Analysis of Financial Statements

Assignment 1
10/11/2013 Submitted to: Ms. Atiqa Rehman Submitted by:Rebecca Ali

DIFFERENCE BETWEEN IAS AND IFRS

IAS

IFRS

Abbreviation

Abbreviation

IAS stands for International Accounting IFRS refers to International Financial Reporting Standards Publish time Standards Publish time

IAS standards were published between 1973 IFRS standards were published from 2001 and 2001 Publish party onwards Publish party

One of the major differences is that the series When the IASB was established in 2001, it was of standards in the IAS were published by the agreed to adopt all IAS standards, and name International Accounting Standards future standards as IFRS. IFRS are issued by the IASB, which succeeded the IASC.

Committee (IASC)

Contradiction IAS cannot supersede IFRS

Contradiction Any principles within IFRS that may be contradictory, will definitely supersede those of the IAS. Basically, when contradictory

standards are issued, older ones are usually disregarded.

Non-current assets It lacks rules like

Non-current assets identification, Introduction of new rules like identification,

measurement,presentation and disclosure of measurement, presentation and disclosure of non-current assets held for sale. non-current assets held for sale.

EXAMPLES OF THE FOLLOWINGS:

Feedback

The stock market is an example of a system prone to oscillatory "hunting", governed by positive and negative feedback resulting from cognitive and emotional factors among market participants. For example,

When stocks are rising (a bull market), the belief that further rises are probable gives investors an incentive to buy (positive feedback - reinforcing the rise, see also stock market bubble); but the increased price of the shares, and the knowledge that there must be a peak after which the market will fall, ends up deterring buyers (negative feedback - stabilizing the rise).

Once the market begins to fall regularly (a bear market), some investors may expect further losing days and refrain from buying (positive feedback - reinforcing the fall), but others may buy because stocks become more and more of a bargain (negative feedback - stabilizing the fall).

Timeliness Timeliness of financial information is requires entities to report all significant post balance sheet events that occur up to the date when the financial statements are authorized for issue. This ensures that users are made aware of any material transactions and events that occur after the reporting period when the financial statements are being issued rather than having to wait for the next set of financial statements for such information. After the balance sheet date during the time when the audit is carried out, it becomes clear which debts were realized and where were not hence it removes the reliability of allowance for bad debts estimate but the information loses its relevance due to too much time being taken. Timeliness is the key to relevance.

Predictive value A company discloses an increase in earnings per share from $8 to $9 since the last reporting period. The information is relevant to investors as it may assist them in confirming their past predictions regarding the profitability of the company and will also help them in forecasting the future trend in the earnings of the company.