IAS’s state how particular types of transactions and other events should be reflected in financial statements. In the past, IAS’s were issued by the Board of the International Accounting Standards Committee (IASC). However, since 2001, the new standards are known as the international financial reporting standards (IFRS) and have been issued by the International Accounting Standards Board (IASB). If you are unsure about how to run your finances or your digital marketing strategies, go ahead and contact a finance expert and a link building agency respectively.
Table of Contents
IAS 1
This accounting standard is used for the preparation of the financial accounts, it is used to organise financial accounts such as trading, profit and balance sheet. It also sets minimum requirements for a business. This standard is for the use of limited companies; the financial statements must include income statement, balance sheet, statement of cash flows, and statement of changes in equity and a statement of accounting policies.
The IAS 1 requires the name of the company, which is Sainsbury’s Ltd, the accounting period that the financial statements are valid from and also the currency used e.g. pound sterling.
IAS 2
This accounting standard says that the value of inventories should be at the lower of cost.
According to http://www.diamondfinance.info/Technical/IAS2.htm inventories are defined as assets held for sale in the ordinary course of business (finished goods),assets in the production process for sale in the ordinary course of business (work in process), and materials and supplies that are consumed in production.
Costs are the cost of purchases, the cost of expenses and the cost of carriage in and outwards.
The statement above means that the inventories should be at a lower price than purchases and expenses.
IAS 7
This accounting standard displays how cash has been gained by a limited company and also what the cash has been used on in the accounting period. This is used alongside the income statement and balance sheet so that Sainsbury’s can know how they are doing financially.
The standard must include the following headings net cash, cash flows from investing activities and cash flows from financing; also the total cash in or outflow must be shown.
IAS 16
This accounting standard is for the fixed assets of a business, it is used to identify whether the fixed assets should be placed in costs or revaluation. Cost has been previously defined above, revaluation is the amount the fixed assets would be worth with exchange rates, this can be used in different countries for instance if the price of a warehouse depreciates in the U.K. It may still be of higher value in Europe.
Also annual reviews are conducted to identify the state of the fixed assets to ensure that the price is not over stated.
IAS 18
This accounting standard is for the sales of goods, which is a source of income/revenue, this standard also relates to the realisation concept.
According to http://www.ifrs.org/Documents/IAS18.pdf, the amount of revenue arising on a transaction is usually determined by agreement between the entity and the buyer or user of the asset. It is measured at the fair value of the consideration received or receivable taking into account the amount of any trade discounts and volume rebates allowed by the entity.
This means that the revenue is determined by what is stated on the trade, profit and loss account, which is stated as Sales.
Whether we like them or we don’t, finances are a truly necessary part of running a small company. In order to get insights on efficient procedures that business owners can adopt to improve their accounting practices, we must get properly informed in advance on how to run our finances in a proper manner.