Advanced Financial Reporting and Regulation Essay

This assignment aims to show a clear account and comparing of stock list accounting criterions related to that occur in the US and at international degree.

Furthermore it will cover historical background and aims of the boards used by companies internationally. After that it will travel on to specific measurings and presentation manners of each companies one-year study and the manner they represent informations about the rating of their stock lists. We besides compare the accounting board in the US, which is the GAAP and the IFRS which is accepted in Europe for case. After finishing that, we start looking at illustrations that may be related to both accounting concepts the GAAP and IFRS. Final portion of this work consists of a treatment and a decision, which covers the chief differences rules of the boards.

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2. History

Accounting and found Puting the fiscal operations of companies over the old ages seemed to involvement in the profession to run into the demands of the users of that information in this sense are get downing to professional accounting development of accounting criterions are adhered to one of these criterions is Inventories, which we will turn to subsequently.

Standard No. 2 of the International Accounting Standards was set up by the Commission on International Standards in 1993 and has been replaced to replace the rating standards, position stock list in the context of a historical cost ( which was released in 1975 ) .In 1997, new readings by the Commission on the development of ” SIC ” was added different versions of the cost of stock list. In 1999 and 2000, made amendments to International Accounting Standards No. 2 ( iasb 2009 ) . In 18 December IASB issued revised version of IAS 2, January 2005 Effective day of the month of IAS 2 ( iasplus 2003 ) .



The aim of this criterion is to depict the accounting intervention of stock lists ; first point is the sum of cost and acknowledgment as an plus of as an plus traded. In order to accomplish gross related issues, this standard provides counsel on finding the costs and subsequent costs as an disbursal. ( iasb 2009 ) . The intent of this criterion is to find the existent income of the stock list by associating grosss from the stock list with the cost of geting it. ( socpa2006.

) accounting criterions ( 2006 ) . This standard determines the cost of stock list.


Underliing principles and relation with IASB ‘s conceptual model

FIFO is prohibited under IFRS ( IAS2 ) Quoting from this policy taxpayers have the freedom to take the method of rating of the options available when taking these revenue enhancement patterns, Because LIFO is acceptable and normally reduces the revenue enhancement load without compromising the concluding consequences of the fiscal studies, the relation between IASB and IFRS in footings of IAS 2- Inventories is that, IASB has banned utilizing LIFO as a method to mensurate Inventories for a company which is covering under IFRS. ( goliath2004 ) .

5. Measurement of stock lists

Inventory is measured at less cost and cyberspace realizable value of cost of stock lists it besides should include the cost of stock list and all the costs of purchase and the costs of transition and other excess disbursals incurred to present stock list to current position ( iasb 2009 ) .

“ When stock lists are sold, the transporting sum of those stock lists shall be recognised as an disbursal in the period in which the related gross is recognised ” .

5.1. Costss of purchase

Inventory purchase costs include the purchase monetary value, import responsibilities and other revenue enhancements except those revenue enhancements that can be recovered by the revenue enhancement governments and the conveyance, managing and other direct costs associated with the acquisition of finished goods, stuffs and services ( iasb 2009 ) .

5.2. Costss of transition Costss of transition of stock lists include adaptative related immediate production units, such as direct employments besides include the costs of production which has remained stable regardless of the costs of production ( iasb 2009 ) .


3. Other costs

costs incurred in supplying the stock list to its present and its current position, for illustration, costs incurred by the company ‘s non-productive operating expenses or the costs of planing merchandises to clients may be appropriate to include in the cost of stock list. the exclusion of certain costs that are non straight connected with the stock, such as storage costs that are non necessary in the production procedure besides excluded the costs of the sale is non included in the cost of stock list ( iasb 2009 ) .

5.4.Cost of stock lists of a service supplier

These costs consist chiefly of the presence of labor and other costs of forces straight involved in the proviso of service, including supervisors.

Besides another step is a step of Cost of agricultural green goodss harvested from biological assets. To finish the procedure of mensurating stock list utilizing some techniques such as cost method or manner retail ( iasb 2009 ) .

