Key Concepts of Financial Reporting Standards
A joint IASB-FASB project was begun in October 2004 with the objective of developing a common conceptual framework for financial reporting. The differences between IFRS and US GAAP which affect the conceptual framework and the general financial reporting requirements have…
Characteristics of a Coherent Financial Reporting Framework
For a financial reporting system to be effective, it must be coherent, meaning that all its pieces must fit together based on an underlying logic. There are however certain barriers to creating such a framework and which limit the overall…
Implications for Financial Analysis of Differing Financial Reporting Systems
The recent adoption of IFRS in many countries, especially in the EU, has advanced the objective of achieving global convergence of financial reporting standards. There are, however, still significant differences remaining in global financial reporting, most noticeably between IFRS and…
Company Disclosures of Significant Accounting Policies
Disclosures in the notes to a company’s financial statements and accompanying discussion provide a good source for obtaining information on the possible effect that financial reporting standards may have on the company’s financial statements. This disclosure can occur in two…
Revenue Recognition
Accounting Standards Codification (ASC) 606 is the new revenue recognition standard affecting all entities getting into contracts with customers to transfer goods or services. These entities include the public, private, and non-profit entities and should be ASC 606 compliant. ASC…
Converged Accounting Standards for Revenue Recognition
In May 2014, the IASB and FASB issued converged accounting standards which aim to provide a principles-based approach to revenue recognition. The core principle behind these converged standards is that revenue is to be recognized in order to “depict the…
Expense Recognition
The IASB Conceptual Framework describes expenses as “decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions…
Non-recurring Items
When assessing a company’s possible future performance, it is advisable to separate recurring items from non-recurring items. Recurring items are items of income and expense that are likely to continue in the future, while non-recurring items are those which are…
Operating versus Non-operating Items
When assessing a company’s current or potential future financial performance, it is important to consider the effects of both operating and non-operating components of the income statement. For example, a company that may appear to be profitable based on the…
Calculation of Earnings per Share
Both IFRS and US GAAP require a company to present its earnings per share (EPS) on the face of the income statement for net profit or loss (net income) and profit or loss (income) from continuing operations. The calculation of…
