“You don’t really understand something unless you can explain it to your grandmother.”
It’s another edition of IFRS is easy.
As a reminder, let me quickly make some additional highlights on the Introduction to IFRS and its Conceptual Framework discussed in the previous edition.
Have you ever wondered whether IFRS is based on principles or rules?
Imagine you came to my office to make some enquiries and I offered you a cup of coffee. Hanging close to my office window is a picture I took when I was 10 years old. You didn’t even notice it. I then told you that you can’t go near to see it clearly cos I don’t allow people that are not close to me to see the picture. After some minutes of discussion, I stepped out to get a file from one of my colleagues. Let’s face it, if you were in that office the minute I stepped out, wouldn’t you think of stealing a second to take a closer look at the picture?
I can guess. That’s what rules do to us. Rules harden one’s heart and makes one look for ways to beat them.
Most local accounting standards are rules-based. This makes Accountants look for the loopholes in them so as to cheat the system. This and other factors were considered when the IASB decided to create standards that are principles-based. Hence, IFRS were developed on a principles-based system.
Yeah, so let’s test your understanding so far. Click below to view or download questions on Conceptual Framework and the solutions. Try and make attempts to solve them before scrolling to the solutions section.
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