Free Students Note: Accounting

International Accounting Standards Committee (IASC)

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International Accounting Standards Committee (IASC)<o:p></o:p></div>
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Formation of the International Accounting Standards Committee<o:p></o:p></div>
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The International Accounting Standards Committee (IASC) was formed in 1973 through an agreement made by professional accountancy bodies from Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland, and the United States of America. Additional sponsoring members were added in subsequent years, and in 1982 the sponsoring "members" of the IASC comprised all of the professional accountancy bodies that were members of the International Federation of Accountants (IFAC).<o:p></o:p></div>
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From its formation in 1973 until a comprehensive reorganization in 2000, the structure for setting International Accounting Standards was known as the International Accounting Standards Committee (IASC).<o:p></o:p></div>
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The International Accounting Standards Committee was essentially the structure, rather than a committee in the traditional sense of a group of people. There was no actual "committee" of that name.<o:p></o:p></div>
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Elements of the old IASC structure<o:p></o:p></div>
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Major components of the old IASC structure were:<o:p></o:p></div>
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·         IASC Board –<o:p></o:p></div>
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·         Consultative Group – an advisory body representing a wide range of international organizations with an interest in accounting<o:p></o:p></div>
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·         Standing Interpretations Committee (SIC) – developed and invited public comment on interpretations of IASC Standards, subject to final approval by the IASC Board<o:p></o:p></div>
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·         Advisory Council – oversight body (despite its name, the Advisory Council functioned more like the Board of Trustees of the current IFRS Foundation)<o:p></o:p></div>
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·         Steering Committees – expert task forces for individual agenda projects.<o:p></o:p></div>
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IASC Board<o:p></o:p></div>
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The standard-setting board of the IASC was known as the IASC Board. The IASC Board had 13 country members and up to 3 additional organizational members who operated on a part-time, volunteer basis. Each member was generally represented by two "representatives" and one "technical advisor". The individuals came from a wide range of backgrounds – accounting practice, business (particularly multinational businesses), financial analysis, accounting education, and national accounting standard-setting. The Board also had a number of observer members (including representatives of IOSCO, FASB, and the European Commission) who participated in the debate but did not vote.<o:p></o:p></div>
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The IASC Board promulgated a substantial body of Standards, Interpretations, a Conceptual Framework, and other guidance that was adopted directly by many companies and that was looked to by many national accounting standard-setters in developing national accounting standards.<o:p></o:p></div>
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List of I.A.S Issued: 
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The international accounting standards committee has so far issued the following standards.<o:p></o:p></div>
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IAS 1: Presentation of Financial Statements. IAS 2: Inventories IAS 3: Consolidated Financial Statements Originally issued 1976, effective 1 Jan 1977. Superseded in          1989 by IAS 27 and IAS 28  IAS 4: Depreciation Accounting Withdrawn in 1999, replaced by IAS 16, 22, and 38, all of which were   issued or revised in 1998 IAS 5: Information to Be Disclosed in Financial Statements Originally issued October 1976, effective 1 January 1997. Superseded by IAS 1 in 1997 IAS 6: Accounting Responses to Changing Prices Superseded by IAS 15, which was withdrawn December 2003 IAS 7: Cash Flow Statements IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors IAS 9: Accounting for Research and Development Activities – Superseded by IAS 38 effective 1.7.99 IAS 10: Events After the Balance Sheet Date IAS 11: Long-Term Construction Contracts [Cf. Construction in progress for the customer standpoint] IAS 12: Income Taxes IAS 13: Presentation of Current Assets and Current Liabilities – Superseded by IAS 1. IAS 14: Segment Reporting (superseded by IFRS 8 on 1 January 2008) IAS 15: Information Reflecting the Effects of Changing Prices – Withdrawn December 2003 IAS 16: Property, Plant and Equipment IAS 17: Leases IAS 18: Revenue IAS 19: Employee Benefits IAS 20: Accounting for Government Grants and Disclosure of Government Assistance IAS 21: The Effects of Changes in Foreign Exchange Rates IAS 22: Business Combinations – Superseded by IFRS 3 effective 31 March 2004 IAS 23: Borrowing Costs IAS 24: Related Party Disclosures IAS 25: Accounting for Investments – Superseded by IAS 39 and IAS 40 effective 2001 IAS 26: Accounting and Reporting by Retirement Benefit Plans IAS 27: Consolidated Financial Statements IAS 28: Investments in Associates IAS 29: Financial Reporting in Hyperinflationary Economies IAS 30: Disclosures in the Financial Statements of Banks and Similar Financial Institutions – Superseded by IFRS 7 effective 2007 IAS 31: Interests in Joint Ventures IAS 32: Financial Instruments: Presentation (Financial instruments disclosures are in IFRS 7 Financial Instruments: Disclosures, and no longer in IAS 32) IAS 33: Earnings Per Share IAS 34: Interim Financial Reporting IAS 35: Discontinuing Operations – Superseded by IFRS 5 effective 2005 IAS 36: Impairment of Assets IAS 37: Provisions, Contingent Liabilities and Contingent Assets IAS 38: Intangible Assets IAS 39: Financial Instruments: Recognition and Measurement IAS 40: Investment Property IAS 41: Agriculture<o:p></o:p> 
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International Accounting Standards Committee (IASC)

International Accounting Standards Committee (IASC) Formation of the International Accounting Standards Committee The International Ac...

