Confused About the New Accounting Standards? Here's What You Need to Know
Whether or not you work internationally, the changes in International Financial Reporting Standards (IFRS) may have a huge impact on your business. Why? Up until recently, IFRS and America's Generally Accepted Accounting Principles (GAAP) have been fairly closely aligned. However, the changes made in IFRS 9 are creating issues for some businesses.
Here's a quick overview to help you get started.
In its simplest form, the new IFRS standard introduces new concepts that are not currently used in GAAP while changing in several other areas that were previously common to both standards. The first covers time value. Under IFRS 9, you'll now have three options to select from: including time value, excluding currency basis and excluding all of the time value. If you choose either of the two exclusion options, you'll need to measure the aligned time value, a new concept that has not been in either IFRS or GAAP previously. Many companies are getting around having to complete the complex new calculations by making sure that their accounting software has the option of taking care of these calculations for them.
Another change to the standard is IFRS 16, changes to leases. This part of the standard will require you to report and disclose information about leases on buildings, vehicles, office space or equipment leases, including changing the classifications of these items to assets and liabilities. The exception to this requirement is if you are in the last 12 months of the lease or if the asset that is being leased has a low overall value. To account for these changes in your accounting books, you could follow the example many companies are using by making journal adjustments to change the balance sheet and income statements to recognize these changes in the standard.
By staying on top of the changes in IFRS and how it will impact your firm's accounting practices, you can rest assured that when you have new opportunities arise, you'll be able to make the most of them without having the hassle of incompatible accounting practices holding you back. If you're not sure how the changes in IFRS will impact your company's financial reporting, AccountRely is here to help. Please feel free to contact our accounting professionals today to discover the AccountRely difference.