IFRS AND ISA

 

The objective of financial reporting is to provide financial information that is useful to investors in making decisions. It is important that the financial information provided to those investors is communicated effectively.

 

IFRS is an acronym for International Financial Reporting Standards and covers full set of principles and rules on reporting of various items, transactions or situations in the financial statements. Often they are referred to as “principles based” standards because they describe principles rather than dictate rigid accounting rules for treatment of certain items.

 

ISA is an acronym for International Standards on Auditing - professional standards for the performance of financial audit of financial information. These standards are issued by International Federation of Accountants (IFAC) through the International Auditing and Assurance Standards Board (IAASB).

 

The standard-setting framework has to be seen within the context of the ethics standards issued by The International Ethics Standards Board for Accountants (IESBA).

 

IESBA is an independent standard-setting body that serves the public interest by setting robust, internationally appropriate ethics standards, including auditor independence requirements, for professional accountants worldwide. These are compiled in the Code of Ethics for Professional Accountants™. Alongside the urgent need for consistent and comprehensive whistle-blowing legislation around the world, the role of good governance in the delivery of transparency, accountability, and high-quality information is a message that the International Federation of Accountants (IFAC), on behalf of the global accountancy profession, has been making consistently for a number of years.

 

 

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IFRS comprise the following components:

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• The Conceptual Framework for the Financial Reporting

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The Framework states the basic principles for IFRS and hence it’s a “must-read” document. It discusses objective of financial statements, underlying assumptions used in IFRS, qualitative characteristics of financial statements, elements of financial statements, recognition of elements of financial statements, measurement of elements of financial statements and concepts of capital and maintenance. The Framework was amended in September 2010.

 

• International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS)

 

Both IAS and IFRS are standards themselves that prescribe rules or accounting treatments for various individual items or elements of financial statements. IASs are the standards issued before 2001 and IFRSs are the standards issued after 2001. There used to be 41 standards named IAS 1, IAS 2, etc., however, several of them were superseded, replaced or just withdrawn.

 

 

• Standing Interpretations Committee (SIC) and Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC)

 

SICs and IFRICs are interpretations that supplement IAS / IFRS standards. SIC were issued before 2001 and IFRIC were issued after 2001. They deal with more specific situations not covered in the standard itself, or issues that arose after publishing of certain IFRS.

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Primary standard setting body is the International Accounting Standards Board (IASB) with 15 full-time members based in London, UK. IASB’s goal is to develop and publish IFRS including IFRS for SME (small and medium enterprises).  IASB also approves interpretations of IFRSs developed by IFRS Interpretation Committee. The process of standard setting is as open and transparent as possible – all meetings of IASB are public and webcast on the net. Literally everyone interested can register to IASB’s official webpage www.ifrs.org and submit his own comments to drafts of new standards. This way, everyone can influence the process of standard setting. IASB has also an interpretative body called IFRS Interpretations Committee (formerly IFRIC). This committee is responsible to review and solve certain accounting issues arising from IFRSs currently in place and provide guidance on those issues.

 

In other words, committee issues interpretations called IFRICs (before 2001 SICs). Each IFRIC must then be approved by IASB. IFRS Interpretations Committee has 14 voting members drawn from different countries and professional backgrounds. Both IASB and IFRS Interpretations Committee are selected, financed and supervised by the IFRS Foundation (formerly called IASC Foundation) who is independent, not-for-profit private sector organization working on public interest.

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On 12 December 2017, the International Accounting Standards Board (Board) has issued Annual Improvements to IFRS Standards 2015–2017 Cycle, which makes narrow-scope amendments to four IFRS Standards.

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Annual improvements are part of the Board's process for maintaining IFRS Standards and contain Interpretations that are minor or narrow in scope.

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Amendments made as part of this process either clarify the wording in an IFRS Standard or correct relatively minor oversights or conflicts between existing requirements of IFRS Standards. 

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The amendments made during the 2015–2017 cycle are:

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IFRS 3 Business Combinations

The amendments clarify that:

A company remeasures its previously held interest in a joint operation when it obtains control of the business.

 

IFRS 11 Joint Arrangements

The amendments clarify that: 

A company does not remeasure its previously held interest in a joint operation when it obtains joint control of the business.

