The language of business is accounting and financial reporting is the medium through which the language is communicated. Accounting and financial reporting are regulated by the Generally Accepted Accounting Principle (GAAP). GAAP consists of accounting standards, company law, stock market regulations, etc.
The global GAAP aims at unifying accounting and financial reporting all over the world through International Financial Reporting Standards. IFRS is prepared on the basis of guidelines issued by International Accounting Standards (IAS, Standing Interpretations Committee (SIC) pronouncements, and International Financial Reporting Interpretations Committee (IFRIC). IFRS was developed in 2001 in order to provide high quality and uniform reporting standard accepted all over the world by the International Accounting Standard Board (IASB).
The International Financial Report Standards (IFRS) are practiced for money and accounts management for the global market based organizations (Boddy, Boonstra and Kennedy, 2005). This report presents accounts and finance related decision making process for multinational companies which have effectively supporting managers to give justifications. The financial accounting is a field of business which is accessed for understanding and learning different characteristics of monitory management in organizations. The IFRS for capital market is discussed with regards to understanding and supporting financial accounting concepts. While managing different activities in international business affairs, it will provide significant information for managing financial affairs.
Understanding the concept
The financial management in various business organizations is an attempt for reviewing accounts, money management, investments, capital structure, corporate accounting etc. Through involvement of research and development of international standards and money transferring operations, such practices and activities in business can be improved. The multinational corporate and organizations are involving different aspects of accounting management for such employees, customers and board of management for decision making. With permission of people involved in financial accounting and capital management, such international standards and policies are set which can be implemented in finance and accounts in business practices (Bogdanova and Guseva, 2014). While considering different consequences of money and financial figures, the financial accounting theories are required to be understood so that effective decisions can be made for allowing transactions.
The planning for investing in different sections of business for starting new venture or installing new set up is dependent on such studies and policies from IFRS. Through observation of standards regarding project management and innovation reflect from different practices and operations in business. The capital structure and money management can be noticed through regular improvements and updates. While involving multiple products and operations in business, it is understood that funds are necessary to arrange assets and productions in business (Bogdanova and Guseva, 2014). While focusing to changing requirements with accounting standards and practices, it is necessary to reflect upon management characteristics. While observing, the study about financial theories and standards, it sounds essential for managing different production and services in business. The effective operations and practices in finance and accounts can be managed through learning and understanding of IFRS. While targeting the objectives of financial management, the journals, ledger, balance sheet and other entries can be well managed through understanding of financial practices. It is noticed that several changes can be managed through accessing information of business affairs. The respective values of business can be well accessed through getting the transaction information from business in and outs (Cœurdacier and Portes, 2005). The changes and implication in different monitory exchange are understood by capital investment on each activity.
The organizations which are following the international business standards must access the IFRS for mechanizing different characteristic of accounts. Through following such standards the business affairs of whole business industry of world can be implicated in financial transactions of capital. The investment information of funds is accessed through accounts and various sources of capital. The management of all available funds can be utilization in planning for internationalization and business expansion. Through identification of multiple resources and factors to collect money, it is observed that the different industries are required separate benchmarking for measuring monitory transactions. While understanding different characteristics of business, it is understood that changing environment and social accounting concerns can introduce business operations with concern to advancement of financial standards in organization. To understanding the requirement of investment, it is necessary to follow some guidelines and instructions from industry. The new entrance in global market needs to explore market for taking financial decision (Erratum, 2013). The standards and theories of accounting practices like transactions of liability and assets can be performed by accountants through involvement of IFRS standards.
The changes and improvement requirements can be monitored for evaluating profit and loss in business through proper guidance of financial management departments. While learning and observing changing different characteristics from business, it is required to get environmental factors in business through getting details of investment for money. With restrictions and filtering of accounts information and capital transaction, the changes can be done on behalf of profitability objectives of business. The financial theories and critical decision making can be understood by management of product and services in business. Through effective monitoring and controls of financial transaction, the value achieved and lost is calculated in financial decisions. With specific account details need identification and implication to manage international business as per standards. The financial theories are support making of financial reports and accounting of such details (Galbraith, 1999).
Through measuring profitability and loss in financial statement, all the methods of critical analysis of social, environmental, economic consequences etc. can be well managed through regulating industry norms of financial practices. The cost-benefit analysis helps in managing different operations through identification of transaction information through learning of financial theories. With cost and benefit analysis of financial transactions and information can be well managed in principle, practices and money transaction practices. The changing circumstances of business through identification f corporate affairs need to be placed in accounts which can be accessed in near future for making financial decisions. While obtaining details instruction and operations in business for new market and products, the finance department allow and supply funds for investing in new venture. It is noticed that changes in financial terms and conditions can be managed through observing theoretical practices (Holmes and Pentecost, 1992). The money management usage financial theories for taking decisions for whether invest in any functional practice or not. To sponsor the investment in any business project, it requires motivation and improvements through business decision making which can be better managed through research and development. The financial standards and practices are accessed through certain financial practices. Moreover various financial market conditions and practices will have effective role in managing business values and operations. Through identification of different roles and responsibilities of accountants, finance executives, managers etc. are accessing information and industrial theories of finance. The sourcing of fund and assets can be better managed through observing practices, assets, social, environmental and capital investments in management operations. The involvement of theories of financial accounting are observed useful for taking business decisions according to demand of market (Zhou, et.al., 2015).
