Accounting Theory Application: Recent Developments in IFRS Standards

This essay provides an overview of recent developments in International Financial Reporting Standards (IFRS). It highlights key changes such as the full application of IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers), amendments in IFRS 2 (Share-Based Payment), the effectiveness of IFRS 16 (Leases), and amendments in IFRS 3 (Business Combination) and IFRS 11 (Joint Operation). The essay references the importance of these standards in enhancing transparency and accountability in financial markets, emphasizing the ongoing evolution of IFRS to address emerging challenges and improve financial reporting practices. It also touches upon the potential impact of these changes on companies' financial statements and the need for careful consideration of goodwill amortization.

Accounting theory and Application

International Financial reporting standard
The IFRS council is considered as a non-profit international organization having
objective to develop a best organization structure which provides the best standard for
the organization which is known as the international financial reporting standard. The
mission of the organization is to develop standards that bring efficiency as well as
accountability in the financial markets with great level of transparency (Ball, Li and
Shivakumar, 2015). IFRS gone through with regular changes and amendments
overtime which helps the market to bring more efficiency and transparency in
accounting practices, some of the recent developments in the IFRS are as follows: -
 New standard IFRS 9 financial instruments applies fully – IFRS 9 was allotted
in the year 2014 which replaced the IAS 39 which was financial instrument:
Recognition and Measurement. IFRS 9 has three major parts, sorting and
measurement, loss and hedging bookkeeping.
 IFRS 15 Revenue from Contracts with Customers applies fully – IFRS 15 was
also delivered in 2014 replacing two IAS 18 revenue and IAS 11 construction
contracts (DeGeorge, Li, and Shivakumar, 2016). This standard is relevant for
all companies and it classifies the fact that how much revenue the company
must recognise for the purpose and all such material information company
needs to disclose in its financial statement about revenue.
 Amendment in IFRS 2 Share Based Payment – In IFRS 2 amendment is based
on the classification of the measurement where the transaction takes place on
the basis of the share based payments. This contains the accounting treatment
which relates to the vesting and the non-vesting condition related to the
transactions that has been entered.
 New IFRS 16 Leases become effective –IFRS 16 becomes effective from 1
January 2019 replaces IAS 17 leases. This is considered as one of the biggest
change which has taken place with the greatest impact on the financial
statement of the company. The amount of work that required it to happen was
also very high in this standard.
 Amendments in IFRS 3 Business Combination and IFRS 11Joint operation –
this is the amendment which relies on the fact that the impairment test. This
happens to ensure that goodwill of the company really exist and is considered
to be existing in the company. The risk that is related to it is that that goodwill
accumulates over the time. This is seen that the balance sheet of the company

gives the overall optimistic representation of the company’s financial health.
This is seen that the sophisticated investor would be able to see the inflated
goodwill numbers. Hence this is considered to be the best reasons so as to
consider the amortisation of the goodwill which will help in reintroduction of
the amortisation of the goodwill of the company (Pichler, Cordazzo and Rossi,
2018). While if the entity gets the control over another entity then joint
operation are to be considered. So the parent company does not measure the
previously held investment in the subsidiary. This is seen that if the entity of
the organization controls another entity then the investor does not check and
measure the previously held goodwill in the joint operations.

References
Ball, R., Li, X. and Shivakumar, L., 2015. Contractibility and transparency of
financial statement information prepared under IFRS: Evidence from debt contracts
around IFRS adoption. Journal of Accounting Research, 53(5), pp.915-963.
De George, E.T., Li, X. and Shivakumar, L., 2016. A review of the IFRS adoption
literature. Review of Accounting Studies, 21(3), pp.898-1004.
Pichler, S., Cordazzo, M. and Rossi, P., 2018. An analysis of the firms-specific
determinants influencing the voluntary IFRS adoption: evidence from Italian private
firms. International Journal of Accounting, Auditing and Performance
Evaluation, 14(1), pp.85-104.