6. Disclosure

Must unwrap the accounting policies adopted in mensurating stock lists, including the cost expression used and the entire value of stock lists and the transporting sum in categorizations besides include revelation of stock list value less costs to sell and the sum of stock lists recognized as an disbursal during the period and the sum of any write-down of stock lists recognized as an disbursal. Furthermore, addition in the sum of any write-down led to a lessening in the sum of stock list recognized during the period and fortunes or events that led to a contemplation of the write-off of stock lists and “ the transporting sum of stock lists pledged as security for liabilities ” This should include revelation information on the book value and the extent of alterations that have taken topographic point on these assets is really of import for users of fiscal statements are besides production demands, added to the above mentioned stuffs and work in advancement. ( bzconsult 2003 ) .


Comparison with US GAAP

One of the differences between the US accounting criterion and the IFRS is that the US construct does include bing methods such as mean cost, FIFO and LIFO in their measurings. However, the IFRS has banned the method of LIFO bing in their statements. The US GAAP does non exemplify any regulations related to biological stock list, turning harvests for case. On the other manus, the IAS 1 steps biological stock lists related to alterations in value reported in income. Presentation is on both sides at lower of cost ; nevertheless the IFRS shows cyberspace realizable value and the US standard the market required value. Merely in certain fortunes the GAAP determines presentation at just value such as, gold excavation in surplus of cost permitted for illustration. The IFRS in contrast, demonstrates just value in surplus of existent cost for agricultural goods. Harmonizing to the policy of IFRS, peculiar costs can non be added to overhead charge in stock list cost.

The IFRS besides does non let adding up costs to overhead charge in stock list cost. Harmonizing to the GAAP the decrease of costs on stock lists can non be illustrated in statements. In add-on, market accommodation can besides non be reversed on statements.

The IFRS in comparing represents a wholly different image of the costs that can be reversed to the right of the criterions. In existent fact, they merely allow it certain conditions and clear defined terns for it. Losses of stock list resources in specific markets is non considered under the GAAP, nevertheless the IFRS for illustration, recognises it as indispensable to reconstruct the losingss of stock lists in the market. Furthermore, they need counsel in the countries of revelation and accounting for stock lists of service suppliers offered. To reason the comparing, The IFRS has to offer a wider scope of regulations and policies related to accounting constructs and methods at international degree. The GAAP on the other side does non hold every bit much regulations as the IFRS, such as non sing important points as the lowering of costs on stock lists for case. ( ifrsaccounting 2010 )


Example from one-year studies

In this research we chose two companies runing in US and the Uk they use different method to measure their stock list. Wal-Mart a US food market supermarket concatenation for illustration uses the method of the last-in, foremost out ( LIFO ) in their accounting. Inventory for international activities are measured under the first-in, first-out ( “ FIFO ” ) method. The retail ratio for FIFO is concerned on the initial border of get downing stock list plus the financial twelvemonth purchase activity.

The militias for LIFO are based on the initial border of the financial twelvemonth purchase activity less the impact of any markdowns. ( wal* mart2009 ) Annual study. Accounting rules and regulations of the GAAP are followed by the elephantine concatenation Wal-Mart in the US food market market. The retail direction demand to do clear and appropriate determinations about the terminal rating of their stock lists. The company calculates its LIFO by utilizing factors such as, stock list degrees, grade up rates and internally generated retail monetary value indices. Physical stock list is counted up on the footing of per centum gross revenues made in the twelvemonth.

. ( wal* mart2009 ) Annual studyThe Group of Sainsbury in the UK follows the governments and policies of the IFRS and stock listsare valued at lower cost. At the warehouse, stock lists are valued on the footing of first in, foremost out method. Cost of supermarket concatenation includes all disbursement made in their activities. Harmonizing to the statement of Sainsbury, stock list disbursal after a period of 52 hebdomads stoping on the 21st March 2009 shows an disbursal of 14,490 million Pounds with wholly 689 goods held for resale in the warehouse. ( Sainsbury 2009 ) Annual study.

9. Discussions and Decision

The American company applied the method of last-in, foremost out ( LIFO ) which is prohibited by IFRS that the difference in measuring method will take to different consequences if applied International Accounting Standards and they use ( “ FIFO ” ) for stock list for international activities which is accepted in both criterions, While the British company used the International Standards ( IFRS ) to measure their stock list utilizing the method of ( “ FIFO ” ) Which is in conformity with International Accounting Standards.Based on the treatment above, it is safe to reason that International Accounting StandardsWill go more applicable and will be preferred by local companies, this alteration is expected will non merely applicable to standard stock list merely, but all the accounting criterions.