Is IAS a financial statement
Annual financial statements according to HGB or IAS / IFRS?
(8/26/2004) IAS / IFRS? That is only something for the big ones, nothing for the normal, down-to-earth medium-sized businesses - many construction companies think that is none of their business. Is it really like that?
Of course one knows the abbreviation IAS (International Accounting Standards); we also know that we can now speak more precisely of International Financial Reporting Standards (IFRS). It is also correct that, from next year on, only EU companies that are listed on the capital market will have to present annual financial statements in accordance with IAS / IFRS. However, the legislature wants to allow other companies to prepare their publishable financial statements according to these rules. Because leading accounting experts assume that the HGB financial statements are an expiring model and will be completely replaced by IAS / IFRS by around 2012. From 2010 this accounting method would therefore be binding for everyone anyway. If you consider the necessary preparations for a changeover, there is not much time left to prepare yourself for the IAS / IFRS.
Change now - what should be considered?
The switch from HGB to IFRS is not just an accounting change. Rather, it is about the introduction and acceptance of a different philosophy: The IFRS are characterized by the principle of "substance over form". A change must therefore be planned and carried out very carefully.
The preparation of an IFRS financial statement is not an end in itself. It has to be in line with the company's policies and goals and thus contribute to success. First of all, it is therefore important to determine what the degree can and should achieve. These decisions result in an accounting strategy that is part of the overall corporate strategy. An analysis of the current situation, the planned changeover time and the level of project implementation (central / decentralized) are part of the strategy. When planning the changeover, particular attention must be paid to the timing, planning of internal and external personnel resources and IT structures. During the implementation of the project, it is necessary to develop accounting guidelines, train employees, process queries in possibly affiliated companies and redesign the accounting processes.
Therefore, a change should only take place if the corporate and balance sheet strategy are tending in the same direction. The dimension of the change should not be underestimated either. Both planning and implementation require time and know-how.
What are the possible problems?
HGB separate financial statements are currently required for the distribution and tax considerations. The IFRS guidelines are stricter than those of the HGB. Companies operating on a purely national basis must bear in mind that comprehensive information must be disclosed under IFRS. This may also include the disclosure of hidden reserves.
The rules of IAS / IFRS are still being revised., Constantly added. The accounting therefore involves regular updates. How these new standards are to be implemented has not yet been conclusively clarified. In the US, the Securities and Exchange Commission (SEC) questions the financial statements. Because recent stock market history teaches that manipulation occurs from time to time. This "enforcement mechanism" is public and therefore exerts pressure to avoid any manipulation. In the event of discrepancies, the financial statements must be changed.
- Minimal solution in (group) financial statements: Restriction to a reconciliation from HGB to IFRS (difference calculation).
The advantage here is that the company accounts basically remain unchanged. The transition to the IFRS financial statements by means of accruals at the end of the period is also not very complex if the IFRS-relevant characteristics of the individual business transactions were recorded during the year.
Difficulties can arise when implementing control impulses from the IFRS financial statements (balance sheet policy, performance measurement). The slow diffusion of the necessary know-how in the operational units has a disadvantageous effect. And contradicting statements from HGB and IFRS key figures could lead to internal confusion.
- Alternative to the minimal solution in (group) financial statements: parallel (group) accounting according to HGB and IAS / IFRS
The step-by-step introduction makes it easier to learn how to use the new standards, especially in operational units. The IT implementation with standard software is usually not a problem either. The available full HGB financial statements are also an advantage in the event of conversion difficulties in the first few years.
However, the two-pronged implementation of group accounting leads to an increased need for audits and rising audit costs. Contradicting statements in the financial statements according to HGB and IFRS could lead to confusion among the users of the financial statements.
- Maximum solution: Complete conversion of (group) accounting to IAS / IFRS
The clear statements and control impulses from the (consolidated) financial statements are an advantage. The compulsion to deal with new standards leads to faster learning effects for employees, provided that sufficient training measures are offered.
If the individual financial statements should or must continue to be prepared in accordance with the German Commercial Code (HGB), the time-consuming recording and posting of business transactions over the course of the year is disadvantageous. A lack of know-how in dealing with accounting according to IFRS can lead to errors in the structuring of the facts and to increased auditing and auditing costs.
A discussion paper of the International Accounting Standards Board is currently available, which deals with an IFRS for small and medium-sized enterprises. This clearly shows the trend towards internationalization in this area as well. So it is time to create the necessary know-how in the companies now in order to be prepared for the changeover.
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