All of a sudden come 2011 everyone will report in IFRS and the theme of IFRS is fair-value reporting , but fair is this fair value that is determinable than that reflects the transacction cost....do the shareholder need reporting of recorded events of financial transaction or much more....do we enter into complicating the accounting concepts of conservatism,materiality,etc.
Well lot of such questions will be asked in the coming times where accountants will focus attention on valujation than testing the veracity of the documents....sometimes i feel we are drifting away from the term Accountants that Tag us to reporting our perceptions about the entries that appear in the financial statements rathen than presenting accurate picture of the transaction its cost involved during execution.....Inflation accounting was there lying dormant conceptually for long and historical accounting had been subject to criticism , but do the fair value accounting fair enough or should we roll back before it rolls out are question that ponders every truth loving citizens.
Look at this example....I have a plant costing Rs.100000/-(transaction cost)now the replacement cost is Rs.150000/- i create a replacement reserve for Rs.50000/-,but the plant a perceivable running life of 10 years ,i have the current capacity earnings to buffer for any maintenance requirement and contingencies and i dont wish to tradeon the plant....2 things arise whether showing the plant at a fictitious replacement value on an year on year basis a true statement of accounts(to my knowledge IFRS already deleted the word "true" from its dictionary).secondly am i not creating a reserve that is non-existent either by appropriating my current profits from my operations in addition to the charge on depreciation...
This is one of the many example which will throw light on how fictitious our financial statement could be from Yr 2011.Well many companies in India are already IFRS complant and hence their balance sheets are jacked so many non- existent values , are we reporting to the needs of the shareholders which truely represents the book-value of the shares in the company.
Things to Ponder.
RV
CAclubindia
