Updates un Financial

REPORTING STANDARD
LEANE ALYANNA A. NOVILUNIO
MA. ROSE B. SEITON
 ice
Breaker
 BINGO Words
RELEVANCE UNDERSTANDABILITY
PROCEDURE COMPARABILITY
FRAMEWORK
RECOGNITION LIFO CONCEPTUAL FRAMEWORK

HISTORICAL COST QUALITATIVE

FINANCIAL STATEMENTS
COMBINED
PRACTICES UNCONSOLIDATED
TIMELINESS GLOBAL APPEAL

ACCOUNTING STANDARD FAITHFUL REPRESENTATION US GAAP

IFRS FAIR VALUE

CONSOLIDATED FINANCIAL REPORTING

DERECOGNITION VERIFIABILITY RULE BASED PRINCIPLE BASED

 overview of
Accounting Standards

US GAAP IFRS
US GAAP
Commonly recognized set of rules and procedures
designed to govern corporate accounting and financial
reporting in the United States
It is a comprehensive set of accounting practices that
were developed jointly by the Financial Accounting
Standards Board (FASB) and the Governmental
Accounting Standards Board (GASB)
It makes financial reporting standardized and
transparent, using commonly accepted terms, practices,
and procedures
international financial
reporting standard
An international accounting framework within which to properly
organize and report financial information.
It is a set of rules and guidelines that every firm has to adhere to
ensure their financial statements are consistent with other firms
worldwide.
It is currently the required accounting framework in more than 120
countries.
It mandates businesses to report
their financial results and financial
position using the same rules
NotableSimilarities
The overall framework for accounting and finance has a
similar structure for both GAAP and IFRS.
Both standards use statements of cash flows, balance
sheets, and income statements.
Have the same guidelines when organizations deal with
cash and cash equivalents.
Preparation of financial statements follows the same
accrued-based approach, and both can recognize
revenue when it is realizable.
 US GAAP Vs. ifrs
GLOBAL Used by around 120 countries. Thus global
Used in the United State of America
APPEAL appeal

Rule base and not principle base PRINCIPLE-BASED Principle base i.e. companies has some
VS. RULE-BASED flexibility with disclosure

Prefers LIFO (Last In, First Out) INVENTORY Does not recommend LIFO (as it revels
method for valuation of inventory METHODS lower income)

Only Cost Model can be used for FIXED ASSET Also recognizes the Revaluation Model in
valuing Fixed Asset VALUATION addition to cost model
 US GAAP Vs. ifrs
Intangible Assets are valued at Fair INTANGIABLE Intangible Assets are valued on the basis
Value ASSET of future economic benefits

All development cost are expensed DEVELOPMENT Some development costs are expensed
out COST and others are capitalized & amortized

Extra Ordinary and unusual amount INCOME Such items come under income statement
are shown below net income STATEMENT

International Accounting Standard BOARD Financial Accounting Standard Board

Board GOVERNING
CONCEPTUAL
Framework
 Definition
Definition
The Conceptual Framework for
Financial Reporting is a complete,
comprehensive and single
document promulgated by the
International Accounting Standards
Board.
Purposes
Purposes
To assist the International Accounting Standards
Board to develop IFRS Standards based on
consistent concepts.
To assist preparers of financial statements to
develop consistent accounting policy when no
Standard applies to a particular transaction or
other event or where an issue is not yet
addressed by an IFRS.
To assist preparers of financial statements to
develop accounting policy when a Standard
allows a choice of an accounting policy.
To assist all parties to understand and interpret
the IFRS Standards.
 The objective of financial
reporting forms the
foundation of the
Conceptual Framework.
The overall objective of

Objective of financial reporting is to

provide financial
information about the

Financial Reporting reporting entity that is

useful to existing and
potential investors, lenders
and other creditors in
making decisions about
providing resources to the
entity.
Qualitative characteristics
of useful Financial Information

Are the qualities or attributes that make financial

accounting information useful to the users.
The objective is to ensure that the information is
useful to the users in making economic decisions.
Classified into fundamental qualitative
characteristics and enhancing qualitative
characteristics.
 Enhancing qualitative characteristics
Fundamental qualitative
characteristics
Relate to the content or substance of
financial information.
RELEVANCE
Capacity of the information to influence a
decision.
Predictive value and confirmatory value
The relevance of information is affected by
its nature and materiality.
FAITHFUL REPRESENTATION
Financial reports represent economic
phenomena or transactions in words and
numbers.
A depiction should have 3 characteristics,
namely - completeness, neutrality and free
from error.
Relate to the presentation or form of the
financial information.
COMPARABILITY
Ability to bring together for the purpose of
noting points of likeness and difference.
May be made within an entity or between and
across entities.
UNDERSTANDABILITY
Requires that financial information must be
comprehensive or intelligible if it is to be most
useful.
VERIFIABILITY
Means that different knowledgeable and
independent observers could reach consensus,
although not necessarily complete agreement, that
a particular depiction is a faithful representation.
TIMELINESS
Financial information must be available or
communicated early enough when a decision
is to be made.
general objective of Financial Statements provide information
about economic resources of the reporting

Financial Statements entity, claims against the entity and changes

in the economic resources and claims.

types of financial statements

Consolidated Financial Statements - comprises
both the parent and its subsidiaries
Unconsolidated Financial Statements -parent
alone
Combined Financial Statements - comprises two
or more entities that are not linked by a parent and
subsidiary relationship
recognition derecognition
recognition derecognition
Removal of all or part of a recognized
The process of capturing for inclusion
asset or liability from the statement of
in the financial statements and item
financial position.
that meets the definition of an asset,
Derecognition of an asset - entity
liability, equity, income or expense.
loses control of all or part of the asset.
Recognition links the elements to the
Derecognition of a liability - entity no
statement of financial position and
longer has a present obligation for all
statement of financial performance.
or part of the liability.
Historical Cost
The entry price or entry value to acquire an
asset or incur a liability.
HISTORICAL COST OF AN ASSET
The original acquisition cost of an asset is
the cost incurred in acquiring or creating
the asset comprising the consideration
paid plus transaction cost.
HISTORICAL COST OF A LIABILITY
The historical cost of a liability is the
consideration received to incur the liability
minus transaction cost.
current value
FAIR VALUE
FV of an asset - the price that would be
received to sell an asset
FV of a liability - the price that would paid
to transfer a liability
VALUE IN USE FOR ASSET
The present value of the cash flows that an
entity expects to derive from the use of an
asset and from the ultimate disposal.
FULFILLMENT VALUE FOR LIABILITY
The present value of cash that an entity expects
to transfer in paying or settling a liability.
CURRENT COST
Asset - cost of an equivalent asset at the
measurement date comprising the
consideration paid & transaction cos.
Liability - consideration that would be
received less any transaction cost at
measurement date.
Conceptual Frameworks of GAAP & IFRS

similarities & differences

The conceptual When it comes to conceptual
frameworks of both frameworks for IFRS, entities
should consider the most
GAAP and IFRS are suitable framework for
similar in structure. creating an accounting
They both have similar policy when no regulations
ways of applying the apply.
accounting object

On the other hand, when

following GAAP, the set
accounting standards
restrict the application of
conceptual frameworks to
certain accounting issues.
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