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International standards IAS are fully suitable for U.S. "generally accepted accounting principles" (GAAP). In a selection of issues, GAAP contains more detailed methodology of calculation. IAS and GAAP standards are based on same principles of accounting and financial reporting. For various reasons, international standards are heavily influenced by accounting practice in the United States. There are now more than 30 accounting standards associated with various facets of accounting.
The deciding factor of using International Financial Reporting Standards is just a company's desire to improve its capability to attract vital foreign financing, establishment of long-term trade relations with foreign customers, attracting foreign investors, joint ventures, and issuance of securities in international market.
IAS establishes such requirements for financial statements, as form, time of recording, content, etc. They're targeted at improving and harmonizing legislation, existing system of accounting standards and procedure of financial reporting. Application of IAS in accounting system is also useful for characterizing company performance in an easier and more realistic form, comparing financial situation of the company with financial situation of foreign companies.
Principles of IAS
Accruals concept in IAS (income and expenditures). Transaction income and expenses are recognized during the time of their appearance (not during the time of money receipt or payment), recorded in accounting records and recognized in financial statements Best ias coaching in Mumbai in the period they relate to. Financial statement prepared relating with accrual principle informs users not merely of past transactions involving payment and receipt of funds, but additionally obligations on payment in future and resources as funds to be received in future.
Guidelines for preparation of financial statements based on IAS:
1. Diligence. Aims to make certain assets and earnings are not exceeded and liabilities or expenses are not ignored. According to this principle of IAS, you ought to be ready to repel potential losses and damages and keep from stating of revenues and income prior for their actual receipt.
2. Substance over form. It's necessary that info on operations would firstly match point and economic reality, not merely established legal form.
3. Completeness of information. Based on IAS, information must certanly be complete. But you ought to consider its importance and value.
4. Comparability. IAS users should be able to compare financial statements of the enterprise, made at differing times, to spot common trends, in addition to financial statements of different enterprises. Accounting policy cannot be executed arbitrarily.
International standards are developed and approved by the Committee on International Financial Reporting Standards. The Committee was formed on June 29, 1973 as a result of adoption of the agreement by accountancy bodies in Austria, Canada, France, Germany, Japan, Mexico, Netherlands, Ireland, Great Britain, and the United States.