business affairs so that company accounts are understandable and comparable across international

boundaries. They are a consequence of growing international shareholding and trade and are

particularly important for companies that have dealings in several countries. They are

progressively replacing the many different national accounting standards. The rules to

be followed by accountants to maintain books of accounts which is comparable, understandable,

reliable and relevant as per the users internal or external.

IFRS, with the exception of IAS 29 Financial Reporting in Hyperinflationary Economies and

IFRIC 7 Applying the Restatement Approach under IAS 29, are authorized in terms of the

historical cost paradigm. IAS 29 and IFRIC 7 are authorized in terms of the constant

purchasing power paradigm. IFRS began as an attempt to harmonize accounting

across the European Union but the value of harmonization quickly made the concept attractive

around the world. They are sometimes still called by the original name of International

Accounting Standards. IAS were issued between 1973 and 2001 by the Board of the International

Accounting Standards Committee. On 1 April 2001, the new International Accounting Standards

Board took over from the IASC the responsibility for setting International Accounting Standards.

During its first meeting the new Board adopted existing IAS and Standing Interpretations

Committee standards. The IASB has continued to develop standards calling the new standards

International Financial Reporting Standards.

In the absence of a Standard or an Interpretation that specifically applies to a transaction,

management must use its judgement in developing and applying an accounting policy that results

in information that is relevant and reliable. In making that judgement, IAS 8.11 requires

management to consider the definitions, recognition criteria, and measurement concepts for assets,

liabilities, income, and expenses in the Framework.

Criticisms of IFRS are that they are not being adopted in the US, a number of criticisms

from France and that IAS 29 Financial Reporting in Hyperinflationary Economies had no positive

effect at all during 6 years in Zimbabwe´s hyperinflationary economy. The IASB offered

responses to the first two criticisms, but has offered no response to the last criticism

while IAS 29 is currently being implemented in its original ineffective form in Venezuela

and Belarus.

Objective of financial statements Financial statements are a structured representation

of the financial position and financial performance of an entity. The objective of financial statements

is to provide information about the financial position, financial performance and cash flows

of an entity that is useful to a wide range of users in making economic decisions. Financial

statements also show the results of the management's stewardship of the resources entrusted to

it. To meet this objective, financial statements

provide information about an entity's: assets; liabilities; equity; income and expenses,

including gains and losses; contributions by and distributions to owners in their capacity

as owners; and cash flows. This information, along with other information in the notes,

assists users of financial statements in predicting the entity's future cash flows and, in particular,

their timing and certainty. The following are the general features in

IFRS: Fair presentation and compliance with IFRS:

Fair presentation requires the faithful representation of the effects of the transactions, other

events and conditions in accordance with the definitions and recognition criteria for assets,

liabilities, income and expenses set out in the Framework of IFRS.

Going concern: Financial statements are present on a going

concern basis unless management either intends to liquidate the entity or to cease trading,

or has no realistic alternative but to do so.

Accrual basis of accounting: An entity shall recognise items as assets,

liabilities, equity, income and expenses when they satisfy the definition and recognition

criteria for those elements in the Framework of IFRS.

Materiality and aggregation: Every material class of similar items has

to be presented separately. Items that are of a dissimilar nature or function shall be

presented separately unless they are immaterial. Offsetting

Offsetting is generally forbidden in IFRS. However certain standards require offsetting

when specific conditions are satisfied. Frequency of reporting:

IFRS requires that at least annually a complete set of financial statements is presented.

However listed companies generally also publish interim financial statementsfor which the

presentation is in accordance with IAS 34 Interim Financing Reporting.

Comparative information: IFRS requires entities to present comparative

information in respect of the preceding period for all amounts reported in the current period's

financial statements. In addition comparative information shall also be provided for narrative

and descriptive information if it is relevant to understanding the current period's financial

statements. The standard IAS 1 also requires an additional statement of financial position

when an entity applies an accounting policy retrospectively or makes a retrospective restatement

of items in its financial statements, or when it reclassifies items in its financial statements.

This for example occurred with the adoption of the revised standard IAS 19 or when the

new consolidation standards IFRS 10-11-12 were adopted.

Consistency of presentation: IFRS requires that the presentation and classification

of items in the financial statements is retained from one period to the next unless: it is

apparent, following a significant change in the nature of the entity's operations or a

review of its financial statements, that another presentation or classification would be more

appropriate having regard to the criteria for the selection and application of accounting

policies in IAS 8; or an IFRS standard requires a change in presentation.

Qualitative characteristics of financial statements Qualitative characteristics of financial statements

include: Relevance

Faithful representation Enhancing qualitative characteristics include:

Comparability Verifiability

Timeliness Understandability

Elements of financial statements The elements directly related to the measurement

of the statement of financial position include: Asset: An asset is a resource controlled by

the entity as a result of past events and from which future economic benefits are expected

to flow to the entity. Liability: A liability is a present obligation

of the entity arising from the past events, the settlement of which is expected to result

in an outflow from the entity of resources embodying economic benefits, i.e. assets.

