PGDBFS 103 International Financial Accounting and

Transcript:PGDBFS 103 International Financial Accounting and:
PGDBFS 103 International Financial Accounting and Policy (IFAP) International Financial Reporting Standards INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) IFRSs are the set of most commonly adopted generally accepted accounting principles worldwide. This module describes and demonstrates the requirements of selected IFRSs and also makes comparison to US GAAPs to indicate differences and similarities. The type of differences between US GAAPs and IFRS will include: definition differences, recognition differences, measurement differences, alternative accounting treatments available, lack of requirements or guidance, presentation differences, disclosure differences IAS 2 - Inventories Recognition: An entity should initially recognise inventory when it has control of the inventory, expects it to provide future economic benefits, and the cost of the inventory can be measured reliably. Measurement: Initial measurement of inventories should be at cost. After initial recognition, inventories should be measured at the lower of cost and net realisable value. Definition of “Cost” - Cost is defined as all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost excludes: administrative overheads, abnormal losses, storage costs, selling costs US GAAP vs IFRS LIFO is only allowed under US GAAP Reversal of inventory write downs prohibited under US GAAP. IFRS allows up to the original write down. IAS 16 – Property, plant and equipment Recognition: When it is probable that future economic benefits associated with the item will flow to the entity; and the cost of the item can be measured reliably. Measurement: initially measured at cost. Cost - costs of acquiring or constructing the asset and costs incurred subsequently to add to or replace part of the asset. The purchase price Directly attributable costs costs of dismantling and removing the item and restoring the site Borrowing costs on qualifying assets. Subsequent measurement US GAAP – cost model IFRS – cost model / revaluation model US GAAP vs IFRS IFRS – component depreciation / annual review of residual value and life US GAAP – no component depreciation / no explicit requirement for an annual review of residual values. IAS 40 – Investment property IFRS Definition - property (land and/or buildings) held in order to earn rentals and/or for capital appreciation. Owner occupied property - PPE; Not IP Property held for sale – Inventory; not IP Initial measurement at cost (both IFRS and US GAAP) Subsequent measurement US GAAP – Cost model [Investor entities may measure at fair value]