Subject: Audit & Assurance service

Assignment # 2

4/6/2021
University of Management and Technology
Moeez Nadeem
BS-AF (002) Batch 04

Submitted to: Sir Jhan Zaib

 International Accounting Standards (IAS)
What Are International Accounting Standards (IAS)?
International Accounting Standards (IAS) were the first international accounting
standards that were issued by the International Accounting Standards Committee
(IASC), formed in 1973. 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.
Globally comparable accounting standards promote transparency, accountability,
and efficiency in financial markets around the world. This enables investors and
other market participants to make informed economic decisions about investment
opportunities and risks and improves capital allocation. Universal standards also
significantly reduce reporting and regulatory costs, especially for companies with
international operations and subsidiaries in multiple countries.

IAS 16 — Property, Plant and Equipment

Overview:

IAS 16 Property, Plant and Equipment outlines the accounting treatment for most
types of property, plant and equipment. Property, plant and equipment is initially
measured at its cost, subsequently measured either using a cost or revaluation
model, and depreciated so that its depreciable amount is allocated on a systematic
basis over its useful life.

Scope:

IAS 16 applies to the accounting for property, plant and equipment, except where
another standard requires or permits differing accounting treatments, for example:

 assets classified as held for sale in accordance with IFRS 5 Non-current

Assets Held for Sale and Discontinued Operations
 biological assets related to agricultural activity accounted for
under IAS 41 Agriculture
 exploration and evaluation assets recognised in accordance
with IFRS 6 Exploration for and Evaluation of Mineral Resources
 mineral rights and mineral reserves such as oil, natural gas and similar non-
regenerative resources.

The standard does apply to property, plant, and equipment used to develop or
maintain the last three categories of assets.

Recognition:

Items of property, plant, and equipment should be recognised as assets when it is

probable that: [IAS 16]
  it is probable that the future economic benefits associated with the asset will
flow to the entity, and
 the cost of the asset can be measured reliably.

This recognition principle is applied to all property, plant, and equipment costs at the
time they are incurred. These costs include costs incurred initially to acquire or
construct an item of property, plant and equipment and costs incurred subsequently
to add to, replace part of, or service it.

IAS 16 does not prescribe the unit of measure for recognition – what constitutes an
item of property, plant, and equipment. [IAS 16.9] Note, however, that if the cost
model is used (see below) each part of an item of property, plant, and equipment
with a cost that is significant in relation to the total cost of the item must be
depreciated separately.

IAS 19 — Employee Benefits

Overview:

IAS 19 Employee Benefits (amended 2011) outlines the accounting requirements for

employee benefits, including short-term benefits (e.g., wages and salaries, annual
leave), post-employment benefits such as retirement benefits, other long-term
benefits (e.g., long service leave) and termination benefits. The standard establishes
the principle that the cost of providing employee benefits should be recognised in the
period in which the benefit is earned by the employee, rather than when it is paid or
payable, and outlines how each category of employee benefits are measured,
providing detailed guidance in particular about post-employment benefits.

Objective of [IAS 19]

The objective of IAS 19 is to prescribe the accounting and disclosure for employee
benefits, requiring an entity to recognise a liability where an employee has provided
service and an expense when the entity consumes the economic benefits of
employee service.

Scope

IAS 19 applies to (among other kinds of employee benefits):

 wages and salaries

 compensated absences (paid vacation and sick leave)
 profit sharing and bonuses
 medical and life insurance benefits during employment
 non-monetary benefits such as houses, cars, and free or subsidised goods or
services
 retirement benefits, including pensions and lump sum payments
 post-employment medical and life insurance benefits
 long-service or sabbatical leave
 'jubilee' benefits
 deferred compensation programmes
  termination benefits.

IAS 19 does not apply to employee benefits within the scope of IFRS 2 Share-based

Payment or the reporting by employee benefit plans (see IAS 26 Accounting and
Reporting by Retirement Benefit Plans).

Short-term employee benefits

Short-term employee benefits are those expected to be settled wholly before twelve
months after the end of the annual reporting period during which employee services
are rendered, but do not include termination benefits: Examples include wages,
salaries, profit-sharing and bonuses and non-monetary benefits paid to current
employees.

Profit-sharing and bonus payments

An entity recognises the expected cost of profit-sharing and bonus payments when,
and only when, it has a legal or constructive obligation to make such payments as a
result of past events and a reliable estimate of the expected obligation can be made.

Types of post-employment benefit plans

Post-employment benefit plans are informal or formal arrangements where an entity

provides post-employment benefits to one or more employees, e.g., retirement
benefits (pensions or lump sum payments), life insurance and medical care.

The accounting treatment for a post-employment benefit plan depends on the

economic substance of the plan and results in the plan being classified as either a
defined contribution plan or a defined benefit plan:

 Defined contribution plans. Under a defined contribution plan, the entity

pays fixed contributions into a fund but has no legal or constructive obligation
to make further payments if the fund does not have sufficient assets to pay all
of the employees' entitlements to post-employment benefits. The entity's
obligation is therefore effectively limited to the amount it agrees to contribute
to the fund and effectively place actuarial and investment risk on the
employee
 Defined benefit plans These are post-employment benefit plans other than a
defined contribution plan. These plans create an obligation on the entity to
provide agreed benefits to current and past employees and effectively places
actuarial and investment risk on the entity.