P2 Ias

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  • Topic: Generally Accepted Accounting Principles, Asset, Balance sheet
  • Pages : 8 (2610 words )
  • Download(s) : 8
  • Published : April 15, 2013
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Frameworks: Frameworks are boundaries for accountant and made up by PRINCIPLE and RULES. There are Two types of framework – 1. Conceptual: Conceptual are made up by historical practice that are done by people like- IAS, GAAP etc. 2. Regulatory: Regulatory are boundaries of rules and regulation like- Company law, National standards of accounting, Stock exchange regulation, Sometimes IAS if country adopt it etc. Usefulness and Requirement of Frameworks:

1.Framework develops over hundred years. These are the principles of established accounting practices. Framework is the fundamental basic of accounting. It provides core guidance to accountant. Core principles of accounting are almost same and acceptable in most of the countries. So, it harmonized accounting practices over the world. 2.Framework worked as a basis of developing IAS. Most common, established practices are converted in to IAS, IFRS. 3.Framework works as a basis of national standards.

4.Framework identifies reporting entities which should prepared financial statements. Frameworks identify common elements of financial statements and gave recognition criteria of these elements (Assets, Liability, Income, Expense, Capital- means owner proportion of assets of the company). 5.Framework provides guidelines to accountants about treatment of items, where IAS is silent or confusing. 6.Framework helps accountants to understand IAS. Framework also helps users to interpret accountants. Framework also helps auditor to understand whether a treatment is correct or not. 7.Framework provides the qualitative characteristics of preparing and presenting financial statements. These qualities and acceptable in all the countries it gives frameworks widen scope to classify acceptable practices and not acceptable practices. Procedures to set up an IAS or IFRS:

IASB is responsible for introducing, drafting of IAS and IFRS. SAC always collect public comment and advice IASB. IASB set up a team for amendment IAS or introduce new IFRS. Team prepares a DP and distributes it to others and collects comments. Based on these comments they prepare ED and collect comments. IASC then approved IAS or IFRS. IFRIC interpret IAS and IFRS. IAS 2 = Inventory: Inventory is resalable and Consumables stationary. Inventories are valued at lower of- Cost: Purchase cost (List price- trade discount), Direct cost of conversion + Production overhead, Carriage in, Packaging cost, Storage cost capitalized only if it is required for the processing of inventory. NRV: Sales – Sales cost.

IAS 8 = Change in Accounting policies, Estimate and Prior period error: Estimate: Judge the conjunction of the assets to direct the value, like- Depreciation. Change in Estimate:
Permission: Accountant can change estimate when it is relevant. Accountant must be prudent while changing the estimation. Accountant also should consider the fundamental quality consistence. They should not do it too frequently. Treatment: Prospective – means treatment should be done future year only not the past year. Change in accounting policies:

Change in THREE things are considered as change in accounting policies- 1.Presentation: Like- Development expenditure, Previously written off but now Capitalized. 2.Recognition: Like- Revenue, Previously revenue recognise when cash received but now revenue recognise when service provided. 3.Measurement: Like- Financial assets, Previously measured at fair value but now measured at amortized cost (present value of all future economic benefit) Note: If change made due to introduction of new law or IAS. Or, due to a change in the nature of transaction then the change should not be consider as a change in accounting policies. Permission: Accountant can change policy only if they can justify the change, Means- in a note they must prove that the new policy is better for this kind of transaction. Treatment: Treatment should be retrospective (change will affect all future and past figure). Change will be...
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