all or most domestic publicly listed companies – Another 12 jurisdictions permit the use of IFRS by these companies • The IFRS Foundation website (ifrs.org) contains profiles of 150 jurisdictions which highlight: – Each jurisdiction’s commitment to global financial reporting standards and – The extent of IFRS application in that jurisdiction
European Union • IFRS (as adopted by the EU) are required for the consolidated financial statements of all European companies whose debt or equity securities trade in a regulated market in Europe • Individual member states may also require or permit IFRS for: – Small securities exchanges that are not deemed regulated markets – Separate financial statements of companies whose securities trade on a regulated market – Consolidated and separate financial statements of companies whose securities do not trade on a regulated market
United States • Since 2002, the IASB and FASB agreed to work together to remove differences between IFRS and US GAAP – This was addressed in a Memorandum of Understanding (Norwalk Agreement) • US companies whose shares are traded in a public market are not permitted to use IFRS • Other US companies may in certain circumstances use IFRS • Foreign companies whose shares are traded in a public market are permitted to use IFRS
Who is involved in the standard setting process?
Key bodies Monitoring Board Oversee trustees and approve their appointment IFRS Foundation 22 trustees Provide governance and oversight of the IASB IASB IFRS Interpretations Committee 14 members 14 voting members Responsible for the approval of Supports IASB standards, exposure drafts and Responds to questions about interpretations application of standards
Other bodies • IFRS Advisory Council – Provides advice and counsel to the IASB and the Foundation Trustees • Accounting Standards Advisory Forum – Supports the Foundation and facilitates technical discussions on standard-setting issues • Standing consultative groups • Transition resource groups
An overview of the standard setting process Including amendments to standards
Agenda consultation • Every five years, the IASB conducts a comprehensive review and consultation to define the standard-setting priorities and develop its project work plan – Topics may be added to the work plan between agenda consultations
Research • Consider the issues • Identify possible solutions • Develop and issue for public comment a discussion document • Consider the comments received on the discussion document within the consultation period • Decide whether to progress to developing a new standard
Developing a standard • Develop and issue for public comment an exposure draft – Include any dissenting opinions of IASB members – Include a basis for conclusions and alternative views of any IASB member who opposes publication • Consider comments received on the exposure draft within the consultation period • Hold public hearings and conduct field tests as required • Make amendments to the exposure draft as required
Issuing a standard • Approval is required by nine members of IASB (if fourteen members) – The standard specifies the effective date – The standard is accompanied by: • The basis for conclusions (including an effect analysis) and • The details of any dissenting opinions of IASB members
What IFRS and IAS are currently in issue?
Overview • Effective for accounting periods commencing on or after 1 January 2018 – 26 IAS – 15 IFRS • Plus IFRS for SMEs – 22 Interpretations
IAS effective for accounting periods commencing on or after 1 January 2018 IAS 1 Presentation of financial statements IAS 2 Inventories IAS 7 Statement of cash flows IAS 8 Accounting policies, changes in accounting estimates and errors IAS 10 Events after the reporting period IAS 12 Income taxes IAS 16 Property, plant and equipment IAS 17 Leases IAS 19 Employee benefits
IAS effective for accounting periods commencing on or after 1 January 2018 Accounting for government grants and disclosure of government IAS 20 assistance IAS 21 The effects of changes in foreign exchange rates IAS 23 Borrowing costs IAS 24 Related party disclosures IAS 26 Accounting and reporting by retirement benefit plans IAS 27 Separate financial statements IAS 28 Investments in associates and joint ventures IAS 29 Financial reporting in hyperinflationary economies
IAS effective for accounting periods commencing on or after 1 January 2018 IAS 32 Financial instruments: Presentation IAS 33 Earnings per share IAS 34 Interim financial reporting IAS 36 Impairment of assets IAS 37 Provisions, contingent liabilities and contingent assets IAS 38 Intangible assets IAS 39 Financial instruments: Recognition and measurement IAS 40 Investment property IAS 41 Agriculture
IFRS effective for accounting periods commencing on or after 1 January 2018 IFRS 1 First-time adoption of IFRSs IFRS 2 Share – based payment IFRS 3 Business combinations IFRS 4 Insurance contracts IFRS 5 Non-current assets held for sale and discontinued operations IFRS 6 Exploration for and evaluation of mineral resources IFRS 7 Financial instruments: Disclosures IFRS 8 Operating segments
IFRS effective for accounting periods commencing on or after 1 January 2018 IFRS 9 Financial instruments IFRS 10 Consolidated financial statements IFRS 11 Joint arrangements IFRS 12 Disclosure of interests in other entities IFRS 13 Fair value measurement IFRS 14 Regulatory deferral accounts IFRS 15 Revenue from contracts with customers
IFRS in issue at 1 January 2018 but not yet effective Leases IFRS 16 Effective for periods commencing on or after 1 January 2019 IFRS 17 Insurance contracts Effective for periods commencing on or after 1 January 2021
Conceptual Framework • It sets out the concepts that underlie the preparation and presentation of financial statements for external users • It deals primarily with: – The objective of financial reporting – The qualitative characteristics of useful financial information – The definition, recognition and measurement of the elements of financial statements
The purpose of the Conceptual Framework (1) • To assist the IASB in the development of future IFRS and in its review of existing IFRS • To assist the IASB in promoting harmonisation of regulations, accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments permitted by IFRS • To assist national standard-setting bodies in developing national standards
The purpose of the Conceptual Framework (2) • To assist preparers of financial statements in applying IFRS and in dealing with topics that have yet to form the subject of an IFRS • To assist auditors in forming an opinion on whether financial statements comply with IFRS • To assist users of financial statements in interpreting the information contained in IFRS financial statements and • To provide information about the IASB’s approach to the formulation of IFRS
What are the IASB’s plans for future standards?
IASB’s work plan • Based on the agenda consultation • Regularly updated • Key projects include: – Conceptual framework – Primary financial statements – Principles of disclosure – Goodwill and impairment
Where can you find out more?
Useful websites • IFRS Foundation – www.ifrs.org • European Financial Reporting Advisory Group – www.efrag.org • Large accounting firms, for example: – www.iasplus.com • Accounting bodies, for example: – www.icaew.com
Thank you for listening
Recommend
More recommend