Question 2: Explain the accounting principle, accounting convention and accounting standards(IAS)?

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Ø  Question 2: Explain the accounting principle, accounting convention and accounting standards(IAS)?<o:p></o:p></div>
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Accounting Concepts<o:p></o:p></h1>
Learning objectives:<o:p></o:p> 
Explain important accounting principles.<o:p></o:p> 
The term concepts includes those basic assumptions or conditions upon which accounting is based. The following are the important accounting concepts:<o:p></o:p> 
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·         Business Entity Concept<o:p></o:p></div>
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·         Going Concern Concept<o:p></o:p></div>
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·         Money Measurement Concept<o:p></o:p></div>
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·         Cost Concept<o:p></o:p></div>
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·         Duel Aspect Concept<o:p></o:p></div>
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·         Accounting Period Concept<o:p></o:p></div>
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·         Matching Concept<o:p></o:p></div>
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·         Realizations / Realization Concepts<o:p></o:p></div>
The explanations of these concepts are as follows:<o:p></o:p> 
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Business Entity Concept:<o:p></o:p></h2>
In accounting, business is treated as separate entity from its owners. Accounts are prepared to give information about the business and not about those who own it. A distinction is made between business transactions and personal transactions. Without such a distinction, the affairs of the business will be mixed up with the private affairs of the proprietor and the true picture of the firm will not be available. The 'Business' and 'owner' are taken as two separate entities. The accountant is interested to record transactions relating to business only. The private transactions of the owner will be recorded separately and will have no bearing on the business transactions. All the transactions of the business are recorded in the books of the business from the point of view of the business as an entity and even the proprietor is treated as a creditor to the extent of his capital.<o:p></o:p> 
The concept of separate entity is applicable to all of business organizations. For example, in case of a sole proprietorship business or partnership business, though the sole proprietor or partners are not considered as separate entities in the eyes of law, but for accounting purposes they will be considered as separate entities. In the case of joint stock Company, the business has as separate legal entity than the shareholders. The coming and going shareholders don not affect the entity of the business. Thus, the distinction between owner and the business unit has helped accounting in reporting profitability more objectively and fairly. It has also led to the development of 'responsibility accounting' which enables us to find out the profitability of even the different sub-units of the main business.<o:p></o:p> 
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Going Concern Concept:<o:p></o:p></h2>
According to going concern concept it is assumed that the business will exist for a long time to come. Transactions are recorded in the books keeping in view the going concern aspect of the business unit. A firm is said to be going concern when there is neither the intention nor necessary to wind up its affairs. In other words, it should continue to operate at its present scale in the future. On account of this concept the fixed assets are shown in the balance sheet at a diminishing balance method i.e., going concern value. There is no need to show assets at market value because these have been purchased for use in future and earn revenues and for sale purpose. If the business is not to continue then market value will have significance. Since business is to continue, fixed assets will be shown at cost less depreciation basis. It is due to the concept that the fixed assets are depreciated on the basis of their expected life than on the basis of market value. The concept also necessitates distinction between expenditure that will render benefit over a long period and that whose benefit will be exhausted quickly, say within one year. The going concern concept also implies that existing liabilities will be paid at maturity.<o:p></o:p> 
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Money Measurement Concept:<o:p></o:p></h2>
Accounting to records only those transactions which can be expressed in terms of money. Transactions or events which cannot be expressed in money do not find place in the books of accounts though they may be very useful for the business. For example, if a business has got a team of dedicated and trusted employees, it is definitely an asset to the business, but since their monetary measurement is not possible, they are not shown in the books of business. It should be remembered that money enables various things of diverse nature to be added up together and dealt with. The use of a building and the use of clerical service can be aggregated only through money values and not otherwise.<o:p></o:p> 
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Cost Concept:<o:p></o:p></h2>
This concept is closely related to the going concern concept. According to this concept, an asset in ordinarily recorded in the books at the price at which it was acquired i.e., at its cost price. This cost serves the basis for the accounting of this asset during the subsequent period. The 'cost' should not be confused with 'value'. It must be remembered that as the real worth of the assets changes from time to time, it does not mean that the value of such an asset is wrongly recorded in the books. The book values of the assets as recorded do not reflect their real value. They do not signify that values noted therein are the values for which they can be sold. Though the assets are recorded in the books at cost, in course of time, they are reduced in value on account of depreciation charges. The idea that the transactions should be recorded at cost rather than at as subjective or arbitrary value is known as cost concept. With the passage of time, the market value of fixed assets like land and buildings vary greatly from their cost. These changes in the value are generally ignored by the accountants and they continue to value them in the balance sheet at historical cost. The principle of valuing the fixed assets at cost and not at market value is the underlying principle in cost concept. According to them the current values alone will fairly represent the cost to the entity. The cost principle is based on the principle of objectivity. There is no room for personal assessment in showing the figures in accounting records. If subjectivity is flowed in records the same assets will be valued at different figures by different individual. Everybody will have his own views about various assets. The cost concept is helpful in making truthful records. The records become more reliable and comparable.

