IFRS-Based Financial

Reporting
Putu Agus Ardiana
Faculty of Economics and Business
Udayana University, Indonesia

Agenda

What is IFRS?
The Use of IFRS
Who Develops IFRS?
IFRS Adoption and Convergence in Selected
Countries (Indonesia, UK, USA)
Objective of Financial Reporting
Revenue
Expense
Assets
Liability
Equity

What is IFRS?
International Financial Reporting Standards (IFRS) is a
single set of accounting standards, developed and
maintained by the IASB with the intention of those
standards being capable of being applied on a globally
consistent basisby developed, emerging and developing
economiesthus providing investors and other users of
financial statements with the ability to compare the
financial performance of publicly listed companies on a
like-for-like basis with their international peers.

The Use of IFRS

IFRS is now mandated for use by more than
100 countries, including the European Union
and by more than two-thirds of the G20
The G20 and other international
organisations have consistently supported
the work of the IASB and its mission of
global accounting standards.

Who Develops IFRS?

IFRS are developed by the International Accounting
Standards Board (IASB), the standard-setting body of
the IFRS Foundationa public-interest organisation with
award-winning levels of transparency and stakeholder
participation. Its 150 London-based staff are from
almost 30 different countries. The IASBs 14-member
Board is appointed and overseen by 22 Trustees from
around the world, who are in turn accountable to a
Monitoring Board of public authorities.

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United Kingdom

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United States

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Objective of Financial
Reporting

to provide financial information about

the reporting entity that is useful to
present and potential equity
investors, lenders, and other
creditors in making decisions in their
capacity as capital providers

Qualitative Characteristics of
Financial Reporting
The qualitative characteristics are the attributes that make
financial information useful. The exposure draft identifies:
two fundamental qualitative characteristics: relevance and faithful
representation
four enhancing qualitative characteristics: comparability,
verifiability, timeliness and understandability. They enhance the
fundamental qualitative characteristics by distinguishing more useful
information from less-useful information.
two pervasive constraints that limit the information provided by
financial reporting: materiality and cost.

In developing standards, the boards will consider the

qualitative characteristics so that information reported in
financial reports is useful to capital providers, thus meeting
the objective of general purpose financial reporting.

Statement of Financial Accounting Concepts No. 1

Objectives of Financial Reporting by Business Enterprises

Financial reporting should provide information

that is useful to present and potential investors
and creditors and other users in making rational
investment, credit, and similar decisions. The
information should be comprehensible to those
who have a reasonable understanding of
business and economic activities and are willing
to study the information with reasonable
diligence.

Statement of Financial Accounting Concepts No. 1

Objectives of Financial Reporting by Business Enterprises

Financial reporting should provide information to help

present and potential investors and creditors and other
users in assessing the amounts, timing, and uncertainty of
prospective cash receipts from dividends or interest and the
proceeds from the sale, redemption, or maturity of
securities or loans. Since investors and creditors cash
flows are related to enterprise cash flows, financial
reporting should provide information to help investors,
creditors, and others assess the amounts, timing, and
uncertainty of prospective net cash inflows to the related
enterprise.

Statement of Financial Accounting Concepts No. 1

Objectives of Financial Reporting by Business Enterprises

Financial reporting should provide

information about the economic resources of
an enterprise, the claims to those resources
(obligations of the enterprise to transfer
resources to other entities and owners
equity), and the effects of transactions,
events, and circumstances that change its
resources and claims to those resources.

Definitions of Elements of Financial

Statements
An asset is a resource controlled by the entity as
a result of past events and from which future
economic benefits are expected to flow to the
entity
A liability is a present obligation of the entity
arising from past events, the settlement of which
is expected to result in an outflow from the
entity of resources embodying economic benefits
Equity is the residual interest in the assets of the
entity after deducting all its liabilities

Definitions of Elements of Financial

Statements
Income is increases in economic benefits during
the accounting period in the form of inflows or
enhancements of assets or decreases of liabilities
that result in increases in equity, other than those
relating to contributions from equity participants
Expenses are decreases in economic benefits
during the accounting period in the form of
outflows or depletions of assets or incurrences of
liabilities that result in decreases in equity, other
than those relating to distributions to equity
participants.

Recognition of Elements of Financial

Statements

An item that meets the definition of an

element should be recognised if:
it is probable that any future
economic benefit associated with the
item will flow to or from the entity;
AND
the item has a cost or value that can
be measured with reliability.

Measurement of Elements of
Financial Statements
Measurement is the process of determining
the monetary amounts at which the
elements of the financial statements are to
be recognised and carried in the balance
sheet and income statement. This involves
the selection of the particular basis of
measurement.

End of Presentation