IFRS and XBRL

How to improve Business Reporting through Technology and Object Tracking

Kurt Ramin, Cornelis Reiman

• Publisher: Wiley
• Year: 2013
• ISBN:
  9781118387856
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Buchhaltungsgrundsätze

International Financial Reporting Standards are increasingly adopted worldwide, and it is critical to understand their place within the global business environment as well as the most up-to-date methods of applying them. In IFRS and XBRL Kurt Ramin and Cornelis Reiman, world authorities on IFRS, have condensed the overwhelming flood of available material to present a comprehensive guide to the key components of IFRS, helping to explain why they are a priority for private enterprises and governments alike. The book:

• provides valuable commentary on key components of IFRS which are crucial to local, national and international business decision making
• demonstrates the importance of disclosure checklists
• offers illustrative financial statements arising from IFRS
• looks at recent developments in IFRS, in particular how the standards should be reflected in the narrative report, and what implications they have for sustainability reporting
• explores how business reporting can be improved, for example through the addition of non-financial reporting
• examines the key issue of emerging technology in reporting under IFRS, especially the use of XBRL and the obvious push for a new paradigm whereby object definitions, tracking and valuation offer considerable benefits to the people who produce and rely upon business reports

To complete the picture, the authors examines other standards, and cover important issues such as US GAAP convergence with IFRS, and the important of International Valuation Standards, IFRS and XBRL is the complete guide to the background, current state, and future of International Financial Reporting Standards.

Part One

International Financial Reporting Standards (IFRS)

TIPS FOR READERS

One of the most noteworthy business reporting developments in the history of accounting is the drafting, distribution and usage of International Financial Reporting Standards. This significant initiative, as the naming suggests, has standardised the principles of financial reporting. As a direct result, there is greater integrity in the use of business reports that, in turn, has a positive impact on subsequent decision making.

In addition, the application of IFRS has facilitated reliable comparative analysis between reporting entities within the same industry or geographical location. Of course, on that basis, dependable comparisons can also be conducted across national borders, through the availability of IFRS translations, to enable usage internationally.

It is noteworthy that these Standards are historically grown, which has led to the inclusion and mix-up of objects/items and valuation.

Summary

The first section presents an introduction to, and objectives of, International Financial Reporting Standards. The second section poses the question: how important are IFRS to business? In responding, the text addresses IFRS and legal objectives. The convergence of IFRS and US GAAP is also a topic of conversation, as is reconciliation with respect to US GAAP. Thereafter, a wider ambit is brought in by way of the International Organization of Securities Commissions (IOSCO). This section concludes with the role of regulators and the related enforcement of standards.

The third section looks into the governance and accountability of the IFRS Foundation, particularly its history, structure and finance. The associated monitoring board and trustees of the IFRS Foundation are presented, along with IASB members and the related due process, in addition to the IFRS ­Advisory Council. This sets a solid base upon which the next section rests.

The fourth section expands upon the framework, preface, standards and interpretations of IFRS. The IFRS are summarised, as are the International Accounting Standards (IAS). The treatment of these Standards leads easily into the more recent, and so-called, IFRS for Small and Medium Sized Enterprises and the section concludes with interpretations to those Standards which are a part of the authoritative literature pertaining to IFRS.

The fifth section addressees the IFRS Practice Statement Management Commentary, followed by future plans in the sixth section, and new presentation formats, as well as model financial statements in the seventh section. The eighth section lists the contents of the IFRS Red Book, and the ninth section introduces a glossary of IFRS-related terminology. The tenth section introduces the IFRS book index.

Target audience

The overall concept map shown in the introduction indicates the necessary breadth and depth of elements in this book which play a fundamental part in supporting current and expected thoughts of a new reporting paradigm. Accordingly, we can see that the various sections of this book are likely to be of particular significance to some people more than to others.

Readers who are expected to have an affinity with, and interest in, Part I of this book include:

• accounting practitioners
• developers of business reporting
• deliverers of business reporting
• standard setters
• auditors
• finance professionals
• academics
• students.

CHAPTER ONE

Introduction to and objectives of IFRS

INTERNATIONAL FINANCIAL REPORTING IS ON THE MOVE, and common world-wide business and financial reporting formats are developing. The recent so-called global financial crisis emphasises the need for financial reporting standards. In effect, International Financial Reporting Standards can be a precursor and an example for a much needed global framework for financial and legal standards.

The goal of the IFRS Foundation (IFRSF) is to develop a single set of high-quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated accounting principles.

As of 2005, the European Union (EU) requires all publicly traded entities in member states to prepare their consolidated financial statements under IFRS. These accounting standards may differ significantly from the US-based Generally Accepted Accounting Principles (GAAP) previously applicable.

More than 150 countries now require the application of IFRS in one form or another. The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) are actively pursuing convergence projects. China, India, Japan and other countries have been agreed upon convergence. In May 2012, the Pan African Federation of Accountants (PAFA) – representing 34 African nations – made a broad policy resolution to adopt IFRS, IPSAS and ISA.

Once global convergence is completed by the IASB, financial statements will be fully comparable worldwide. Needless to say, accounting and financial reporting changes have an impact on capital markets and on critical financial measures, such as profits, earnings per share, valuation of assets and credit ratings. This overview is designed to provide an understanding of the basic issues when people are reporting using IFRS, such as the following:

Corporate

• How are business combinations accounted for under IFRS 3?
• What further changes are planned regarding measurement, such as the application of fair value?
• How are goodwill and other intangibles accounted for?
• How does adopting IFRS in separate financial statements affect distributable profits?
• What are the new rules when accounting for pensions and stock options under IFRS 2?

Banking and capital markets

• How are financial covenants affected by moving to IFRS?
• What is the impact of IFRS on performance indicators, such as EBITDA (earnings before interest, taxes, depreciation and amortisation) finance costs, net debt and net worth?

Tax

• How is...