While observing the effectiveness of financial practices, the international standards are made benchmarking for financial operations. The raise of capital can be managed through learning and practices different operations involved in management decision. Through observing the changes and implicating them to business, it require to understand financial theories for different records of balance sheet, cash flow and inward statement, profit and loss statements etc. For example if an organization is planning to invest in foreign market, then it requires to understand changing market conditions and previous base of financial transactions. Through maintaining different characteristics of business decisions, it is necessary to focus on investment in new market. The cost-benefit analysis are supporting monitoring and controlling of market situations according to demand of market. While controlling the transaction of money for new market, some specific parameters are set according to demand of project. The investment done for observing changes in existing conditions, it requires to concentrate possible outcomes through practices based on financial accounting. The MNC are taking such decisions on the basis of products and services in the market place. Through observation of different rules and regulation which are designed according to demand of consumers, it is observed that financial management theory will be suitable to take effective finance management. With prior permission of chief financial executive of company, such global marketing and business decisions can be taken on behalf of management understanding. While monitoring the changes in various conditions, the financial operations are supporting to take industrial standards of finance department. Through learning and development of financial theories and practices several changes and improvement can be noticed in operational management. The external and internal environment of business is managed through the better economical conditions. The sound financial management affect useful investment decision through which multiple business factors can be accessed for planning to relocate or expand business locations (Holmes and Pentecost, 1992). Through several research and study, financial standards are designed which are executed according to demand of management decisions. Through influence of business in marketplace, it is requires to access previous record of target country for globalization in business.
International Financial Reporting Standard for social accounting IAS 37 Provisions, Contingent Liabilities and Contingent Assets
The IAS 37 standard presents the accounting process for provisions, contingent assets and liabilities. The provisions are accurately estimated based on the expenditures required to cover up the existing obligation. In addition to this, it also outlines the present value of expenditures that is required to pay the liabilities in case when the time value of money is material.
The objective of IAS 37 is to apply recognition and measurement criteria to the provisions, contingent liabilities and assets. Also included in it is the disclosure of sufficient information related with the financial transactions to the users in an understandable manner (Xiao, 2013). The purpose is to enable stakeholders to help with decision making process related with their investment. The key principle behind the introduction of the standard is to recognize the provision only in the presence of a liability which is related with the past events. The Standard therefore, ensures that only accurate and reliable liabilities or obligations are considered in the financial statements (Gordon and Gelardi, 2005). These obligations are planned for future expenditures even if the authorized members are excluded from it.
Business entities often realize the need to serve the local community and undertake certain activities. These may include - improvement in the infrastructure, contribution to education, clean water, building residential area for the poor, employment generation, support to small scale industries and many more (Kabir and Akinnusi, 2012). These commitments are termed as Corporate Social Responsibility (CSR) in accounting.
IFRS lays down specific guidance on the accounting for provisions, liabilities and asset obligations. The outline discusses the procedure to consider the CSR obligations under IAS 37.
The process explains when and how should a company recognize a CSR obligation -
The IAS 37 requires a provision to be recognized when all the below criteria are met -
- The entity has present obligation that occurs as a result of the past event.
- The obligation to be paid requires an outflow of resources that will also generate economic benefits.
- An estimation of the amount of obligation
The legal obligation is termed as that derives from a contract, legislation or other operation of law. A constructive obligation is termed as that derives from an entity's actions in an established pattern of past practice, policies and specific statement. Also the entity informs other parties and stakeholders that it will accept responsibilities for the fulfillment of obligations. Moreover, the provisions also require that the entity informs other parties such as stakeholders that it will fulfill responsibilities on their part as well (Moser and Martin, 2015).
In order to determine the CSR obligation, a judgment will be require to apply that whether the obligating event is occurred to support the introduction of legal and constructive obligation. So at the first instance, it is essential to recognize whether the obligation is legal or constructive. The entire procedure for the recognition of provision and obligation will be based on the facts and figures.
Thus it can be concluded that a provision to be recorded under the IAS 27, the mining entity need to determine the recognition of the provision to record as an expense for the time duration. A judgment will be required to determine the reliability of the accounting treatment. If the obligation to be recorded as the CSR exist during the introduction of the order issue, then the mining entity need to consider the IFRS statements and provisions for financial reporting (Chetty, 2011). The mining entity can also consider that CSR obligation is part of the overall cost to develop the mine and therefore will capitalize the liability as part of the mine asset. Therefore the construction of healthcare facility in such a case would be considered as the property of the ABC Company.
On the other hand, if the obligating event for the CSR liability exists during the construction phase, then the obligating event will be considered as the operating expense for the period. This would further need determination of the type of event on the basis of facts and figures. The CSR process for the business entities have been made complex and requires due process of exercise of judgment to arrive at a conclusion.