 

IAS 12 Income Taxes
The amendments clarify that: 

A company accounts for all income tax consequences of dividend payments in the same way.

 

IAS 23 Borrowing Costs
The amendments clarify that: 

A company treats as part of general borrowings any borrowing originally made to develop an asset when the asset is ready for its intended use or sale.  

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The amendments are effective from 1 January 2019, with early application permitted.

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The following list summarizes all IAS / IFRS, whether withdrawn or still in place. Those withdrawn or superseded by other standards are marked in italic.

 

Standard Title (Related SIC / IFRIC)

 

IFRS 1 First-time Adoption of International Financial Reporting Standards

IFRS 2 Share-based Payment (IFRIC 19)

IFRS 3 Business Combinations (SIC 32, IFRIC 17, IFRIC 19)

IFRS 4 Insurance Contracts (SIC 27) 

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations 

IFRS 6 Exploration for and Evaluation of Mineral Resources  

IFRS 7 Financial Instruments: Disclosures (IFRIC 12, IFRIC 17) 

IFRS 8 Operating Segments 

IFRS 9 Financial Instruments  

IFRS 10 Consolidated Financial Statements 

IFRS 11 Joint Arrangements 

IFRS 12 Disclosure of Interests in Other Entities 

IFRS 13 Fair Value Measurement  

IFRS 14 Regulatory Deferral Accounts (for Canada only)

IFRS 15 Revenue Recognition

IFRS 16 Leases

 

IAS 1 Presentation of Financial Statements (SIC 7, SIC 15, SIC 25, SIC 29, SIC 32, IFRIC 1, IFRIC 14, IFRIC 15, IFRIC 17, IFRIC 19) 

IAS 2 Inventories (SIC 32) 

IAS 3 Consolidated Financial Statements – superseded 

IAS 4 Depreciation Accounting – withdrawn  

IAS 5 Information to Be Disclosed in the Financial Statements – superseded 

IAS 6 Accounting Responses to Changing Prices – superseded

IAS 7 Statement of Cash Flows 

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (SIC 7, SIC 10, SIC 15, SIC 21, SIC 25, SIC 27, SIC 31, IFRIC 1, IFRIC 4, ISIC 7, SIC 10, SIC 15, SIC 21, SIC 25, SIC 27, SIC 31, IFRIC 1, IFRIC 4, IFRIC 5, IFRIC 6, IFRIC 12, IFRIC 13, IFRIC 14, IFRIC 15, IFRIC 16, IFRIC 18, IFRIC 19) 

IAS 9 Accounting for Research and Development Activities - superseded 

IAS 10 Events after the Reporting Period (SIC 7, IFRIC 17)

IAS 11 Construction Contracts (SIC 27, SIC 32, IFRIC 12, IFRIC 15)

IAS 12 Income Taxes (SIC 21, SIC 25, IFRIC 7) 

IAS 13 Presentation of Current Assets and Current Liabilities – superseded  

IAS 14 Segment Reporting - superseded  

IAS 15 Information Reflecting the Effect of Changing Prices - withdrawn 

IAS 16 Property Plant and Equipment (SIC 21, SIC 29, SIC 32, IFRIC 1, IFRIC 4, IFRIC 12, IFRIC 18)

IAS 17 Leases (SIC 15, SIC 27, SIC 29, SIC 32, IFRIC 4, IFRIC 12) 

IAS 18 Revenue (SIC 27, SIC 31, IFRIC 12, IFRIC 13, IFRIC 15, IFRIC 18) 

IAS 19 Employee Benefits (IFRIC 14) 

IAS 20 Accounting for Government Grants and Disclosure of Government Assistance (SIC 10, IFRIC 12, IFRIC 18)

IAS 21 The Effects of Changes in Foreign Exchange Rates (SIC 7, IFRIC 16) 

IAS 22 Business Combinations - superseded 

IAS 23 Borrowing Costs (IFRIC 1, IFRIC 12)

IAS 24 Related Party Disclosures  

IAS 25 Accounting for Investments - superseded

IAS 26 Accounting and Reporting by Retirement Benefit Plans  

IAS 27 Separate Financial Statements (IFRIC 5, IFRIC 17) 

