Assignment details

Running head: IMPACT ANALYSIS

Adoption of International Financial Reporting Standards (IFRS)

Unit 1 IP

Betty Thompson

ACCT655-1702A-01

Dr, Bih Horng-Chiang

April 16, 2017

Introduction 2

Major requirements of IFRS 1 for companies adopting IFRS for the first time 3

Key impacts of IFRS 15 on US companies during transition 3

Effects of adoption of IFRS 15 on the Statement of Cash Flows 5

Necessary updates to financial statements 5

References 6

Adoption of International Financial Reporting Standards (IFRS)

The Pelicans Corporation is a home equipment manufacturing company that was previously using the US GAAP laws to run its operations. The company is, however, planning on how to adopt the IFRS because it is a publically traded company. This impact analysis is to provide The Pelicans Corporation with a guide towards adopting the IFRS 1 and all the other laws.

For a company to adopt IFRS for the first time, they are required to present their financial statement. From this, the IFRS will decide on which procedure to follow next. If the most recent financial statements presented are either under the GAAP, with a partial application of IFRS or with some reconciliation with the IFRS, they will then be considered. They will be considered also if the entity or company has prepared IFRS statements both for external use or if they haven’t prepared any

Revenue recognition has been the most common difference creating the biggest gap between IFRS and US GAAP; the gap is caused by the processes involved in IFRS and vice versa. Other laws e.g. the IAS have broad and wide revenue laws that are hard to make out, as a result, some companies ignore the laws and even create their laws regarding the revenue recognition. This step is a big leap into failure as some companies lack the knowledge to create effective laws. Some companies have established their IFRS policies which they based on US GAAP laws. This was a mix up of both policies hence creating an uneven situation to parties, the company, and the government.

Enterprises that have adopted IFRS 15 have an advantage over those who don't have it because the model presents comprehensive direction on how to account for approved contract modification. This will enable any company to be front based to any of its operations. Using this advantage, the company will be able to ascertain on every contract made and the improvements that resulted from them. Following this deal, the policy will help the company to keep clear records and avoid suing other companies for the wrong reasons. This will also decrease the amount of losing incorporated to the company annually.

Moreover, IFRS gives the company a performance obligation towards providing sufficient service to the customers. This will ensure that the company assesses the liability of its goods and service before delivering it to the customer. A closer reference into the goods will make sure that the demands of the contracts are met and hence reduce the legibility of the company. This will increase the company’s income and a sale because of few complaints from the customers. In the cross-reference from the apparent situation, Pelicans Corporation will increase its chances into the shelves of many shops in the state. Its relevance is of much importance if it gives flawless results and products to its customers. The company's customers will reap many benefits because the policy forces the entities to transfer the goods and services at their best shapes.

The IFRS policy measures an entity’s progress; this will enable the company to keep track of its progress throughout a given time. This will open up the company’s ability to keep track of its progress, henceforth giving it a firm foundation towards creating a limited amount of eminent and traceable changes. This will also help the company’s progress towards complete satisfaction the company’s performance obligations set by the policy. Using this policy, the company will be obligated to finding appropriate touch towards making of profits from all of its operations daily.

Considering both direct and indirect methods, IFRS 15 will create an improvised cash flow which takes into consideration the whole process. IFRS rules allow the company to allocate interest expenses as part of financing or investing the cash flow. This will hence cause a lot of changes as the cash flow will be controlled by the interest expenses. Although many companies choose to enhance their cash flow from operations and excluding the interest expenses, they change once they begin to scope from IFRS.

The date of transition begins at the first period in which comparative statements are presented. The financial statement of a company also includes a balance sheet of the previous year starting from the time it took effect. Companies which have adopted IFRS are therefore liable and should incorporate balancing sheets to their policies. This is new as a lot of companies do not advocate for the same. It also means that they include the statement of their financial position, statement of profits and loss, cash flow and changes in equity. All the statements should be presented in pairs.

Vitez, O.(2016) Impact of technological change on business activity. Chron. Retrieved from

www.smallbusiness.chron.com/impact-technological-change-business-business-activity-2191.html

Catropa, D. & Andrews, M. (2013)The Most Significant Change. Strategy. Retrieved from

https://www.insidehinhered.com/blogs/stratedgy//survey-results-what-has-been-most-significant-change