International Accounting Standards (IAS)

Definition

International Accounting Standards (IAS) are accounting standards issued by the International Accounting Standards Committee (IASC) between 1973 and 2001. These standards are designed to ensure consistency, transparency, and comparability of financial statements across international boundaries. Following the replacement of the IASC by the International Accounting Standards Board (IASB) in 2001, these standards are still maintained and continue to apply unless amended or withdrawn by the IASB which now also issues standards under the title International Financial Reporting Standards (IFRS).

Key International Accounting Standards

IAS 1: Presentation of Financial Statements (revised 2007)
IAS 2: Inventories (revised 2005)
IAS 7: Cash Flow Statements
IAS 8: Accounting Policies, Changes in Accounting Estimates, and Errors (revised 2003)
IAS 10: Events After the Balance Sheet Date (revised 2003)
IAS 11: Construction Contracts
IAS 12: Income Taxes
IAS 14: Segment Reporting (revised 2003)
IAS 16: Property, Plant, and Equipment (revised 2003)
IAS 17: Leases (revised 2003)
IAS 19: Employee Benefits (revised 2011)
IAS 20: Accounting for Government Grants and Disclosure of Government Assistance
IAS 21: The Effects of Changes in Foreign Exchange Rates (revised 2003)
IAS 23: Capitalization of Borrowing Costs (revised 2007)
IAS 24: Related Party Disclosures (revised 2009)
IAS 26: Accounting and Reporting by Retirement Benefit Plans
IAS 27: Consolidated and Separate Financial Statements (revised 2003)
IAS 28: Investments in Associates (revised 2011)
IAS 29: Financial Reporting in Hyperinflationary Economies
IAS 30: Disclosures in the Financial Statements of Banks and Similar Financial Institutions
IAS 31: Interests In Joint Ventures (revised 2003)
IAS 32: Financial Instruments: Presentation (revised 2003)
IAS 33: Earnings Per Share (revised 2003)
IAS 34: Interim Financial Reporting
IAS 36: Impairment of Assets (revised 2004)
IAS 37: Provisions, Contingent Liabilities and Contingent Assets
IAS 38: Intangible Assets (revised 2004)
IAS 39: Financial Instruments: Recognition and Measurement (revised 2003)
IAS 40: Investment Property (revised 2003)
IAS 41: Agriculture

Examples

Example 1: IAS 1 - Presentation of Financial Statements

IAS 1 outlines the requirements for the presentation of financial statements, including what constitutes a complete set of financial statements, the general features, and guidelines for their structure. A company might follow these guidelines to ensure their balance sheet, income statement, statement of changes in equity, and cash flow statements are compliant, transparent, and comparable with those of other companies globally.

Example 2: IAS 2 - Inventories

IAS 2 provides guidelines on how to account for inventories. It includes the determination of costs (such as costs of purchase, costs of conversion), the methodology for cost formulas (such as FIFO or weighted average), and the necessity of indicating net realizable value. A retail company using FIFO for inventory assessment would use this standard to ensure proper reporting.

Frequently Asked Questions

1. What is the difference between IAS and IFRS? IAS were issued by the IASC between 1973 and 2001 and were subsequently replaced by IFRS issued by the IASB from 2001 onwards. However, IAS remains valid unless replaced or amended by IFRS.

2. Are companies legally required to follow IAS? For companies listed in the EU, the use of IAS/IFRS in financial reporting is mandatory for years starting on or after January 1, 2005. Other jurisdictions might have different requirements.

3. Can firms still refer to standards as ‘IAS’? Yes, existing IAS standards are still applicable and referred to unless they are replaced by new IFRS standards.

4. How do IAS handle the issue of foreign currency transactions? IAS 21 covers The Effects of Changes in Foreign Exchange Rates, providing guidelines for the conversion and reporting of foreign currency transactions.

5. What does IAS 11 address? IAS 11 addresses accounting for Construction Contracts, guiding on how to account for revenue and costs associated with construction activities.

