Revised IFRS: Issues and Advantages

MEMORANDUM
To: The Directors of Grant Thornton Australia.
From:
Cc:
Subject: Issues relating to revised IFRS’s
Date:
Current IFRS
Financial reporting in all countries has been changing majorly in few years. Trade are
increasing beyond national boundaries which is the cause of introduction of new system of
reporting which can be followed by all countries. So for presenting the financial system in
accordance to the requirement of reporting of every country International Financial Reporting
Standard or IFRS has been introduced. It is a London based accounting standard currently
applicable in more than 120 countries except United States which follows General Accepted
Accounting Principles or GAAP. IFRS is simpler and cleaner based principles than GAAP which
make it easy to understand.
International Financial Reporting Standard consist of accounting standard that sets common rule
issued by the International Accounting Standard Board so that the financial statement are
consistent, transparent and comparable in the world. It specifies companies the process to
organize and report their financial information. IFRS main objective is to make transparent
accountability and efficiency to make the financial market of trust, growth and long term
stability in the world global market. IFRS sets some rules which is followed while preparing
financial statement are as follows:

 A statement is prepared to know the financial position of the firm known as balance
sheet and IFRS set the rule for reporting the required components of the balance sheet.
 A comprehensive income statement has to prepared consisting of profit and loss
statement and other income statements. It includes all income and expenses items.
 A statement showing change of equity is required to know the amount of the company at
the beginning and at the end of the year. It is also known as statement of retained
earnings as it shows the company earning for a financial year.
 A cash flow statement is required which shows all the financial transactions for a
particular financial year. All cash flow transaction can be separately shown into
operating, investing and financing.
 A company has to make a summary of its accounting policies and for every parent and
subsidiary company separate report has to be made.
Revised IFRS
IASB has introduced the revised conceptual framework of financial reporting which
introduce some new terms like stewardship and prudence. It also includes revised definition of
asset that focus on the rights which has the potential to produce economic benefit and liability
that transfer the economic resources but it does not replace the difference between the liability
and equity instrument. Revised IFRS also discuss about the historical cost and current value
providing guidance for selecting measures on every particular assets and liability. It states the
financial performance primary source is by profit and loss account providing some exceptional
case. It also discussed the uncertainties in financial statement, process of reporting entity and the
preparation of combined financial statement. The main purpose of revising the conceptual

framework is to develop better accounting policies covering those area which were not covered
in previous IFRS.
Issues in revised IFRS
IASB introduced the revised IFRS to make the IFRS more compatible with the business market.
But it did not fix all problems and gave rise to some issues which are as follows:
 IFRS 15 revenue from contract with customer which is assessment of promise for
providing goods and service.
 IAS 27 separates financial statement to invest in the subsidiary account for cost.
 IAS 27 separates financial statement in subsidiary account for cost.
 IAS 37 provision for contingent liability and asset are related to deposit of taxes instead
of income tax.
 IFRS 9 financial instrument and IAS 39 recognize and measure the financial application
which are highly required.
 IFRS 9 financial instrument consist of physical statement of contract for buying or selling
of non-financial items.
 IFRS 9 financial instrument credit the expected credit loss.
 IFRS 9 credit the impaired financial asset.
 IFRS 11 sale arrange the sale arising from sale of joint operator.
 IFRS 11 shows the relationship of liability in relation to joint operator.
 IAS 23 borrowing cost makes excess transfer of constructed goods.
 IAS 38 intangible assets removes the right to receives access to the supplier’s software on
the cloud.