Financial Statements - Setting and Enforcing Global Accounting Standards
What is the International Organization of Securities Commissions (IOSCO)
Although the IFRS and GAAP frameworks are different, they usually agree in the overall structure and principle and are working toward convergence. The two differ in the following ways:
• IFRS requires users to consider the general principles in the absence of specific standards.
• US GAAP distinguishes between objectives for business and non-business entities.
• The IASB framework gives more emphasis to the importance of the accrual and going concern assumptions than FASB
• GAAP framework establish a hierarchy of qualitative financial statement characteristics;
• Some differences in how each defines, recognizes, and measures individual elements of financial statements
• Companies reporting under standards other than GAAP that trade in USA must reconcile their statements with GAAP.
The International Accounting Standard Board (IASB)
The IASB structure's main features are:
- the IASC Foundation - which is an independent organization whose two main bodies are the Trustees and the IASB
- a Standards Advisory Council
- the International Financial Reporting Interpretations Committee
The IASC Foundation Trustees appoint the IASB members, exercise oversight and raise the funds needed, but the IASB has sole responsibility for setting accounting standards. This organization was created to set international accounting standards in an effort to bridge the gap between the accounting standards of different nations.
- Dividends paid by a company to its shareholders are classified on the cash flow statement under cash flow from financing.
- The dividends received by a company from its investments are classified as cash flow from operations.
- All interests received and paid by or to a company are classified as cash flow from operations.
Under IAS GAAP:
- Dividends paid by a company to its shareholders, dividends received by a company from its investments and all interests received and paid by or to a company can be classified as either cash flow from financing or cash flow from operations.
These rules are summarized in the following chart:
|U.S. GAAP||IAS GAAP|
|Dividends paid by a company to shareholders||Cash Flow from Financing||Cash Flow from Financing or Operations|
|Dividends received by a company from investments||Cash Flow from Operations||Cash Flow from Financing or Operations|
|All interest received and paid by or to a company||Cash Flow from Operations||Cash Flow from Financing or Operations|
It is highly likely you will need to calculate a figure on a cash flow statement according to one of the two rules.
Personal FinanceA strong balance sheet sets a company apart and boosts investor confidence. How healthy is Costco based on an analysis of its balance sheets from the last two years?
Investing BasicsBrokers and registered investment advisors have some key differences. Here's what you need to know.
ProfessionalsDCF and Comparables models are widely used in equity valuation. We explain the pros and cons of each method.
ProfessionalsAlthough it seems simple, Tobin's Q Ratio is more complex than it appears. We explore some of its main strengths and weaknesses.
TaxesEvery advisor and saver needs to know these three estate planning secrets.
ProfessionalsWhy is cash flow so important, and what steps can a business take to improve it?
EntrepreneurshipRunning a business in healthcare? You might want to rethink cash flow management practices.
ProfessionalsSometimes your spending gets out of hand or income has a hiccup. Here's how financial advisors can help clients who have cash flow issues.
ProfessionalsHere are 10 ways to to improve a manufacturer's cash flow.
ProfessionalsImproving cash flow in construction requires some sector-specific strategies.
Professionals who help individuals manage their finances by providing ...
Formerly known as the Association for Investment Management and ...
A professional designation given by the CFA Institute (formerly ...
A financial professional who studies various industries and companies, ...
The differences between a Chartered Financial Analyst (CFA) and a Certified Financial Planner (CFP) are many, but comes down ... Read Full Answer >>
According to the CFA Institute, a person who holds a CFA charter is not a chartered financial analyst. The CFA Institute ... Read Full Answer >>
The types of positions that a Chartered Financial Analyst (CFA) is likely to hold include any position that deals with large ... Read Full Answer >>
Prepaid expenses benefit both businesses and individuals. Prepaid expenses are the types of expenses that are bought or paid ... Read Full Answer >>
If you are looking specifically for an investment banking position, an MBA may be marginally preferable over the CFA. The ... Read Full Answer >>
You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't ... Read Full Answer >>