Q2IFRS - Intermediate Accounting (Kieso)

Question

What are the characteristics of high-quality information in a company’s first IFRS financial statements?

Step-by-Step Solution

Answer

The characteristics of high-quality information in a company’s first IFRS financial statements include:

• Transparency.
• Provide an appropriate beginning point.
• It can be produced at a cost that does not surpass its benefits.

Step 1: Meaning of IFRS financial statements

IFRS financial statements are the statements of financial position at year-end or the completion of the period, a profit and loss statement, and other absolute income for the period.

Step 2: Transparency

IFRS Standards bring transparency by advancing the global comparability and quality of accounting information, helping investors and other market users make knowledgeable financial decisions. IFRS also enhances the information of accounting reports by encouraging transparency and avoiding managers of organizations facing bankruptcy by involving in creative financial practices.

Step 3: Provide an appropriate beginning point

The objective of IFRS 1 first-time adoption of International Financial Reporting Standards (IFRS) is to supply the proper beginning point for accounting as per International Financial Reporting Standards (IFRSs). An organization shall make and disclose a beginning IFRS statement of accounting position at the date of transition to IFRSs. It is the commencing point for its accounting in compliance with IFRSs.

Step 4: Can be produced at a cost that does not surpass its benefits

Some voluntary and essential exemptions to the basic principle in IFRS1 of reflective application exist. The exceptions have been permitted in the areas where the cost would possibly be higher than its advantages to the users of the accounting statements and where it's difficult to make alterations.