7.3 International Accounting Standards

• What does IAS stand for?

  International Accounting Standards
• IAS are crucial for global accounting because they facilitate global trade and investment.
• The development and adoption of IAS involve research, consultation, exposure drafts, final standards, and national adoption
• What is the primary difference between IAS and GAAP in terms of their approach?

  Principle-based vs. rule-based
• Match the key characteristics of IAS and UK GAAP:

  Applicability of IAS ↔️ International

  Applicability of UK GAAP ↔️ United Kingdom

  Flexibility of IAS ↔️ Higher

  Flexibility of UK GAAP ↔️ Lower
• Why do IAS facilitate global trade?

  They provide a common framework
• Consistent standards under IAS build confidence among investors in different markets.
• Consistent accounting practices under IAS strengthen global economies by fostering trust and stability
• What is the role of the IASB in the IAS development process?

  Research and consultation
• Steps in the IAS development and adoption process:

  1️⃣ Research and Consultation

  2️⃣ Exposure Draft

  3️⃣ Final Standard

  4️⃣ National Adoption
• IAS simplifies cross-border trade by ensuring financial statements are understandable across countries.
• How do IAS benefit multinational corporations?

  Simplify global reporting
• Match the characteristics of IAS and GAAP with their descriptions:

  IAS Approach ↔️ Principle-based

  GAAP Approach ↔️ Rules-based

  Applicability of IAS ↔️ Global

  Applicability of GAAP ↔️ United States
• IAS 1 impacts the structure and format of financial statements to ensure clarity and comparability
• What does IAS 16 govern?

  Property, plant, and equipment
• Steps in the IAS development and adoption process:

  1️⃣ Research and Consultation

  2️⃣ Exposure Draft

  3️⃣ Final Standard

  4️⃣ National Adoption
• What does IAS 1 standardize in financial statements?

  Structure and format
• IAS 1 ensures comparability of financial statements by standardizing their structure and format
• IAS 1 provides guidance for categorizing cash flows in the cash flow statement.
• What are the three categories of cash flows in the cash flow statement under IAS 1?

  Operating, investing, financing
• What does IAS 1 standardize in financial statements?

  Structure and format
• IAS 1 provides clear formats for the income statement.
• What does the Statement of Changes in Equity highlight under IAS 1?

  Share capital, Retained earnings
• IAS 16 governs accounting for tangible assets
• Installation costs are included in the cost of an asset under IAS 16.
• What are two methods of depreciation allowed under IAS 16?

  Straight-line, Declining balance
• Under IAS 16, impairment reflects a decline in asset value
• What does revaluation of an asset update under IAS 16?

  Fair value
• IAS 1 and IAS 16 enhance the transparency of financial statements.