Introduction to Accounting
Question 1A) By the use of specific examples, provide an explanation to your assistant of how IFRS presentation and disclosure requirements can assist the predictive role of historically prepared financial statements
The International Financial Reporting Standards or better known as IFRS, are generally principal-based standards, interpretations, and framework which is taken up by the International Accounting Standard Board (IASB) (Accounting Standards, 1997). The IFRS financial statements include the presentation of a set of statement of financial position, an income statement, a statement of cash flows and a statement of changes in equity. Information that are presented in the IFRS set of financial statements must have a predictive element to confirm or deny the past evaluations made by users (Carey, 2009). Therefore, information that exists in historically prepared financial statements prepared under the IFRS can be used as a predictive tool in the sense that it provides a comparison of the performance of a specific organization throughout a certain time frame. For example, information that are presented in the balance sheet projects the amount of assets and liabilities that are incurred by the organization as well as the value of owner’s equity at a certain point of time. Such information are usually presented at the beginning of an accounting period (Carey, 2009) and hence, by comparing a series of information provided in previous balance sheets, the firm can be able to predict its future performances through the increasing or decreasing trend in its assets, liabilities and owner’s equity. Apart from that,
(222 words)
Question 1B) Explain why accounting standards are needed to help the market mechanism work effectively for the benefit of preparers and users of corporate reports. Discuss the costs and benefits of providing more disclosures in financial statements
Generally Accepted
The International Financial Reporting Standards or better known as IFRS, are generally principal-based standards, interpretations, and framework which is taken up by the International Accounting Standard Board (IASB) (Accounting Standards, 1997). The IFRS financial statements include the presentation of a set of statement of financial position, an income statement, a statement of cash flows and a statement of changes in equity. Information that are presented in the IFRS set of financial statements must have a predictive element to confirm or deny the past evaluations made by users (Carey, 2009). Therefore, information that exists in historically prepared financial statements prepared under the IFRS can be used as a predictive tool in the sense that it provides a comparison of the performance of a specific organization throughout a certain time frame. For example, information that are presented in the balance sheet projects the amount of assets and liabilities that are incurred by the organization as well as the value of owner’s equity at a certain point of time. Such information are usually presented at the beginning of an accounting period (Carey, 2009) and hence, by comparing a series of information provided in previous balance sheets, the firm can be able to predict its future performances through the increasing or decreasing trend in its assets, liabilities and owner’s equity. Apart from that,
(222 words)
Question 1B) Explain why accounting standards are needed to help the market mechanism work effectively for the benefit of preparers and users of corporate reports. Discuss the costs and benefits of providing more disclosures in financial statements
Generally Accepted