Contact Info:
Qaswar Nawaz Warraich
cell no: 03446551266
Skype: live:qaswarnawaz
Qaswar Nawaz Warraich
cell no: 03446551266
Skype: live:qaswarnawaz
Saturday, February 21, 2015
Tuesday, February 17, 2015
According to IAS 38:
Research
· Activities aimed at obtaining new knowledge
· The search for applications of research findings or other knowledge
· The search for product or process alternatives
· The formulation and design of possible new or improved product or
process alternatives
Development
· The evaluation of product or process alternatives
· The design, construction and testing of pre-production prototypes
and models
· The design of tools, jigs, moulds and dies involving new technology
· The design, construction and operation of a pilot plant that is not
of a scale economically feasible
for commercial
production
Wednesday, February 11, 2015
The conceptual framework
The framework for the preparation and presentation of financial statements sets out the concepts that underlie financial statements for external users. It is designed to:
• assist the Board of the IASB in developing new standards and reviewing existing ones
• assist in harmonizing accounting standards and procedures
• assist national standard setting bodies in developing national standards
• assist preparers of financial statements in applying IASs/IFRSs and in dealing with topics not yet covered by IASs/IFRSs
• assist auditors in forming an opinion as to whether financial statements conform with IASs/IFRSs
• assist users of financial statements in interpreting financial statements
• provide those interested in the work of the IASB with information about its approach to the formulation of IFRSs.
The scope of the framework
The framework deals with:
• the objective of financial statements
• the qualitative characteristics that determine the usefulness of information in financial statements
• the definition, recognition and measurement of the elements from which financial statements are constructed .
• concepts of capital and capital maintenance.
Underlying assumptions of the framework
The framework identifies two underlying assumptions:
(1) the accruals basis of accounting
(2) the going concern basis.
IFRS vs GAAP
GAAP (US Generally Accepted Accounting Principles) is the accounting standard used in the US, while IFRS (International Financial Reporting Standards) is the accounting standard used in over 110 countries around the world. GAAP is considered a more “rules based” system of accounting, while IFRS is more “principles based.” The U.S. Securities and Exchange Commission is looking to switch to IFRS by 2015.
GAAP
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IFRS
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Stands for
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Generally Accepted AccountingPrinciples
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International Financial Reporting Standards
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Introduction
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Generally accepted accounting principles (GAAP) refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice.
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International Financial Reporting Standards are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.
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Used in
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United States
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Performance elements
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Revenue or expenses, assets orliabilities, gains, losses, comprehensive income
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Revenue or expenses, assets or liabilities
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Required documents in financial statements
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Balance sheet, income statement, statement of comprehensive income, changes in equity, cash flow statement, footnotes
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Balance sheet, income statement, changes in equity, cash flow statement, footnotes
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InventoryEstimates
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First-in, first-out or weighted-average cost
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Inventory Reversal
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Prohibited
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Permitted under certain criteria
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Purpose of the framework
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US GAAP (or FASB) framework has no provision that expressly requires management to consider the framework in the absence of a standard or interpretation for an issue.
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Under IFRS, company management is expressly required to consider the framework if there is no standard or interpretation for an issue.
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Objectives of financial statements
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In general, broad focus to provide relevant info to a wide range of stakeholders. GAAP provides separate objectives for business and non-business entities.
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In general, broad focus to provide relevant info to a wide range of stakeholders. IFRS provides the same set of objectives for business and non-business entities.
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Underlying assumptions
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The "going concern" assumption is not well-developed in the US GAAP framework.
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IFRS gives prominence to underlying assumptions such asaccrual and going concern.
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Qualitative characteristics
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Relevance, reliability, comparability and understandability. GAAP establishes a hierarchy of these characteristics. Relevance and reliability are primary qualities. Comparability is secondary. Understandability is treated as a user-specific quality.
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Relevance, reliability, comparability and understandability. The IASB framework (IFRS) states that its decision cannot be based upon specific circumstances of individual users.
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Definition of an asset
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The US GAAP framework defines an asset as a future economic benefit.
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The IFRS framework defines an asset as a resource from which future economic benefit will flow to the company.
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The Standard Setting Process of International Financial Reporting Standards by the International Accounting Standards Board (IASB)
The Standard Setting Process
International Financial Reporting Standards (IFRSs) are developed through an international consultation process, the "due process", which involves interested individuals and organisations from around the world.
