Report on the international financial reporting standards (IFRS)

Introduction of international financial reporting standards IFRS

The report is based on international financial reporting standards IFRS. The basic rule of IFRS is to set form and also that financial statements could be reliable and consistent, transparent and could be compared with the companies to get competitive position in the market. IFRS are issued by international accounting standard boards. This expressed that how company maintains risk accounts and transactions that impact on financial position of the business. IFRS is used to establish to create harmony in the accounting language and the business market tools compared the financial statements of the companies among country-to-country and on international level (Nobes, 2006).

The basic purpose of this report is to develop understanding of accounting principle and different rules that are applicable as per the standards of I FRS. It aims to develop ability to identify and apply the rules and principle of IFRS in different scenarios to give an answer performance of the period. The report is based on analysis of revenue recognition issues and backgrounds of the principles of IAS 18 revenue. There is short description about the comparison between IFRS 15 and IAS 18.

Main body of international financial reporting standards IFRS

Revenue recognition is generally accepted accounting principle known as GAAP. It identifies the specific conditions that are used to generate revenue and determine how to generate it and a record in the transactions of the business. For instance, revenue recognition is fairly straightforward product method that is used to analyze after the product is sold and customer pay for the product if. There are several conditions in which there could be exceptions to the revenue recognition principle. There are many issues and problems that could be relevant revenue recognitions it to adopt in the information system of accounting.

Grouping and aggregating data with the increased number of transactions are difficult task to do in the business and it is required by Revenue recognition to display at the sources and groups into common revenue contractor. Without grouping and aggregation of data, there may be risk that could expand with the difficulty of cost bearing and time consuming. Recalculation of revenue also is a difficult task and an issue in revenue recognition and it is required by the principle of revenue recognition to recalculate the income that is received from the customers (Bohusova & Nerudova, 2009).

Revenue recognition is most likely to critical factor in under the event based revenue reclamation, and it revolves around that. We have new triggers and other such aspects that would not be recognized. Therefore, it is hard to recognize the event from which revenue is generated. Contracts for the company or not come in free and as they are important for the company, so there must be a cost that could be beard by company to gain the contract. Such cost may be required to recognize at the point of the time over a fixed to calculate and collect the data about this cost manually is very difficult. There is other number of issues that could be faced by financial institutions such as audit and compliance risk, Earnings restatements, Inability to be flexible in the market, where to scaling business operations and delays in IPOs.

The background of IAS 18 revenue outlines are different accounting requirement for which the reorganization of revenue from the sale of point could be rendered of service. Revenue is measured at the fair value and it is considered that it is received or receivable in specific time. The recognition of revenue is prescribed and conditions are met which are depends on the happening or not happening of any certain event. IAS 18, was reissued in December 1993 and it is operating for different kinds of periods from beginning of after 1^st January 1995.The main objective of IES 18 is to prescribe the accounting treatment of different transaction that are result in revenue generating of the transactions (Sedki, Smith, & Strickland., 2014).

IAS 18 divided the principle of revenue recognition into three parts that are explained in blow:

1.      Sale of goods of international financial reporting standards IFRS

Revenue recognized when all the following condition have been satisfied, such as:

·         The seller of words has transferred important risk and reward of the ownership of the goods to the buyer.

·         There is no control and managerial involvement in the ownership of the goods of seller after selling it.

·         The amount of revenue could be measurable easily

·         There are economic benefits associated with the transaction to follow the seller.

·         The cost that it incurred by the seller in respect of transaction could be measurable easily.

2.      Provision of services of international financial reporting standards IFRS

There are different approaches that are selected by revenue recognition to provide the services of IAS as a team. It’s described that with the results of transaction involved, the rendering of the services; it could be estimated easily and reliably. The revenue recognition rate gradually critical point as it is case for revenue, for sale of goods. There must be evolving conditions that must be satisfied, such as:

·         The amount of revenue could be measurable.

·         There must be economic benefit associated with the transaction for the seller.

·         After the completion of the transaction, the report must be recorded according to the measurable transaction.

3.      Constructions contract of international financial reporting standards IFRS

IAS 18 is not eradicate lead addressed the issue of district revenue recognition of services and goods. However, it also applies on the contractor. Contracts are specifically sheeted for the construction of an asset or the combination of different assets to get revenue from that a set for the fix in long term basis. There are many construction contracts that are fixed price and such contracts. At least two sellers to pay for this and fixed cost of the unit before the output, again by the buyer there must be following conditions that should be followed:

·         Contract revenue could be measurable easily.

·         There must be economic benefits associated with the contract for the seller.

