|
How We Can Help You Implement IFRS and Valuation for Financial
Reporting (VFR)
International
Financial Reporting Standards are regulatory standards of practice for accountants in how assets and liabilities are reported
on a company’s financial statements, such as the balance sheet. The world is moving toward the common
practice of reporting assets at market value. This has always been the case. In the
case, particularly in the United States, assets were frequently reported at book value. Book value is an
accounting concept that quite different from market value. Because real estate is an asset whose value
is reported as part of property, plant and equipment on the balance sheet, appraisers are now involved in the process of appraising
real estate for the purposes reporting the value of these assets on the company’s financial statements. AAA The International Accounting
Standards Board (IASB, former International Accounting Standards Committee IASC) was founded i 1973 as a result
of an agreement by accountancy bodies in several countries with the objective to "develop... a single set of high quality, understandable and
enforceable global accounting standards” Until now the IASB has included all 143 professional
accountancy bodies from 104 countries that are members of the International Federation of Accountants (IFAC) and has therefore
gained worldwide recognition. Although the IFRS is mandatory for all European listed companies since 2005, the SEC has refused
to approve the proposed rules until now. But there is still hope that either the SEC will accept
the IFRS in the future and/or that the
Financial Accounting Standards Board (FASB) will adjust their rules to a “fair value” concept similar to the one used by the
IFRS. The development of new standards “is [thereby] a dynamic international process which involves most countries” The IASB
has no national authority. It is the task of the national bodies to adopt these standards into their local
jurisdiction. The choice of reporting today falls under two options. Publicly-traded companies can report
the value of their assets at book value or fair market value. In the future, assets will be reported at
fair market value. AAA Below
is an example of an actual retailer in the U.S. Here, the stock price of the company increased by 34% in a single day
because of reporting real estate at the higher fair market value instead of book value. Marsh Supermarkets is a dramatic
example of how book value and market value can be quite different. The highlighted text that follows is reprint of a
news article the recently appeared in the convenience industry trade publications. AAA |
