The process of managing working capital is one that never ends for finance/accounting workers i...
Financial reporting includes various disclosure of financial information to the stakeholders regarding the financial performance and organizations’ financial position over a period of time. Components of financial reporting includes financial statements, notes and also various reports that are asked by regulatory authorities. To standardize the accounting information in the financial statements, specific accounting policies based on Generally Accepted Accounting Principles are required. In this article, we will discuss financial reporting disclosures requirements concerning accounting standards and global ethical standards.
In the last few years, financial reporting in India has witnessed massive changes. As the trade globalizes, the compliance and reporting requirements also increases. Producing financial statements of a company as per the reporting requirements of every country it operates in would be a tough ask and is not practically possible as well. Therefore the need for International Financial Reporting Standards came into existence. International Financial Reporting Standards refers to accounting standards issued by the International Accounting Standards Board. Its primary objective is to provide a common accounting language to increase transparency in the financial information presentation.
It is an independent body that was formed in 2001. Its responsibility was to establish the international financial reporting standards. It replaced the International Accounting Standards Committee, which used to establish international accounting standards.
The International Accounting Standards Board is based in London and has provided the conceptual framework for financial reporting. It provides a conceptual understanding and the basis of accounting practices. International Accounting Standards Committee has already issued specific international standards called International Accounting Standards. Currently, International Accounting Standards and IFRS is in force.
The IFRS are as follows:
This was the list of International Financial Reporting Standards issued by the International Accounting Standards Board. It may be noted that in India, Ind AS are issued by the ASB (Accounting Standards Board) to converge Generally Accepted Accounting Principles with International Financial Accounting Standards.
Some of the recent amendments notified by MCA include the following:
The Council of Institute of CAs of India has emphasised keeping the code before legal requirements. Various ICAI pronouncements became applicable before the concept of non-assurance services got codified in Section 144 (Companies Act 2013).
The International Ethics Standard Board for Accountants provides the ethical standards which have to be complied with by the professional accountants. In 2009, the council of ICAI adopted the International Ethics Standard Board for Accountants code, also called as IFAC code of ethics. In 2018, IESBA issued the code of ethics. The ICAI adopted these standards, and it was issued in code of ethics in 2019 and made applicable in a staggered way from 1st July 2020.
The code of ethics has some significant features such as:
It is worth mentioning here that the 1st and 3rd points have been implemented with effect from 1st July 2020 but remaining has been deferred.
With increase in transparency through financial disclosures, disclosure of information related to finances under financial reporting is becoming more significant. Financial reporting disclosures is essential for stakeholders, investors, lenders, regulators etc.