Equity: Nominal equity is the nominal residual interest in the nominal assets of the entity

after deducting all its liabilities in nominal value.

The financial performance of an entity is presented in the statement of comprehensive

income, which consists of the income statement and the statement of other comprehensive income

. Financial performance includes the following elements:

Revenues: increases in economic benefit during an accounting period in the form of inflows

or enhancements of assets, or decrease of liabilities that result in increases in equity.

However, it does not include the contributions made by the equity participants.

Expenses: decreases in economic benefits during an accounting period in the form of outflows,

or depletions of assets or incurrences of liabilities that result in decreases in equity.

However, these don't include the distributions made to the equity participants.

Results recognised in other comprehensive income are limited to the following specific

circumstances: Remeasurements of defined benefit assets or

liabilities Increases or decreases in the fair value of

financial assets classified as available for sale(as defined in the standard IAS 39)

Increases or decreases resulting from the application of a revaluation of property,

plant and equipment or intangible assets Exchange differences resulting from the translation

of foreign operations according to the standard IAS 21

the portion of the gain or loss on the hedging instrument in a cash flow hedge that is determined

to be an effective hedge The statement of changes in equity consists

of a reconciliation of the changes in equity in which the following information is provided:

total comprehensive income for the period, showing separately the total amounts attributable

to owners of the parent and to non-controlling interests;

for each component of equity, the effects of retrospective application or retrospective

restatement recognised in accordance with IAS 8; and

for each component of equity, a reconciliation between the carrying amount at the beginning

and the end of the period, separately disclosing changes resulting from:

profit or loss; other comprehensive income; and

transactions with owners in their capacity as owners, showing separately contributions

by and distributions to owners and changes in ownership interests in subsidiaries that

do not result in a loss of control.

Statement of Cash Flows Operating cash flows: the principal revenue-producing

activities of the entity and are generally calculated by applying the indirect method,

whereby profit or loss is adjusted for the effects of transaction of a non-cash nature,

any deferrals or accruals of past or future cash receipts or payments, and items of income

or expense associated with investing or financing cash flows.

Investing cash flows: the acquisition and disposal of long-term assets and other investments

not included in cash equivalents. These represent the extent to which expenditures have been

made for resources intended to generate future income and cash flows. Only expenditures that

result in a recognised asset in the statement of financial position are eligible for classification

as investing activities. Financing cash flows: activities that result

in changes in the size and composition of the contributed equity and borrowings of the

entity. These are important because they are useful in predicting claims on future cash

flows by providers of capital to the entity. Notes to the Financial Statements: These shall

present information about the basis of preparation of the financial statements and the specific

accounting policies used;(b) disclose the information required by IFRSs that is not

presented elsewhere in the financial statements; and provide information that is not presented

elsewhere in the financial statements, but is relevant to an understanding of any of

them. Recognition of elements of financial statements

An item is recognized in the financial statements when:

it is probable future economic benefit will flow to or from an entity.

the resource can be reliably measured In some cases specific standards add additional

conditions before recognition is possible or prohibit recognition all together.

An example is the recognition of internally generated brands, mastheads, publishing titles,

customer lists and items similar in substance, for which recognition is prohibited by IAS

38. In addition research and development expenses can only be recognised as an intangible asset

if they cross the threshold of being classified as 'development cost'.

Whilst the standard on provisions, IAS 37, prohibits the recognition of a provision for

contingent liabilities, this prohibition is not applicable to the accounting for contingent

liabilities in a business combination. In that case the acquirer shall recognise a contingent

liability even if it is not probable that an outflow of reseources embodying economic

benefits will be required. Measurement of the elements of financial statements

Par. 99. Measurement is the process of determining the monetary amounts at which the elements

of the financial statements are to be recognized and carried in the balance sheet and income

statement. This involves the selection of the particular basis of measurement.

Par. 100. A number of different measurement bases are employed to different degrees and

in varying combinations in financial statements. They include the following:

(a) Historical cost. Assets are recorded at the amount of cash or cash equivalents paid

or the fair value of the consideration given to acquire them at the time of their acquisition.

Liabilities are recorded at the amount of proceeds received in exchange for the obligation,

or in some circumstances, at the amounts of cash or cash equivalents expected to be paid

to satisfy the liability in the normal course of business.

(b) Current cost. Assets are carried at the amount of cash or cash equivalents that would

have to be paid if the same or an equivalent asset was acquired currently. Liabilities

are carried at the undiscounted amount of cash or cash equivalents that would be required

to settle the obligation currently. (c) Realisable value. Assets are carried at

the amount of cash or cash equivalents that could currently be obtained by selling the

asset in an orderly disposal. Assets are carried at the present discounted value of the future