Financial Reporting Standards

This investigation adopted the compare and contrast qualitative research method as this is the most appropriate way in determining the effect the type of business to the success of the business. This study is divided into two parts. They are: 1. COMPARE International Reporting Standards emphasized Financial Statements and Non – International Reporting Standards emphasised Financial Statements. 2. CONTRAST  International Reporting Standards emphasized Financial Statements and Non – International Reporting Standards emphasised Financial Statements. RESEARCH INSTRUMENT

This is a qualitative research study. The researcher used secondary sources were taken from books and journals. These secondary sources had guided the researcher to broaden the point of understanding in order to complement the primary research. RESEARCH PROCEDURE The researcher seeks the secondary methods to determine the effect of International Financial Reporting Standards on Financial Statements. After a through studying, reading and scrutinizing the different data, implementing it is best to use the secondary sources as a basis for company business analysis and then coming up with the output.

Chapter IV PRESENTATION, ANALYSIS, AND INTERPRETATION OF DATA This chapter puts forward the presentation, analysis and interpretation of the data collected. The questions identified in the problem are used as the bases for the presentation. The sequence of the structure includes table, analysis and interpretation of the data of the current study. PRESENTATION OF THE STUDY The research questions are: 1. Compare the use of IFRS Emphasis and Non IFRS Emphasis on Financial Statement Presentation.

There are many similarities between financial statements that prepared using International Financial Reporting Standards and financial statements that are not prepared using International Financial Reporting Standards. Both the financial statements prepared using the International Financial Reporting Standards as well as the non IFRS based reports contain an assets portion, liabilities portion, shareholders’ equity portion, revenues section, expenses section and profit section. Likewise, both the financial statements prepared using the IFRS as well as the non IFRS based reports contain a statement of cash flows.

Further, both the financial statements prepared using the International Financial Reporting Standards as well as the non IFRS based reports use prepared for the use of stockholders, stockholders, customers, creditors, managers and government regulating agencies. 2. Contrast the use of  IFRS Emphasis and Non IFRS Emphasis on Financial Statement Presentation. There are many differences between financial statements that prepared using International Financial Reporting Standards and financial statements that are not prepared using International Financial Reporting Standards.

Further, financial statements that are prepared in accordance with International Financial Reporting Standards use fair market value in the preparation of financial statements. Also, financial statements that are prepared in accordance with International Financial Reporting Standards are more relevant. In addition, financial statements that are prepared following International Financial Reporting Standards are a better decision making data. Furthermore, financial statements that are prepared in accordance with International Financial Reporting Standards are more consistent with accounting bodies.

Likewise, financial statements that are prepared in accordance with International Financial Reporting Standards are more understandable. Definitely, financial statements that are prepared in accordance with International Financial Reporting Standards are more reliable. Lastly, preparing the financial statements in accordance with International Financial Reporting Standards is a plus in terms of financial reporting equity. Financial statements that are prepared that are International Financial Reporting Standards inspired use fair market value in the recording of financial statements.

Fair market value has been described in the related literature portion of this research. Fair market value is described as the amount that the seller is willing to offer to all parties interested in buying the seller’s products. And, fair market value is the purchase price that the buyer is willing to pay in order possess a product. This can be explained using economics. Economics explains that as the number of buyers or demand will decrease as the purchase price of goods will increase. Likewise, the seller would increase their supply of goods produced if the selling prices of their goods increase.

The seller’s need to sell at a profit will be satisfied if the buyer’s need to buy at a reasonable price is also met. This meeting price is known as the equilibrium price. Another name for equilibrium price is the market price. One way of determining the fair market value of an asset stated in the company’s balance sheet is to see the current market price of the same product sold in the market. Another way of determining the fair market value is to use the historical cost as basis when there is no current selling or buying activity to determine the fair market value of a product.

Statement of Financial Accounting Standards (IFRS) no. 107 shows the assets liabilities and shareholders equity should be restated to their fair market values. Further, financial statements that are prepared in accordance with International Financial Reporting Standards use fair market value in the preparation of financial statements. Generally, international accounting standards permit the revaluation of property, plant and equity. This means that the buildings, land, equipment and other large value items are restated using the fair market value at the time of preparation of financial statements.

The derivatives are measured using fair market value. Derivatives are financial instruments that derive their value from the movement in commodity prices, foreign exchange rate and interest rates of an asset or financial instrument. Derivative contracts are described as paying a small percentage of the total amount of the asset that will be bought at a later date. This down payment means that the buyer promises to pay for the entire contract price when the maturity date arrives. However, the investor of derivatives is generally not interested to waiting for the maturity date.

The derivative buyer wants to make a profit by selling the derivative at a higher price. The hedging of such derivatives is also recorded using fair market value. The change in the fair market values of the derivatives is recorded as recognized profits and loses. The examples of derivatives that are good hedge alternatives are interest rate swap, forward contract, futures contract, option and foreign currency forward contract. On the other hand, the non –IFRS influenced financial statements do no require that the derivatives should use fair market value in the preparation of financial statements (Blount 2005).