IFRS (International Financial Reporting Standards): Standards issued by the IASB starting in 2001 to replace IAS.
IASB (International Accounting Standards Board): The current body responsible for issuing accounting standards.
IASC (International Accounting Standards Committee): The committee that existed before the IASB and issued IAS.

Online References

Suggested Books for Further Studies

International Financial Reporting Standards (IFRS) 2021: Official Pronouncements by IFRS Foundation
Wiley IFRS 2022: Interpretation and Application of IFRS Standards by PKF International Ltd
International Accounting by Timothy S. Doupnik and Hector Perera
Financial Reporting and Analysis: Using Financial Accounting Information by Charles H. Gibson

Accounting Basics: “International Accounting Standards (IAS)” Fundamentals Quiz

### What body replaced the International Accounting Standards Committee in 2001? - [ ] The Financial Accounting Standards Board (FASB) - [x] The International Accounting Standards Board (IASB) - [ ] The European Financial Reporting Advisory Group (EFRAG) - [ ] The Global Reporting Initiative (GRI) > **Explanation:** The International Accounting Standards Board (IASB) replaced the International Accounting Standards Committee (IASC) in 2001. ### Are all IAS automatically phased out once IFRS standards are issued? - [ ] Yes, all IAS are replaced immediately. - [ ] Only those IAS standards issued after 2005 are replaced. - [ ] Yes, but over a grace period of 5 years. - [x] No, IAS remain in place until amended or withdrawn by the IASB. > **Explanation:** IAS standards continue to remain applicable unless and until they are specifically amended or withdrawn by the IASB. ### Which standard covers Inventories? - [ ] IAS 8 - [ ] IAS 16 - [ ] IAS 12 - [x] IAS 2 > **Explanation:** IAS 2 covers the accounting treatment for inventories. ### Which standard outlines the guidelines for Events After the Balance Sheet Date? - [ ] IAS 17 - [ ] IAS 24 - [x] IAS 10 - [ ] IAS 36 > **Explanation:** IAS 10 provides the guidance on Events After the Balance Sheet Date. ### By which year did listed companies in the EU become required to use adopted IAS? - [ ] 2001 - [ ] 2003 - [x] 2005 - [ ] 2007 > **Explanation:** From January 1, 2005, listed companies in the EU are required to use adopted IAS in their financial statements. ### What does IAS 1 require financial statements to include? - [ ] Only the income statement and balance sheet - [ ] Only the cash flow statement - [x] A complete set of financial statements - [ ] Just the notes accompanying the financial statements > **Explanation:** IAS 1 requires financial statements to include a balance sheet, income statement, statement of changes in equity, and cash flow statements, among others. ### Which of the following IAS covers Accounting and Reporting by Retirement Benefit Plans? - [x] IAS 26 - [ ] IAS 34 - [ ] IAS 19 - [ ] IAS 39 > **Explanation:** IAS 26 covers Accounting and Reporting by Retirement Benefit Plans. ### Which IAS standard deals with Financial Instruments: Recognition and Measurement? - [x] IAS 39 - [ ] IAS 22 - [ ] IAS 32 - [ ] IAS 9 > **Explanation:** IAS 39 addresses Financial Instruments: Recognition and Measurement. ### Which IAS standard applies to Related Party Disclosures? - [ ] IAS 7 - [ ] IAS 18 - [x] IAS 24 - [ ] IAS 2 > **Explanation:** IAS 24 is the standard that governs Related Party Disclosures. ### How many IAS standards were originally issued by the IASC up to 2001? - [ ] 10 - [ ] 25 - [ ] 35 - [x] Over 40 > **Explanation:** Over 40 International Accounting Standards (IAS) were issued by the International Accounting Standards Committee (IASC) up to 2001.

Thank you for embarking on this journey through the comprehensive accounting lexicon and tackling our challenging sample exam quiz questions. Keep striving for excellence in your financial knowledge!