Question 2: Explain the accounting principle, accounting convention and accounting standards(IAS)?

Ø Question 2: Explain the accounting principle, accounting convention and accounting standards(IAS)? Accounting Concepts Learning o...

Ø Question: Explain the users of Financial Statement?

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Ø
Question: Explain the users of Financial
Statement?<o:p></o:p></div>
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Financial Accounting<o:p></o:p></div>
Accounting can be defined
as an information system that provides information about the results of a
business' performance and its economic position.
The systematic recording, reporting, and analysis of financial transactions of
a business. The person in charge of accounting is
known as an accountant, and this
individual is typically required to follow a set of rules and regulations, such as the Generally Accepted Accounting Principles. Accounting allows a company to analyze the financial performance of
the business, and look at statistics such
as net
profit.<o:p></o:p>

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Financial
statements are intended to be understandable by readers who have "a
reasonable knowledge of business and economic activities and accounting and who
are willing to study the information diligently." There are different
kinds of users of financial
statements. The users of financial statements may be inside or outside
the business. <o:p></o:p></div>
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The users
of financial statements use financial statements for a large variety of
business purposes and their ability to understand and analyze financial
statements helps them to succeed in the business world. 
 
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Classification of Users of Financial Statements<o:p></o:p></div>
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The users
may be classified into internal and external users.
Internal users refer to managers who use accounting information in making
decisions related to the company's operations. External users, on the other
hand, are not involved in the operations of the company but hold some financial
interest. They may be classified further into users with direct financial
interest – the owners, investors, lenders and creditors, and users with indirect financial
interest – government, employees, customers and the others. The various users
of financial statements are classified and detailed as follows: <o:p></o:p></div>
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1. Internal Users  
The internal users of financial statements are individuals who have direct
bearing with the organization. They may include:<o:p></o:p></div>
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Ø  Management:
for analyzing the organization's performance
and position and taking appropriate measures to improve the company results.
In small businesses, management may include the owners. In huge organizations,
however, management is usually made up of hired professionals who are entrusted
with overall responsibility of operating the business or a part of the
business. They act as agents of the owners. The managers, whether owner
or hired, regularly face economic decisions – How much supplies will we
purchase? Do we have the cash? How much did we make last year? Did we meet our
targets? All those, and many other decisions, require analysis of accounting
information.<o:p></o:p></div>
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Ø  Owners
or investors: for analyzing the
viability and profitability of their investment and determining any future
course of action. Stockholders of corporations need financial
information to help them make decisions on what to do with their shares of
stock (investments) – hold, sell, or buy more shares. Potential investors need
information to assess the company's potential for success and profitability. In
the same way, small business owners need financial information to determine if
the business is profitable and whether to continue or drop it.<o:p></o:p></div>
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Ø  Employees: The
financial reports or the financial statements are of immense use to the
employees of the company for making collective bargaining agreements. Such
statements are used for discussing matters of promotion, rankings and salary
hike. Employees are interested in the company’s profitability and stability.
They are after the ability of the company to pay salaries and provide employee
benefits. They may also be interested in the company’s financial position and
performance to assess the possibility of company expansion and career
opportunities.<o:p></o:p></div>
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2.
External Users 
External users of accounting
information include the following:<o:p></o:p></div>
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Ø  Creditor: for determining the credit worthiness of the organization.
Terms of credit are set according to the assessment of their customers'
financial health. Creditors include suppliers as well as lenders of finance
such as banks. The vendors who extend credit to a business require
financial statements to assess the creditworthiness of the business.<o:p></o:p></div>
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Ø  Government: The
financial statements of different companies are also used by the government to
analyze whether the tax paid by them is accurate and is in line with their
financial strength. – Governing bodies of the state, especially the tax
authorities, are interested in an entity's financial information for taxation
and regulatory purposes. Taxes are computed based on the results of operations
and other tax bases. In general, the state would like to know how much the
taxpayer is making to determine the tax due thereon.<o:p></o:p></div>
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Ø  Regulatory
Authorities: for ensuring that the company's disclosure of
accounting information is in accordance with the rules and regulations set in
order to protect the interests of the stakeholders who rely on such information
in forming their decisions.<o:p></o:p></div>
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Ø  General
Mass and Media: The common people as well as media also make part of
the users of financial statements. Anyone outside the company such as
researches, students, analysts and others are interested in the financial
statements of the company for varied reasons.<o:p></o:p></div>
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Ø Question: Explain the users of Financial Statement?

Ø Question: Explain the users of Financial Statement? Financial Accounting Accounting can be defined as an information system that ...