Financial Reporting Standards
Financial Reporting Standards provide accountants with rules as to how financial statements should be prepared. They tell us what information should be recognized and disclosed in a set of financial statements, how amounts should be measured or valued and how information should be presented.
The use of financial reporting standards provided significant advantages to investors, businesses and other organizations.
- The accounts of different companies are prepared in a much more consistent fashion which makes it far easier to compare the performance, financial position and cash flows of different companies across the world
- The standards provide well considered approaches to recording transactions that accountants in practice or in business might not have come across before. They should therefore improve the quality and usefulness of the information provided in company financial statements.
Types of Financial Reporting Standards
There are different versions of financial reporting standards in use across the world. Two of these are relevant to UK companies.
International Financial Reporting Standards
International Financial Reporting Standards (“IFRSs”) must be used by UK companies that are listed on a stock market and may be used by almost all other companies in the UK if they wish. These Standards are written and issued by the International Accounting Standards Board (the “IASB”) who also issue updates to the Standards as required.
The different IFRSs are referred to using two types of names:
- International Accounting Standards or IASs
- International Financial Reporting Standards or IFRSs
Both types have exactly the same regulatory force or standing.
UK Financial Reporting Standards / UK GAAP
UK Financial Reporting Standards are often referred to as UK GAAP (GAAP standing for Generally Accepted Accounting Practice) and are issued by the Financial Reporting Council (or FRC). Those UK companies who do not use IFRSs will prepare their financial statements using these standards.
In this course we will only look at the requirements of the International Financial Reporting Standards
International Financial Reporting Standards covered on this course
This course will look at the main requirements of the following standards.
- IAS 1 Presentation of Financial Statements (covered in section 3 of this course)
- IAS 7 Statement of Cash Flows (covered in section 4 of this course)
- IAS 2 Inventories
- IAS 10 Events after the reporting period
- IAS 16 Property, plant and equipment
- IAS 36 Impairment of assets
- IAS 37 Provisions, contingent liabilities and contingent assets
- IAS 38 Intangible assets
- IFRS 3 Business combinations (covered in section 6 of this course)
- IFRS 10 Consolidated financial statements (covered in section 6 of this course)
- IFRS 15 Revenue from contracts with customers
- IFRS 16 Leases
“Financial reporting standards known as IFRSs have greater standing than those known as IASs”
Is this statement true or false?
Click here to reveal the answer
The statement is false. Both tell accountants how certain types of transactions or issues should be dealt with.