The due process comprises six stages, with the Trustees of the IFRS Foundation having the opportunity to ensure compliance at various points throughout:
1. Setting the agenda
2. Planning the project
3. Developing and publishing the discussion paper
4. Developing and publishing the exposure draft
5. Developing and publishing the standard
6. After the standard is issued
1. Setting the agenda
The IASB, by developing high quality financial reporting standards, seeks to address a demand for better quality information that is of value to those users of financial reports.
When deciding whether a proposed agenda item will address users’ needs the IASB considers:
§ The relevance to users of the information and the reliability of information that could be provided,
§ Existing guidance available,
§ The possibility of increasing convergence,
§ The quality of the IFRS to be developed,
§ Resource constraints.
To help the IASB in considering its future agenda, its’ staff is asked to identify, review and raise issues that might warrant the IASB’s attention. New issues may also arise from a change in the IASB’s Conceptual Framework for Financial Reporting.
In addition, the IASB raises and discusses potential agenda items in the light of comments from other standard-setters and other interested parties, the IFRS Advisory Council and the IFRS Interpretations Committee, and staff research and other recommendations.
In making decisions regarding its agenda priorities, the IASB also considers factors related to its convergence initiatives with accounting standard-setters. The IASB’s approval to add agenda items, as well as its decisions on their priority, is by a simple majority vote at an IASB meeting.
2. Planning the project
When adding an item to its active agenda, the IASB decides whether to conduct the project alone or jointly with another standard-setter. Similar due process is followed under both approaches.
When considering whether to add an item to its active agenda, the IASB may determine that it meets the criteria to be included in the annual improvements process. The IASB assesses the issue against criteria such as
§ Clarifying,
§ Correcting,
§ Well defined and sufficiently narrow in scope that the consequences of the proposed change have been considered,
§ Completed on a timely basis,
All criteria must be met to qualify for inclusion in annual improvements.
Once this assessment is made, the amendments included in the annual improvements process will follow the same due process as other IASB projects. The primary objective of the annual improvements process is to enhance the quality of IFRSs by amending existing IFRSs to clarify guidance and wording, or correcting for relatively minor unintended consequences, conflicts or oversights. After considering the nature of the issues and the level of interest among constituents, the IASB may establish a working group at this stage and a project team for the project will be selected. The project manager draws up a project plan under the supervision of the directors of the technical staff and the project team may also include members of staff from other accounting standard-setters, as deemed appropriate by the IASB.
3. Developing and publishing the discussion paper
A discussion paper is not a mandatory step in the IASB’s due process. Normally the IASB publishes a discussion paper as its first publication on any major new topic as a vehicle to explain the issue and solicit early comment from constituents. If the IASB decides to omit this step, it will state its reasons.
Typically, a discussion paper includes a comprehensive overview of the issue, possible approaches in addressing the issue, the preliminary views of its authors or the IASB, and an invitation to comment. This approach may differ if another accounting standard-setter develops the research paper.
Discussion papers may result either from a research project being conducted by another accounting standard-setter or as the first stage of an active agenda project carried out by the IASB. If research has been performed by another accounting standard-setter, issues related to the discussion paper are discussed in IASB meetings, and publication of such a paper requires a simple majority vote by the IASB. If the discussion paper includes the preliminary views of other authors, the IASB reviews the draft discussion paper to ensure that its analysis is an appropriate basis on which to invite public comments.
For discussion papers on agenda items that are under the IASB’s direction, or include the IASB’s preliminary views, the IASB develops the paper or its views on the basis of analysis drawn from staff research and recommendations, as well as suggestions made by the IFRS Advisory Council, working groups and accounting standard-setters and presentations from invited parties. All discussions of technical issues related to the draft paper take place in public sessions.
When the draft is completed and the IASB has approved it for publication the discussion paper is published to invite public comment. The IASB normally allows a period of 120 days for comment on a discussion paper, but may allow a longer period on major projects (which are those projects involving pervasive or difficult conceptual or practical issues).
After the comment period has ended the project team analyses and summarises the comment letters for the IASB’s consideration. Comment letters are posted on the IASB’s website. In addition, a summary of the comments is posted on their website as a part of IASB meeting observer notes.
If the IASB decides to explore the issues further, it may seek additional comment and suggestions by conducting field visits, or by arranging public hearings and round-table meetings.
