Page 164 - DCOM409_CONTEMPORARY_ACCOUNTING

Unit 13: Critical Evaluation of Principles and Practices

The IFRS is full of words and phrases that are open to interpretation. The accompanying Notes
table has a selection of the probabilities in IFRS literature that a user is expected to interpret
in the context of understanding what an accounting standard requires.
Ian Wright also identifies other issues that are potentially problematic.
The IFRS literature contains an increasing range of technical terms which don’t translate
well into languages other than English. Also, the standards were written in different eras
and sometimes by individual national standard-setters due to which the usage of the
English language differs resulting in them being structured in disparate ways.
One can therefore see the potential hazards in interpreting a principle-based accounting
standard that contains highly subjective phraseology.

In this context, one can expect problems of interpretation in India also. For instance, the
word “shall” (a key word in accounting standards) is used in a manner that is completely
different from its usage in countries where English is the mother tongue. Any user of IFRS
would therefore need to be alive to these issues when interpreting IFRS.

Source: www.thehindubusinessline.com
Self Assessment

Fill in the blanks:

3. Records should be made only of that information that can be expressed in ……………
terms.
4. The business entity principle means that business is accounted for …………. from its
owner(s).
5. Assets are always shown at their cost and not at their current …………….
6. Assets = ………. + Owner’s Equity

7. Accounting records, events and transactions on the assumption that the entity will continue
to operate for an ………… long period of time.
8. Cost is measured on a cash or ………….basis.

9. The ………… is considered to have taken place only when either the cash is received or
some third party becomes legally liable to pay the amount.
10. The ………… principle means that financial information is supported by independent and
unbiased evidence.

Task Compare the Indian accounting principle with the accounting principles used in
US.

13.3 Summary

Externally communicated accounting information must be prepared in accordance with
accounting standards that are understood by both the senders and the users of that
information.
Accounting principles were historically developed through common acceptance and usage.

LOVELY PROFESSIONAL UNIVERSITY 159