IAS, which stands for International Accounting Standards, are globally recognized accounting principles promoted to facilitate the availability of adequate, reliable and comparable information for users across borders. All these standards were developed by the International Accounting Standards Council (IASC), and the International Accounting Standards Board (IASB) adopted them as their standards, amended and reissued them. This blog covers all about IAS, its history, its development over the years as well as the importance of each standard in this series.
Structure and Purpose of IAS
International Accounting Standards (IAS) are designed to provide a comprehensive framework for:
- Preparation of Financial Statements: In order to guarantee that the financial statements are prepared both systematically and in conformity with specific particular formats set.
- Disclosure Requirements: The principle of greater openness is the result of the need for such disclosure.
- Comparability: It makes it possible to compare companies within different industries and in different regions.
- Decision-Making: Helping investors, local and international governments, analysts, etc, to make the right decisions.
Brief Description of Each of the International Accounting Standards
The following table provides an overview of the IASs, their dates of issuance and major changes or replacement.
IAS 1: Presentation of Financial Statements 2007
IAS 1 contains basic practices for the presentation of the financial statements, structure, and minimum details to be included. It seeks to facilitate comparability in the current period with reports posted in the previous periods and with other entities.
IAS 2: Inventories (2005*)
This standard discusses how inventories should be accounted for with particular emphasis on how cost is calculated and recognized as an expense together with the write-down of inventories to net realizable value.
IAS 3: Consolidated Financial Position (1976; Replaced in 1989)
Formerly issued guidance on preparing consolidated financial statements; however, it was amended by IAS 27 and IAS 28 in 1989.
IAS 4: Depreciation Accounting was withdrawn in 1999
Concerned with the accounting of depreciation but was withdrawn after being included in another standard.
IAS 5: Data to be reported in the financial statements (1976; Superseded in 1998)
This standard was related to disclosure and was later incorporated in IAS 1.
IAS 6: Strategic issues in Accounting: Accounting Responses to Changing Prices [SUPERSEDED]
Originally issued guidance on how to account for the impacts of changing prices, it was later cancelled in 2003.
IAS 7: Statement of cash flows (1992)
IAS 7 insists that entities prepare and present a statement of cash flows and classify cash flows of the entity in operating, investing and financing activities during that period.
IAS 8: Statement of Accounting Policies, Changes in Accounting Estimates and Errors (2003)
This standard is concerned with the choice and use of accounting policies and the handling of changes in accounting estimates and mistakes.
IAS 9: Reporting for research and development expenditure (superseded in 1999)
This standard was replaced by IAS 38 and focused on accounting for research and development.
IAS 10: Activities after the Reporting Period (2003)
Provides guidance on the accounting treatment of those events that occur up to the date of the financial statements issuance but are outside the reporting period.
IAS 11: Construction Contracts (1993; Revised in 2017)
Originally implemented for reporting of construction contracts, but superseded by the IFRS 15.
IAS 12: Income Taxes (1996)
This standard provided a blueprint for recognising income taxes as well as deferred tax benefits and expenses.
IAS 13: The presentation of the company’s current assets and current liabilities (replaced in 1998)
Originally designed to offer recommendations on how current assets and liabilities should be presented, it was laid down by IAS 1.
IAS 14: Segment Reporting was initially issued in 1997 and was replaced in 2009.
Called for reporting of financial information in business and geographic segments but was substituted by IFRS 8.
IAS 15: Information Which Provides the Impersonal Impact of Fluctuating Prices (Withdrawn in 2003)
This standard covered matters relating to the cost of change in prices but was later scrapped.
IAS 16: Property, Plant and Equipment (2003)
Issues the best practices on the recognition, measurement, and depreciation of property, plant, and equipment.
IAS 17: Leases (2003; Superseded in 2019)
Described the guidance on leases but was superseded by IFRS 16.
IAS 18: Revenue (Superseded 1993, Superseded in 2017)
Originally entirely dedicated to the recognition of revenues, it was succeeded by IFRS 15.
