International standards of financial information (IFRS) and the concept of the right value

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International standards of financial information (IFRS) and the concept of the right value

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Abstract

The international financial environment is in constant transformation and hence, the International Financial Reporting Standards (IFRS) has been implemented. The setting up of the IFRS is a logical revision of the international financial system, particularly following the collapse of Enron in 2001.

IFRS has been designed to harmonize international accounting standards and to provide a single model that all companies can apply. The main challenge for the adoption of these standards is to facilitate the functioning of capital markets by protecting investors and maintaining confidence in financial markets.

The idea is to put forward the concept of fair value through better real-time evaluation of the company, with more transparent information, thus facilitating its comparability with other companies.

Thus, two new accounting concepts are added: the primacy of economic over the legal means of the information published should present a true picture of the reality of the business and the relative importance of information should be published if it is likely to influence investor choice.

International standards expect a presentation of the cash flow that allows investors to have a real vision of the company.Indeed, this table is presented in three categories: operating cash flows, the flows related to investments and those related to financing transactions.

This enables readers to gain visibility into the business' ability to generate cash from its operating activities, the profitability of its investments and its ability to repay its financing or to raise funds for finance its investments.

IFRS provide news in the financial sector by focusing on transparency of information in respect of capital providers but exposes societies to constraints.
Indeed, today's companies face some disadvantages. They are exposed to volatility in the value of their assets on the market, and must constantly make impairment test reclamation.

Tags: International Financial Reporting Standard( IFRS), concept of fair value, transparency in finance sector

Introduction
The origins of the financial crisis: explanations
1. Allocation of risky "subprime" mortgages
2. Securitization of bad loans
3. Market liquidity
IFRS
1. Traditional accounting models
2. International standardization: is fair value "scapegoat" of the financial crisis?
What is the future for fair value?
1. Criticism of the IASB: a lack of anticipation of the adverse effects
2. Reforms in fair value

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[...] The International Financial Reporting Standards (IFRS) and the concept of fair value Table of contents Introduction I - Application of the principle of fair value in net financial debt 1. TDIRA (IAS 32) 2. Cash collateral and derivatives (IAS 39) 3. Commitments on minority (IAS27/IAS32) II- Cash flow in addition to the income statement: 1 – The distinction of French GAAP 2 - The usefulness of the table of cash flows Conclusion Introduction It was due to a constantly changing global financial atmosphere that International Financial Reporting Standards (IFRS) were implemented. [...]

[...] In derivatives, it now includes active derivatives of trading, hedge cash flows, hedging and fair value of the net investment hedge. Derivatives hedging cash flow and net investment hedges are in place to cover items that are not included in net debt (cash flows, net foreign currency assets). However, the market value of these derivatives is included. The "effective portion of cash flow hedges" and "unrealized gain or loss on net investment hedges" is added to net debt to offset this temporary difference. [...]

[...] They are, therefore, not always in line with fair value and the fact that the IFRS are rigid principles. [...]

[...] In contrast, international standards want a presentation of the cash flow that allows investors to have a real vision of the company. This table is divided into three categories: Operational flows, the cash flow from investments and those related to financing transactions. This allows readers to gain visibility on the company's ability to generate cash from its operating activities, the profitability of its investments and its ability to repay its financing or to raise funds to finance its investments - The usefulness of the table of cash flows Cash flow allows the ability to display some operations that are not included in the income statement but that generate cash outflow, such as capital purchases. [...]

[...] which may represent a decrease of cash in the future. Conclusion IFRS provides news in the financial sector with emphasis on transparency of information with regard to the providers of funds but implements constraints on companies. Companies today face two disadvantages: first, they are exposed to the volatility of the value of their assets in the market and second, they must constantly revaluate them. IN order to minimize these constraints, companies, especially in the case of France Telecom, simultaneously apply and also try to circumvent these standards. [...]

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