Slide 11.1 Frank Wood and Alan Sangster, Business Accounting, Volume 2, 11 th Edition, © Pearson Education Limited 2008 International Accounting Standards Board The need today for the IASB is mainly due to the following: The considerable growth in international investment. The growth in multinational firms, which have to produce financial statements covering a large number of countries. It is desirable that the activities and efforts of the various national standard-setting bodies be harmonised.

Slide 11.2 Frank Wood and Alan Sangster, Business Accounting, Volume 2, 11 th Edition, © Pearson Education Limited 2008 The Framework for the Preparation and Presentation of Financial Statements The Framework for the Preparation and Presentation of Financial Statements was issued in 1989 and is split into seven main sections: 1.The objective of financial statements. 2.Underlying assumptions. 3.Qualitative characteristics of financial statements. 4.The elements of financial statements. 5.Recognition of the elements of financial statements. 6.Measurement of the elements of financial statements. 7.Concepts of capital and capital maintenance.

Slide 11.3 Frank Wood and Alan Sangster, Business Accounting, Volume 2, 11 th Edition, © Pearson Education Limited 2008 IAS 8: Accounting policies, changes in accounting estimates and errors Accounting policies are defined in IAS 8 as: The specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.

Slide 11.4 Frank Wood and Alan Sangster, Business Accounting, Volume 2, 11 th Edition, © Pearson Education Limited 2008 IAS 8: Accounting policies, changes in accounting estimates and errors (Continued) When selecting an accounting policy, its appropriateness should be considered in the context of producing information that is (a)Relevant to the economic decision-making needs of users; and (b)Reliable, in that the financial statements: (i) represent faithfully the financial position, financial performance and the cash flows of the entity; (ii)reflect the economic substance of transactions, other events and conditions and not merely the legal form; (iii)are neutral, i.e. free from bias; (iv)are prudent; (v) are complete in all material aspects.

Slide 11.5 Frank Wood and Alan Sangster, Business Accounting, Volume 2, 11 th Edition, © Pearson Education Limited 2008 IAS 2: Inventories Cost is defined as: ‘all costs of purchase, conversion and other costs incurred in bringing the inventories to their present location and condition’. Cost of purchase comprises purchase price including import duties and other irrecoverable taxes, transport and handling costs and any other directly attributable costs, less trade discounts, rebates and subsidies. Cost of conversion comprises: (i)Costs which are specifically attributable to units of production; (ii)Systematically allocated, fixed and variable production overheads.

Slide 11.6 Frank Wood and Alan Sangster, Business Accounting, Volume 2, 11 th Edition, © Pearson Education Limited 2008 IAS 12: Income taxes The standard prescribes the treatment of tax on income in the financial statements. It distinguishes between two categories of tax: 1.Current tax 2.Deferred tax

Slide 11.7 Frank Wood and Alan Sangster, Business Accounting, Volume 2, 11 th Edition, © Pearson Education Limited 2008 IAS 18: Revenue Revenue is measured at the fair value of the consideration received or receivable. Revenue from sale of goods is recognised when: (a)Significant risks and rewards of ownership are transferred to the buyer; (b)The seller has no continuing managerial involvement or control over the goods; (c)The amount of revenue can be measured reliably; (d)It is probable that economic benefits will flow to the seller; (e)The costs of the transaction can be measured reliably.

Slide 11.8 Frank Wood and Alan Sangster, Business Accounting, Volume 2, 11 th Edition, © Pearson Education Limited 2008 IAS 19: Employee benefits There are four categories of employee benefit: (i)short-term employee benefits such as wages and salaries; (ii)post employment benefits, for example, pensions; (iii)other long-term employee benefits, such as long- service leave or sabbatical leave and long-term disability benefits; (iv)termination benefits.

Slide 11.9 Frank Wood and Alan Sangster, Business Accounting, Volume 2, 11 th Edition, © Pearson Education Limited 2008 IAS 26: Accounting and reporting by retirement benefit plans There are two types of retirement benefit plans: Defined contribution plans Defined benefit plans

Slide Frank Wood and Alan Sangster, Business Accounting, Volume 2, 11 th Edition, © Pearson Education Limited 2008 IFRS 2: Share-based payment IFRS2 identifies three types of share-based payment transaction: Equity-settled share-based payment transactions. Cash-settled share-based payment transactions. Transactions in which the entity receives or acquires goods or services and the terms of the arrangement provide one or other of the parties to the transaction with a choice as to whether the transaction is settled in cash or by issuing equity instruments.