Chapter 1Introduction: The Background and Evolution of IFRS, and a Discussion on Why IFRS Would Have an Impact on Industry

At first blush, it would appear that a book on the impact that IFRS would have on industry is needless and unnecessary as all IFRS Standards are principle-based and, irrespective of the nature and peculiarities of a particular industry, the same principles would apply. However, accounting history has shown us that a general principle cannot take into account the accounting nuances of each and every industry. There could be interpretational issues when applying the same principles across all industries. As an illustration, let us take the principle of transfer of risks and rewards required in IAS 18 Revenue to recognise revenue on sale of goods. The transfer of risks and rewards could occur at different times for a software product company that sells its goods on the internet and a machinery manufacturer which transports its machinery to the customer's premises at its own risk. In the latter case, the transfer of risks would occur at a different time if the customer bore the risk of transporting the goods to his premises. Since IAS 18 only lays down a principle, determining the timing of transfer of risks and rewards is not very clear from the accounting standard. This gap in IAS 18 would however appear to have been rectified by its successor IFRS 15.

1.1 Rule-based vs. Principle-based Standards

Readers are probably aware that it was an Italian mathematician ...

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