4. Developing and publishing the exposure draft
Publication of an exposure draft is a mandatory step in due process. An exposure draft is the IASB’s main vehicle for consulting the public. Unlike a discussion paper, an exposure draft sets out a specific proposal in the form of a proposed IFRS (or amendment to an IFRS).
The development of an exposure draft begins with the IASB considering issues on the basis of staff research and recommendations, as well as comments received on any discussion paper, and suggestions made by the IFRS Advisory Council, working groups and accounting standard-setters and arising from public education sessions.
After resolving issues at its meetings, the IASB instructs the staff to draft the exposure draft. When the draft has been completed, and the IASB has balloted on it, with a minimum of nine votes necessary to publish an exposure draft, the IASB publishes it for public comment.
An exposure draft contains an invitation to comment on a draft IFRS, or draft amendment to an IFRS, that proposes requirements on recognition, measurement and disclosures. The draft may also include mandatory application guidance and implementation guidance, and will be accompanied by a basis for conclusions on the proposals and the alternative views of dissenting IASB members (if any).
The IASB normally allows a period of 120 days for comment on an exposure draft. If the matter is exceptionally urgent, the document is short, and the IASB believes that there is likely to be a broad consensus on the topic, the IASB may consider a comment period of no less than 30 days, but it will set such a short period only after formally requesting and obtaining prior approval from 75 per cent of the Trustees. The project team collects, summarises and analyses the comments received for the IASB’s deliberation.
After the comment period ends, the IASB reviews the comment letters received and the results of other consultations. As a means of exploring the issues further, and soliciting further comments and suggestions, the IASB may conduct field visits, or arrange public hearings and round-table meetings. The IASB is required to consult the IFRS Advisory Council and maintains contact with various groups of constituents.
5. Developing and publishing the standard
The development of an IFRS is carried out during IASB meetings, when the IASB considers the comments received on the exposure draft. Changes from the exposure draft are posted on the website.
After resolving issues arising from the exposure draft, the IASB considers whether it should expose its revised proposals for public comment, for example by publishing a second exposure draft. If the IASB decides that re-exposure is necessary, the due process to be followed is the same as for the first exposure draft
As it moves towards completing a new IFRS or major amendment to an IFRS, the IASB prepares a project summary and feedback statement. These give direct feedback to those who submitted comments on the exposure draft, identify the most significant matters raised in the comment process and explain how the IASB responded to those matters. At the same time, the IASB prepares an analysis of the likely effects of the forthcoming IFRS or major amendment. The analysis will therefore attempt to assess the likely effects of the new IFRS on:
The financial statements of those applying IFRSs,
The possible compliance costs for preparers,
The costs of analysis for users (including the costs of extracting data,
Identifying how the data have been measured and adjusting data for the purposes of including them in, for example, a valuation model,
The comparability of financial information between reporting periods for an individual entity and between different entities in a particular reporting period, and
The quality of the financial information and its usefulness in assessing the future cash flows of an entity.
When the IASB is satisfied that it has reached a conclusion on the issues arising from the exposure draft, it instructs the staff to draft the IFRS. A pre-ballot draft is usually subject to external review, normally by the IFRS Interpretations Committee. Shortly before the IASB ballots the standard, a near-final draft is posted on its limited access website for paying subscribers. Finally, after the due process is completed, all outstanding issues are resolved, and the IASB members have balloted in favour of publication, the IFRS is issued, followed by publication of any project summary and feedback statement and any effect analysis.
Accounts receivable
Subsidiary Ledgers Defined
A subsidiary ledger contains the details about the balance of a specific general ledger account (often referred to as the control account or master account). The subsidiary ledger is maintained separately from the general ledger, but its total should always equal the balance in the general ledger account it supports.
The subsidiary ledger can take many forms, as described in more detail below.
It might consist of a listing of customers and amounts owed (accounts receivable), a listing of amounts owed to vendors (accounts payable), or a listing of inventory items on hand with quantities and costs.
Subsidiary Ledger Examples
Accounts receivable - Companies maintain a list of invoices due from their customers, normally in the form of an accounts receivable aging register.
This provides them with a listing of all the outstanding and unpaid invoices due from their customers. It also lets them know how old the invoices are, so they are aware of any past due items. If all of the individual invoices due from customers on the aging register are added together, the total should equal the general ledger balance in accounts receivable.