IAS 19: Employee Benefits (1998; Updated in 2011)
Explains the existence of employee benefits and pensions as well as other post-employment benefits.
IAS 20: Classification of Grants received from Government and notes to the financial statement on Government Assistance (1983).
Outlines the manner in which government grants are acquitted as well as the manner in which government assistance is disclosed.
IAS 21: The impact of fluctuation in foreign exchange rates (2003)
Defines how foreign currency transactions take place and how financial statements are translated.
IAS 22: Business Combinations (1998 issued, superseded in 2004)
Related to business combinations but had been eliminated by IFRS 3.
IAS 23: Borrowing Costs (2007*)
Affects the recognition of borrowing expenses related to obtaining the financing of a qualifying asset.
IAS 24: Related Party Disclosures (2009*)
Sets down guidelines for disclosures relating to related parties with whom it has transactions.
IAS 25: Accounting for Investments (superseded in 2001)
This standard, having been replaced by IAS 39 and IAS 40, covered the accounting for investments.
IAS 26: Various Accounting and Reporting by Retirement Benefit Plans in Progress (1987)
Offers direction on the accounting and reporting for retirement benefit plans.
IAS 27: Separate financials statements (2011)
Focuses on the accounting and disclosure requirements for separate financial statements.
IAS 28: Investments in Joint Ventures & Associates (2011)
Provides guidance on the capitalisation of investments in associates and joint ventures by the equity method.
IAS 29: Financial reporting in hyperinflationary economy (1989)
It is relevant for the use by entities that are in hyperinflationary economies to give direction on how to report financial statements in such economies.
IAS 30: Use of Disclosures in the Financial Statements of Financial Institutions, particularly Banks (1990; Superseded in 2007)
It was implemented to provide a record of disclosure requirements intended for banks and other similar institutions, though it lost that function due to IFRS 7.
IAS 31: Interests in Joint Ventures (2003; Superseded in 2013)
The standard dealt with accounting for joint ventures but has been eliminated with IFRS 11 and IFRS 12.
IAS 32: Financial Instruments: Presentation (2003*)
As prescribed, the format for presenting financial instruments and classifying liabilities and equity.
IAS 33: Earnings per Share (2003*)
Increases the relevance and reliability of information for investors in establishing accounting standards for the calculation and reporting of earnings per share of companies with shares listed in the market.
IAS 34: Interim financial reporting (1998)
Offers approach and procedures on interim financial reports so that these reports will be in line with the company’s annual reports.
IAS 35: Discontinuing Operations (Standard was issued in 1998, but it was superseded in 2005)
Concentrated on the discontinuing operations report but being replaced by IFRS 5.
IAS 36: Impairment of Assets (2004*)
Requires entities to make sure that the assets being reported are shown not more than their recoverable value.
IAS 37: The Company recognizes provisions, contingent liabilities and contingent assets as brought out in the Notes forming the accounts as follows (1998)
Provides guidance on the concept of provisions, measurement of provisions, contingent liabilities and assets.
IAS 38: Intangible Assets (2004*)
Gives direction on the extraction of intangible assets and their measurement.
IAS 39: Financial Instruments: Recognition and Measurement (2003; superseded IFRS 9)
Formerly used in the recognition and measurement of financial instruments, it was replaced by IFRS 9.
IAS 40: Investment Property (2003*)
Allows the accounting for investment property at cost or revalued to fair value or at fair value through profit or loss.
IAS 41: Agriculture (2001)
Focuses on the accounting for agricultural operations and biological and agricultural outputs.
Conclusion
International Accounting Standards have been central to the development of the globalization of accounting and reporting systems. Today, however, over half of the IAS standards have been replaced by IFRS, but the concepts of these IAS standards still remain part of the current sources of modern accounting. It becomes, therefore, very important for accountants, financial managers, and businesses to have adequate knowledge of the IAS since these standards form the basis of financial reporting around the globe.
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