Differences between IFRS and AAIOFI standards Term Paper

Differences between IFRS and AAIOFI standards - Term Paper Example The development of the international accounting standards and its acceptance would help in reducing the compliance costs and in the process would develop consistency in the quality of the audit. (IFRS in your pocket 2005, p. 2) What are IFRS standards? The International Financial Reporting Standards (IFRS) have been enforced by International Accounting Standards Committee for the better understanding by the equity investors, the lenders and anyone else who uses the information. The world securities regulators have been recommended by the International Organization of Securities Commission to allow the foreign users to use IFRS in making financial statements for the cross border offerings and listings. The uses of IFRSs have been made obligatory in the consolidated statements of the listed Europe companies from the year 2005. It has also been reported that many countries have started replacing their national GAAP by IFRSs in their domestic companies in comparison with the other nation s which are adopting policies to approve IFRSs either verbatim or in the exact manner as their national standards. The IASB and the US counterpart of it, the Financial Accounting Standard Boards, have taken up a comprehensive agenda to converge the IFRSs and the US GAAP as much as possible over the next several years. A convergence project has also been initiated with Japan. The pre-requisites of the global business is a global capital market which is ensured by superior governance, better-quality laws and a set of internationally accepted accounting standards. The IFRSs standards have been largely accepted around the world. The Standards of IFRS 1. The initial acceptance of the International Financial Reporting standards. The objective of the standard was to lay down the process when the IFRSs are being newly adopted by any organization while drafting its financial statements for common purpose. The statement includes an overview of the financial statements for the first time entit ies and they should draft their accounting policies according to the IFRSs which have been enforced from 31st December, 2005. The organization is needed to frame its financial statements at least for the years 2005 and 2004 and also should reaffirm the opening balance sheet. As IAS 1 requires the comparative financial data of the previous one year minimum the opening balance sheet that will be produced should be of January 1, 2004 if not earlier than that. If the entity adopts the standards on 31st December 2005 and produce selected portion of the financial data on an IFRS basis for the period before 2004 along with its financial statements for the year 2004 and 2005, that would not change the fact that the opening balance sheet according to the IFRSs standards will be of 1st January 2004. (p. 57) 2. Share Based Statement The objective of the standard is to lay down for the transaction which involves the receiving or acquiring of goods or services by the entity either as a â€Å"co nsideration for its equity instruments or by incurring liabilities for amount based on the price of the entity’s shares or other equity instruments of the entity†. (p. 58) The Standard specifies the mandatory recognition of the entire share based payments in the financial statements on the basis of a fair value measurement. It also specifies the recognition of any goods and