MBA 2ND Semester

Advanced Financial Accounting-5201

Chapter-01
Title: An Introduction to
International Financial Reporting
Standards
Aims: The aim of the chapter is to give an
introductory idea on international financial
reporting standards.
Learning Outcomes: By the end of the session, the students will be able
to:
a) Know about Development of Accounting and Financial Reporting.
b) Know about International Accounting Standards with steps of
standard setting and its importance.
c) Get an overview on International Accounting Standards Committee
(IASC) and IASC Foundation Constitution Review.
d) be acquainted with International Financial Reporting Standards
(IFRS) and various Steps in the IFRS standard-setting process.
e) Distinguish between IAS and IFRS.
f) Be familiar with History of International Accounting Standards Board
(IASB) and Steps of IASB Due process.
Learning Outcomes: By the end of the session, the students will be able
to:
g) Know International Financial Reporting Interpretation Committee
(IFRIC) also Recognize the Role of the IFRS Interpretations Committee.
h) Know about Standard Advisory Council (SAC)
i) Get an overview on Bangladesh Accounting Standards (BAS) and
Bangladesh Financial Reporting Standards (BFRS).
j) be acquainted with status of International Accounting Standards (IAS)
and Status of International Financial Reporting Standards (IFRS).
 Introduction Part
Welcome and Rapport, Bridging, Pre-assessment, Content outline.

Content Outline:
1.Development of Accounting and Financial Reporting
2.International Accounting Standards
3.Steps for setting International Accounting Standards.
4.Need for International Accounting Standards
5. Brief History of the International Accounting Standards Committee (IASC)
6.The IASC Foundation Constitution Review
7.International Financial Reporting Standards (IFRS)
8.History of International Financial Reporting Standards (IFRS)
 Introduction Part
Welcome and Rapport, Bridging, Pre-assessment, Content outline.

Content Outline:
9.Steps in the IFRS standard-setting process.
10.IAS VS IFRS
11.History of International Accounting Standards Board (IASB)
12.Steps of IASB Due process
13. International Financial Reporting Interpretation Committee (IFRIC)
14.Role of the IFRS Interpretations Committee
15.Standard Advisory Council (SAC)
16.Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting
Standards (BFRS)
17. Status of International Accounting Standards (IAS)
18.Status of International Financial Reporting Standards (IFRS)
Development Part
1.Development of Accounting and Financial Reporting

Double entry bookkeeping-debits on the left, credits on the

right—began hundreds of years ago. It was first codified in the
15th Century by a Franciscan monk named Luca Bartolomes
Pacioli. His work was built on that of another Italian scholar,
Benedetto Cotrugli.
During the Industrial Revolution-as America’s transportation
links were being forged, railroad companies pioneered the use
of financial reporting to attract public and private financing for
projects.
Development of Accounting and Financial Reporting

The expansion of the U.S. automobile industry in the 1920s can partially be
attributed to accounting modernization. General Motors, by presenting its
financial information in the form of ratios such as return on investment and
return on equity, was able to provide the market with more detailed and useful
metrics. As a result, the company could adapt more quickly to market changes
and make better decisions regarding investments.
The pivotal economic event of the 20th century, the Great Depression, focused
the U.S. on the need for comprehensive accounting reform. Many market
participants felt that poor accounting and reporting procedures helped cause the
downturn.
In 1930, the American Institute of Accountants (known as the AICPA since 1957)
and the New York Stock Exchange began an attempt to revise financial reporting
requirements. Shortly thereafter, passage of the Securities Act of 1934 chartered
the Securities and Exchange Commission, and gave the SEC the power to oversee
accounting and auditing methods.
Development of Accounting and Financial Reporting

For nearly 40 years, the SEC looked to bodies established by the accounting
profession to develop and establish accounting standards.
By the 1970s, market participants’ thinking about accounting standard
setting evolved, as they came to believe in the importance of an
independent standard-setting structure, separate and distinct from the
accounting profession—so that the development of standards would be
insulated from the self-interests of practicing accountants and their clients.
Following a detailed study, the accounting profession in 1972 recommended
creation of a new body, the Financial Accounting Foundation, to serve as the
nation’s accounting standard-setting authority.
Through the FAF, the FASB in 1973 became the designated standard-setter in
the private sector for setting standards that govern the preparation of
corporate financial reports along with not-for-profit organizations.
Development of Accounting and Financial Reporting
In 1984, the Government Accounting Standards Board (GASB) was
formed under the FAF umbrella to issue standards and other
communications that result in decision-useful information for users of
government financial reports.

