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Differences between the IAS and IFRS

The question of the differences between the IAS and IFRS has arisen on a number ofoccasions in accounting circles, and in fact, some would question if there is any

difference at all.

One of themajor differences is that the series of standards in the IAS were published bythe International Accounting Standards Committee (IASC) between 1973 and 2001,

whereas, the standards for the IFRS were published by the International Accounting

Standards Board (IASB), starting from 2001.

When the IASB was established in 2001, it was agreed to adopt all IAS standards, andname future standards as IFRS. One major implication worth noting, is that 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.

Examples

To make a difference in the decision process, information must possesspredictive

value and/orfeedback value. Generally, useful information will possess both qualities. For

example, if net income and its components confirm investor expectations about future cash-

generating ability, then net income has feedback value for investors. This confirmation can also

be useful in predicting future cash-generating ability as expectations are revised.

Example 1:

A company discloses an increase in Earnings Per Share (EPS) from $5 to $6 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 future trend in the earnings of the company. (Predictive value)

Relevance is affected by the materiality of information contained in the financial statements

because only material information influences the economic decisions of its users. The investors

when take a corrective action while keeping in mind the dollar one increase in EPS is known as

feedback value. If the disclosure is on time then it has followed timeliness otherwise not.

Example 2:

A default by a customer who owes $1000 to a company having net assets of worth $10 million is

not relevant to the decision making needs of users of the financial statements.

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However, if the amount of default is, say, $2 million, the information becomes relevant to the

users as it may affect their view regarding the financial performance and position of the company

The SEC requires its registrants to submit financial statement information not only on an annual

basis, but also quarterly for the first three quarters of each fiscal year.