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IFRS
Conceptual Framework
DANIKA GRACE BROWN
FALL 2014
Agenda
US GAAP Conceptual Framework
IFRS Conceptual Framework:
The Similarities and Differences Between GAAP and IASB
Conceptual Frameworks
User Specific
Understandability
Information Specific:
Primary
Relevancy timely, predictive, feedback value
Reliability verifiable, unbiased, correct
Secondary
Comparable between business enterprises
Consistency between periods
Elements:
Assets
Comprehensive Income
Distributions to owners
Equity
Expenses
Gains
Investments by owners
Liabilities
Losses
Revenues
Principles
Constraints
COMPARISON OF STRUCTURE
GAAP
Board of Trustees Govern FAF
IFRS
Trustee Appointments Advisory Group
Advises the IASC
DUE PROCESS
IASB exercises similar due process of FASB:
1. Agenda
2. Discussion Paper (DP) not mandatory
3. Public Hearing
4. Exposure draft issued
5. Public Hearing
6. Pre-ballot draft (usually reviewed by IFRIC)
7. IASB members ballot in favor of publication
8. Published IFRS
SPECIAL NOTE
October 2004 IASB contributed to its agenda to
OBJECTIVES
IFRS To provide information about the financial
UNDERLYING ASSUMPTIONS
Accrual Basis the effects of transactions are
QUALITATIVE CHARACTERISTICS
Basic agreement between GAAP and IFRS:
GAAP
1. Relevance
2. Reliability
3. Comparability
4. Consistency
IFRS
1. Understandability
2. Relevance
3. Reliability (prudence)
4. Comparability
(Includes consistency)
QUALITATIVE CHARACTERISTICS
Basic agreement between GAAP and IFRS:
1. Understandability the information must be
QUALITATIVE CHARACTERISTICS
Basic agreement between GAAP and IFRS:
2. Relevance information must be relevant to the
QUALITATIVE CHARACTERISTICS
3. Reliability
QUALITATIVE CHARACTERISTICS
4. Comparability information should be
CONSTRAINTS
In the IFRS framework constraints are included
with qualitative characteristics:
Cost-benefit and timeliness: Constraints related to
ELEMENTS
ASSET A present economic resource controlled by
the entity as a result of past events from which future
economic benefits are expected to flow to the entity.
Difference with FASB: Emphasis placed on a
present asset (economic resource) from which
there will be a future economic benefit.
ELEMENTS
LIABILITY A liability is a present obligation of the
entity arising from past events, the settlement of which
is expected to result in an outflow from the entity of
resources embodying economic benefits.
Slight change in wording:
resources embodying economic benefits
ELEMENTS
EQUITY is the residual interest in the assets of
the entity after deducting all its liabilities.
Same as GAAP definition
ELEMENTS
INCOME are increases in economic benefits during
the accounting period in the form of inflows or
enhancements of assets or decrease of liabilities that
result in increases in equity, other than those relating
to contributions from equity participants.
Incorporates GAAP definition of Revenue and
Gains.
ELEMENTS
EXPENSES decreases in economic benefits during
the accounting period in the form of outflows or
depletions of assets or incurrences of liabilities that
result in decreases in equity, other than those relating
to distributions to equity participants.
Incorporates GAAP definition of Expenses and
Losses
MEASUREMENT BASIS
FASB:
Usually historical cost
Allows fair value
Concept # 7 addresses present value measure
IFRS:
Historical most common
Current cost / Replacement cost
Realizable or settlement value
Present value
CONCEPTS OF CAPITAL
FINANCIAL CAPITAL MAINTENANCE
CONCEPT:
A PROFIT IS EARNED..IF:
CONCEPTS OF CAPITAL
PHYSICAL CAPITAL MAINTENANCE
A PROFIT IS EARNED..IF:
CONCEPTS OF CAPITAL
Physical Capital Maintenance:
CONCEPTS OF CAPITAL
Main difference between financial and physical capital
maintenance:
Holding gains and losses
January 1 Item of inventory is purchased for
$50,000
December 31 The price of the item is $70,000, but
the item is not sold at the end of the year.
Holding gain = $20,000
CONCEPTS OF CAPITAL
Reporting:
Financial capital
1. Measured in dollars
2. Holding gain/loss are included in income
Physical capital
1.
2.
FINANCIAL STATEMENTS
1.
2.
3.
4.
5.
6.
References
AICPA. (n.d.). IFRS Resources. Retrieved 10 30, 2014, from
IFRS: http://www.ifrs.com/index.html
FASB. (n.d.). FASB Standards. Retrieved 10 31, 2014, from
FASB :
http://www.fasb.org/jsp/FASB/Page/LandingPage&cid=11
75805317350
Gleim, I. N. (2014). CMA Review. Gainesville, FL: Gleim.
Kieso, D. E. (2010). Intermediate Account. Hoboken, NJ:
Wiley.
Plumlee, M. (2010). International Financial Reporting
Standards. Boston, MA: Prentice Hall.