Today, the need for relevant comparable financial reporting is greater

than ever. The global economy is dynamic and often unpredictable. In
order to maintain stability, institutional and retail investors must be
able to trust publicly-available financial information. Accounting
standards are created to meet this need, and are enacted to guide
reporting companies along this path.
Development of Accounting and Financial Reporting
We are all well known about recent development of financial
reporting-
• International Accounting Standards Committee (IASC), formed in
1973, and issued International Accounting Standards (IAS).
• In 2001, International Accounting Standards Board (IASB) formed,
issued International Financial Reporting Standards (IFRS) replaced by
previous one.
 2. International Accounting Standards
International Accounting Standards (IAS) are older accounting standards
which were replaced in 2001 by International Financial Reporting Standards
(IFRS), issued by the International Accounting Standards Board (IASB), an
independent international standard setting body based in London.
International Accounting Standards (IAS) were the first international
accounting standards that were issued by the International Accounting
Standards Committee (IASC), formed in 1973. The International Accounting
Standards (IAS) constitute a single set of high-quality accounting standards,
which help in the preparation of consolidated financial statements,
including the balance sheet, income statement, statement of changes in
the financial position, cash flow statement and explanatory notes.
The goal then, as it remains today, was to make it easier to compare
businesses around the world, increase transparency and trust in financial
reporting and foster global trade and investment.
3. Steps for setting International Accounting
Standards.
4. Need for International Accounting Standards
Need for Accounting Standards are as follows:
1. It helps in dissemination of timely and useful financial information to all
Stakeholders and users.
2. It helps to provide a set of standard accounting policies, valuation norms
and disclosure requirement.
3. It ensures disclosures of accounting principles and treatments, where
important information is not otherwise statutorily required to be disclosed.
4. It helps to reduce or totally eliminate, accounting alternatives, thereby it
leads to better inter-firm and intra-firm comparison of Financial Statements.
5. It reduces scope of creative accounting, i.e. twisting of accounting policies
to produce Financial Statement favorable to a particular interest group.
 5. Brief History of the International
Accounting Standards Committee (IASC)
• The International Accounting Standards Committee (IASC), the
predecessor of the IASB, was established in 1973 and came into being
through an agreement by professional accountancy bodies from
Australia, Canada, France, Germany, Japan, Mexico, the Netherlands,
the United Kingdom, Ireland, and the United States.

