There are plenty of acronyms floating about in the business world, but two of the most important when it comes to your accounting function are IAS and IFRS. Learn a little more about IAS vs. IFRS, as well as some of the most important IAS accounting standards, right here.
What is IAS and IFRS?
IAS = International Accounting Standards
The IAS was a set of standards that was developed by the International Accounting Standards Committee (IASC). They were originally launched in 1973 but have since been replaced by the IFRS.
IFRS = International Financial Reporting Standards
IFRS is a set of standards that was developed by the International Accounting Standards Board (IASB).
IAS vs. IFRS – what’s the difference?
The IAS and IFRS are incredibly similar. In fact, only a handful of the updates in the IFRS make the IAS redundant, meaning that many countries continue to follow IAS and defer to IFRS only when the two differ.
So, what does IFRS and IAS do?
Both IFRS and IAS are standards to which companies must adhere in their financial statements. It is required by EU regulation within Europe. Following Brexit, Britain is expected to adopt a new set of standards as set out by the IASB, though these are not expected to differ very much from the IFRS that the EU will follow. The IFRS are required around the world, well beyond Europe, so it’s unlikely that the UK will seek to create vastly different standards.
To better illustrate how standards are set out and precisely what they entail, here’s a quick look at a few of them:
IAS 1 is concerned with the presentation of financial statements. It gives guidance on how they should be structured and what they should contain. It requires a full set of financial documents including a cash flow statement, profit and loss statement, etc. The IAS 1 can be traced back to 1974 and has been updated over a dozen times, most recently in July 2020.
Referring to Property, Plant and Equipment, IAS 16 outlines how these items should be treated by your accounting function. It outlines that PP&E is to be initially measured at its cost and subsequently measured using a cost or revaluation model. PP&E should also be depreciated, with its depreciated amount allocated across its useful life on a systematic basis. IAS 16 was last updated in May 2020.
Concerned with Impairment of Assets, IAS 36 instructs that assets are not carried at more value than their recoverable amount. Entities must run impairment tests to ascertain the loss of value of an asset. This standard was last updated in May 2013.
Covering Provisions, Contingent Liabilities and Contingent Assets, IAS 37 outlines how these should be accounted for and disclosed. This includes measuring provisions at the best estimate, taking account of risks and uncertainties. This was last updated in May 2020.
Outlining the handling of Intangible Assets, IAS 38 states that intangible assets should be measured at cost and subsequently measured at cost or using a revaluation model and amortised over its useful life. IAS 38 was last updated in May 2014.
Staying on top of standards
As you can see, IAS and IFRS apply to pretty much all aspects of your business’s finances. Chartered accountants should be clued up on these standards as part of their training, though if you are currently serving as an unqualified accountant, you may want to consider a structured course to make sure you know the important rules around your trade.
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