International Accounting
Standards
A presentation by the
assistant lecturer , Department of accounting
CHATZICHRISTOS CHRISTOS
What the IAS are

The I.A.S. are the categorization of the basic
accounting principles, rules and policies that
accountants should use (and auditors to check
if they are) for the preparation of the Financial
Statements.
 The principles used are very general so as to
cover the need of all member countries.
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What Financial Statements are:

The Balance Sheet
 Income Statement
 Notes/Disclosures
Obligatory from the Greek
Law, 2190/1920

Cash Flow statement
 Statement of changes in Equity
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Who are the Users of the Financial
Statements







Equity investors
Lenders
Employees
Analyst / Advisers
Business contacts
Government
The Public
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Regulatory Framework
The IASC Foundation
International Accounting Standards Board (IASB)
Former IASC
Standard Advisory
International Financial Reporting Interpretations Committee (IFRIC)
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Regulatory Framework
The “birth” of an IAS

The IASB identifies a subject and appoints an
Advisory Committee to advise on the issues
 The IASB publishes an Exposure Draft for
public comment
 Following the consideration of comments
received on the draft the IASB Publishes the
final text of the standard
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Implementation of the IAS



Neither the IASC nor the Accountancy profession has
the power to enforce compliance with IAS
The international Organization of Securities
Commissions (IOSCO) recommended that its members
including U.S. Securities and Exchange Commission
permit multinational issuers to use IAS to prepare their
financial statements for cross border offering and
listings.
The E.U. proposed that by the year 2005 , all EU listed
companies should have to prepare their F.S. in
compliance with the IAS
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Development of the IAS
IASC
has published ,from 1973 until March 2001,
41 Standards.
From march 2001 and on , any standard
published ,should be called International
Financial Reporting Standard (IFRS)
(The first IFRS is now in a draft mode, and it
contains the rules that should be used for the first
time, implementation of the IAS)
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Standing Interpretation Committee
It was established in 1996 so as to:
 Give an insight view, for a “blurring” standard
 To publish temporary rules for immediate
subjects, that are not being dealt by the IAS
The role of the committee is very important
because it controls the right usage of the IAS,
and prevents Creative Accounting
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Creative Accounting
Is used:
 for “beatifying” the Balance Sheet
 Increasing/Decreasing profits
 Generally show the view of the management for
the financial Statements and not
The true and fair view
that they meant to.
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Examples of Creative Accounting

Construction Companies show payments in advance as
Income (IAS 11)
 Provision for Future Penalties (eg. Law or Tax) (IAS 12)
 Recognition of Goodwill (IAS 38)
 Sale and Leaseback (Financial Lease) (IAS 17, SIC 27)
e.g. A company owns a building which sells to the lessor
and “rents” it back for its remaining useful life. The
company improves its Cash flow statements (by the
price sold), and recognizes a profit for the sale.
The company not only should not recognize the sale
but it must also recognize a loan with a mortgage for
the building
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Examples of Creative Accounting
E.g. A company has receivables worth 10,000 Euros, and
“sells” them to a Subsidiary (or a fictional ) Factoring
Company for 9.000 Euros, ( the remaining Balance is
a financial cost)
1. The parents B.S. is shown with better ratios
2. The group is not consolidating the subsidiary, since
there is no such obligation.
What should be done:
 In the consolidated B.S. intragroup transactions must
be eliminated (if a link was found by the auditors,) or
 A loan should be recognized
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Examples of companies used
Creative Accounting
1.
2.
3.
4.
5.
6.
7.
8.
Enron
WorldCom
Rite AiD
Adelphia
Vivendi Universal
Xerox
AOL Time Warner
Global Crossing
Tyco
10. Halliburtin
11. Elan
12. Kmart
9.
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General Accounting Principals used by the
Framework for the preparation and preparation of
F.S.
1.
2.
3.
4.
5.
6.
7.
Matching accruals concept
Going Concern
Consistency
Comparative Information
Prudence
Substance over legal form
True and Fair Presentation
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The True and Fair Presentation
Requires
The
(NBV) assets (CGU’s) of a company Should
be presented either :
1)Cost less Depreciation (Benchmark)
2)The Revalued Amount (Allowed alternative)
Companies should make (underIAS16) ,regular
revaluations, and review for impairment losses
(IAS 36)
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Criticism
There
is a skeptical view for the IAS’s treatment
as an allowed alternative is given to benchmark
treatment on several IAS.
This
might cause a mix up
But
The primary scope of the IAS is to present to
users the “True and Fair view” of the Financial
position of an enterprise and not to assist
auditors / Tax authorities
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Different models of accounting
Anglo-Saxon model
Differences
French – German model
Less
Coding
Much
Almost none
Tax influence
Much
Self adjusting
Regulation of profession
With Law Framework
Cyprus
o USA
o UK
Examples
Greece
o
France
Germany
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Different models of accounting
The 2 Model Converge the
Last years
World recognition and
establishment of the
IAS
E.U.
Directives
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Thank you
I want to express my gratitude to the company GlobalTraining that
allowed me to use their material
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