IAS 28 Investments in Associates (IFRIC 5) 

IAS 29 Financial Reporting in Hyperinflationary Economies (IFRIC 7) 

IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions - superseded

IAS 31 Interests in Joint Ventures – superseded  

IAS 32 Financial Instruments: Presentation (IFRIC 2, IFRIC 12, IFRIC 19) 

IAS 33 Earnings per Share 

IAS 34 Interim Financial Reporting (IFRIC 10) 

IAS 35 Discontinuing Operations - superseded  

IAS 36 Impairment of Assets (SIC 32, IFRIC 1, IFRIC 10, IFRIC 12) 

IAS 37 Provisions, Contingent Liabilities and Contingent Assets (SIC 27, SIC 29, IFRIC 1, IFRIC 5, IFRIC 6, IFRIC 12, IFRIC 13, IFRIC 14, IFRIC 14)

IAS 38 Intangible Assets (SIC 29, SIC 32, IFRIC 4, IFRIC 12) 

IAS 39 Financial Instruments: Recognition and Measurement (SIC 27, IFRIC 2, IFRIC 5, IFRIC 9, IFRIC 10, IFRIC 12, IFRIC 16, IFRIC 19)

IAS 40 Investment Property (SIC 21)

IAS 41 Agriculture

 

If you have any questions on IFRS material, please contact us . We and our associates will be able to help you learn how to simplify the information and make the learning fun.

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ISAs and ISQC 1

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The final set of clarified standards comprise 36 International Standards on Auditing (ISAs) and International Standard on Quality Control (ISQC) 1, including:

• One new standard, addressing communication of deficiencies in internal control;

• 16 ISAs containing new and revised requirements (these have been referred to as "revised and redrafted ISAs"); and

• 20 ISAs that have been redrafted to apply the new conventions and reflect matters of general clarity only (these have been referred to as "redrafted ISAs and redrafted ISQC 1").

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A complete list of the individual standards that comprise the clarified ISAs, as well as ISQC 1, is below.

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• ISA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing 

• ISA 210, Agreeing the Terms of Audit Engagements 

• ISA 220, Quality Control for an Audit of Financial Statements

• ISA 230, Audit Documentation 

• ISA 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements 

• ISA 250, Consideration of Laws and Regulations in an Audit of Financial Statements 

• ISA 260, Communication with Those Charged with Governance 

• ISA 265, Communicating Deficiencies in Internal Control to Those Charged with Governance and Management

• ISA 300, Planning an Audit of Financial Statements 

• ISA 315, Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment

• ISA 320, Materiality in Planning and Performing an Audit 

• ISA 330, The Auditor's Responses to Assessed Risks 

• ISA 402, Audit Considerations Relating to an Entity Using a Service Organization 

• ISA 450, Evaluation of Misstatements Identified during the Audit 

• ISA 500, Audit Evidence 

• ISA 501, Audit Evidence-Specific Considerations for Selected Items 

• ISA 505, External Confirmations 

• ISA 510, Initial Audit Engagements-Opening Balances 

• ISA 520, Analytical Procedures 

• ISA 530, Audit Sampling 

• ISA 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures 

• ISA 550, Related Parties 

• ISA 560, Subsequent Events 

• ISA 570, Going Concern

• ISA 580, Written Representations 

• ISA 600, Special Considerations-Audits of Group Financial Statements (Including the Work of Component Auditors)  

• ISA 610, Using the Work of Internal Auditors 

• ISA 620, Using the Work of an Auditor's Expert

• ISA 700, Forming an Opinion and Reporting on Financial Statements 

• ISA 705, Modifications to the Opinion in the Independent Auditor's Report

• ISA 706, Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report 

• ISA 710, Comparative Information-Corresponding Figures and Comparative Financial Statements 

• ISA 720, The Auditor's Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements

• ISA 800, Special Considerations-Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks 

• ISA 805, Special Considerations-Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement 

• ISA 810, Engagements to Report on Summary Financial Statements 

• International Standard on Quality Control (ISQC) 1, Quality Controls for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements

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If you have any questions on ISA material, please contact us . We and our associates will be able to help you learn how to simplify the information and make the learning fun.