Question 1 (b)

IFRS: meaning and why they are needed

5 marks

Time to write
About 10 minutes

From an older CBCS paper

Question

Question 1 (b) · 5 marks

What are International Financial Reporting Standards (IFRSs) ? Explain why IFRSs are needed. 5

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

10 minfor 5 marks

Read from the question

  • What…?Explain…2 asks, each with its own marks below. Answer both.

Write it in this order

  1. Read; underline the asks; jot your points 1 min
  2. 1 Meaning of IFRS, with the Indian position 2 marks 3 min
  3. 2 Why IFRS are needed 3 marks 5 min
  4. Check: every ask answered, key terms underlined 1 min

Easy marks

  • Step 1 opens with the meaning: a one-line definition, the quickest mark in it.

Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks.

Try it first. About 10 minutes for 5 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Meaning. International Financial Reporting Standards (IFRS) are a single set of high-quality, globally accepted accounting standards issued by the International Accounting Standards Board (IASB), the successor of the International Accounting Standards Committee (IASC); the earlier standards issued by the IASC are known as International Accounting Standards (IAS). Like any accounting standards, they codify the generally accepted accounting principles and lay down, as codes or guidelines, how the items in the financial statements are to be recognised, measured, presented and disclosed. India does not adopt IFRS word for word: the ICAI gives due consideration to international standards and integrates them in the light of conditions and practices in India.

Why IFRS are needed

  1. Comparability across countries. Business, trade and capital are global; without common standards the statements of firms in different countries rest on different national rules and cannot be meaningfully compared. Standards bring uniformity of assumptions, rules and policies and so ensure consistency and comparability.
  2. Access to international capital. Investors and lenders abroad can read statements prepared on a framework they understand, lowering the cost of capital and helping cross-border listings and investment.
  3. One language for multinational groups: subsidiaries in many countries can report on one basis, avoiding costly reconciliations between national GAAPs.
  4. Reliability and less manipulation: a well-understood standard reduces the room to manipulate reported data and strengthens investors' confidence.
  5. Better decisions and oversight: reliable, comparable data help investors, governments, regulators and auditors.

Where the 5 marks sit

#ComponentMarks
1Meaning of IFRS, with the Indian position2
2Why IFRS are needed3
Total5
Keyboard: ← → previous and next question, / search

Report a problemopens an email to admin@getkunji.com with the question ID1201-Q1balready filled in.