International Accounting Standards
What it is and its purpose
How it is related In the financial documents
Presentation of the financial statements
IAS 1 requires that companies comply with a number of accounting concepts as follows: going concern, Accruals, Consistency, materiality, prudence, business entity, money measurement, realisation, historical cost, and duality.
IAS 1 states that a complete set of financial statements comprises, Income statement, Balance sheet, Statement of changes in equity, statement of cash flows, accounting policies and explanatory notes.
The standard applies to all types of stock. It states that stock should be valued at the lower of the cost or net realisable value. This is to ensure that stock is valued correctly and precisely.
This is related to the Cost Of Goods Sold (COGS) and goes in the income statement. It also goes into the balance sheet in the Current asset section.
Statement of Cash Flows
This standard requires that a cash flow statement must be included as part of the company’s published accounts. This ensures that cash flow statements are produced to a high standard with the standardized layout.
The cash flow statement is required to be included in the financial statements of larger limited companies.
This standard defines policies as “The specific principles, bases, conventions, rules and practices applied by an entity (Business) in preparing and presenting financial statements.” They are specific accounting methods selected by the directors and followed by the company, such as depreciation methods.
This depends on the policy that is being dealt with. The policies that are used have to be applied consistently from year to year such as depreciation, or the pricing method of assets (historic cost or Net book value)
Events after the reporting period
These are events that are either favourable or unfavourable events that take place after the financial statements have been prepared at the year end and before the time when the statements are authorised for issue to interested parties.
Adjusting event – These are events that provide evidence of conditions that existed at the end of the reporting period. An adjustment should be made in the financial statements.
Non – adjusting events – Events/conditions that arose after the reporting period.
It depends whether or not…