What is meant by IFRS impact assessment?
Effect of an International Financial Reporting Standards (IFRSs) needs to be assessed to understand the impact on – recognition, measurement and disclosure on revenue, expenses, assets and liabilities to an entity, when a new standard or revision in existing standards taken place.
In order to cope up with the requirement of new challenges in the economy or to rectify the possible errors or for better presentation of the financial statements time to time, the IASB
- Either issues new IFRS
- or reissue the existing standards with suitable modifications.
Such newly issued or reissued IFRS will be always specifying the date from which it will be effective be considered in the financial statements.
IFRS impact assessment is an assessment conducted when new or revised accounting standard is implemented in any business from a specific date. Sometimes the value disclosed in the financial statements needs to be changed while comparing with those normally disclosed under existing practice, because of change in measurement of the item. In some cases, the impact will be only on information disclosed in the financial statement and may not necessarily an impact on the financial figures. In certain situations, items which were not accounted till date or had a different treatment earlier may change by the adoption of new or revised one. In some other cases, the impact could be on both; on the financial figures as well as on the disclosure requirements.
Why it is important to commence IFRS impact assessment?
Anyways, whether the impact is on the amount to be recognized or the amount to be measured or on the disclosure requirements, it is important to do an analysis of impact on introduction of IFRS well before preparing the financial statement to report to the stakeholders and/or to the public. Then the management will have a fair idea on the impact of such new or revised IFRS well before closing the financial year.
What is the information required to conduct IFRS Impact Assessment?
- Audited financials for the immediate two previous financial years.
- Accounting manuals, if any adopted by the management.
- All details of various types of contracts (whether written or verbal) entered with customers of the company.
- Agreements/ Contracts/ relevant Invoices.
- Detailed classification of Financial Assets & Financial Liabilities.
- Details of contract revenue, costs in year previous year anticipated projects for the current year etc.
- Other relevant information, supporting documents as and when required.
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