IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

52

Wiley IFRS: Practical Implementation Guide and Workbook

Interpretation and considering the relevant Implementation Guidance issued by the IASB for the Standa rd or Interpretation. 4.2 If the extant IASB Standards or Interpretations do not address a specific transaction, other event, or condition, management shall develop and apply a policy that is relevant to decision– making needs of users of financial statements and is reliable as well. In this context, "reliable" means to • Be neutral • Be prudent • Be complete in all material respects 4.3 In making these judgments, the management of an entity should apply the following sources in descending order: • The requ irements and guidance in Standards and Interpretations dealing with similar and re– lated issues • The defin itions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses as outlined in the IASB' s Framework 4.4 Furthermore, in making the judgment, the management of an entity may also consider the most recent pronouncements of other standard-setting bodies that use a similar conceptual frame– work to develop standards, other accounting literature, and accepted industry practices, to the ex– tent that these do not conflict with the sources of primary reference (i.e., the IASB Standards and Interp retations and its Framework). Practical Insight According to lAS 8, when an entity's management is faced with a situation of interpretation of the IASB Standards on a matter that is not expressly covered by the existing IASB Standards or Interpretations, then it should look at the IASB' s Framework for answers. While doing so it should also research recent pronouncements of other standard-setters to the extent that these do not conflict with the IASB Standards or Interpretations or its Framework. For example, compare Standards issued to date by the IASB to U.S. generally accepted ac– counting principles (GAAP), which addresses not only genera l accounting standards but is replete with industry-specific rules and guidance. US GAAP contains accounting pro– nouncements and guidelines for industries ranging from oil and gas to real estate; the IASB Standards are geared toward general accounting standards and not so much industry-specific guidance, although some of the recently promulgated IASB Standards seek to address industry specific standards as well. To date, the only industries that are covered by the IASB Standards are insurance, banking, and the extractive industry. Thus, according to lAS 8, if an entity's management is seeking answers to accounting matters or issues relating to a specific industry that the IASB Standards have not yet addressed, then guidance under US GAAP (or other national standard that provide such guidance) may be consulted, keeping in mind that the guidance to be applied must not conflict with the primary source of reference (i.e., the IASB Standards and Interpretations or the IASB' s Framework). 5. CONSISTENCY OF ACCOUNTING POLICIES 5.1 Once selected, accounting policies must be applied consistently for similar transactions, other events, and conditions unless a Standard or Interpretation specifica lly otherwise requires or permits categorization of items for which different policies may be appropriate. 5.2 If a Standard or Interpretation requ ires or permits such categorization, an appropriate accounti ng policy shall be selected and applied consistently to each category. • Represent faithfully the financial position, financial performance and cash flows • Reflect the economic substance of transactions, other events, and conditions