Most universities recommend students follow the International Accounting Standards when working on their accounting papers. Nowadays, these standards are also called the International Financial Reporting Standards or the IFRS. The standards were first established by the International Accounting Standards Board (IASB) in an attempt to simplify the process of financial reports and data comparisons on an international level. By following these set principles, you can maintain transparency and increase trust in the accounting process.
Students unfamiliar with these international principles might consider getting assignment help from professional accountants. Besides, confusion generally arises since the IFRS standards are quite different from the Generally Accepted Accounting Principles (GAAP) followed in the United States. While the IFRS is followed in over 140 countries, including the entirety of the European Nation, the United States, China, and Japan have declined to follow the same.
However, hiring MyAssignmenthelp.co.uk for Accounting assignment help is not a necessity when you can master the standards yourself. Check out this simple guide that covers the features of these international standards.
- Conceptual Framework
The standards for the conceptual framework were last updated in March 2018. While there’s no need to go over the previous versions, you’re sure to find an education blog on MyAssignmenthelp.co.uk covering this in more detail. According to the international standards, the framework must include the following –
- A list of the objectives for the general purpose financial reporting
- The criteria for recognizing assets and liabilities in a financial statement and the criteria to remove them
- A detailed description of the reporting entity and its boundary
- Capital and its maintenance details
- A detailed definition of the assets, liabilities, equities, income and expenditures
- Guidance for using measurement bases
- Presentation and disclosure details
- Financial Statements
According to the international standards, every financial report must include –
- The balance sheet or the financial position statement
- The profit and loss statement or the statement of comprehensive income
- Cash flow statements
- Statement for changes in equity
- Additional notes related to each statement
- Consistency
The IFRS states that businesses must follow the same accounting standards for every financial period. In case there is any deviation from the same, the financial statements must include the reason for the change.
- General IFRS Principles
Going concern – You have to present financial statements under the assumption that the business will continue to trade indefinitely without any pause.
Materiality – All financial statements should include material information. In other words, any information that can influence a decision should be included.
Comparative Information – There should be an allowance to make comparisons regarding financial position and performance based on the financial information provided.
Accrual Accounting – You should report all income and expenditure on an accrued basis instead of ‘cash’ and ‘payment.’ In other words, even if a business hasn’t received payment for a service provided, they must include it as ‘income’ in their financial report.
Frequency – Every business must prepare a financial report annually. The reports can happen on a quarterly or half-yearly basis as well. However, the maximum length of time the business can go without conducting a financial analysis is one year.
Presentation Consistency – In order to maintain fair comparisons, financial statements must be generated consistently every year.
- Non-compensation
Every financial transaction has to be recorded in the statements. There’s no option to compensate one transaction for the other. For example, when you’re among friends, you might loan someone $30 one month. In the past, they might have given you a loan of $10 and $20. Logically, you can cancel out each other’s loans. But businesses cannot follow the same practice. Every transaction has to be listed as either an asset or a liability.
Does GAAP Follow the International Accounting Standards?
The United States does not follow the IFRS standards but sticks to GAAP principles. You’ll notice that there are quite a few similarities between the GAAP and IFRS standards. But complete harmonization has yet to be achieved. That’s why there are similarities in the lease accounting standard but differences in other aspects. The GAAP is only followed in the USA. However, foreign businesses that operate in the US have to stick to these standards as well, even if they follow the IFRS in other countries.
In conclusion,
If you want your assignments to follow the International Accounting Standards, it’s up to you to revise the rules thoroughly. Now that you have a basic idea of the principles that are to be followed, you can ensure that your accounting solutions follow the same standards. Be sure to double-check every financial statement that you create. After all, a single mistake can disrupt your chances of securing top grades.