• The objective behind setting up the IASC was to develop, in the public
interest, accounting standards that would be acceptable around the
world in order to improve financial reporting internationally. Over the
years, IASC saw several changes to its structure and functioning.
 5. Brief History of the International
Accounting Standards Committee (IASC)
• Main functions of IASC is to pursue governments, standard setting
bodies, securities regulators, and the business communities that
published financial statements to comply with International
Accounting Standards.
• This also drew the world’s attention to the fact that there exists a
truly representative international accounting body that could
ultimately qualify as a global standard setter and be able to develop a
single set of accounting standards that would be acceptable to most,
if not all, countries worldwide
 5. Brief History of the International
Accounting Standards Committee (IASC)
The objectives of the IASC foundation, as stated in its Constitution, were:
a. To develop, in the public interest, a single set of high quality,
understandable, and enforceable global accounting standards that require
high quality, transparent, and comparable information in financial statements
and other financial reporting to help participants in the various capital markets
of the world and other users of the information to economic decision;
b. To promote the use and rigorous application of those standard; and
c. In fulfilling the objectives associated with (a) and (b), to take account of, as
appropriate, the special needs of small and medium-sized entities and
emerging economies; and
d. To bring about convergence of National Accounting Standards and
International Financial Reporting Standards to high-quality solutions.
6.The IASC Foundation Constitution
Review
• The IASC was formed in 1973 through an agreement made by
professional accountancy bodies from Australia, Canada, France,
Germany, Ireland, Japan, Mexico, the Netherlands, the UK and the
USA.
• The IASC Foundation is an independent body, not controlled by any
particular Government or professional organization. Its main purpose
is to oversee the IASB in setting the accounting principles which are
used by business and other organizations around the world concerned
with financial reporting.
6.The IASC Foundation Constitution
Review
• In November 1999, the IASC board itself approved the constitutional
changes necessary for its own restructuring. In May 2000, the IFAC
unanimously approved the restructuring. The constitution of the old
IASC was revised to reflect the new structure.
• A new IASC Foundation was incorporated (under the laws of the US
state of Delaware), and its trustee were appointed. By early 2001, the
members of the IASB and the SAC were appointed, and the new
structure became operational. Later that year, the IASB moved into
new quarters in London. The technical staff of the IASB comprises
over 20 accounting professionals—roughly quadruple the former
IASC’s professional staff.
7.International Financial Reporting Standards (IFRS)
• Definition of 'International Financial Reporting Standards - IFRS' A set of
international accounting standards stating how particular types of
transactions and other events should be reported in financial
statements. IFRS are issued by the International Accounting Standards
Board. IFRS are sometimes confused with International Accounting
Standards (IAS), which are the older standards that IFRS replaced. (IAS
were issued from 1973 to 2000.)
• Investopedia explains 'International Financial Reporting Standards -
IFRS' the goal with IFRS is to make international comparisons as easy as
possible. This is difficult because, to a large extent, each country has its
own set of rules. For example, U.S. GAAP are different from Canadian
GAAP. Synchronizing accounting standards across the globe is an
ongoing process in the international accounting community.
 8.History of International Financial
Reporting Standards (IFRS)
The International Accounting Standards Committee (IASC) was established in June
1973 by accountancy bodies representing ten countries. It devised and published
International Accounting Standards (IAS), interpretations and a conceptual
framework. These were looked to by many national accounting standard-setters in
developing national standards. In 2001 the
International Accounting Standards Board (IASB) replaced the IASC with a remit to
bring about convergence between national accounting standards through the
development of global accounting standards. During its first meeting the new
Board adopted existing IAS and Standing Interpretations Committee standards
(SICs). The IASB has continued to develop standards calling the new standards
"International Financial Reporting Standards" (IFRS). In 2002 the European Union
(EU) agreed that, from 1 January 2005, International Financial Reporting
Standards would apply for the consolidated accounts of the EU listed companies,
bringing about the introduction of IFRS to many large entities. Other countries
have since followed the lead of the EU.
9.Steps in the IFRS standard-setting
process.
Agenda Research
Consultation Program

Post-
Standard Setting
implementation
Program
Reviews

Maintenance
Program
 10.IAS vs. IFRS
Technically they are the same. IFRS is the current set of standards that is reflective of the
changes in the accounting and business practices over the last two decades. IAS is what
used to be prior to the introduction of IFRS. However, not all of the IAS are outdated. In
fact, to date there are only 17 IFRS issued and the IAS that were not superseded by the
IFRS are still in use. The IASB no longer issues IAS. Any future standards will now be called
IFRS, and if they are contradictory to existing IAS, the IFRS will be followed. The key
different points of IAS and IFRS as follows:
• IAS stands for International Accounting Standards, while IFRS refers to International
Financial Reporting Standards.
• IAS standards were published between 1973 and 2001, while IFRS standards were
published from 2001 onwards.
• IAS standards were issued by the IASC, while the IFRS are issued by the IASB, which
succeeded the IASC.
Principles of the IFRS take precedence if there’s contradiction with those of the IAS, and
this result in the IAS principles being dropped.
11.History of International Accounting
Standards Board (IASB)
Students will read this topics.
12. Steps of IASB Due process
Research
program

Post-
IASB Developing a
implementation
reviews
Due proposal for
publication
process

Re-deliberations
and finalization
13. International Financial Reporting
Interpretation Committee (IFRIC)

Students will read this topics.

14. Role of the IFRS Interpretations Committee

Development
Composition and approval of
Interpretations

Authority of Annual
Interpretations improvements
 15.Standard Advisory Council (SAC)
A body of experts who advise the International Accounting Standards
Board (IASB) on priorities in setting accounting standards. The members
also inform the IASB of the implications of proposed standards for users
and preparers of financial statements and may give other advice to the
IASB or the trustees of the International Accounting Standards
Committee Foundation (IASC Foundation). The IASB is required to
consult the SAC in advance of decisions on major projects and the
trustees of the IASC Foundation must consult the SAC in advance of
making any changes to its constitution.
16. Bangladesh Accounting Standards (BAS) and
Bangladesh Financial Reporting Standards (BFRS)
Home task and Feedback
17.Status of International Accounting Standards (IAS)

From word File

18.Status of International Financial Reporting Standards (IFRS)

From word File

 Conclusion

1.Quick recap
2.Post assessment
3.Feedback
4.Refernces
5. Forward Planning