·         Both the buyer and seller in the contract must be in the stage of completion and end of the reporting period could be measurable.

These principles are most to be satisfied in the revenue recognition according to the IAS 18. In most cases, where valuable represent the cash that are received by the seller. IAS18 explained that different arrangements are effectively used in financing the transaction to gain the substance of the transaction of supply of goods and services (Nobes C. , 2012).

The basic purpose of entering into a business is to earn profit and gain the utility as much as it would be earned from the investments that are invested by the owner of the business. The basis of IAS 18 is to have the translations when IF Rs 15 replaces IAS 18. In the modern business word, tragically, it is sometime when the there were tough challenges for the accountant to determine the revenue recognition in the financial statements. It exactly hit the standard of IAS 18, which gives guidance to revenue recognition to applicable different rules that are under the IFRS, 15 and IAS 18 revenue recognition contains different kinds of principle for the revenue recognition, but there are quite easy and many companies are using the judgments to apply the certain situation.

There are some companies that are developed IFRS’s policies according to their requirement. IAS was hard to applicable on the situation of the companies as every company is different situation in the market that would not it followed by Arab nations, Therefore, IFRS 15 could be able to impact on the companies and the biggest impact of the new standard was that companies will report profit in the different ways. It was appreciable by the owners of the business and with the widely accepted the IFRS 15 (Cordazzo, 2008).

International financial accounting Standards Board develops different standards to we have new recognition with the long term project in the business market. These international standards are inconsistent in the weakness and respective standards of accounting. IFRS 15 from contract with the customer established you different framework that are used to determine the revenue in the contract. If the basic principle is tool, learn about the vendors’ revenue to transfer under promise to good sales and services of the customer according to the amount that is paid for the consideration of the contract.

The application of the basic and simple in IFRS 15 is carried in two 5 steps. The first step is related with the identification of the contract and the 2^nd is identification of a separate performance from the obligations. The third step is based on to determine the transaction price and then to allocate the transaction prices to the performance of the obligations. The last step is based on the recognition of revenue, which were created from the performance of obligation that is satisfied. It has an entity to apply different model to a portfolio of the contract with the similar contractor streets of the entity. In this way it is better to implement in the organization that are working according to IAS 18 reasons IFRS 15 and replace the IAS 18 with the better implementation of the prices.

As we know very well that IAS 18 revenue based on the principle of revenue recognition that all quite possible to get the third. There are some companies that are developing their own IFRS policies based on the G AAP rules. There are many issues in a contract of constructions by applying IAS 18 that was replaced with the IFRS 15 revenue from contracts with customers

Conclusion of international financial reporting standards IFRS

The report is concluded with that the any business that are working in the financial market is required to prepare their accounts according to the standard rules that are accepted generally in the overall world market. These rules are commonly known as revenue recognition that based on IASB Board standards are used by the companies according to the situation and the conditions to implement different kinds of books of accounts. Revenue is the net inflow in the business that is generated from the economic benefits during a specific period of course of activities of the business. , it is hard to recognize the event from which revenue is generated. Contracts for the company or not come in free and as they are important for the company, so there must be a cost that could be beard by company to gain the contract. Such cost may be required to recognize at the point of the time over a fixed to calculate and collect the data about this cost manually is very difficult.

The main purpose of the revenue stranger is to provide a comprehensive revenue recognition model for all the contracts with the clients to make better comparability in the market. They have nearly definition standard based on the principle that the company will apply to determine the measurement of the revenue and roll timing in which is that it is recognized. The given principle or the basic principles of an entity will recognize revenue in the transfer of goods and services or in the contract of constructions that have new student standards are effective for the interim and animal reporting that are given by GAAP public reporting. So it could be said that rules are rules and made according to some strangers and therefore it is necessary to follow these rules to get the better opportunity in the market.

References of international financial reporting standards IFRS

Bohusova, H., & Nerudova, D. (2009). US GAAP and IFRS convergence in the area of revenue recognition. Economics and Management , 4, 12-19.

Cordazzo, M. (2008). The impact of IAS/IFRS on accounting practices: evidence from Italian listed companies. Séminaire DEMA/ERM .

Nobes, C. (2012). On the Definitions of Income and Revenue in IFRS. Accounting in Europe , 9 (1), 85-94.

Nobes, C. W. (2006). Revenue recognition and EU endorsement of IFRS. Accounting in Europe , 3 (1), 81-89.

Sedki, S. S., Smith, A., & Strickland., A. (2014). Differences and similarities between IFRS and GAAP on inventory, revenue recognition and consolidated financial statements. Journal of Accounting and Finance , 14 (2), 120.