Part 1 – Chapter 1: International financial reporting PART 1: I NTRODUCTION TO INTERNATIONAL FINANCIAL REPORTING C HAPTER 1: I NTERNATIONAL FINANCIAL REPORTING B ACKGROUND I NTERNATIONAL FINANCIAL REPORTING Accounting can be defined as the systematic gathering and organization of information about the financial position, the performance and the cash flows of an entity. This information is on the one hand the basis for the structured financial information that is provided to stakeholders of the entity, usually in the form of financial statements that consist of a statement of financial position (balance sheet), a statement of profit or loss and other comprehensive income, a statement of cash flows, a statement of changes in equity and notes. Individual financial statements are the financial statements of one entity, consolidated financial statements present financial statements for a Group of entities as if it is one entity. Financial reporting standards are the national or international guidelines that are used to prepare these financial statements. This part of accounting is called financial accounting. On the other hand, financial information also used for internal purposes, i.e. to provide information for management decisions. There are less legal restrictions for the preparation of this information. This part of accounting is often called management accounting or managerial accounting. International financial accounting is often used as a synonym for the accounting standards of the International Accounting Standards Board (IASB), although researchers in international financial accounting are also interested in differences between national financial reporting standards, reasons for these differences, harmonization of financial reporting standards, the arguments pro-and contra harmonization or standardization. After a small introduction on international financial accounting, this course will focus on the standards of the International Accounting Standards Board (IASB), which are called International Financial Reporting Standards (IFRS). D IFFERENCES IN ACCOUNTING SYSTEMS When comparing national financial reporting standards that are applicable in different countries, researchers did not find objective differences in the basic concepts: accrual basis, historical cost, going concern, prudence. More differences are found in presentation and disclosure. A significant amount of differences can be found in the specific accounting rules and methods. D IFFERENCES IN PRESENTATION AND DISCLOSURE – Statement of financial position (balance sheet): Some entities use a liquidity format (assets and liabilities are gathered based on their liquidity, so that the liquidity position is immediately clear for the reader of the financial statements), while others have all the assets on one side (the left side, or the debit side) and the liabilities on the other side ( the right side, or the credit side).
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